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Aozora chief Sacasa steps down

By Michiyo Nakamoto in Tokyo Published: February 11 2009 02:00 | Last updated: February 11 2009 02:00

Aozora Bank, the Japanese lender, replaced its chief executive yesterday and, after warning of a wider than expected full-year loss, said it would shift its focus back to domestic lending. The mid-sized bank, 45 per cent owned by Cerberus, the US private equity group, said that Federico Sacasa would step down as chief executive after only one year in the job and be succeeded by Brian Prince, deputy president. Since Cerberus acquired a majority in Aozora in 2003, the bank has had four foreign chief executives. In the current environment, when people are looking for new funding, Aozora's strong capital base means "it's a good opportunity for Aozora to expand its customer base", Mr Prince said. Aozora forecast yesterday a worse than expected Y196bn ($2.1bn) net loss in the year to March 2009 mainly because of losses and writedowns related to its overseas investments. That, compared with Aozora's forecast in November of a Y27bn net loss. For the nine months to December 2008, the bank reported a Y109.4bn net loss. The latest management reshuffle reflects the difficulty Aozora is experiencing in identifying a profitable role for itself in Japan's lacklustre banking market. Its share price has fallen to about one-fifth of its Y517 peak in November 2006, closing at Y107 yesterday. The bank's poor performance this year highlights the damaging impact of aggressive investments in non-core assets, collateralised debt obligations (CDOs) and hedge fund investments, which have bombed. Aozora said yesterday it would write down the value of its investment in GMAC - the financial services group which received a $5bn injection from the US government and in which Cerberus owned 51 per cent - by Y36.4bn to just 3.2 per cent of the original book value. A bigger blow is the Y46bn in losses it will take on hedge fund investments, including an Y11bn loss related to the bank's indirect exposure to Madoff Securities, the company at the centre of the alleged US fraud. Writedowns on CDO investments will come to Y9bn and losses related to the failed Lehman Brothers will total Y9.6bn. In Japan, investments in exchange traded funds are forecast to result in a Y30.7bn loss. Analysts were sceptical about Aozora's plans to focus on domestic lending and increase retail deposits. "It does not have a customer base and that is why it built up investments in GMAC and others in the first place," said Keisuke Moriyama, banking analyst at Nomura in Tokyo. See World View
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