December 12, 2019

Breakingviews: Nomura aims for more sustainable Wall Street role

by Breakingviews.

Nomura’s topsy-turvy history of trying to build a successful U.S. investment bank has made it the butt of rivals’ jokes. Now the Japanese group is taking another stab, buying renewable-energy boutique Greentech Capital Advisors. There’s reason to think Nomura has some decent odds of making this one work.

Some of its past ventures have become almost legendary for the toll they took. Chief among these was Nomura’s dive into American real estate towards the end of the millennium. Set up in part by Ethan Penner, who some credit with creating commercial mortgage-backed securities, the unit made a bumper profit for a few years before crashing in the wake of Russia’s sovereign-debt default in 1998. Huge bets on emerging markets worsened the pain.

A decade later, Nomura hoped to take advantage of the financial crisis by snapping up Lehman Brothers’ European business out of bankruptcy and going on a hiring spree stateside. It also bought U.S. equity brokerage Instinet in 2007. The units endured 10 years of culture clashes and restructurings, while investment-banking revenue and market share slipped. The bank wrote down the last of its goodwill from those deals at the start of this year.

Greentech won’t bring that kind of risk. For a start, it’s not a big deal – around $100 million, the Nikkei Asian Review reported. Founder and former UBS investment-banking boss Jeff McDermott, along with his 74 colleagues, shouldn’t be stepping on current Nomura employees’ toes, either: The firm targets a fast-growing niche bigger banks have largely ignored, namely smaller players in renewable energy, sustainable tech and infrastructure.

Interest ought to be picking up as climate change prompts companies big and small to reassess the risks and opportunities it presents. That does raise the question of why McDermott is selling when a boom could be beginning in this part of the M&A market. Nomura, though, is hoping the deal brings it closer to a more sustainable Wall Street role.


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