Nomura's wholesale business is struggling and will be affected. There will be job cuts. Big job cuts
Nomura Plans $1 Billion of Wholesale Cuts
CHANYAPORN CHANJAROEN APRIL 04, 2019
Nomura Holdings Inc. unveiled plans to cut $1 billion of costs at its struggling wholesale business, as Japan’s largest securities firm embarks on yet another sweeping overhaul of its international operations.
A majority of the reductions will be completed by March 2020, Nomura said at an investor presentation in Tokyo on Thursday after the market close. The company also said it will eliminate at least 30 of its 156 retail brokerage branches dotted across Japan.
“To restart this company" as a new Nomura, “I have to commit myself to proceeding quickly with efforts to build a muscular base,” Chief Executive Officer Koji Nagai told investors. “We realized that as long as we continue with the way we have done business thus far, Nomura won’t be able to get itself out of the current situation.”
Nagai’s comments, along with the ambitious cost-cutting target, amount to a tacit acknowledgement that Nomura’s years of stop-start international expansions have failed to generate returns for shareholders. Nomura’s operations outside Japan have lost money for four straight quarters, with Europe a leading headache for Nagai.
Read about Nomura’s attempts to revive its European business
The firm has already begun eliminating jobs in Singapore and Hong Kong, according to people with knowledge of the matter. Eight out of nine employees in its Singapore equity research operation have been let go, the people said, asking not to be identified. Nomura also cut at least 10 jobs at its equities business in Hong Kong, one of the people said.
Nomura said it will “right-size” its wholesale business, which is made up of investment banking and global markets divisions. While the firm didn’t provide any details of job cuts in the presentation it said it will:
downscale areas including secondary trading in emerging markets as well as G-10 rates, foreign exchange and flow credit
cut costs in flow business in Europe, the Middle East and Africa by 50 percent
“optimize” cash equities including by consolidating its Instinet electronic trading platform in Asia.
Last week, Bloomberg reported that Nomura plans to cut dozens of trading and investment-banking jobs in Europe and the U.S.
Nagai commissioned the review in January after the bank posted its biggest quarterly loss since the global financial crisis, thanks partly to a goodwill writedown on its 2008 acquisition of Lehman Brothers Holdings Inc. assets – the deal that hobbled the bank’s European operations.
Credit rating companies have been keenly anticipating Nomura’s latest revival attempt. S&P Global Ratings said in February that it may consider reviewing the firm’s debt ratings if its restructuring efforts are unsuccessful and earnings power remains weak. Moody’s Investors Service said in November that it may downgrade the rating if the bank can’t improve profitability without adding risk to its balance sheet.
Shares of Nomura closed 1.5 percent lower in Tokyo, erasing its gains for this year and underperforming the benchmark Topix index, which has climbed 8.4 percent.
What Bloomberg Opinion Says
“Nomura needs a presence outside Japan, just a smaller one. A bare-bones operation in Europe, where Wall Street rivals reign in investment banking, would be a start.”
–Nisha Gopalan, columnist
Click here to view the piece.
Nomura also said it will simplify its corporate structure by reducing the number of functions by half. Excluding the internal audit team, Nomura has 10 corporate areas ranging from finance to risk management and compliance. These will be streamlined into five to avoid duplication and reduce costs.
“To put the latest reform of our platform into one word, it’s simplification,” Nagai said. “The urgent task right now is for us to proceed with the reconstruction of the platform with full force to put the company back on a growth path as soon as possible.”
— With assistance by Gareth Allan, Sophie Jackman, Abhishek Vishnoi, Sofia Horta e Costa, Mark Cudmore, and Kana Nishizawa