The Malaysian Insider

TOKYO, Nov 19 – The head of Nomura Holdings Inc., Japan's biggest brokerage, said global leaders must focus on bolstering their faltering economies now that the immediate challenge of the liquidity crisis appears to be receding.

Kenichi Watanabe, the brokerage's president and chief executive, praised financial authorities from the major countries that met in Washington last weekend for cooperating amid the turmoil and helping to thaw credit markets.

“But the focus is now shifting toward the real economy,” said Watanabe at the Foreign Correspondents Club of Japan. “This really depends on the financial situations of each country, and how each respective government uses its funds wisely.”

For Watanabe, getting the global economy back on track is critical to his ambitions of transforming Nomura into a world-class investment bank.

When storied Wall Street firm Lehman Brothers Holdings Inc. filed for bankruptcy in mid-September, Nomura pounced. It snapped up Lehman's operations in Asia, Europe and the Middle East for $2 billion in what Watanabe describes as a “once-in-a-generation” opportunity. It later added three of Lehman's subsidiaries in India.

Watanabe, who took over as chief executive in April under a mantra of change, said he seeks nothing less than a “new Nomura.”

“I felt Nomura's clients were changing but we were not,” he said. “Therefore top management was considering how we could change the company to better serve the growing needs of our clients. And we were looking to further increase our client base.”

Since then, global stock markets have plunged, corporate profits have sunk and consumer spending is at historical lows. The list of major economies in recession now includes Japan, Hong Kong and the 15-nation euro-zone.

Japan Inc., however, faces a future of relative decline without expansion abroad. Big players in the financial sector, which have suffered far smaller subprime losses than their U.S. and European counterparts, have moved aggressively to take advantage of Wall Street's meltdown.

Top Japanese bank Mitsubishi UFJ Financial Group Inc. invested $9 billion for a 21 per cent stake in Morgan Stanley and recently completed the purchase of UnionBanCal Corp., now a wholly owned subsidiary.

Watanabe predicts that Japanese companies will seek more overseas mergers and acquisitions in the future, especially with a climbing yen.

“The strong yen is not necessarily bad for Japanese companies,” he said, referring to concerns that the Japanese currency's current strength is hurting the earnings of exporters.

Nomura itself is hurting badly just as it embarks on its overseas offensive.

The company stayed deep in the red for the third straight quarter as the global financial turmoil drained its bottom line. The July-September period's net loss of 72.9 billion yen ($785.6 million) widely undershot the consensus forecast.

Watanabe declined to predict when the Tokyo-based company would turn a profit but touted the long-term benefits of the Lehman purchase, which provides a “perfect” complement to its existing businesses and client base.

“Given what is happening in financial markets, our overall performance is closely linked with these markets,” he said. “With market conditions changing, we are trying to adapt as much as possible to return to the black.”

Analysts are finding it difficult to quantity the Lehman acquisition's contribution to profitability.

“The key issue in this regard will be how to maintain and improve the motivation level of Lehman employees,” said Credit Suisse analyst Azuma Ohno in a recent note to clients. “It would be in Nomura's best interests to fully integrate former Lehman employees in key positions within the Nomura hierarchy.”

Watanabe downplayed suggestions that Nomura was having trouble retaining top Lehman talent or assimilating the approximately 8,000 former Lehman employees it did keep. Unlike its Western counterparts, Nomura has no plans for companywide layoffs, he said.

Instead, Watanabe repeatedly said the new blood would only help the company evolve.

“It's not about trying to keep the old Nomura or the Lehman culture,” he said. “We want to transform ourselves to become the new Nomura.” – AP