(Corrects amount of Sato’s pay cut in the third paragraph of story published on May 23.)
Mizuho Financial Group Inc. (8411) named Yasuhiro Sato as chief executive officer and will combine some functions at its corporate, retail and trust units after a computer systems failure angered depositors and regulators.
Sato will replace Takashi Tsukamoto next month, subject to shareholder approval, and Satoru Nishibori will step down as head of the retail unit, the Tokyo-based bank said today in a statement. Administrative and systems operations of Mizuho Corporate Bank Ltd., Mizuho Bank Ltd. and Mizuho Trust & Banking Co. will be integrated by March 2013, it said.
Malfunctions at the retail bank delayed transactions worth more than $10 billion after a record earthquake in March, triggering a regulatory probe and a 13 percent drop in the parent’s stock. Among challenges for Sato, who will take a 30 percent salary cut for three months, is achieving a third year of profit growth as Japanese lenders compete for declining loans.
“The system glitch was a trigger that accelerated the pace of the bank’s management reshuffle and restructuring,” Yoshinobu Yamada, a Tokyo-based analyst at Deutsche Bank AG, said before the announcement. “A reduction of personnel expenses has long been one of Mizuho’s issues that must be addressed to boost local competitiveness.”
Mizuho said it will consider merging the three units, a move that would bring it into line with bigger rivals Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., which each have one main banking subsidiary that serves retail and corporate clients.
‘Sense of Urgency’
The glitches “increased our sense of urgency,” Tsukamoto said at a briefing. “We are prepared to do anything to create a one-bank regime, and a merger is one option.” He will become chairman next month.
Tsukamoto’s pay will be cut by 50 percent for six months, according to the statement. Other senior executives will also accept lower pay temporarily to take responsibility for the systems failure, it said.
The ratio of Mizuho’s operating costs, including staffing, to overall ordinary expenses was 60 percent in the year ended March 31, according to its latest earnings statement. That compares with 54 percent for Mitsubishi UFJ and 45 percent for Sumitomo Mitsui, based on their earnings disclosures.
Combining the banking units “could at least improve the group’s management efficiency,” Shinichi Ina, an analyst at Credit Suisse Group AG, wrote last week.
Sato, 59, is CEO of Mizuho Corporate Bank. After graduating from Tokyo University in 1976, he joined Industrial Bank of Japan Ltd. and worked there until the company combined with Dai- Ichi Kangyo Bank Ltd. and Fuji Bank Ltd. to form Mizuho in 2000.
Mizuho, Japan’s third-biggest bank by market value, fell 1.6 percent to 126 yen at the close in Tokyo before the announcement. The bank has declined 13 percent since the day before the systems glitch on March 15. Mitsubishi UFJ, the country’s biggest publicly traded lender, dropped 7 percent in the same period, and Sumitomo Mitsui lost 14 percent.
Loans outstanding in Japan have fallen for 17 months in a row, the longest slump since 2005, as households and companies hoard cash. The economy fell into a recession last quarter, shrinking at an annual 3.7 percent pace after the March 11 quake and tsunami crimped production and spending.
Japan’s Financial Services Agency is investigating the computer failure that delayed salary payments and halted automated teller machines in the wake of the disaster. Nishibori said at the time that the problem was related to a surge in donations to victims.
History of Mishaps
The mishap was the latest to plague Mizuho in its 11-year history. Past problems include a systems breakdown in 2002 that led to cash-card rejections and overcharging of customers, and a trading error in 2005, when its brokerage unit sold thousands of shares for as low as 1 yen each.
Earnings at Mizuho have improved since the global financial crisis, when it incurred the biggest losses on U.S. subprime mortgage-related securities of any Asian bank. Net income will climb 11 percent to 460 billion yen ($5.6 billion) in the year ending March 31, buoyed by fees and commissions, the company forecast this month.
Mizuho announced changes to its securities business in March, saying it will turn two brokerages and a trust bank into wholly owned subsidiaries this fiscal year.
To contact the editor responsible for this story: Chitra Somayaji at firstname.lastname@example.org