Japanese bank Resona hopes to boom from baby boomers
Small business owners will retire and borrow to invest in rental property
Resona Holdings, Japan's fifth-biggest bank, is targeting retiring entrepreneurs to boost lending by 600 billion yen (HK$57.3 billion) as they sell businesses and invest in rental properties.
Resona is betting on a demographic shift in the world's third-biggest economy that will push people who are 65 and older to 30 per cent of the population by 2025.
The bank's president, Seiji Higaki, 61, expects ageing proprietors of small companies will close shop to seek loans for new apartment buildings, swapping business revenue for rents.
"Just look around - many of the small-business buildings and factories in Tokyo have been scrapped and replaced by apartments and condominiums," he said.
"These are custom-made loans that will carry higher interest rates than ordinary corporate loans," he said.
The wave of retirements will probably also spur borrowing from younger people buying businesses from departing owners, he said.
Resona has set up a team of 90 people to oversee lending focused on retiring small-business owners and will increase the number there to 130 by April, Higaki said.
He expects to achieve the lending target in three years.
Shares of Resona climbed 2.6 per cent to 346 yen at the close in Tokyo yesterday.
The benchmark Topix Index gained 1.8 per cent.
Unlike larger rivals including Mitsubishi UFJ Financial Group, which are looking abroad to counter sluggish demand at home, Resona intends to search for areas of lending growth within Japan, Higaki said.
Japan's baby boomers - the seven million people born between 1947 and 1949 - began to reach retirement age this year.
The number of people 65 and over jumped 2.6 per cent to 30.3 million in May from a year earlier, making up more than a fifth of the population, internal affairs ministry data show.
Small businesses accounted for 9.9 trillion yen, or 38 per cent, of Tokyo-based Resona's 26.2 trillion yen in total loans as of September 30, according to company data.
Mortgages were 47 per cent, or 12.4 trillion yen, and the remaining 15 per cent was loans to large companies.
Average net interest margin, a measure of profit on loans, at the 84 Japanese lenders in the Topix Banks Index has dropped to 1.35 per cent from 1.6 per cent three years earlier, according to Bloomberg data based on the latest company filings. That is the lowest in more than 10 years.
Resona, which received a 1.96 trillion-yen government bailout in 2003, has posted profit in the past eight fiscal years by focusing on retail customers under chairman Eiji Hosoya, who died this month.
The bank unveiled a plan to repay taxpayer money last week. It will increase reserves by 100 billion yen in each of the next three years to repay some of the 870 billion-yen balance.
Hosoya, who was 67 when he died on November 4 from an unspecified illness, implemented restructuring measures including the sale of Resona's headquarters building in 2008.
"We are watching changes in Japan's social structure closely and looking for financing needs that come along with them," Higaki said.
"One of my big missions is to continue leading Resona banking group based on the foundations laid by Hosoya," he said.