Nomura Holdings Inc.’s retail lending surged 50 percent after Japan’s record earthquake as clients of the country’s largest brokerage tapped their investment portfolios to access cash.
Daily loan transactions jumped to about 150 from 100 and credit volume also climbed 50 percent as customers sought funds following the disaster, Naoshi Sakai, an executive director of Tokyo-based Nomura’s banking and trust agency services unit, said in an interview.
Nomura aims to expand outstanding loans backed by clients’ investments sevenfold to 200 billion yen ($2.4 billion) in the next five years, according to two executives who declined to be identified. The brokerage, which bought some Lehman Brothers Holdings Inc. assets in 2008, follows JPMorgan Chase & Co. and UBS AG in building out both advisory and banking units.
“It’s a niche business: It’s reasonable to see Nomura strengthening its commercial banking as rival investment banks in the U.S. and Europe are doing the same,” said Shiro Yoshioka, an analyst at Japaninvest Co. in Tokyo. “Japanese brokerages have good relationships with retail customers, so it’s natural to invite them to deposit and borrow money.”
The loan service allows borrowers to get credit faster than they can from retail banks and may encourage them to switch portfolios from rival brokerages, Sakai said. Shortages of basic necessities following the quake, as well as fears about nuclear radiation leaks, closure of local businesses and destruction of property drove up demand for funds.
‘Surprised to See’
“Our customers are surprised to see 100 million yen transferred to their accounts overnight, which is difficult to do at their main banks,” he said. “This loan works when investors need cash but are hesitant to sell their shares.”
The nation’s benchmark Nikkei 225 Stock Average has lost 6.9 percent since March 10, the day before the magnitude-9 temblor and tsunami struck Japan. Noumura closed unchanged at 421 yen at the 3 p.m. close of Tokyo Stock Exchange trading.
The company is targeting retirees, office workers, business owners and executives who own their company’s shares. Clients can borrow as much as 50 percent of the market value of Japanese equities and Nomura has the right to sell the stock if the value falls below 70 percent of the loan amount.
“It’s a survival instinct: people want to secure liquidity when they face anxiety in their lives,” said Naoki Iizuka, a senior economist at Mizuho Securities Co. in Tokyo. “They realize that they need cash when they see the news on television and imagine if they were at evacuation centers.”
Loans to Customers
The broker now has about 5,000 accounts managed through its Nomura Trust & Banking Co. unit and is targeting a loan balance of about 50 billion yen within a year, the officials said. Customers borrow between 1 million yen and 2 million yen on average and can get credit of up to 100 million yen at 2.675 percent interest, said Sakai.
Daiwa Securities Group Inc., Japan’s second-largest brokerage, has applied to the Financial Services Agency for a banking license to offer deposit and loan services, the brokerage said on April 4.
Nomura published color advertisements in newspapers inviting customers to use their share portfolios to borrow funds before the quake.
“While your stocks are fast asleep, you can use them to renovate your bathroom, buy platinum jewelry for your wife, splash out on a new car, or go back to school,” according to a Feb. 24 advertisement.
The brokerage, which bought bankrupt Lehman’s Asian and European assets in 2008, also began the lending business that year. Nomura got about 57 percent of its revenue from domestic operations in the three months ended Dec. 31.
“Lending is a side business of stocks and mutual funds,” Sakai said. “But our loan business is growing.”