Struggling to revive profits as low yields persist, a handful of troubled regional banks are wading deeper into riskier credit such as near-junk rated overseas bonds, according to a Bloomberg survey.
Weaker regional lenders are fighting for survival as the government presses for consolidation in the industry, which has been wracked by shrinking rural populations. Unlike mega-banks, which can mitigate the blow from negative interest rates by diversifying more into businesses like investment banking, regional lenders sometimes lack the resources for such shifts.
The country's low rates have forced some traditionally conservative local lenders to dive into riskier assets after cutting holdings of Japanese government bonds, which had been their mainstay.