TOKYO -- Nomura Holdings said Tuesday that Koji Nagai will stay on as president and group CEO, exceeding the seven-year norm in order to steer Japan's largest brokerage group out of an earnings crunch even as some investors call for new leadership.
Since assuming the top job in 2012, Nagai has been instrumental in lifting Nomura's assets under management to over 110 trillion yen ($982 billion) from less than 70 trillion yen. The group's overseas business turned a profit during the fiscal year ended March 2017.
Much of the good fortune can be credited to the Abenomics boom. But this fiscal year, the wholesale segment booked an 81.4 billion yen goodwill impairment charge stemming primarily from the 2008 purchase of assets from Lehman Brothers and the 2007 acquisition of New York electronic trader Instinet. Trading operations could not overcome historically low interest rates.
That contributed to a consolidated net loss exceeding 100 billion yen for the nine months ended December, and Nomura is staring at its first full-year red ink in a decade.
The retail segment, Nomura's bread and butter, is also struggling. Rocky share prices have caused individual investors to shrink back from the stock market, leading to a precipitous dip in segment profit during the third quarter. Nomura focused on increasing assets under management through client-centered reforms, but this was not enough to reverse deteriorating profitability.
At the same time, Nomura announced that Kentaro Okuda and Toshio Morita will remain in place as group co-chief operating officers. As head of American operations Okuda is granted wide authority over the offshore business. Morita, president of core unit Nomura Securities, holds the same level of authority over domestic operations.
The 55-year-old Okuda and the 57-year-old Morita had been seen as front-runners to replace Nagai, 60. But the earnings slump put that on hold.
Meanwhile, the Japanese equities market has grown skeptical of Nagai's leadership. Nomura Holdings' share price has sunk 34% since the end of 2017 -- far more than the Nikkei Stock Average's 5% drop.
Nagai had apparently considered handing the reins to a younger generation. But the nominating committee believed that such a team had not been fully developed to look over the entire organization, according to a Nomura executive. The group eventually reached the frustrating conclusion that Nagai would have to be his own successor.
Okuda will return to Tokyo from New York to restructure the wholesale unit and take on the concurrent role of deputy president. Satoshi Arai, 53, will be installed as head of the retail segment.
In April, Nomura will announce structural reforms featuring cost reductions in both the retail and wholesale segments. The cutbacks will affect all corners, including back-office positions.
Nagai's tenure as Nomura chief is set to surpass that of the late Setsuya Tabuchi, who transformed the Japanese brokerage into a global powerhouse during a seven-year-plus term that ran through 1985. This time around, Nagai must prove that Nomura can reform itself while maintaining his hold on the company.