Shinsei plunges after news on Aozora merger collapse

Misery loves company, with Shinsei Bank continuing its slump as it fell to its lowest in two months in Tokyo trading after news went around on the supposed collapse of merger talks with equally beleaguered Aozora Bank.

Shinsei slumped 5.5% to 98 yen at 9:08 am Monday in Tokyo, the biggest decline since Dec. 8, according to a Bloomberg report.

Shinsei previously dropped as much as 8.7%, and has fallen 38% on the Tokyo Stock Exchange since merger plans were announced on July 1.

The Japanese bank, partly owned by US investor Christopher Flowers, agreed on July to merge with Aozora after the two companies reported a combined annual loss of $4.2 billion on soured investments in overseas bonds, hedge funds and US mortgage assets.

Disagreement on a business strategy, however, has prompted the two Tokyo-based lenders to call off the transaction planned for October 2009, as reported last week.

Shinsei may thus be compelled to sell shares to raise capital. As this developed, Aozora also slid 0.9% to 108 yen.

View full report in Bloomberg.