Rumours about Jasjit “Jesse” Bhattal’s future as the head of Nomura’s investment bank have been doing the rounds for years now. There’s never been much debate about whether he would stay or whether he would go — the question has always been when, as industry watchers have wondered how Nomura could possibly have absorbed the cost of buying Lehman Brothers’ European and Asian operations in 2008.
The rumours came to an end yesterday, when Nomura announced Bhattal’s decision to retire from his position as president and CEO of the wholesale division and deputy president of Nomura.
The Japanese bank said that Bhattal’s responsibilities will be assumed on an interim basis by Nomura chief operating officer and chairman for wholesale, Takumi Shibata, who will also determine the strategy to appoint his permanent successor.
Shibata said in a statement: “Jesse has had a distinguished career, spanning nearly three decades in the industry. We would like to thank him for his contribution in leading the wholesale business through exceptionally difficult markets, growing market share across all key product lines and helping to transform the franchise. He leaves Nomura well-positioned in terms of depth of management talent and client relationships to establish us as Asia’s number one global investment bank. We wish him well in his future endeavours.”
Bhattal, 55, could not be reached for comment, but colleagues said that he was retiring from the banking industry. Bhattal’s relationship with Nomura has been full of ups and downs. He is credited with having negotiated the Nomura buy-out in the first place; but declines in trading and investment banking revenue led to a ¥46.1 billion ($600 million) loss for the three months ended September 2011. Then in November Moody’s Investors Service said it may cut Nomura’s credit rating from Baa2, the second-lowest investment grade rating.
Nomura immediately responded by saying, not surprisingly, that it was disappointed by Moody’s decision. The bank pointed out that: “The agency’s concerns were centred on the wholesale division and its low underlying profitability. However, Nomura had already identified this as an issue and recently instigated a $1.2 billion cost cutting programme aimed at significantly lowering the business’ break-even point. Although Nomura reported a net loss for the second quarter ended September 30, it had previously delivered nine consecutive quarters of profit through to the first quarter of the current fiscal year.”
Bhattal appears to be a part of that cost-cutting programme. He joined Lehman Brothers in 1993 and served as deputy head of Asia investment banking from 1995 to 1997, and head of Asia investment banking from 1998 to 2000. In 1999, he was made chairman of the Asia-Pacific region, and in July 2000 he was appointed CEO of Asia-Pacific. He joined Lehman Brothers’ executive committee in 2003 and then in 2008, when Lehman was crumbling, he is credited with having negotiated the deal with Nomura.
Here’s how one insider described at the time how the 2008 buyout went down: “We had just been declared bankrupt, the US executive committee told us to sit tight and keep the employees together while they negotiated a deal for the entire global operation. Everyone kept turning up to work hungry for information but with nothing to do. Then, shockingly, the US-based management cut themselves a very special compensation deal with Barclays Capital for just the US operation and told us we were on our own. I think that infuriated everyone, but that’s when Jesse shone.”
After masterminding the marriage between Nomura and Lehman Asia, he announced in July 2009 that he was stepping down from his job as chairman of Nomura Asia at the end of the year. But then, at the last moment, he changed his mind and in March 2010 was appointed president and chief operating officer of Nomura’s global wholesale business, making him the first foreigner to head the Tokyo-based bank’s non-retail operations in Japan and abroad, and the first non-Japanese to join Nomura’s executive management board.
But almost from the get-go people started questioning how long it could last. For one, many Lehman bankers were said to have been given one- or two-year bonuses at levels equal to those in 2007 to sign on at the Japanese firm — higher than the typical Nomura bonus package and well above the 2008 bonuses paid at the US banks. Others said, even if he survived criticism for that deal, the fact that he was an outsider on the Japanese board would make him vulnerable. All along, Bhattal has kept mum, only speaking highly of the marriage and the outlook for Nomura.
“He’s been a gentleman,” said a colleague. “But it was time to move on.”
