In this second installment of a three-part series delving into Nomura Report 2024, our Group CEO Okuda shares how we are strengthening our current and new businesses.
Summary
- Expanding private businesses: In addition to our public businesses, Nomura offers clients diversified investments across new asset classes such as private equity and alternative investments. By investing in the private domain ahead of our competitors, we will drive industry growth and Nomura’s overall success.
- B to B to C business model: Nomura’s corporate/institutional investor business and individual investor business are both highly competitive, underpinning our unrivaled strengths as a group. We will collaborate across divisions, leveraging our collective strengths to uncover new business opportunities.
- Global strategy leveraging Japan franchise: Two-thirds of Nomura’s Wholesale business revenues are generated outside Japan. We are working on multiple large-scale businesses using our extensive network in Japan and our global platform.
I believe that our future growth is dependent on our efforts in the asset management alternative private asset space. Being a leader in this area will provide us with a distinct advantage.
Since we established the Investment Management division in April 2021, alternative assets under management have tripled to 1.9 trillion yen.
Several of our initiatives to expand into private markets have also started to bear fruit. For instance, we launched Japan’s first investment trust that invests in buyouts of unlisted companies. This privately placed fund invests in private assets using the J-Ships scheme for qualified investors.
Our Investment Banking businesses have also used the scheme to support fundraising transactions by startups, providing our clients with private equity and unlisted stock investment opportunities.
These are examples of how we are collaborating across divisions and outside the firm. New business opportunities lie in cross-divisional collaboration. We will continue to adopt new ways of thinking and accept mistakes as we take on new challenges.
We are not just looking at new sources of revenue. We recognize the importance of expanding and strengthening our current businesses.
For instance, one issue we must address in Japan to further grow our revenues is to increase the number of high-net-worth clients.
We have seen steady results in our strategic alliances with regional financial institutions. For clients in prefectures where we only had one branch office and couldn’t properly reach them, we are now able to provide them with information, our proposals, and products and services.
These tie-ups allow both parties to provide higher added value and bring about growth opportunities. We are also keen to contribute together to regional economies over the long term.
Our business model is dual-pronged with a business-to business side targeting corporates and institutional investors and a business-to-consumer side targeting individual investors. Both businesses are highly competitive and the fact we operate in both areas is one of our strengths.
A case in point is fundraising by corporates. We are well positioned to underwrite fundraising transactions thanks to the solid relationships of trust our Wholesale business has with corporates.
If these companies are looking at individual investors as new shareholders to complement institutional investors, our Wealth Management channel can connect them to individuals searching for investment opportunities, resulting in satisfied corporate and individual clients.
Our Workplace Business is the classical example of how our business-to-business-to-consumer strengths shine through. This is where we have onboarded many clients including entrepreneurs and employees of startups that have gone public, executives of listed companies, and high-net-worth individuals. We also have the largest domestic share of employee stock ownership programs. Offering them additional services provides the potential for new clients.
Competition to capture emerging wealth clients from an early stage is speeding up in international markets. This client segment has a strong potential to become high-net-worth clients as they are startup managers or employees with stock options yet to be cashed out.
We are addressing this not just through our Wealth Management business, but by the Group as a whole as we focus on making future high-net-worth individuals Nomura clients as soon as possible.
Banking and lending are essential to support the high-net-worth business. We are enhancing our Trust Banking business amid the rising interest rate environment in Japan.
Nomura Trust and Banking celebrated its 30th anniversary in October 2023. It has seen tremendous growth with outstanding loans nearly tripling over the past five years. Strategically, this is a very important business for us as we grow and strengthen our high-net-worth business amid rising interest rates.
In April 2024, the company launched a publicly offered fund using the trustee single-party scheme, where only Nomura Trust and Banking as the trustee calculates the unit price, marking the first time in Japan that the scheme has been used for publicly offered investment trusts.
To build our Trust Banking business into our fourth division, we will step up collaboration across the Group, strengthen the management structure and expand the business so it can grow as an independent bank.
As a global financial services group, we operate a network across approximately 30 countries and regions.
In Wholesale, about two thirds of our revenues come from our international business while the other third is generated by Japan-related businesses. Our global franchise built up over many years is the driving force behind our ability to generate over half of our revenues outside Japan.
Our platform doesn’t just connect Japan and the world. We connect the Americas, EMEA and Asia together as well. We aim to leverage this platform to deliver optimal solutions that meet the needs of our clients around the world. We are committed to making these connections to give our clients the best value possible.
India and the Middle East offer huge potential as new locations for future investment. We already have over 4,000 people in India. It is our second largest operation after Japan. Our onshore services business has been operating for over 15 years and we offer a full-service platform in Wholesale.
In the Middle East, we opened a Dubai office for our International Wealth Management business in December 2022. As many Asian and Middle Eastern high-net-worth individuals run family businesses in addition to managing their assets, we are strengthening relations with shareholders who are also decision makers and plan to offer services for corporates.
Our Content Company established in July 2020 was the first to start reaching out to international investors after covid when it launched the Revisit Japan concept in March 2022 to convey the appeal of Japanese companies and equities.
In total, 44 analysts traveled to 34 cities in 18 countries and regions to hold over 1,000 one-on-one meetings. As a result, last fiscal year our Japan Execution Services posted its strongest revenues in ten years.
We believe it is our duty to help resolve social issues through our sustainable-related businesses to realize a sustainable society. We have a target of arranging 125 billion US dollars of sustainable financing over the five years from the year ended March 2022 to the year ending March 2026.
We are proactively underwriting sustainable-related bonds globally and transition bonds in Japan. Our efforts in arranging these types of bonds are delivering results and we rank number one in Japan and top ten globally.
Since setting up a dedicated Infrastructure and Power Finance team in the US in 2017, we have worked on over 15 billion US dollars of infrastructure and sustainable asset projects, over half of which were related to solar energy and other renewable energy.
We have also been involved in many projects in Japan, with our Japan-related business working on about 2 billion US dollars (Y300bn) of transactions. Our coverage in Japan is now in place and we will look to further strengthen our capabilities in our home market.
Blockchain and crypto assets technologies are expected to play a central role in the future of finance.
Nomura Group’s digital asset subsidiary Laser Digital was established in Switzerland in 2022. In August 2023, we received an operating license approval from Dubai’s Virtual Asset Regulatory Authority, and we are now working to generate revenues in this market. We also established a Japan office in October 2023 where we are strengthening collaboration across the Group and developing the business.
As of the end of March 2024, Nomura Securities had been involved in 53.5 billion yen of fundraising via security tokens, cementing its position as an industry frontrunner with a market share of 43.8%. Security tokens are digital securities that use technologies such as blockchain and have real estate, bonds, etc. as underlying assets. By using security tokens, individual investors can make small investments in large-scale real estate projects, something which was out of reach to them previously.
We aim to open up new areas of business and grow revenues by making two of our in-house platforms widely available to third parties.
In 2021, we started providing a financial service platform focused on the financial product intermediary business. This was led by our strategic alliances with regional financial institutions, and we have continued to steadily expand the business. Looking ahead, we aim to become an integrated platformer for the securities industry.
Recently, we have seen an increase in requests from financial institutions asking us to take on their middle and back office functions for securities operations because it is too much of a burden for them to do by themselves. By offering our platform to cover these areas and contributing to the growth of the securities business, we believe we can create a win-win partnership for both parties.
The other platform we can offer is for asset managers. The Japanese government has announced the creation of a Japan-style Emerging Managers Program as part of their drive to promote the entry of new asset managers into the market.
The biggest barrier to entry is middle and back office functions. Systems used by major asset managers are costly, making them a heavy burden that can be a barrier to market entry. We believe we can take leadership here and build a platform that is easy for other asset managers to use.
In this way, we aim to be a platformer in Japan’s securities and asset management businesses by opening up our infrastructure for use by other companies.
Before I became Group CEO, when I asked people what they thought of Nomura they would often say that we weren’t contributing to society as much as we should, and that we were only thinking of ourselves. We have proactively made proposals to address social issues and by offering our platforms to third parties, we will contribute to not only the industry but the overall economy.
To make this idea a reality, we are organizing internally and appointing people as we move with speed to step up collaboration with other companies.
