Investment Banking-r2:AMM grid in qxp 12/24/09 9:33 AM Page 28
INVESTMENTBANKING
Clockisticking
onDaiwa’s
desiretogrow
TheJapanesebankwantstobuilditsregional
franchiseafterdissolvingitsonshorejointventure
withSumitomoMitsui.Butneedstobequickifit
wantstofulfilitsambitions,asfiercecompetitionis
SHIGEHARUSUZUKI
president and CEO
buildingathomeandabroad.PeterMcGillreports.
of Daiwa Securities.
D
DaiwaSecuritiespresident&CEOShigeharuSuzukiisclosetolosinghis Itneverhappened,andSuzukideniesthatDaiwaevenconsidered
temper. it.“Totellthetruth,itwouldnotyieldagreatbusinessbenefittous,”
“Wehavebeenengagedinthesecuritiesbusinessfor100years,andit hesays.
wasonlyinthelastdecadethatweteamedupwithSumitomoMitsui,”he ButwhileDaiwafeltthealliancewasoneofequals,Sumitomo
tellsAsiamoney. Mitsuiseemedtohaveotherideas.
Hisexasperationstemsfromquestionsaboutthedissolutionin “TheimpressiononealwaysgotfromtalkingtoSumitomoMitsui
Septemberoftheinvestmentbank’s10-year-oldwholesalebrokingjoint peoplewasthatDaiwawasundertheirwing,wassomehowapartof
venturewithSumitomoMitsuiFinancialGroup(SMFG).Thesudden them.Itwasn’tanequalrelationshipatall,”saysBrianWaterhouse,a
divorcehasbeenthetalkofTokyoeversince–ashavemisgivingsabout seniorbankanalystatCLSAinTokyo.
Daiwa’sprospectswithoutit. DaiwamayhavebeenhappywiththeJVasitwas,butSumitomo
Suzukiinsiststhattheseveringoftiespresentsagreatbusinessoppor- Mitsuiwantedmore.AndwhenastrugglingCitigroupputNikko
tunity,notacauseforconcern. Cordialontheblockinearly2009,itgotitschance.
“Wewillnotloseanycustomers,”heassuresAsiamoney.“Thereasonis SumitomoMitsuibeatrivalsMUFGandMizuhotosnapupJapan’s
thatevenbefore10yearsago,wehadverygoodrelationswithissuers third-largestbrokerageforUS$7.9billioninJune.
thathadveryclosetiestoSumitomo.” ItthenofferedDaiwaanultimatum:eitherallowtheNikkoassets
Plus,Suzukinotes,Daiwaisactivelyaimingtodiversifyitsrevenues.In tobemergedintotheJVandallowSumitomoMitsuiownershipto
November,theinvestmentbankannounceditwouldinvestUS$1.15bil- riseto60%inreturn,ordissolvetheJV.
lioninexpandingitsAsianoperations,includingamajorincreasetoits Daiwabaulkedattheattemptedpowergrab.AsSuzukiputsit,the
HongKongoffice. keyissuesatstakewereaboutcontrollingrisk,andaccountability.
YetforallSuzuki’sprotestations,thefactremainsthatDaiwahasjust “SMBC’sbankingoperationishugeand,therefore,theloss,ifany,
lostakeytacticaladvantageatatimewhenitscompetitorsareincreasing- theymakeoninvestmentbankingwouldberelativelysmall.Inour
lyemboldened. case,weonlydosecurities,andtheprofit/lossimpactfromthe
Asidefromthenownakedpredatoryambitionsofformerally wholesalebusinesscoulddominateourfinancials.”
SumitomoMitsui,MitsubishiUFJFinancialGroup(MUFG)hasjust Thedisagreementledtothepartnershipbeingdissolvedin
enteredaglobalalliancewithMorganStanley,whichincludesplansto September,withDaiwabuyingSumitomoMitsui’sshares.
mergetheirsecuritiesfranchisesinJapan.
ThenthereisNomura.Daiwa’sarch-rivalboastsacommandinglead GOINGITALONE
inthedomesticcapitalmarkets,whileitsacquisitionofLehmanBrothers’ SumitomoMitsuihasnotbeenshyaboutitsintentionssince.Within
AsianandEuropeanoperationslastyearhasboosteditsstandinginkey daysoftheJV’send,SMFGpresidentTeisukeKitayamabraggedofthe
globalleaguetables. synergiestobereapedfromtheNikkoacquisition,andofhisintentto
Incontrast,Daiwa’sAsiainvestmentplansarefarlessambitious,while challengeNomuraSecurities,theclearmarketleader.
itslackofamajorallyleavesitlookingvulnerable. Forhispart,Suzukiofferssimilararguments.
CanDaiwatrulygoitalone? “Thenewbusinesswegainfromourindependentstatuswillmore
thanoffsetthebusinesswemaylosefromthedissolution,”hesays.
THEENDOFTHEAFFAIR HisargumentisthatpreviouslysomeJapanesefinancialinstitu-
ForallSuzuki’sstatementsaboutthebenefitsofthedissolutionofDaiwa’s tions“couldnotplaceanyorderswithDaiwaSMBC”becausethey
JV,itwasitsformerpartner’sactionsthatforcedtheclosure. didn’twanttosee40%ofprofitsfromtheirbusinessbenefitadirect
SumitomoMitsuihaslongwantedtobeaforceininvestmentbanking. rival.
Initially,itthoughtitcoulddosowithDaiwa.In1999thetwoagreedto OneexampleisDaiwa’sparticipationasajointleadmanagerof “a
createawholesaleJVinwhichDaiwaheld60%andSumitomoMitsui largepercentage”oftheonebillionsharesallottedtoMUFG’sforth-
owned40%. comingJapaneseequityoffering.ItisbusinessSuzukisaysDaiwa
Therewasspeculationfromtheoutsetthatadeeperalliancewould SMBCwouldneverhavegot.
follow.In2005,justoneyearafterSuzukitookthehelmatDaiwa,every YetforallSuzuki’sjustification,itishardtobelievethattheendof
majorJapanesenewspaperreportedthatafull-blownmergerwasinthe a10-yearalliancewithoneofJapan’slargestbankinggroupswillbe
works. inconsequential.
28 DEC2009/JAN2010 ASIAMONEY
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