Mizuho, which is Japanese for "a fresh harvest of rice", is the name that Dai-ichi Kangyo Bank (DKB), Fuji Bank and International Bank of Japan (IBJ) chose for their merged entity. Now Mizuho is reaping the benefits that come with three of the major banks in Japan. But three months into the desk merger, have they integrated fully? Michael Robertson was head of the Euro-MTN desk at IBJ and he is now head of primary and structured finance at Mizuho. He remembers the reaction in the banks when news of the merger was made public in August 1999. He says: "Most people were excited by the prospect of becoming the world's first trillion dollar bank, but some were disappointed. For all three, it represented a change to their long-standing traditions." The Mizuho Holding company was formed on September 29 last year and the MTN desks finally found themselves working side by side on December 1 2000. The Euro-MTN operation is not set up like most of Mizuho's competitors. There is an emphasis on structures, with seven people dedicated to structured products and eight on the origination team. All are involved in other debt capital market products, such as asset-backed securities and standalone bonds, as well as Euro-MTNs. And the coverage of the investor network in Japan is extensive, with 124 sales people working in Tokyo. The Mizuho MTN team has clocked up 225 trades so far this year, excluding syndicated trades and trades greater than $250 million, but including trades of one year or less. However, unlike many of its American and European competitors, the Mizuho desk chooses not to submit the majority of its trades to MTNWare. According to the database Mizuho has been bookrunner off just 34 trades this year, leaving 85% of its MTN business unrepresented. This contrasts with many of Mizuho's competitors who claim that between 90% and 95% of their trades are logged on MTNWare. But Mizuho is not keen on market transparency. Robertson says the reason for not disclosing many of the trades is to maintain a competitive edge and to keep Mizuho's structures and investors confidential. He says: "The structured MTN business is the bigger part of our operation, although there is a growing international corporate credit market in Japan now. Our competitive edge is offering structured notes tailoring risk profiles to meet specific investor requirements." About 90% of Mizuho's trades are in yen and in the MTNWare yen bookrunner league table, Mizuho comes fourth behind Salomon Smith Barney, Nomura Securities and Daiwa SBCM Europe. If all Mizuho's trades were included, it would take first place in the league table, according to Mizuho. David Roberts-Jones was head of DKB's desk and is now director, primary and structured finance at Mizuho. He believes that Mizuho has taken strengths from each of the three banks. He says: "For instance, two of the three parties brought successful penetration of the European private placement business, and some brought better placement of foreign currency issues into Japan - all contributed their strengths. It's really great because we've all brought something to the table." Mizuho has developed close ties with its counterparties. Like most Japanese banks, Mizuho is rated A3/BBB+, so it uses external swap counterparties for some trades, depending on the maturity. Roberts-Jones says: "Of all our yen trades, only about 5% of the non-Japanese issuers are funding directly in yen, because most non-Japanese issuers don't need yen funding - but we've persuaded more issuers to fund in yen on a floating basis, cutting out the basis risk and reducing costs. It's true that the majority of the trades are done by non-yen payers and these have to be swapped out into US dollar or euros." Last year DKB, Fuji Bank and IBJ were appointed to five dealer panels off Euro-MTN programmes, excluding IBJ and DKB's self-arranged programmes. But Robertson says that dealerships are by no means the priority for Mizuho's MTN business. He says: "The Euro-MTN market is very reverse enquiry-driven, so being a named dealer is not as important as it used to be, or as important as it is in the US market. In fact, for dealers, there is a potential downside to being awarded a dealership. That is that some issuers do expect named dealers to produce a minimum amount of financing, which may or may not be possible depending on market conditions. And there is often no disadvantage to joining as a dealer for the day, on an ad hoc basis. I think we will see more issuers not having named dealer panels." But for the future, Mizuho is not content to be the leader only in Japan. The MTN desk is building up its business in Europe and developing its European investor base. Robertson says: "We have had good flows out of various parts of Europe - the market has been quite structure-friendly in southern Europe for example, and the structure-intensive business is our particular strength." The larger desk has left more scope for concentrated activity in specific geographic regions. And this is one of the luxuries of working as part of a larger team. Roberts-Jones says: "It's a long day if you don't have enough staff to cover all the markets in each time zone. Now we do and it's great for each originator to be able to focus in more depth on a smaller part of the world."
March 09, 2001
