Japan's Nomura Holdings Inc announced on October 16 its exit from the US market for mortgage-backed securities after suffering large losses because of the subprime loan crisis.
Nomura Holdings Inc, Japan's biggest securities firm, said it would slash 400 jobs, or 30 percent of the workforce, at its US operations due to the US mortgage woes, which wreaked havoc on global markets in August.
The company said it expected to post a pre-tax loss of up to 60 billion-yen (511 million dollars) for the fiscal second quarter to September because of restructuring charges and a 73-billion-yen loss from the subprime debacle.
"We have moved decisively to deal with the issue and have avoided further and protracted losses by taking firm and immediate action," said chief executive Nobuyuki Koga.
"This draws a line under the residential mortgage-backed securities (RMBS) problem," he added.
Nomura said it had reduced its exposure to US residential mortgages from 266 billion yen (2.3 billion dollars) in June to just 14 billion yen currently, about 100 million yen of which is subprime related.
The Japanese giant had already lost 31.2 billion yen on US residential mortgage-backed securities market in the three months to June.
The pre-tax loss means Nomura will likely book a quarterly net loss in the second quarter, the first since early 2003, Nomura chief financial officer Masafumi Nakada told the news conference.
"We believe the costly restructuring step will help us clear all problems in our US business and return to the black in the next fiscal year and onwards," Nakada said.
The group said it would now focus more on asset management and the marketing of Japanese and other Asian equities in the US market. The subprime turmoil was not the only reason for the US losses, chief executive Koga said.
Subprime loans flourished in the US during the last part of the housing boom, providing mortgages to people with poor credit histories, often allowing them to buy homes beyond their means.
Higher repayment costs are now causing rising delinquencies and investors are reassessing their exposure to risky assets such as mortgage-backed securities.
Credit rating agency Standard & Poor's said that Nomura should be able to cope with the loss. "The group's generally solid business performance in other segments such as domestic operations, and its 2.3 trillion yen capitalisation on a consolidated basis are capable of absorbing the US RMBS-related loss," the agency said.
Japanese banks have also reported losses on subprime loans but their exposure is believed to be limited as they take less risks than their foreign peers.
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