[TOKYO] Morgan Stanley's Japanese investment-banking joint venture plans to hire more bankers this year to compete with Nomura Holdings Inc and defend its three-year grip on mergers advice in the country.
The US bank and Mitsubishi UFJ Financial Group Inc.agreed to increase staff at their securities firm, including people to cover industries and advise on takeovers, Deputy President Haruo Nakamura said in an interview last month, without giving numbers. The joint venture already added 60 bankers over the past two years to about 460, according to Nakamura.
"It won't be easy for us to sustain our position because the competition with other megabanks and foreign banks is intensifying," said Nakamura, head of investment banking at Mitsubishi UFJ Morgan Stanley Securities Co. "Clients have a perception that Nomura is stable because of its large workforce."
Morgan Stanley and MUFG have been gaining market share in Japanese investment banking since they formed two joint ventures five years ago. They trailed only Nomura among underwriters of equity offerings in the country last year while topping the rankings for managing bond sales and M&A advice at a time when more companies are pursuing takeovers to cope with a slowing economy.
Nakamura said the pipeline for mergers and acquisitions involving Japanese firms has risen as much as 30 per cent this year. Larger deals - those that exceed US$1 billion - will increase because more companies are seeking acquisitions abroad as well as consolidating at home, he said.
The venture stems from MUFG's US$9 billion investment in Morgan Stanley during the global financial crisis. The Japanese bank remains the largest shareholder in the US firm with a 22 per cent stake.
The hiring plans contrast with cutbacks in investment banking elsewhere in the world, particularly at European firms such as Barclays Plc and Deutsche Bank AGas they grapple with stricter capital rules and a trading slump.
Morgan Stanley was the second-ranked adviser on global mergers last year, trailing only Goldman Sachs Group Inc to capitalize on a rise in takeovers. Its Japanese venture advised on deals valued at US$71.8 billion in 2015, topping the rankings for a third straight year, according to data compiled by Bloomberg. Nomura was second, followed by Sumitomo Mitsui Financial Group Inc. and Bank of America Corp, the data show.
Nomura has a "decent number" of M&A deals in the works, Shigesuke Kashiwagi, the chief financial officer of Japan's biggest brokerage, told analysts on a conference call on Feb 2. The firm doesn't disclose staff numbers of its investment- banking divisions.
In equity underwriting, Morgan Stanley and Nomura were both joint global coordinators for the 1.4 trillion-yen (US$12 billion) three-pronged initial public offering of Japan Post Group last year. They were also selected to manage an IPO for Kyushu Railway Co, which may take place as soon as the year starting April.
Mitsubishi UFJ Morgan Stanley employed 5,170 people as of December, a 9 per cent increase from two years earlier. By comparison, Nomura had 16,282 staff members in Japan, little changed over the same period.
"Nomura is a giant in Japan in the sense that it has many salesmen and client assets and wider corporate ties," Nakamura said. "We'll boost headcount because our two owners both want us to enhance our presence. They have high expectations."