Inside Nomura’s Ambitious Plan To Take On Wall Street: ‘Clients Will Pay For The Best Bankers’

Inside Nomura’s Ambitious Plan To Take On Wall Street: ‘Clients Will Pay For The Best Bankers’

Nomura is making a “very significant” push to hire junior and senior dealmakers, as the Japanese lender embarks on an ambitious expansion to challenge Wall Street rivals, according to the new joint global head of its investment bank.

Jeff McDermott, who will become Nomura’s co-head of global investment banking from 1 October, will spearhead the Japanese bank’s latest efforts to break into Wall Street’s club of top dealmakers in the US — by far the world’s largest fee pool.

McDermott told Financial News that he is looking to boutique investment banks’ success in grabbing lucrative mandates from larger rivals with big balance sheets to show how it is possible to bolster market share in the US and Europe. 

READNomura names McDermott as co-head of global investment banking

“What is motivating me to lead this expansion is the scope of our intentions,” he said. “If this was a minor move, I probably would not be the best person to execute on it, but this is an ambitious agenda that we fully intend to realise upon over multiple years.”

McDermott picks up the mantle for a fresh Wall Street expansion at Nomura. The Japanese bank has attempted to wrestle market share in the US since it kicked off an international expansion in the wake of the 2008 financial crisis, and has a history of aggressive recruitment sprees over the years.

These have yet to result in significant gains, however. Last year it cut around 10% of its investment banking team in Europe and the US as part of a broader cost-reduction exercise under chief executive Kentaro Okuda. It employed 2,116 in the Americas as of June 2021.

Nomura currently ranks 40th by investment banking fees in the Americas, according to data provider Dealogic, with a 0.5% share of the market. The bank said during its investor day this year that it will aim to grow advisory revenues globally by 50% by 2024, but McDermott’s  appointment reflects an ambition to exceed that.

READ Nomura to bolster team of dealmakers as Japan Inc hunts for overseas bargains

Unlike previous buildouts Nomura says it will remain focused under the latest push. According to McDermott, the target will be digital technology, fintech and sustainability, which he said is a “megatrend” that will straddle industry sectors. The bank has a “right to win” in these areas, he said.

“Clients will pay for the best bankers, with the best advice, so I don’t think we need to be all things to all people,” he said. “We just have to be the absolute best in the spaces where we focus. Given where our market share is now, we can really grow our business by many multiples”.

However, he added that Nomura would also look to be “opportunistic” in adding teams of dealmakers from competitors in other sectors when they become available.

McDermott was previously global head of investment banking at UBS, and has also held senior roles at Citigroup during an 35-year career in the sector. In 2009, he founded boutique GreenTech Capital Advisors, which focuses on deals in the sustainability space, having been inspired by a conversation with his then 14-year-old son on climate change. He built the bank from scratch for a decade before it was acquired by Nomura in 2020.

READ Nomura cutting around 10% of London dealmaking team

He said he knows “how long this takes” to build up an investment bank and “how intense an effort it is” over a number of years.

McDermott added that the world was in the “early innings of a move to sustainability” that would shift from energy to food, consumer, and other sectors. He added that larger investment banks often have one or two generic ESG specialists, and believes that Nomura can gain an edge by offering deeper expertise.

“Larger banks still run into the kind of buzzsaw of having these hard-coded silos that have existed for 30 years, where people really don’t spend the time on sustainability, don’t collaborate and don’t have the same depth of insight,” he said. “So, I think that’s why we believe we can compete with some of these sectors.”

Nomura’s hiring push for both junior and senior bankers comes as rivals including Barclays, HSBC and Citigroup are recruiting dealmakers and Credit Suisse is replenishing its ranks after some high-profile departures. Meanwhile, junior banker salaries have been pushed up by 20% or more as every investment bank on Wall Street has battled to retain talent amid a boom in deals and an increase in burnout.

“We think we’re offering young people an opportunity to really learn about the industries of the future, where there’s disruptive change reshaping the industry, versus just working on basic static industries and just being a core investment banker,” McDermott said on Nomura’s ability to attract juniors.

He added that despite the current crisis around junior bankers, the industry has always seen a high turnover of staff on Wall Street.

“Something like 100 analysts start and 15 years later only five of them are still in the business as managing directors,” he said. “It’s always been a business where people get great training. Some people love it and stay and work in it for 20 or 30 years, but a lot of people work in it for two to five years and then go off to run companies, they work for clients or go into private equity.”

To contact the author of this story with feedback or news, email Paul Clarke

2021-10-10 20:57:29