TOKYO -- Mizuho Financial Group is forming a surprising partnership with a regional lender linked to domestic rival Mitsubishi UFJ Financial Group, seeking to economize as its earnings erode under the Bank of Japan's negative interest-rate policy.
The tie-up with Shizuoka Bank, covering a range of services for retail customers and small to midsize businesses, will be the first in a broader effort by Mizuho to trim costs and redistribute operations through partnerships with regional banks. Other local lenders may be inspired to seek similar arrangements.
Mizuho intends to gradually rotate out new home-loan contracts in Shizuoka Prefecture, southwest of Tokyo, to its partner. In turn, Mizuho Trust & Banking will offer support in managing the succession of assets of business owners and other clients of Shizuoka Bank.
The partners will announce a general agreement this month at the earliest. The move appears to have been unofficially reported to relevant authorities.
The BOJ's negative key rates continue to eat into interest margins, banks' bread and butter. More than 60% of the country's bank loans carry rates of less than 1%. Meanwhile, the number of competitors has barely changed over the last half decade. With banks increasingly in a glut, maintaining the same products and services countrywide is growing less feasible.
Earnings-wise, Mizuho has fared worse than its big rivals, MUFG and Sumitomo Mitsui Financial Group. Last fall, it announced plans to reduce domestic locations and trim its payroll.
Japan's regional lenders have historically been linked to one of the three megabanks, often building strong ties among personnel as well as in capital terms. Shizuoka Bank is part of a particularly close-knit group within the keiretsu -- a corporate structure of businesses linked through shareholding and other protocols -- of MUFG, making its partnership with Mizuho a stunning move.
Regional banks typically lack international bases to draw on and so are hit hard by the central bank's negative-rate policy. A growing number of such lenders have begun forming holding companies and reshuffling among themselves, but some may be spurred to follow Mizuho and Shizuoka Bank's example instead.