Three questions to ask about the coming bonuses at Nomura

Nomura is one of the last investment banks to announce bonuses - Macquarie and Royal Bank of Canada Capital markets notwithstanding. After reporting strong fourth quarter results today, insiders say that Nomura is due to announce bonuses to employees in the next few weeks.

This is what Nomura-bankers and Nomura-watchers need to look out for:

1. Will equity bankers at Nomura get paid?

Will Nomura be kind to its equities bankers?

Nomura's equities business is in a state of upheaval as it integrates with electronic broking platform Instinet. As we reported last month, Nomura cleared out several of its senior equity researchers in March. Nomura's head of European equities is said by Financial News to be leaving, whilst its heads of equity sales and cash sales reportedly left in February.

One headhunter, speaking on condition of anonymity, said he'd spoken to three senior Nomura equities bankers who had been given advance warning on the size of the bonus pool in order to retain them. "They all said the same thing: bonuses will be 25-30% down and 25% of people will be zeroed."

Nomura declined to comment.

2. Will Nomura's bonuses be diverted to the US?

Nomura has spent the past few years building up its US investment banking business, and pulling back from its investment banking business in Europe the Middle East and Africa. Today's results make this look justified: in the fourth quarter, EMEA wholesale banking revenues at Nomura fell by 43% (or by 21% when a one-off private equity loss is deducted). US wholesale banking revenues fell by only 14% over the same period. Full year 2012 US fixed income revenues at Nomura more than doubled versus 2011.

Will Nomura divert bonuses away from its struggling London-based EMEA business in favour of its bankers in New York? It's quite probable, said Simon Maughan, head of sector strategy at Olivetree Securities. "The US capital markets are stronger than in Europe, and banks like HSBC and Credit Suisse have already highlighted the pay differential that's emerging between higher value-added North American businesses and their EMEA counterparts," said Maughan. "Nomura would be following a trend."

If Nomura doesn't divert its bonus pool to the US, it may divert it Japan. The domestic Japanese market was an important revenue-driver for Nomura in the fourth quarter, with revenues there rising 165% year-on-year.

3. What will happen to Nomura's bonus deferrals?

Nomura was one of the first banks to introduce long deferrals on its bonuses, with bonus deferrals for managing directors extended to five years last May.

Another headhunter, speaking on condition of anonymity, said some senior Nomura fixed income bankers have been told that bonuses will comprise a higher proportion of cash this year and that deferrals may be curtailed to three years. Nomura declined to comment.

Jon Terry, head of compensation and benefits said most banks have sought to pay a higher proportion of cash - particularly to junior staff, this year. "Now that bonus pools are smaller and there's less money to go around, banks are trying to make that money look and feel more valuable by relaxing deferral conditions for some of the more junior guys."