Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

Aomori Bank (8342) Michinoku Bank (8350) Bank Merger

Aomori Bank  (8342 JP):  A Withered Oak in the Green Forest

Quiddity Advisors

Event-Driven

Historically, Japan has been overbanked. There have been Tier 1 and Tier 2 regional banks in every prefecture, along with credit unions and the strong presence of agriculturual cooperatives, and of course, Japan Post Bank with some 24,000 branches and outlets across Japan. It has been tough sledding to be a regional bank - too much cash in retail hands, over-cashed corporate customers, flat to declining regional growth on declining regional population growth, and greater urban growth centred around the largest cities.Japan's regional banks have been upping the pace of mergers since the former FSA commissioner Toshihide Endo showed up (before Suga-san became PM - he became commissioner in 2018) and started encouraging banks to merge and enter new businesses (consulting and investment banking advisory for clients, etc). In 2018, the FSA actually came out and said there were 23 different prefectures which were likely unprofitable for even one lender, and 12 other prefectures (out of a total of 47+Tokyo, Hokkaido, and Okinawa) could support just one bank, and 10 other prefectures could support two. When Suga-san became Prime Minister last year, he too pushed on regional banks to merge, saying "there are too many of them."<a href="https://www.smartkarma.com/entities/aomori-bank-ltd" target="_blank" data-smartkarma-citation="entities:18478:1" rel="noopener">Aomori Bank (8342 JP)</a> and fellow Aomori Prefecture bank <a href="https://www.smartkarma.com/entities/michinoku-bank-ltd" target="_blank" data-smartkarma-citation="entities:6599:1" rel="noopener">Michinoku Bank (8350 JP)</a> agreed in 2019 to form an operational alliance, which was widely seen as a precursor to merging. Last year on September 6, the Nikkei carried an article saying that Aomori Bank and Michinoku Bank could consider a merger, and the CEO of Aomori Bank was quoted as saying he didn't rule out the possibility. The two banks had 95 and 94 banks, respectively, last year, and they mostly competed against each other in each major city, minor city, and even small town, and officials from both banks had said that was too many to support. The NEW news is that on Friday, the two banks <a href="https://www.michinokubank.co.jp/news_2726.pdf" target="_blank" rel="noopener">announced</a> they would merge. So now we have a deal to look at.

Historically, Japan has been overbanked. There have been Tier 1 and Tier 2 regional banks in every prefecture, along with credit unions and the strong presence of agriculturual cooperatives, and of course, Japan Post Bank with some 24,000 branches and outlets across Japan. It has been tough sledding to be a regional bank - too much cash in retail hands, over-cashed corporate customers, flat to declining regional growth on declining regional population growth, and greater urban growth centred around the largest cities.Japan's regional banks have been upping the pace of mergers since the former FSA commissioner Toshihide Endo showed up (before Suga-san became PM - he became commissioner in 2018) and started encouraging banks to merge and enter new businesses (consulting and investment banking advisory for clients, etc). In 2018, the FSA actually came out and said there were 23 different prefectures which were likely unprofitable for even one lender, and 12 other prefectures (out of a total of 47+Tokyo, Hokkaido, and Okinawa) could support just one bank, and 10 other prefectures could support two. When Suga-san became Prime Minister last year, he too pushed on regional banks to merge, saying "there are too many of them."Aomori Bank (8342 JP) and fellow Aomori Prefecture bank Michinoku Bank (8350 JP) agreed in 2019 to form an operational alliance, which was widely seen as a precursor to merging. Last year on September 6, the Nikkei carried an article saying that Aomori Bank and Michinoku Bank could consider a merger, and the CEO of Aomori Bank was quoted as saying he didn't rule out the possibility. The two banks had 95 and 94 banks, respectively, last year, and they mostly competed against each other in each major city, minor city, and even small town, and officials from both banks had said that was too many to support. The NEW news is that on Friday, the two banks announced they would merge. So now we have a deal to look at.

Aomori Bank & Michinoku Bank Merger - Nothing To Write Home About Yet