October 3, 2010
By GRAHAM BOWLEY
The discreet sign by the door does not say Lehman Brothers. But step inside: a bit of Lehman lives on here in Manhattan. Two years after Lehman’s collapse, hundreds of former Lehman employees are working together again at the Wall Street headquarters of Nomura, the Japanese brokerage giant.
The Lehmanization of this tradition-bound Japanese bank is startling. The head of investment banking came from Lehman. So did the chief risk officer, who held a similar post at Lehman. The top global economist, the co-heads of fixed income, senior salesmen, traders — the list goes on.
The arrivals are part of one of the most aggressive — and potentially most risky — expansions under way on Wall Street. Nomura, a heavyweight in Japan, is a perennial also-ran in the United States. But in the wake of the financial collapse, its executives sense an opening.
Rivals scoff at the idea that Nomura can break into the big leagues here. Nomura tried in the 1980s, and again in the 1990s and 2000s.
“The Japanese banks have always wanted to come here for the prestige,” said Edward Lincoln, director of the Center for Japan-U.S. Business and Economic Studies at New York University. “This is the place you have got to be, but they have never made much headway.”
And yet at a time when giants of American finance have begun to cut back again, Nomura is hiring. Today it employs 1,900 people inside the World Financial Center in Lower Manhattan and its eight other offices in the United States and Canada. That is up from 650 two years ago.
Nomura bought Lehman’s international operations in September 2008, swelling its global work force by more than 8,000 in Europe and Asia.
In the United States, Lehman’s investment banking and capital markets operations, and 10,000 Lehman workers, were swallowed by Barclays, the British bank. Not all stayed on there, however. After the merger, Barclays laid off 3,000 employees, many from Lehman, who scattered across Wall Street.
Since then, Nomura has become something of a Wall Street melting pot: everyone, it seems, came from someplace else.
But for the people in the Lehman diaspora who have coalesced here, the new Nomura feels like a homecoming.
“Coming here meant reuniting with many of my former colleagues from Lehman,” said Michael P. Guarnieri, who spent 12 years at Lehman before joining Nomura last year as global head of bond research.
Still, skeptics like Mr. Lincoln see a culture clash coming. They wonder if Nomura will be willing — or able — to offer the big paydays that many American bankers have come to expect.
Naoki Matsuba, the president and chief executive of Nomura’s American operations, is confident that this time his bank will succeed. “This is a once in a lifetime opportunity,” he said.
Mr. Matsuba represents the will of Nomura’s ambitious president and chief executive back in Tokyo, Kenichi Watanabe. Mr. Matsuba said that in the wake of the financial collapse, companies and investors would think twice about their bankers.
“We believe that the landscape will change in a tough market,” he said.
From Mr. Matsuba’s glass-fronted end-office on the sixth floor, you can see bankers from all over Wall Street — from Bear Stearns, Bank of America, Deutsche Bank, Barclays, Citibank, Goldman Sachs.
Lehman was a strong bond house, and many of the former Lehman people at Nomura are on the fixed income side, whereas the new staff on the equities side of the firm come more from all over Wall Street.
A former Bank of America executive, Ciaran O’Kelly, a wiry Irishman, is running Nomura’s expanded equities operations. David Steck, from Deutsche Bank, heads foreign exchange.
Yet of the roughly 1,000 new workers, about 250 arrived from Lehman Brothers. Among them are people like Jeffrey Michaels and Charles Spero, the joint heads of Nomura’s fixed income division, where the head count has risen to 360 people, from 60.
“We have the advantage of growing while many other banks are shrinking,” Mr. Michaels said.
“It is a good position to be in.”
Some of the new employees are refugees from the shake-up since the financial crisis and seem glad to still have a job. They acknowledge that taking business from the established Wall Street firms is going to be hard.
Others, however, are stars poached from rivals.
Nomura is making much of its recent hiring of one of Wall Street’s best brokerage analysts, from UBS, as well as a widely respected media industry analyst, from Sanford C. Bernstein.
It is also beefing up its investment banking business, run by the former Lehman banker Glenn H. Schiffman. The staff count in investment banking has rocketed to about 100, from 12 at the start of the year.
Last month, Nomura hired five new members in its natural resources investment banking team, in addition to four investment bankers on its media team, including three with backgrounds at Lehman.
The chatter on Wall Street is that, despite the Japanese reluctance to pay big salaries, scores of new hires are being lured by hefty amounts, including some on generous two-year guaranteed contracts. Nomura executives deny they are paying above the market rate.
In February Nomura raised $3 billion on international debt markets, its first United States public bond sale, to back its push in the United States and globally. In another sign of its ambition, after giving up its license in November 2007, last year it once again became a primary dealer in the Treasury bond market.
It still has a long way to go: Nomura ranks 17th in United States-marketed bond underwriting so far this year, compared with 25th in 2009, according to Dealogic.
It is even further down the league tables, at 35th, in mergers and acquisition advice.
But it is taking some strides forward: its newly assembled fixed income analysts team was ranked seventh for 2010 in a closely watched Institutional Investor survey, the first time Nomura has even been ranked.
And so, for the moment, this Japanese bank has a bit of Wall Street swagger.
“As a new entrant and a challenger in the U.S. marketplace, competitors are not always aware of Nomura,” Mr. O’Kelly said. “This will change.”
Susanne Craig and Peter Lattman contributed reporting.
