On November, 2004 the Bank received a business integration proposal from Wakayama Bank. Since then, both banks have been engaged in intense negotiations. We believe that such a move should be judged according to whether it benefits our shareholders and customers, and, to this end, we have discussed in detail the likely merits of synergy and the eventual form the alliance will take. Having agreed that it would benefit shareholders and customers of both banks to integrate our businesses into a unified regional financial service group under a holding company, both banks on March 16, 2005 signed a basic agreement to set up such a holding company through exchange of shares, subject to resolutions being passed by a general meeting of shareholders of both banks, and to approval of the relevant government authorities. This step was taken after their Boards approved establishment of such a holding company under a business integration plan predicated on eventual full merger.
Basic agreement on business integration
On March 16, 2005 Kiyo Bank and Wakayama Bank concluded a “basic agreement on business integration,” under which the banks will establish a holding company by exchange of shares, and integrate their businesses under its auspices, predicated on eventual full merger with full consent of both parties.
Issues to address before business integration
To prepare for the alliance, each bank has set up an Integration Coordination Office and eight integration coordination committees, which are dealing with specific issues in close collaboration with their opposite numbers.
Joint operations
Even before the alliance is formally inaugurated, both banks will seek greater efficiency through joint operations in a wide range of businesses, including development of marketing channels and new businesses.
As a first step, from May 6, 2005 customers of both banks get preferential treatment in charge and transfer fees for using ATMs of both banks.
Summary of business integration
We believe that our business integration should be beneficial for our shareholders and customers. To this end, both banks have discussed in depth the likely benefits of synergy and the eventual form the alliance will take. We have agreed that it is possible to achieve greater benefits by integrating operations, and establishing a unified regional financial service group under a holding company.
Purpose
— Creation of an integrated financial services supplier
— Contribution to the regional economy
— Reinforcement of our business base
— Provision of sophisticated, diversified services
Form and timing of the alliance
We will establish a holding company on February 1, 2006, with full merger scheduled to occur during fiscal 2006.
— Name of new financial group: Kiyo Financial Group
— Name of holding company: Kiyo Holdings, Inc.
Expected benefits from the new bank group
Unified management under a holding company
Operating within its specialty, each subsidiary will seek new business opportunities by forming alliances with companies outside the Group, while the Financial Group will stand at the center providing a management vision and Groupwide strategies, creating an integrated financial service supplier rooted in its community. In addition to providing a focal point for the allied Group management capable of supplying smooth services, the holding company will concentrate the Group business planning management departments to enhance operating efficiency.
Creating an integrated financial service supplier through formation of strategic operational alliances with other companies and sectors
In addition to conventional strategies, we will form operational alliances with other companies and sectors to create a financial service supplier that meets customer needs swiftly, harnessing the strengths of both banks. We will encourage each bank to market its products and services beyond the Banks’ customer bases, bringing to bear the comprehensive services provided by the Group. In this way we aim to steadily expand our revenue base.
Synergy
It will take time before full system integration can occur under our merger, but by immediately forming an allied entity as a holding company ahead of full merger, we can “bring forward” the benefits of synergy and increase customer convenience at an early stage.
This merger will promote expansion of our customer base and enable us to cultivate customer needs. In this way we aim to expand business opportunities to develop earning power.
Strategic allocation of capital in relation to risk, and effective use of management resources
With due consideration for the profitability and future prospects of our business, we will concentrate management resources, strategically allocating capital in consideration of risk, and taking measures regarding capital allocation when necessary.
Personnel exchange and deployment of departments within the Group will be undertaken in such a way as to ensure the right staff are always in the right place. Our initiatives will also include personnel training and organizational revitalization.
| Outline of Kiyo Bank and Wakayama Bank |
|
| Name |
The Kiyo Bank, Ltd. |
The Wakayama Bank, Ltd. |
| Founded |
May 2, 1895 |
January 18, 1921 |
| Head Office |
35, Honmachi 1-chome, Wakayama |
24 Nanabancho, Wakayama |
| Representative |
Hiroomi Katayama, President |
Takeo Suzuki, President |
| Paid-in capital |
¥60.3 billion |
¥12.7 billion |
| Deposits |
¥2,581.7 billion |
¥408.4 billion |
| Loans |
¥1,769.6 billion |
¥311.5 billion |
| Capital ratio |
9.01% |
6.88% |
| Non-performing loan ratio |
6.8% |
12.3% |
| Employees |
1,607 |
489 |
| Branches |
94 |
34 |
| ATMs outside branches |
138 |
30 |
|
