Tokyo-area Banks Postponed Merging, Reality of Banks in Japan
Tokyo TY Financial Group and local lender Shinginko Tokyo have not agreed on plans to merge and will delay an announcement that had been slated for Sept. 25. The banks will try again to reach an agreement before the year is out.
The municipal government owns 80% of Shinginko Tokyo and the size of its post-merger stake has been the focus of much attention. Tokyo is expected to become a major, but not the biggest, shareholder in the combined entity, holding a stake of several percent. The actual reason of the delay has not been released, but financial specialists believe that earlier or later it will take place.
The merger would initially bring Shinginko Tokyo and Tokyo TY Financial's two banking units under a single holding company. By year's end, the prospective partners are to settle on which of the two units.
Some financial professionals say that Financial l services agency leak this news earlier so that both banks cannot run away from each other and they will not be able to avoid the merge at the end.
Industry participant tells that publishing the news earlier to attract other local banks to get involved in the bank merger. It is great for Tokyo TY to have more local banks in their hands as just having Shinginko does not enlarge the scale of the bank dramatically.
Higashi-Nippon Bank will be merging with the biggest local bank, Bank of Yokohama in April next year. This will create a bank of total assets of more than 15 trillion yen, to be even bigger and they seem to keep growing by trying to attract more local banks under their groups.
One special thing that Tokyo TY is providing is the safety of being connected to the capital of the country. Tokyo TY is said to be looking for a big local bank to merge in order to become larger in scale to oppose the Higashi-Nippon Bank and Bank of Yokohama group.
With these low-interest rates in Japan, banks will have to look for the quantity of customers as well as the quality especially after Tokyo Olympic in 2020. This is because funding requirements will be tapering off and it is definitely important to expand their scale.
On the other hand, other highly ranked big banks like Chiba bank and Joyo bank from Ibaraki prefecture are also said to show a movement of merging. With the news of two banks merging together, all other regional financial institution are going to face the similar situation to get merge with others.
In most of the cities, a number of population decrease cannot be avoided. However in Tokyo there are not much decrease in population and it's an attractive place for the wealthy class with large incomes. In order to enclose the customers, competition between the banks will be intense. With this unstable situation for many banks might trigger many small local based banks to be involved in merging too.
There are about one hundred local banks in Japan and about five hundred in total including credit unions and central banks. The number of banks can be up to one tenth of the number now in the future. The movement of local banks for survival will be intense.
News Souce: Nikkei Shimbun, Sankei Shimbun, Toyo Keizai