Three new megabank groups started their operations Monday morning, raising hopes that the presence of the new entities will further accelerate the disposal of bad loans held by Japanese banks.
Sumitomo Mitsui Banking Corp., the product of a merger between Sumitomo Bank and Sakura Bank, opened with a ceremony attended by its president, Yoshifumi Nishikawa, at its new headquarters in Hibiya, Tokyo.
“I feel like we are setting sail on rough seas,” Nishikawa said at the ceremony.
Mitsubishi Tokyo Financial Group Inc., a merged body of Bank of Tokyo-Mitsubishi, Mitsubishi Trust & Banking Co. and Nippon Trust Bank, also started its operations Monday, as did UFJ Holdings Inc. — a holding firm of Sanwa Bank, Tokai Bank and Toyo Trust & Banking Co.
Speaking at UFJ’s opening ceremony, UFJ President Hideo Ogasawara said, “We will go ahead with structural reform among the Big Four groups so that we will be able to make a great leap.”
These launches usher in a new era for Japan’s Big Four megabank groups, including Mizuho Holdings Inc.
Mizuho Holdings was formed in September as a three-way alliance combining Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan.
Industry analysts said the appearance of the Big Four will stir further corporate realignments in the banking industry.
Some pointed out, however, that the megabanks are still struggling under a mountain of bad loans and are crippled by low profitability and low-quality capital bases.
The recent weakness in Tokyo share prices has compounded their woes, seriously undermining their ability to draw on latent gains on their massive stockholdings to deal with bad debts.
Meanwhile, three firms in the nonlife insurance industry — Nipponkoa Insurance Co., Aioi Insurance Co. and Nissay Dowa General Insurance Co. — also started operations Monday.
Nipponkoa was established through a merger of Nippon Fire & Marine Insurance Co. and Koa Fire & Marine Insurance Co., while Aioi was created via a merger of Chiyoda Fire & Marine Insurance Co. and Dai-Tokyo Fire & Marine Insurance Co.
Dowa Fire & Marine Insurance Co. and Nissei Nonlife Insurance Co. merged to create Nissay Dowa, with Dowa constituting the surviving entity.
Nipponkoa President Ken Matsuzawa said, “I have a sense of self-renewal as we lead the pack of corporate realignments in the insurance industry.”
In October, Mitsui Marine & Fire Insurance Co. and Sumitomo Marine & Fire Insurance Co. are slated to merge to become Mitsui Sumitomo Insurance Co.
SMBC rated stable
Standard & Poor’s Corp. said Monday it has assigned its BBB-plus long-term and A-2 short-term counterparty credit ratings to Sumitomo Mitsui Banking Corp.
The outlook on the long-term rating is stable, the U.S. rating agency said. SMBC was formed Sunday through the merger of Sakura Bank and Sumitomo Bank.
“The rating reflects the new bank’s strong franchise in the domestic market, which provides a solid funding base,” S&P said.
But the rating also takes into account SMBC’s lingering asset quality problems, weak profitability and poor capital structure, it said.
Against the backdrop of the weak economy, ongoing high credit costs may delay SMBC’s financial recovery, S&P said, adding it estimates the bank’s credit costs reached 800 billion yen in fiscal 2000, almost twice the previous estimate.
“Given the weakness of some corporate borrowers and declining real estate prices, Standard & Poor’s does not expect the bank’s asset quality to recover dramatically for two to three years,” the agency said.
Sony Bank formed
Sony Bank Corp., an Internet-based bank, was established Monday and is expected to begin conducting business in June.
Last month, the Financial Services Agency gave Sony Corp. preliminary approval to set up the bank.
The bank, the first established by a nonbanking company, will soon formally apply for a bank license with the FSA.
The online bank aims to attract 600,000 accounts and deposits totaling 1 trillion yen within five years.
Bank holding company
SAPPORO (Kyodo) North Pacific Bank and Sapporo Bank on Monday formed Japan’s first holding company for regional banks, creating Japan’s fifth-biggest regional banking group, with deposits of 5.8 trillion yen.
The holding company, Sapporo Hokuyo Holdings Inc., is capitalized at 55.8 billion yen. It debuted on the Tokyo and Sapporo stock exchanges, supplanting the delisting North Pacific Bank.
Having integrated their operations under Sapporo Hokuyo Holdings, the two Hokkaido-based banks are to shut 49 of their current 291 branches over the next three years. They are also set to trim 250 jobs, reducing their combined workforce down to around 4,000.
North Pacific Bank and Sapporo Bank will continue to conduct their business separately, with North Pacific Bank targeting big corporate customers and Sapporo Bank serving individuals and small and medium-size companies.
Iwao Takamuki, president of North Pacific Bank, is the chairman of the holding company, while Sapporo Bank President Jiro Yoshino is its vice president.
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