Mizuho Bank plans to hire more people for its transaction banking business as it chases growth in this area to gain access to stable dollar funding, according to its top executive.
The firm is seeking to grow its head count to add to the roughly 160 transaction bankers it already has in Asia, Masahiko Kato, its CEO said in an interview, without specifying a number. The unit of Mizuho Financial Group is open to poaching from rivals after being a late comer to this market, Kato said.
The business of managing cash and other day-to-day activities like billings and payments for clients has come into sharper focus amid rising interest rates, as banks try to get hold of cheaper funding sources. Mizuho and its rivals have been trying to increase dollar and other foreign currency-denominated deposits from clients to back the expansion in overseas lending that they¡¯ve pursued in recent years.
In Asia and the Oceania regions, Mizuho¡¯s transaction banking clients grew by 144 companies in the last fiscal year, compared with an increase of 43 the year before, according to Kato. The bank is targeting gross profit growth of 20% in transaction banking in the region, as it starts to win businesses from rivals after tapping some of their staff, he said.
In January, Mizuho announced Ashutosh Kumar joined the lender from Standard Chartered PLC. as co-head of global transaction banking for Asia and Oceania.
Mizuho is focusing on transaction banking because it gives the lender access to stable dollar funding via cash pools it manages for corporate clients. Kato said deposits from such customers are not as sensitive to interest rate changes as other funding avenues since the funds are parked for daily transactions and other needs.
¡°We call them sticky deposits,¡± said Kato. ¡°They are a relatively cheap funding source.¡±
He said the amount of dollar and other foreign currency deposits from its Asia transaction banking businesses grew by 50% in the past five years, adding the importance of this funding source will only increase as U.S. interest rates rise and lenders continue to step up their overseas expansion.
In an October report, Bank of Japan pointed out that stable foreign currency funding is one of the most important challenges for Japan¡¯s big banks, that have been lending aggressively abroad even though they don¡¯t have a retail footprint in places like the United States. For Mizuho, the level of client deposits stood at 75% of that of loans in foreign currencies as of March this year.
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