Don't say we didn't tell you. We suggested that things were afoot in Nomura's equities business around six weeks ago. "Equities is going to get decimated," said one insightful headhunter. - And it has been. Bloomberg reports that Nomura is "shuttering" equity research, sales, trading and underwriting for European stocks. Cue the kinds of mass equities redundancies unseen in the City of London since RBS closed its equities business four years ago.
For equities professionals at Nomura the news has been both surprising and devastating. "A lot of people are surprised," says one equities headhunter, speaking off the record. "It's almost unbelievable," says another. "- They're closing everything and there's a lot of panic. These people need new jobs - they have mortgages to pay, children at school."
While all job losses are bad news, there are aspects to the cuts at Nomura that make them especially pertinent. These include:
Why go through the hassle of hiring someone only to make them redundant a few months later? Worse, what happens when you leave a perfectly good job for a new role only to find that role no longer exists?
In October last year, Nomura hired Benjie Creelan-Sandford from Macquarie to cover Southern European banks research. Why?
Nomura has also hired numerous students onto its 2016 'markets' trainee program and its markets summer internship. These students anticipate working across fixed income and equities and will therefore be disappointed. Summer interns at Nomura will now struggle to find full time jobs (given that they're likely to far exceed the number of opportunities on offer.)
Nomura's not the first bank to let go of people before bonuses are paid and it won't be the last. Nonetheless, the timing of today's redundancies is particularly harsh. "People were due to get their bonuses at the end of May," says one headhunter. "Now they'll get nothing at all."
It's particularly galling as Nomura's equities business was allegedly profitable last year.
In a world where equities professionals have been taking over all trading operations (think Morgan Stanley, think BNP Paribas), Nomura moved in the other direction - appointing Steve Ashley, a dyed in the wool fixed income trader, as head of global markets in December 2013. And so while other banks are cutting fixed income, Nomura is cutting equties - and the equities bonus pool could always be shared between the remaining fixed income staff...
Nomura's cuts are a possible warning of things to come at other banks who don't rank highly in equities.
Morgan Stanley analysts warned in March that if you want to keep your job in equities, you need to work for a top five player (Morgan Stanley, Goldman Sachs, J.P. Morgan, Credit Suisse and Bank of America). As the market consolidates around market leaders, top banks are best positioned to thrive.
Nomura's equities revenues fell in EMEA and were flat in the Americas in the past quarter.
Recruiters warn that Nomura's decision to cut its losses augurs badly for other banks with marginal equities business. MiFID II, the wording for which was finalized this week, will only make things worse.
“Nomura’s decision to pull back from equities underscores the extent to which this is a difficult time for second tier institutions – especially if you’re in research," says Zaki Ahmed at Financial Search. "MiFID II will come into effect from January 2018 and will compel clients to pay for the research they use. The effects are likely to be brutal - clients will only pay for top quality analysts and while demand is likely to increase for top-ranked analysts as a result, others will suffer."
Markets revenues at Nomura:
Thanks to MiFID II, the situation is worse for Nomura's unwanted researchers - especially those who are unranked.
"People will struggle most to find jobs if they've worked in research," says Oliver Rolfe, founder of London recruitment firm the Spartan Partnership. "Markets are crying out for salespeople and sales traders with strong franchises, whereas most firms already have their analysts lined up and in place."
Nomura does have some top names, however. Recruiters say researchers like Christyan Malek (oil) and Fraser Ramzan (general retail) will be in strong demand.
Lastly, Nomura's London equity operations contain plenty of ex-Lehman bankers who've been hanging out there since Lehman went under eight years ago. People like Alessandro Ricci, head of Structured Equity and Fund Derivatives Sales for EMEA and Ken Brown, global head of equity capital markets, may now need to find new jobs elsewhere.