Mizuho Seeks $100 Billion From Overseas Transaction Banking

(Bloomberg) -- Mizuho Financial Group Inc. wants to grow its business managing overseas corporate money by $100 billion this fiscal year, as it seeks new ways to boost international earnings at a time of negative interest rates at home.

“We’re expanding with a focus on the cross-border transactions of non-Japanese corporations doing business in Asia,” Zenichi Tanakamaru, a senior vice president in Mizuho’s global corporate department, said in an interview.

He hopes the push into transaction businesses -- which include cash management and trade finance services for corporate clients -- will help to boost the volume of foreign exchange Mizuho handles by 20 percent in the year to March 31, from $500 billion in the previous fiscal year.

With the Bank of Japan’s negative interest-rate policy squeezing the profitability of core domestic loan business, Mizuho and its megabank peers Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. have been expanding their international operations to shore up earnings. Transaction banking business enables Mizuho to capture low-cost deposits in local currencies, funding its lending and investments where it can profit from margins as well as earning fees on transactions.

The global transaction-banking market generated revenues of $45 billion in the year ended March 2017, a report compiled by industry analytics firm Coalition Development Ltd. shows. No Japanese lenders yet rank among the top 10 banks in the area, a list topped by Citigroup Inc., HSBC Holdings Plc and JPMorgan Chase & Co., the Coalition data show.

Long Way

“Japanese banks are expanding aggressively in transaction banking in the Asia ex-Japan region,” Eric Li, research director at Coalition, said in an interview. “But it’s off a very small base, and they still have a very long way to go to catch up to the top 10 players.”

Mizuho opened its global transaction-banking headquarters in Singapore last year, the first time Japan’s third-largest lender has located the head office for a business line outside its home country.

The business unit has roughly doubled its staff numbers in the past three years, now reaching a total of 280 in its offices in Singapore, Tokyo, Hong Kong, China, New York and London, according to Tanakamaru. This includes five senior salespeople it recruited from foreign competitors, who have been deployed to lead the business in each region.

“We’ve got our people and our organization in place now; this year and next year will be the time to reap rewards,” he said.

The Tokyo-based bank is also focusing on improving its product-development abilities so it can compete with U.S. and European rivals, expanding online systems for supply-chain finance and currency management. The bank in July completed a trial of a blockchain-based trade-finance solution including issuance of a letter of credit and delivering trade documents, which is now ready to roll out to clients, Tanakamaru said.

Mizuho fared worst among Japan’s megabanks in the first quarter of this year, announcing an 11 percent decline in net income in a statement last week, while MUFG’s profit surged 53 percent and Sumitomo Mitsui’s gained 31 percent.

To contact the reporters on this story: Gareth Allan in Tokyo at gallan11@bloomberg.net, Shingo Kawamoto in Tokyo at skawamoto2@bloomberg.net.

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Russell Ward