Nomura bought 70 bankers for $92m; then their boss quit
Nomura is cutting targets, and with them costs. In a statement today, Nomura CEO Kentaro Okuda, cut the bank's core pre-tax income target for 2024 by 25% in three core divisions - retail, investment management and wholesale (the investment bank). It also announced a further $363m in cost savings.
The latest cuts, which are expected to come from streamlining administrative and systems operations, come after Nomura cut 30 EMEA investment bankers, or 10% of its total in January. They follow an 18% year-on-year increase in costs at Nomura's wholesale bank last year and a 60% decline in profitability.
A better understanding of Nomura's predicament requires a longer timeline. Between 2020 and 2022, costs at Nomura's wholesale bank rose 33%. Nomura hiked salaries for its junior investment bankers to $100k in 2021 and promptly launched a hiring spree for 50 new juniors. It also spent $92m acquiring Greentech Capital Advisors and its 70 investment bankers.
Last week, Jeff McDermott, the former head of Greentech Capital Advisors and global co-head of the investment bank, quit. Insiders don't seem to have seen his exit coming. "Personal reasons was what he told everyone," says one insider. McDermott isn't going to a competitor - the memo accompanying his departure said that he plans to “seek opportunities to help investors and companies create value through the sustainability transition.”
What happens now to Nomura's team of green technology bankers (repackaged as Nomura Greentech) and to its bankers in general? Seemingly nothing. Chris Willcox, the head of Nomura's wholesale bank who joined in 2021 from JPMorgan Asset Management, said today that the bank isn't planning major headcount reductions in investment banking. The bank has said it's cautious about hiring ex-Credit Suisse bankers, but today it added two new bankers to cover mobility and automotive clients in Europe and the US.
Nonetheless, naysayers suggest Nomura remains susceptible to its old failing of fickleness. "Every two or three years they change their strategy in a pretty drastic way," says one recently ex-managing director. "They hired these people under Jeff McDermott around the top of the cycle and may now be getting cold feet."
Nomura insists this isn't the case, though, and points to the new additions even after McDermott left. “Nomura’s strategy for investment banking is not changing. We plan to scale our footprint in international investment banking while enhancing productivity. We will continue to invest through targeted hiring into sectors where we are strong and selectively build new capabilities,” says a spokesman. It might even be argued that the 70 Greentech bankers were cheap at the price: Michael Klein was only recently trying to sell his 40-person boutique to Credit Suisse for $175m.
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