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NOMURA Holdings’s wealth management business is on a growth path after a multi-year overhaul that saw its thousands of retail bankers shift away from catering to the masses of Japanese investors towards the well-to-do.
The division that generates a quarter of revenue at Japan’s biggest brokerage is past an era of reducing staff and is now keen to recruit mid-career talent, said Go Sugiyama, head of wealth management. He is also open to the possibility of buying other companies to expand.
Banks around the world are trying to emulate the likes of Morgan Stanley and UBS Group by beefing up their wealth business to ensure revenue grows even in times when financial markets are rocky.
For Nomura, the domestic retail business has been a cornerstone of stability over the years, generating profits that helped to make up for occasional underperformance at its global trading and investment banking operation. But pressure for change has grown as innovation and the rise of online brokers squeeze profitability, while rival banks accelerate their push to win over Japan’s wealthy.
That prompted Nomura to revamp the business in 2019, the latest attempt over the years to rejig it. As well as cutting headcount and consolidating branches, it began to focus more on managing the growing assets of rich households while moving away from the long-standing practice of generating commissions from securities transactions.
“We feel we have made very good progress,” Sugiyama said. The company has completed “the phase of large-scale organisational changes.”
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The road ahead for Nomura could be bumpier as some of the economic tailwinds that have benefited its wealth push fade. A dramatic stock-market sell-off following the Bank of Japan’s surprise interest-rate increase in July has thrown some doubt on the willingness of Japanese households to invest more of their 2.2 quadrillion yen (S$19.5 trillion) in financial assets.
But Sugiyama pushed back against such pessimism, pointing out that Nomura’s wealthy customers bought more products in value terms than they sold during the worst of the rout on Aug 5. The benchmark Nikkei 225 Stock Average plunged more than 12 per cent that day, the most since the October 1987 crash.
The Bank of Japan’s policy normalisation is also “extremely positive” in part because “the return of interest rates helps increase options for our customers”, including investing in bonds, he said.
Nomura’s wealth management segment that serves domestic clients has been a consistent performer over the years. Known as the retail division until the current fiscal year, it made money every quarter since at least April to June 2009, while the larger wholesale operation posted quarterly losses a dozen times over the same period, according to filings.
Under chief executive officer Kentaro Okuda and his predecessor Koji Nagai, the company has accelerated efforts to boost that stability by increasing its so-called recurring assets under management, which include mutual funds and other products for which holders regularly pay fees.
Those assets hit an all-time high of 24.3 trillion yen in June, accounting for 16 per cent of the division’s overall assets under custody, filings show. Sugiyama said he is “confident” in achieving Nomura’s goal to expand it to 35 trillion yen by March 2031.
Revenue from recurring assets rose 34 per cent to a record 45.8 billion yen in the three months ended June, enough to cover two-thirds of the division’s non-interest expenses.
Meanwhile, the number of wealth division employees fell to a 17-year low of 7,328 last fiscal year, filings show. The headcount – which includes middle and back-office staff – has dropped 20 per cent since fiscal 2019, largely through attrition and limiting new hires.
Nomura is “not at all” thinking about trimming costs through job cuts, Sugiyama said. “The focus is on how we can raise the level of our people while recruiting excellent resources.”
The company has recently seen a doubling in job applications from mid-career retail bankers from other firms, he added.
“We absolutely wouldn’t rule out anything” to boost wealth operations, Sugiyama said when asked whether Nomura might make acquisitions.
Japan has seen a number of tie-ups between commercial banks and brokerages since the pandemic, intensifying competition in the retail space. Most recently, Nomura’s biggest domestic rival Daiwa Securities Group Inc. invested in Aozora Bank earlier this year.
Nomura has exited its loss-making mobile brokerage venture Line Securities.
One key to the shift in business model has been getting bankers to think and act like wealth managers rather than brokers, which has taken time, according to Sugiyama.
“I feel it is really something that takes 10 years,” he said. “But things have really changed. They have gotten better.” BLOOMBERG
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