But Japanese banks’ enthusiasm for expansion is viewed with cynicism by some of those in the market who say they are notorious for getting in, then getting out, then getting in again.
“It’s a bit like HSBC in North America,” says one headhunter. “They commit for a few years and then pull back. Japanese banks are very strong in Asia and their core businesses are outside Europe. When things get tough, they scale back.”
Is this time any different? London bankers who’ve worked at Japanese houses say Nomura’s Lehman acquisition has broken the mould. Daiwa points out that its London headcount has grown 25% in the past year and that following its acquisition of KBC Financial Products, it’s now got “considerable market presence in the global convertible bonds space.” Meanwhile, Mizuho has allegedly got multiple mandates out for fixed income hires.
However, there are a few minor cracks in the expansionary façade.
Daiwa has recently lost Clarke Pitts, its former head of equity derivatives, whom it says left by ‘mutual agreement’ following the KBC purchase. Elsewhere, Mitsubishi UFJ has lost Jeremy Palliser, whom it hired from UBS to build its fixed income business after just 15 months. Sascha Prinz, the former co-head of rates at UBS, who joined Mitsubishi in May 2009, has also left. Palliser’s now at Scotia Bank; Prinz is now at BAML.
Having spoken to some of those who’ve tried and failed and tried and succeeded to get on in Japanese banks’ London operations, here are some possible pointers to the situation on the ground.
1) Japanese banks’ European operations often make negligible profits
“It’s not that Japanese banks are inherently flaky, it’s just that their operations can be loss making in Europe,” says one ex-Japanese banker. “They are under financial pressure from Japan and have limited resources.”
2) They’re incredibly risk averse
Given the pressure from Japan, the same ex-Japanese banker says his former employer was loathe to take risks. “I’d say that if we went into a business we could make $50m, but lose $5m. A US bank would go ahead, but they were more concerned about the downside,” he alleges.
This risk aversion is apparently borne partly of the fact that Japanese managers in London ultimately aspire to a promotion in Japan. The only way they will achieve this is if nothing goes wrong during their time in London. And the best way to ensure nothing goes wrong in London is to do nothing.
“The careers of Japanese bankers in London are often about trying to do nothing wrong rather than something well,” the banker alleges.
3) They won’t pay
Another facet of Japanese banks’ reticence in Europe is said to be their unwillingness to pay market rates.
“I interviewed around 40 people,” alleges the disaffected escapee. “When it got to the final stages, the Japanese would take over the negotiations and make an unacceptably low offer.
“I had one situation where we were trying to hire someone currently on a salary of 250k and they offered 150k,” he reminisces.
The exception to this is apparently prop trading in a Japanese bank. As we noted recently, Japanese banks are still free to trade prop and allegedly pay their traders a healthy percentage of profits.
4) European operations are just the icing on the Japanese cake
According to the same (admittedly disaffected) Japanese bank employee, European operations are merely ornamentation for titillation of Japanese clients.
“All they really want is to be able to tell their Japanese clients that they have an international business and trade all these products outside Japan,” he whinges.
5) European management can be short-lived
The same ex-Japanese banker says the bank he worked at had an interesting approach to management: senior staff in Europe were rotated across all product lines. Whilst this had the advantage of giving managers a perspective on what was going on across the firm, it also reduced ‘ownership’ and commitment to expansion.
“A new guy could come along and get rid of things without getting egg on his face,” he reflects.
6) European management has to refer everything back to Tokyo
“When I joined, I was under the impression that the management in London had the authority to make decisions without referring back to Tokyo,” says another ex-Japanese banker. “This turned out not to be the case.”
7) Decisions are taken painstakingly slowly
This can have its advantages. According to another senior Japanese bank employee in Europe, it means banks can’t get in and out quickly.
“There is intense, deliberative, painstaking planning that goes into anything,” he says. “A decision can be made only after consensus has been reached with a million people and is then executed meticulously.
“This means that reversing something is like stopping a moving train,” he adds. “But the criticism is that by the time they do anything, it’s the tail end of the market.”