PUBLIC FUNDS PUT BANK AT DISADVANTAGE: JAPAN'S RESON

Resona Holdings Inc. (TSE:8308) decided to repay 900 billion yen (US$10.8 billion) in public funds because "being indebted indefinitely to taxpayers will have a detrimental effect" on the bank's business by worrying employees and spurring harmful rumors about its viability, its chairman said in an interview Thursday.

As part of plans to speed up repayments, Resona will also raise up to 600 billion yen via a public share offering. If it achieves its plans, the bank's balance of public funds will shrink to just shy of 800 billion yen, down from a peak of more than 3 trillion yen.

With Resona making headway on this important issue, there is growing speculation over whether Eiji Hosoya, who has been chairman for more than seven years, will retire. In the interview, Hosoya made it clear that he will stay in the position for the time being, saying, "I cannot discuss my future with our external directors until we are firmly convinced that plans to repay public funds and regain (the bank's) financial health are on track."

Even so, the chairman suggested that a successor will likely be chosen from within Resona.

"Rather than concentrating power with a single person, Resona shall be run by a team of top executives," he said.

Asked about the stunning earnings recovery at bigger Japanese banks in the April-September half, Hosoya said that although Resona's results were unremarkable in number terms, "We've been extremely successful in areas like adding smaller business clients in Tokyo."

"If our current efforts stay on track, we'll be one rank higher (in Japan's banking hierarchy) in three years," he said.