Nomura profit falls 76% as banking turmoil hits trading

NOMURA Holdings’ profit fell as fixed income trading revenues were hit by a spike in volatility in March and deal-making slumped on muted client activity.

Net income slid 76 per cent from a year earlier in the three months ended Mar 31 to 7.4 billion yen (S$70 million), Japan’s largest brokerage said in a statement on Wednesday (Apr 26). The figure missed an average estimate of 38.5 billion yen by four analysts polled by Bloomberg.

The brokerage said it plans to buy back as much as 20 billion yen in shares, less than it announced a year ago. While fixed income started the year strong, it slowed last month, the company said. The past year was very tough for investment banking, though deal origination should recover later this year, chief financial officer Takumi Kitamura said at a briefing.

Nomura is grappling with challenges that include historic market moves triggered by troubles at Silicon Valley Bank and Credit Suisse Group. While the turmoil is helping to fuel trading activity, it hit just as Wall Street firms were already in retrenchment mode with interest rates rising and the economic outlook becoming uncertain.

Nomura has slashed its entertainment budget for executives, people familiar with the matter said, as it steps up efforts to rein in costs. The firm’s rates traders bounced back from market volatility fuelled by last month’s banking industry woes after the turmoil initially inflicted modest losses, the head of Nomura’s investment banking and trading businesses said in an interview several weeks ago.

Nomura’s revenues fell 6 per cent at the global markets unit, in line with the average decline in trading at five of the biggest Wall Street lenders. Fixed income rose 9 per cent despite the turbulence in March, while equities was down 21 per cent.

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One pocket of concern for big investment banks remains the muted activity in capital markets as companies seek to ride out volatility, which has depressed fees. Nomura’s investment banking revenue slipped 20 per cent in the quarter.

Christopher Willcox took the helm of the wholesale arm in October, overseeing a division that spans trading, underwriting and advice on mergers. chief executive officer Kentaro Okuda wants the business to generate more stable revenue from advisory and wealth management services while reducing reliance on volatile trading – a tough task as dealmaking slumps and competition to serve rich clients heats up. BLOOMBERG