Japan’s not-so-neo digital banks
Japan’s Banking Act does not have a requirement to maintain physical branches, so pure-bred digital banks have a long history in this country. Here are two examples of banks that IPO’ed last year.
SBI Sumishin Net Bank, Ltd. was founded in 1986 as Sumishin Business Service for the purpose of providing Sumitomo Trust and Banking with office administrative services. It was repositioned two decades later and then obtained its banking license in September 2007. Nowadays, it is the leading mortgage originator and Banking-as-a-Service provider with 19 partners live on the platform, and five more committed. SSNB listed on the Tokyo Stock Exchange Standard Market in March 2023.
Rakuten Bank obtained its banking license as eBank in July 2001. It reached one million accounts in 2005. After entering into a business & capital alliance with Rakuten in September 2008, Rakuten received approval to become the majority shareholder in February 2009, and consolidated the Rakuten Branch of Tokyo Tomin Bank (one of the earliest BaaS implementations). This consolidated business becomes Rakuten Bank in May 2010. In January 2021, its total accounts exceeded ten million. In April 2023, Rakuten Bank listed on the Tokyo Stock Exchange Prime Market.
The chart below shows the share price performance of SSNB and Rakuten Bank since the SSNB IPO, in comparison to the mega banks, until mid-June 2024 (source: SSNB’s “Briefing on Current Management Information”). With so much emphasis on the price-book-ratio (PBR) through the Tokyo Stock Exchange initiatives, at these price levels SSNB has a PBR of 2.74 and Rakuten of 1.82, compared to MUFG’s 0.94, SMFG’s 0.89, and MHFG’s < 0.8.
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