Taking Promise fully in-house: a bank absorbing a consumer lender whole (2011)

Why a bank took a consumer lender whole

The core of this decision was that, with the market shrinking under regulation, the bank chose not to cut the consumer lender loose but to take it wholly inside. The refunding of overpaid interest was a burden in which past high rates turned directly into future payouts. Few firms could bear it alone: Takefuji ran out of strength, while Acom and Promise survived by leaning on bank capital. For Sumitomo Mitsui Financial Group, full acquisition meant putting in about $2.6B (¥210bn) to take on the damaged assets and, with them, a network of retail customers and lending.

And yet what it took on was not a growth business but a shrinking market and the weight of interest refunds. Even after propping up the balance sheet with fresh capital and repainting the firm in group colours by changing its name, there was no guarantee that consumer finance itself would grow again. The group would later bundle the company with its card business, tying it to payments to widen its uses. Where a bank places its point of contact for lending to individuals, and in what vessel it carries that lending — taking Promise in was a move that answered the question with capital, and the answer is still being rearranged today.