Japan’s Chiba bank to maintain above domestic average profitability

The bank will maintain strong loan quality and liquidity, Moody’s said.

Japan’s Chiba Bank is expected to maintain its strong loan quality and liquidity over the next year.

Despite this, Chiba Prefecture’s biggest bank will tread the same path in earnings as the rest of its banking peers: with weak, albeit above average, profitability.

Chiba Bank’s profitability was 0.33% in the first nine months of FY2022, which ended in March 2023. Whilst low, this is a stronger showing than most of the other regional banks in Japan.

Moody’s attributed the “stronger” profits to Chiba Bank's relatively large and vibrant home market economy, which covers Chiba Prefecture and the eastern part of Tokyo.

The bank's cost-control efforts, which include the formation of alliances with other regional banks; and the bank's steady net fee and commission income through sales of investment-type financial products and corporate-related services, also contributed to its profits.

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Problem loans ratio for the property industry remains low, despite 26% of its total loans came from the domestic real estate sector.

The bank’s favorable location near the “affluent” Greater Tokyo Metropolitan area further mitigates its concentration risk, given that most loans originated from the Chiba Prefecture.

Liquidity remains strong, Moody’s added. This is supported by the bank’s solid deposit franchise, given the bank's deposit share of around 28% of its home market as of the end of March 2022 and its low loan to deposit ratio of 77% as of the end of December 2022.