Mizuho CEO says higher fee income will offset negative rates
TOKYO: Mizuho Financial Group Inc. is counting on fee businesses to make up for lower returns from lending and bond investments in the wake of the Bank of Japan's negative interestrate policy. "Non-interest income will grow significantly as we move into new businesses" in the negative-rate environment, Chief Executive Officer Yasuhiro Sato said in an interview at the bank's Tokyo headquarters last week.
Sato said this could offset the 40 billion yen ($365 million) that he expects the BOJ's policy will shave off income from businesses such as lending this fiscal year. With returns from lending diminishing, Mizuho is forecasting profit will decline 11 percent this fiscal year, underscoring why it's seeking to boost income from areas such as investment banking, trust banking and brokerage services. The Tokyo-based bank has bolstered its securities operations by hiring staff at home and abroad, particularly in the U.S., where it is trying to gain market share by capitalizing on other firms scaling back.
One business that can benefit from low interest rates relates to corporate pension funds, according to Sato. With low rates increasing the costs that employers must pay for pensions with fixed benefits, many companies are switching to defined-contribution plans, the Japanese equivalent of a 401k, he said. The group's trust bank earns fees for setting up such plans for the banking unit's customers. "One of our strengths is the ability to generate income by cooperating among our group bank, trust bank and securities functions," Sato said.