Seven & I's move away from banking leaves market wondering

Japan Times

28-05-2025

Seven & I Holdings wants to be less of a bank and more of a convenience store operator, and the market is somewhat skeptical about that transformation.
The plan, which has been reported in the media but not confirmed by the company, is to sell Itochu a partial stake in Seven Bank and focus on the business of running 7-Eleven.
This doesn't really add up, according to at least one analyst. The two businesses — banking and convenience store — are just too dependent on each other, and the argument that separating them will somehow make 7-Elevens better might not impress investors.
'In our view, Seven & I's convenience store business and Seven Bank's operation are highly interconnected,' said Takahiro Kazahaya, an analyst at UBS Securities. 'We don't think the market will necessarily see the sale of Seven Bank as a move to strengthen the 7-Eleven convenience store business.'
The involvement of Itochu is also an issue, as the trading company owns Family Mart, 7-Eleven's arch rival.
Canada's Alimentation Couche-Tard has been trying to acquire Seven & I, which has responded by working to increase shareholder value and telegraphing this commitment to a renewed focus. It is changing its name to 7-Eleven Corp.
Seven & I has already said it is planning to deconsolidate Seven Bank from its balance sheet by the end of this fiscal year but has not disclosed how. Seven & I owns 46% of Seven Bank.
According to local press reports, Seven & I is seeking to sell some shares to Itochu, which is looking to acquire about 20% of Seven Bank shares. The reporting also indicated that Itochu might install Seven Bank ATMs at Family Mart stores.
Seven & I said in a statement last week that it has not released any information about Seven Bank and Itochu.
Kazahaya said if Seven & I is really planning to sell a Seven Bank stake to Itochu, it might damage relations with 7-Eleven franchise owners, as Seven Bank ATMs are a strong competitive edge.
The daily average number of transactions per Seven Bank ATM was over 108 last fiscal year, while the figure for Lawson Bank's ATM was 59. And when people enter a convenience store to use an ATM, they will often buy something while they are there.
While Family Mart does not disclose data on ATM usage, if Itochu decides to set up Seven Bank ATMs at Family Mart stores, it could frustrate 7-Eleven franchise owners who compete with Family Mart in their areas, Kazahaya said.
'The convenience store business is a franchise system that is built on the trust of franchise owners, so it's really crucial to keep them satisfied,' he said.
Seven & I would need to carefully explain the move to those owners if the company really decides to proceed with it, he added.
For Itochu and Family Mart, acquiring Seven Bank shares would help improve competitiveness. Family Mart does not have a banking business and outsources ATM operations. Seven & I and Lawson run banks and have their own ATMs.
Obtaining a license to run a bank comes with regulatory hurdles, so Itochu could avoid those if it ties up with Seven Bank, said Hironari Nozaki, a professor at Toyo University.
Itochu could install Seven Bank ATMs at Family Mart stores and dominate the convenience store ATM competition. But Nozaki believes that room for growth might be limited in the longer-term.
This is because Seven Bank's business model is quite different from other banks, as it heavily relies on ATM fees rather than interest income. Last fiscal year, ATM fees generated more than 80% of the total revenue.
'It's highly likely that the number of ATM transactions will taper off in the future, since cashless payments are expected to become more popular,' Nozaki said.
Itochu was a potential investor in efforts to take Seven & I private as a takeover defense against Couche-Tard. The founding family of Seven & I and other investors were considering such a move through an ¥8 trillion ($55 billion) buyout.
But Itochu announced in February that it decided not to join the transaction after it found that capital raising would be difficult.
Earlier this month, Seven & I and Couche-Tard signed a nondisclosure agreement.