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Mizuho Mulls Buying Asia Investment Bank to Boost Fee Income

Mizuho Financial Group Inc. CEO Yasuhiro Sato
Yasuhiro Sato, chief executive officer of Mizuho Financial Group Inc. Photographer: Tomohiro Ohsumi/Bloomberg

Mizuho Financial Group Inc., Japan’s second-largest lender by assets, is considering buying an investment bank in Asia to help improve slow growth in winning equity and debt offerings in the region.

The lender’s expansion plans may also include allying with an investment bank, and purchasing asset managers and hedge funds in Singapore, India and Indonesia, Chief Executive Officer Yasuhiro Sato said in an interview. He also plans to increase the branches in Asia outside of Japan to 50 from 33 within five years for its corporate banking unit. Mizuho isn’t currently in talks with any banks for an acquisition or investment, he said.

Mizuho, ranked No. 22 in Asian equity underwriting this year, aims to tap corporate banking clients to boost fee income from advisory and underwriting as the domestic economy slows and loan demand slumps. The bank is yet to break into the top 10 for equity deals in the region since listing in the U.S. in 2006 in a bid to win more investment banking businesses.

“Our power to originate deals currently is still far from enough,” Sato, 59, said in an interview on Dec. 6. “We have to strengthen our capability in capital markets. It will be a big challenge to do it alone.”

Sato added he has no plan to sell Mizuho’s stake in Bank of America Corp., the second-largest U.S. lender by deposits, or add to its stake of BlackRock Inc., the world’s biggest asset manager.

Climbing the Ranks

Mizuho’s shares fell 1 percent to 103 yen at the 3 p.m. close of Tokyo Stock Exchange trading. The stock has lost 33 percent this year.

Mizuho sank to 22nd in equity underwriting this year, excluding self-led transactions, from No. 13 last year and jumped to Asia’s No. 5 bond underwriter this year from No. 7. The bank this year climbed to No. 11 in Asian merger and acquisition advising with deals valued at $44.6 billion, including a merger between Sumitomo Metal Industries Ltd. and Nippon Steel Corp. That compares with ranking 38th last year, data compiled by Bloomberg show.

The bank’s first-half profit fell 25 percent on “persistently sluggish” spending by Japanese companies, Sato said last month as he announced plans to cut 3,000 jobs. Fees and commissions had also declined.

Mizuho Securities Co., its investment banking unit, had a loss of 26.7 billion yen for the six months ended Sept. 30, compared with a profit of 6.4 billion yen a year earlier. The unit earlier this year hired Yasuo Agemura from Nomura Holdings Inc. as a managing director and head of its global markets business to help bolster its investment banking operations.

Business Abroad

Mizuho Financial’s net income for the six months ended Sept. 30 fell to 254.7 billion yen. It had 6.2 trillion yen of cash at that time, compared with 9.7 trillion yen at larger rival Mitsubishi UFJ Financial Group Inc. and 6.7 trillion yen at Sumitomo Mitsui Financial Group Inc.

Since signing a business partnership with India’s Tata Group earlier this year, Mizuho has arranged meetings for about 200 of its corporate clients with Tata-affiliated companies, Sato said. More than 20 Mizuho clients are now in talks for alliances with whose companies, possibly generating fees for the Tokyo-based bank, he said, declining to comment on the companies.

Mizuho Corporate Bank Ltd., which has 13 branches and offices in China, plans to increase them to 20 in four or five years, while it also plans to add offices in India, Turkey and Myanmar, the CEO said.

The bank in September agreed to buy a 15 percent stake in Joint-Stock Commercial Bank for Foreign Trade of Vietnam, the state-owned lender known as Vietcombank, for about $570 million. Vietcombank is the country’s fourth-biggest bank by assets.

BofA, BlackRock

Mizuho will also keep its stake in Bank of America, Sato said. The lender acquired the holding through its 2008 investment of $1.2 billion in Merrill Lynch & Co., before the New York-based investment bank was taken over by Bank of America.

Sato said in an interview on Feb. 8 that the bank would take time to determine whether to maintain its 0.3 percent stake in the U.S. bank or sell the shares. Since then, the stock has declined 62 percent.

Mizuho bought a 2 percent stake in BlackRock for $500 million in November 2010 to compete with larger rival Sumitomo Mitsui, which tied up with Barclays Plc in wealth management. In the February interview, Sato said he planned to leverage the stake to buy investment advisory firms in Asia with BlackRock.

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