Nomura Targets 100 Top Executives in Investment Banking

Nomura Holdings' James DeNaut
James DeNaut, head of investment banking for the Americas for Nomura Holdings Inc. Photographer: Graham Haber/Nomura Holdings Inc. via Bloomberg

Nomura Holdings Inc., Japan’s largest brokerage, plans to almost triple the number of senior executives in its Americas investment-banking division as competitors retrench.

The unit expects to have about 100 managing and executive directors within three to five years, up from 38 now, James DeNaut, head of investment banking for the Americas, said in an interview in New York.

The bank wants to become “one of the top 10 globally and one of the few that are Asian centric,” said DeNaut, 49. “We are going to be very focused on the sectors which have good, high-quality fee pools.”

Nomura, which has expanded from 900 U.S. employees in March 2009 to 2,350 this year, is adding senior executives to reach $1 billion in investment-banking revenue from the Americas, which would help place the firm among the top 10 banks in fees, DeNaut said. Bank of America Corp. and Societe Generale SA are among those cutting jobs as deals and trading stall.

“We’re going to go into a period in the next couple of years of a very good market for U.S. investment banking,” DeNaut said. “Some companies which are doing well are starting to look to do merger work, consolidating sectors and improving margins. Those companies that are still struggling through balance-sheet issues are active on financing or restructuring transactions.”

Europe Retrenchment

The Americas contributed 43.4 billion yen ($544 million), or 27 percent, to Nomura’s fiscal fourth-quarter global wholesale net revenue, which consists of investment banking, fixed income and equities trading. The quarter was the Americas wholesale division’s strongest since Nomura began building its U.S. operation in April 2009, the Tokyo-based firm said.

Nomura’s expansion plans in the Americas, the bank’s only profitable overseas region, contrast with its retrenchment in Europe, where it is losing money after buying bankrupt Lehman Brothers Holdings Inc.’s operations in 2008. Since the end of September, Nomura has trimmed staff in Europe by 478 employees to 4,014 as of March 31, company presentation materials showed April 27.

The Japanese firm has been building its business through hiring in the Americas, where it missed out on buying Lehman’s operations to Barclays Plc.

Expansion ‘A Must’

“Expanding the U.S. business is a must for Nomura if it wants to raise its ranking in the global league tables,” said Takehito Yamanaka, a Tokyo-based analyst at Credit Suisse Group AG. “It’s easier for Nomura to hire talented bankers as its banking and brokerage rivals are reducing headcounts.”

Other firms are grappling with how to cut costs at their U.S. investment banks as the European sovereign-debt crisis and slow economic growth in the U.S. squeeze deal and trading revenue. Global announced merger and acquisition transactions fell in the three months ended March 31 for the third consecutive quarter and were 26 percent lower than a year earlier, according to data compiled by Bloomberg.

Bank of America, based in Charlotte, North Carolina, is planning more than 300 job cuts from its corporate- and investment-banking and trading divisions as underperformers are trimmed, a person briefed on the matter said this month. Paris-based Societe Generale is cutting 1,580 jobs globally from its corporate- and investment-banking unit.

Cost Cutting

Nomura Chief Executive Officer Kenichi Watanabe, 59, eliminated 1,300 jobs worldwide in the six months ended March as part of a $1.2 billion cost-cutting program. The pace of the headcount reductions probably will ease, Jonathan Lewis, co-deputy chief financial officer, said April 27.

Nomura ranks ninth on the global mergers and acquisition league tables year-to-date. The firm is advising Xstrata Plc on its $45.3 billion proposed sale to Glencore International Plc, the biggest announced deal so far this year, according to Bloomberg data. For transactions involving companies in the U.S., Nomura ranks 21st, the data show.

Investment-banking net revenue at Nomura fell 60 percent to 19.9 billion yen in its fiscal fourth quarter from a year earlier. Revenue from Nomura’s global fixed-income business climbed 25 percent to 86.6 billion yen in the three months ended March from a year earlier, and equities revenue slid 20 percent to 51.7 billion yen.

‘Have an Edge’

Nomura shares climbed 30 percent since Nov. 24, when they reached the lowest in at least 37 years, as investors bet the company can sustain profit that increased in each of the past two quarters. Profit rose 86 percent in the three months ended March from a year earlier to 22.1 billion yen, led by trading income gains that outweighed declines in investment banking.

Ciaran O’Kelly, head of equities in the Americas, said Nomura can take additional share in the region’s research and sales and trading. The firm isn’t targeting a specific percent of the market, he said.

“We want to pick areas in which we know that we have an edge,” O’Kelly said in an interview. “The metric for us at Nomura -- it’s around the clients, it’s around profitability, it’s around relevance, as opposed to pure size.”

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