Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Equity Bottom-Up

We highlighted the financial predicament of <a href="https://www.smartkarma.com/entities/fukushima-bank-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:7474:1">Fukushima Bank (8562 JP)</a>, an obscure secondary regional bank from Fukushima Prefecture in the Tohoku Region of northern Japan, in our Insight <a href="https://www.smartkarma.com/insights/fukushima-bank-8562-jp-years-of-living-dangerously" target="_blank" rel="noopener" data-smartkarma-citation="insights:22816">Fukushima Bank (8562 JP): Years of Living Dangerously</a> .  At that time, the bank’s share price was just short of the ¥700 level.  Since then, the share price has fallen to around the ¥250 level, a 64% decline.  To put this in perspective, in percentage terms Fukushima Bank’s stock price has now fallen even further than the thoroughly-disgraced <a href="https://www.smartkarma.com/entities/suruga-bank-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:6267:1">Suruga Bank Ltd (8358 JP)</a>  over the same period: a remarkably ignominious achievement.  Fukushima Bank’s market capitalisation has shrunk to the point where the bank is now the 3rd-smallest of the 76 stock exchange-listed regional banks.As an independent entity, Fukushima Bank’s position looks untenable.  Its current size is insufficient to ensure its survival.  It can barely generate sufficient net interest and fee income to cover its overheads, let alone rebuild capital.  Yet foreign investors in aggregate own over 22% of the bank’s total shares in issue.  Why?  Caveat emptor!  (May the buyer beware)!

We highlighted the financial predicament of Fukushima Bank (8562 JP), an obscure secondary regional bank from Fukushima Prefecture in the Tohoku Region of northern Japan, in our Insight Fukushima Bank (8562 JP): Years of Living Dangerously .  At that time, the bank’s share price was just short of the ¥700 level.  Since then, the share price has fallen to around the ¥250 level, a 64% decline.  To put this in perspective, in percentage terms Fukushima Bank’s stock price has now fallen even further than the thoroughly-disgraced Suruga Bank Ltd (8358 JP)  over the same period: a remarkably ignominious achievement.  Fukushima Bank’s market capitalisation has shrunk to the point where the bank is now the 3rd-smallest of the 76 stock exchange-listed regional banks.As an independent entity, Fukushima Bank’s position looks untenable.  Its current size is insufficient to ensure its survival.  It can barely generate sufficient net interest and fee income to cover its overheads, let alone rebuild capital.  Yet foreign investors in aggregate own over 22% of the bank’s total shares in issue.  Why?  Caveat emptor!  (May the buyer beware)!

Fukushima Bank (8562 JP) - Living on the Edge

Compared with, say, megabank <a href="https://www.smartkarma.com/entities/218" target="_blank" data-smartkarma-citation="entities:218:1">Mitsubishi Ufj Financial (8306 JP)</a> whose capitalization now exceeds ¥9.58 trillion (US$86.14 billion), little <a href="https://www.smartkarma.com/entities/7474" target="_blank" data-smartkarma-citation="entities:7474:1">Fukushima Bank (8562 JP)</a> from Fukushima Prefecture to the north of Tokyo with a market capitalisation of just ¥16.0 billion (US$144.1 million) is unlikely to be on the investment radar of most foreign institutional investors.  Yet foreign investors collectively own an astonishing 24.54% of total outstanding shares.  What on earth is the attraction?

Compared with, say, megabank Mitsubishi Ufj Financial (8306 JP) whose capitalization now exceeds ¥9.58 trillion (US$86.14 billion), little Fukushima Bank (8562 JP) from Fukushima Prefecture to the north of Tokyo with a market capitalisation of just ¥16.0 billion (US$144.1 million) is unlikely to be on the investment radar of most foreign institutional investors.  Yet foreign investors collectively own an astonishing 24.54% of total outstanding shares.  What on earth is the attraction?

Fukushima Bank (8562 JP): Years of Living Dangerously

Japan

THE FUKUSHIMA BANK, LTD. is a regional bank based in Fukushima.  The Bank provides commercial banking services including deposits, savings, loans to local individuals and industries, and foreign exchange transactions.  The Fukushima Bank also provides financial services such as leasing, credit card, credit guarantee, and insurance services, and also develops software.

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Fukushima Bank (8562 JP)