The former Lehman Brothers banker who was hired to salvage Nomura Holdings Inc.'s ambitious global expansion resigned after he was unable to garner support from Tokyo for an overhaul of the global wholesale-banking operations, people familiar with the matter said.
The resignation of Jasjit "Jesse" Bhattal, Nomura's highest-ranking foreign executive and joint deputy president, is a blow to Nomura's bid to become a global investment-banking powerhouse and creates a leadership vacuum at the bank's wholesale-banking unit.
The Japanese bank is suffering from the same problems facing investment banks globally: volatile stock and bond prices, soft merger activity and tighter regulation. That is even hitting Asia, a region that has been a key area of growth and investment for banks. Now firms are cutting staff and granting smaller bonuses.
Nomura announced $1.2 billion in cuts to annual costs in November, but analysts said that might not be enough to stabilize profitability.
Bhattal, 55 years old, had pushed for those cuts, but in fierce debates with Tokyo counterparts and global executives protecting their head counts, he was unable to build a consensus to take the radical steps he thought were necessary to improve profitability going forward, people familiar with the matter said. These included shutting down operations in marginal countries and closing unprofitable business lines, those people said.
While the bank said it has identified most of the cost cuts, people familiar with the matter said that in some cases it used short-term measures that avoided big layoffs.
Nomura on Tuesday praised Bhattal and said he had retired. Takumi Shibata, the bank's chief operating officer, was named to temporarily take over his role.
As part of a restructuring of Bhattal's operation, the head of the global markets division, Tarun Jotwani, is to step down, according to people familiar with the matter. Jotwani, also formerly of Lehman, had been tapped within Nomura as a possible successor to Bhattal the people said. Global markets spans fixed-income and equities trading.
Jotwani, who is based in London and joined Nomura from Lehman, couldn't be reached for comment.
Other banks are announcing cuts as well. Bank of America Merrill Lynch is the latest bank to trim staff in Asia, aiming to cut around 20% of its expensive managing directors in the region by the end of the first quarter, a person familiar with the situation said Tuesday. Citigroup and Goldman Sachs Group Inc. have cut small numbers of staff in Asia, and other firms, including Morgan Stanley, are expected to follow suit in coming weeks.
In the battle among the world's biggest investment banks, Nomura is hobbled by its relatively smaller size and lower credit rating, which makes it harder to compete.
Nomura launched a global expansion effort powered by its acquisition of Lehman Brothers Holdings Inc.'s businesses in Europe and Asia in 2008; Barclays PLC bought Lehman's U.S. operations. But the Japanese bank has struggled to maintain profitability since then, and its stock price has plunged about 80% since the Lehman deal.
When the bank announced the cost cuts in November, it effectively scaled back its ambition to become a global bank that competed in every major line of business.
Bhattal, a native of India, became the first foreigner to break the bamboo ceiling at the Japanese brokerage firm by joining its executive committee in 2010. But his resignation highlights longstanding problems at Japanese companies trying to globalize and adopting western-style business methods.
At Nomura, Bhattal's wholesale division handles advising on mergers and acquisitions and capital raising as well as trading for big institutions.While he was instrumental in negotiating the sale of Lehman's assets in Asia Pacific to the Japanese bank and then joined Nomura as part of the sale, he was largely sidelined while the Japanese firm went on a hiring spree, particularly in the U.S., and offered big guaranteed contracts to high-profile bankers.
In 2010, he was made chief operating officer of the wholesale division as it became clear the expansion strategy was struggling and as several senior ex-Lehman bankers defected after their bonus guarantees ran out. He was then promoted to chief executive of the division.
Bhattal will work out his six-month notice period and then plans to invest his own money and potentially accept invitations to hold boardroom positions, people familiar with the matter said.
This story first appeared on WSJ.com.
Write to Alison Tudor at alison.tudor@wsj.com
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