Mizuho Chases Financial Bond Deals as It Starts London Team

(Bloomberg) -- Mizuho Financial Group Inc.’s investment bank is targeting a bigger share of global financial bond deals as it seeks more profits overseas and expands its debt capital markets business at home and abroad.

The Japanese bank has managed $8.7 billion of financial bonds so far this year, climbing 27 spaces compared with the same period last year to rank nineteenth, according to data compiled by Bloomberg. Mizuho set up a financial bond team in London last fiscal year to join similar groups in Tokyo, New York and Hong Kong, and has about 25 staff in the business, according to Yuzo Kanamori, head of global investment banking at Mizuho Securities Co.

“Our corporate bond business has already come a long way, and we want to do more in the financial institutions bond area,” said Kanamori in an interview at Mizuho’s Tokyo offices. “I have to consider where we can make more profits from here on. We want to do more domestically, but there is certainly considerable upside potential for our DCM business overseas.”

Mizuho and Japanese peers Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. are building overseas bond teams as they seek more fee income amid declining margins on loans at home under the Bank of Japan’s negative-interest rate policy. Mizuho rose to No. 9 in underwriting notes for U.S. companies last year after purchasing loans and adding bankers in North America from Royal Bank of Scotland Group Inc. in 2015.

Kanamori, who also oversees Mizuho’s M&A and equity capital markets businesses, said his division plans to add 10 more staff abroad this fiscal year, depending on market conditions and revenues. Mizuho was a joint-lead underwriter on dollar-denominated deals for banks including Industrial & Commercial Bank of China Ltd., Shinhan Bank, and Bank of New York Mellon Corp. so far this year. It still has less than 1 percent share of financial bond deals globally, according to data compiled by Bloomberg.

Japan’s big banks need to strengthen their fee businesses as global regulations make boosting income from increased overseas lending more difficult, according to Rie Nishihara, a senior analyst at JPMorgan Chase & Co. While Mizuho was able to leverage its acquisition of RBS’s operations to boost its presence in underwriting corporate bonds, it may find it more difficult to win business from the world’s top banks, she said.

Mizuho shares climbed 0.5 percent as of 11:07 a.m. in Tokyo. They have fallen 6.1 percent this year.

Mizuho wants to boost cross-border deals, whether it is Asian deals in the dollar market, U.S. corporate transactions in Europe or bond sales by overseas entities in Japan or Australian, said Kanamori. Mizuho has climbed nine places to sixth in Australia’s Kangaroo market so far this year, data compiled by Bloomberg show.

“Ten years ago, we had almost no revenue from overseas in our investment banking business, whereas now before-tax profit from Japan and overseas is almost equal,” he said.

To contact the reporters on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net, Tesun Oh in Tokyo at toh15@bloomberg.net.

To contact the editors responsible for this story: Neha D'silva at ndsilva1@bloomberg.net, Andrew Monahan at amonahan@bloomberg.net, Chan Tien Hin