TOKYO: Japan's Mizuho Financial Group Inc has ended its years-long strategy of continuous asset-buying in favour of doing more with what it's got, as ever-more stringent banking regulation makes sustaining acquisitions an increasingly costly endeavour.
The group is taking a more disciplined approach to "balance sheet control", seeking to replace overseas assets it sells rather than add more, as well as offer more services that do not require significant investment, Koji Fujiwara, chief executive of core unit Mizuho Bank Ltd, told Reuters.
Mizuho and its Japanese peers emerged relatively unscathed from the global financial crisis of 2007-09, able to step up both overseas spending and lending.
Mizuho, Japan's second-largest lender by assets, increased its assets by more than 30 percent in the past decade to over 200 trillion yen ($1.83 trillion). Outstanding overseas loans have doubled since March 2009 to about $200 billion.
But under Basel III global capital rules, banks have to set aside more capital to cover assets and loans, so they can better withstand future financial shocks. This has prompted banks around the work to adjust their business models.
"In terms of scale, we are about the right size now. We don't need to make either significant increases or reductions in assets," said Fujiwara, who assumed his position this month.
He said the bank is reshuffling its loan portfolio, and that the process is likely to accelerate in the financial year that started this month, as it actively expands overseas lending such as for client mergers and acquisitions (M&S), while stepping up the sale of existing loans to other financial institutions.
"Overseas secondary markets are fertile and deep and we have to sell more (existing) loans if we are going to extend more new loans," Fujiwara said in an interview.
He said the bank is shifting to more fee-oriented services that do not significantly draw on a bank's balance sheet, such as underwriting shares and bonds as well as M&A advisory.
"It's possible to double our business activity while keeping our asset size the same," Fujiwara said.
"We are trying to build a business model that does not depend on the balance sheet. It's especially so in this interest rate environment," he said, referring to the Bank of Japan's negative benchmark interest rate, which makes it costly for commercial banks to deposit funds at the central bank.
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