Nomura seeks global acquisitions to expand wealth management business

Nomura seeks global acquisitions to expand wealth management business

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Nomura’s chief executive is on the hunt for global acquisitions to expand the wealth management business of Japan’s biggest brokerage and investment bank.

Kentaro Okuda said in an interview with the Financial Times that the bank was making a strategic shift towards wealth management and adopting a consultancy “mindset”.

As part of the push into private equity and private credit markets, Okuda wants Nomura to expand its global asset management capacity in preparation for a generational shift in Japanese investment habits.

“One of the targets of M&A is asset managers outside Japan who are very strong in alternative assets,” said Okuda at the bank’s headquarters in Tokyo. “A second target is the advisory type of business, also outside Japan.”

After becoming the bank’s chief executive in 2020, Okuda has said his mission has been to lower costs and reduce Nomura’s reliance on volatile revenue streams from trading and investment banking.

But his early tenure was spent dealing with the aftermath of the 2021 implosion of Bill Hwang’s Archegos Capital. Nomura reported a $2.9bn hit from the collapse.

The bank and brokerage is preparing to capitalise on the opportunity from an expected transfer of Japanese household wealth from cash and deposits into higher yielding investments.

With the current percentage of assets that Japanese investors channel into private equity and private debt close to zero, Okuda says he expects to see an increase in household and institutional investment into those kinds of alternative assets.

Japanese households currently hold about half of their total ¥2.2 quadrillion ($13tn) of financial assets as cash and deposits, according to the Bank of Japan.

But banks and analysts expect the country’s normalising central bank monetary policy and the return of sustained inflation to push people to reconsider their savings strategy. A wave of inheritance expected to be passed down from boomers born after the second world war is also expected to shake up investment habits.

Major global private equity firms, including Blackstone and Carlyle, have been stepping up campaigns to entice Japanese individuals into their funds, as well as preparing for major financial institutions such as Japan’s Government Pension Investment Fund to allocate more of its ¥226tn asset portfolio into alternative investments.

In May, analysts at Morgan Stanley MUFG published a note forecasting a “momentous change” in Japan’s wealth and asset management industry and the multibillion-dollar revenue opportunities for Japanese banks and rivals competing for the business of wealthy and “upper affluent” customers.

Nomura has renamed its once famously aggressive retail brokerage operations as the “Wealth Management” division, underlining the shift to offering higher value services including investment advice.

Okuda said the bank wanted to shift the attitude of its hard-selling brokers. “The mindset is changing from the broker to the consultant,” he said.

He added that in order to extend the bank’s reach to wealthy customers, Nomura would build on a series of alliances with regional Japanese banks formed in 2019, which broke a long tradition of working alone.

Okuda acknowledged that Nomura would face intensifying wealth management competition from Japanese megabanks MUFG, SMBC Group and Mizuho, as well as foreign groups such as UBS.

“It would be better for us not to have anybody to compete with in this market,” said Okuda, but he added “competitors will naturally come into the market from abroad as well as the [Japanese] megabanks and others. I think they are already here and competing.”