Top Japan-Based Lenders Aim to Win Bigger IB Deals in the US
Top lenders in Japan are seeking to win bigger investment banking (“IB”) deals in the United States in an effort to make better utilization of their massive balance sheets.
Given the huge asset balances backed by household deposits, Japan’s top lenders have been notable players in the U.S. corporate lending business for years. However, they are struggling in advising and other fee-based businesses in the U.S. IB markets.
In sync with the above-mentioned effort, Japan’s Mizuho Financial Group, Inc.’s MFG securities arm plans to boost hiring in the United States to cement its position among the top 10 stock and bond underwriters in the lucrative market. The news was reported by Bloomberg.
Per Yoshiro Hamamoto, the CEO of Mizuho Securities, MFG’s U.S. unit will likely recruit more than 100 people for its IB and trading business by the end of March 2024.
MFG’s hiring comes at a time when the overall IB business in the United States is struggling because of a slump in deal-making. Amid the muted environment for global mergers and acquisitions, U.S. banking giants, including JPMorgan JPM, Citigroup C and Morgan Stanley MS, are cutting IB jobs.
Last month, JPM made a fresh round of layoffs in Asia. People familiar with the matter said that the firm cut around 20 IB jobs. The reduction mostly affected junior staff at associate and analyst levels in sectors, including consumer, healthcare and private capital markets.
Previously, JPMorgan axed 500 roles across various departments and about 30 IB jobs in the Asia-Pacific in May and February, respectively.
Similarly, the Financial News stated that Citigroup would likely cut 30 IB jobs and 20 more in its corporate banking unit in London.
MS considered cutting around 7% of jobs in the Asia-Pacific region (excluding Japan). This is part of the broader 3,000 IB job cuts announced by Morgan Stanley.
Despite the prevailing IB headwinds, MFG has made global corporate and IB its main focus area in a new growth plan.
This is evident from the company’s recent acquisition of U.S. boutique firm Greenhill & Co.
Hamamoto said that the acquisition would help fill in “missing pieces” in Mizuho’s operations through Greenhill’s strength in advisory and industry coverage.
He added, “We will gain more capabilities to pitch various solutions to clients, instead of simply offering to extend a balance sheet. Our strategy is to make better use of our balance sheet and boost returns on risk-weighted assets.”
Hamamoto also said that the stronger advisory functions would likely have a spillover effect on equity offerings, wherein MFG seeks to move up into the top 10.
Notably, the United States generates more IB fees than any other market.
Hamamoto believes that winning more deals will pave the way for Mizuho to capture other relevant business from clients, such as debt and stock underwriting, which, in turn, generates the business of selling securities to investors.
Japan’s largest bank, Mitsubishi UFJ Financial Group, Inc. MUFG, also boosted its presence in the United States through a $9-billion investment in MS in 2008. The investment gave MUFG about 20% ownership of MS. Since then, MUFG and MS have entered many big deals together.
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