(The following statement was released by the rating agency)
Sept 27 - Japan Post Bank’s planned entry into the Japanese mortgage market will have a material negative impact on the country’s regional banks, but is unlikely to affect the mega banks, Fitch Ratings says.
JPB’s mortgage pricing power will be stronger than that of the regional banks, whose overheads generally significantly exceed JPB‘s. In addition, JPB’s target clients are the same as those the regional banks are courting in an attempt to expand their business out of saturated markets (including small and medium-sized corporate owners, corporate employees without long employment records at single companies and female workers). Consequently, the regional banks strongly oppose JPB’s business expansion. Intensified competition could trigger consolidation among regional banks in the longer term.
The impact on the mega banks would be limited because their operating base is already concentrated in highly competitive areas, in which there is unlikely to be a material difference in pricing power. For example, the mega banks already offer highly competitive 10 year-mortgage loans with a fixed rate of less than 1.4%. They are also able to offer a broader product range.
On 3 September JPB (100% owned by the government through Japan Post Holdings) filed an application for new entry to three business areas: retail loans including mortgage loans, sales of property and casualty insurance products and corporate loans. At present, JPB’s investment is heavily concentrated on Japanese government bonds, which account for more than 80% of its JPY180trn in deposits.