MIzuho CEO Masahiro Kihara. — Bloomberg
TOKYO: Mizuho Financial Group Inc’s chief executive officer (CEO) has expressed optimism that momentum in investment banking will continue both at home and in the United States, where Japan’s third-biggest lender has been expanding.
Mizuho has completed the integration of US boutique investment bank Greenhill & Co, which it purchased two years ago, and is now reaping the benefits, CEO Masahiro Kihara said in a Bloomberg Television interview yesterday.
“We’re now able to pursue large-scale merger and acquisition deals,” he said.
The Federal Reserve’s (Fed) interest-rate cut overnight will have a positive effect on Mizuho’s business in the United States, Kihara said.
“The momentum will continue probably, and that’s good for us.”
He expects the Fed to reduce rates two or three more times.
Mizuho has ambitions to become Asia’s top investment bank.
The firm is ranked 22nd among advisers on global mergers and acquisitions this year, having worked on deals including 3G Capital’s US$9.4bil agreement to buy footwear maker Skechers USA Inc, according to data compiled by Bloomberg.
The bank is seventh on M&A transactions in Japan, where volumes are at the second-highest on record.
Deals in Japan are being fuelled by CEOs who have changed their mindsets to improve returns for shareholders, particularly at large-cap companies, Kihara said.
Now that trend is spreading to midcaps, and Mizuho has expanded its capabilities in the sector, according to Kihara.
Japan’s biggest banks are forecasting another year of record profits as higher interest rates boost lending income and tariffs do little to derail business.
Mizuho raised its annual profit forecast in November, its second upward revision for the fiscal year ending in March.
The bank’s shares have surged 46% this year.
Kihara said new Prime Minister Sanae Takaichi is keen to grow the economy, making Japan “very, very interesting.”
Takaichi had recently unleashed the country’s biggest burst of spending since pandemic restrictions eased, adding to concerns about the country’s public debt.
Japanese government bonds have tumbled this year, sending yields to the highest in decades.
But Kihara said he doesn’t expect any huge shocks as long as the government maintains fiscal discipline.
He said 10-year JGB yields may exceed 2% – a level they haven’t breached in 19 years – but will remain relatively low.
Kihara anticipates the Bank of Japan (BoJ) to raise interest rates this month, in line with market expectations.
And even if the BoJ hikes again next year, he doesn’t see the yen appreciating much.
Japan’s currency is likely to trade around 145 to 150 per dollar, he said. The yen was at 155.64 yesterday morning.
Kihara also spoke about the bank’s forays in India and China.
Mizuho is still in talks to purchase a stake in Mumbai-based investment bank Avendus Capital Pvt. and hopes to reach an outcome early next year, he said.
Mizuho is keen to expand its presence in China, where it will focus on debt capital markets initially.
The firm’s securities unit received regulatory approval to set up a wholly owned brokerage on the mainland in September, and it hired Daiwa Securities Group Inc’s former China head to lead the entity.
“It is a challenge, but I think it’s worth doing,” he said. — Bloomberg
