LONDON, Sept 10 (Askume) – The global head of Nomura Holdings Plc (8604.T) expects trading revenue to grow strongly over the next three years, possibly by as much as 30%, as the company expands its hedge fund services business, according to this message.
The Japanese bank expects to exceed its three-year revenue growth target of 20% this year, thanks to rising revenue from buying and selling government bonds and stocks, as well as new expansion plans announced by Rig Karakhanis earlier this year.
“Our rates business in Europe is going through a significant transformation with the addition of the new team, and they are proving to be very efficient,” Karakhanis said.
Karakhanis said in a recent interview that revenue from Nomura’s marketing unit could grow 15-20% from last year to 2024. The division is Nomura’s largest by revenue.
After suffering a $2.9 billion loss in 2021 following the collapse of the Archegos fund, the second-biggest hit to the banking industry , Nomura has moved further into prime brokerage, in which banks provide hedge funds services such as financing and trade execution.
The Archegos revelations stunned the industry and exposed flaws in risk management. Nomura came under regulatory scrutiny, with British regulators imposing higher capital requirements, which were eased last year .
Karakhanis, who was appointed to head the unit in 2023, said Nomura has been improving its risk controls, risk management and technology over the past two years.
“It’s a huge opportunity for us … we’re finding that customers are really interested in diversifying [away from other banks],” he said.
Karakhanis said the initial focus would be on leveraging Nomura’s existing core businesses in the US and Asia to encourage clients to trade a broader range of assets.
Banks love the steady, predictable revenue stream of prime brokerage, but as Archegos has proven, it also comes with risk.
Prime brokerage generates about $20 billion in annual revenue for banks, up from $15 billion in 2020, according to research firm Collision Greenwich.Banks such as Barclays Plc (BARC.L) are considering expansion. However, the top banks by market share — JPMorgan Chase (JPM.N) , Morgan Stanley (MS.N) and Goldman Sachs (GS.N) — have dominated for years while rivals have struggled to grow.
“This is a three-year, five-year plan and we will continue to make progress and leverage our balance sheet,” Karahanis said, declining to disclose any numerical targets for the prime broking plan.
Karakhanis, who recently returned to Singapore after spending a year in London, said despite plans to hire 400 new staff in 2023, Nomura’s markets unit has 3,200 employees, the same number as last year.
