Aozora Bank

Aozora Bank is a Japanese commercial bank headquartered in Tokyo and listed on the Tokyo Stock Exchange under ticker 8304. Its institutional history begins in 1957, when Nippon Fudosan Bank was established to manage the remaining Japanese assets of the former Bank of Chōsen. The new institution received a special government trust-banking license comparable to the license held by Long-Term Credit Bank of Japan, reflecting the role that long-term credit institutions played in Japan's postwar financial system. The bank was renamed Nippon Credit Bank, commonly abbreviated NCB, in 1977. Its business and financial position were later heavily affected by the collapse of Japan's asset-price bubble and the resulting deterioration in bank loan portfolios. In December 1998, the Japanese government placed NCB under state control because of the scale of its non-performing loans and related losses. A private investor group led by SoftBank, Orix and Tokio Marine & Fire Insurance acquired the institution in 2000. The transaction included a government defect-warranty arrangement under which certain loans meeting specified deterioration conditions could be sold back to the government during a limited period. The bank adopted the Aozora name in 2001. SoftBank initially considered developing it as an investment bank focused on internet-related companies, but that strategy did not proceed as planned. SoftBank subsequently sold its stake, and Cerberus Capital Management became the principal investor in 2003. Aozora later expanded its activities across corporate finance, retail banking, investment banking, securities, asset management-related services and financial solutions for institutional customers. It began operating as a retail bank in 2006 and opened a new branch in Nihonbashi later that year. Aozora's history also reflects the risks associated with international credit markets. During the 2008 global financial crisis, it disclosed significant exposure to Lehman Brothers and to the Bernard L. Madoff investment fraud. In 2009, Aozora and Shinsei Bank announced negotiations concerning operational integration and a possible future merger. Those discussions ended in 2010 after the parties failed to resolve differences concerning capitalization and business strategy. The bank subsequently developed its securities and wealth-management capabilities. It acquired Japan Wealth Management Securities in 2011 and combined that business with Aozora Securities in 2012. Cerberus began reducing its ownership in 2013, completing its exit from Aozora's shareholder base that year. Aozora remains a focused Japanese banking institution rather than one of the country's largest megabanks. Its activities include deposits, lending, payments and settlement, corporate and structured finance, retail banking, investment banking, securities and services for institutional investors. The bank has maintained a domestic branch network and has also used overseas representative offices and financing subsidiaries to support international business.

Aozora Bank's predecessor was Nippon Fudosan Bank, founded in 1957 to administer assets in Japan that had remained from the former Bank of Chōsen. The institution received a special government trust-banking license, placing it within the postwar long-term-credit framework alongside institutions such as Long-Term Credit Bank of Japan. Its initial role was closely connected with real-estate and long-term finance. In 1977, Nippon Fudosan Bank changed its name to Nippon Credit Bank, or NCB. The bank's later history was shaped by the bursting of Japan's asset-price bubble in the early 1990s. Falling real-estate and securities values weakened borrowers and left financial institutions with large volumes of non-performing loans. In December 1998, the Japanese government took NCB under public control to address its financial problems. The bank was reported at that time to have approximately ¥270 billion in debt. In 2000, an investor consortium led by SoftBank, Orix and Tokio Marine & Fire Insurance purchased NCB from the government for ¥80 billion. The transaction included a defect-warranty mechanism that allowed the bank, for a limited period and under specified conditions, to request government purchase of claims whose values had declined substantially. Aozora used the mechanism relatively conservatively in comparison with the contemporaneous restructuring of Long-Term Credit Bank of Japan, later renamed Shinsei Bank. The cited historical account states that Aozora used it to write off approximately ¥400 billion in bad debts owed by around 100 companies. The bank was renamed Aozora Bank in 2001. SoftBank initially sought to develop Aozora as an investment bank oriented toward internet-related businesses, but the plan did not obtain the anticipated cooperation from Japan's Financial Services Agency. SoftBank sold its 49 percent stake to Cerberus Capital Management in September 2003 for ¥101 billion. Under the new ownership structure, Aozora continued developing a broader banking model. Aozora formally launched retail-banking operations on April 1, 2006, and opened a new Nihonbashi branch on November 20 of the same year. Alongside retail services, the bank maintained corporate-finance, investment-banking and institutional businesses. It also operated through overseas representative offices and financing subsidiaries, although the precise location and number of offices have varied over time. The 2008 global financial crisis exposed the bank to substantial international counterparty risk. When Lehman Brothers entered Chapter 11 bankruptcy in September 2008, Aozora was identified as its largest unsecured bank-loan creditor in the cited historical source, with approximately US$463 million in loans. In December 2008, Aozora announced that it had ¥12.4 billion of exposure to the Bernard L. Madoff Ponzi scheme. These events illustrated the vulnerability of a smaller institution with international investment and lending relationships during a period of severe market disruption. On April 25, 2009, Aozora and Shinsei Bank announced negotiations to integrate their operations, with a possible merger envisioned for 2010. Both institutions had suffered losses linked to the US subprime-market turmoil. The negotiations ended in May 2010 without an agreement, reportedly because of unresolved differences over capitalization, business strategy and the changed financial environment. Aozora acquired Japan Wealth Management Securities in 2011 and merged it with Aozora Securities in 2012. These steps strengthened the bank's securities and wealth-management platform. In January 2013, Cerberus announced that it would sell most of its remaining Aozora investment, reducing its overall holding from approximately 58 percent to 7.7 percent. The remaining stake was sold through Barclays in August 2013, ending Cerberus's ownership. Today, Aozora is a listed Japanese commercial bank with a business mix that includes corporate lending and finance, retail deposits and loans, investment banking, securities, institutional services and payment-related activities. It is smaller and more specialized than Japan's major megabanks. Its Tokyo head office is in the Kudan area of Chiyoda, while its domestic network and overseas representation support business with Japanese and international customers. Current executive details, branch counts and group structure should be confirmed against the bank's latest official disclosures.

1. 2013Cerberus exited its investment

   Cerberus reduced its stake and sold its remaining interest, ending its shareholding in Aozora.

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2. 2012Securities businesses consolidated

   Japan Wealth Management Securities was merged with Aozora Securities.

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3. 2011Japan Wealth Management Securities acquired

   Aozora acquired Japan Wealth Management Securities.

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4. 2006Retail banking launched

   Aozora began retail-banking operations and opened a new Nihonbashi branch later that year.

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5. 2003Cerberus became a major shareholder

   SoftBank sold a 49 percent stake to Cerberus Capital Management.

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6. 2001Aozora Bank name adopted

   Nippon Credit Bank began operating under the Aozora Bank brand.

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7. 2000Privatized through investor-group acquisition

   A consortium led by SoftBank, Orix and Tokio Marine & Fire Insurance acquired NCB from the government.

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8. 1998Placed under government control

   The Japanese government took control of NCB amid severe bad-debt problems following the collapse of the country's asset-price bubble.

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9. 1977Renamed Nippon Credit Bank

   Nippon Fudosan Bank adopted the Nippon Credit Bank name, commonly abbreviated as NCB.

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10. 1957Nippon Fudosan Bank established

    Nippon Fudosan Bank was created to manage the remaining Japanese assets of the former Bank of Chōsen and received a special government trust-banking license.

    Source

A focused Japanese commercial bank combining corporate finance, retail banking, investment banking and institutional financial services.

• Corporate BankingCommercial banking

  Aozora's corporate-banking activities provide lending, credit facilities, financing structures and related financial solutions for companies. The business developed from the institution's long-term-credit and real-estate-finance origins into a broader corporate-finance offering. Services may be tailored to operating companies, financial sponsors and other business customers, with additional support from the bank's investment-banking and international-finance capabilities.

• Retail BankingConsumer banking2006

  Retail banking includes deposit accounts, personal lending, payments and other services for individual customers. Aozora formally launched retail-banking operations in 2006, adding a consumer-facing channel to its established corporate and institutional activities. The retail business is supported by branches and other banking channels in Japan.

• Investment BankingInvestment banking

  Investment-banking services support corporate and institutional customers with financing, capital-markets activity, advisory work and structured transactions. Aozora's investment-banking identity was particularly visible during the early post-restructuring period, when SoftBank considered positioning the renamed bank as an internet-focused investment bank. The bank later operated a broader, diversified investment-banking platform.

• Securities and Wealth ManagementSecurities services2011

  Aozora's securities-related activities serve investors and institutional customers through securities, wealth-management and related financial services. The platform was expanded through the 2011 acquisition of Japan Wealth Management Securities and its 2012 combination with Aozora Securities.

• Institutional and International FinanceInstitutional banking

  The bank provides financing and other financial services to institutional clients and supports selected international transactions through overseas representative offices and financing subsidiaries. Its international exposure has historically included lending and investment relationships with overseas financial institutions, as illustrated by its disclosed Lehman Brothers and Madoff-related exposures in 2008.

• 2011Acquired Japan Wealth Management SecuritiesM&A

  Aozora sought to strengthen its securities and wealth-management capabilities alongside its banking operations.

  What changed. The bank acquired Japan Wealth Management Securities.

  Aftermath. The acquired business was combined with Aozora Securities in 2012, consolidating related activities.

  Source
• 2009Proposed integration with Shinsei BankM&A

  Aozora and Shinsei had both been affected by losses connected with the US subprime-market crisis, creating a rationale for combining operations.

  What changed. The two banks announced negotiations for operational integration and a possible eventual merger.

  Aftermath. The discussions collapsed in May 2010 because the parties could not resolve differences concerning capitalization, strategy and related conditions.

  Source
• 2006Entered retail bankingProduct launch

  Aozora had historically been associated with corporate, long-term-credit and institutional finance, while its post-restructuring strategy sought a broader banking base.

  What changed. Aozora launched retail-banking operations on April 1, 2006, and opened a new Nihonbashi branch later that year.

  Aftermath. Retail customers became an additional target segment alongside companies and institutional clients.

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• 2001Adopted the Aozora Bank brandStrategy

  Following the privatization of Nippon Credit Bank and changes in ownership, the institution needed a new corporate identity and operating direction.

  What changed. The bank changed its name to Aozora Bank and operated under the new brand.

  Aftermath. The renamed institution broadened its activities beyond its predecessor's historical long-term-credit and real-estate-finance role.

  Source

• 2008Exposure to the Bernard L. Madoff Ponzi schemeControversy

  Aozora announced in December 2008 that it had approximately ¥12.4 billion of exposure to the investment fraud operated by Bernard L. Madoff. The disclosure occurred during the global financial crisis and added to concerns about the bank's international credit and investment exposures.

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• 2013Cerberus reduced and then exited its Aozora holding

  Cerberus announced a substantial reduction of its Aozora stake and later sold its remaining holding through Barclays distribution arrangements, ending its shareholding.

  M&AOther
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• 2012Japan Wealth Management Securities combined with Aozora Securities

  The acquired securities business was merged with Aozora Securities, consolidating related activities within the group.

  M&A
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• 2011Aozora acquired Japan Wealth Management Securities

  Aozora acquired Japan Wealth Management Securities as part of the development of its securities and wealth-management activities.

  M&A
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• 2010Aozora and Shinsei ended merger discussions

  The proposed integration was abandoned after the banks could not agree on capitalization, business strategy and other terms.

  M&A
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• 2009Aozora and Shinsei announced integration discussions

  Aozora and Shinsei Bank announced negotiations concerning integration of their operations and a possible eventual merger, following losses associated with the US subprime-market crisis.

  M&A
  Source
• 2008Aozora disclosed exposure to Lehman Brothers

  Aozora was reported as Lehman Brothers' largest unsecured bank-loan creditor when Lehman filed for Chapter 11, with exposure of approximately US$463 million according to the cited historical account.

  OtherBankruptcy
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• 2006Aozora launched retail-banking operations

  Aozora began operating as a retail bank and later opened a new branch in Nihonbashi.

  Product launch
  Source
• 2003Cerberus acquired a major Aozora stake

  SoftBank sold its 49 percent stake to Cerberus Capital Management after its intended internet-focused investment-bank strategy did not receive the expected regulatory cooperation.

  M&A
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• 2001Nippon Credit Bank adopted the Aozora name

  The former Nippon Credit Bank began operating under the Aozora Bank name after its ownership transition and restructuring.

  OtherLeadership change
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• 2000Investor group acquired Nippon Credit Bank

  A group led by SoftBank, Orix and Tokio Marine & Fire Insurance acquired the nationalized bank. The transaction included a government loan-warranty provision.

  M&A
  Source
• 1998Nippon Credit Bank placed under government control

  The Japanese government took control of Nippon Credit Bank as the institution struggled with extensive bad debt left by the collapse of the country's asset-price bubble.

  RegulationOther
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1. Aozora Bank
2. Aozora Bank official website