Daiwa Cuts Jobs Abroad as Profit Falls 45% on Trading Slump

  • Results announced after shares tumble on BOJ inaction
  • Brokerage commissions and underwriting fees also fell

Daiwa Securities Group Inc. said it has almost completed a round of job cuts overseas as a trading slump contributed to a 45 percent decline in fourth-quarter profit.

Net income fell to 21.3 billion yen ($196 million) in the three months ended March 31 from 38.5 billion yen a year earlier, Japan’s second-largest brokerage said in a statement on Thursday. The Tokyo-based firm cut personnel in areas including investment banking in Asia and fixed income, currencies and commodities in Europe over the past two quarters, Chief Financial Officer Mikita Komatsu said at a briefing.

The results were announced hours after the Bank of Japan decided against expanding monetary stimulus, triggering a surge in the yen and a plunge in stocks that further clouds the outlook for securities firms. Larger competitor Nomura Holdings Inc. posted a surprise quarterly loss on Wednesday and said it will close some businesses to return its overseas operations to profit.

While Daiwa has a more modest footprint outside of Japan than Nomura, Chief Executive Officer Takashi Hibino has also been reducing expenses to cope with the global trading slump. Daiwa employed 1,566 staff overseas as of March, 70 fewer than a year earlier.

Shares of Daiwa fell 7.5 percent, the most since Feb. 12, at the close in Tokyo before the results were released, taking this year’s decline to 13 percent. Nomura tumbled 10 percent and is down 29 percent in 2016. The benchmark Topix retreated 3.2 percent Thursday.

The drop in profit was in line with the 21.5 billion yen average of 11 analyst estimates compiled by Bloomberg. Revenue fell 14 percent in the quarter from a year earlier to 150.6 billion yen.

Brokerage commissions slid 22 percent to 15 billion yen, and trading profit dropped 31 percent to 28.7 billion yen. Underwriting fees declined 40 percent to 3.9 billion yen. Pretax losses abroad widened to 714 million yen from 127 million yen.

Bank of Japan Governor Haruhiko Kuroda and his colleagues opted to take more time to assess the impact of negative interest rates, surprising the slight majority of economists surveyed by Bloomberg who had projected some action. Daiwa CFO Komatsu said the policy will eventually help to tackle deflation.

“Negative rates are something new that nobody expected, so it’s taking time for people to adjust,” Komatsu said. “We should see the positive effects soon.”

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