Will US$3.8b revive Mizuho from Japan's Retail Banking ashes?

The last listing of a Japanese Bank on the New York Stock Exchange was 17 years ago. November 8th 2006 was a momentous occasion for Mizuho Financial Group as its listing underscored the revival of the nation's financial firms after repaying public money given in a bailout after the recessions of the 1990s. Japan's second-largest bank by market value will use most of its capital in the next three years to focus on expanding its retail banking operations, adding branches and increasing sales.

It plans to invest about 450 billion yen ($3.8 billion) on 100 new branches and computer systems to help it sell more products and private banking services, said Chief Executive Terunobu Maeda in an interview with Bloomberg News. So what's its strategy? The Tokyo-based firm's main focus is to rebuild at home and win a greater share of the 1,700 trillion yen in financial assets held by Japanese citizens. "We will be left behind unless we focus on Japan where the economy is recovering from deflation," Maeda said in Tokyo.

"It's a bit too early to operate an aggressive investment banking business overseas as it would eat capital." Mizuho, which has 460 Japan branches compared with the 5,800 Bank of America Corp. has in the U.S., is modeling itself on San Francisco-based Wells Fargo, which added branches and used them as a platform to sell more services. In 2002, Mizuho had 699 retail outlets. The lender is aiming to boost revenue by selling more investment trusts, mortgages, foreign currency deposits and insurance products to so-called Japanese baby boomers, who will receive 80 trillion yen in lump-sum retirement payments in the five years from 2007.

Maeda's decision to focus on the home market and not its overseas franchise underscores the symbolic nature of its NYSE presence, and indicates it does not want a re-run of the past. "In the late 1980’s, Japanese banks rushed into the international market," said Keisuke Moriyama, a Tokyo-based banking analyst at Nomura Holdings Inc. "They got caught in a vicious circle after buying assets irrelevant to their core business, which lowered profitability." Will Mizuho succeed in capturing the hearts (and bank accounts) of Japan? Will spending 450 billion yen be enough to conquer the 1,700 trillion yen market? Tell us what you think.