Wednesday, September 29, 2004
Japan's merged banks trail US peers, says S&P
REUTERS
TOKYO: Japan's major banks have failed to experience significant profit growth following consolidation compared with their American peers, Standard & Poor's Ratings Services said in a report released on Tuesday.
The report cites three reasons for the challenge Japanese banks face in achieving synergy effects: a lack of clear purpose or strategy for consolidation; egalitarianism among banks and, a focus on resolving internal issues rather than improving customer services or enhancing marketing capabilities.
"In Japan, banks tend to integrate for defensive purposes and have less specific and aggressive targets than their US counterparts," said Naoko Nemoto, a Standard & Poor's credit analyst and author of the report.
During the past five years in Japan, 16 major banks have been consolidated into seven groups. If the merger of Mitsubishi Tokyo Financial Group Inc and UFJ Group takes place as announced, there will remain only three mega bank groups that offer comprehensive financial services. In the US, more than 10 money centre banks have been consolidated into three groups.
The report examines the effects of mergers among major banks in Japan and the US between fiscal '00 and fiscal '03 (ended March 31, '04), focusing on gross profit, growth in core profit, and shares of the loan market in order to evaluate synergy effects, as well as changes in employee numbers, branches, and operating expenses for streamlining effects.
A key issue for the Japanese banking industry will be whether future consolidations can result in positive synergy effects. Amid rapid and significant changes in the characteristics of the banking business, consolidations based on cost reduction alone will be too limited in scope, according to the report.
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