Like small U.S. banks, Japanese community banks face intense competition from large banks that often use their size to their advantage.
What Kazuo Miyagaki wants to know is how his counterparts here can still be relatively profitable in a low interest rate environment while his $4.2 billion-asset Tajima Shinkin Bank struggles.
“The banks we visited have no losses and high profitability,” he said through an interpreter. “How can they do that?”
To find out, Mr. Miyagaki, Tajima Shinkin’s president and chief executive, did some traveling. He was one of 20 bankers from Tajima Shinkin and the $7.6 billion-asset Banshu Shinkin Bank of Himeji who visited four banks in Chicago, two in New Jersey, and two in New York last week. Japan has nearly 300 so-called Shinkin banks, including Tajima Shinkin and Banshu Shinkin, both of which are in the Hyogo prefecture.
Shinkin banks can only lend within a certain geographical area. They are also restricted to lending to corporations with less than 300 employees and $8.1 million in capital, according to the Shinkin Central Bank of Japan. But the Shinkin banks vie with commercial banks that can lend to anyone anywhere in the country.
On top of this, persistently low interest rates and a deflationary economy have led to a decline in bank lending, according to the Bank of Japan. At the end of May the amount of loans outstanding for all Japanese lending institutions was $3.9 trillion, 2.4% less than a year earlier.
Terry Griffin, the Community Bankers Association of Illinois’ Chicago-area vice president, helped organize the brain-picking visit. She said the big theme to emerge was that U.S. community banks have prospered by providing good service and specialized products.
For example, the $106 million-asset Pacific Global Bank in Chicago’s Chinatown has employees who speak Chinese, keeps overhead low, and is careful about lending without being overly conservative, said Betty P. Chow, Pacific’s president and CEO.
When the delegation asked about growth, Ms. Chow said Pacific plans to build a branch in a non-Chinese neighborhood and is studying the Latino market while looking for Spanish-speaking bankers.
At the $409 million-asset Labe Bank the group heard Lowell I. Stahl, Labe’s chairman, discuss practices such as targeting a mostly Eastern European population, doing business in 25 different languages, and tailoring accounts for immigrants and senior citizens.
The Japanese bankers specifically requested to meet with executives at the $1.6 billion-asset ShoreBank Corp., which is well known for its success in community-development lending. Fran Grossman, an executive vice president at ShoreBank, said the delegation spent four hours learning about the company’s work in low- and middle-income markets in inner-city neighborhoods.
“We spent a fair amount of time in each session stressing that ShoreBank is a relationship bank and we can compete with larger banks because we choose to compete in narrowly defined niches,” Ms. Grossman said.
Technical Visits International, a Los Angeles company, arranged the tour, contacting the Community Bankers Association of Illinois to coordinate the visits.
Ms. Griffin, who selected the sites, said she chose banks with markets that have unique needs.
“It shows our banks turn challenges into opportunities,” she said.
The New York stops on the tour were the $24.5 billion-asset New York Community Bank of Westbury and the $18 billion-asset Independence Bank of Brooklyn. In New Jersey the group visited the $3.6 billion-asset Columbia Bank of Fair Lawn and the $232 million-asset Millington Savings Bank.
