Three regional banks in northern Japan are entering talks regarding a potential merger, marking a significant trend in the industry amid declining populations. Aomori Michinoku Bank, Bank of Iwate, and Akita Bank from the Tohoku region are expected to announce these discussions as soon as Friday, according to sources who spoke on condition of anonymity due to the confidential nature of the matter.
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The proposed merger could significantly impact the banking industry, as these banks are located in areas experiencing some of the steepest population declines in Japan. They face mounting pressure from adverse demographic trends and heightened competition for deposits in a rising interest rate environment.
Aomori Michinoku Bank, a subsidiary of Procrea Holdings, was formed through a consolidation process itself, with two banks in Aomori Prefecture merging under the holding company in 2022 before uniting into a single entity projected to be operational by 2025. On Friday morning, Procrea's shares rose by as much as 6.7% in Tokyo, while shares of both Bank of Iwate and Akita Bank increased by more than 3%. All three banks have seen their stock prices more than double this year.
The banks described their discussions in separate statements, noting that their boards will consider the merger prospect on Friday, although no final decisions have been made. Kyodo News first reported on the planned merger discussions.
If finalized, the merger would create a banking group with over ¥13 trillion ($82 billion) in assets, surpassing 77 Bank, currently the largest lender in the region based in Sendai. In light of the challenging demographic issues in rural areas, Japan’s Financial Services Agency has been encouraging regional banks to develop sustainable long-term strategies, including possible collaborations with rival banks.