Mizuho: Joining the AT1 Bond Fray Amidst Financial Turbulence and Seizing Global Opportunities

Forging Ahead in a Competitive Landscape


Responding to a global financial ripple effect, Mizuho Financial Group Inc. is gearing up to become the third major Japanese bank to sell Additional Tier 1 (AT1) bonds. The decision follows the near-collapse of Credit Suisse Group AG, which resulted in a worldwide fire sale of AT1 bonds. This move not only underscores the resilience of Japan’s local credit market but also mirrors a positive shift in investor sentiment.


Optimistic Momentum in the Japanese Financial Sector


Preparations are in full swing for Mizuho to launch a two-part AT1 note, denominated in yen, with Mizuho Securities Co., the underwriter, suggesting pricing could be revealed as early as July. The size of the issuance, however, remains undetermined. This development heralds Mizuho Financial’s entry into an exclusive club previously joined by Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group Inc., other Japanese financial powerhouses who have ventured into AT1 note sales.


AT1 Bonds: A Volatile Space with High Potential


Considered the riskiest bank debt, contingent convertible bonds, or AT1 bonds, have witnessed a bounce-back in recent weeks, despite prices still trailing their pre-crisis levels. This trend was observed in a Bloomberg index, hinting at a potentially lucrative, yet challenging, opportunity for Mizuho.


Mizuho’s Global Ambitions: Purchasing Boutique Firm Greenhill & Co.


In addition to its planned bond offering, Mizuho has also revealed its intentions to amplify its presence in the US investment banking sector. The bank has purchased boutique firm Greenhill & Co., sending a clear signal about its global ambitions and commitment to establishing a robust international footprint.


Utilizing Bond Proceeds for Operational Growth


As part of its strategic financial planning, Mizuho intends to utilize the bond proceeds for working capital. This decision underlines the bank’s focus on maintaining a robust operational machinery while it explores new growth avenues.


Japan’s Unique Financial Ecosystem: A Haven for AT1 Bonds


The current flurry of AT1 sales in Japan sheds light on the unique characteristics of the country’s financial environment. As expectations for interest rates to remain low continue, the demand for higher-yielding assets is surging. Toshiyasu Ohashi, chief credit analyst at Daiwa Securities Co., believes that this trend is creating a fertile ground for the Japanese banking sector to embark on more AT1 deals.


Conclusion: A Positive Trajectory in Challenging Times


While global financial markets grapple with uncertainties, Mizuho’s strategic foray into AT1 bond sales and its assertive global expansion efforts embody a sense of optimism and resilience. The bank’s actions serve as a testament to Japan’s robust and resilient financial landscape, signalling a promising future in the face of adversity.


By navigating uncharted financial territories and demonstrating its adaptability, Mizuho has not only showcased its strategic agility but also set a blueprint for other banking institutions worldwide. It remains to be seen how these calculated risks shape Mizuho’s future and the global banking landscape at large.

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