Major banks' return to domestic lending has become increasingly pronounced, with their domestic market share rising to 46.8% in August. This is the first such development since the bubble burst, driven by a recovery in net interest margins and a recovery in demand for funds. Meanwhile, headwinds are intensifying for regional banks and credit unions.
The share of domestic lending by major banks, including the 3 megabanks, has recovered, driving an expansion of their share of the domestic market. In August, their domestic market share reached 46.8%, marking the first shift into an expansionary phase since the bubble burst. The backdrop includes improving net interest margins and a recovery in demand for funds.
The intensifying competition to attract deposits is also contributing, with the scramble for funds acting as a headwind for regional financial institutions.
According to Bank of Japan statistics, the outstanding balance of domestic loans at city banks stood at the high ¥230 trillion range as of August, up 7.9% year on year, and accounted for 46.8% of domestic lending.
While this trend is consistent with major banks' return to domestic lending, regional banks and credit unions are expected to remain in a difficult environment, including due to worsening earnings conditions.