Investment banking not down and out as Nomura picks up Lehman business

Investment banking giants have taken a beating in recent weeks, due to the sub-prime crisis and subsequent credit crunch.

But recent moves by Japanese banks to snap up assets of struggling banks show that there is still a market for their services.

This was underlined this week by Nomura's acquisition of Lehman Brother's operations in Asia and Europe.

According to sources, employees of Lehman Brothers Singapore are breathing a sigh of relief.

With Nomura buying up Lehman's Asian and European operations, some 5,500 jobs, including 270 in Singapore, now seem a little more secure.

The move, along with other deals struck this week, contradict the idea that the days of powerful investment banks are over.

Earlier this week, Goldman Sachs and Morgan Stanley gave up their investment bank status and converted to bank holding companies.

But observers said investment banking is far from dead, although banks have encountered difficulties when they overstretch themselves.

"Historically, investment banks have gotten in trouble when they started building up substantial long term assets - long term loans in particular - on their balance sheets. That's a business that's more typically a commercial banking business. In fact, that's the reason First Boston became Credit Suisse First Boston in the past," said Deborah E. Schuler, senior VP, Financial Institutions Asia, Moody's Singapore.

Moody's believes the business model of investment banking is still a valid one. And Nomura's acquisition of Lehman's European assets reveals another region where there is growth potential.

"European capital markets in Western Europe are obviously fairly well developed. Banks still play a larger role in the bond market for instance there (in Europe) than they would in the United States, so there's room there. Also, you have to remember that in Europe, there's Eastern Europe which is a large number of emerging markets on their own, so there's substantial growth opportunity," said Schuler.

Japanese institutions are not the only ones investing in weakened Wall Street firms. Billionaire investor Warren Buffet recently took a US$5 billion stake in Goldman Sachs. - CNA /ls

http://www.channelnewsasia.com/stories/corporatenews/view/

Business Financial Services

Investment banking not down and out as Nomura picks up Lehman business