Oct. 26 (Bloomberg) -- Nomura Holdings Inc., Japan's largest securities firm, rose the most in three weeks in Tokyo trading after its second-quarter earnings report eased investor concern losses on investments in subprime loans may widen.

The stock rose as much as 5.5 percent before ending 4.2 percent higher at 1,909 yen at the close of trading in Tokyo. It was the stock's first increase this week.

Nomura reported its first loss in more than four years yesterday as the value of loans to U.S. borrowers with shaky credit plunged. The company said it has almost completed reducing to 14 billion yen ($123 million), from 657.8 billion yen on March 31, investments related to residential mortgage- backed securities.

``Nomura bit the bullet, and hard, by taking losses on virtually all its declared subprime exposure in the quarter,'' said Neil Katkov, managing director of the Asia Research Group at Celent LLC, a Boston-based financial research and consulting firm. Its writedowns are ``clearing the way for a strong income showing in the second half.''

Nomura posted a loss of 10.5 billion yen for the three months ended Sept. 30, compared with 43.5 billion yen profit a year earlier. Brokerage commissions rose to 106.9 billion yen from 66.1 billion yen, and asset management fees rose to 50.9 billion yen from 35.5 billion yen.

``Residential, mortgage-backed securities issues have been almost sorted out,'' said Tokyo-based Goldman Sachs analyst Takehito Yamanaka in a report yesterday, maintaining his ``buy'' rating. ``We can expect the U.S. business, which has frequently posted a loss, to turn profitable after the restructuring.''

To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net.

Last Updated: October 26, 2007 02:52 EDT