Expectations Heighten for GE Entry into Japanese Banking Sector

GE Money Service Plaza Sapporo

 

   Signs are growing that General Electric Company (GE) is preparing to enter the Japanese banking sector. Financial circles are abuzz with speculation that the major US manufacturer aims to take over a Japanese bank.
   Up to now, GE has built up its financial business in Japan around non-banking services such as credit cards and consumer finance. The scale of its financial operations in Japan (total balance of assets) stood at over 1 trillion yen at the end of 2004. Japan is GE's largest overseas market, second only to its home region of North America.

CEO Goes Public on Banking Plans

   GE seems to have decided that the best way to enter the Japanese banking sector is to move beyond non-banking activities. Jeffrey R. Immelt, Chairman of the Board and Chief Executive Officer of the group, has already made clear to several Japanese media organizations the company's intention to enter the Japanese banking sector.
   What interests finance industry observers is how GE will go about it. GE's original plan was that one of its European banks would open a Japanese branch by 2006. The aim was to capitalize on burgeoning business opportunities following the full financial liberalization program (Japan's 'Big Bang') launched in 1996. With the full range of financial products such as investment trusts, insurance plans and share investments available at bank counters, the company decided to target personal savings. However, because new banking licenses take so much time and effort to acquire from the financial authorities, sources now believe that GE is also considering acquisition of a Japanese bank.

Shinsei Bank and Aozora Bank May Be Targets

Head office of Laox in Akihabara, Tokyo (Oct. 6). GE's products are also available in Japanese home electronics stores.

 

   Pundits have narrowed down the field of likely takeover targets to Shinsei Bank and Aozora Bank. Shinsei Bank was created from failed Long-Term Credit Bank of Japan, and Aozora Bank from Nippon Credit Bank, both in 1998. In 2004, Shinsei Bank listed again on the Tokyo Stock Exchange. But neither bank has come up with a clear model for future growth. Japanese financial authorities would probably welcome the absorption of one of these banks by such a highly regarded company as GE, as it would help stabilize and strengthen the nation's financial system.
   As befits a would-be entrant into the Japanese banking sector, GE has recently been accelerating personnel strategy moves. In early September, it scouted one of Japan's top bankers, UFJ Bank's "MOF man" (the key official responsible for maintaining good relations with the financial authorities), sending shock waves through the banking sector. (MOF means Ministry of Finance.)