Nomura targets investment banking recovery on Japan market rally

Hottest Market

“Japan is the hottest market in the world now, and corporates are getting more profitable,” said Akino, Tokyo- based chief fund officer at Ichiyoshi Asset Management Co., which oversees about 30 billion yen. “The brokerage may be able to get more mandates in M&A, debt and equity businesses.”

Japanese companies shunned the stock market over the past two years as a record earthquake and Europe’s sovereign debt crisis damped investor sentiment. Share sales in 2011 and 2012 totaled 3.9 trillion yen, less than 2010’s 5 trillion yen, according to data compiled by Bloomberg.

Nomura expects initial public offerings in Japan will reach the highest in six years in 2013. About 60 Japanese companies will announce debut share sales, Masaharu Kambe, head of the IPO department in Japan, said in an interview in January.

Last quarter’s earnings were aided by a 16 billion yen gain from the sale of Annington Homes Ltd., a U.K. housing estate company. The sale helped the company post a 4.3 billion yen pretax profit abroad, snapping 10 straight quarters of losses from overseas operations.

Job Cuts

CEO Nagai has pledged to cut $1 billion of costs that swelled after the firm bought Lehman Brothers Holdings Inc. operations in 2008. The investment bank trimmed payrolls last quarter as part of its cost cutting. The company had 34,098 employees as of Dec. 31, down 717 from three months earlier.

To boost fixed-income and equity businesses, Nomura formed a 26-member global markets executive committee headed by division chief Steve Ashley, an internal memo showed on Jan. 29.

Equity underwriting fees fell 19% to 3.4 billion yen last quarter, yesterday’s report showed. Income from managing bond sales dropped 67% to 1.5 billion yen. Merger advisory fees slid 16% to 6.3 billion yen.

Not all analysts see a turnaround at the Japanese firm.

“Nomura is still facing a tough time expanding its investment banking business globally,” said Futoshi Sasaki, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “Japanese companies have ample cash, so it’s hard to believe they’ll come back to the capital markets for fundraising.”

Nomura was the No. 1 manager of share sales by Japanese companies last quarter, up from second a year earlier, and was also the top-ranked underwriter for 2012, data compiled by Bloomberg show. The bank’s rank for advice on Japanese mergers and acquisitions fell to ninth in the quarter from the top spot a year earlier. It slipped to second for the full year.

Bloomberg News

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