In September, Mizuho Holdings was listed on the Tokyo Stock Exchange as apart of the ongoing merger between Industrial Bank of Japan, Dai-Ichi Kangyo Bank and Fuji Bank. The international operations of the three banks were then officially merged and a consolidation of offices and product lines begun. Itosaka talks to FinanceAsia about the outlook for Mizuho’s operations in Asia.
Q. What major growth areas Mizuho is targeting outside Japan?
When I look at the international operations of Mizuho, Asia is the most important area for us. The reason is that we have so many Japanese clients operating in Asia, manufacturing, sales offices and so forth. Here in Japan, Mizuho has a large customer base with 80% percent of listed companies, so it’s essential for us to support these companies’ activities in Asia too.
We’d like to establish some core competencies to compete with the large global banks. We should establish these first in Asia, rather than Europe or the US. In these places there is so much more competition and it’s difficult for us to get ahead. We intend to compete on the same level, but it’s very difficult to dominate. But in Asia there is that possibility.
Q. What services do you see Mizuho being able to dominate in?
Syndication, project finance, trade finance, and MBOs or other highly-leveraged transactions will be the core products we’re going to focus on. We’d also like to use our activity in the US and European markets to learn about new kinds of products and transfer these techniques and know-how to Asian business areas.
Loan syndication is an important product for us. We are the number one arranger in Asia, but that includes Japan. We’d like to be much more active outside Japan. The economic situation in South East Asia has been improving and we’ll have many more opportunities to syndicate loans for borrowers in those countries.
Through the consolidation of the three banks we’ll be able to create strength in certain areas. For example, project finance is probably the main strength of Japanese banks. We’re also very strong in leveraged finance areas like management buy-outs (MBO). When we compare our abilities in these areas to some US banks, we are still behind, but among Japanese banks we are the best.
In London, Mizuho is one of the strongest banks providing MBO finance. To bring better structuring of MBO back to Japan we use our know-how from the London staff. I believe we can extend our know-how in this area to other Asian countries. In order to do that we’re establishing finance product offices in Hong Kong and Singapore.
Q. Is all this transfer of know-how going to mean lots of staff transfers?
We’re going to establish some kind of global product system for this. We’re now working on how we should build that system. For some products we are going to be transferring personnel, but for some products we’ll establish a central point where we can pool all of the support that different area offices might need.
Q. In these areas you’ve identified there is still strong competition in Asia, particularly among the European and US banks. How do you plan to dominate?
Frankly speaking they have better products and a better service network right now. The strongest point for Mizuho is that we have a very large customer base from our past activities and have good relationships with many local companies. This is one of our key assets. The important thing is how we build on this existing customer base to provide better service. So the first step is the key product offices in Hong Kong and Singapore and transferring people with know-how to those offices.
Q. When will these new product offices be up and running?
Probably April 2002 after the completion of consolidation at the three banks. Right now we’re working to consolidate our overseas offices and many will be completed before April 2002. But in large offices like London, New York, Hong Kong and Singapore, we need a lot of work to bring together the three banks’ operations. Systems support is definitely something that’s necessary because their operations are large. We’ll have new systems and also organisational structures in place by end March 2002.
Q. With office mergers taking place and final organisational structure not yet decided, is this uncertainty affecting current business performance?
We will not create the new systems from nothing. We have our current operations in different countries handling the securities business, syndication and so forth. During the time until we complete the new organization we have to ask them to extend their capabilities and business activities across all the present offices. It doesn’t mean we’ll be inactive until 2002.
Q. In the past many Japanese banks have lacked focus on credit risk. How strong is Mizuho’s commitment to profit rather than monetary support of Japanese companies?
Of course we’ll do business that’s profitable. I’m quite sure as our presence in Asia becomes established that we can see some substantial profits from the area.
Q. Will international profits play a growing role in the group balance sheet?
I hope so. Right now approximately 25% of total profit comes from international business activities. But of course this also includes foreign exchange activities here in Japan for companies that trade abroad. The trend towards more international business will definitely increase. I believe more Japanese companies will transfer some areas, such as manufacturing, outside of Japan and in order to stay competitive in the global market they have to do so.
Q. Taiwan is a good example of this, with Japanese semiconductor companies outsourcing production and investing in companies there.
Yes we support many Japanese companies in Taiwan.
Q. Taiwan is going through a shake-up in the financial industry and foreign banks are seeing some opportunities for acquisitions. Is Mizuho looking at an acquisition strategy in Taiwan or elsewhere?
We don’t have any interest in buying local banks to expand our business there. Mizuho already has a large operation through Dai-Ichi Kangyo Bank (DKB), which largest Japanese bank in Taiwan. Compared to many Taiwanese local banks, it is also about the same size or even larger. We don’t need to expand through acquisitions there, but in some areas we may look at opportunities to expand in this manner. For example in Hong Kong - this is also through DKB - Mizuho has a local bank subsidiary called Chekiang First Bank. We may look at different opportunities, but it will depend on what kind of business we’re seeking in that country, whether it’s retail banking, commercial banking, or investment banking.
