Nomura Gains on Plan to Cut Additional $1 Billion in Costs

Nomura Holdings Inc. (8604) rose the most in more than two weeks in Tokyo after Japan’s biggest brokerage said it plans to cut another $1 billion of costs by March 2014.

The shares jumped 2.3 percent to 264 yen at the 3 p.m. close in Tokyo. The benchmark Topix Index (TPX) fell 0.4 percent.

The reductions will center on wholesale operations, which include investment banking and equities, spokesman Eiji Miura said at a briefing on Aug. 31. Nomura, which has posted losses overseas for nine straight quarters, implemented a $1.2 billion cost-cutting program last year after expenses swelled following its acquisition of Lehman Brothers Holdings Inc.’s Asian and European businesses in 2008.

“Investors reacted positively to seeing Nomura deepen cost cuts and its outline for achieving the actual reduction target,” said Masao Muraki, a Tokyo-based analyst at Deutsche Bank AG. “It won’t be easy to turn to a profit overseas unless the market environment improves. Also, cutting the wholesale workforce could hurt revenue.”

Chief Executive Officer Koji Nagai, appointed to the post in July, is seeking additional expense reductions as the company retreats from a global expansion overseen by former CEO Kenichi Watanabe. Miura spoke after Nagai told 450 managers of the plan in Tokyo.

Workforce Reduction

Nomura will cut jobs, mainly at overseas units including Europe, two people with knowledge of the matter said on Aug. 31.

The bank will strengthen its cross-border businesses including mergers and acquisitions advisory, Nagai, 53, told the executives, according to one of the people, who asked not to be identified because the meeting was private.

Nagai signaled in July that he will focus on business at home and elsewhere in Asia, describing the region as the “mother market.”

Net income tumbled 89 percent in the three months ended June from a year earlier to 1.9 billion yen as investment banking fees and brokerage commissions fell, Nomura reported on July 26. It posted a 12.1 billion-yen pretax loss from overseas operations, led by Europe.

The brokerage employed 3,975 people in Europe and 2,423 in the Americas, mostly in New York, among its 35,063 staff globally at the end of June. Operations in Europe have taken the brunt of efforts to trim costs over the past year, with the region accounting for 450 of the 560 jobs cut worldwide as the sovereign debt crisis roiled markets and slowed economic growth.

Most of Nomura’s European employees work in its wholesale unit, which includes investment banking and trading operations in London.

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

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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