July 1 (Bloomberg) -- Mizuho Financial Group Inc., Japan’s third-largest bank by market value, will raise as much as 655 billion yen ($6.8 billion) from selling shares after local and overseas investments depleted capital.

Mizuho plans to offer 3 billion common shares to institutional investors in the U.S. and Europe, and sell to individuals and funds in Japan, the Tokyo-based bank said in a statement today. The bank may set the price as early as July 15.

Japan’s three largest lenders including Mitsubishi UFJ Financial Group Inc. have announced plans to raise more than 4.6 trillion yen after share losses and mounting bad loans eroded their capital. Mizuho’s proposed sale follows an announcement last month by Sumitomo Mitsui Financial Group Inc. that it will raise as much as 923 billion yen by selling shares.

“By any measure, the Japanese mega banks are still relatively capital deficient,” Ismael Pili, a Tokyo-based analyst at Macquarie Group Ltd., said before the announcement.

Mizuho, which reported a loss of 588.8 billion yen for the year ended March 31, had Tier 1 capital ratio of 6.4 percent at the end of the period, the lowest among Japan’s three largest banks. Tier 1 capital is a gauge of a lender’s ability to absorb losses.

Following the latest round of fund raising, the bank’s capital “still looks pretty weak” compared to its two largest domestic rivals and other Asian banks, Pili said.

Mizuho Securities Co., Nomura Securities Co., JPMorgan Chase & Co., Bank of America Corp.’s Merrill Lynch & Co., Goldman Sachs Group Inc., Morgan Stanley and UBS AG are underwriting the share sale.

Japanese banks and brokerages are investing to expand operations in Japan, Europe and the U.S. Mitsubishi UFJ is merging its securities arm with the local unit of Morgan Stanley, while Sumitomo Mitsui is purchasing Nikko Cordial Securities Inc. from Citigroup Inc.

To contact the reporters on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.netTakahiko Hyuga in Tokyo at thyuga@bloomberg.net

Last Updated: June 30, 2009 23:47 EDT