Two regional banks in central Japan are planning to integrate their operations, as a long-anticipated industry consolidation picks up pace.

The deal between Aichi Financial Group and San ju San Financial Group will create a regional banking group with total assets worth more than ?11.6 trillion ($74 billion), according to data from the two lenders in a statement Wednesday. They said further details will be disclosed as soon as arrangements are made.

Aichi Financial¡¯s shares closed 2.6% higher while San ju San jumped 6.8%, beating the broad Topix index¡¯s 1.2% advance.

Japan has been seeing a wave of regional bank deals, and there¡¯s potential for more consolidation to come from other lenders and their neighboring rivals. Those banks are under growing pressure to map out their future amid the country¡¯s shrinking population and intensifying fight for deposits in a rising interest-rate environment.

In March, Bank of Nagoya, which shares the same home market as Aichi Financial, reached an agreement with bigger rival Shizuoka Financial Group to consolidate their operations under a holding company.

Shares of Aichi Financial and San ju San were suspended from trading after the integration plan was first reported by public broadcaster NHK. Japanese hedge fund Ariake Capital has built more than a 10% stake in Aichi Financial. Ariake Capital said in April when it reported its shareholding increase in Aichi Financial that it may make important proposals to the company.

The two banks said that their respective prefectures, Aichi and Mie, have a ¡°thriving¡± manufacturing industry that they expect to benefit further from the building of new expressway and a high-tech train line. Toyota Motor, the world¡¯s largest automaker, is based in Aichi.

But the banks acknowledged that a shrinking population drove their consolidation plans.

¡°The business environment surrounding regional financial institutions has been undergoing significant changes, due to the impact on economic activities and labor markets resulting from population decline and the aging society,¡± they said in the statement.

Rising interest rates and intensifying competition, including from companies in other industries due to technological advances, also are forcing regional banks to act in an ¡°agile manner,¡± the two lenders said.