On Monday, Jefferies began coverage on Rakuten Bank Ltd (5838:JP), issuing a Hold rating and setting a price target at JPY4,400.00. The firm highlighted the bank’s strong connection to the Rakuten Group, which boasts a customer base of 100 million Rakuten ID accounts and 1.8 billion users across its group services worldwide. These numbers suggest that Rakuten Bank has the potential to reach a vast audience for any new banking services it introduces, essentially covering the entire Japanese population.
Rakuten Bank’s systems, which are primarily developed in-house except for some specialist areas, allow for rapid development and innovation. This technical agility, combined with the absence of physical branches, results in cost savings that the bank can redirect towards system development expenses. According to Jefferies, this strategic approach provides Rakuten Bank with a significant competitive edge in the banking sector.
The analyst noted that the cost benefits derived from not maintaining traditional branches could be utilized as investments in system improvements. Rakuten Bank’s ability to leverage the engineering expertise within the Rakuten Group, which employed 30,000 people at the end of 2023, further enhances its competitive advantage over other banks.
Jefferies’ assessment underscores Rakuten Bank’s unique position within the Rakuten ecosystem. The bank’s integration with the broader group services and its focus on technological development are central to its strategy and potential for growth in the financial industry. The Hold rating indicates a neutral stance on the bank’s stock, with the set price target reflecting Jefferies’ expectations for its performance.
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