By Thomas Wilson and Emi Emoto
TOKYO (Reuters) - Daiwa Securities Group Inc (T:8601), Japan's No. 2 brokerage firm, may decide as early as mid-June to move dozens of London-based staff to Frankfurt or another European city, ahead of Britain's exit from the European Union, its chief executive said.
The German city is Daiwa's favoured destination, as London-based staff can easily be transferred to its investment banking branch in Frankfurt, Seiji Nakata told Reuters in a recent interview.
"We're looking at Frankfurt as the leading candidate," he said. "The move will be in the dozens of staff, even including management, and can be done without much time or cost."
Daiwa said it would keep staff in London even after Brexit, but declined to say how many. It currently employs around 450 people in the EU, mostly in the British capital.
UK-based financial services firms doing business in the EU rely on the "passporting" system to sell across the region. But their UK operations are expected to lose this access after Brexit, prompting firms to consider moving staff or operations to other European cities.
Other investment banks were also favouring Frankfurt for some of their UK-based staff, beating out contenders such as Paris and Dublin.
Frankfurt's chief lobbyist expects U.S. investment banks to move hundreds of key staff to the city within two years, while Standard Chartered (L:STAN) looks to base its European operations there.
OVERSEAS M&A PUSH
Daiwa's overseas business accounted for 10 percent of total pretax profit of 136 billion yen (£932 million) in the year ended March, driven mainly by mergers and acquisition business in Europe, Asia and Oceania.
To capture a greater share of Japanese deal-making in the United States, Daiwa is looking to hire more M&A bankers in sectors including technology, media and telecoms, Nakata said.
"(Japanese companies') M&A needs will be booming worldwide for several years to come," he said. "But the problem in America is that our number of bankers is small compared to the size of the market."
Daiwa may also increase its stake in New York-based boutique Sagent Advisors or invest in a separate advisory firm, Nakata said.
Nomura Holdings Inc (T:8604), Japan's largest brokerage firm, said last month it will boost coverage of cross-border deals at its U.S. arm.