Japan's Nomura Holdings posted its first quarterly loss in 2-1/2 years on November 01 due to a slump in investment banking revenues and tripled its cost-cutting target to $1.2 billion to cope with market conditions a top executive said were about as tough as the 2008 financial crisis.
The debt crisis in Europe has ratcheted up pressure on Japan's top brokerage to tap the brakes on a global expansion that started with its purchase of the Asian and European businesses of failed Wall Street bank Lehman Brothers in 2008.
Nomura lifted its cost-savings target to $1.2 billion from the $400 million announced in July. About 60 percent of the savings will come from Europe, where Nomura is losing money and has 4,500 staff, or 13 percent of its global workforce. While Nomura did not disclose details on staff reductions, a source with knowledge of the matter said the scheme would bring total job losses to more than 1,000, including the 300 full-time workers it set out to cut in September under a previous plan.
"Nomura is the only Japanese investment bank with a presence across North America, Europe and Asia. Downsizing in Europe will weaken its competitiveness against rivals such as Goldman Sachs," said Yoichi Shinohara, a fund manager at Tokyo-based Asset Design.
Nomura posted a net loss of 46.1 billion yen ($591 million) for July-September, the fiscal second quarter, against a profit of 17.8 billion yen in April-June. The result was worse than the average 35.6 billion yen loss forecast by four analysts surveyed by Thomson Reuters.
It marked Nomura's first loss since January-March 2009, when it lost 215.8 billion yen due to costs to integrate Lehman's operations.
Nomura's woes mirror troubles across the investment banking industry as turmoil in financial markets, triggered in large part by problems in Europe and new regulations, squeezes trading gains and depresses fees. Credit Suisse said it would cut another 1,500 jobs and scale back its capital-guzzling investment banking business.
"I've been in the business a long time, many decades, and I certainly can't remember a time when there was a single quarter that we saw such adverse market conditions," Jesse Bhattal, head of Nomura's wholesale division told Reuters in an interview. "It is pretty similar to the financial crisis."
Nomura said the cuts would mainly target the wholesale division, which suffered a pretax loss of 73 billion yen, and said that resources would be shifted from Europe to more promising operations in Asia and the United States. Bhattal said he expected the division would re-establish a profitable structure by the end of the current financial year.
"These cuts are aimed at establishing a structure that can still respond even if the bad business environment remains intact for 18 months," Nomura Chief Financial Officer Junko Nakagawa said at a news conference.
Nomura estimated its exposure in Europe at $3.55 billion. It said Italy accounted for about 80 percent of that and that most if its holdings were in government securities and in positions that matured in the next five months.