Nomura Profit Vindicates Lehman Gambit – US-FOREX.US
Nomura Holdings returned to profit for the first time in six quarters, helping Japan’s leading brokerage vindicate its decision to buy the Asian and European operations of failed U.S. investment bank Lehman Brothers.
In the three months ended June 30, Nomura Holdings
earned 118 million. Net revenue more than doubled to 3.1 billion.
Nomura last year snapped up its chunks of Lehman for a reported 200 million, a purchase that CEO Kenichi Watanabe at the time described as a “once in a lifetime opportunity.’’ Watanabe, a 33-year veteran at the Japanese brokerage, was gambling that the injection of Wall Street mettle will help transform his more conservative company into a global financial powerhouse.
Until the Lehman acquisition, almost all of Nomura’s equity underwriting business and fees from merger and acquisition deals came from clients in Japan. Adding Lehman also allowed it to snag a trove of hedge fund clients in Asia.
That Nomura is making money again will be a relief to Watanabe, who has given himself three years to integrate 8,000 former Lehman workers into Nomura’s workforce. It will help him convince investors that his decision to buy parts of the failed American brokerage was a savvy move rather than the folly that at times it seemed to investors.
Nomura lost more than 7 billion in its last business year, shrinking the cash cushion that was helping the company weather the credit crisis roiling global financial markets. An embarrassed Watanabe had to apologize to shareholders for the loss.
To make the marriage of disparate corporate cultures work, the Nomura boss is trying to forge a hybrid firm that encompasses both highly-paid, easy-to-fire staff and workers who accept a smaller pay packet in return for a guarantee they won’t be laid off when business turns sour.
To stem any exodus from the former Lehman offices, Watanabe also promised many of his new workers that he would for two years pay the bonus they could have expected at their former employer. Personnel costs at Nomura in the first quarter jumped by more than 500 million.
Nomura, however, isn’t the only broker to see earnings surge. Goldman Sachs
posted a profit of 3.4 billion in its latest quarter. A recovery in the securities industry will likely mean in an increase in new hiring, and for Watanabe, that means he may have to think of new ways to stop his star earners from taking Nomura’s money and jumping ship.