Overcapacity Leads to Cuts at Nomura’s Equity Research Group


New York, NY – A few weeks ago, Japanese investment bank, Nomura cut a large number of staff in the firm’s London equity research operation.  Management cited overcapacity and a continued period of falling commissions to be the primary reason for the staff reductions.

Recent Equity Research Cuts

Headhunters, who refused to be named, said that nearly 20 members of the bank’s London-based equity research division were eliminated.  Some of the senior departures included Graeme Pearson, head of Nomura’s equity research department and Rufus Grantham, the deputy head of research for the bank’s EMEA unit.  Most of the cuts came in the utilities, retail, healthcare and pharmaceutical sectors.

These recent cuts in its equity research department follow a company decision in December 2012 when Nomura announced that it would create a global markets unit combining its fixed income and equities research groups.  This new unit is now led by Steve Ashley, head of global markets, and Naoki Matsuba, the co-head of global markets.

The reductions in Nomura’s equity research team follow departures in the bank’s sales team.  In February, Nomura’s head of equity sales for Europe, the Middle East and Africa, Mark Rutherford, left after the head of cash sales for the region, Jonathan Bowen, resigned.

Rationale for these Reductions

The recent cutbacks in Nomura’s equity research department are a result, some say, of concerns that there are too many brokers providing research and trading services in the European equities market.  This development, following a sustained period of low commissions in the European equities market, has made it extremely difficult to economically justify providing “waterfront research coverage”.

This could explain why Nomura has said that it is focusing its resources on the sectors it is most highly regarded in, including financial services, natural resources, and industrial companies.  Nomura is also expected to invest in cross-asset and quantitative research.

Prior New Hires at Nomura

Despite these staff reductions, Nomura is also selectively hiring people – particularly to bolster its US equity research distribution capabilities.  In early March Nomura announced that it had hired Scott Litner, Jason Meyer, and Richard Oates to increase the bank’s US equity research distribution capabilities to clients across the Americas, Europe, the Middle East and Africa.

Mr. Litner joined Nomura as head of New York equity research sales, covering clients in New York and Denver.  Jason Meyer joined Nomura to lead the firm’s Midwest US equity research sales effort based in Chicago.  Mr. Oates joined Nomura as a US equity research sales representative, based in London.

Nomura’s equity research department in the Americas currently has over 200 stocks under coverage, spanning sectors such as: financial services, technology, media and telecoms, consumer, industrials and basic materials.

Integrity’s Take on These Developments

The staff reductions in Nomura’s equity research department are not surprising for a number of reasons.  First, the weak equity commission environment, and the large number of sell-side players in the space have made the equity research business a painful game of musical chairs.  Unfortunately, the rewards for remaining in the game have declined the longer you stay in the game.

In addition, Nomura has a history of jumping into and out of the investment banking and equity research business in the past ten to fifteen years, revealing a lack of understanding or commitment to the business.  While we thought the acquisition of talent from Lehman Brothers a few years ago would change this pattern, it is unclear whether senior management at Nomura has “bought into” the business model.

Certainly it is clear that Nomura does not believe it should play in the “waterfront coverage” business.  However, it is interesting that Nomura decided to expand its research distribution capabilities in the US.  Perhaps this is a clue that the firm really is committed to building up specific research and banking franchises that it can succeed in on a global basis.  We will have to wait and see.



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