‘A focused approach is paying off’

Boosting international revenues has been a key priority for Nomura, one of Japan’s most well-known banks, over the past decade, as it has sought to diversify its income from outside of its ageing domestic base.

It has not always been a smooth ride, however, and the bank has made significant changes over the past five years in order to optimise the business model within its international wholesale division, including in its investment bank, as well as its global markets division. Notably, in 2016 it exited equity capital markets, as well as equities trading in Europe, the Middle East and Africa (EMEA). And, in 2019, announced it would be directing more focus towards primary financing and advisory activities, and downscaling activity in secondary trading across its international franchise covering EMEA, the Americas and the rest of Asia.

Right priorities

Charles Pitts-Tucker, head of investment banking for EMEA, believes these efforts have been bearing fruit, and the bank now has the right priorities and strategy in place to succeed going forward. “Over the past couple of years, we have gone through something of a refocusing, and I think that has certainly paid off,” he says.

Revenues in areas such as debt capital markets (DCM) and mergers and acquisitions (M&A) — areas identified as key growth segments — were particularly pleasing in 2020. “We had a very strong year,” says Mr Pitts-Tucker. “We really saw some of the themes, which we were hoping to drive, pick up — such as in M&A, where we did a lot more cross-border business and built up some of our primary financing businesses. That really has started to come through.”

Had it not been for a pre-tax loss of Y245.7bn ($2.23bn), widely reported to be a result of the firm’s exposure to Archegos Capital Management (the now infamous family office of former hedge fund manager, Bill Hwang, that collapsed in March 2021), the wholesale division could have had its best performance in years. Mr Pitts-Tucker declined to comment in relation to the pre-tax loss “resulting from business activities with a US client”.

Strongest possible position

When assessing the bank’s strong performance in key areas, such as DCM and M&A, it is somewhat difficult to separate the effects of Covid-19 from the impact of Nomura’s own strategic shifts. Like other banks, it has no doubt benefited from the robust demand for capital raising in the wake of the pandemic and, since late 2020, advisory around a robust flow of M&A deals. However, he believes the changes the bank has implemented have put it in the strongest possible position to take advantage of the wider market conditions.

“I think the work that we’ve done to make ourselves more focused gave us a cushion against the worst impacts of Covid-19,” he says. “It meant that we were able to carry on much as we had intended, with our portfolio of businesses in place and enabling us to make the most of opportunities that came up.”

Like other banks, and businesses more broadly, Nomura had to shift most of its operations to working from home, and Mr Pitts-Tucker is proud of how staff “never missed a beat” getting this set up. He believes their continued success during this period is testament to the work done on developing client relationships in recent years. He says: “When you can’t see people in person and you’re having to do all of your meetings online, that clearly works all the better if you already have strong relationships in place. So, I think this period has been a very good test of the work we have been doing.”

M&A success

For Mr Pitts-Tucker, one of the areas where this work in building client relationships has clearly been paying off is in M&A, where Nomura has had several strong quarters, including on cross-border deals. He cites its sole advisory role on Taiwanese semiconductor manufacturer GlobalWafers’s bid to acquire German rival, Siltronic, and another sole advisory mandate for Japanese semiconductor firm, Renesas Electronics, on its bid for UK-based Dialog Semiconductor, as two prominent examples of very international deals, as well as the bank enjoying successes on cross-border activity within Europe. “We’ve been putting legwork into deals that we started engaging on a couple of years ago, being tactical and focusing on the right deals, and that is now beginning to bear fruit,” he notes.

He says there has been a focus not only on ensuring teams in different geographies are working well together, but at a local level they have also been investing in talent within country teams, to develop deep, on-the-ground knowledge within local markets, such as its team in Italy, which it has heavily invested in over the past two to three years.

Strength internationally

The bank has long been able to leverage its strength in Japanese and Asian markets more broadly to drive cross-border activity with its international client base. Mr Pitts-Tucker maintains that this will continue to be a key strength for the bank: “As a global investment bank, that is something that we can use to our advantage, not only to drive business for our clients in Europe, but also to enable us to serve clients in Asia with content, ideas and opportunities that come from Europe, and the US too. I do think that is a real differentiator for Nomura.”

However, he is also clear that the bank cannot rest on that regional strength to drive activity and to compete internationally. “You can’t be a global investment bank by just being strong in one region — you have to be strong in all regions,” he notes. “And, critically, you must then also have the ability to connect those regions in the right way for your clients.”

This is not a case of being all things to all people — Mr Pitts-Tucker says the bank has been unapologetic in recent years in choosing which countries and which sectors to specialise in. However, it has made a point of ensuring that its expansion plans are coordinated and rolled out holistically throughout its global network, to ensure that it has strength and capabilities in the relevant areas for its clients.

Upcoming growth areas

Ensuring a bank remains relevant with its clients for the long term also requires a keen sense of upcoming trends and getting ahead of them. For Nomura, this is manifested in its 2020 acquisition of Greentech Capital Advisors (since rebranded Nomura Greentech) — a boutique investment bank with expertise in sustainable technology and infrastructure advisory, particularly M&A. 

Environmental, social and corporate governance (ESG) has also been a major growth area in recent years, and Nomura is banking on it making the same impact within M&A and other areas as it has had within the bond markets. “Clients are figuring out what actions they need to take in relation to this agenda — it is a huge growth area,” he says. “What we saw in the Greentech team was a very high-quality group of people who had already spent a lot of time understanding themes that everyone’s now talking about. They were ahead of the curve in this area, and the content they can offer is relevant to all sorts of clients.”

For Mr Pitts-Tucker, plugging the capabilities of Greentech into Nomura’s existing energy infrastructure and industrials teams, along with its country network, has enabled the bank to create “an incredibly competitive combination”.

ESG is in Nomura’s DNA — right from its founding principles, he argues — which place a premium on the bank fulfilling obligations to wider society. And it intends to be active in ESG across all areas where it is relevant to its clients, whether in the ECM markets advising on green special purpose acquisition company (SPAC) initial public offerings (IPOs) — it advised on six of the total 30 green SPAC IPOs in 2020 — or debt financing or ESG-linked solutions to managing credit-related or foreign exchange risks. 

Mr Pitts-Tucker also singles out technology as a major growth area for the future, and has shaken up the bank’s traditional technology, media and telecoms (TMT) sector team in recognition of the fact that tech cuts across so many other areas. “My view is that things have changed and the traditional TMT set-up wasn’t quite the right way anymore,” he says. Instead, the TMT team, along with the bank’s business services team, has become the technology, media and services team.

“If you think about it, technology and services are really in every sector,” Mr Pitts-Tucker says. He again cites the aligning of the Greentech team with its energy, industrial and infrastructure team. “These structural changes have made our set-up more ‘of the moment’, and that has led to some really interesting themes emerging and dialogue with clients,” he says.