Mizuho Financial Group Inc., Japan’s second-largest publicly traded bank by assets, is raising as much as 748 billion yen ($8.4 billion) in its second share sale in a year to comply with stricter global capital rules.
Mizuho plans to sell as many as 6 billion shares for 130 yen each, according to a filing made to the Ministry of Finance today. The Tokyo-based bank’s stock closed at 135 yen today, the lowest in seven years.
The offering adds to $43 billion in new equity raised by Mizuho and its two largest local rivals since December 2008, as regulators push for greater capital buffers to avert another credit crisis. Mizuho may avoid having to sell more stock as banks will likely be given additional time to comply with the new rules for financial strength, said Ismael Pili, an analyst at Macquarie Group Ltd.
“The capital standards set to be introduced at year-end may not be as onerous as we expected,” said Tokyo-based Pili. Banks may get at least 10 years to meet new criteria, giving them enough time for them to build capital “organically,” he said.
Banks should increase the quality of capital they hold by the end of 2012, the Basel Committee on Banking Supervision said in a report published Dec. 17. Regulators may grant banks transition periods of up to a decade to implement capital rules to ease concerns that lenders and their economies won’t be able to bear the burden of tougher requirements until a recovery takes hold, according to bankers, regulators and lobbyists involved in the talks.
Mizuho will still trail Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. in financial strength, according to Fitch Ratings Ltd. Mizuho’s core Tier 1 ratio, a measure of its ability to absorb losses, was 4.2 percent at the end of March, compared with 7.8 percent at Mitsubishi UFJ and 7 percent for Sumitomo Mitsui, Fitch estimates.
A share sale of 800 billion yen would allow Mizuho to boost its core capital ratio to 5.6 percent, according to Fitch.
Stock sales by Japan’s largest lenders have depressed bank shares, with the Topix Banks Index slumping to the lowest level since at least January 1983 this month. Japanese banks trade at a discount to book value, Bloomberg data show.
“With the big banks having their financing out of the way, I think Japanese banks are attractive,” said Nicholas Smith, director of equity research at MF Global FXA Securities Ltd. in Tokyo. “There may be some upside for Mizuho and other banks at current valuations.”
Mitsubishi UFJ has fallen 5 percent in Tokyo trading since pricing its latest stock sale in December. Sumitomo Mitsui shares have dropped 12 percent since the bank priced its share offering in January.
Mizuho returned to profit in the fiscal year ended March 31 and predicts net income will jump 80 percent to 430 billion yen in the current 12-month period. That is the highest full-year profit forecast among Japan’s publicly traded banks.
Bank earnings may get a boost this year from lower-than-expected bad-loan costs, according to MF Global’s Smith.
Takashi Tsukamoto, Mizuho’s chief executive officer, said June 22 he and two bank unit presidents will take a 30 percent pay cut for three months as the lender reduces dividends. Six Mizuho executives including Tsukamoto received more than 100 million yen in compensation in the year ended March 31, the highest executive pay reported by a Japanese bank.