Mizuho Financial Group Inc. plans to raise around ¥800 billion to ¥1 trillion by issuing common shares to brace for stricter global capital requirements, sources said Tuesday.
Japan’s second-largest banking group is expected to announce the move by the end of this month, the sources said.
Global regulators’ debates about stricter capital requirements for banks have encouraged Japanese lenders to accelerate the issuance of new common shares, and since late last year both Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. have implemented capital increases.
Investors had been looking to see how Mizuho, the worst capitalized among Japan’s top three banks, would cope with the tighter capital rules.
The Basel Committee on Banking Supervision released proposals in December for stricter capital adequacy rules to limit banks’ core equity capital to common stock and retained earnings and exclude preferred stock from the narrowed definition of capital.
The proposed new rules put Japanese banks under pressure to accelerate the issuance of new common shares because their capital contains a large volume of preferred shares and appears weaker than that of their major overseas rivals.
Mizuho’s core capital adequacy ratio stood at 8.78 percent as of the end of December, satisfying the 8 percent requirement for internationally operating banks under Bank for International Settlements rules.
But excluding preferred shares and deferred income tax assets under the envisioned tighter capital rules, the bank’s capital ratio falls to around 3.5 percent, making a capital increase imperative, the sources said.
Mizuho’s new share offering would boost the rate to around 5 percent, although that would still fall below the 6 percent to 7 percent of MUFG and SMFG.
Mizuho increased its capital last summer, raising about ¥530 billion through a public offering and third-party allocation of new shares.
For fiscal 2009, which ended March 31, Mizuho is estimated to have achieved its target of returning to the black with a group net profit of ¥200 billion on the back of the economic recovery.
Founder to retire
Mizuho Financial Group Inc. Chairman Terunobu Maeda and two other Mizuho group leaders are planning to retire after leading the group since its creation through a merger of three major banks in 2002, industry sources said Tuesday.
Mizuho Financial Group is expected to announce the retirements as well as public stock offerings when it releases its earnings report Friday for the last business year.
The two other retiring group leaders are Mizuho Corporate Bank Chairman Hiroshi Saito, 66, and Mizuho Bank Chairman Seiji Sugiyama, 63.
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