Heard on the Street: Any knock to the Japanese housing market from an economic downturn would hit Chiba Bank disproportionately hard
For Chiba Bank, 8331 -1.52% in particular, the market doesn’t yet seem to be fully accounting for all the risks it faces as one of the country’s largest regional lenders.
The squeeze on margins caused by three decades of declining and now subzero benchmark interest rates has cut Chiba Bank’s interest income as a share of total assets in half over the last 10 years, down to below 0.25%. Unlike the country’s megabanks, such as Mitsubishi UFJ Financial and Sumitomo Mitsui Financial, it can’t reasonably escape by venturing overseas for other assets.
The residential vacancy rate in the region, where the bank’s loans are overwhelmingly concentrated, runs to almost 17%, up from below 13% four years ago and higher than in neighboring Kanagawa and Saitama, according to real estate information company TAS Corp. Any knock to the housing market in Japan caused by an economic downturn would hit Chiba Bank disproportionately hard. And if the Bank of Japan attempts to combat economic problems by cutting interest rates even further, as it insists it is prepared to do, the pressure on profitability would be compounded.
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