Nomura to boost focus on private markets under new chief

Nomura is poised to break with almost a century of tradition by unveiling a new strategic focus on private markets and Japan’s vast hinterland of unlisted companies.

The move is part of a broader shake-up at Japan’s biggest brokerage to be announced this week by its new chief executive, Kentaro Okuda.

Mr Okuda — the first CEO in the history of the company to have emerged from the investment banking division — has told people within the firm that he is eager for Nomura to play a larger role in the country’s large market for the trading in, and management of, shares in unlisted Japanese companies. 

As part of that push, said executives at the 95-year-old company, Mr Okuda was considering a rebranding that would cut the word “securities” from its core brokerage subsidiary. The potential name change would be used to show — both internally and to clients — that Mr Okuda is serious about increasing Nomura’s presence in areas such as advisory work and private debt financing.

The appointment of Mr Okuda, who took the helm on April 1, comes against a backdrop of market turmoil and a looming global recession. Unlike most of Nomura’s most senior executives, he does not have any experience in the group’s prestigious retail brokerage business.

Mr Okuda, who has spent his entire career at Nomura, including a stint as head of the Americas business, said even before the coronavirus outbreak that he would take charge of the company “with a sense of crisis”.

According to several people close to Mr Okuda, he has expressed concern internally that in order for the company to move forward it must shift from the mindset that its fortunes are fundamentally set by the dealing and issuance of publicly traded securities. 

In addition to managing the Covid-19 crisis, Mr Okuda’s challenges include motivating staff after slashing costs by billions of dollars over the past three years.

Mr Okuda’s close involvement in the integration of Lehman Brothers’ non-US businesses after their 2008 acquisition, said people who worked alongside him, had given him a clear sense of how resistant Nomura could be to change. He has already attempted to stamp his authority with a dozen new senior management appointments, half of whom did not begin their working lives at Nomura.

Mr Okuda has also expressed the need to update a corporate tradition in Japan of hiring large blocs of university graduates who expect to spend their entire careers at the company. Instead, he aims to increase the number of mid-career hires from outside, according to people familiar with his thinking.

He will unveil his vision for Nomura at an investors’ day event on Tuesday.

Mr Okuda’s likely plans for the domestic business hinge on the idea that many Japanese companies have come to view being publicly listed as a burden. Because of that, he believes that Japan could be headed for a historic boom in management buyouts, delistings, and mergers between listed and unlisted firms, according to people who have worked closely with him. Bankers think that trend could be dramatically accelerated by the Covid-19 emergency.

It is less clear how Mr Okuda plans to transform Nomura’s international operations, which have struggled to make money. But colleagues say that he differs from other senior Nomura executives in seeing the 2008 acquisition of the European and Asian arms of Lehman as a valuable enhancement of the company’s global network, rather than a strategic error.

The need for Mr Okuda to develop new business lines was highlighted this month when Nomura posted its first net loss — of ¥34.5bn ($324m) — in five quarters. The group was hit by a fall in investment banking activity and widening credit derivative spreads in January to March. That offset higher trading revenues due to market volatility caused by coronavirus.

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