- Bank is chasing fees by advising SMEs on investing, growth
- Mizuho became No. 1 underwriter of Japan IPOs this year
Mizuho Financial Group Inc. is increasing its pool of bankers who advise small Japanese businesses on matters ranging from investing to going public, part of a push to spur fee income at the nation’s third-biggest banking group.
Tokyo-based Mizuho seeks to boost the number of bankers covering small and mid-sized enterprises, or SMEs, by about 50 percent in the next three years from the current 350, said Hidetoshi Kaji, a senior corporate officer at its securities unit. It will do so mainly by transferring people from its retail brokerage and filling the gap by hiring new graduates.
Chief Executive Officer Yasuhiro Sato has been stressing the importance of bolstering fee businesses as plummeting interest rates curtail profitability from lending. Japanese SMEs, which earned record profits last year, are paying fees for advice on anything from investing in a negative-rate world to pursuing acquisitions and listing shares during global market turmoil.
“Taking a company public is a big event for us and the company owners, and it’s crucial to support them as the lead manager to hold a long-term relationship,” Kaji, 52, said in an interview in Tokyo last week. “Negative interest rates are forcing small businesses to think about how to take risks when they can’t get decent returns from domestic bonds.”
Succession planning is also a key area for Mizuho, as Japan’s growing ranks of aging business owners seek advice on how to hand over the reins to the next generation.
According to Kaji, Mizuho Securities Co. will move about 150 to 200 people, mainly those who handle individual clients, to cover SMEs and “middle-market” firms, which he defined as those with an estimated value of less than 100 billion yen ($990 million) if they were publicly traded. The brokerage plans to recruit 400 graduates for the year starting next April, increasing its intake by 13 percent from a year earlier, with most joining the retail brokerage operation, said Hiroki Saigusa, a Tokyo-based spokesman.
“Frankly, we’re not increasing manpower fast enough to keep up with the rapid growth of the business,” Kaji said. “We see fairly big potential in biotech, IT and financial technology companies because they’re the ones that are seeking growth” by listing their shares, he said.
By contrast, other major Japanese securities firms aren’t accelerating hiring of university graduates next fiscal year. Nomura Holdings Inc., Daiwa Securities Group Inc. and SMBC Nikko Securities Inc. plan to recruit fewer school leavers, while Mitsubishi UFJ Morgan Stanley Securities Co. will keep the number little changed, spokesmen for the companies said.
Mizuho climbed to the top of Japan’s rankings of IPO underwriters in the first half of 2016 from seventh last year, managing listings ranging from CHIeru Co., a Tokyo-based online education provider, to Hiroshima-based tofu maker Yamami Co., data compiled by Bloomberg show. The number of IPOs in Japan increased in each of the past six years, led by smaller companies.
Oversight of small firms falls within Mizuho’s new retail and business banking division, one of five in-house companies created by CEO Sato this year and the biggest by revenue. Mizuho expects revenue from the division will expand about 7 percent over the next three years to 740 billion yen in the 12 months ending March 2019, according to calculations based on a presentation for investors on June 17. It sees the unit’s profit climbing to 60 billion yen from 16 billion yen in the same period.
The bank’s four other in-house companies are corporate and institutional, global corporate, global markets and asset management. Sato set up the system this year to make the financial group more responsive to customers.
Pretax profit at SMEs in Japan climbed to a record 5.2 trillion yen last year, according to the trade ministry. Such companies generate about 55 percent of the country’s economic activity, government data show. Still, sentiment among smaller companies worsened last quarter as a rising yen damped prospects for exporters, a Bank of Japan survey showed last week.
Mizuho isn’t the only investment bank to focus on small businesses in Japan. Goldman Sachs Group Inc. is planning to work with smaller companies on takeovers abroad as they follow larger peers in the search for growth overseas, local M&A head Yoshihiko Yano said in December.