Nomura strategy in question as top two quit amid insider trading allegations
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Nomura strategy in question as top two quit amid insider trading allegations

Chief executive and chief operating officer replaced, as performance woes continue to plague troubled bank, prompting speculation that the Japanese institution will retreat to its core markets.

Nomura’s two top executives have quit following the bank’s alleged involvement in an insider trading scandal in Japan, prompting uncertainty about the troubled bank’s future strategy. 

Kenichi Watanabe, chief executive officer, and Takumi Shibata, chief operating officer, have resigned. The two men were instrumental in Nomura’s takeover of the non-US operations of Lehman Brothers. 

Watanabe, who joined the bank in 1975, is replaced by Koji Nagai, who is currently president of Nomura Securities. Atushi Yoshikawa, currently regional head of the Americas, will assume the role vacated by Shibata.  

Last month, Watanabe was given a six-month salary cut, while Shibata was given a five-month cut. The insider trading allegations are that some bank staff leaked information on share offerings to customers before that information became public. Sources said the two had come under mounting pressure to fall on their swords, particularly given the bank’s exclusion from several recent bond deals and mandates. 

Analysts immediately reacted by saying that the management changes mean Nomura will retrench to its home market and largely abandon the strategy it has been pursuing for the past four years. That is probably an overstatement. Certainly the changes are likely to mean a shift in strategy and more job cuts can be expected, particularly in the bank’s equity franchise. But Europe and, to a lesser extent, the US, are areas the bank cannot simply walk away from given the investment it has already made. 

The management shake-up and the departure of the top two executives, a cataclysmic event for the bank, came as it announced that group net profit had plunged 91% on the previous quarter. The group has largely struggled for profit in the past three years. The departures are thought to be primarily due to the reputational and business damage done by the insider trading allegations as opposed to the group’s run of poor profitability more generally.

The management of Nomura has been criticized for the bank’s performance, particularly in Europe and the US, as it sought to increase its global reach. It remains a powerhouse in its home market but has slipped back in some other parts of Asia. 

Nomura is in 16th position in the tables for global investment banking fees over the year to date, according to Thomson Reuters and Freeman Consulting. 

On announcing the management shake-up, Nomura said it faced a rapidly evolving business environment marked by instability in Europe and global regulatory tightening. 

It said under the new leadership, the bank would build a ‘new global business model’ designed to allow the firm to remain flexible and adapt quickly to the changing environment.  It added that it would remain committed to growing ‘Asia’s global investment bank’ again, suggesting that the thrust of its strategy in future will be closer to home. 

Among other casualties of the shake-up are Philip Lynch, head of Asia, and Hiromu Yamaji, chairman of banking.

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