Mizuho Financial Group, Inc. Q2 FY2024 earnings call

Management has completed the first half of the medium-term business plan, with financial targets exceeded ahead of time. Focus is on five areas of sustainable growth and making growth investments. Efforts are made to strengthen infrastructure and efficiency, with cost reduction and product/service reinvention. Lessons are learned from system failures to ensure operational stability. A new HR framework, CANADE, is implemented and transition is completed. The purpose culture is promoted with 416 town hall meetings. In Japan, large corporate business accounts for 70% of domestic business with diversified income. Overseas, Americas has a large wallet share, EMEA optimizes operations, and collaboration with Greenhill is advanced. There is cooperation with Rakuten, Greenhill integration progresses, and efforts are made to enhance customer experience and asset management.

In terms of segment performance, for the banking sector, AUM is steadily increasing through enhanced consulting capabilities and expanded product lineup. Overseas, efforts are made to raise profitability and diversify revenue sources. The acquisition of Greenhill in December last year has brought about synergies and collaborations. Regarding asset profitability, in the first half of 2024, low-profit deals were reduced by ¥1.1 trillion, and high-profit business increased by ¥1.6 trillion, resulting in RORA rising from 3.1% to 3.3%. Cross-shareholdings were reduced by ¥300 billion over three years, with ¥183.3 billion reduced in the first half of 2024. The Employee Retirement Benefit Trust Fund saw a reduction of ¥200 billion. In Japan, 70% of domestic business is large corporate business, with income diversified. Overseas, Americas has the largest wallet share, EMEA focuses on efficient operations, and collaboration with Greenhill is strengthened for global CIB.

FY24 net business profit is forecasted to be ¥1.17 trillion, an increase of ¥100 billion compared to previous. The medium-term business plan is to be advanced to achieve steady financial progress and more stable growth. Shareholder return policy remains unchanged, with progressive dividends as the principal approach and consideration of intermittent share buybacks, taking performance, capital adequacy, stock price, and growth investment opportunities into comprehensive account.

Risks include system failures, cyber risks, geopolitical risks. For example, geopolitical risks such as Trump-related policies may lead to inflation rise and interest rate increase again, which may affect the Americas portfolio.

Q: From the outside, the integration with Greenhill is fully underway, CET1 ratio is 10%, HR system is updated. What is the primary focus area next? Regarding the cooperation with Rakuten Card, it is perceived that Mizuho Bank and Rakuten Bank are competing for Rakuten Card, where will customers open accounts and is there cannibalization?

A: Primary focus areas include system failures, cyber risks, geopolitical risks, and asset and wealth management which hasn't met expectations. For Rakuten Card, it's believed there is no cannibalization and hopes for win-win with Rakuten, customers can choose to open accounts according to their preferences.

Q: Long-term ROE and direction of risk asset investment?

A: Long-term ROE is on an upward trend, aiming for 8% and above. Risk asset investment needs to effectively utilize assets to generate returns, with strict control of risk-return in this fiscal year and cautious use of assets for growth.

Q: Reason for bold change in capital allocation thinking and prospects of future alliance and partnership with Rakuten Card?

A: In capital allocation, with CET1 ratio reaching 10.5% based on Basel III, meeting regulatory capital requirements under stress tests, entering a stage of balancing growth investment and shareholder return. Cooperation with Rakuten Card will deepen the alliance, with various menus and targets, and will gradually improve targets and key performance indicators and monitor progress.

Q: Progress speed of cross-shareholdings this fiscal year and promising areas for profit in Rakuten Card cooperation?

A: For cross-shareholdings, CFO leads discussions on three-year targets, and may accelerate pace according to customer situations. In Rakuten Card cooperation, acquisition, integrated operation, etc. areas are promising for profit, with expected ROI of 8% within five years.

Q: Position of Mizuho Group in consumer credit and income contribution and visibility of cooperation with Rakuten, and resource allocation and performance in non-Americas regions of global CIB?

A: In consumer credit, housing loans focus on growth opportunities after providing loans, credit card loans can be strengthened through cooperation with Rakuten. Regarding income contribution and visibility, details need to be carefully considered with business lines and ROE as important key performance indicators. In non-Americas regions of global CIB, EMEA market has difficulties in rational profit making, needing adjustment of organization and setup, and APAC market expands business through derivatives and risk solutions, advancing cross-border M&A strategies through Greenhill capabilities.