The chief executive of Mizuho, SoftBank’s main lender, said he was “totally unconcerned” about the Japanese technology conglomerate’s financial health despite the sell-off in tech stocks forcing it to slow down investments.
Mizuho, Japan’s third-largest lender, is part of a consortium of banks that provided SoftBank with a syndicated loan of $ 8bn this month as billionaire founder Masayoshi Son prepares to list UK chip designer Arm Holdings.
Mizuho’s exposure to SoftBank is estimated by analysts to be in the range of $ 2.3bn to $ 4bn, with successive chief executives taking pride in being one of Son’s main banks. SoftBank’s chief financial officer Yoshimitsu Goto has described the association as an “absolute relationship of trust”.
Masahiro Kihara, Mizuho’s chief executive who replaced his predecessor in February after a series of serious technology glitches, said he trusted SoftBank’s calculations of its debt.
“SoftBank properly controls its loan-to-value ratio and it also has a cash position covering bond redemptions for at least the next two years, so at this point, we do not think there’s any issue,” said Kihara.
Of course, we are analyzing each other carefully. But I am totally unconcerned about this, ”he added, speaking at the bank’s Tokyo headquarters.
Kihara’s comments come after Son told his top executives to slow down SoftBank’s investments as interest rates rise and Beijing enforces a regulatory crackdown on the tech sector. Son was also concerned about his personal borrowings against SoftBank shares, said people familiar with the matter.
Kihara was referring to a metric showing SoftBank’s net debt compared to the value of its holdings – a ratio closely monitored by Son as a gauge of the company’s financial health.
The LTV has jumped from under 10 per cent in mid-2020 to 22 per cent, creeping closer to the 25 per cent threshold Son has vowed not to cross in “normal times”. SoftBank’s shares have fallen more than 50 per cent in the past year.
The company’s stock plunged on Monday after Chinese markets sold off over fears that Beijing could join Shanghai and enter a Covid-19 lockdown.
Justin Tang, head of Asian research at United First Partners in Singapore, said that in addition to the threat of sustained disruptive “zero-covid” policies in China, the war in Ukraine and rising interest rates meant SoftBank’s Vision Fund would struggle to list its tech investments.
Kihara said the bank regretted the past system failures, which a third party probe last year partly blamed on the bank’s corporate culture. The probe found that employees were afraid to take action, preventing them from responding to crises.
Mizuho ordered the probe in 2021, just two years after the high-profile rollout of its $ 3.6bn banking system. The system was hit by four disruptions in a matter of weeks, including one that knocked out thousands of ATMs and left customers irate after the machines swallowed their cards.
The botched rollout revealed how the bank was struggling to modernize after a decade of missteps. Mizuho was reliant on a stable of IT vendors and lacked a group-wide technology strategy, according to the probe and banking experts.
“I think the employees should be able to speak out on the things they have noticed. We should discuss and create new projects and make changes for the better, ”said Kihara.
He added that he was focused on speeding up the bank’s digitalisation. As part of the effort, he cited a recent tie-up with Google to use the US tech giant’s cloud services to analyze data about customer transactions conducted on its banking apps and at retail branches.