In Chiba, Japan, the lender opts for a “wing” alliance over mergers to combat economic woes

TOKYO (Reuters) – As an aging population and years of ultra-low interest rates prompt Japan to push for consolidation among regional lenders, Chiba Bank is weathering the challenge with a different approach — forging loose alliances, or “wings,” with other players forms.

A Japanese yen note is seen in this illustrative photo taken on June 1, 2017. REUTERS/Thomas White/Illustration/Files

One of the alliances formed by Chiba Bank 8331.T — a lender based in a prefecture where Narita Airport and Tokyo Disney Land are located — groups 10 regional banks across Japan with total assets of 70 trillion yen ($665 billion).

“Together we are trying everything that can bring positive results as there are limits to what a single bank can do,” Hidetoshi Sakuma, president of Chiba Bank, told Reuters on Friday. “We are open to and welcome any bank that wishes to join.”

Under the name “Tsubasa” or wing in English, members have offered syndicated loans, developed financial products and created a common, cashless settlement platform.

Collaboration ideas emerge at casual gatherings among bank leaders, who have even traveled together to Europe and the United States to interact with lenders and fintech companies.

Members are not pressured to get involved in projects that don’t meet their needs, Sakuma said.

“Consolidation could do more harm than good,” he added, as the merger of two banks could lead to power struggles and hurt employee morale.

A recent merger of Eighteenth Bank and Shinwa Bank in Nagasaki, under which the merged bank would be part of a Fukuoka-based group, has fueled concern in the community about a shift in focus away from local borrowers.


Regulators have long urged regional banks to consolidate as their combined net profits have plummeted 40% over the past four years. More than 100 lenders in 47 prefectures are competing for loan margins, which have fallen to 0.2%.

Prime Minister Yoshihide Suga has also stressed the need for consolidation, but regional banks have been slow to respond.

“Each region has its own history and unique industrial structure, which local lenders know best,” Sakuma said. “It is better if each regional bank remains independent and learns from each other.”

Chiba Bank will continue to avoid mergers, Sakuma added, as its alliances pay off.

The alliance with a lender in neighboring Saitama has generated cumulative synergies worth nearly 10 billion yen since its inception in fiscal 2016, the bank says.

Chiba Bank’s overhead ratio, a measure of the company’s operating expenses as a percentage of revenue, is about 53%, versus the 73% average for regional banks.

Annual profits from its core business rose 1.4% to 67.5 billion yen in the year ended March.

The advantages of being based in Chiba, which also has Japan’s sixth-largest population, puts the bank in a better position than many others struggling to cope with a shrinking local economy.

Still, the alliances are just one of many steps Chiba Bank is taking to stay relevant in the age of rapid digitization, Sakuma said.

“We’re considering it,” he said when asked if Chiba Bank would form alliances with non-banks. “Someday we want to be a company like Alibaba.”

The Chinese e-commerce giant 9988.HK has a host of other ventures, including investments in online bank MYBank and fintech subsidiary Ant Group.

Reporting by Leika Kihara and Takahiko Wada; Editing by Himani Sarkar

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