Japan regional banks face further delays in merger plans (updated)
26/06/2017 04:36
* Big city banks have already consolidated
* They now number three compared with 21 previously
* Japan's 100-plus regional banks lag behind
* They are under pressure from shrinking market, weak
margins
(Adds total amount of loans held by regional banks and quotes
from officials)
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 neighbouring
rivals, but so far the sector has remained largely unchanged
even as big city banks have contracted from 21 to three
"megabanks" over the past 20 years.
As of May, regional banks held about 235 trillion yen ($2.12
trillion), or 53 percent, of Japan's outstanding bank loans of
447 trillion yen.
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.
"We are making our best efforts to complete the merger of
our operations with Fukuoka Financial by October," said a
spokesman at Eighteenth Bank, who asked not to be identified.
But another official familiar with the dealings said it
would be "very difficult" to complete the merger by October.
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 and Neil Fullick)
((813-6441-1840, junko.fujita@thomsonreuters.com, Reuters
Messaging:junko.fujita.reuters.com@reuters.net;))
Keywords: JAPAN REGIONAL BANKS/