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Japanese Banking Giants Strategize for Greater US Investment Market Share

Japan's leading banks are revamping strategies to make a bigger splash in the US investment banking sector, executives revealed.

Japanese Yen
Japanese Yen

The Japanese Banking Ambition in US Investment Banking

Japanese mega-banks have, for many years, held significant positions in US corporate lending, thanks to enormous assets supported by domestic deposits. However, they have found it challenging to make significant headway in the highly profitable investment banking sector, specifically in advisory and other fee-based services.

Mizuho's Strategic Acquisition of Greenhill

The $550 million acquisition of US boutique firm Greenhill by Mizuho in May represents a significant step towards remedying this situation. Yoshiro Hamamoto, CEO of Mizuho Securities, states that the acquisition will fill in the "missing pieces" in advisory services and other areas, enhancing their capabilities beyond simple balance sheet offerings. This move is expected to stimulate growth in equity offerings, with Mizuho aiming to ascend the US league table to a top-10 position.

Previous Moves Boost Mizuho’s Debt Market Position

Mizuho's 2015 acquisition of the Royal Bank of Scotland's North American corporate loan portfolio greatly strengthened its presence in debt capital markets. This solid base is expected to support the company's future growth in the US investment banking sector.

Sumitomo Mitsui’s Plan to Expand in US Investment Banking

Meanwhile, Mizuho's larger domestic rival, Sumitomo Mitsui Financial Group (SMFG), is also targeting US investment banking expansion. The bank announced plans to triple its stake in Jefferies Financial Group to around 15%, intending to merge its US equity and M&A business with its partner to utilize Jefferies' investment banking expertise and SMFG's balance sheet.

Mitsubishi UFJ Paves the Way in US Investment Banking

These ambitions follow the path of Mitsubishi UFJ Financial Group (MUFG), which previously increased its US presence with a $9 billion investment in Morgan Stanley in 2008. This investment resulted in MUFG acquiring around a 20% stake in the Wall Street bank, leading to numerous major deals between the two firms.

Challenges and Opportunities for Japanese Banks in US

Historically, Japanese banks have had a patchy record in the U.S. market, being seen as generous lenders without pressing for M&A deals in return. This perception is changing, with former executives pointing to a shift in attitudes and strategic approaches. However, analysts warn that Japanese firms need to effectively leverage their connections to Japanese investors to avoid the pitfalls experienced by some European banks.

Mizuho's Acquisition to Enhance Cross-Border M&A Advisory

Mizuho's Hamamoto has voiced that the Greenhill deal will expand the range of its cross-border M&A advisory, particularly beneficial for Japanese companies intensifying their search for investment or divestment opportunities to improve capital efficiency. The bank plans to maintain the Greenhill brand, its global network, and its leadership team.