Mizuho Cuts FY Guidance; Plans to Accept Citi's Offer for Nikko

In a statement to the Tokyo Stock Exchange after trading finished today, Mizuho Financial Group said it is cutting its fiscal year (ending this month) guidance for net income by 25% to ¥540 billion ($4.6b). Separately, Bloomberg reports Mizuho plans to sell its 4.8% stake in Nikko Cordial to Citigroup. Mizuho lowered its guidance from its prior forecast in November, due primarily to an increase in bad loan costs, which a Macquarie analyst says "isn't a surprise and is probably a one-off cost." Also, Mizuho says its earnings from stock trading decreased. Regarding Citigroup's revised bid of ¥1,700 yen/share to acquire Nikko, a Mizuho spokeswoman told Bloomberg it plans to accept Citi's offer. This helps Citi's chances of gaining majority control, but three of Nikko's four largest shareholders have previously said it is worth at least ¥2,000/share. A JP Morgan analyst in Tokyo commented, "Overseas funds cannot keep asking for a higher price as Citigroup will just walk away." Nikko's ordinary shares lost 0.53% to ¥1,676 ($14.22 at ¥117.9/$1) today, while Mizuho gained 0.66% to ¥762,000 ($12.93 ADR equiv).

Sources: Press release, Bloomberg [I, II]
Commentary: Nikkei Shimbun: Mizuho Will Sell Stake in Nikko to Citigroup • Japan: Best and Worst Performing ADRs 03/09 - 03/16 • Japan's Mega Banks' Profits Drop Double Digits
Stocks/ETFs to watch: Mizuho Financial Group (MFG) (JP:8411), Nikko Cordial (NIKOY) (JP:8603), Citigroup (C). Competitors: Mitsubishi UFJ Fin. Grp. (MTU), Mitsui Sumitomo Fin. Grp. (SMFJY.PK), Nomura Holdings (NMR). ETFs: iShares MSCI Japan Index (EWJ), iShares S&P/TOPIX 150 Index (ITF), iShares S&P Global Financial Index Fund (IXG)

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