By Taiga Uranaka
TOKYO, Dec 19 (Reuters) - Ashikaga Holdings Co Ltd's
return to Japan's stock market has rival lenders
bracing for the exit of its main shareholder Nomura Holdings Co
- an event expected to trigger consolidation among the
country's regional banks.
Japan has more than 100 regional banks, accounting for
around 40 percent of the country's $4.6 trillion in outstanding
loans. But overall loan demand has shrunk 10 percent over the
last 20 years, prompting regulators to call for convincing
growth strategies and increasing pressure on the banks to
Any unloading of Nomura's 38 percent stake - one that
translates to effective control - is likely to go to a rival in
a neighbouring market, rocking the boat in highly competitive
regions just north of Tokyo and spurring other lenders to also
bulk up, industry experts say.
Nomura bought into Ashikaga in the wake of the bank's
nationalisation 10 years ago due to bad debts. But the
investment by Japan's biggest brokerage was purely financial and
an exit is widely seen as just a matter of timing.
"Ashikaga's listing is not the end of the story. Our
attention is on whom Nomura will sell its stake to," said a
senior executive at a rival regional bank.
"It will definitely be a trigger for industry
consolidation," said the executive, who declined to be
It is not clear when Nomura will begin talks to offload the
stake but a source familiar with the investment bank's thinking
said it "was considering action that would encourage regional
bank consolidation in the not too distant future".
Nomura said that nothing had been decided and that it would
look at all possible options in the future. Ashikaga declined to
Ashikaga jumped 8 percent to 455 yen in morning trade in its
market debut, giving it a market value of 148 billion yen ($1.4
billion) that ranks it about No.18 among Japanese regional
It raised some $260 million from the offering, which only
consisted of newly issued shares. The funds will be used to buy
back preferred stock.
While industry insiders say it's too early to pin down which
regional banks might emerge as potential suitors to Ashikaga,
they note that lenders such as Joyo Bank Ltd and Gunma
Ltd are fierce competitors for loans north of Tokyo.
Banks with national networks underwent a major realignment
after the bursting of the bubble economy in the 1990s, resulting
in a winnowing of more than dozen lenders to just four major
But few regional banks have bitten the bullet in terms of
M&A and a shake-up is widely viewed as long overdue.
There have been two regional banks merger announcements in
the past two years but neither threatened to change the
competitive landscape - one covered regions where loan demand is
seen as particularly weak while another was between two Tokyo
A recovering economy on the back of bold monetary and fiscal
policies from Prime Minister Shinzo Abe is also providing little
incentive for immediate action.
Combined first-half net profit for the nation's 106 regional
banks jumped 46 percent, helped by smaller credit costs and a
fall in impairment losses on their stock holdings, government
But there is no getting around a bleak outlook for growth
given Japan's declining population, especially in regional
areas. A small pick-up in loan volumes has been by driven by the
acquisition financing needs of large firms, and by cash-strapped
utilities - demand that is serviced by banks with national
Regional lenders instead are left to scrabble over offering
loans to the few clients in their areas that need them, cutting
interest rates lower and lower in a bid to gain business.
But this year Japan's Financial Services Agency as part of
its annual inspections has begun asking regional banks to
present a convincing growth strategy for the next five to 10
years, a move seen by many bankers as a prod to seek mergers and
"Consolidation has to happen eventually no matter what.
There are too many banks. I know some banks are considering some
moves," said a senior executive at a top national lender.
($1 = 103.2050 Japanese yen)
(Additional reporting by Emi Emoto and Noriyuki Hirata; Editing
by Edwina Gibbs)