Two powerhouses of Japanese regional banking have teamed up in a joint venture on ship finance that will target big ticket deals such as funding ultra large containership newbuilding contracts.
Yamaguchi Financial Group (FG) and Ehime Bank joined forces to form the West Seto Partnership Agreement.
Yamaguchi Financial Group is located on the Western Japanese Island of Kyushu, home of shipbuilding giants such as Mitsubishi Heavy Industries and Oshima Shipbuilding.
Ehime Bank is on the nearby Island of Shikoku, home of Imabari Shipbuilding and some of Japan’s largest private shipowners, including Shoei Kisen and Nissen Shipping. Both islands surround Japan’s Inland Sea which is known in Japanese as the Seto Naikai.
Yamaguchui FG chief executive Takeshi Yoshimura said that the partnership would target high value deals such as ultra large containerships.
He said: “The Inland Sea region is one of the centres of the Japanese maritime industries. The regions owners control 1,063 ships representing 30% of ship ownership in Japan. To create a business that meets the various needs of the maritime industries, we need to use the know how of Ehime Bank.”
Ehime Bank president Yoshinori Nishikawa stressed that both banks would maintain their independence.
“Clearly we will be able to offer a better service working together,” he said. “The strategy will be to maintain independent management, there is no discussion about merging in the future.”
Both banks pride themselves on supporting industry in their local regions.
Growing regional banking
Japanese regional ship finance, which include banks such as Ehime bank, Hiroshima Bank and Iyo Bank, has grown tremendously over recent years. It has been regarded as the second fastest growing source of newbuilding finance after Chinese lease finance.
Ehime Bank and Hiroshima Bank are currently each providing over $5bn in ship finance loans annually.
The regional banks have moved to expand in ship finance because areas around the Inland Sea are in the process of de-industialising and depopulating. Shipbuilding and shipowning are, however, traditional industries that have remained in the area for them to work with.
The regional banks have also seen an opportunity after many western ship finance banks left the market after the 2008 financial collapse.
Imabari Shipbuilding has invested in expanding its shipbuilding capacity over recent years to build ultra large containerships.
It is likely that it will be partnering with Ehime Bank and Yamaguchi FG in their joint venture to put together competitive finance and ownership packages to attract ultra large containership orders.
