TOKYO — As the coronavirus pandemic saps corporate finances, Mizuho Financial Group is prepared to provide billions of dollars to struggling businesses that need capital injections, the Japanese bank’s CEO Tatsufumi Sakai told Nikkei.
Companies have so far focused mainly on raising working capital as shutdowns slash income. But longer-term goals remain on managers’ minds, Sakai said in a recent interview.
“When we talk to our clients, there’s very strong [investment appetite] for digital upgrades and other activities,” Sakai said. “It’s not simply that they’re holding off on investment because of the coronavirus; there’s a shared understanding that you need to prepare for the post-coronavirus world.”
“Big corporations are thinking about strategic investments, while more small and midsize companies are saying, ‘Now’s the time to make sure we have succession plans in place,'” the CEO added.
The bank, one of the country’s top three lenders, counts roughly 70% of listed Japanese companies among its customers. Mizuho plans to provide hundreds of billions of yen in support this fiscal year in forms including subordinated debt, which can partly count toward capital, and preferred shares that lack voting rights, according to Sakai. (One hundred billion yen equals $933 million.)
Mizuho has received requests for 17 trillion yen in financing from Japanese and foreign companies, including new credit lines, and has acted on about 10 trillion yen of that amount, Sakai said.
As for what he his telling his own organization, Sakai said: “I am telling our staff, ‘It’s not that we can’t go back to before the coronavirus, but rather that we shouldn’t go back there.'”
Sakai was promoted to chief executive of the financial group in April 2018 after leading its securities unit. His previous posts included head of the group’s international banking and investment banking.
The recent stay-at-home push in corporate Japan sparked by the pandemic fits with Mizuho’s digital pivot in recent years.
One area of focus for the megabank is electronic contracts, which let businesses handle financing applications while working remotely, with no need to physically stamp the documents with traditional seals. About 8,000 companies use these contracts now, and Mizuho expects the total to rise to 14,000 by the end of this fiscal year.
The coronavirus has made businesses realize that they have not gone far enough in planning for a digital future, “and we will leverage that in our business,” Sakai said.
The group has installed tablets in all its branches as it moves from paper to digital documents. It expects the resulting reduction in workloads to save more than 100 billion yen ($929 million) in overhead.
The change will also free up employees to focus on consultations for asset management and estate planning, for example.
Mizuho will increase the number of locations specializing in retail banking to about 100 by fiscal 2021 from 20 or so now, according to Sakai. This is even as the group looks to reduce its network of bricks-and-mortar banks and brokerages by about a quarter between fiscal 2017 and fiscal 2024.
Mizuho’s retail and small-business operations have struggled with narrow profit margins. The group forecasts a 3 billion yen net loss for the segment in fiscal 2020, down from a 16.5 billion yen profit in fiscal 2019. Sakai said the megabank will “firmly control fixed costs” and make the business consistently profitable.