On the one hand, the resignation of Kenichi Watanabe, chief executive of Nomura (and Takumi Shibata, its chief operating officer) could simply be the symbolic sacrifice the bank's clients were asking for after the insider trading scandal engulfing the bank in Japan.
Nomura was already missing out on advisory business to local rivals, and lost its number one position managing bond sales in Japan as a result of the case. As Kouichi Niwa, a Tokyo-based analyst at SMBC Nikko Securities Inc, told Bloomberg: “What Nomura needs the most now is to retrieve market trust and boost earnings power.”
On the other, this could be a disaster for those in its European operation. The two men orchestrated the bank’s acquisition of Lehman Brothers’ European and Asian assets and have been the pushing through its stuttering expansion since. Their removal could mean a change of strategy, particularly if the rumoured appointment of the more domestically-focused Koji Nagai, president of its Japanese brokerage, proves correct.
Redundancies have so far been light
Nomura has, of course, struggled to turn a profit in its overseas investment banking operation. Its results are out this morning for the three months to June 2012 and its wholesale division posted a lost of Y8.6bn (£71m). In EMEA, it posted net revenues of Y41bn, which is a 26% decline on this point last year.
Nomura says that fixed income and some large M&A and debt capital market deals were positives for its EMEA operations in the last quarter, however.
The bank has been cutting back in Europe, but not spectacularly compared to its international peers. What’s more, despite the announcement of 1,300 job cuts internationally, headcount in both the US and Asia-Pac has remained broadly stable.
Year-on-year to 30 June, 461 people have departed from its European operations, as the table below shows. And the chart below from Imas Insight also demonstrates a steady decline in the number of FSA approved persons this year. Questions have to be asked about whether the cuts have been deep enough so far.
Nomura does, however, still seem willing to hire the right people. Since Steve Ashley joined from RBS in January to lead Nomura’s fixed income team, he’s been recruiting his former colleagues. This has been something of a shake-up in the team, however, and 30 managers left the fixed income team in March. It's also hired for equity research and an FX team in Dubai in recent months.
Perhaps the bigger challenge is attempting to retain those employees its eager to keep and attract those it has ambitions to recruit. Previously, James De Naut, Nomura’s head of investment banking for the America’s told Bloomberg he plans to hire another 62 managing directors and executive directors over the next three to five years, taking the total to 100.
Long bonus deferrals for managing directors (up to five years) together with reports that some MDs had ALL their bonuses deferred this year, isn’t a particularly attractive proposition, though. However, the fact that top performers were flat on last year, and those in London were paid OK, however, shows that Nomura will dig deep if it necessary.