Nomura guts leveraged loans group: Reuters

(Reuters) Nomura Holdings Inc is laying off more than two-thirds of its U.S. employees who focus on leveraged buyouts, people familiar with the matter said on Tuesday, as the Japanese bank announced broad strategic changes in Europe and the United States to boost profits.

The cuts are part of a strategic decision by the Japanese lender to back away from the risky, but at times highly profitable, business of leveraged buyouts, which has come under pressure as concerns about potential interest rate hikes and the health of the U.S. economy have rattled the junk bond market.

Nomura will instead focus more on traditional corporate mergers and acquisitions, the people said, who were not authorized to speak publicly about the matter.

The sources did not specify the number of layoffs, which they said included senior members of the leveraged finance and financial sponsors groups.

Nomura declined to comment.

The staff cuts began on Tuesday as Nomura announced the strategic changes after losing billions of dollars in its efforts to expand in Europe and the United States. The bank said it would disclose full details of those plans on April 27.

Nomura now wants to fashion itself as a boutique investment bank, targeting large companies rather than private equity firms as clients, the sources said. Nomura had been investing heavily in its U.S. operations, with the aim of becoming a full-service investment bank.

Nomura will continue to work with private equity firms, though less than before, one of the sources said. The strategy shift has been driven largely by Nomura Group Chief Operating Officer Tetsu Ozaki, another source said.

Nomura had tried to take advantage of U.S. regulations introduced in 2013 to curb the issuance of junk-related loans. Since the Japanese bank was not subject to those rules, it was able to offer more aggressive terms to private equity firms seeking to finance acquisitions.

Mark Epley, former co-chief of Nomura’s global financial sponsors group, and Carl Mayer, who headed leverage finance in the United States, left the bank on Tuesday, the sources said.

Epley declined to comment. Mayer could not be reached for comment.

In addition to the leveraged finance and financial sponsors groups, Nomura has decided to scale back in U.S. equity capital markets, equity research and securitized products, one of the sources said.

Nomura had poached several senior leveraged finance and private equity bankers from large U.S. and European banks to strengthen the leveraged buyout team. Just five months ago, Nomura said it planned to invest further in its Americas operations over the next two to three years, expanding its mergers and acquisitions advisory services and primary equity and debt businesses.

Nomura ranked seventh overall for financing leveraged buyouts in the United States in 2015, ahead of banks like Goldman Sachs Group Inc and Citigroup Inc, and up from No. 12 in 2014, according to Thomson Reuters LPC data.

(Reporting by Greg Roumeliotis, Olivia Oran and Mike Stone in New York; additional reporting by Kristen Haunss in New York; Editing by Richard Chang)

Photo: Nomura Holdings’ Chief Executive Officer Koji Nagai poses for pictures after an interview with Reuters in Tokyo, Japan, February 9, 2016. REUTERS/Yuya Shino