Bank debut sees share price slip

Shares in Tokyo Star Bank, the first Japanese lender to go public in almost two years, opened 3.5 per cent lower on their debut, on concern that the price was too high for a bank that does not expect profit growth this year.

The bank, a lender to small businesses in Japan's capital, fell 15,000 to 415,000 ($5120) on the city's stock exchange.

Lone Star Funds, a Dallas-based investment fund that bought Tokyo Star in 2001, this month raised 85.4 billion ($1.05 billion) by selling a one-third stake at 430,000 a share.

Lone Star sold 198,593 shares in Tokyo Star, pricing the stock at the top of a range marketed to investors in Japan's third-largest initial public offering of the year. The original price target was increased by 23 per cent.

"The price was expensive and the decision to raise it 23 per cent came as a surprise," said Hideaki Kurimoto, who helps manage the equivalent of US$2.7 billion ($3.85 billion) at Meiji Dresdner Asset Management in Tokyo.

"The sale took place when most investors had already added sufficient banking stocks to their portfolios so they don't have strong reasons for buying Tokyo Star."

On Monday, Mizuho Financial Group, Japan's second-largest bank, raised 487.7 billion in Japan's largest share sale since 2001, pricing the stock at a 2 per cent discount, the smallest it had targeted.

Japan's economy is heading for its longest period of growth in eight years, making it easier for companies to pay debt and seek funds for investment. The Topix Banks Index rose 32 per cent this year, almost double the pace of the nation's benchmark.

Lone Star bought then-bankrupt Tokyo Sowa Bank in 2001 for 40.4 billion, renaming it Tokyo Star.

Tokyo Star boosted lending 25 per cent to 868 billion in the year ending March 31. The bank forecasts net income for this fiscal year will be little changed at 14.5 billion.

"The listing of Tokyo Star indicates the recovery of Japan's banking industry," said Jun Nishizaki, chief portfolio manager at Nissay Asset Management.

"Lone Star has done well."

- BLOOMBERG