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Banking

Japan: Mizuho leads as megabanks look overseas

Mizuho Corporate Bank and its German subsidiary have together bought a Russian bank, Michinoku Bank (Moscow), completing the purchase of 100% of all 10 million outstanding shares on January 21.

The move might turn out to have much further-reaching consequences than the Japanese bank’s higher-profile purchase of a stake in Merrill Lynch earlier in the month. The acquisition of a small stake in a Wall Street bank looks like a purely financial investment of spare capital, whereas the Russian adventure indicates the increasing desire of Japan’s largest commercial banks to seek profits overseas, as the domestic markets offer little joy.

A Tokyo-based M&A banker at a bulge-bracket firm sums up market perception of Mizuho’s $1.2 billion investment in Merrill Lynch. "Now is a good time to invest in a Wall Street Securities house, and from a purely financial perspective it makes sense for a relatively cash-rich Japanese firm to take a stake in an investment bank with potentially huge return on equity that’s going through a tough spot. So, it’s a reasonable idea financially. Is it a meaningful investment from a relationship perspective? No. As a percentage of Merrill Lynch the investment is small, and Merrill has a relationship with another mega bank in the form of a private banking joint venture with Mitsubishi UFJ, so they can hardly start favouring Mizuho heavily."

Contrast this with the complete acquisition of a Russian bank, which Mizuho Corporate Bank says it will use to help serve Japanese clients looking to capitalize on Russia’s growth.

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