Tohoku Area Banking Industry Report
Jan 13, 2016
Tohoku Area Banking Industry Report
Tohoku Area at grace
• Tohoku represents 8.2% of Japan GDP. Population has been declining since 1980’s and per capita GDP ranks lower 25% tile except for Miyagi and Fukushima
• Center of Economy is Sendai. Many banks are opening their branch in Sendai.
• Compared to other area, drop of DI was relatively moderate.
• There is 15 banks in Tohoku area. Except for 77 bank, their size are small and OHR are high. 7 out of 15 banks have 70+ OHR and 5 (Michinoku, Iwate, Tohoku, Shonai, Toho) of which are highest 20% among Japanese banks.
• Shonai, Hokuto, Tohoku, and Michinoku aligns together in several business areas.
• Though Shonai had high MOF capital ratio of 11% in 03/08, it has dropped to 8.7% in 9/08 because Shonai injected capital to Hokuto. Hokuto’s MOF capital raito became 8.0% in 9/08 because of this injection.
Aomori
Iwate
Hokuto
77
SendaiShonai
Kirayaka
Toho
Fukushima
Daito1.5 tn+ deposit
4 tn+ deposit
<1.5tn deposit
Yamagata
Akita Kita-Nippon
Tohoku
Michinoku
: AAI NET (ATM Alliance)
: Alliance (Study group, Syndicate loan, Securitization product)
: Mizuho is one of the major shareholders
: Tokyo Mitsubishi UFJ is one of the major shareholder
Tohoku Economy – as bad as Kanto and Chubu
• DI of small/mid manufacturing companies in Tohoku area has dropped by 12.7 point from (-38) 1H 2008 to (-50.7) 2H 2008. The drop is almost as high as Kanto and Chubu where many manufacturing companies for export exist.
Manufacturing Companies
Non-manufacturing Companies
DI of small/mid companies by region
Tohoku Area
0.0 1.0 2.0 3.0
Kanto
Hokkaido
Kinki
Chubu
Kyusyu
Chugoku/Shikoku
Tohoku
Hokuriku
Average population per regional bank mn
Hokkaido
Tohoku
Kanto
Hokuriku
ChubuKinkiChugoku/Shikoku
Kyusyu
Source: Compiled using “Statistics of Prefecture 2008”
• Tohoku ranks second lowest nationwide among peers when measured by average population per regional bank.
• 15 regional banks among population of only 9.5 million people.
Shonai Bank: 11th largest out of 15 banks in Tohoku
0,000
0,500
1,000
1,500
2,000
2,500
3,000
3,500
77 B
ank
Toho
Ban
k
The
Aom
ori
Bank
Bank
of Iw
ate
Aki
ta B
ank
Mic
hino
kuBa
nk
Yam
agat
aBa
nk
Kira
yaka
HD
*
Kita
-Nip
pon
Bank
Hok
uto
Shon
ai B
ank
Send
ai B
ank
Toho
ku B
ank
Fuku
shim
aBa
nk
Dai
to B
ank
Deposits of all regional banks in Tohoku (as of FY03/08)
Source: Compiled from company annual reports
* Kirayaka HD is aggregation of Shokusan Bank and Shiawase Bank
JPY bn
Size Matters
Source: Company Annual Report (as of 3/2008)
• Tohoku ranks second lowest nationwide among peers when measured by average population per regional bank.
•OHR, thus profitability of the bank, is correlated to the size of bank. Because of its size, “Jinano” banks have disadvantage to their competitors.
Holding-co w/ Hokuto Bank
Post-merger: Shonai & Hokuto become 4th largest Tohoku bank
0
500
1,000
1,500
2,000
2,500
3,000
3,500
77 B
ank
Toho
Ban
k Th
e Ao
mor
i Ban
k Sh
onai
& H
okut
oBa
nk o
f Iw
ate
Akita
Ban
k M
ichi
noku
Ban
k Ya
mag
ata
Bank
Ki
raya
ka H
D *
Kita
-Nip
pon
Bank
H
okut
o Ba
nkSh
onai
Ban
kSe
ndai
Ban
kTo
hoku
Ban
k Fu
kush
ima
Bank
D
aito
Ban
k
Deposits as of FY03/08JPY bn
However, MOF Cap ratio of Shonai Bank has dropped from 11% (03/08) toto 8.7% (9/08)because of the capital injection to Hokuto Bank
Akita
●
●Yamagata
●●
●
●
●
●●
●
●
●
●
●
●●
●
Akita City
TsuruokaCity
Sakata City
Yamagata City
●
●●●
●
●
●
●
●●
●●
● Sendai City
Iwate
Miyagi
Appendix 1: Shonai Bank
Fastest Growing Bank In Tohoku
Source: Compiled from company annual reports
* Kirayaka HD is aggregation of Shokusan Bank and Shiawase Bank
-3.00%
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
Shon
ai B
ank
Bank
of Iw
ate
Yam
agat
a Ba
nk
Kita
-Nip
pon
Bank
The
Aom
ori B
ank
Aki
ta B
ank
Hok
uto
Toho
ku B
ank
Send
ai B
ank
Mic
hino
ku B
ank
77 B
ank
Fuku
shim
a Ba
nk
Kira
yaka
HD
*
Growth in deposits of all regional banks in Tohoku (3yr CAGR; as of FY03/08)
ISB and Branch Strategy
SendaiCityYamagata
City
In-store branch map (6 in Yamagata; 8 in Miyagi, 1 in Fukushima)
While most other banks are prioritizing impersonal channels like net banking, Shonai is expanding efforts into face-to-face banking.
Two key distribution channels: Branches: Elegant interior design; focus on “life-consulting” ISBs: Shopping mall based; Low up-front investment burden
Concentrating on investment trust and insurance products, Shonai has been successful in acquiring affluent customers.
Using the innovative In-Store Branch (ISB) format, Shonai has also achieved high new customer acquisition at low cost.
While most other banks are prioritizing impersonal channels like net banking, Shonai is expanding efforts into face-to-face banking.
Two key distribution channels: Branches: Elegant interior design; focus on “life-consulting” ISBs: Shopping mall based; Low up-front investment burden
Concentrating on investment trust and insurance products, Shonai has been successful in acquiring affluent customers.
Using the innovative In-Store Branch (ISB) format, Shonai has also achieved high new customer acquisition at low cost.
【 ISB ( in-store branches )】【 ISB ( in-store branches )】
【 Branches with elegant interior design offer individual consulting areas 】
【 Branches with elegant interior design offer individual consulting areas 】
Leverage ISB expertise
3
0
30
1211
3
Shonai will become an agency in Tohoku area and also provide Aeonbankconsulting service of In Store Bank management for other Aeon ISBs.
Aeonbank has found in 2007 backed by one of the top GMS in Japan, Aeon.
Shonai made an alliance with Aeonbank in Nov 2008.
# of ISBs of Aeonbank by Area
Countrywide network of GMSs Successful pioneer of SBI in Tohoku Area
Source: Company Semi Annual Report
Branch Mgt Consulting
4
1
1
1
15Shonai
Michinoku
Yamagata
Iwate
77
ISBs
# of ISBs of Regional Banks in Tohoku
Focus on Fee Business
Source: Compilied from company annuar reports
Fee Income Ratio ( Fee Income / Gross Profit )
Ratio of mutual fund AUM to total AUM and ratio of fee income to gross profit
0%
5%
10%
15%
20%
0% 5% 10% 15% 20% 25%
Mutu
al Fu
nd A
ssets
under
managem
ent
/ M
utu
al Fund A
ssets
and D
eposi
ts u
nder
managem
ent
Asset MgmtFee Business
Traditional Banking
OtherFee
Business
Shonai Bank
Survey of 64 regional banks (as of FY3/08)
Top Saler of MF/Insurance in Tohoku Area
0
20
40
60
80
100
120
140
160
180
200
Dec
-98
Dec
-99
Dec
-00
Dec
-01
Dec
-02
Dec
-03
Dec
-04
Dec
-05
Dec
-06
Dec
-07
Dec
-08
(bn) Mutual Fund sales since Dec 1998
7 year CAGR 25.2%
7 year CAGR 25.2%