Financial services group SBI Holdings Inc. and a regional bank in Fukushima Prefecture on Monday announced a capital tie-up that will expand the Tokyo-based company’s networks.
SBI will invest ¥1.11 billion ($10 million) in Fukushima Bank and provide expertise on financial products and information technology to enhance efficiency in the bank’s business practices, the two firms said.
SBI will become Fukushima Bank’s top shareholder with an equity stake of about 18 percent. SBI will buy 5 million new shares to be issued by the bank under a third-party allotment system for ¥222 apiece. Including shares held by subsidiaries, the SBI group’s overall stake will rise to some 19 percent, and it will send an official to serve on the bank’s board.
Fukushima Bank, which has been struggling with profitability under the Bank of Japan’s ultraeasy monetary policy, including negative interest rates, said it greenlighted the alliance at a board meeting Monday and expects the tie-up to help deliver a turnaround.
SBI has been expanding alliances with banks in its effort to become Japan’s “fourth mega-bank,” joining Mizuho Financial Group Inc., Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc.
In September, SBI concluded a capital tie-up with Shimane Bank, injecting ¥2.5 billion. The alliance with Fukushima Bank is its second tie-up with a regional financial institution.
Established in 1922, Fukushima Bank posted a group net loss of ¥3.12 billion in the business year ended in March last year, falling into the red for the first time in seven years.
The Financial Services Agency ordered it to improve business operations and the bank logged a ¥521 million net profit in the year through March this year.
Many small banks in Japan have been affected by population decline and the rising costs of developing fintech, which delivers financial services via information technology, and implementing measures to fight money laundering.
Of the 105 regional banks, 45 have booked a loss in their core business for at least two straight years through March. Of those, 27 logged red ink for more than five years in a row, according to the FSA.
Given the trend, banks have accelerated moves to enhance business by striking alliances with their peers. In July, for example, Bank of Yokohama and Chiba Bank announced a deal to share customer information.