Nomura eyes fixed income gains as rivals shrink

Wed Sep 12, 2012 1:20pm EDT
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By Sarah White

LONDON (Reuters) - Japan's Nomura (8604.T: Quote) is pinning its turnaround hopes on bond and foreign exchange trading even as big rivals shrink some of those divisions, and a swoop on clients abandoned by others is helping it grow, the bank's fixed income boss said.

Fixed income, which includes other areas such as interest rate swap trading, has become a rare bright spot for Nomura as rocky markets force it to row back on a bold expansion four years ago, when it bought the European and Asian units of the now defunct Lehman Brothers.

The bank hopes a captive base of investors in Japan and Asia will help anchor its push, as Nomura profits from escaping some of the side-effects of the financial regulations squeezing others, said its global head of fixed income Steven Ashley.

"We're still looking to progress and grow and take market share where it's appropriate for us," Ashley told Reuters in an interview.

"Our competitors have been challenged and focused on delivering their businesses... That has definitely allowed us some more scope," he added.

Tougher rules on capital under Basel III regulations are pushing firms such as Morgan Stanley (MS.N: Quote)in the United States or Switzerland's UBS UBSN.VX to slim down in fixed income, as banks are forced to hold more capital against bonds on their books.

Nomura is not exempt, but Ashley said the bank did not have the same backlog of old transactions on its books, taking up capital resources to the same degree.

A shift away from derivatives being traded privately between parties, with transactions instead executed on exchanges and cleared more transparently, is also cracking open a market that used to be heavily dominated by a small group of banks, he added.   Continued...