Shinsei sells HQ to help cover loss

Shinsei, the Japanese bank, has been forced to sell its Tokyo headquarters to help cover a $300m loss on investments in the US mortgage market.

The mid-sized lender, the first Japanese bank to be bought by foreign investors after it collapsed in the financial crisis of the late 1990s, said on Thursday it had agreed to sell the building near Tokyo’s Imperial Palace to a property fund managed by Morgan Stanley for $118m.

Morgan Stanley’s real estate funds have now picked up two Tokyo bank buildings from institutions hobbled by the US subprime mortgage crisis: last month it bought Citigroup’s local headquarters for Y48bn ($477m).

Profits from the sale will help Shinsei avoid a second straight annual net loss, which would have jeopardised top management jobs under rules governing banks that have received bail-outs from the government.

Thierry Porte, Shinsei’s chief executive, said: “This simply makes good economic sense.” The bank plans to move to a “new, more cost-efficient location” in the next three years.

Shinsei said it would take a $100m charge in the fourth quarter, ending March 31, to cover losses linked to the US mortgage market, bringing its total housing-related markdowns and provisions for the year to $302m.

It cut its estimate of pre-tax recurring profits from Y60bn to Y20bn but said profits from the headquarters sale would allow it to report a net profit of Y65bn, above its previous forecast of Y50bn.

The bank has also postponed sales of debt securities it had been counting on for revenues this year.

Shinsei has been hit harder than other Japanese banks by the turmoil in financial markets.

“They’ve been more reliant on the credit trading business and a more investment banking-style business model,” said Jason Rogers, an analyst at Barclays Capital. “There have always been questions about the sustainability of those revenue streams.”