Nomura Strengthens Its International Investment Banking Division in a Head-on Competition with Mega-banks and Foreign Affiliates

The head office of Nomura Holdings

 

   Nomura Holdings, Inc., a leading financial group in Japan, made a move to strengthen the function of its Global Wholesale Division in response to the diversification and globalization of corporate financing measures. Nomura established a new organization in the spring of 2004 as a centerpiece of this move. The objective is to enhance Nomura's position as an international investment bank against leading U.S. securities companies and Japanese mega-bank groups.

   Nomura improved its capabilities in product development by establishing a Capital Market Department within its Investment Banking Products Division. Mega-banks are exerting their strength through alliances between principal bodies and affiliated securities companies. Nomura's move aims to integrate the underwriting of such equities and debts.
   Nomura's capability in providing customers with total advice for financial restructuring has been increased. Furthermore, Nomura established a Global Market Unit that will strengthen functions that are similar to those conducted by banks. They include a trading framework for derivatives (a field that U.S. affiliates and bank-affiliated securities excel at), engagement in the domestic credit market, and asset finance. In addition to equities, this unit will be in charge of overseeing syndicates and fixed incomes.

Response to Financial Restructuring

   The move by Nomura to strengthen the overall function of its Global Wholesale Division also means that the company, which is not affiliated with any mega-banks, is challenging Japanese mega-banks head on. In the background of Nomura's decision is the fact that business opportunities in relation to needs such as capital financing (aside from equity financing) and diversified financial restructuring has expanded because the acquisition of such items have become a free trade situation due to the diminished influence of main banks over companies.

Workroom of Nomura Holdings

   Regarding the company's outlook, Nomura chief operating officer Hiroshi Toda said:

The jump in the growth of American investment banks in the 1990s was due to an increase in share prices. Although Nomura wants to compete globally, a priority for this purpose is to strengthen the domestic market. Our strength is that we have a retail market in Japan, which has the largest amount of financial assets in the world. If the Japanese economy takes off and share prices rise, the realization of our dream to become a globally competitive financial institution will become clearer. We will not deny that there is a possibility that we will acquire foreign-affiliated companies as one of our measures towards this end.

Revival of a Tarnished Brand Name

   While fiscal 2004 saw slow growth in deposits and savings at banks and post-office savings, assets on deposit at the Nomura Securities Group grew 32%, as compared with the same period of the previous year, to 63.8 trillion yen, assisted by an increase in actual price. This was a result of developing detailed information services for customers in speedy response to changes in the securities system.

   Two scandals erupted at Nomura in the latter part of the 1990s that caused a malfunction of its corporate governance. It has utilized the lesson learned through these bitter experiences which resulted in the loss of customers, and it is managing its group with focus placed on compliance. The once-damaged Nomura brand image is recovering. The fact that influential customers are once again beginning to place their trust in Nomura is leading to its confidence towards becoming an international investment bank.