Mizuho CEO Says Path to Take On the Asian Retail Banking Business Is Online

(Bloomberg) -- Mizuho Financial Group Inc. will pursue a digital route if it decides to follow its Japanese competitors into retail banking in Asia’s fast-growing emerging markets, according to its chief executive officer.

Japan’s third-largest banking group is more likely to either buy an online lender or build one from scratch itself, rather than acquire banks with physical branches, CEO Tatsufumi Sakai said in an interview. “We don’t intend to enter legacy consumer business at this point,” he said. “We’re more interested in a digital business model.”

Mizuho CEO Says Path to Take On the Asian Retail Banking Business Is Online

The nation’s biggest banks have made Asia their growth focus as persistently low interest rates and a sluggish economy hurt prospects at home. Mizuho’s approach would mark a sharp contrast with Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., which have spent billions of dollars acquiring traditional commercial lenders in Southeast Asia in recent years.

While Mizuho doesn’t have any specific plans to get into retail banking in emerging Asia right now, the region has huge growth potential and a young population that is embracing digital technology for banking, according to Sakai. “The need for financial services will no doubt increase,” he said.

With the weakest capital ratio among the three Japanese banks, Mizuho has less room to make acquisitions of the scale that its rivals have achieved. At home, the lender is reducing its retail branch network and bolstering digital channels, according to a five-year business plan released last month.

Mizuho’s name has been linked in the past to possible bank takeovers in Thailand and Indonesia, though no transaction materialized.

Sakai, 59, also spoke of Mizuho’s ambitions to expand transaction banking for corporate clients in Asia. Handling more money transfers and cash flows for companies would allow the bank to boost its overseas deposits, providing a relatively cheap source of foreign-currency funding.

Mizuho and its rivals have been aggressively expanding overseas lending, which generates bigger margins than domestic loans. But they don’t have enough dollars from clients accounts to cover all of those loans, meaning they must rely partly on market funding, which poses risks in times of stress.

“It’s important to secure as much as client deposit money as a stable funding source” to continue expanding lending abroad, Sakai said. While there has been ample liquidity in the past three years, “we expect the funding environment will become tighter,” he said.

Mizuho’s foreign-currency deposits amounted to 74% of non-yen loans as of March, company data show.

Sakai ruled out the idea of acquiring a U.S. bank to expand Mizuho’s dollar deposits, given the costs of buying and integrating a local lender, along with regulatory issues. He said it would be “more practical” to set up an online lender there, too.

Sakai, who rose through the ranks at Mizuho in areas including international banking and strategic planning, said he examined the feasibility of buying a U.S. bank a lot in the past. “It’s not easy,” he said.

©2019 Bloomberg L.P.

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