Banks sector: Analysis of regional bank consolidation

Research evidence excerpt

Banks sector: Analysis of regional bank consolidation

14 May 2026

Mizuho Securities Equity Research Banks

Industry Overview

Still see potential for accelerated consolidation among regional banks

After the market close on 13 May, Aichi Financial Group (7389) and SanSenior Analyst:

ju San Financial Group (7322) announced that they had reached a basicMaoki Matsuno

agreement to proceed with discussions toward a business integration. In this+81 3 6202 8289

maoki.matsuno@mizuho-sc.com report, we discuss: 1) the benefits of regional bank consolidation; 2) economies

of scale; 3) the relationship between population and deposits; 4) examples

of regional bank consolidation; and 5) alliances that could be candidates for

future regional bank consolidation. As we have noted in several reports issued

to date, we maintain our view that: 1) there is a possibility of accelerated

consolidation among regional banks; and 2) regional banks held by alliances

and some funds are likely to be candidates for consolidation going forward

(e.g., Ariake Capital has a stake of more than 10% in Aichi Financial Group).

Benefits of regional bank consolidation: Given the risk of future population

decline, we believe that consolidation could be a rational option, as the Bank

of Japan’s interest rate hikes have significantly improved the profitability of

yen deposits, which should allow banks to benefit from economies of scale.

Generally, when acquiring a regional bank, while 1) system integration costs

are recognized over a certain period, and 2) costs related to standardizing

accounting methods for items such as loan loss provisions and depreciation,

as well as expenses for branch consolidation, may be recognized, we believe

that 3) depending on the bank, a gain on negative goodwill may be recognized