Mark Leahy, Nomura’s Asia ex-Japan head of debt origination and syndication, is leaving the bank as part of its plan to cut $1 billion of costs from investment banking, announced at the start of the month.
Nomura’s troubles are well-known, but news of Leahy’s departure nevertheless came as a surprise to the market on Friday when reports first surfaced. He is an experienced and respected figure within the industry, and was previously head of debt syndication at Deutsche Bank, which he left in early 2009. He joined Nomura less than 18 months ago, after a two-year sabbatical on a vineyard in Australia.
Clayton Carol, head of leveraged finance, will take over Leahy’s role.
Speaking on the phone this weekend, Leahy described the decision as “mutual” and was notably realistic about the situation facing debt capital markets desks in Asia.
“It shouldn’t escape anybody that the industry is over capacity, probably by 25% to 30% at this stage,” he said. “It’s unlikely that revenues will get back to pre-crisis levels, so it makes sense for firms to consolidate while making sure that teams can still function. It reassures me to know that the team I’m leaving behind is a very good one.”
Nomura’s new chief executive, Koji Nagai, reiterated Nomura’s commitment to Asia earlier this month and announced a plan to re-focus on the region as a home market — stressing that most of the cost-savings would affect Europe and the US.
Layoffs in Asia-Pacific had been selective during the previous round of cuts, with overall headcount more or less unchanged, but there now seems to be more emphasis on directly reducing wage costs in the region. The bank has cut a number of jobs across Asia during the past few weeks, according to sources, and there may yet be more in the pipeline, though Nomura has not provided details about staff reductions in Asia.
Clearly, the big pay deals offered to attract senior bankers during the past few years have now become a drag on profits and are an easy target for banks that want to “right-size” their operations in Asia.
“One of the challenges in a shrinking industry is to foster and promote younger talent — the game of musical chairs can favour more senior players,” said Leahy. “I’m glad key members of the team have a chance to take on greater responsibility and open up new opportunities.”
On the face of it, Asian DCM desks have been busy this year. In total, the region’s borrowers have raised more than $100 billion across all G3 currencies this year — more than was raised during the whole of 2011. But the numbers are a bit deceptive as most of that issuance has come from investment-grade borrowers, which pay much lower fees than lower-rated companies.
According to Dealogic, the total amount of high-yield dollar bonds from Asia ex-Japan stood at $8.6 billion in mid-September, compared to $13.2 billion during the same period last year. In comparison, the volume of dollar investment-grade bonds is $60 billion, nearly double the $31 billion during the same period last year.
“You need to do five to six times as many investment-grade deals to earn the fees generated in the high-yield market,” said Leahy. “Nonetheless, it’s been a breakout year for Asian DCM, although the market is a tiny fraction of what it could be if you compare to bond markets in the rest of the world. So the potential is clear.”
However, after years of building teams that were scaled to meet that potential, many banks are now looking to adjust to the reality.
As for Leahy, he is planning to spend the immediate future “chillaxing”, which sounds considerably better than worrying about where the next bond deal is coming from. He will officially leave the bank at the end of this week.
Before joining Nomura, Leahy co-founded and was a managing director of Arrive Private Investments, a start-up brokerage business within the Arrive Wealth Management group in Melbourne.
He was also head of fixed-income syndicate for Asia ex-Japan at UBS, from 2001 to 2004, and head of European sales at EnronCredit in London from 2000 to 2001.