latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/in-japan-merger-hopes-rise-for-allied-regional-banks-with-overlapping-networks-60483014 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

In Japan, merger hopes rise for allied regional banks with overlapping networks

StreetTalk – Episode 69: Banks left with pockets full of cash and few places to go

Street Talk – Episode 69: Banks left with pockets full of cash and few places to go

Industries Most and Least Impacted by COVID-19 from a Probability of Default Perspective – September 2020 Update

Street Talk Episode 68 - As many investors zig away from bank stocks, 2 vets in the space zag toward them


In Japan, merger hopes rise for allied regional banks with overlapping networks

Japanese regional banks that are already in operational alliances and serving the same neighborhoods are more likely to merge, analysts said, as the new prime minister could push more struggling lenders to consolidate in a move aimed at revitalizing the local economy.

There has been market chatter about, as well as share-price gains in, some regional banks since early September after Yoshihide Suga, who was officially elected Japan's prime minister Sept. 16, on several occasions publicly suggested regional lenders consider "reorganization" as there are "too many" of them.

"It should be easier for banks of similar sizes to merge, compared with those of different sizes, because smaller banks tend to hesitate to be taken over by larger ones," said Nana Otsuki, chief analyst at Monex Securities Co.

In Japan, there are around 100 regional banks, of which nearly 80 are listed companies. So far, the consolidation has been slow due to resistance from banks themselves, analysts said.

There have been a few tie-ups among regional banks that are serving the same neighborhoods. For example, in 2019, Aomori Bank Ltd. and Michinoku Bank Ltd. in Aomori prefecture agreed to form an operational alliance, and Fukuoka Financial Group Inc. and Eighteenth Bank Ltd. in Fukuoka prefecture consolidated their operations. Meanwhile, Fukui Bank Ltd. and Fukuho Bank Ltd. in Fukui prefecture struck a similar pact in May.

While the entire banking sector in Japan has been hit by ultra-low interest rates, benign national economic growth and elevated costs for years, regional lenders have been hit harder due to a dwindling and aging population, as well as weaker loan growth outside metropolitan areas.

The Financial Services Agency in 2018 identified 23 prefectures as unprofitable areas even for one bank to operate in. The agency said that 12 other regions could support just one lender and 10 other prefectures could accommodate up to two banks.

In May, the lawmakers stepped up their push for a merger by approving a new policy to exempt regional banks from antitrust law, which will clear a major obstacle for consolidation in future. The legislation will take effect in November.

Market chatter heats up

Among the many regional banks, Aomori Bank and Michinoku Bank may reportedly consider a merger, The Nikkei reported on Sept. 6.

As of Sept. 25, the share price of Aomori Bank gained 11% this month, while that of Michinoku Bank rose 23%. The Nikkei Average Index fell 0.2% during the same period.

Susumu Narita, Aomori Bank's president, said that he will not rule out the merger possibility, according to The Nikkei report. An official at Michinoku Bank, who asked not to be named, told S&P Global Market Intelligence Sept. 18 that the bank, which is not currently merger talks with Aomori Bank, could consider such a consolidation.

Toyoki Sameshima, a senior analyst at SBI Securities Co., said an integration of Aomori Bank and Michinoku Bank is more likely than combinations of other regional banks, given the existing operational alliance and overlapping branches.

Yusuke Yasuoka, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co., added that alliances among regional banks in the same prefecture are unusual, which could be a stepping stone to a merger.

The two lenders formed "a comprehensive alliance" in October 2019, including sharing their back-office operations and allowing their clients to use each other's ATMs without charge.

Aomori Bank and Michinoku Bank are fairly equal, with 95 and 94 branches, respectively, at the end of March 2020, mostly located in the same areas of the Aomori Prefecture. Two officials at the two banks agreed that the total of nearly 190 branches is too large.