World News

Nomura sees hope in advisory, underwriting as rates stay low, society ages: outgoing CEO

By Takashi Umekawa and Takaya Yamaguchi

TOKYO (Reuters) – Nomura Holdings cannot escape an aging society or low interest rates, but the Japanese investment bank might be able to wring more money out of advisory and underwriting as it grapples with the long-term “megatrends”, its outgoing chief executive said.

The comments from Koji Nagai, Nomura’s longest-serving CEO in three decades, underscore the deepening sense of crisis for Japan’s top brokerage and investment bank amid a shrinking fee pool from trading that threatens financial services in the world’s third-largest economy.

Nagai is due to become Nomura’s chairman in April and will be replaced by Kentaro Okuda, now co-chief operating officer, to lead a turnaround at the firm, which last year posted its first annual loss in a decade, has cut costs and also announced plans to shut 20% of its domestic retail branches.

The headwinds from the “megatrends” will stay for another decade, Nagai said, indicating Nomura needs to focus on its primary business that include underwriting and deal advising.

Already, Nomura has announced it will buy Greentech Capital Advisors, a U.S. mergers and acquisitions advisory firm which specializes in renewable energy.

The size of the Greentech deal was not disclosed, although the Nikkei newspaper put it at 10 billion yen ($91 million).

“This is really a business chance and unavoidable theme for us,” Nagai said in the interview last week which was embargoed for release on Friday.

The new CEO will also keep trying to meet cost-cutting goals, Nagai said. Nomura is aiming for about 140 billion yen in cost cuts by March 2022, with about 60% achieved as of December.

Okuda has said he wants to speed up the pace of reform with “a sense of urgency”, but has not provided details.

A senior company source says Nomura is likely to sharpen its focus on its domestic retail business as that could be a strong source of revenue.

Nomura posted a 57% year-on-year plunge in retail investment pretax profit in the quarter to September.

A three-decade bank veteran, Okuda, 56, has worked overseas, including as head of Nomura’s U.S. arm.

When asked about Okuda’s lack of experience in the domestic retail business, outgoing chief Nagai said it would be “short-sighted” to judge his potential ability based on such factors.

“Management is operated by a team in which each member can help and complement each other. There is no ‘Superman’.”

(Reporting by Takashi Umekawa and Takaya Yamaguchi; Editing by David Dolan and Himani Sarkar)