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Japan’s Tsukuba Bank Aims to Reverse Loss on 8% Payroll Cut

Oct. 1 (Bloomberg) -- Tsukuba Bank Ltd., a Japanese regional lender with deposits of 2 trillion yen ($24 billion), will cut its head count and branch offices to turn a loss into profit this year, President Kozo Kimura said.

The bank plans to eliminate 150 jobs, or 8 percent of its payroll, to 1,850 in the next three years, Kimura, 66, said in an interview at his office yesterday. He will also trim the number of local branches by 30 to about 120 within a year.

Japanese regional banks are under pressure to slash costs as the nation’s stagnant economy weighs on demand for business loans. Tsukuba City, Ibaraki prefecture, where the lender is based, is north of Tokyo and known as Japan’s research town with the Japan Aerospace Exploration Agency and Tsukuba University also located there.

“Lending demand looks very weak, particularly from small and medium-sized companies,” Kimura said. “We need more cost cuts to achieve our lending target.”

Bank lending in Japan has fallen for nine straight months as the economic recovery loses momentum. Companies are funding a modest increase in capital spending with cash on hand, Masayuki Oku, chairman of the Japan Bankers Association and Sumitomo Mitsui Financial Group Inc., said on Sept. 21.

Tsukuba Bank, formed through the merger of Kanto Tsukuba Bank Ltd. and Ibaraki Bank Ltd., had a net loss of 1.5 billion yen in the year ended March on increased integration costs, including work to upgrade its computer network. The bank, forecasting net income of 800 million yen this fiscal year, aims to boost profit to 5 billion yen by March 2013.

Kimura’s bank plans to increase its loans outstanding to at least 1.6 trillion yen by March 2013 from 1.46 trillion yen as of March 31, according to a three-year business plan unveiled in June.

Tsukuba Bank’s shares have fallen 5.4 percent this year, compared with an 8.5 percent drop in the benchmark Topix index.

To contact the reporter on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net; Shingo Kawamoto at skawamoto2@bloomberg.net.

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net.

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