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Building enduring ties with customers

Hiroyuki Taira / The Yomiuri Shimbun

Kazuhiro Higashi speaks to The Yomiuri Shimbun.

By Takashi Yamazaki / Yomiuri Shimbun Senior WriterThe banking sector’s business environment has seen fundamental changes. What is the plan for Resona Holdings, Inc. — managing the group’s four consolidated subsidiary banks mainly operating in the Tokyo metropolitan and Kansai areas — to survive? For this installment of Leaders, a column featuring corporate management and senior executives, Kazuhiro Higashi, president of Resona Holdings, Inc., explains his strategy.

“What is common sense at Resona does not make sense outside.”

The late Chairman Eiji Hosoya used to complain about Resona’s corporate culture with that remark.

[Resona Holdings manages four banks: Resona Bank and Saitama Resona Bank in the Tokyo metropolitan area, and Kansai Mirai Bank and Minato Bank in the Kansai area. Resona Bank went through a management crisis in 2003 due to holding massive nonperforming loans. The government decided in May that year to inject about ¥2 trillion of public funds to bailout the bank, effectively nationalizing it. Hosoya, an executive vice president of East Japan Railway Co., or JR East, was made the chairman of Resona Holdings in a bid to rebuild the business.]

“Why do banks end their counter services at 3 p.m.?” Hosoya asked me one day. He pressed the matter further and said, “Our corporate customers operate until at least 5 p.m. Why not extend our counter services until 5 p.m.?”

His question discombobulated us because everybody simply took that schedule as a matter of course in the banking sector.

Urged by Hosoya on this issue, some branches started to experimentally stay open until 5 p.m. However, those branches had to close at 3 p.m. for one hour to do paperwork.

The majority of customers did not understand such strange operating hours — closing at 3 and reopening at 4 for just one more hour. Later on, I explained the situation to him by saying, “We have not seen noticeable customer transactions during the extended business hours.” The chairman got angry and said, “Why do we have to close at 3 p.m. for an hour in the first place?”

The reason for the branches closing at 3 p.m. was because employees had to collate the cash and the transaction slips after daily operations. When we extended the branches’ closing time to 5 p.m., employees needed to work later.

We called for ideas from our employees to resolve the issue.

One employee proposed introducing a coordinated database system that requires no manual collation work. By introducing the system, even when keeping branches open until 5 p.m., employees could go home without much delay. We started using this system.

[In April 2004, Resona Bank and Saitama Resona Bank extended business hours to 5 p.m. at about 450 branches. Yet even now, it is not usual for bank branches to stay open until 5 p.m. in this country.]

Introducing the coordinated database system was an employee’s idea. The employee, however, had given up on proposing it, realizing that it fell outside the bank’s “common sense.” The employee finally spoke up, following urgings by Chairman Hosoya, who would say things such as “Banking is a service business” or “Change established practices.”

Chairman Hosoya, in my view, taught us a lesson: “We can make a fresh start only when critically reexamining ourselves.”

Regional customers are key

[Hosoya died from illness at age 67 in November 2012 while chairman. In April the following year, Higashi assumed the presidency of Resona Holdings. In June 2015, Resona completed repayments on its public funds. The company opened a new chapter by withdrawing from governmental control, which had lasted about 12 years.]

While in debt, our top priority was always using our profits for repayment. After completing repayment, we had to establish basic management principles in order to define our corporate mission.

Nonperforming loans piled up because we allowed large-scale loans that exceeded our banking capacity. Business prospects for our main businesses such as loans do not look bright under the prolonged ultra-low interest rate environment. What then would be the best strategy for our survival?

I came up with an idea to rebuild our businesses focusing on our strength in dealing with small and medium-sized companies, as well as individual customers. We decided to move forward as a community-based bank, not acting as if we serve a variety of customers like a department store.

However, doing business with small and medium-sized companies or individual customers is not easy. It is all about continuously making small transactions. The labor cost will not be so different between a deal of ¥10 billion and that of ¥100 million, even though the difference in the transaction amount is 100-fold. We have to always consider how to reduce costs.

I am always telling employees that we have to build enduring relationships with many customers. Even though the per-transaction profit may be small, we would like to increase the number of our customers and maintain a durable business relationship with them.

[Bank earnings come from three main sources: net interest margin, sales of financial products along with fees from various types of services, and trading gains from transactions including government bonds.]

The distinctive features of our banking operations are its trust and real estate businesses, which manage customers’ assets over a long period of time. Both businesses charge fees. They also require us to have long-term business perspectives, such as of five-year or 10-year time spans.

Many employees, however, still tend to increase lending to gain results in a short period of time. Changing their ways of doing business is not an easy task.

Although forming a business structure focusing on fee income might take time, it should help us develop differently from other financial institutions. Once we achieve it, we can enjoy a unique position with which other firms can’t easily catch up. We are continuing to work on changing our mind-set.

New services for survival

[The technological development of fintech — a combination of finance and IT — is progressing. With the gradual entry of different industries into the banking sector, bank management has become more difficult.]

We are adapting to the needs of the internet society. For the individual customers’ convenience we have, among other innovations, developed a smartphone app for money transfers and bank transactions.

Meanwhile, consultations with customers, involving such turning points in their lives as obtaining a housing loan or receiving a retirement allowance or inheritance, are handled face-to-face at our branches. To enable customers to visit us on weekends, we plan to increase the number of branches open seven days a week to 32 from 26 within the current fiscal year.

In addition, employee training courses will be further improved in order to enhance their ability to understand customers’ needs. I would like to train our staff to deal with our customers with sincerity, such as telling them not to buy our financial products if these are not suitable to their needs.

When I was in my 30s, I was assigned to a pharmaceutical company. As I was in charge of financial affairs, I had meetings with bank clerks associated with the firm, which gave me a customer’s perspective on relationships with banks.

When a bank employee tries to promote something, customers can see through unspoken intention. Whenever a bank teller recommends something by saying “for the customer’s benefit,” customers are able to distinguish between proposals that are truly beneficial to them and those that are not.

The problem is that bank employees have not yet realized that customers do have that insight.

I have temporarily transferred employees to other corporations so they can gain new experiences.

The business environment in the banking sector is extremely difficult. However, corporations can only gain strength when facing challenges under adverse circumstances. I often tell our employees: “Banks might no longer exist in the future. That is why we have to change ourselves.” That is exactly the same kind of thing that Hosoya used to say.

In other words, we will become a truly good financial service institution by surviving the current environment.

■ Kazuhiro Higashi / President of Resona Holdings, Inc.

Born in Fukuoka Prefecture in 1957, Higashi graduated from the Faculty of Economics at Sophia University in Tokyo in 1982 and joined Saitama Bank. He assumed various positions including executive officer in charge of finance at Resona Holdings in 2003, managing executive officer at Resona Bank in 2007 and deputy president at Resona Holdings in 2009 before taking his current position in April 2013.

■ Key Numbers

837 branches

The company has established its current form through M&As including with the former Daiwa Bank, Saitama Bank and Kyowa Bank. The number of manned branches in the country was 837 as of the end of March this year. According to the consolidated financial results for fiscal year ended March, its ordinary income was ¥860.7 billion, and net income attributable to owners of parent was ¥175.1 billion. The consolidated number of employees was 33,375 as of the end of March.Speech

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