Two of Japan's most troubled banks took action on Tuesday to end their long-running financial woes, with one announcing a radical restructuring and the other finding a merger partner.
The moves are seen as just the beginning of a drive by the the indebted banking industry to get ready for Japan's emerging "Big Bang" era of financial deregulation.
Nippon Credit Bank Ltd, one of three long-term credit banks in Japan, announced that it would cease overseas operations, sell off its Tokyo headquarters as well as other property and write off bad loans totalling 460 billion yen ($3.7 billion).
NCB said the restructuring will boost earnings by 50 billion yen ($403 million) over the next five years. It hopes to gain 67 billion yen ($540 million) from the real estate sales and will also eliminate 600 jobs to cut costs.
Despite the moves, NCB president Hiroshi Kubota told a news conference that he cannot rule out the possibility of a tie-up or merger with other banks in the future.
Earlier on Tuesday, NCB put three non-bank financial affiliates under bankruptcy protection.
As a long-term credit bank, NCB raises cash through issuing debentures rather than taking deposits.
The Japanese government, which has spoken of the benefits of deregulation and leaving the market alone, has taken a strong hand in ensuring that NCB survives, urging other banks to accept newly floated shares to help it rebuild its capital base.
The Ministry of Finance (MOF) also said it planned to use 80 billion yen ($645 million) from a special fund created to cope with bad loans from the collapse of "jusen" housing loan firms.
Finance Minister Hiroshi Mitsuzuka told a news conference that the capital increase and disposing of bad loans "will substantially improve NCB's business foundation and will contribute to the stability of financial systems both at home and abroad".
Financial analysts have criticised the NCB plan, saying it would further weigh down other big banks, which are themselves in far from robust financial health.
Hokkaido Takushoku Bank, Japan's 10th-largest commercial bank, meanwhile, said it will merge with the smaller Hokkaido Bank Ltd and cease overseas operations to become a "super-regional" bank.
Such super-regionals use their local power base to build a large presence that rivals their big-city competitors.
Hokkaido Takushoku said it had no choice but to retrench, ending lofty ambitions of being a global player in the banking world.
"We made the decision (on the overseas pullout) believing that it was inevitable to ensure leverage in our business while promoting bad loan write-offs," it said in a statement.
Hokkaido Takushoku said it and Hokkaido Bank would merge as equals by April 1998.
Both are headquartered in Sapporo, the largest city on Japan's northernmost main island of Hokkaido.
The merger will cut costs at the two banks and mean the elimination of 2,000 jobs.
It will also help Hokkaido Takushoku face its mountain of bad debts. The bank has long been considered the most troubled of Japan's major city banks and a merger candidate.
As part of the new focus it will shut down its six overseas branches in locations including New York and London and seven representative offices. It said the withdrawal from overseas operations would have only a limited impact on its business.
Hokkaido Takushoku will cut costs by 40 billion yen ($322 million) per year through steps such as rationalising overlapping branches.
($1=124 yen)
