June 3, 2019 / 3:10 PM / a month ago

Japan's Mizuho aims to build warchest for Asia fintech investment

TOKYO (Reuters) - Mizuho Financial Group aims to build a warchest of several billion dollars in the next five years to target financial technology in Asia, its chief said, as the Japanese megabank looks to chart a different path from its bigger rivals.

FILE PHOTO: Mizuho Financial Group's Chief Executive Officer Tatsufumi Sakai attends an interview with Reuters at the company's headquarters in Tokyo, Japan August 20, 2018. Picture taken August 20, 2018. REUTERS/Toru Hanai

Mizuho is fighting to right its business after posting an 83% plunge in net profit in the last financial year, hit by impairment losses on fixed assets and an overhaul of its securities portfolio.

Once Japan’s second-largest lender by assets, Mizuho has been recently eclipsed by Sumitomo Mitsui Financial Group (SMFG). Its market value is down by a third in a little over a decade and it has largely stayed on the sidelines as top megabank Mitsubishi UFJ Financial Group, in particular, has been more aggressive overseas.

“I have an image that we will be able to have several billion dollars for investment,” chief executive Tatsufumi Sakai said in an interview with Reuters last week that was embargoed for release on Tuesday.

“I would positively consider digital businesses if there are opportunities in Asia,” he said, adding he was not interested in investing in a traditional banking business overseas.

Mizuho has already made some forays into the digital space. In 2016 it jointly founded online credit scorer J.Score Co with SoftBank Corp.

Last year, it agreed with Line, the dominant messenger app in Japan, to launch a smartphone-focused bank, aiming to start its operation in fiscal 2020.

But aggressive expansion appears unlikely. Under a mid-term plan that was unveiled last month, Mizuho is looking to boost a key measure of capital strength, its Common Equity Tier 1 (CET1) ratio, to more than 9% from 8.2% in fiscal 2018. As it stands, Mizuho’s ratio is the weakest among the Japanese megabanks with SMFG boasting 10.3% and MUFG at 11.4%.

Mizuho is also aiming for a group net profit of 900 billion yen ($8.31 billion) by 2023 versus 408 billion yen in fiscal 2018.

MUFG and SMFG each reported more than 1 trillion yen of group net profit in the year ended in March, while Mizuho fell well behind them in profitability.

Undeterred, Sakai said the bank would walk its own path. “We are not chasing them,” he said.

Reporting by Takashi Umekawa and Taro Fuse; Editing by David Dolan and Muralikumar Anantharaman

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