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Mizuho to regroup to save capital
TOKYO, Japan -- Japanese banking giant Mizuho Holdings says it will regroup under a holding company next March, in a move to shore up its capital and regain its health. Mizuho is the world's biggest bank by assets but is viewed as one of the weaker of Japan's four big banking groups. Between them, the major Japanese banks have as much as $420 billion in problem loans on their books. The other three big banks are UFJ Holdings, Mitsubishi Tokyo Financial Group and Sumitomo Mitsui Financial Group. The banks have promised to clean up their loan portfolios and announced hefty writeoffs when they released first-half results last month. But analysts say there is still much to be done. Shares in Mizuho are trading percent 1.67 percent higher on Thursday morning at 122,000 yen. The broader market, measured by the Topix, is down about 0.2 percent to 872.81. Reform agenda
The administration of Japanese Prime Minister Junichiro Koizumi has made the overhaul of the banking system a cornerstone of the reform agenda, but the government faces entrenched political, bureaucratic and corporate opposition. Analysts told Reuters news agency that the announcement by Mizuho on Wednesday that it would put relatively healthy affiliates under a new holding company known as Mizuho Financial Group would give it greater access to reserves to pay dividends or beef up capital reserves. Mizuho also will transfer as much as 5 trillion yen ($40 billion) in non-performing loans from its banking operations to a new loan-recovery entity. Analysts said Mizuho could face a capital shortage as it deals with rising loan write-offs on top of a weak stock market. Beyond such accounting benefits, however, they struggled to see how the reorganisation would help. "In order to strengthen the group, Mizuho needs to come up with, for instance, measures to raise new capital, reduce bad loans or new business models," BNP Paribas analyst Naoto Odagiri told Reuters. "The market would clearly see the advantages of such measures, but I don't think changes in structure just announced will have any direct impact on profitability or restructuring." Neutral for sharesHironari Nozaki, an analyst at HSBC Securities, said the move would be neutral for shares in Mizuho, which have lost nearly 90 percent of their value since the group was formed two years ago. They have been hit hard in recent months as the government gears up to accelerate the disposal of banks' bad loans, including inspections of loan books and a timetable that gives lenders until next April to adopt stricter accounting methods. Prior to the announcement, shares in Mizuho ended Wednesday down 6.25 percent at 120,000 yen, against a 1.81 percent fall in the Topix. Mizuho's holding company move is similar to the strategy adopted by rival Sumitomo Mitsui Financial Group, the nation's second-biggest banking group, which moved into a holding company structure on Monday by putting profitable affiliates under the same umbrella. To go publicMizuho Holdings President Terunobu Maeda told a news conference that the new holding company, which includes a credit card company, a thinktank and a venture capital firm, will go public. Existing shares in Mizuho Holdings will be delisted from Tokyo and other bourses. Mizuho also said that Mizuho Asset Trust & Banking Co Ltd will merge with a wholly owned trust banking unit, Mizuho Trust & Banking Co Ltd, and come under the aegis of the new holding company. Mizuho, burdened with nearly five trillion yen ($40 billion) of sour loans, said it would speed up bad debt disposal by transferring them to a separate unit, or use a special corporate rehabilitation scheme by September 2003. It did not specify the amount of bad loans to be transferred. Mizuho Holdings was created through a three-way merger in 2000. It said last week that it returned to profit in the first half but forecast a loss for the full year as it plans to take huge loan-loss charges of 1.04 trillion yen ($8.3 billion). Reuters contributed to this report.
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