Mizuho Financial Group Inc. is doubling down on bets in the U.S. capital markets by seeking to expand into more lucrative areas, according to its new chief executive officer.
The firm wants to hire bankers to build its businesses with non-investment grade companies and leveraged buyout financing, where returns are expected to be higher, Masahiro Kihara, CEO of Japan’s third-largest bank, said in an interview. There will be proper risk management for these undertakings, he said.
The U.S. is “a super-important market. It’s the second-biggest revenue and profit generator after Japan,” Kihara said. “There is more room for what we can do in America.”
Faced with years of low interest rates and tepid economic growth at home, Japanese banks have been exploring overseas markets to drive their profits. For Mizuho, one such strategic area has been the U.S. debt capital market, which provided a boost to its bottom line during the pandemic-induced financing boom.
Among Japan’s three megabanks, Mizuho has been most aggressive in growing non-investment grade bond business in the U.S. The bank ranked 12th as underwriter for the country’s high-yield corporate notes last year, followed by Mitsubishi UFJ Financial Group Inc. at 16th and Sumitomo Mitsui Financial Group Inc. at 21st, according to data compiled by Bloomberg.
“By working with these clients, we are hoping to win M&A advisory and ECM deals as well,” said Kihara.
Still, such ambitions aren’t without risks and some foreign banks have struggled in their U.S. expansion. Nomura Holdings Inc., for example, has stopped offering cash prime-brokerage services in the U.S. and Europe in the wake of the debacle with collapsed Archegos Capital Management LP. Credit Suisse Group AG is said to be looking for a new chief executive officer to run its U.S. holding company as it seeks to rebuild in the country following setbacks.
Mizuho’s Kihara said that while the bank may be taking on more risks than its rivals by pushing into non-investment grade businesses in the U.S., it has built risk hedging capabilities and are avoiding sectors with particularly high volatility and leverages.
Kihara, 56, was promoted to the top post in February after his predecessor resigned to take responsibility for a series of IT system troubles. On top of fixing its internal control and IT systems, his mission is to catch up with the bank’s better-capitalized megabank rivals, which have ramped up in Asia’s emerging economies by buying banks and other financial companies over the last few years.
Kihara said he isn’t interested in buying traditional commercial banks in Asia. Instead, Mizuho will pursue opportunities in digital finance, citing deals like the February acquisition of a 10 percent stake in Tonik Financial Pte., which runs a digital bank in the Philippines.
Mizuho is also planning to spend 50 billion yen ($390 million) over the next five years to invest in its corporate clients’ carbon transition efforts, through buying into their ventures, he said.