Imagine that you run investment banking in Europe for a sizeable foreign firm whose name still enjoys a little cachet from its heyday 20 years ago when it figured high in the debt and equity arranger league tables and which sought to invest in Europe and rebuild scale after the global financial crisis.
The news comes down that your firm is getting out of European cash equities and equity capital markets, ending the jobs of the research analysts that used to cover many of the same corporate clients your coverage teams pitch for business.
That is a loss of regular contact with those CFOs and the CEOs at earnings calls and strategy reviews; an end to introductions arranged for them to new institutional investors from your firm’s large home market; and, of course, no more equity capital market revenue to pitch for. You won’t be working on their share placements or spin-offs anymore.
What do you do?
Charles Pitts-Tucker, Nomura
Charles Pitts-Tucker, the wonderfully understated head of investment banking EMEA at Nomura, sets down his chop sticks and looks intently at Euromoney across the two bento boxes between us. He confides: “We had to have quite a re-think.”
The firm did indeed. Its biggest success stories, in the UK, Spain and Italy, were all set back. “It meant we couldn’t do corporate broking anymore, for example,” Pitts-Tucker recalls. The trace of a grimace briefly stretches his mouth. Nomura had only decided to make a big push in UK corporate broking 12 to 18 months previously. So, that must have been a bit frustrating.
But there is no point crying over spilled mirin.
“Having been through a couple of restructurings in my time at Nomura, I felt the most important thing was that we made decisions and implemented them quickly, so that people who were concerned about how we would move forward without a cash equity capability in EMEA quickly settled down. And we have had a good year since,” says Pitts-Tucker.
“We kept equity solutions, so we continue to provide equity derivatives and margin loans. In addition, we realized there was now an opportunity to compete in equity advisory, a market dominated by two competitors, allowing clients to benefit from more choice in the market. We are an experienced independent adviser, without any conflicts.”
The firm hopes to win some business from Lazard and Rothschild.
“We still have access to institutional investors through Instinet and we offer debt services and ratings advisory, so we really can advise companies across their capital structure, rather like the old merchant banks, and provide balance sheet if appropriate,” he says.
Pitts-Tucker came to Nomura as a leveraged finance banker from the last days of Lehman, and that is still a good business for the firm, in the UK especially.
“In France, the team has diversified away from ECM and has done some important infrastructure deals. We have a new head of Italy who is doing some really interesting M&A work involving Japan there. We have a very strong team in Spain who have been very active regarding their most recent phase of restructuring. In Germany, we’ve been strong in industrials and leveraged finance,” Pitts-Tucker says.
The Japan-to-Europe M&A fee pool each year is not that large. Pitts-Tucker claims to have no interest in league tables. And why would he, with the firm 19th in the global M&A revenue ranking year-to-date, one place below Houlihan Lokey but just ahead of Macquarie?
“What’s important to us is hitting the revenue and profit budgets we set ourselves,” he says. “Our senior people all know their teams’ targets from a revenue, cost and profit perspective. We cannot be all things to all clients, but this is an exciting place to work partly because we haven’t yet achieved all that we can. Bankers outside the global bulge bracket often bemoan their firms’ scale, but I can assure you that our scale is often our friend, particularly in terms of flexibility and approach, and the business we target is invariably in competition against the larger banks on the street.”
Goldman Sachs and JPMorgan will hardly be worried, but the firm is, once again, hiring selectively, filling coverage gaps with a focus on origination
“This is an interesting time, with some banks still restructuring and many pruning their client lists to concentrate only on the companies that are most relevant to them,” Pitts-Tucker says. “This leaves a tier of companies that are, perhaps, not receiving quite as much attention from a coverage perspective as they were 12 to 18 months ago.”
He claims that for all the apparent strategy shifts, the ship is quite steady: “The idea of a high attrition rate at Nomura in Europe is a bit of a myth. The management team has been very stable since 2012 and we have a clear view of our strategy and what we want to achieve. This is a firm with its own identity. We’re not trying to be a version of somebody else.”