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Nomura CEO sets sights on China's rich with new brokerage

Group to slash overseas bond trading as it shifts to customer-centered services

Nomura's strength lies in its "deep customer base," CEO Koji Nagai told Nikkei. (Photo by Yoichi Iwata)

TOKYO -- Top Japanese brokerage Nomura Holdings will open its Chinese securities unit this year with a focus on wealth management, CEO Koji Nagai said, part of a shift toward customer-focused business and away from proprietary trading.

"China's capital markets are underdeveloped relative to the size of its economy, and interest in overseas financial products is high," Nagai told Nikkei in a recent interview.

Nomura's first Chinese brokerage unit, for which the company secured regulatory approval last month, will have a staff of about 100, Nagai said. Nomura will hold a 51% stake.

The joint venture aims to meet a need for wealth management services in China, mainly from affluent customers with millions of dollars or more in assets.

Using this as a starting point, Nomura plans to expand into corporate banking there, ultimately having the two businesses "go hand in hand" as they do in Japan, he said.

The group is restructuring its operations to concentrate resources in areas with better growth prospects. Under plans announced this month, it will close 20% of its Japanese retail banking branches and scale back some overseas operations

"Nomura's strength lies in its deep customer base, centered on Japan," Nagai said.

In particular, the company seeks to better deliver comprehensive services, including fundraising and foreign exchange, that cut across internal divisions. "We want to specialize in financial services that meet the needs of businesses and other customers," Nagai said.

This shift in priorities will also be reflected in Nomura's Japanese sales division. The group will bring together representatives with specialized knowledge to meet the needs of corporations and wealthy clients looking to engage in sophisticated transactions, broadening the range of fields it can handle.

Outside Japan, Nomura will cut proprietary bond trading operations, in which it takes on risk, "by 50% in Europe and 40% overseas as a whole," Nagai said.

Profits from bond trading remain chronically depressed by loose monetary policy around the world, which has sapped volatility from debt markets. The U.S. Federal Reserve has put interest rate hikes on hold, and some observers speculate that it could go back to easing.

"Monetary policy normalization will likely be delayed another two years, or six years depending on the circumstances," Nagai said.

That could lead to a "breakdown" in traditional trading operations, he said.

The CEO argued that the aging of Nomura's retail customer base in Japan will require a change in thinking throughout the group. In face-to-face sales, "we thought of ourselves as the champions of selling to wealthy customers, and we didn't provide sufficient services for people wanting to make small investments," he said.

Catching up with the industry's digital shift is also a must. "We're challengers in this field," he said. "If there's something we don't have within our company, we're open to learning from online brokerages as needed."

Asked about the possibility of tie-ups or acquisitions as a tool for going digital, Nagai added: "Anything is possible."

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