The Azabu rescue plan and the FY1994 write-off (1994)

When a view on the market shackles the decision to write off

“For a year and a half we simply let the money run out” — the words of a Mitsui Trust executive describe the nature of this judgement well. Lending to Azabu Building, about $414.3M (¥60bn) in the autumn of 1990, had swollen to $1.7B (¥215bn) fifteen months later. The delay came not because the value of Azabu’s assets was unreadable, but because the bank, afraid of losing a $892.1M (¥120bn) share-purchase contract, could bring itself neither to force a change of president nor to shelve the interest. A view on one particular block of shares, it appears, shackled the main bank’s judgement about how to work the problem out.

Blaming only the delay would not be fair, though. Unrealized gains on listed securities of $9.9B (¥1.33tn) at September 1991 were the largest of any trust bank, and its fund trusts had been selling equities from the end of 1989 until their weighting was close to zero; within the industry there was even a verdict that Mitsui “was quick on its feet getting out of land.” Even so, the $2.0B (¥200bn) write-off ran on into the $2.7B (¥330bn) ordinary loss of the year to March 2002, and became a distant cause of the specialist trust banks no longer being able to stand alone.