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Resona Holdings Inc. is targeting retiring entrepreneurs to boost lending by some ¥600 billion through businesses they sell and rental properties they invest in.

Japan’s fifth-largest bank is betting on a demographic shift that will push people who are 65 and older to 30 percent of the population by 2025. Resona President, Seiji Higaki, 61, expects aging proprietors of small companies to close shop and seek loans for new apartment buildings, swapping business revenue for rental income.

“Just look around: Many of the small business buildings and factories in Tokyo have been scrapped and replaced by apartments and condominiums,” Higaki said in an interview Monday. “These are custom-made loans that will carry higher interest rates than ordinary corporate loans.”

The wave of retirements will probably also spur borrowing from younger people buying businesses from departing owners, and Resona has set up a 90-strong team to oversee lending focused on retiring small business owners, Higaki said, adding he will expand it to 130 by April and expects to achieve the lending target within three years.

Unlike Resona’s larger rivals that are looking abroad to counter sluggish demand at home, the bank intends to search for areas of lending growth in Japan, according to Higaki.

Seven million baby boomers born between 1947 and 1949 began to reach retirement age this year, while the number of people aged 65 and over jumped 2.6 percent to 30.3 million in May from a year earlier, accounting for more than a fifth of the population, data from the internal affairs ministry show.

Small businesses accounted for ¥9.9 trillion, or 38 percent, of Resona’s total ¥26.2 trillion in loans as of Sept. 30, according to the bank’s data. Mortgages made up 47 percent, or ¥12.4 trillion, of this total and the remaining 15 percent consisted of loans to large companies.

Average net interest margin, a measure of profit on loans, among the 84 domestic lenders in the Topix banks index has dropped to 1.35 percent from 1.6 percent three years earlier, based on the latest company filings, falling to the lowest level since at least 2001.

Resona, which received a ¥1.96 trillion government bailout in 2003, has posted profits in the past eight fiscal years by focusing on retail customers under the late Chairman Eiji Hosoya, who was 67 when he died Nov. 4 from an unspecified illness. Hosoya implemented restructuring measures, including the sale of Resona’s headquarters in 2008.

The bank unveiled a plan last week to repay part of the outstanding ¥870 billion balance in taxpayer money by increasing reserves by ¥100 billion in each of the next three years.

“We are watching changes in Japan’s social structure closely and looking for financing needs that come along with them,” Higaki said. “One of my big missions is to continue leading the Resona banking group based on the foundations laid by Hosoya.”

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