2 Banks in Japan’s Tohoku Region Eyeing Merger in FY 2026

Jiji Press

13:24 JST, January 25, 2024

Tokyo (Jiji Press)—Fidea Holdings Co. said Thursday that its two subsidiary banks will consider merging in fiscal 2026 to enhance operations at a time when their earnings power is declining amid ultralow interest rates and falling populations.

The envisaged merger would create the first local bank in the Tohoku northeastern Japan region to operate across a prefectural border.

The two institutions are Shonai Bank, based in the city of Tsuruoka in Yamagata Prefecture, and Hokuto Bank, based in the city of Akita, the capital of the namesake prefecture. Fidea, a financial holding company, has its headquarters in Sendai, the capital of Miyagi Prefecture, also in Tohoku.

Fidea, listed on the Tokyo Stock Exchange’s top-tier Prime section, was created in 2009 through the business integration between Shonai Bank and Hokuto Bank. Since then, the group has made streamlining efforts, such as integrating the two banks’ head office functions and back-office operations.

In February 2023, the group completed repayments of public funds injected for recapitalization in the past.

The group expects that the merger will create synergies in areas including a matching service for businesses and support for business turnaround in wide areas in Tohoku, and help reduce costs through the full adoption of the same computer systems and administrative work procedures.

If the Bank of Japan raises interest rates in a shift from its current ultraeasy monetary policy in the future, that would provide commercial banks with an opportunity to expand their profits.

The Fidea group aims to support local industries in Tohoku and help the region’s decarbonization efforts, by expanding its business scale and reinforcing its business foundations.

In 2022, Fidea considered integrating operations with Tohoku Bank, based in Morioka, the capital of Iwate Prefecture, part of Tohoku. But the idea was withdrawn later due to gaps in their management strategies.