The Sumitomo Bank alliance and the industry’s first pure holding company (1998)

Between bank and broker, only the holding company remained

What told in this decision was less the alliance itself than the choice of structure that contained it. To take in Sumitomo Bank’s capital, Daiwa adopted a form no one in the industry had tried — a listed pure holding company — and divided retail from wholesale by line of business. Because it had that structure ready before Nomura Securities did, Daiwa converted the market’s turn into profit quickly, and could later expand the joint venture, and then dissolve it, as a rearrangement of subsidiaries that never shook the parent. More than the substance of partnering with a bank, it was the judgement about what structure to reorganise into that made Daiwa nimble through the 2000s.

The distance to keep from banks, on the other hand, can hardly be said to be settled even now. The joint venture with Sumitomo Bank, struck in 1998 as a measure of last resort, widened into a full alliance with Sumitomo Mitsui, was dissolved a little over ten years later, and left Daiwa independent again. Borrow a bank’s capital and take scale, or hold independence and take agility — the question of how the industry’s number two should live differently from Nomura Securities remains open a quarter of a century on. Only the skeleton of the pure holding company has stayed constant, as the base that absorbs the swing. Under a holding company, whom to partner with and what to separate out: the form Daiwa chose in 1998 is still the foundation of the company.