Today is Nomura's investor day. After all the dark rumours about what was coming next, the worst hasn't come to pass. - Nomura isn't closing its European business. It is, however, making some pretty savage cuts.
Nomura wants to cut $1bn in costs from its wholesale business in the "medium term" with $600m to come out in its financial year of 2019/2020. The distribution of the pain is helpfully summed up by the chart below.
Nomura's new plan for its wholesale bank
In line with one Nomura trader's complaints to us yesterday that half his team had gone, Nomura wants to cut 50% of costs in its flow trading business. As the chart above shows, you absolutely do not want to be working for Nomura in G10FX, emerging markets or flow credit in either Europe, the Middle East and Africa or the Americas right now. You particularly don't want to be in high yield bond trading, which Nomura is exiting entirely. Brexit or not, the bank also says it wants to "streamline" its continental European presence in flow trading.
While these are the worst jobs at Nomura in 2019, you probably also don't want to be in the businesses that the bank euphemistically says it will "optimize". This means ECM in Asia ex-Japan and the Americas. It means coverage globally, G10 rates in EMEA, G10 FX in Asia ex-Japan and cash equities in Asia ex-Japan (Bloomberg says Nomura's already been ejecting equities staff in Singapore).
And yet, as the chart above shows, there are some areas of Nomura's wholesale business that look nice and comfortable. Nomura's M&A bankers are fine. So are its DCM bankers, its structured solutions professionals and its financing specialists. Nomura says it wants to, "expand into services such as infrastructure financing in Americas." It wants to focus on corporate clients. And, as we noted last week, it's making a big push into trading that's driven by artificial intelligence (AI) as a means of cutting costs.
Elsewhere in its presentation, Nomura confirms yesterday's rumour that entire swathes of management are being taken out. The Japanese bank wants to cut costs in its 'corporate structure' by 30%. In the past, it had regional heads of things like risk management, compliance, HR, IT and strategy. In future, it will just have one global head. That's a lot of middle management pain.
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