Mizuho to boost capital ratio
By Taro Fuse |
May 12, 2010, Wednesday
|
Print Edition
Print Edition
MIZUHO Financial Group Inc, Japan's second-largest bank by assets, plans to raise about 800 billion yen (US$8.7 billion) in common shares to prepare for stricter capital requirements, three sources familiar with the matter said.
Mizuho has been under pressure to raise new capital after top lender Mitsubishi UFJ Financial Group raised about US$15 billion and third-ranked Sumitomo Mitsui Financial Group about US$20 billion in their two rounds of fundraising between December 2008 and February this year.
Mizuho raised only US$5.7 billion in the same period.
Timed with the multi-billion-dollar capital raising, Mizuho plans to announce the departure of its chairman and those of its two core banking units on Friday, the Nikkei business daily reported, a move that would strengthen the control of current President Takashi Tsukamoto.
"A capital raising of 800 billion yen would be within the market's scenario," said Nana Otsuki, a bank analyst at UBS in Tokyo. But she added uncertainty remains as to whether that would be enough for Mizuho as it has not been determined how stringent new capital rules would be.
Japanese banks have been moving to raise capital to preempt the pending government move in line with international guidelines published late last year. Up to now they have relied heavily on preferred securities and preferred shares but these may no longer count toward core capital under the new regulations.
In December, the Basel Committee on Banking Supervision published draft reforms requiring that the predominant form of Tier-1 capital be common shares and retained earnings.
The new offering would boost the amount of shares outstanding by about 30 percent based on Mizuho's market value of 2.65 trillion yen.
Mizuho plans to approve the offering at a board meeting on Friday and sell the shares to domestic and overseas investors in June, said the sources speaking on condition of anonymity.
In one of the most stringent scenarios for the new regulations, which exclude preferred shares, deferred tax assets and others, Mizuho's core capital ratio would stand at 1.29 percent as of the end of December, UBS estimates.
MUFG's stands at 5.78 percent, and SMFG's at 4.5 percent after the bank raised capital in January, it said.
UBS's Otsuki said she estimated a capital raising of 800 billion yen would add about 1.35 percentage points to Mizuho's core capital.
Mizuho has been under pressure to raise new capital after top lender Mitsubishi UFJ Financial Group raised about US$15 billion and third-ranked Sumitomo Mitsui Financial Group about US$20 billion in their two rounds of fundraising between December 2008 and February this year.
Mizuho raised only US$5.7 billion in the same period.
Timed with the multi-billion-dollar capital raising, Mizuho plans to announce the departure of its chairman and those of its two core banking units on Friday, the Nikkei business daily reported, a move that would strengthen the control of current President Takashi Tsukamoto.
"A capital raising of 800 billion yen would be within the market's scenario," said Nana Otsuki, a bank analyst at UBS in Tokyo. But she added uncertainty remains as to whether that would be enough for Mizuho as it has not been determined how stringent new capital rules would be.
Japanese banks have been moving to raise capital to preempt the pending government move in line with international guidelines published late last year. Up to now they have relied heavily on preferred securities and preferred shares but these may no longer count toward core capital under the new regulations.
In December, the Basel Committee on Banking Supervision published draft reforms requiring that the predominant form of Tier-1 capital be common shares and retained earnings.
The new offering would boost the amount of shares outstanding by about 30 percent based on Mizuho's market value of 2.65 trillion yen.
Mizuho plans to approve the offering at a board meeting on Friday and sell the shares to domestic and overseas investors in June, said the sources speaking on condition of anonymity.
In one of the most stringent scenarios for the new regulations, which exclude preferred shares, deferred tax assets and others, Mizuho's core capital ratio would stand at 1.29 percent as of the end of December, UBS estimates.
MUFG's stands at 5.78 percent, and SMFG's at 4.5 percent after the bank raised capital in January, it said.
UBS's Otsuki said she estimated a capital raising of 800 billion yen would add about 1.35 percentage points to Mizuho's core capital.
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