Nomura Securities

Nomura Securities is the largest stock broker in Japan and it has started to become a big international investment bank due to its purchase of the Asian and European operations of Lehman Brothers. Nomura Securities offers the sort of services that other large investment banks do, including trading, investment banking advice and underwriting. It was the inventor of the conduit mortgage that drove the securitization of mortgages, where the company who loaned the money was not the same as the company who found the borrower and vetted the loan.

Japanese broking is a very large business due to the high market penetration that most brokers have among Japanese domestic consumers. In Japan most household wealth is controlled by the wife, who is also a more confident investor than the average Western head of the household, and this group is often referred as “Mrs. Watanabe”. Unlike many other mass market brokerages Nomura has a very sophisticated range of offerings, which combined with its large market size mean that it can compete in investment banking far more competitively than other banks.

Nomura is part of the large Nomura conglomerate, or zaibatsu. The Nomura conglomerate is based in Tokyo, but Nomura Securities has recently moved to London in order to build its international presence. As well as financial services, the Nomura group is also involved in industrial activities such as oil and gas exploration.

Despite its varied size, Nomura Securities is very much at the heart of the wider Nomura Group. Nomura Securities is the most profitable part of Nomura, and the Japanese retail operation provides the lion’s share of the profits for Nomura Securities. Nomura is named after its founder Tokushichi Nomura, a stockbroker who founded Nomura. Encouraged by the pre and post war Japanese governments Nomura used its cheaper capital to fund and then buy and operate a large variety of Japanese industrial operations, many of which it still operates today.

In the credit crunch, Nomura was one of the more stable operations, having gone through a difficult patch in 1998 when the bond market had suffered. It was in the position to be able to buy assets and expand abroad, as it had long wanted to do.

Its opportunity to expand abroad came with Lehman brothers. Lehman Brothers was one of the top five investment banks in America. As a result of a number of poor decisions they found that they were too exposed to the falling residential property markets. After a number of unsuccessful attempts to sell themselves to Barclays, Bank of America and the Korea Development Bank they found that they could not repay their debts and had to declare bankruptcy, one of the biggest bankruptcies in the world up to that time.

As a result the British retail bank Barclays, who had earlier balked at paying the price that Lehman wanted to get for the whole operation, moved in to buy Lehman’s main operations in America. Barclays Capital was now a worldwide investment banking presence, building on its strong London base.

The other Lehman Brothers operations, particularly in Europe and Asia were bought up by Nomura Securities, after Barclays made clear that they were not interested in buying these parts – particularly the London based European operation where Barclays Capital were particularly strong.

Nomura has built on its purchase of Lehman Brothers to move its operations from Tokyo to London. Although Tokyo has one of the biggest financial markets in the world, this is dominated by Japanese companies and investors and was seen as too domestic for a bank with international ambitions. London has the reputation as an international financial capital, with the English language, deep capital markets, a well educated work force and a stable tax and regulatory framework.

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