Nomura Holdings Inc. (8604), Japan’s biggest brokerage, is planning to cut as many as 30 jobs in part of its Americas equities division this week amid a global reorganization, according to people briefed on the plan.
The reductions will occur as early as today in execution services, which Tokyo-based Nomura is folding into its independent Instinet unit, said the people, who requested anonymity because the cuts haven’t been announced.
Chief Executive Officer Koji Nagai, 53, is targeting profitability for overseas operations by June 2014 as he cuts $1 billion of costs worldwide. Nomura said this month it’s reorganizing the equities division into three segments, with execution services, including cash, programs and electronic products outside of Japan to be wrapped into Instinet, the brokerage it acquired in 2006.
“On the one hand they want to reduce costs and on the other they also want to move to the Instinet system from a trading perspective,” said Mac Salman, a Tokyo-based analyst at Jefferies Group Inc. “That gives them the opportunity to cut costs on the execution side.”
Nagai, who took over from Kenichi Watanabe as CEO on Aug. 1, is overhauling the Japanese bank after expenses swelled following its 2008 purchase of Lehman Brothers Holdings Co. operations in Europe and Asia. The company has posted pretax losses abroad for the past nine quarters.
“We are currently in the process of reducing costs in the Americas in order to transition the equities business to the new operating model” disclosed this month, said Jonathan Hodgkinson, a New York-based spokesman for Nomura. He said he couldn’t comment on the number of jobs to be cut in execution services.
Nomura named Samir Patel and Michael Rietbrock co-heads of Americas equities this month to replace Ciaran O’Kelly as the firm recalibrates its overseas operations.
The company said this month that it will reduce costs by $210 million in the Americas, $450 million in Europe and the Middle East and $340 million in Asia including Japan, with about 45 percent of the cuts worldwide coming from trimming staff.
Shares of Nomura rose 0.4 percent to 281 yen at 11:12 a.m. in Tokyo. They have gained 8.9 percent since Nomura unveiled the expense-reduction plans on Aug. 31.
“Equity markets are being dramatically reshaped globally” by economic forces and demands for agency-driven execution, Benoit Savoret, the firm’s global co-head of equities, said in a Sept. 6 statement. The firm’s changes “uniquely position Nomura in this new market environment.”
Nagai said in an interview this month that it will take time to make a profit abroad as the company will first have to implement the cost savings program by March 2014. Eliminating jobs “will generate restructuring costs after that,” he said.
Nomura is eliminating about 100 investment banking jobs in Europe as part of a 30 percent reduction in its workforce in the region, three people with knowledge of the plans said last week.
In Asia, the bank is reorganizing its global finance team into two main streams, an internal memo confirmed by Nomura showed this week. Global finance units within the investment banking and fixed-income divisions will reconfigure into debt origination including debt capital markets, private placements, leveraged finance and private financing activities; and risk solutions, according to the memo obtained by Bloomberg.
Mark Leahy, the head of debt syndicate and debt origination for Asia excluding Japan, said this week that he is leaving as part of the revamp.
Nomura’s biggest domestic competitor is also expanding cost cuts. Daiwa Securities Group Inc. (8601) said this week that it will eliminate as many as 50 derivatives jobs in Hong Kong and may shrink investment banking and equity research in the city. The reductions are in addition to 500 positions eliminated by the Tokyo-based firm in Asia and Europe since last October.
The Americas contributed 35.5 billion yen ($457 million), or 29 percent, to Nomura’s fiscal first-quarter global wholesale net revenue, which includes investment banking, fixed-income and equities trading. That compares with 42.5 billion yen, or 27 percent, in the previous quarter ended March 31, which was the Americas wholesale division’s strongest since Nomura began building its U.S. operation in April 2009.
Nomura generated 161.7 billion yen in global equity trading revenue in the 12 months ended June 30. That compares with $3.2 billion at Bank of America Corp. and $5.6 billion at Morgan Stanley.
“Downsizing Nomura is an anguished option to take when the company is still competing as a global investment bank,” Kouichi Niwa, a Tokyo-based analyst at SMBC Nikko Securities Inc. “But this is an unavoidable option to boost profitability.”
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