FUKUOKA – Regional banks Nishi-Nippon Bank and Fukuoka City Bank said Friday they have reached a basic agreement to integrate their business under a holding company next April.
The banks said they will establish a joint committee to hammer out details of the integration, which they hope will make them the No. 1 regional bank in Kyushu.
The new entity will boast assets of 7.22 trillion yen, surpassing the Bank of Fukuoka. It will also be one of the nation’s largest regional banks.
The planned integration is the first to be announced in Japan’s banking sector since the government lifted its protection of bank time deposits on April 1, a move that has prompted the reorganization of local and small institutions.
The banks said they will make their automated teller machines accessible to each other’s customers at no charge and introduce flat fees for cash transfers among branches before the integration.
They said their core computer systems will remain in place for the time being.
Once they are placed under the holding company, the two banks may also consider merging and reorganizing themselves into units that separately handle corporate and retail businesses.
Founded in 1924, Fukuoka City Bank has 141 outlets and 2,200 employees. It had outstanding deposits of 2.58 trillion yen and outstanding loans of 2.27 trillion yen at the end of March last year.
Nishi-Nippon Bank, established in 1944, has 185 outlets and a workforce of 3,300. It had outstanding deposits of 3.93 trillion yen and outstanding loans of 3.42 trillion yen at the end of March 2001.
Fukuoka City Bank, a second-tier regional bank, and Nishi-Nippon Bank, a regional bank, apparently believe the integration will help reduce operational costs and bolster their financial bases, according to industry analysts. Both are feeling the pinch due to their aggressive disposal of bad loans.
Nishi-Nippon Bank is expected to report a pretax loss of 98 billion yen for fiscal 2001, which ended March 31, after setting aside loan-loss charges for the failed supermarket chain Kotobukiya Co.
Fukuoka City Bank, also struggling under the weight of bad loans, received 70 billion yen in public funds in January.
Both institutions expect the business integration to help them survive intensifying competition in the banking sector following the abolition of the full refund guarantee on time deposits, the analysts said.
With the accord, Fukuoka City Bank is expected to put on hold a deal agreed earlier with the Bank of Fukuoka, another regional bank, to integrate their basic computer systems.
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