Shizuoka Financial Group and Bank of Nagoya reached an agreement to consolidate their operations under a holding company, in the latest example of Japan¡¯s regional lenders joining forces in a market hit by a shrinking population. Shares of the lenders jumped.
¡°To sustainably enhance our corporate value, it is the best option for us to strengthen regional finance through aggressive management integration,¡± Shizuoka Financial Group President Hisashi Shibata told a news conference in Tokyo on Friday.
¡°Considering the future, I thought we should take a step forward,¡± Bank of Nagoya President Ichiro Fujiwara said at the news conference, apparently mindful of changes in the business environment on the back of interest rate hikes by the Bank of Japan.
Under the pact, Bank of Nagoya will become a fully owned subsidiary of Shizuoka Financial through a share swap on April 1, 2028, the banks said in a joint statement. The share swap ratio will be determined later, they said.
Shares of the two regional banks based in central Japan surged on the news. Bank of Nagoya rose as much as 16%, the most in 17 years, while Shizuoka Financial gained as much as 6.2%, the most since April last year.?
The moves reflect challenges smaller lenders are confronting in a market suffering not only from the dwindling number of people, but also increased competition for deposits and surging bond yields that are inflicting paper losses on debt holdings. Speculation has been rife that more deals could be struck among Japan¡¯s dozens of listed smaller banks. ?
The wave of regional bank consolidation will continue, partly because it¡¯s getting harder for banks to keep up with cybersecurity and artificial intelligence spending, said Toyoki Sameshima, an analyst at SBI Securities in Tokyo. ¡°Big regional banks¡¯ appetite for expansion is not small,¡± he said.
Shizuoka is one of Japan¡¯s biggest regional banks with a market capitalization of about ?1.63 trillion ($10.2 billion), operating in a region that¡¯s home to the likes of Suzuki Motor Corp.?
Bank of Nagoya is the smaller of the two and operates in Nagoya City, which is one of Japan¡¯s population hubs located in central Japan. There, competition among local lenders has traditionally been so competitive that it¡¯s known as ¡°Nagoya rates,¡± as banks race to the bottom to win customers.?
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