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Mizuho: when east meets west

28th April 2005
By BBR Staff Writer

Japan's Mizuho [8411.TO] bank has announced new links with US-based banks Wachovia [WB], Bank of New York [BK] and Wells Fargo [WFC]. Mizuho will use the links to develop a range of investment and retail products. More importantly though, Mizuho also plans to establish a private bank, but it will need to find a specialist wealth management partner to avoid over-stretching its capabilities.

Mizuho's links with the three US players are expected to lead to the development of a range of financial products for its retail banking and wealth management operations. Although this will initially focus on mutual fund products, the bank expects the product range to expand in time. Mizuho is also said to be considering a more significant capital tie-up with another financial institution to take a part in its fledgling private banking unit, although this has yet to be confirmed.

The news is yet another example of the impact on the Japanese wealth market caused by the forced withdrawal of Citibank. The vacuum that has been left has generated a storm of interest from both foreign and local banks that are eager to pick up a piece of the Japanese market.

With the impending merger between Mitsubishi Tokyo Financial Group [8306.TO] and United Financial of Japan set to create Japan's biggest bank, knocking Mizuho from its current top spot, Mizuho is obviously keen to shore up its operations. The company has already tried to head off its major competition with plans to open the 70-person private banking unit by the end of this year.

Given the increasing competitive pressures within the Japanese market, Mizuho should look to bring in a specialist wealth manager to help establish its operations. With Mizuho having no prior experience of private banking it will struggle to create from scratch the knowledge, resources and experience needed to run a complex private banking operation for wealthy clients, though the product development skills of its new US partners will obviously be a substantial benefit.

Given Mizuho's size, it should not be hard to find a major private bank willing to form a venture which will, after all, give the foreign firm access to one of the biggest client bases within the potentially lucrative Japanese market. However, without such a link, the bank runs the risk of attempting too much too soon.

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