Mizuho Financial Group will avoid issuing dilutive common shares or taking public money if it needs to raise more funds, the incoming president of Japans second-largest bank said in an interview.
Takashi Tsukamoto, who will take the helm of the bank in April, also told Reuters that Mizuho needs to build up its securities business, although he declined to say whether that may include buying Citigroups Japanese brokerage.
Separately, the incoming president of Mizuhos corporate banking arm said it could consider capital tie-ups or acquisitions overseas to increase its global reach.
Reuters interviewed Tsukamoto and the incoming heads of Mizuhos corporate lending and retail banking businesses from March 10 to 17. Both interviews were embargoed until Thursday. Mizuho and Japans two other "megabanks", Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group, have raised about $25 billion in recent months, after Tokyos tumbling stock market wiped out the value of their massive share holdings.
Mizuho has so far relied on preferred securities to raise its funds, and Tsukamoto said it would continue to do so. Issuing such securities does not increase the companys outstanding common shares and therefore does not hurt shareholder value.
"We would avoid the risk of dilution, that is dilution from issuing common shares," he said, when asked about the possibility of future fundraising. He also ruled out taking public funds.
"At present there is no need for us to consider the option of taking government money." But he said he would like to use a revived Bank of Japan scheme under which the central bank buys lenders shareholdings.
"We can avoid the downside pressure in the market and at the same time we can reduce the stock holdings," Tsukamoto said on March 17. "I think that is a very good measure." Unlike Western banks, Japanese lenders take stakes in their corporate clients to seal business ties, making bank profits sensitive to swings in equity prices.
Mizuho has raised nearly $5 billion since last year, but analysts say it may need more because it has the weakest Tier 1, or core capital ratio, and the highest "break-even" point on the Nikkei of Japans three megabanks.
Mizuho has said its break-even point, the level where it starts to book paper losses on stockusiness as it is," he said. Mizuho, Mitsubishi UFJ and Sumitomo Mitsui are all likely bidding for Citigroups Japanese brokerage, sources told Reuters last month, in a deal that could cost up to 300 billion yen.
Citigroup could select a buyer for the unit, Nikko Cordial Securities, as early as April, the Nikkei newspaper said on Friday.
Tsukamoto declined to say whether the bank was looking to acquire Nikko Cordial. Mizuhos securities business is growing in the United States, helped by its status as a primary dealer for US Treasuries, said Yasuhiro Sato, the incoming head of Mizuho Corporate Bank. "Our securities business in the United States is very profitable at the moment, it is exceeding our forecasts by about three times over," Sato said in a separate interview, although he did not disclose the forecasts.
Mizuho could also consider capital alliances or acquisitions overseas to increase its global reach, Sato said. "In terms of our distribution, our sales network, were fairly strong domestically, but in terms of our sales network to overseas investors, we are considerably weaker than foreign financial firms."
"Over the long term, we will have to make some investment or acquisition in order to have access to a global distribution channel." Sato said the bank would continue to focus on areas such as equity and debt financing, as it looks to take business away from Western banks crippled by the subprime crisis.
Mizuho last year invested $1.2 billion in Merrill Lynch & Co. The US brokerage has since been taken over by Bank of America, and Mizuho has yet to announce any kind of official operational tie-up with the US bank.
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