Will changes improve Nomura’s fortunes?

Nomura Holdings replaced Chief Executive Officer Nobuyuki Koga after a five-year tenure during which he failed to boost profit and an attempt to expand in the U.S. backfired as the subprime mortgage market collapsed.

Japan's largest brokerage appointed 55-year-old Kenichi Watanabe, head of its consumer operations, as CEO effective next month, the company said in a statement. Koga, 57, will become chairman of Nomura Securities, its brokerage unit.

Nomura's stock has risen 32 percent since Koga took over in April 2003, about half the gain of Japan's brokerage index and the broader Topix. Koga's push to challenge Wall Street firms in the U.S. led to 15 billion yen ($146 million) in costs for closing its home-loans division in the world's biggest economy.

“The old management team took responsibility for the old problems,” said Yasuhiro Matsumoto, a credit analyst at Shinsei Securities in Tokyo. “Management is going to be focused on the domestic market and the asset management business.”

Nomura's 8.28 percent return on equity, a financial yardstick used to measure profitability, trails the 32 percent of Goldman Sachs Group Inc. and the average 17 percent of the world's 20 largest banks, according to Bloomberg data. It compares with 10.77 for Daiwa Securities Group, Nomura's closest competitor in Japan.

The Tokyo-based firm had a loss of 145.6 billion yen on investments related to residential mortgage-backed securities for the nine months ended September 30.

“I'm taking this job amid severe financial market conditions,” Watanabe said at a press conference in Tokyo. Nomura needs to strengthen its domestic operations, he said.

Watanabe joined the company in 1975 after graduating from Kobe University. In addition to heading Nomura's retail business, he is executive vice president of Nomura Securities.

Koga joined Nomura's brokerage in 1974 after graduating from the University of Tokyo and became chief operating officer in 2001. He also worked as a business planner and human resources manager at the firm.

In Koga's first year in charge, Nomura earned 172 billion yen. In his fourth year, it was 176 billion yen. By comparison, net income at Goldman more than doubled in the same period.

Nomura dropped to 41st last year among financial advisers on global mergers, with a market share of less than 1 percent, according to data compiled by Bloomberg. That compares with its rank of 20th with a 1.7 percent share for 2003, when Koga became chief executive.

Japan's economy has gained every quarter since February 2002, the longest expansion since the end of World War II, according to the Cabinet Office.

Nomura also said Takumi Shibata, the president of its asset management unit and a former president at Nomura International Plc, will become its new chief operating officer.

Hiromi Yamaji, who helped the firm advise Oji Paper on its $1.4 billion unsolicited bid for Hokuetsu Paper Mills, will become chief executive of global investment banking.

“Nomura intends to provide business solutions to clients in Europe and Asia and seek a world-class lineup by assigning non-Japanese onto its board,” Watanabe said.

What other strategies does the new management have up its sleeve?