To stem capital losses from slumping stock markets, the new president of Mizuho Financial Group Inc. has said he plans to reduce the megabank’s ¥3 trillion in equity holdings by about 20 percent.
“Because ¥3 trillion is certainly a tremendous amount, we have long been considering the need to reduce a little more of our holdings,” Mizuho President and Chief Executive Officer Takashi Tsukamoto said Wednesday in an interview with The Japan Times. “We hope they will be brought down to around half, or 50 percent of our Tier 1 capital.”
Tier 1 capital is a bank’s core capital and is often used to gauge its financial health. Mizuho’s Tier 1 capital stood at ¥4.6 trillion as of December.
Tsukamoto, 58, took over the banking group on April 1. He got his start with Mizuho at Dai-Ichi Kangyo Bank, one of Mizuho’s predecessors, in 1974 after graduating from Kyoto University.
Tsukamoto said the group had ¥9 trillion invested in stocks in 2002, when Dai-Ichi Kangyo, Fuji Bank and Industrial Bank of Japan merged to become Mizuho. Since then, Mizuho has been slashing its equity holdings to prevent declining stock markets from eating up its capital.
Tsukamoto said, however, that Mizuho will need extra time to reduce its massive equity holdings because its sales might trigger a plunge in the stock market.
The nation’s three megabanks are expected to report net losses for business 2008 due to sizable appraisal losses on shareholdings and increased writeoffs for bad loans, but Tsukamoto refused to confirm this.
“Although our earnings results will undoubtedly be austere, we are still calculating the figures,” he said.
Although banks are being criticized for not lending enough to companies struggling to survive the deepening recession, reviving memories of the megabanks’ troubles during the bad-loan crisis in the late 1990s, Tsukamoto said Mizuho has taken every step it can to boost corporate financing.
In the latter half of the business year that ended in March, Tsukamoto said Mizuho increased lending to small firms by ¥400 billion to ¥500 billion. He also said Mizuho handled around ¥300 billion in emergency corporate loans that were fully guaranteed by the government and set up a team this month dedicated to helping struggling firms maintain or resuscitate their businesses.
The megabanks bear a huge responsibility to the economy, Tsukamoto said.
“Especially on rainy days, we will have to make utmost efforts to hand out umbrellas (to cash-strapped firms),” he said, vowing to increase efforts to facilitate corporate financing.
Although Asia is not immune to the fallout from the subprime-mortgage crisis, Tsukamoto said Mizuho’s overseas strategy is to become an Asian-centric global bank. He said the Chinese and Indian economies have been growing more rapidly than the rest and Asia and its huge population have room for economic growth.
“We will also grow by partially helping Asian economic growth,” Tsukamoto said.
Tsukamoto said he was eager to strengthen Mizuho’s partnership with Merrill Lynch & Co., Inc. Two brokerages in the Mizuho group — Mizuho Securities Co. and Shinko Securities Co. — plan to merge on May 7.
“What we, domestic banks’ securities firms, are lacking is a global reach to investors and customers worldwide,” he said. “In that sense, I think there is some room for collaboration with Merrill, which has been extremely active globally,” Tsukamoto said.
Mizuho, however, does not currently have any more plans to invest further in the U.S. bank, he said.
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