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Nomura plans US$1b of  wholesale cuts

Tokyo

NOMURA Holdings Inc unveiled plans to cut US$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.

The company didn't give specifics on job cuts as it presented the effort to investors on Thursday after the market close in Tokyo. But the axe has already begun to fall, with about 100 positions being culled in Europe, the Middle East and Africa on top of reductions in Hong Kong and Singapore, people with knowledge of the matter said.

"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 realised 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."

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Mr Nagai's comments, along with the ambitious cost-cutting target, amount to a tacit acknowledgment that Nomura's years of stop-start international expansions have largely been fruitless.

Nomura's operations outside Japan have lost money for four straight quarters, with Europe a leading headache for Mr Nagai.

The job cuts in Europe will mostly target rates and credit traders in London, one of the people said, asking not to be identified as the numbers aren't public. Eight out of nine employees in the Singapore equity research operation have been let go, the people said. 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. That includes: downscaling areas including secondary trading in emerging markets as well as G-10 rates, foreign exchange and flow credit cutting costs in flow business in Europe, the Middle East and Africa by 50 per cent optimising cash equities including by consolidating its Instinet electronic trading platform in Asia.

Most of the wholesale cost cuts will be completed by March 2020, Nomura said. The company also said it will eliminate at least 30 of its 156 retail brokerage branches dotted across Japan.

Mr 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.

The CEO flagged the potential for cuts in Europe in a December interview. Nomura's plan to end the status of its office in the UK capital as a global booking hub means the current 3,000-strong workforce in Europe may be "a little large," he said at the time.

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 per cent lower in Tokyo, erasing their gains for this year and underperforming the benchmark Topix index, which has climbed 8.4 per cent.

"To put the latest reform of our platform into one word, it's simplification," Mr 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." BLOOMBERG