Japan's regional banks (>100 entities) suffer some of the strains that afflict mega banks but more so given the absence of diverse international opportunity.
PH Score™ shows clearly that in very many cases they face profitability pressure from rock bottom interest rates, soft loan demand and demographic changes as the youth migrate to the metropolitan hubs and the dependency ratio increases. Net Interest Revenue is a very high proportion of total Income at regional banks versus the more diversified banks. Many have increased risk in their investment portfolios given the limitations of JGB returns and to compensate for a modest increase in credit costs moving forward.
However, challenges may spur consolidation opportunity in a market with far too many lenders. And this process has already started.