By Thomas Wilson and Emi Emoto
TOKYO (Reuters) - Nomura Holdings Inc (T:8604) plans a shift in focus in the United States toward client-oriented services from market-based trading, the chief executive said, in its latest attempt to establish a profitable business in a major overseas economy.
Japan's biggest investment bank will move resources into areas such as mergers-and-acquisition (M&A) advisory, Koji Nagai said in an interview. The approach would differ from his predecessors, whose emphasis on securities in the U.S. and Europe ended in heavy losses.
"We're going to build a proper client base in America," Nagai told Reuters on Tuesday. "If we have that platform we won't need to rely on high-risk, market-focused business. We'll completely change our approach."
Nomura earns around half of revenue from its domestic retail division, where it mainly books commission from trading stocks for a rapidly aging customer base. Government efforts to end two decades of deflation depend on more people shifting savings to more productive assets such as stocks via banks like Nomura.
But such efforts - typified by the Bank of Japan (BOJ) lowering its policy interest rate below zero late last month - may not be sustainable over the long term, said Nagai, likely strengthening Nomura's resolve to seek growth overseas.
"Leaving aside the BOJ's 2 percent target, it's not yet clear whether inflation of over 1 percent will take root," Nagai said. "Japan could even return to deflation."
Top of Nomura's overseas list is expanding its wholesale business in the United States, a country which features in around half of Japan's outbound M&As.
But a major U.S. push in the 1990s selling commercial mortgage-backed securities suffered heavy losses after the 1998 Russian debt crisis. Ten years later, it bought the Asian and European operations of failed peer Lehman Brothers and again booked substantial losses after the 2012 euro zone debt crisis.
"At the moment we're hardly making any money (overseas)," said Nagai. "Securitized products make money in good times, but in bad times cause huge losses."
Nomura's overseas division is heading for a sixth straight annual loss in the business year ending March, after posting an October-December loss of 19.9 billion yen ($173.15 million).
