Nomura plans prime broking to take on rivals

A man walks past a logo of Nomura Securities in Tokyo January 26, 2009.

SINGAPORE (Reuters) - Nomura Holdings (8604.T) plans to launch a global prime brokerage business by September as the financial crisis creates room for new players to offer lucrative services to hedge funds, a senior executive said on Monday.

The move shows how Japan's biggest investment bank, which scooped the European, Middle Eastern and Asian units of bankrupt Lehman Brothers, is muscling into an industry once dominated by Goldman Sachs (GS.N) and Morgan Stanley (MS.N).

"We think prime brokerage is a very interesting opportunity because of what happened in the industry this past year," Siggi Thorkelsson, Nomura's head of equities Asia-Pacific, told Reuters in an interview ahead of a four-day Nomura Asia Equity Forum in Singapore starting Tuesday.

"We also know from the hedge funds themselves and from investors in the hedge funds that there is a much greater desire to diversify the prime broker counterparties and be less exposed to just a handful of companies."

Prime brokerages offer services such as clearing, securities lending and financing for assets to hedge funds.

Hong Kong-based Thorkelsson, who oversees 930 people in the region including some sales people outside Asia, said Nomura had historically not been present in the prime broking space.

"It used to be the case that the barriers to entry were very high as there were a couple of firms that dominated the market. Now those firms have lost a lot of the market share and there's market share to be gained there," he said.

The hedge fund industry suffered record redemptions last year due to weak performance exacerbated by a meltdown in financial markets last fall. But things are looking up.

"The tide seems to have turned there. There are have been a number of firms that have done extremely well and those hedge funds will be the biggest beneficiaries of a less crowded market place in the coming years," said Thorkelsson, who used to work at Lehman.

He said legacy Lehman bankers Tim Wannenmacher in Hong Kong and Gunner Burkhart in London would oversee the launch of the new business.

ASIA GROWTH

Nomura is also looking to increase its market share in Asia in electronic trading, derivatives and convertible securities.

"Our ambition for Asia is to be in the top three to five in terms of market share and we are not there yet," Thorkelsson said, adding that the firm was in the top 10. "We have seen our market share tripled from Jan-June."

"We actually see this as a great opportunity to hire talented individuals," the engineer by training said, adding the firm has been selectively hiring.

Currently, Asia excluding Japan accounts for 30 percent of its Asia-Pacific equities business and the firm plans to grow that share to 50 percent in one and half years, Thorkelsson said but did not provide details.

"Most important markets for us in the medium-to-long term are China and India and in the immediate term, Hong Kong and Singapore are the main areas of focus."

Thorkelsson said Nomura is also looking to start its warrants business in Hong Kong and South Korea, and expects regulatory approval to begin onshore trading business in Malaysia.

He said he was optimistic about growth because Nomura was well-capitalized and growing its business, unlike some its competitors which have scaled back, while Asia's importance has increased among international investors.

But he warned that market conditions would remain rocky if global economic forecasts for major economies such as China and India do not meet investors' expectations.

"I get the impression this is all fragile. If we get any kind of deviation in any of these things then we could well find ourselves heading south again."

(Editing by Anshuman Daga)