Bid for bank stake lifts Nikkei

News of the deal boosted bank shares in Tokyo

The Nikkei index has risen on the news that investors led by the US private equity firm JC Flowers are bidding for a stake in Japan's Shinsei Bank.

The group will offer about $1.8bn (£874m) for a 32.6% stake in the mid-sized Japanese lender.

JC Flowers and Ripplewood bought the defunct Long Term Credit Bank of Japan in 2000, turned it round, renamed in Shinsei and floated it in 2004.

Flowers is also one of the potential bidders for Northern Rock in the UK.

Private equity deal

The turnaround of Shinsei was one of the most lucrative private equity deals.

Shinsei Bank says bringing in the investor group will help strengthen its investment and retail banking operations.

The private equity bidders clearly see opportunities for fresh profits as Shinsei's share price has fallen about 40% so far this year.

It has been a tough year for the Japanese banking sector, which has been hit by exposure to US sub-prime debt as well as weak domestic business as a result of slow economic growth in Japan.

Profits have also been hit by government-imposed caps on the rates of interest banks can charge on loans to consumers.

The Japanese government currently holds 12% of Shinsei's shares along with options that could leave it owning 27%.

Tokyo's Nikkei 225 index, which had fallen as much as 1.9% during the day, closed up 1.1% to finish at 15,211.52, helped by a boost to banking shares from news of the Shinsei deal.