ET Exclusive: Global shocks won’t alter our plans for India, says Masahiro Kihara, CEO Mizuho Financial Group

India’s demographic advantages, GDP expansion and opportunity to broaden exports make it an important growth engine for Mizuho Financial Group, says Masahiro Kihara, chief executive of Japan’s third-largest megabank with $1.9 trillion in assets. The group is constantly evaluating opportunities for investment and lending in India, and plans to double the headcount at its global capability centre here, he tells Joel Rebello and Sangita Mehta. Edited excerpts:

What is driving Japanese interest in India?

The future of India is very promising. From a demographic perspective, you have a lot of advantages. Besides wages, the working age population is still increasing, which is totally opposite from Japan. You have a stable democratic framework with robust digital infrastructure. And beyond that you are inducing people to come and make in India (with) start-up India, production-based incentives and so on. The Japanese are looking for areas where they can grow. So, India is a very promising area. Also, Japan and India have a long-standing relationship sharing the same values, having sympathy towards each other. So, that gives Japanese companies confidence to invest here.

Where does India fit into Mizuho’s plans?

There are 1,400 Japanese companies operating here and we bank with many of them. But also, there is interest among Japanese companies to come here for the first time. And among those 1,400, there are many that want to expand here.
We want to be supportive of the growth of Indian and Japanese companies. Also, we want to commit to the growth of India because both countries have been friends for many years. So, for us, India is a very important country. In November 2023, we increased our capital base to $500 million, so that our Indian operation can extend more lending.

Are you likely to make more investments in India?

I think at some point, we probably will need additional capital to inject here. And I'm happy to do that if there's a need for that.

What would be the trigger for you to inject more capital?

We have (invested) $500 million and based on the needs that we get from our customers I think it's sufficient right now. But as this country grows, I guess there will be much more for companies asking for lending.

Any acquisitions that you're looking at in India?

First of all, in terms of organic, we focus on five business areas: Japanese retail; asset management and wealth management in Japan; Japanese corporates; global corporate investment banking and sustainability. We are constantly looking at opportunities in these areas. So, I can’t allude to what will happen in India.

There have been reports about Mizuho acquiring a majority stake in Avendus Capital. What is the status?

I can’t allude to that. No comments.

Will corporate banking continue to be your focus in India?

We are particularly very good at corporate wholesale banking. In the global space, I think we should stick to wholesale banking because regional retail banking is very difficult. Wholesale banking is the area where we have expertise, we have strength.

Given the global uncertainties in terms of rates, markets, trade and political tensions, what is your view on growth?

Of course, there’s a lot of uncertainties but at some point things will get clear. Then everybody will start adjusting to a new world order. So, I would say given that there's uncertainty from a global perspective, the activity might be slow. But once things get clear, activity will come back.

Does it change the way you invest in India or will you have to re-look at your plans in India?

I think India is a little bit insulated from all these things. I would say that India is a bit of a different story. Very different from Japan. So, we won't change what we were going to do in India.

What would be the impact of the US tariff war on India?

The effect on India is probably minimal. You might even benefit from production moving into India from other countries, given the fact that maybe the tariff rate is lower than the other countries. What is happening is that corporations are thinking of diversifying their supply chain from a stability perspective. Everybody is thinking about moving into areas that have growth potential. So, India is in a good position from that perspective.

What advantages do you think India has over China?

In the long run, the working age population, I think that’s the most important part. For India it is going to grow. China is going to decrease. That's a big advantage.

What are your plans on the global capability centre in India?

We have around 600 people and we want to double that in two or three years and move in more and more operations here in India because India has a talent pool.

Which are the sectors you're very optimistic about?

In India there is ambition to grow in manufacturing from auto electronics, semiconductors and infrastructure. Increasingly, when the per capita (income) goes up, there should be increasing demand for retail too. India is constructing airports, highways, railroads. We have done many projects in the infrastructure sector. We have also beefed up the project finance team recently.

The top three Japanese banks are here in India with deep pockets. How would you differentiate between yourselves and them?

We at Mizuho are very good at industry research. We have a very strong global corporate and investment banking franchise, developed from 2015 when we purchased assets from RBS and onboarded 100 relationship managers. We want to integrate every capability that we need in the investment bank inside our bank, to get synergies between those capabilities. Based on these strengths, we'll try to bring all these capabilities into India too, and I think we can be competitive on them.

Given that the compliance cost has gone up, how difficult is it for you to do business across the globe?

Basically, we are providing a very critical function for the economy and to our clients such as settlements and deposit-taking, and I think stability of the operation is very important. So, there are risks such as anti-money laundering and cybersecurity and if you need to invest (for compliance), you have to invest. But having said that, you try to recoup that increase of cost by getting better in other areas, reducing the cost in other areas.

What is your outlook for Japan, because you have an ambitious target of a trillion-dollar profit in three years?

I would say growth of 1% should be achievable for the coming years, although this year there's a lot of uncertainties. Based on the growth, wage increases will happen, which means that there will be room for people to consume. And a 1% rate growth should be enough for us to achieve our targets. About 50% of our business comes from Japan and 50% comes from overseas from where we can also increase our profit. Out of our overseas business 50% comes from the US, 30% from Asia and the rest from the EU. I would be happy to see the percentage of Asia increasing a little bit, maybe to 35%.

Given the structural challenges including demography and demand in Japan, what is the opportunity for Mizuho there?

Japanese corporations are actually very growth oriented, so they want to improve their returns, which means that they need investment or they want to get rid of certain businesses that are not doing too well. Given the current uncertainty, corporate action is a little bit down, but at some point, it will recover again which will give us a lot of opportunity to help support their strategy, provide finance, etc. We have already seen this happening in SMEs, too. So, it's not only about blue-chip companies. The second area is wealth management because Japanese consumers are thinking that they have to invest by themselves for their future. This will also grow in Japan.