July 10, 2019 / 2:30 AM / 4 months ago

UPDATE 2-Japan's Yokohama, Chiba banks tie up to counter low interest rate environment

* Partnership covers retail banking, M&As

* Bank presidents say merger not under consideration

* Regional banks navigating low rates, ageing population (Adds executive comments, context)

By Takashi Umekawa

TOKYO, July 10 (Reuters) - Bank of Yokohama Ltd and Chiba Bank Ltd on Wednesday said they have agreed to establish a business partnership, as the pair seek revitalisation in a market characterised by an ageing population and a lengthy period of low interest rates.

The agreement between two of Japan’s biggest local lenders covers areas such as retail banking, database marketing and mergers and acquisitions, the banks said in near-identical statements.

Years of near-zero interest rates have made traditional banking barely profitable in Japan, where regional lenders also have to contend with dwindling populations. Market watchers have long called for consolidation as a primary means of growth - and even survival.

“Progression in ageing, prolonged negative interest rates, and different industries’ entry have largely changed our business environment,” Chiba Bank President Hidetoshi Sakuma told reporters.

“When I met with Mr. Sakuma alone in March, we talked about the possibility of this partnership,” said Bank of Yokohama President Yasuyoshi Oya. “That was the start of discussion.”

Asked about the possibility of merging, the executives said that was not currently under consideration.

Bank of Yokohama is Japan’s largest regional bank with 16.8 trillion yen ($154.34 billion) in assets to Chiba Bank’s 14.9 trillion yen.

The country’s banking sector is dominated by Mitsubishi UFJ Financial Group Inc, Sumitomo Mitsui Financial Group Inc and Mizuho Financial Group Inc.

$1 = 108.8500 yen Reporting by Takashi Umekawa; Editing by Chang-Ran Kim and Christopher Cushing

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