Resona Holdings Inc. and Dai-ichi Mutual Life Insurance Co. are close to striking a deal on capital and operational tieups as banks and insurers increasingly move to beef up business relations ahead of further deregulation, industry sources said Sunday.
Resona, the holding company of Resona Bank and Saitama Resona Bank, plans to issue about 100 billion yen worth of preferred shares to Dai-ichi, the sources said, adding negotiations have entered their final stage with a target of reaching an agreement by the end of July.
The companies are studying an operational alliance that would enable Resona to sell Dai-ichi’s insurance products at its branch banks after the full deregulation scheduled in December for over-the-counter sales of insurance policies by banks.
While banks and insurers have been increasingly working to strengthen their relations ahead of the deregulation, a full-fledged alliance by Resona and Dai-ichi may spur other major banks and insurers to follow suit.
The Resona group has an edge in retail banking, including individual mortgage loans, giving it an upper hand in selling insurance policies to individuals, according to analysts.
Against this backdrop, Resona wants to boost its income base by aggressively promoting the insurance business to gain commission fees, they said.
The planned capital alliance will help Resona return public funds injected by the government when it was effectively nationalized in 2003 following a financial collapse. It still has an outstanding balance of 2.3 trillion yen in unreturned public money.
Resona plans to secure repayment resources by March 2009 by building up retained earnings and issuing preferred shares without voting rights, the sources said.
As part of the plan, Resona is set to issue more than 300 billion yen worth of bondlike preferred shares, of which about 100 billion yen will be allocated to Dai-ichi, they said.
Resona is also considering allocating them to foreign-affiliated insurance companies, investment banks, securities firms and companies in other industries, the sources said.
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