Armed with a stren gthened credit rating, Nomura is upgrading in Europe and plans a US expansion, targeting $1bn of international corporate finance revenues by 2018, writes David Rothnie.

1. Can Nomura’s international expansion deliver in corporate finance?
Armed with a strengthened credit rating, Nomura is upgrading in Europe and plans a US expansion, targeting
$1bn of international corporate finance revenues by 2018, writes David Rothnie.
There is an inherent stuffiness in the banking industry about Nomura. When the Japanese bank rescued the European
and Asian operations of Lehman Brothers in 2008, one senior former Lehmanite admitted: "It was never really in my
career plan to have Nomura on my business card."
While it is true that Nomura lacks the firepower of its rivals and has long since abandoned former chief executive Kenichi
Watanabe’s dream of becoming a global investment banking powerhouse, it has a spring in its step and an optimistic
vision of its future that many of its larger rivals in Europe do not currently share.
Nonetheless, when UK corporate finance veteran Nick Bowers quitDeutsche Bank for Nomura in May, eyebrows were
raised about the merits of such a move.
The appointment of Bowers, who will join next month as co-head of UK investment banking, comes after Nomura
unveiled a new strategy to boost growth in its international investment banking division, which comprises its capital
raising and advisory units.
Bowers is the third managing director to join the Japanese firm’s London operation this year — in February, the bank
hired Patrik Zeigherman from Société Générale as head of its industrials team in EMEA, and a month later it hired former
Morgan Stanley banker Euan Drysdale as a managing director in its natural resources group.
It is part of a plan to improve the bank’s coverage of corporate clients, and the recruitment policy represents a
combination of upgrades, new hires and plugging gaps from departures.
Mandate successes
The hires come amid a string of mandate successes in EMEA. Nomura’s recent noteworthy UK deal successes include
advising South African company Brait on its £1.9bn acquisition of UK fashion retailer New Look, following this with a role
as joint global coordinator and joint bookrunner on the refinancing of New Look's capital stack in June.
It also acted as financial adviser and corporate broker to Dragon Oil when it agreed a £3.7bn takeover offer from
Emirates National Oil Company, and as joint global co-ordinator on the €627m IPO of Spanish rail engineering company
Talgo.
This is part of a broader push by Nomura to boost international revenues. The bank scaled back drastically during 2012,
as costs spiralled out of control following the acquisition of Lehman Brothers’ European and Asian operations in 2008.
The bank’s international operations contributed 65% of total wholesale revenues in the most recent financial year and
so remain crucial to its success.
At an investor day held in Tokyo back in May, Kentaro Okuda, its global head of investment banking, laid out the
challenge the bank faces as it embarks on the next phase of its strategy.
Having shrunk its investment banking offering under its "fit for the future" strategic revamp in 2012, slashing $2bn of
costs, Okuda said it is now looking to grow again, and has set the investment banking business a $2bn revenue target
with an equal split between its Japanese and international business.

2. In the 12 months to the end of March 2015, the unit, which includes capital markets and advisory, generated revenues
of $767m. Okuda said he wants to hit the new target in "the next two to three years" but stressed that "I’m trying to
bring that forward as much as possible".
Putting the rating behind it
The Japanese bank has been hobbled for more than two years by its credit rating, but last October, it gained a two-notch
upgrade from Moody’s, narrowing the gap with its western rivals from 3.4 notches in March 2012 to 0.9 now. Nomura
Securities returned to single-A territory with an upgrade from Baa2 to A3, while Nomura Holding was upgraded from
Baa3 to Baa1.
Having a lower rating set Nomura at a clear disadvantage in winning long term business or business based on credit
worthiness, and with the upgrade it is moving fast to increase its business with central banks, pension funds and
sovereign wealth funds. Exploiting the upgrade is one of the key planks of Nomura’s wholesale banking growth strategy
and CEO Tetsu Ozaki says that will increase annual revenues at the division by $250m over the next 18 months.
Nomura has also overcome some of thorniest challenges that bigger rivals are still grappling with.
In 2012 it became one of the first banks to oversee a root-and-branch integration of its fixed income and equities
platform into a unified markets division run by Steve Ashley. It has taken this a step further by boosting co-operation
between markets and its investment banking division, which is run in EMEA by Charles Pitts-Tucker, who is also co-head
of international investment banking with Jim Denaut in the US.
The co-operation is most evident in Nomura’s global finance business, which is a joint venture between investment
banking and markets. In March, the bank cemented this collaboration with a management revamp so that global finance
is now run jointly by Ken Brown, who sits in investment banking, and Simon Deeny, who comes from the markets side.
Scrapping the silos
Ashley has played a big role in abolishing silos and fiefdoms as the bank introduced a single balance sheet to clients
across markets and investment banking, enabling it to allocate capital and resources in an agile way.
In April, Nomura moved Yasuo Kashiwagi, who was executive chairman, EMEA, back to Tokyo to be co-head of global
markets with a brief to work closely with Ashley, the global head, "to promote closer cross-regional collaboration and
drive the global markets client businesses."
Nomura is a pure play investment bank and while the revenues it generates from advisory would constitute a rounding
error at Goldman Sachs, it shares the same vision as its storied rival — to generate repeat business on cross-border,
multi-product deals leading with its advisory and capital markets products.
"It’s somewhere between a boutique and small investment bank in terms of the size of its corporate finance offering,”
says Stéphane Rambosson, partner at headhunter firm DHR International. “But its smaller size has become a virtue and
it really plays to its strengths. It has none of the politics of big banks."
The original rationale of the Lehman Brothers deal nearly seven years ago was to provide Nomura with a growing,
diversified earnings stream away from its stagnant home market, and while the bank may have scaled down its dreams
of global domination, that fundamental objective has survived.
Two steps to growth
Accordingly, Okuda is adopting a two-step strategy for growth. In Japan, the bank is looking to wring more revenues
from its existing client base. Since becoming global head of investment banking in 2012, Okuda has focused on building a
solutions business in Japan, and with some success — in the last financial year, the firm’s Japanese investment banking
division generated more revenues from the solutions business than it did from advisory.

3. But the strategy comes from elsewhere. Solutions is an import of a business that came across from Lehman in Europe. In
EMEA, the solutions business is run by Selim Toker and sits within the global finance group.
Outside Japan, Nomura has a clear strategy to boost cross-border regional deal flow in its areas of strength. While it
does not break out revenues between international regions, Nomura said EMEA accounts for the largest international
share.
This strength comes from areas of focus such as the financial sponsors business, both from a leveraged finance as well as
an advisory perspective. The bank also says a big part of its success in EMEA is down to the creation of an integrated FIG
offering under Hubert Bastide and Laura Atherley.
Okuda also expects further progress in the bank’s SSA bond business in EMEA, another bright spot in recent years.
During the first half of 2015, Nomura was ranked sixth in the global SSA rankings, up from 18th three years ago.
Go West
Banks often choose a tagline that becomes a stick to beat them with.
Barclays’ “Go-to Bank” slogan has attracted criticism, while Nomura’s “Asia’s leading global investment bank” has also
been open to scrutiny, as it implies the firm should be leading the way in cross-border deals.
Okuda acknowledged this has failed to materialise and is keen to make it happen. “We are not the biggest so the key is
to collaborate among divisions and regions,” he told investors. “Some people think we are weak in cross-border M&A,
and that is true to some extent, but in the last year our international investment banking team visited Japan 200 times,
and each time they come they visit 10 clients, and we are making a lot of proposals to clients.”
The challenge for Nomura’s international expansion plan is that while its largest investment banking platform is in
EMEA, the biggest fee pool is in the US.
“EMEA is the largest in terms of size but we are focusing the most on Americas in terms of capturing growth,” said
Okuda.
While the bank is adding talent in EMEA, the real expansion drive is in the Americas.
Since 2011, the bank has recruited around 33 managing directors and five executive directors in the US, and stepped up
the recruitment drive last October with the addition of 13 managing directors.
The hiring spree, which has come either side of the bank opening its Americas headquarters in Manhattan in November
2013, has helped it boost the number of US clients it banks more than fourfold, albeit from a low base.
“If we can become strong in the Americas it will help EMEA and APAC,” said Okuda.
Nomura knows that in order to hit its ambitious revenue targets, it will need to maintain its focus, and continue its
hawkish cost control.
Since 2012 Nomura has grappled with and overcome some of the biggest challenges facing the industry and now with
rivals such asCredit Suisse, Barclays, Deutsche Bank and Standard Chartered all braced for change under new CEOs, a
Nomura business card is looking like a badge of respectability.
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