Mizuho chief executive bullish on overseas loan growth

Mizuho will continue to enjoy strong growth in overseas lending through the coming quarter on a jump in loan requests from international borrowers as European banks curb lending due to the region's debt crisis, the CEO of the Japanese bank said.
The euro zone turmoil has also created a rare opportunity for Japanese banks to ramp up their overseas expansion as their European rivals rush to offload assets, though Mizuho will cautiously wait to see how the crisis pans out, Yasuhiro Sato told Reuters in an interview.
Mizuho Financial Group's outstanding overseas loans grew 13 percent to a record $132 billion in the six months to September, about 16 percent of the total, helping to cushion a decline in Japan where firms remain reluctant to expand operations. "In Asia, Japanese and French banks had been the main players in infrastructure finance, but the French have been pulling out," Sato said. "We are likely to maintain the same pace of loan growth" in the six months to March as in the April-September half, he said.
With little exposure to Europe's troubled sovereign debt, Japanese banks are seen as well-positioned to buy assets of European lenders, which are expected to ditch up to 3 trillion euros of loans to meet new capital rules and ease funding strains.
That would be a boost for the country's three biggest banks by assets - top-ranked Mitsubishi UFJ Financial Group, No 2 Mizuho and Sumitomo Mitsui Financial Group (SMFG) - which are looking overseas to offset lacklustre lending business at home. But Sato said Mizuho would only be interested in buying European assets that would establish business relations with target clients, such as regional blue chips or multinationals - an approach that may not contribute in the immediate term but would pay off eventually.
"Buying assets such as project finance loans and aviation leases may push up short-term profits, but it would do no good for our long-term overseas client relationships," he said.
Sato, 59, took the helm of Mizuho in June after a nearly four-decade career that included a stint in New York, where he made important connections with global financial players - ties he says give him an advantage among top Japanese bankers. Among those connections is Henry Kravis, co-founder and Chief Executive of KKR & Co. Sato said it was a phone call by Kravis that led to Japanese trading house Itochu Corp's $1 billion participation in KKR's $7.2 billion acquisition in November of oil and gas group Samson Investment.
"I got a call on my mobile phone from him. I was in a car on the way to dinner with clients. He said we need a quick decision, asking if there's a Japanese company that can join the deal," Sato said. "And I said yes. It was a really good deal."
Still, Sato is largely untested as the head of the financial group, which has been lagging its rivals in profitability. He faces the daunting challenge of overhauling the group's sprawling structure, seen as a relic of a three-way merger a decade ago.
He is under growing pressure to turn around its investment banking unit Mizuho Securities, which suffered a 420 billion yen net loss for the year ended in March 2008 amid the financial crisis. It again posted losses for the six months ended in September, hit by a sharp slowdown in stock-brokering as well as bond and equity underwriting. "Mizuho's biggest problem is Mizuho Securities. Without its losses, Mizuho is likely to have a capital ratio comparable to that of SMFG," said Yoshinobu Yamada, a senior analyst at Deutsche Securities.
Mizuho is estimated to have the lowest capital ratio - a key gauge of a bank's capital cushion against losses - among Japan's top three banks. Deutsche estimates that Mizuho had a common equity tier-1 ratio of 5.36 percent as of the end of September, lower than SMFG's 7.39 percent.