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Nomura counts cost of salary and bonuses for Lehman stars
Jim Armitage24 Apr 2009
Nomura's takeover of Lehman Brothers' London-based operations sent the Japanese broking giant into a fifth straight loss because of the large salary and bonus deals it made to stop the collapsed bank's leading dealmakers from leaving.
Japan's biggest brokerage risked unrest among shareholders and its own employees after guaranteeing large bonuses and salaries for the Lehman staffers it took on when it bought the bank's Canary Wharf-based Asian, European and Middle Eastern operations.
The Evening Standard revealed last month that Lehman's senior management, led by Christian Meissner and William Vereker, were about to get bumper cash payouts. For top rainmakers, those were more than £1 million. Today Nomura admitted to losses in the January to March quarter of a thumping 217.1 billion yen (£1.5 billion), far bigger than the 153.9 billion yen losses a year ago and well ahead of City forecasts.
Staffing costs doubled to 161.7 billion yen as the bank began its programme of spending an estimated £1 billion to absorb the 8000 Lehman workers.
It now faces calls from shareholders in Tokyo for a major cull to get Nomura back on track. Tatsuo Majima, analyst at Tokai Tokyo Financial, said: “Nomura needs to eliminate the same number of people it hired from Lehman to turn the company around.”
The pay and bonus guarantees saw Nomura pledge to match what Lehman's bankers earned in 2007, a record year for City pay. Two thirds of the bonus was paid at the end of March as a reward for staying with Nomura for six months. The rest will be paid to those who remain with the bank for the first anniversary of the takeover in September.
Incumbent Nomura bankers are said to have been furious at the two-tier bonus situation as they were expecting shrivelled bonuses for the year of poor trading. Nomura's own top management, led by chief executive Kenichi Watanabe, agreed to forgo their annual bonuses.
Reader views (2)
Nomura always does this, they build up at the wrong time at the wrong price. Japanese management at Nomura do not know how to build or run an investment bank. They bought people in a business in complete meltdown, these "stars" brought Lehman to its kness and couldn't cover their own costs at Nomura, it tells you everything. They could easily have picked these people off for a fraction of what they paid had they been patient. Buy in a few key guys, set them revenue as well as cost budgets and then let them build the business. All that will happen now is that these guys will collect their guaranteed bonus's and leave, same old, same old.
- James Macleod Ritchie, Oyster Bay Cove, 24/04/2009 15:01
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"due to the large salary and bonus deals it made to stop the collapsed bank's leading dealmakers from leaving". Nomura are not a naive investor and clearly knew, as is obvious, that no bankers would walk elsewhere as there is no elsewhere in the current market. All the usual banks that would've taken the Lehman people are simply not recruiting. Why then did Nomura agree to pay these huge salary/bonuses? Because, with the full agreement of the world's politicians, they expect and anticipate that the world will eventually return to business as usual for the 'masters of the financial universe'. Which means that they believe that the politicians are not going to change the way banks do business despite the disaster we're witnessing today. Why should that matter to us mere mortals? Well, without changing the way the banks make money (and indeed than spend the majority of that money on themselves with massive pay packets) we will find ourselves in exactly the same position in 2015, 2025 etc etc. Next time there won't be sufficient funds left for governments to do much, they will default on the massive borrowings they've taken out and this next crash will destroy funding for the likes of the NHS, schools etc etc.
If you're comfortable with a return to 'business as usual' then you're probably an investment banker, with private health care and private school fees paid. For the rest of us there is the real prospect of an early death and ignorance. Looking forward to it?
- Bobby Smith, surrey, 24/04/2009 11:03
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