Mizuho Securities Co, the unit of Mizuho Financial Group Inc, is interviewing analysts from competitors as it seeks to fill positions in mergers and acquisitions advisory and industry coverage.
“I want to break the myth that analysts can’t be successful in investment banking,” Yohei Osade, co-head of investment banking at the brokerage, said in an interview. “Analysts know what investors think and how they behave.”
Mizuho is seeking an edge in deal-making, where Japan’s biggest banks are competing for fees to bolster profits that are being squeezed by rock-bottom interest rates. Osade, 50, also wants to hire senior bankers to advise clients on raising funds from equity capital markets, an area where Mizuho lags behind other major Japanese firms including Sumitomo Mitsui Financial Group Inc and Nomura Holdings Inc.
“My focus is ECM, which is the weakest area at Mizuho, and strengthening the business is my mission,” he said. “We’ll scout star players from outside the firm who have strong expertise” and hire more than five by March, he added.
In July, Osade himself made the switch from working in the secondary market, where as global head of Asian equities he helped improve the bank’s sales and research rankings. When he was in his previous role, he advocated encouraging analysts to become investment bankers, saying in 2014 that Mizuho could tap their knowledge about industries and equities to advise clients.
Osade said in the interview that the bank will continue to allow such moves, taking into account the analyst’s qualifications and career goals.
It’s rare, though not unprecedented, for research staff at securities firms to become dealmakers. Mizuho hired Yasuhito Tsuchiya, who was an industrial sector analyst at Merrill Lynch Japan Securities Co, as a front-line banker last year to make the most of his industry knowledge and relationship with Japanese companies. Osade also wants to improve communication between the equity and investment banking divisions. Mizuho will encourage sales staff and analysts to talk to dealmakers so that they can pitch the best products to clients, he said.
Interactions will conform with strict regulatory boundaries that separate the operations to avoid conflicts of interest, he added.
Citigroup Inc was among 10 Wall Street firms that agreed to pay $1.4bn in 2003 to settle claims by US and state authorities that they used biased research to gain lucrative underwriting and merger assignments. The settlement imposed new limits on contact between bankers and researchers.
Osade said an insider-trading scandal that rocked the Japanese securities industry six years ago has made firms nervous about allowing bankers to converse with research and sales staff.
The scandal, in which employees of some brokerages were found to have leaked non-public information on equity offerings that was later used by clients to trade shares, resulted in disciplinary action against Nomura and others. “We’ve all become very conservative since the incident, but we should be more strategic,” Osade said. “While complying with rules, we’ll encourage bankers to absorb information from the secondary business to pitch deals, which will be a huge weapon.”
Tokyo-based Mizuho is ranked fifth among managers of equity offerings in Japan this year, according to data compiled by Bloomberg. The bank is the nation’s top bond underwriter.