SMBC Nikko Securities Inc. (8316), the brokerage unit of Sumitomo Mitsui Financial Group Inc., plans to add 100 equity and bond sales staff, traders and bankers abroad within three years to compete with global firms.
SMBC Nikko targets a 25 percent increase in employees in Europe, the U.S. and Asia outside Japan to 500 by the year ending March 2016 to bolster trading, underwriting and mergers advice, Chief Executive Officer Tetsuya Kubo said in Tokyo.
Japan’s biggest lenders are expanding investment banking abroad at a time when brokerages Nomura Holdings Inc. (8604) and Daiwa Securities Group Inc. (8601) scale back their global ambitions by eliminating jobs. Sumitomo Mitsui, the nation’s second-largest bank by market value, probably posted record profit for the year ended March, analysts’ estimates show.
“We want to chase the lead pack of runners and obtain major-league deals,” Kubo, 59, said in an April 17 interview. “SMBC Nikko doesn’t have to be like Goldman Sachs. We won’t pursue every single line of business, but we’ll go after all Japan-related work, including cross-border M&A advice, global equity offerings and Samurai bond underwriting.”
SMBC Nikko plans to hire 1,000 people in total over the three years, including about 410 university graduates in 2014 and 400 in 2015, to boost retail operations, said Kubo, who became CEO of the Tokyo-based firm this month.
Prime Minister Shinzo Abe’s efforts to end deflation have spurred Japanese stocks and weakened the yen, improving prospects for brokerages and an export-driven economic recovery. The currency’s 13 percent decline against the dollar this year won’t deter companies from seeking takeovers abroad, Kubo said.
“Abe’s policies obviously boosted retail business and will give us more chances to underwrite public offerings,” he said. “Japanese companies know they have to expand abroad as the declining birth rate hinders growth at home.”
Kubo was involved in setting up an alliance with Moelis & Co., the U.S. investment bank founded by Kenneth Moelis. Sumitomo Mitsui’s banking unit said last year it will invest $93 million in the New York-based firm to strengthen the tie-up on merger advisory operations.
“Cross-border M&A markets have been the exclusive domain of foreign banks,” said Kubo. “We’ve sent several SMBC Nikko bankers to Moelis, and we’ll communicate closely with Moelis bankers to strengthen the advisory business.”
Sumitomo Mitsui’s rank among financial advisers on global cross-border mergers and acquisitions rose to 53rd last year from 111th in 2011, according to data compiled by Bloomberg.
Among advisers on takeovers involving Japanese companies, Sumitomo Mitsui is ranked ninth this year, the data show. It’s in fifth place among managers of Japanese equity offerings and third for bond sales in the country.
The company formed SMBC Nikko in 2011 after its lending unit bought operations including Nikko Cordial Securities Inc. from Citigroup Inc. in 2009.
Sumitomo Mitsui is poised to post record annual profit next month, helped by bond trading and fees. Net income climbed to 693 billion yen ($7 billion) for the year ended March, more than its 540 billion yen forecast, according to the median estimate in a Bloomberg survey of 17 analysts.
The potential increase in overseas payrolls at SMBC Nikko contrasts with a reduction at Nomura, as Japan’s biggest brokerage implements a $1 billion cost-cutting program. The number of Nomura staff outside of Japan fell to 12,270 in December, down 733 from a year earlier, company figures show.
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