Two Japanese regional banks eye tie-up to fight margin pressures (updated)
11/05/2021 07:02
* Deal may become 1st case of exemption from antitrust rules
* Consolidation would underscore plight of regional lenders
* Policymakers fret pandemic may saddle banks with bad loans
* Consolidation will give new bank 70% share in prefecture
(Adds milestone, reported comment from bank head, context on
struggling borrowers)
By Leika Kihara
TOKYO, May 11 (Reuters) - Two regional banks in Japan's
northern prefecture of Aomori said they were considering
consolidating, joining a flurry of lenders seeking to survive
amid narrowing margins from a rapidly ageing population and
ultra-low interest rates.
If the deal materialises, it could become the first case
under a revised law that took effect in November exempting
regional bank consolidations from antitrust rules.
Aomori Bank 8342.T and Michinoku Bank 8350.T , both
listed lenders based in Aomori, said in a statement on Tuesday
they were "considering" a business consolidation.
The statement came in response to a report by public
broadcaster NHK on Monday they were in talks to consolidate, a
move that would give them a 70% share in the prefecture.
Takayuki Fujisawa, president of Michinoku Bank, said joining
forces with Aomori Bank was "the best option" for the regional
economy, according to Jiji news agency.
Prime Minister Yoshihide Suga has emphasised the need for
regional banks to consolidate, as years of ultra-loose monetary
policy and a dwindling regional population erode their profits.
"Regional banks are facing a difficult business
environment," Finance Minister Taro Aso told reporters.
While regional banks have played a key role in supporting
firms hit by the COVID-19 pandemic, some policymakers warn they
could be saddled with a pile of bad debt if the crisis persists.
Particularly under strain are borrowers hit by state of
emergency curbs to combat the pandemic. Major tourist agency
KNT-CT Holdings 9726.T said on Tuesday it was considering
raising capital, after media reports that it would seek 40
billion yen ($368 million) in aid from banks and its parent
firm.
"Even after the pandemic subsides, financial institutions'
profits will remain under pressure from low interest rates and
structural factors," the Bank of Japan warned in a report last
month. urn:newsml:reuters.com:*:nL4N2MD1VK
Regulators have long prodded regional banks to merge,
including by changing laws to exempt their consolidations from
antitrust rules. The BOJ has also created a scheme aimed at
incentivising regional lenders to consolidate, underscoring its
concern over the health of the banking system. urn:newsml:reuters.com:*:nL1N2HW0FR
($1 = 108.8100 yen)
(Reporting by Leika Kihara; Additional reporting by Yoshifumi
Takemoto; Editing by Jacqueline Wong and Gerry Doyle)
((leika.kihara@thomsonreuters.com; +813-6441-1828; Reuters
Messaging: leika.kihara.reuters.com@reuters.net))