Chiba Bank to Tie Up With Musashino, Stop Short of Merger

  • Deal is a `new model for cooperation' for regional banks
  • Japan's local lenders face shrinking loan margins, population

Chiba Bank Ltd. is forming an alliance with Musashino Bank Ltd. in what could herald a new way for Japanese regional lenders to cope with industry headwinds without resorting to merging.

The banks, based in prefectures that border with Tokyo, will acquire shares in each other, they said in statements Friday. While the amount and timing are yet to be decided, the companies may limit the stakes to about 3 percent, Chiba Bank President Hidetoshi Sakuma said at a news briefing in Tokyo.

The deal is a “new model for cooperation” between regional banks, the companies said. Japan’s more than 100 local lenders are under pressure to combine or find ways of boosting profitability as rural populations decline and loan margins are squeezed even further under the central bank’s negative interest-rate policy. Lenders that have agreed to merge recently, including Bank of Yokohama Ltd. and Higashi-Nippon Bank Ltd., have opted to form a holding company to oversee the entities.

Chiba Bank and Saitama-based Musashino Bank will cut costs by sharing administrative tasks as well as expertise in product and systems development, according to the statement. They will keep their own brands and branch networks. Chiba Bank is Japan’s third-biggest regional lender by assets, according to data compiled by Bloomberg.

The companies had been considering forming an alliance “for some time” and negative rates had nothing to do with the move, Musashino Bank President Kikuo Kato said at the briefing. Neither party is thinking about any future merger or exchange of executives, he said.

Shares of Musashino Bank closed 4 percent higher in Tokyo trading, the best performance on the Topix Banks Index. Chiba Bank, based in the prefecture of the same name east of Tokyo, rose 2.8 percent. The lenders have dropped at least 34 percent this year.

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