(Oct 2): Three regional lenders in northern Japan are set to begin talks on a merger that would create the area’s largest banking group, a fresh sign that industry consolidation is gaining momentum as the population declines.

Aomori Michinoku Bank Ltd, Bank of Iwate Ltd and Akita Bank Ltd, with more than ¥13 trillion (US$82 billion or RM337 billion) in total assets, are expected to announce the discussions as early as Friday, according to people familiar with the matter. 

They join a growing number of Japanese banks that are considering mergers to survive in an industry facing worsening demographics and an intensifying fight for deposits as interest rates rise. Japan’s financial regulator has been pushing regional lenders to draw up viable long-term visions, including joining operations with rivals.

Shares of Procrea Holdings Inc, the parent company of Aomori Michinoku, rose as much as 8.9% in Tokyo on Friday. Bank of Iwate and Akita Bank climbed more than 4% before paring gains. Shares of all three lenders have more than doubled this year, giving them a combined market capitalisation of ¥559 billion. 

Procrea, Akita Bank and Bank of Iwate issued separate statements saying their respective boards will discuss the prospect of merger talks on Friday and nothing has been decided. Kyodo News first reported the planned discussions.

The three banks are based in the Tohoku region, which has some of the steepest population declines in Japan. A combination would create a banking group with more assets than the area’s biggest lender, 77 Bank Ltd, which is based in Sendai, Miyagi prefecture.

Asked about the merger plans, Finance Minister Satsuki Katayama declined to comment but said that generally speaking, regional banks are “operating in an increasingly challenging environment, including because of population decline”. 

“It’s important that they continue to support their local economies by providing a broad range of financial intermediation services,” she said at a regular briefing. “The Financial Services Agency will continue to encourage regional banks to reform their businesses, whether through mergers and integrations or other means.”

Aomori Michinoku was itself created through a recent consolidation. Two banks in the Aomori prefecture came under the holding company in 2022 before combining into a single lender in 2025.

Japan had 95 regional lenders as of April, according to the Bank of Japan. That’s roughly the equivalent to two in each prefecture. The country is among the most overbanked in the developed world, with about 34 branches per 100,000 people in 2024, higher than 26 in the US and just 16 in Australia, according to World Bank statistics. 

Not all mergers have been carried out. San Ju San Financial Group Inc and Aichi Financial Group Inc, based in central Japan, said last month that they scrapped plans to combine, citing differences in views on the business direction.

Uploaded by Tham Yek Lee