Nomura U.S. hiring spree key to global ambition

TOKYO (Reuters) - Takumi Shibata of Nomura Holdings Inc (8604.T) is ready to poach top U.S. bankers to deliver on an ambitious plan to turn Japan's top investment house into a global player.

Nomura. A big U.S. expansion. Big names.

The company has been there before. An earlier foray built on proprietary trading and mortgage securities ended in tears when world markets swooned in 1998 after Russia's debt default. Nomura took a $1 billion-plus hit and closed down a U.S. operation that was known for its big bets -- and big bonuses.

"It was a bunch of locally isolated organizations with locally isolated strategies," said Shibata, Nomura's chief operating officer and architect of its new overseas expansion.

"So (Nomura's) capital was the only thing that was uniting them," Shibata said, seated in a Nomura meeting room behind a Claude Monet painting -- a remnant of Nomura's 1980s expansion.

This time is different, Shibata said, adding Nomura now has a singular focus on customer trading and is building a global organization with plenty of controls.

"If you are to be doing something new, you need to have a very strong control," said Shibata, an erudite 57-year-old who spent much of his career in London. "And I am sort of a direct control person as opposed to those who believe in delegation."

Exhibit 1: Shibata built Nomura's European operation in the late 1990s by teaming up with former Goldman Sachs (GS.N) banker Guy Hands to create securities on everything from pubs to railroad stock. They parted ways when Hands started making up nearly a third of Nomura's global trading business -- a "dangerous" situation, Shibata said.

Exhibit 2: When Nomura picked up the Asian and European businesses of Lehman Brothers in late 2008, Shibata quickly shuttered a London shop betting on little-traded and complicated securities.

"I was confronted with a proposal that we would give them bonuses because we ... needed them to manage our risk," Shibata said. "That was exactly the reason why we didn't need them. If we were to keep them they would find ways to go around various hurdles ... in the same sort of areas where we lost money."

Tarun Jotwani, a former Lehman trader who heads Nomura's fixed income business, flipped the focus so that 85 percent of revenue now comes from customer business, Shibata added.

A WEEDING OUT

Shibata's No. 1 priority is the U.S. market. The firm is building its businesses there from scratch because Barclays (BARC.L) grabbed Lehman's U.S. arm during the financial crisis.

The crisis showed it pays to spread your risk, meaning there's an opportunity for new entrants like Nomura, said Shibata, an opera buff who enjoys fine arts and wine.

"Institutions need to diversify," said Shibata, estimating around a quarter of the entire U.S. trading pie is up for grabs.

"The next several months are the weeding out: Tightening spreads and a tightening regulatory environment will cause headwinds for the industry," Shibata said.

"It's only during difficult times that market share will move," Shibata said. The U.S. market makes up half of the world's banking fees, so you've got to be there, he added.

Beefing up stock and bond trading by adding more research and new areas like convertibles is at the top of his to-do list. In all, Shibata said he expects Nomura's U.S. workforce to jump by a quarter to 2,000 in the financial year to March 2011.

The U.S. expansion is meant to drive Nomura's ambitious target of generating three quarters of its revenues overseas in five years, up from 50 percent now. Shibata wants to bring international revenue to 60 percent in the next year.

For a graphic on Nomura's overseas earnings, click here: link.reuters.com/pup23j

Once Nomura has set up a trading business, deals will follow, Shibata said, adding: "Companies are shy to switch allegiance."

Shibata has dispatched Glenn Schiffman, a former media banker who oversaw Lehman's Asia deals business, to build the U.S. M&A business. Schiffman's brief is to poach several rainmakers, Shibata said. It's virgin territory: Nomura has about two dozen people in investment banking in the Americas.

UNCERTAINTY

Shibata, who used to head Nomura's asset management operations, has been consulting "his teachers" -- big-time U.S. fund managers who can kick business Nomura's way -- in deciding who to poach.

To attract top talent, Shibata is shaking up compensation. He's pushing for more employee stock ownership -- his own holding consists of some 40,000 shares worth $300,000 -- OK for Japan but a pittance in the Western world.

He's also a driving force behind measures to give Japanese staffers bonuses tied to individual and divisional performance. That is, if they give up the guarantee of life-long employment. Last year, about 45 percent took Nomura's offer, and he thinks a majority will agree to a revised deal this year.

He is big on uncertainty -- and the opportunities it brings.

"That's the beauty of watching opera, nothing is certain," he said, giving the example of seeing the same opera three nights in a row. He had a different experience each time because of the change in audience, the cast's performance and his own mood.

Bottomline: Be aware and be flexible. That's Shibata's advice to his 25-year-old daughter who is making her way at a different financial firm in Tokyo -- and to any aspiring banker.

"Be proactive, use your own brain and don't expect things will be the same tomorrow, " he said. "The only thing that is certain is that we are living in the era of uncertainty."

(Additional reporting by Junko Fujita; Editing by Chris Gallagher and Nathan Layne)