Turning back from international and securities banking to retail and home ground (1991)

A return that was the recoil of expansion

At the heart of this decision was a retreat to the ground it had come from, as the recoil of a “mini city bank” overreach financed by the largest deposit base in the regional league. Chasing the city banks in the glamorous departments — international business and securities — the bank expanded overseas acquisitions and its dealing operations, until the turn in markets and the bad loans that followed ate into earnings. It stopped there and moved resources back to a home franchise it knew to be thin. It can be read as a choice made in the swing between managing for the profitable business and playing the part a regional bank exists to play.

The ground it returned to, however, was no refuge either. Deepening a local franchise in a market the city banks contest hard is not easy, and the cold verdict — “home-town banking discovered once it stopped making money” — caught the difficulty exactly. Should a regional bank chase scale and edge toward the city banks, or commit to its region and build a value of its own? The Bank of Yokohama’s 1991 turn answered, for once, in favour of the second. That answer would be carried a long way — through the public funds taken and repaid, and through the later wave of consolidation — into a strategy of holding the region as a surface.