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SMBC Nikko Opens San Francisco Office for Japan Equity

A pedestrian walks past the SMBC Nikko Securities Inc. headquarters in Tokyo. Photographer: Haruyoshi Yamaguchi/Bloomberg
A pedestrian walks past the SMBC Nikko Securities Inc. headquarters in Tokyo. Photographer: Haruyoshi Yamaguchi/Bloomberg

Oct. 18 (Bloomberg) -- SMBC Nikko Securities Inc., the brokerage arm of Japan’s second-biggest bank by market value, said it opened an office in San Francisco this month to tap overseas investors’ demand for the Asian nation’s equities.

The unit of Sumitomo Mitsui Financial Group Inc. will also double the size of its Hong Kong office by Dec. 31, adding a second floor in Citibank Tower, Tadataka Ishida, a Tokyo-based spokesman at SMBC Nikko, said in an interview.

SMBC Nikko Chief Executive Officer Tetsuya Kubo plans to raise overseas headcount in equity and bond sales, trading and investment banking by 25 percent within three years as Japan’s stock rally attracts foreign investors and spurs domestic share sales. The firm’s first San Francisco office since 1992 opened Oct. 1 and will house several sales staff, Ishida said.

The company is competing for equity business with brokerages including Nomura Holdings Inc. amid a 40 percent surge in the Nikkei 225 Stock Average that’s made Japan the best performer among major markets. Stocks have gained since December when Prime Minister Shinzo Abe took office on pledges of fiscal spending and monetary easing to revive the economy.

Shares of Tokyo-based Sumitomo Mitsui rose or 0.4 percent, to 4,895 yen in Tokyo today. The stock has climbed 57 percent this year.

Trailing Rivals

SMBC Nikko is the fifth-ranked equity underwriter for Japan stocks in 2013, eclipsed by No. 1 Nomura and second-placed Daiwa Securities Group Inc., according to data compiled by Bloomberg. Japanese companies have raised 4.1 trillion yen ($42 billion) this year, already exceeding 2.1 trillion yen for all of 2012, the data show.

Expanding overseas will boost SMBC Nikko’s relationships with foreign investors, helping it win more mandates from Japanese companies looking to sell shares globally, Ishida said.

SMBC Nikko’s San Francisco office puts it closer to some of the biggest U.S. institutional investors, including the California Public Employees’ Retirement System, the nation’s largest pension fund with $270 billion of assets, and the California State Teachers’ Retirement System.

The new branch will be SMBC Nikko’s fifth to sell Japanese equities outside of the country, joining offices in New York, London, Singapore and Hong Kong, Ishida said.

To bolster trading, underwriting and merger advising, SMBC Nikko plans to add 100 equity and bond sales staff, traders and bankers overseas to total about 500 by March 2016, Kubo said in an interview in April. The brokerage increased its headcount abroad by 30 people to about 450 from April to September, Ishida said.

To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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