(Reuters) - While rival banks sit on their deposits, frustrating government efforts to reflate Japan's stagnant economy, regional banker Takashi Tsuchiya will write you a loan to close your business or end your marriage.
The portly boss of Ogaki Kyoritsu Bank (OKB) (8361.T) in the central Gifu prefecture, who deploys an infectious giggle as liberally as he disburses loans, sees opportunities in borrowers that most of Japan's reluctant regional lenders would dismiss as dead ends.
Such "curtain call" loans can lift customers from the wreckage of their private lives, but for Tsuchiya, it's a creative way of supporting Japan's sluggish regional economies, where low birth rates and internal migration are hollowing out small towns and villages and squeezing his bank's margins.
“In Japan closing a business only has a negative image. It means you failed,” Tsuchiya said. “But it could be a positive event. You can start your life all over again. It’s like you finish your performance at a theater and you get invited back to the stage as the applause continues,” he said, with a ripple of laughter.
The loudest applause would come from Prime Minister Shinzo Abe, who says reviving local economies is among his top priorities. He wants annual business closures and new startups to hit 10 percent of all firms, on a par with the United States, up from 4.5 percent now.
Corporate closures hit a 10-year high last year, even as the economy recovered, but business starts have lagged behind, said Masashi Seki, manager at the information division for Tokyo Shoko Research Ltd, a think-tank that focuses on bankruptcies. Part of the problem is the glacial pace of lending at Japan's 105 local banks.
The loan-to-deposit ratio at the biggest two thirds of them was down at about 70 percent last year, compared with nearly 113 percent for banks in the European Union.
Tsuchiya, 68, whose father also ran OKB, Japan’s 41st-biggest bank by assets, wants to be part of the solution. "Our business is closely tied to local economies, so we have to help local economies to thrive," he said.
DEMOGRAPHIC DEFICIT
The bank has also tried the direct approach to rejuvenating Ogaki, its home town of about 160,000. Last year it paid to renovate a shuttered shopping district near its headquarters, one of the many arcaded rows of once-bustling shops that now stand testament to the decline of Japan's smaller urban centers.
All the shops on "OKB Street" are now open, but business is slow, struggling with demographic trends. Gifu prefecture had 2 million people in 2010, but Japan's National Institute and Social Security Research expects that to fall to 1.66 million by 2040, mirroring a national decline from 128 million to 99 million by 2048.
Hiroya Masuda, former governor of Iwate Prefecture in northern Japan, says half the nation’s towns and villages will eventually disappear if the birthrate continues to fall and people keep moving to the bigger cities.
OKB has seen some success in drumming up loan business. Lending rose 4.7 percent last year, beating bigger local rival Juroku Bank's (8356.T) 2.6 percent and well above the 1.3 percent managed by Japan's 10 biggest banks, according to central bank data.
Recognizing social trends has contributed to that growth. OKB is not just targeting unhappy couples with divorce loans, but also with loans for fertility treatment, or cosmetic surgery. Hard-pressed single mothers are another growing segment.
For all that, OKB's net interest margin has fallen in each of the last five years, and for the year ended in March was a little less than half the average at regional rivals, which in turn was a sickly 0.24 percent. To address weak profitability at the regional banks, the government is urging them to combine.
Second-largest regional lender Bank of Yokohama (8332.T) and much smaller rival Higashi-Nippon Bank (8536.T) said on Tuesday they were considering a merger.
Tsuchiya said he had been chastened by an earlier arduous merger with a small credit cooperative, so he did not want to repeat that experience.
Instead, OKB, like rival Juroku, is expanding into nearby Nagoya, Japan's third-largest city and home of Toyota Motor Corp, the world’s biggest carmaker, and the network of suppliers that has grown up around it.
That provides the bank with a safety net if falling population, which Tsuchiya calls his biggest concern, continues to empty out the smaller towns. "We have to see the reality," he said. "We have to think about what’s happening in 10 years' time."
reuters.com
The portly boss of Ogaki Kyoritsu Bank (OKB) (8361.T) in the central Gifu prefecture, who deploys an infectious giggle as liberally as he disburses loans, sees opportunities in borrowers that most of Japan's reluctant regional lenders would dismiss as dead ends.
Such "curtain call" loans can lift customers from the wreckage of their private lives, but for Tsuchiya, it's a creative way of supporting Japan's sluggish regional economies, where low birth rates and internal migration are hollowing out small towns and villages and squeezing his bank's margins.
“In Japan closing a business only has a negative image. It means you failed,” Tsuchiya said. “But it could be a positive event. You can start your life all over again. It’s like you finish your performance at a theater and you get invited back to the stage as the applause continues,” he said, with a ripple of laughter.
The loudest applause would come from Prime Minister Shinzo Abe, who says reviving local economies is among his top priorities. He wants annual business closures and new startups to hit 10 percent of all firms, on a par with the United States, up from 4.5 percent now.
Corporate closures hit a 10-year high last year, even as the economy recovered, but business starts have lagged behind, said Masashi Seki, manager at the information division for Tokyo Shoko Research Ltd, a think-tank that focuses on bankruptcies. Part of the problem is the glacial pace of lending at Japan's 105 local banks.
The loan-to-deposit ratio at the biggest two thirds of them was down at about 70 percent last year, compared with nearly 113 percent for banks in the European Union.
Tsuchiya, 68, whose father also ran OKB, Japan’s 41st-biggest bank by assets, wants to be part of the solution. "Our business is closely tied to local economies, so we have to help local economies to thrive," he said.
DEMOGRAPHIC DEFICIT
The bank has also tried the direct approach to rejuvenating Ogaki, its home town of about 160,000. Last year it paid to renovate a shuttered shopping district near its headquarters, one of the many arcaded rows of once-bustling shops that now stand testament to the decline of Japan's smaller urban centers.
All the shops on "OKB Street" are now open, but business is slow, struggling with demographic trends. Gifu prefecture had 2 million people in 2010, but Japan's National Institute and Social Security Research expects that to fall to 1.66 million by 2040, mirroring a national decline from 128 million to 99 million by 2048.
Hiroya Masuda, former governor of Iwate Prefecture in northern Japan, says half the nation’s towns and villages will eventually disappear if the birthrate continues to fall and people keep moving to the bigger cities.
OKB has seen some success in drumming up loan business. Lending rose 4.7 percent last year, beating bigger local rival Juroku Bank's (8356.T) 2.6 percent and well above the 1.3 percent managed by Japan's 10 biggest banks, according to central bank data.
Recognizing social trends has contributed to that growth. OKB is not just targeting unhappy couples with divorce loans, but also with loans for fertility treatment, or cosmetic surgery. Hard-pressed single mothers are another growing segment.
For all that, OKB's net interest margin has fallen in each of the last five years, and for the year ended in March was a little less than half the average at regional rivals, which in turn was a sickly 0.24 percent. To address weak profitability at the regional banks, the government is urging them to combine.
Second-largest regional lender Bank of Yokohama (8332.T) and much smaller rival Higashi-Nippon Bank (8536.T) said on Tuesday they were considering a merger.
Tsuchiya said he had been chastened by an earlier arduous merger with a small credit cooperative, so he did not want to repeat that experience.
Instead, OKB, like rival Juroku, is expanding into nearby Nagoya, Japan's third-largest city and home of Toyota Motor Corp, the world’s biggest carmaker, and the network of suppliers that has grown up around it.
That provides the bank with a safety net if falling population, which Tsuchiya calls his biggest concern, continues to empty out the smaller towns. "We have to see the reality," he said. "We have to think about what’s happening in 10 years' time."
reuters.com
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