Mizuho Bank CEO Pledges to Boost Lending to Small Businesses

Mizuho Financial Group Inc.’s banking unit chief pledged to take more risks to increase lending to small businesses as Prime Minister Shinzo Abe’s efforts to revive the economy spurs spending by companies.

“Loan demand has already been increasing from big companies,” Mizuho Bank Ltd. President Nobuhide Hayashi said in an interview in Tokyo yesterday, a month after taking the post amid a management overhaul following a scandal involving credit given to gangsters. “To boost Japan’s vitality, we need to secure an environment that allows small and medium-sized enterprises to expand without worries.”

Mizuho Financial said in September it aims to increase domestic lending by 4 trillion yen ($39 billion) by 2016, raising its target by a third as the Tokyo Olympics and Abe’s stimulus policies prompt big companies to borrow. Smaller firms, which employ about two-thirds of Japan’s workers, are more hesitant to boost spending because their slimmer balance sheets make them more vulnerable to swings in the economy.

An index measuring demand for bank loans from small companies fell to 5 in the three months ended March from 7 in the previous quarter, a Bank of Japan loan officer survey showed last month. A gauge for larger corporate borrowers rose to a two-year high of 7.

“Mizuho has to compete with other megabanks and regional lenders to make loans to small businesses,” said Shinichiro Nakamura, a Tokyo-based analyst at SMBC Nikko Securities Inc. “If competition becomes so tough that lending margins shrink, there’s a risk that Mizuho’s effort could hurt its earnings.”

Mizuho Financial’s lending and trust banking units had a combined 54.9 trillion yen in outstanding domestic loans as of December, an increase of about 1.2 trillion yen from March last year, the company’s data show.

Take Risks

“Japan is finally pulling itself out of deflation step by step,” said Hayashi, 57, who replaced Yasuhiro Sato as the unit’s chief executive officer on April 1. “We want to make our best efforts to increase loans so that we can exceed our targets. I’m telling loan managers for small businesses: ‘Let’s take risks.’”

Shares of Mizuho Financial slid 1 percent to 202 yen as of 12:56 p.m. in Tokyo. The stock has dropped 11 percent this year, in line with the benchmark Nikkei 225 Stock Average’s decline.

Sato stepped down as head of Mizuho Bank after Japanese regulators penalized the financial group last year for failing to stop 200 million yen in loans to members of crime groups and then filing an incorrect report on the matter. He remains CEO of the parent company.

Hayashi became deputy president of Mizuho’s corporate banking unit in April last year, three months before it merged with the retail lending arm to form Mizuho Bank.

Before it's here, it's on the Bloomberg Terminal.