Northern Japan banks eye US$82bil merger

TOKYO: Three regional lenders in northern Japan agreed to begin talks on a merger that would create the area’s largest banking group, a fresh sign that industry consolidation is gaining momentum as the population declines.

Procrea Holdings Inc, Bank of Iwate Ltd and Akita Bank Ltd, with more than 13 trillion yen (US$82bil) in total assets, announced the plans in a joint statement following board meetings last Friday, confirming earlier media reports.

They join a growing number of Japanese banks that are considering mergers to survive in an industry facing worsening demographics and an intensifying fight for deposits as interest rates rise.

Japan’s financial regulator has been pushing regional lenders to draw up viable long-term visions, including combining operations with rivals.

“Japan’s regional bank consolidation could be entering a faster phase as lenders seek scale against rising competitive and funding pressures,” Bloomberg Intelligence analyst Michael Makdad wrote in a note.

Shares of Procrea, which is the parent company of Aomori Michinoku Bank, rose 5.9% in Tokyo last Friday.

Akita Bank closed 0.5% higher and Bank of Iwate was unchanged. Shares of all three lenders have more than doubled this year, giving them a combined market capitalisation of 556 billion yen.

The three banks are based in the Tohoku region, which has some of the steepest population declines in Japan.

A combination would create a banking group with more assets than the area’s biggest lender, 77 Bank Ltd, which is based in Sendai, Miyagi prefecture.

“The operating environment surrounding the three banks is expected to become even more challenging,” the lenders said in the statement.

Leveraging their respective strengths will contribute to the sustainable development of their communities and customers and enhance corporate value, they said.

The three banks aim to complete the business integration in April 2028.

Asked about the merger plans before the announcement, Finance Minister Satsuki Katayama said that generally speaking, regional banks are “operating in an increasingly challenging environment, including because of population decline.”

“It’s important that they continue to support their local economies by providing a broad range of financial intermediation services,” she said at a regular briefing.

“The Financial Services Agency will continue to encourage regional banks to reform their businesses, whether through mergers and integrations or other means.”

Aomori Michinoku was itself created through a recent consolidation. Two banks in Aomori prefecture came under the holding company in 2022 before combining into a single lender in 2025.

Japan had 95 regional lenders as of April, according to the Bank of Japan. That’s roughly the equivalent to two in each prefecture.

The country is among the most overbanked in the developed world, with about 34 branches per 100,000 people in 2024, higher than 26 in the United States and just 16 in Australia, according to World Bank statistics.

Not all mergers have been carried out.

San Ju San Financial Group Inc and Aichi Financial Group Inc, based in central Japan, said last month that they scrapped plans to combine, citing differences in views on the business direction. — Bloomberg