Pedestrians are reflected on a sign displayed outside a Nomura Securities branch in Tokyo.YURIKO NAKAO/Reuters
Nomura Securities is making a symbolic break with the post-Lehman era. Top deal-maker William Vereker, one of the few former executives of the Wall Street firm still at the Japanese investment bank, has given up his management responsibilities and may leave altogether. It's another sign that Nomura's global ambitions have been reined in by commercial reality. Now its new leadership must explain how a revised strategy will serve shareholders better.
It's almost four years since Lehman collapsed, prompting Nomura to launch an opportunist swoop on the bank's businesses in Asia and Europe. For a while, the prospect of an Asia-focused investment bank challenging Wall Street's bruised bulge bracket seemed plausible. But as U.S. financial institutions recovered and investment banking revenue dropped, smaller players like Nomura faced a painful squeeze. The bank's new executives, installed in July following an insider-trading scandal, are planning a strategic rethink.
Mr. Vereker's decision to step back from his role as joint head of investment banking underscores the challenge of changing direction. Within Nomura, the 45-year-old had argued for a fundamental rethink of the business model, as well as pushing for acquisitions that would give it additional scale. That approach has been rejected. Mr. Vereker will become a vice-chairman, working with existing clients such as Xstrata, but seems unlikely to stick around for long. For other Nomura employees, particularly in London and New York, that's hardly an encouraging sign.
Nomura's new top management will no doubt argue that the bank is facing up to reality. They have pledged to carve a further $1-billion (U.S.) off its cost base by early 2014, and to deliver $3.2-billion of pretax profit by 2016. They may also be assuming that the weakness of the industry means relatively few employees are at risk of jumping ship.
But it's far from clear that Nomura will be able to ring-fence profitable business lines while closing down money-losing units. Like all investment banks, it also faces the question of how to slim down compliance, risk management and technology costs when regulators are keeping a close watch. Nomura is due to sketch out its strategy in greater detail later this week. Shareholders – and employees – will take some persuading.