TOKYO -- Mitsubishi UFJ Trust and Banking will ink an agreement as early as Monday to acquire the trust bank owned by Shinkin Central Bank, part of the financial-industry shifts caused by the Bank of Japan's negative-rate policy.
The purchase of Shinkin Trust, estimated to cost more than 10 billion yen ($95.4 million) at the most, is set to conclude by next summer. The Mitsubishi UFJ Financial Group unit plans to fully absorb operations of the target.
Shinkin Trust administers assets linked to products sold at the Japanese credit associations known as shinkin banks, the outstanding balance coming to 1.3 trillion yen. Mitsubishi UFJ Trust will take over this role. The bank will provide comprehensive asset management support, including help in developing products assisting in estate planning, seen as a growth area.
Mitsubishi UFJ Trust has been pursuing acquisitions in recent years with an eye firmly on expanding the business of administrating assets, seen as a stable source of earnings. The financial company plans to use the latest purchase to broaden operational ties with Shinkin Central Bank and the shinkin banks in its network.
Meanwhile, Shinkin Central Bank aims to streamline and cut costs in the asset management business. Deposits collected by the 265 shinkin banks came to 137 trillion yen at the end of September. Growth in lending is softening, and the negative-rate policy has put the squeeze on investing. Shinkin banks now park 29 trillion yen in excess funds at Shinkin Central Bank, up 12% from a year earlier. Interest payments from Shinkin Central Bank to shinkin banks have been dwindling of late, driving efforts to overhaul asset management operations at the main bank.
Shinkin Central Bank will continue to independently provide backing for asset management operations at shinkin banks, though Mitsubishi UFJ Trust will lend its expertise.
The deal between Mitsubishi UFJ Trust and Shinkin Central Bank aims to prevent the outflow of inheritable deposits at shinkin banks, usually located in rural areas, to financial institutions in urban areas where the heirs live. Shinkin Central Bank will look into forming alliances with other major financial institutions in order to build up expertise.
The negative-rate policy is leading to alliances across regions and industries in the Japanese financial sector. Tokyo TY Financial Group has moved to purchase a stake in an asset management company formed by Bank of Yokohama and Sumitomo Mitsui Trust Bank, a unit of Sumitomo Mitsui Trust Holdings. Yamaguchi Financial Group has launched an asset management company with Daiwa Securities Group.