Global Markets Company
As a partner with expert knowledge of market mechanisms and the ability to draw on a range of intermediary functions, we will further integrate our banking, trust banking, and securities capabilities to offer the best products and services for our clients' varied needs.
The Global Markets Company engages in sales and trading in order to provide clients with market product–based solutions, and we also conduct banking operations, including asset management and capital raising, securities investment, and other related activities.
In the 5–Year Business Plan, we have set out a basic strategy to develop a framework for offering products and services ideally suited for our clients' true needs, as well as to strengthen our market presence, as part of maintaining our status as one of Asia's major players in global markets.
Going forward, we will continue to be a partner with expert knowledge of market mechanisms and the ability to draw on a range of intermediary functions. In our sales and trading operations, by optimizing our global network and products framework, we will draw on a broad range of intermediary functions to connect investors with other investors and connect issuers with investors. In our banking operations, we will enhance the sophistication of our ALM and portfolio management through flexible asset allocation while maintaining a focus on achieving a balance between realized gains and unrealized gains/losses.
Business environment and challenges
According to estimates from the International Monetary Fund, with the US Federal Reserve Board refraining from hiking interest rates and other countries adopting similar monetary easing policies, the global economic growth rate remained steady in the first half of 2019 and is expected to trend upward in the second half. On the other hand, US–China trade friction, Brexit negotiations, and other factors continue to create an uncertain business environment, and the structure of the market also appears to be undergoing considerable changes due to the tightening of global financial regulatory standards and the rise of digitalization and AI in financial markets.
In this environment, we will strive to consistently respond to our clients' increasingly varied risk hedging needs and investment needs. At the same time, in our banking operations, we will enhance the sophistication of our ALM and portfolio management and aim to maintain our status as one of Asia's major players in global markets.
Trends in performance
While financial markets were facing growing uncertainty, we embarked on a restructuring of our portfolio of non–Japanese bonds and other securities. As a result, our FY2018 Net Business Profits came to －JPY14.1 billion, falling short of our fiscal year target. In the 5–Year Business Plan, we have adopted the goals of advancing the global management of our sales and trading operations and of improving the risk taking capabilities of our banking operations in order to shift to a stable revenue structure. Through these efforts, we expect to achieve net business profits of JPY150 billion in FY2019 and of JPY260 billion in FY2023.
|Net Business Profits||190.0||(14.0)||(204.0)||150.0||180.0||260.0|
Results are based on FY2018 management accounting rules (including Net Gains Related to ETFs), targets are estimates based on FY2019 management accounting rules.
Progress on key strategies
Enhance sales and trading operations by advancing global management
To respond to our clients' true needs, in addition to our ongoing integration of banking, trust banking, and securities services, we are advancing the global management of each of our products and integrating our operations frameworks to improve our price competitiveness and ability to provide solutions. We will also leverage the broad client base that we have developed through our commercial banking business to further focus on and expand our securities business. In doing so, we will facilitate the realization of a positive cycle of funding between financial market participants and further raise our global market presence.
Enhance the sophistication of our ALM and portfolio management in our banking operations
We are enhancing the sophistication of our ALM and portfolio management both by enhancing our early warning indicator management to anticipate changes in market conditions in advance and by optimizing diversification of investment into interest rates, equity, credit, and other areas based on market conditions. We are also speeding up our decision–making processes through digitalization. We are pursuing such initiatives to improve our earnings power and conduct portfolio management with a focus on the balance between realized gains and unrealized gains/losses, while at the same time restraining volatility in the revenue from our banking operations. In addition, with stable capital raising and balance sheet management, we are continuing to support our clients' global business and positively contributing to Mizuho's overall business strategy.
Build markets infrastructure and develop digital innovation professionals
In order to continue providing high quality services to our clients in the future, we are allocating our corporate resources strategically towards building next–generation trading rooms, market IT systems, and market back offices in line with technological advancements. In this way, we are upgrading our infrastructure, reducing our costs, and maintaining and heightening our competitiveness. Moreover, we will further accelerate our initiatives to streamline our operations by improving our employees' digital literacy and utilizing robotic process automation.
Internal management accounting basis
Internal management accounting basis
Calculated by Mizuho Securities based on trading data from each section of the Tokyo Stock Exchange
AI and digital innovation initiatives
In collaboration with NTT Communications, we have developed a voice input system that uses speech recognition, text mining, and robotic process automation to automate entry of market product transaction data. We have already begun using this tool to streamline our banking operations. Going forward, we will aim to make further improvements through operational excellence, optimize and upgrade our operations, and establish a sustainable competitive advantage.
First Japanese bank to issue US dollar–denominated CD linked to SOFR
In February 2019, we became the first Japanese bank to issue a US dollar–denominated certificate of deposit (CD) linked to the Secured Overnight Financing Rate (SOFR). SOFR is a new US dollar reference rate that the Federal Reserve Bank of New York began publishing in April 2018 as an alternative to USD LIBOR, which may soon become unavailable. Financial transactions using SOFR are expected to increase. We will continue to positively contribute to US financial markets with our products, develop insight and knowledge about new reference rates, and support our clients in raising capital.