Next year is shaping up to be another tough one for Nomura Holdings Inc’s employees in Europe, with more job losses likely as the Japanese securities firm shifts business away from the region to more profitable centres in Asia and the US.
Japan’s biggest investment bank needs to cut staff while finding ways to spur revenue in the region, chief executive officer Koji Nagai said. “We have to bolster our top line and control these excessively large costs,’’ he said in an interview in Tokyo.
Nomura has struggled to generate profits in Europe since it bought Lehman Brothers Holdings Inc operations in 2008. And the firm’s recently announced plan to end the status of its London office as a global booking hub means the current 3,000-strong workforce in the region may be “a little large,” Nagai said.
Even after eliminating more than a thousand jobs in Europe this decade, the Tokyo-based company continues to lose money there, posting a pretax loss of ¥16.8bn ($151mn) in the region in the first half of the current fiscal year. Wholesale revenue dropped 29% from a year earlier amid a slump in fixed-income trading.
“Our top line itself is in an unusual situation,” Nagai said. “Client activity has weakened significantly.”
Under Nagai, 59, Nomura is planning to allocate more resources to the Americas, where the fee pool is bigger. Capital of its London unit will be cut to around $3bn from $5bn as its role narrows to booking transactions from the greater European region rather than globally, Nagai said in a presentation this month.
The firm’s difficulties in Europe have been compounded by Brexit, which threatens to swell costs and create separate pools for capital and funding, wholesale banking chief Steve Ashley said in a November interview.
Nomura will move 50 to 100 people to its new Frankfurt unit and elsewhere on the continent to ensure continuity after UK leaves the European Union, Ashley said.
Nagai said he wants to bring the European operation’s return on equity – a measure of how well a firm uses reinvested earnings to generate additional profits – to 5% or higher on a pretax basis.
He aims to reach that target in all geographical areas by March 2020 as a “minimum’’ requirement, he added.
Nomura doesn’t disclose where that measure stands in each region, said Kenji Yamashita, a spokesman. Nagai announced the ROE goal earlier this month, without offering a timetable.
Chief financial officer Takumi Kitamura told reporters October 31 that he intends to bring the European unit to “an appropriate size” and “achieve a balance in terms of manpower, resources and capital.”
Closer to home, Nagai expressed concern about the aftermath of the initial public offering of SoftBank Corp, saying its 15% plunge on the first day of trading may hurt individual investors’ confidence in Japanese markets.
Nomura was among the global coordinators of the deal, Japan’s biggest ever, which lost investors more money than any other debut in history, according to data compiled by Bloomberg. The IPO suffered “one misfortune after another,” Nagai said, citing factors including the global stock rout, a network outage and the arrest of an executive at supplier Huawei Technologies Co. “This can’t be positive for sentiment from a common sense perspective.’’
Nagai, Nomura’s longest-serving CEO in more than 30 years, wouldn’t be drawn on how long he will stay in the role he’s held since 2012.
But he said his eventual successor will need to be someone who can continue his efforts to overhaul the domestic retail business model and boost profitability for the global wholesale segment. “If there are candidates with equal abilities, the younger one will probably be better,” he said.
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