Selecting business models and sustained improvement in profitability The first and the biggest challenge for Japanese financial institutions is to raise their profitability in a sustained manner. Looking at the recent business performance of Japanese financial institutions, core profitability has been trending down due partly to a narrowing profit margin and declining lending outstanding.
For that reason, an increase in profitability is an imminent challenge. In doing so, while it applies to every industry, it is essential to choose the optimal business model that utilizes an institution’s respective realms of expertise. As I have mentioned earlier, competition in commercial banking business, in which Japanese financial institutions are mainly engaged, is expected to intensify at home and abroad.