It would perhaps be too simplistic to look at two deals from last week — Mizuho’s acquisition of U.S. boutique bank Greenhill, and Citi’s evolving strategy for its Mexico retail bank — and say, European and U.S. banks are pulling out of foreign outposts while Asian ones are pushing in.
It may have more to do with the clientele.
Looking back nearly three years, the list of European banks pulling up the stakes on their U.S. footprints is growing. BBVA sold its U.S. retail presence to PNC. HSBC dealt its U.S. branches to Citizens Bank and Cathay Bank, and is in the process of offloading its Canadian presence onto Royal Bank of Canada. BNP Paribas sold Bank of the West to BMO.
But that’s retail. Hoi polloi. Ask any of those banks and they’ll tell you they’re more than happy to hold onto rich people’s money. HSBC in 2021 said it would retain and repurpose 20 to 25 U.S. locations as international wealth centers. BNP Paribas said its corporate and institutional banking operations in the U.S. would remain a “strategic pillar” for the bank’s development. And Citi said last week it would continue to operate in Mexico through its institutional clients group and steer ultra-high-net-worth individuals to its private bank — once it finds a way out of retail there.
The ongoing gold rush for Japanese banks looking to grow in the U.S. appears aimed not at the wealthy but at dealmaking itself.
MUFG made it a priority to hold onto its 20% stake in Morgan Stanley when it spun off Union Bank to U.S. Bank.
Sumitomo Mitsui last month announced it would more than triple its share of Jefferies — to up to 15% — with a particular focus on cross-border mergers and acquisitions, healthcare and leveraged finance.
A second prong to that bank’s U.S. strategy may prove an outlier: It has invested $150 million in a U.S. digital consumer bank it aims to launch within the next 12 to 18 months.
Against that background, Mizuho agreed to buy Greenhill last week for $15 a share. The move will ultimately cost Japan’s third-largest bank $550 million, including debt. The transaction put a 121% premium on Greenhill’s stock, but shares in the boutique bank nearly made up that gap by market close on the day the deal was announced.
“The stock as recently as February was trading right around this price,” Jerry Rizzieri, CEO of Mizuho Securities USA, told Bloomberg. “We think we’re paying a fair price for a premium brand.”
It wouldn’t be Mizuho’s first foray into U.S. investment banking. The Japanese lender owned a stake in Evercore for seven years, ending in 2015. During that time, Evercore’s stock more than quadrupled.
“Mizuho offers a full complement of products ranging from debt, equity, capital markets, derivatives, fixed income and equity sales and trading, securitization. The piece that’s been missing has been M&A,” Rizzieri told Bloomberg.
Mizuho has drilled into U.S. debt underwriting since a 2015 acquisition of Royal Bank of Scotland's North American corporate loan portfolio. The Japanese bank tagged M&A advisory and equity underwriting, then, as areas for growth, according to Reuters.
Greenhill CEO Scott Bok will become chairman of Mizuho’s M&A and restructuring advisory business, inside a banking division led by Michal Katz.
Mizuho will gain roughly 370 employees, but most of Greenhill’s global footprint will overlap with Mizuho — save for Melbourne and Stockholm, Rizzieri told Bloomberg.
The transaction, expected to close by the end of the year, comes as dealmaking has dropped by about 44% so far in 2023. Greenhill’s revenue, meanwhile, sunk to roughly $50 million in this year’s first quarter, according to the Financial Times.
But investment bankers in Tokyo have said they expect strained ties between the U.S. and China to spur a glut of overseas deals among Japanese companies.
