Procrea Holdings reveals how merging two rivals is the ultimate strategy for challenging the future of Aomori.
To begin, I would like to ask about the current interest rate environment in Japan. As interest rates rise, they inevitably affect both lending and deposit rates, and they are also an important factor in discussions surrounding regional financial institutions and regional revitalization. As monetary policy normalization progresses and Japan returns to what could be described as a “world with interest rates,” how are rising rates affecting your bank’s business model—particularly in terms of lending, deposits, and asset management?
Regarding rising interest rates, when viewed comprehensively, we believe they will have a positive impact on our earnings over the medium to long term. However, during the transition period, there is an inevitable time lag, and some temporary pressure on profitability cannot be avoided.
When interest rates rise, deposit rates tend to increase first. In other words, before lending rates and investment returns catch up, our interest expenses increase, which initially suppresses earnings. That said, market investment returns and yields on short-term assets improve relatively quickly, and lending rates gradually rise as well. Eventually, these factors more than offset higher deposit costs, leading to an overall improvement in profitability. At the same time, rising interest rates entail the risk of price declines in securities holdings, so careful management in this area remains essential. Overall, we view interest rate normalization as a positive development for our bank.
Next, in relation to regional revitalization, I would like to ask about the role of global investment in Aomori. In recent years, foreign capital has shown growing interest not only in major metropolitan areas such as Tokyo and Osaka, but also in regional areas. What significance do you believe foreign capital holds for Aomori, and how is your bank acting as a bridge between overseas investors and local small and medium-sized enterprises and industries?
To be candid, Aomori Prefecture has not historically been particularly proactive in attracting foreign direct investment. However, as a regional financial institution responsible for supporting the local economy, we recognize that this will become an increasingly important theme going forward. In fact, increasing points of contact with overseas capital is one of the pillars of our medium-term management plan. Aomori’s strength lies in “food,” rooted in its primary industries. We have abundant regional resources—agricultural products, seafood, and processed foods—that have strong potential for overseas markets. Supporting local companies in expanding abroad is a very important mission for us. One representative initiative in this regard is the “Overseas Challenge Program.”
I would like to learn more about this “Overseas Challenge Program.” Prior to this interview, we were fortunate to sample some excellent Aomori seafood, and it truly felt like products with strong global potential.
Could you explain the specifics of this project? Is it based on partnerships with overseas institutions, consulting support, or another approach?
This is an ongoing initiative, and one of its defining features is that active local business owners serve as mentors. The president of a major Aomori-based company with extensive experience in exporting acts as both instructor and advisor, working directly with participating companies. All support is fully customized. Currently, eight companies are participating, and for each one, the mentor president and our consulting team conduct on-site visits to provide hands-on, practical advice. Last month, as an interim milestone, we took all eight companies to Singapore for business matching and market research. It was a highly meaningful step forward.
Headquarters of the Aomori Michinoku Bank in Japan.
Across Japan, including Aomori, population decline and aging are becoming increasingly severe, leading to major challenges such as business succession and a shortage of successors among small and medium-sized enterprises. Other regional banks are strengthening consulting and succession support to address this issue. How is your bank tackling these challenges through initiatives such as the “Value-Up Studio”?
Aomori is one of the regions experiencing particularly rapid declines in both population and the number of businesses nationwide. As a regional bank, we believe it is our crucial role to mitigate the negative impacts of these changes as much as possible. Within our group, we have a consulting firm called Aomori Sosei Partners, which specializes in regional challenges such as business succession, M&A, and management restructuring. The team provides tailored, hands-on support to each individual SME.
Digital transformation (DX) is unavoidable when advancing business succession and efficiency. How important is DX for SMEs in Aomori, and how does your bank support it? Additionally, could you tell us about DX initiatives within the bank itself?
We consider DX to be one of the most important elements supporting both our bank’s growth and that of the region. It is positioned as a key pillar in our new medium-term plan. DX initiatives are divided into two areas: internal operations and customer support. Internally, we are improving operational efficiency and enhancing digital services, including more advanced use of AI. For customers, Aomori Sosei Partners supports the introduction of optimal DX solutions tailored to each company’s needs. Through this division of roles, we aim to contribute to the digitalization of the entire regional economy.
These initiatives require enhanced skills and adaptability among personnel. What strategies does your bank have for reskilling, talent acquisition, and supporting employee growth?
Thanks in part to the merger, we are not currently facing a labor shortage. However, in the long term, the effects of population decline are unavoidable, making human resource development a critical management issue. What I value most is employees having the ability to proactively shape their own careers. In an era of rapid change—including climate change—people who can think independently and adapt to diverse environments are essential. Our new medium-term plan places “people” at its core. We emphasize autonomy, flexibility, and respect for diversity, and particularly prioritize the advancement of women. We have instructed our HR department to move beyond traditional Japanese personnel systems and create new frameworks.
I would now like to ask about the merger itself. The merger between Aomori Bank and Michinoku Bank is expected to generate various synergies. What concrete benefits have emerged, and what was the background behind the decision to merge?
The merger was implemented this January, so it has been less than a year. Our first mission was to establish a solid operational foundation as a new bank. From next year onward, we expect efficiency gains and revenue synergies to become more visible. As part of cost synergies, we are consolidating branches, closing or merging two branches per month starting in September, a process that will continue for the next two years. In a recently announced financial institution ranking, our bank achieved the top national position in terms of transaction share within the prefecture. This is evidence that merger synergies are already beginning to manifest as a strength.
One of the most commonly cited difficulties in mergers is the integration of corporate cultures. From my experience as a consultant, this is often the greatest challenge. How are you working to integrate the two banks into a single culture?
It is indeed a critical and time-consuming challenge, but ultimately, I believe cultural integration comes down to aligning values. While differences between the former banks naturally exist, I consistently share with employees the values that the new bank should uphold. What matters most is that everyone ultimately bases their decisions and actions on these shared values. Specifically, we have defined four core value areas:
Regarding the new medium-term plan after the merger, could you share the key financial targets and the main drivers for achieving them?
There are two major drivers. First is our strong commitment, as a bank, to solving the challenges facing Aomori Prefecture. Without regional economic development, the sustainability of a regional bank is impossible. If Aomori does not grow, neither can we. Second is securing sufficient earnings capacity to fund these efforts. By fully leveraging the bank’s functions and services, we aim to contribute meaningfully to solving regional challenges. Rather than confining ourselves to the traditional boundaries of banking, we aspire to be an institution that truly contributes to the region’s future.
Tourism is also one of the pillars of your medium-term plan. Aomori has a different appeal from the so-called “Golden Route” between Tokyo and Osaka, and its potential seems very significant. Could you tell us about your initiatives to promote tourism, including collaboration with MOSPA?
While Aomori does not attract tourism on the scale of Kyoto, it receives a relatively high number of inbound visitors within the Tohoku region. With rich natural scenery, food, and culture, tourism is an extremely important sector for the regional economy. What matters is supporting local businesses so they can fully leverage these resources. Aomori Sosei Partners has a specialized tourism team that provides comprehensive support to hotels and ryokan, including operational efficiency improvements, DX implementation, and website development. The bank itself is also directly involved in tourism promotion. For example, we send out our own Nebuta float every year at the summer Nebuta Festival. We believe contributing to cultural promotion helps enhance the region’s appeal.
Finally, I’d like to ask a more personal question. Newsweek readers include global corporate leaders, investors, and travelers seeking new perspectives on Japan. If we were to interview you again three years from now, what kind of future would you like to be talking about? What dreams, goals, or vision do you hold?
I don’t know whether I’ll still be president in three years (laughs), but by then I hope the synergies from this merger will have fully blossomed, and the new bank will be firmly established. Above all, I want to be able to say with confidence, “Our bank has become an institution that the region truly needs.” That is my wish.
One final question. In a single phrase, how would you describe the kind of bank you want this new institution to become for readers around the world?
“A bank that customers cannot do without.” That is our goal.
For more information, visit their website at: https://www.am-bk.co.jp/
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