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Companies

Nomura curtails famed retail network at home in shift to China

US strategy moves away from junk bonds to M&A

Nomura will curtail its famously aggressive marketing to focus on China and digitization.   © Reuters

TOKYO -- Nomura Holdings will reassess its vaunted marketing forces as part of sweeping restructuring steps designed to help the investment bank adapt to the rapid digitization of financial services and an aging customer base.

Under the plans announced Thursday, Japan's top brokerage will close 20% of its retail locations at home and streamline overseas operations. The aim is to cut annual costs by 140 billion yen ($1.26 billion) in the next three years.

This would enable Nomura to reallocate resources to growth areas and reduce its reliance on gung-ho marketing that once propelled the company to the top spot at home but is no longer suited for a business landscape altered by digitization.

With the emergence of such trends as the aging population and digitization, "the traditional investment banking business model is crumbling," CEO Koji Nagai said at an investors day presentation.

Nomura will slice costs by half at its European trading business, downsizing an operation that has been weighing on the group's performance. The company will bolster U.S. operations related to mergers and acquisitions, while withdrawing from trading of high-yielding junk bonds.

In Japan, Nomura is scaling back the aggressive door-to-door and phone sales for which the company is known. The brokerage plans to shut more than 30 of its 156 retail locations, mostly in the Tokyo area. It will reassign 3,300 of its 6,900 sales staffers in order to meet customer needs better, and performance will play a bigger role in determining compensation.

The changes are expected to save the group $1 billion abroad and 30 billion yen at home in the three years through March 2022. Nomura looks to shave costs to under 950 billion yen from the current 1 trillion yen, according to Nagai.

To spur growth, Nomura will pour more resources into China. The group received approval from Chinese authorities in March for a majority-owned local securities unit. "We aim to win market share among wealthy customers and other demographics there," said Nagai.

In terms of digitization, Nomura this month launched an in-house company dedicated to exploring collaboration with other industries and bringing in outside talent. The operation will be independent of sales and help spread research and product development know-how held separately by departments across the group. It also will offer smartphone-based services to customers.

The cuts at Nomura's Japanese retail operations signal a major shift for the financial group, which became the leading player through salespeople based out of an extensive retail network in Japan. Even when overseas and legal businesses were flagging, sales representatives lifted the group as a whole thanks to tough quotas. They also brought in business beyond just retail, such as in equity finance.

"What's most impressive about Nomura is its sales abilities," the head of a rival brokerage said.

But Nomura now will review its nationwide strategy of maintaining branches at prime locations in front of train stations and major roads, co-Chief Operating Officer Toshio Morita said. Instead, the group will focus on matching different types of clients -- be it wealthy individuals or companies -- with sales representatives who possess the corresponding skills.

Nomura's shift away from face-to-face marketing may be a signal that the era of aggressive marketing is coming to an end for the brokerage industry as a whole.

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