TOKYO: Japan's Nomura Holdings has no plan to follow the lead of Wall Street rivals and seek a tie-up with a commercial lender, its chief executive told Reuters, pledging to stay independent even as the investment bank faces its first annual loss in a decade.
Nomura in January reported a net loss of more than 101 billion yen (US$903 million) in the first three quarters of the year to end-March. It has since announced an overhaul plan to cut US$1 billion in cost from its wholesale business and close more than 30 of its 156 retail branches.
But it will not seek to join forces with a commercial bank, Koji Nagai said, eschewing a model that has reshaped Wall Street since the financial crisis and has seen Morgan Stanley tie up with Japan's biggest bank, Mitsubishi UFJ Financial Group.
"We can do a deal with any partner if we make the effort. We don't belong to any banking group and that is our strength," Nagai told Reuters in an interview this week embargoed for release on Friday.
Even without capital ties to any of Japan's three megabanks - Mitsubishi UFJ, Mizuho Financial Group and Sumitomo Mitsui Financial Group - Nomura has been able to retain its formidable presence in Japanese investment banking, particularly deals.
It is advising Nippon Paint Holdings on a US$2.7 billion bid for Australia's DuluxGroup, announced this week.
But it doesn't have the lending firepower of a rival such as Morgan Stanley, which thanks to its tie-up with Mitsubishi UFJ, has been able to leverage the Japanese bank's massive balance sheet to offer financing alongside of advisory services.
ENVY & INDEPENDENCE
Nagai said that while he felt "envy" toward competitors with lending power, a capital alliance with one of the megabanks would sacrifice Nomura's independence - likely closing it off from clients allied to one of the other megabanks, given the Japanese corporate practice of sticking to a "main bank" and doing business with that lender's affiliates.
"We won't give up our independence by joining a capital alliance," he said.
As part of the cost-cutting overhaul Nomura also plans to axe about 100 jobs in London, the center for its European banking business, Reuters has previously reported.
The wholesale business has been squeezed by lower trading revenue in fixed income.
Credit-ratings firm Moody's has said that Nomura's overhaul plans, if successful, would help it refocus its business and reduce earnings volatility.
Nagai said Nomura is also focused on driving its mass-affluent customers - often defined as those with less than US$1 million in investable assets - to its digital platform. The bank is looking to hire people from online brokerages to help drive that strategy, he said.
(US$1 = 111.9100 yen)
(Reporting by Takashi Umekawa and Taro Fuse; Editing by David Dolan and Christopher Cushing)