Nomura needs to cut costs by $1bn, and jobs are in line of fire
The wholesale segment has been dragging on the performance of Japan's biggest brokerage and investment bank
Tokyo — Japan's Nomura Holdings will cut $1bn in costs from its wholesale business and shut more than 30 of 156 domestic retail branches in its latest overhaul, the ailing bank said on Thursday.
Nomura also plans to axe about 100 jobs in London — the centre for its European investment banking business — as part of the overhaul, a banking source said.
The wholesale segment has been dragging on the performance of Japan's biggest brokerage and investment bank, pushing it to its heaviest quarterly loss in nearly 10 years in the three months to December.
Nomura then put the business, which serves corporations and institutional investors, under review as CEO Koji Nagai focused on reducing reliance on volatile global markets and building up stable revenue flows.
The target of cutting $1bn in costs will be achieved over the "medium term", with 60% completed by the end of the financial year to March 2020, Nomura's joint COO Kentaro Okuda said in an investor day presentation.
The cost reduction will result in revenue gains of between $300m and $400m, with the ultimate target of building a wholesale platform that delivers consistent pretax income of $1bn, he said without giving a timeframe for that goal.
The segment swung to a pretax loss of ¥95.9bn ($861m) in the third quarter, versus a ¥14bn profit a year earlier.
Nomura's wholesale business has been squeezed by lower trading revenue in fixed income and what the bank described on Thursday as rigid indirect costs, adding that revenue for the business fell 24% to $4.9bn in the past financial year.
The bank said it would "de-emphasise" all operations in Europe, the Middle East and Africa while sharpening its focus in Asia, excluding Japan, and the Americas, where it aims to increase business with corporate clients.
The planned London job cuts represent part of this push, the banking source said, declining to be named.
The source, who has knowledge of Nomura's business strategy, said the investment bank will also focus more on the corporate business rather than rates. It will also shift focus from bond trading to the primary market managing bond sales for borrowers.
Nomura will look to maintain all of its existing relationships regardless of the job losses, he added. The bank is a primary dealer for a number of European government bond issuers.
When asked about how many jobs will be cut as part of the global overhaul, Nomura CEO Nagai declined to comment.
A document shows that Nomura would look for a 50% cost reduction in its trading business in Europe, Middle East and Africa, while also aiming to digitise its systems.
The plans include pursuing "strategic growth opportunities" in China, where the bank last week received regulatory approval to set up a majority-owned brokerage joint venture.
For the year ended in March, analysts expect the company to post its first annual loss since 2009, Refinitiv data shows, hurt also by a steep drop in profit at its retail business.
Japanese banks have been accelerating cost-cutting by shutting down domestic branches as they grapple with ultra-low interest rates and a declining population at home.
Nomura's plans to pare its retail footprint at home comes after rival Mizuho Financial Group said in March that it would book about ¥500bn of impairment losses on fixed assets, including costs from closing branches at home and software-related expenses.