Japan regional banks face further delays in merger plans
25/06/2017 23:00
By Takahiko Wada and Sumio Ito
TOKYO, June 26 (Reuters) - A proposed merger between two
banks in southern Japan will likely be delayed for a second time
over monopoly concerns, sources said, highlighting the
difficulty regional banks face in trying to consolidate to
survive the shrinking market.
Last year, the largest banking group on the island of
Kyushu, Fukuoka Financial Group Inc 8354.T , said it wanted to
buy local rival Eighteenth Bank 8396.T . It intended to merge
it with Shinwa Bank, which it already controlled.
But Japan's Fair Trade Commission objected because the
merged entity would control an unprecedented level of about 70
percent of loans in Nagasaki prefecture. The FTC argued the
merger would undermine competition and lead to higher interest
rates, poorer service and branch closures in remote areas.
To overcome the objections, Shinwa Bank and Eighteenth Bank
had been preparing to sell loans to other banks, but three
officials familiar with the matter said reaching the target
would be difficult. One official said the banks were not
expected to sell enough loans to satisfy the FTC.
Japan's 100-plus regional banks have struggled, particularly
in rural areas, as the country's dwindling population has led to
weaker loan demand. Wafer thin lending margins under the Bank of
Japan's negative rates policy has also squeezed profitability.
To survive, some have tried to merge with neighboring
rivals, but so far the sector has remained largely unchanged
even as big city banks contracted from 21 to three "megabanks"
over the past 20 years.
Fukuoka Financial Group's president said earlier this month
that he still hoped to complete the merger by October. A
spokesman said the bank would have to decide in July whether to
delay the transaction.
Elsewhere, two smaller banks in Niigata prefecture Sea of
Japan coast, Daishi Bank Ltd 8324.T and Hokuetsu Bank Ltd
8325.T , agreed to merge and are awaiting authorities'
approval.
(Writing by Junko Fujita; editing by Malcolm Foster & Simon
Cameron-Moore)
((813-6441-1840, junko.fujita@thomsonreuters.com, Reuters
Messaging:junko.fujita.reuters.com@reuters.net;))
Keywords: JAPAN REGIONAL BANKS/