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Nomura Cut Italian Assets by 83% Since September Amid Crisis

Nomura Said to Cut Its GIIPS Assets by 75% Since End-Sept.
Nomura Holdings Inc. reduced its assets linked to Greece, Ireland, Italy, Portugal and Spain by 75 percent since the end of September, a person with direct knowledge of the matter said. Photographer: Kiyoshi Ota/Bloomberg

Nomura Holdings Inc., Japan’s largest brokerage, reduced assets linked to Italy by 83 percent from the end of September as it slashed southern European holdings amid the region’s widening sovereign debt crisis.

The total for Italy was reduced to $467 million as of Nov. 24 from almost $2.82 billion, according to a statement posted on the Tokyo-based company’s website late yesterday. The securities firm cut the value of assets linked to Spain by 62 percent from Sept. 30 to $175 million, while Greece’s was cut 43 percent to $27 million, it said.

Investors have driven Nomura shares down 52 percent this year as losses from overseas operations mounted and on concern that the Tokyo-based brokerage’s European holdings may lead to wider losses. Nomura is cutting jobs and slashing annual costs by $1.2 billion, mostly in Europe, as it also seeks to avert a potential downgrade by Moody’s Investors Service.

“The reductions may ease concerns in the market, as investors have been worried about Nomura’s exposure to Italy,” said Masao Muraki, an analyst at Deutsche Bank AG in Tokyo who has a “hold” rating on the stock. “The actual effect remains to be seen.”

In the latest sign of stress in the European financial system, Moody’s said today that it may cut debt ratings of banks in 15 countries including Italy to reflect the potential removal of government support. It will review ratings on subordinated, junior-subordinated and Tier 3 debt of 87 European banks.

Shares Rise

Shares of Nomura rose 6 yen, or 2.5 percent, to 246 yen on the Tokyo Stock Exchange, their third straight day of gains. They fell to 224 yen on Nov. 24, the lowest level in at least 37 years. Contracts to insure Nomura bonds against default for five years fell 5 basis points to 405 in New York yesterday from 410, the highest in at least a year, according to data provider CMA.

Nomura’s assets linked to Ireland climbed 2.3 percent to $315 million, the Japanese firm said. The reported holdings for Greece, Ireland, Italy, Portugal and Spain include debt, derivatives and counter-party agreements, a person with knowledge of the matter said yesterday.

Banks around the world are sounding their loudest warnings yet that the euro area risks unraveling unless its guardians quickly intensify efforts to beat the two-year sovereign debt crisis. Economists from banks including Morgan Stanley, UBS AG and Nomura said over the past week that governments and the European Central Bank must step up their crisis response.

Mainly Government Bonds

Government bonds accounted for 74 percent of the $3.55 billion linked to the five European nations as of Sept. 30, according to a statement issued by the brokerage on Nov. 1. Financial institutions consisted of 20 percent and corporates 6 percent, it had said.

More than 80 percent of the amount matures by the end of March 2012, while Italy accounted for 79 percent, Nomura had said at that time.

Nomura on Nov. 1 posted a 46.1 billion yen ($591 million) loss for the three months ended Sept. 30 as pretax losses from overseas operations swelled to 52.4 billion yen, the biggest in at least six quarters. The net loss was Nomura’s first in more than two years, prompting the company to triple a target for cost cuts with most of the reductions slated for Europe.

The firm started cutting jobs in Japan by eliminating at least 15 positions in equity-related businesses, two people with knowledge of the matter said last week.

Moody’s on Nov. 9 said it may lower the brokerage’s credit rating after reviewing losses from its capital markets activities and the brokerage’s expense-reduction program. The exposure to Europe’s most troubled nations “appears manageable, and has not been a rating driver for the review,” the ratings company said at that time.

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