May 28 (Bloomberg) -- Nomura Holdings Inc., Japan’s biggest brokerage, had its credit rating cut two levels to Baa2 by Moody’s Investors Service, citing the damage done to its earnings by the global credit crisis.

“Challenges to stabilizing earnings will continue,” Moody’s said in a statement yesterday. The ratings company also noted uncertainty about the integration of Lehman Brothers Holdings Inc. units acquired by Nomura last year.

Nomura now carries the second-lowest investment-grade rating from Moody’s. The company is cutting costs after posting a bigger-than-estimated loss in the quarter ended March 31, in contrast to a return to profit at Goldman Sachs Group Inc. and Bank of America Corp.

“Deterioration in the global investment climate may force the company to post additional losses, further delaying its earnings recovery,” Moody’s said. The ratings firm said Nomura’s outlook is stable.

Keiko Sugai, a spokeswoman for Nomura, said the company will continue to reduce costs and to integrate the acquisition of Lehman businesses as quickly as possible.

Nomura’s shares fell 1.7 percent to 707 yen as of 10:24 a.m. in Tokyo while the Nikkei-225 Stock Average fell 0.1 percent.

Downgrade ‘Inevitable’

“The Moody’s downgrade is inevitable considering the long- term outlook for the economic environment,” said Mitsushige Akino, who oversees about $632 million at Ichiyoshi Investment Management Co. in Tokyo. “In the short term, investor sentiment on Japanese stocks has been recovering, and Nomura’s share price has been helped by this optimistic trend.”

Nomura’s 708.2 billion yen ($7.4 billion) loss for the full year was the second-largest of any Japanese company, behind Hitachi Ltd. Its 215.8 billion yen deficit for the final three months of the fiscal year compared with a median analyst estimate of a 127 billion yen shortfall.

On April 15, Nomura filed for registration with Japan’s Ministry of Finance to allow it to raise as much as 400 billion yen selling bonds within two years. On May 14, it made another filing to potentially raise a further 300 billion yen.

Chief Executive Officer Kenichi Watanabe has said Nomura may spend more than $2 billion to absorb 8,000 workers it took over from Lehman in October. The company, which had 25,626 employees as of March 31, eliminated more than 2,000 positions between October and May.

“The challenge for Nomura is to reduce expenses,” Standard & Poor’s said in a report after Nomura’s quarterly results. “A substantial recovery in earnings is unlikely.”

S&P has a BBB+ rating on Nomura, its third-lowest investment grade.

The brokerage raised more than $7 billion last fiscal year to replenish capital eroded by losses and the cost of integrating Lehman.

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

Last Updated: May 27, 2009 21:28 EDT