Shares of Credit Suisse Group AG (NYSE: CS) drops over 1.66% to trade at $4.46 in early trading session on Friday as Mizuho Financial Department Inc. has emerged as a candidate for at least part of Credit Suisse Group AG’s securitized products group as the Swiss bank draws closer to a formal agreement, according to people familiar with the situation.
The Japanese bank is competing against Apollo Global Management Inc., Centerbridge Partners, Pimco, and Sixth Street, according to the sources, who all asked anonymity to disclose private information.
Mizuho, headquartered in Tokyo and helmed by CEO Masahiro Kihara, has stated that securitized products constitute a “fundamental pillar” of its markets business in the Americas. The United States is a “critical market.” “It’s the second-largest revenue and profit producer after Japan,” Kihara said in an April interview, adding that the bank had more space to grow in America.
“We will provide an update on the status of our comprehensive strategy review when we release our third-quarter earnings; it would be premature to comment on any potential outcomes before then,” a Credit Suisse representative said in an email. A spokeswoman for Mizuho declined to comment.
Any prospective transaction would be among Mizuho’s largest since it paid over $3 billion for a portfolio of North American loans from Royal Bank of Scotland in 2015. Kihara, who was appointed CEO in February, has previously purchased a minority position in a rival firm for 80 billion yen ($543 million).
“It’s normal for Mizuho to evaluate any purchase as long as it can develop its international business by acquiring at a discount or at a reasonable price,” said Shin Tamura, a Bloomberg Intelligence analyst. Nonetheless, securitization is a business that resulted in the bank’s highest loss of any Japanese lender during the subprime mortgage crisis, he continued.
According to Credit Suisse, the securitized products platform is very lucrative, using around $20 billion in risk-weighted assets and approximately $75 billion in leverage exposure, which is a regulatory measure of assets.
Jay Kim, who has overseen the SPG Company since 2016, buys and sells securities backed by pools of mortgages and other assets such as auto loans or credit card debt. The business also offers funding to customers who wish to purchase these products, and will securitize loans on their behalf, dividing them into new securities with varied risk and return, and selling them to investors for a fee.
On October 27, Credit Suisse will reveal the findings of its strategic review.
