Regional bank in Japan battles ultra-low rates with wine bar, sea urchins
15/05/2019 06:58
By Leika Kihara and Takahiko Wada
SHIMONOSEKI, Japan, May 15 (Reuters) - As years of near-zero
interest rates in Japan make traditional lending barely
profitable, one regional bank is seeking to drum up business
through less conventional enterprises, from opening wine bars to
helping local fishermen farm sea urchins.
The new approach comes as Japan's regulators cautiously
loosen rules to allow banks to venture into other businesses to
help offset the hit to their net interest income from
ultra-loose monetary policy.
For Takeshi Yoshimura, the 59-year-old president of
Yamaguchi Financial Group 8418.T , the effects of the Bank of
Japan's zero interest rates are compounded by other challenges
his region faces, notably a dwindling population and an exodus
of firms to bigger cities like Tokyo.
That is why he is prodding young employees to come up with
ideas to make better use of the roughly 280 branch offices
spread across Yamaguchi and Hiroshima, the western Japan
prefectures where Yamaguchi Financial mainly operates.
One idea was to rent out space to a wine bar at a branch in
Yuya, a sleepy town with hot springs where such businesses
aren't common.
"Yuya is a nice tourist destination, but there are very few
places to drink and dine," Yoshimura said. "Visitors to the bar
can open a bank account or get consulting services from one of
our bankers," he told Reuters on Tuesday. The bar opens in July.
The goal is to transform all other branches into community
hubs of various kinds, such as cafes or child-care centres, that
break the stereotype of traditional banking.
"Closing branches would cut costs. But we're not doing that
because we want to maintain a place where we have face-to-face
interaction with our customers," Yoshimura said.
Years of heavy money printing by the BOJ have pushed
borrowing costs to near-zero, benefiting borrowers but hurting
Japan's regional banks that are already suffering from a
dwindling population and a lack of fund demand.
Yamaguchi Financial, which ranks 11th among Japan's 78
listed regional banks in total assets, is no exception. Its
consolidated net profit in the year that ended March fell 30%
from a year earlier. Profits from core lending operations were
down 26%.
Nearly 60% of regional banks could suffer net losses a
decade from now if corporate borrowing keeps falling at the
current trend, the BOJ warned in a report in April. urn:newsml:reuters.com:*:nL3N21Z1PM
Aside from utilising its branches, Yamaguchi Financial is
seeking to boost the region's fishery industry. After local
fishermen complained they were catching fewer natural sea
urchins, its bankers created a network of local academics and
researchers to experiment ways to farm the creatures.
If the farming is successful, the bank would provide loans
to build plants, market the urchins across Japan and possibly
open a restaurant with a view of the sea where visitors can try
the delicacy over a glass of wine, Yoshimura said.
Yamaguchi Financial also helps local food producers with the
branding and marketing of goods ranging from honey, beef to
sake.
The group hopes to make such non-financial businesses
profitable in the next three to five years, which would in turn
drive fresh business opportunities for the bank.
"Banking is still important. But we also need to come up
with other business models to prepare for the day when banks
would be allowed to do many other things," he said.
"One day, people could barely remember the day we were a
bank. That's fine."
(Reporting by Leika Kihara and Takahiko Wada; Editing by Sam
Holmes)
((leika.kihara@thomsonreuters.com; +813-6441-1828; Reuters
Messaging: leika.kihara.reuters.com@reuters.net))