Mizuho Financial Group plans to expand into Myanmar, Laos and Bangladesh as early as the business year starting in April in a bid to tap growing markets as lending at home dwindles, the head of its international banking unit said.
"We need to pay attention to these countries because they will become markets that cannot be ignored," Yasuhiro Sato, CEO of Mizuho Corporate Bank, said in an interview with Reuters.
Mizuho, Japan's No 2 lender, will also expand its network in China, where it already has 13 offices, and plans to add a third in India in addition to the ones it has in New Delhi and Mumbai, he added.
Like its domestic rivals, Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group, Mizuho faces a persistent contraction in demand for loans in deflation-hobbled Japan that is crimping earnings. To make up the shortfall and seek better returns on the 150 trillion yen ($1.8 trillion) of assets it holds the bank has to look for opportunities abroad. Lending in Japan in January declined for the 14th straight month, dipping by 1.8 percent from a year earlier.
By extending loans in those burgeoning economies Mizuho is also hoping to tap demand for lucrative investment banking services from rapidly growing multinational corporations, Sato said. "For western banks, it is a matter of course that providing loans is just a door opener and actual profits come from bond and equity underwriting and advisory business," Sato said.
"Japanese banks have not been able to build such relationships overseas, especially with non-Japanese clients." By forging relationships with senior executives, Mizuho has started to attract non-Japanese clients to services other than simple loan transactions, Sato said. Beyond Asia, Sato, who joined the Industrial Bank of Japan in 1976, which a decade ago merged with two other lenders to create Mizuho, said he wants to extend the company's ties with Brazil with possible steps such as opening a branch in South America's leading economy.
To succeed overseas, Sato, 58, whose career at Mizuho has included a stint in New York, will have to vie both with long-time domestic rivals, MUFJ and SMFG, and better established western players such as HSBC, Standard Chartered and Goldman Sachs.
To bolster its business, Japan's largest lender, MUFJ, at the height of the global financial crisis in 2008, acquired a 21 percent stake in Morgan Stanley for $9 billion. So far they have set up joint investment banking and brokerage ventures in Japan.
No 3 SMFC in 2009 bought Citigroup's Japanese brokerage Nikko Cordial Securities for 550 billion yen. To give it an edge overseas, Mizuho, may seek alliances with other financial institutions in Asia, Sato said.
"Nowadays, when big companies like Toshiba and Hitachi offer shares, they make global offerings, they don't just sell to Japanese investors, but to western and Asian investors too," Sato said. "The reality is that many big companies look to Goldman Sachs and Morgan Stanley; we are lacking in our distribution capability."