Ageing, digitization drive new income streams to Japan's regional banks
Banks can help ageing SME owners manage business risks, says Moody’s.
Increasing demand for financial services related to the ageing population and increased digitization due to the COVID-19 pandemic could bring new income streams to Japan’s embattled regional banks, according to a new report by Moody’s Japan K.K.
Whilst the country's move towards an ageing and shrinking population has suppressed economic growth, the increased demand for financial services related to ageing creates new opportunities for banks to increase their fee income, says Tomoya Suzuki, a Moody’s assistant vice president and analyst.
For example, an increasing number of small and medium-sized enterprise (SME) owners will be at risk of closing their businesses due to old age and therefore will need banks' services to help them manage this transition, adds Suzuki.
Banks can also offer services that will advise owners on M&As or arrange real estate sales for fees, Moody’s report added. They can also help support the smooth transfer of assets between generations by providing tax planning and executing trusts among other services.
Social distancing and health concerns due to the coronavirus outbreak have also forced non-technology savvy people, such as the elderly who are increasingly using the internet and smartphones, to adopt online banking.
“Once they're used to the convenience of digital channels, bank customers are unlikely to shift back to face-to-face services even after the pandemic ends,” according to the report.
As a result, the need for banks to maintain physical branches is diminishing, making it easier to reduce fixed costs and improve efficiency through digitization of operations.
“We expect this combination of fee income growth and cost cuts will slow a deterioration in regional banks' credit profiles," adds Suzuki.
Fee income just accounted for 13% of Japanese regional banks’ gross profit in the year ended March 2020.
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