December 28, 2017 / 8:04 AM / a year ago

Japan's Nomura poised to start China retail brokerage business: CEO

TOKYO (Reuters) - Nomura Holdings Inc (8604.T) is ready to serve wealthy Chinese as soon as the world’s second-largest economy allows foreign financial institutions to open securities brokerages, the chief executive of Japan’s biggest brokerage and investment bank said.

Nomura Holdings' Chief Executive Officer Koji Nagai attends an interview with Reuters in Tokyo, Japan, December 27, 2017. Picture taken December 27, 2017. REUTERS/Toru Hanai

“We have been preparing to start business in China for years. We are waiting first in the queue for when the country eventually opens up,” Koji Nagai told Reuters.

Nomura already serves wealthy Chinese from retail operations in Hong Kong, and offers wholesale - or business-to-business - services in mainland China.

“But we want to do retail business (in mainland China) as well, like we do in Japan,” Nagai said in an interview.

China has been gradually opening up in recent years, and stunned the finance industry in November when it unveiled plans to allow foreign control of domestic financial institutions.

Banks such as Citigroup Inc (C.N) and Credit Suisse Group AG (CSGN.S) could take advantage of the change by taking majority control of joint ventures they operate with local partners, industry insiders said.

For its part, Nomura aims to establish a retail brokerage targeting China’s growing affluent class, said Nagai, Nomura’s chief since 2012.

“In terms of per-capita GDP, China is nearing the stage where mass consumers start needing brokerage services,” Nagai said, referring to gross domestic product.

Still, he said Nomura is taking a long-term view toward Chinese market. “It will take time to make it a real business. We are hoping to become profitable in five to 10 years at the earliest.”

More immediately, he said Nomura needs to build up investment banking operations in the United States, noting its size does not match a market which generates over half of the global investment banking industry’s fee revenue.

“We have strong sector coverage in Japan, Asia and Europe. There is a missing link in the United States and we need to fill that,” he said.

He also said Nomura could pursue both organic and inorganic growth opportunities in the United States. “If we see good opportunities to hire bankers, we will do so, and if there is a good boutique house, we might buy it.”

“Anyway, we are not aiming to compete squarely with bulge brackets. We are an investment bank with strength in Asia and we will connect that with Europe and the United States,” he said. Bulge brackets refers to global financial institutions such as Goldman Sachs Group Inc (GS.N).

On bitcoin, Nagai said his bank is “studying” the cryptocurrency but has no plans, for instance, to enter the platform business such as by running an exchange.

Bitcoin has shot up in value in recent months, conjuring fear of a mostly speculation-driven price bubble destined to collapse. In September, JPMorgan Chase & Co (JPM.N) Chief Executive Jamie Dimon called bitcoin a fraud.

Nagai said while the cryptocurrency’s recent price movement appears to be highly speculative, “I wouldn’t brand bitcoin as bad or the situation akin to the tulip bubble” of the seventeenth century, when the price of tulips famously sky-rocketed before spectacularly crashing.

Reporting by Taiga Uranaka, Taro Fuse and Takahiko Wada; Editing by Christopher Cushing

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