Nomura suffers 1st annual loss in a decade, scraps Directors’ bonuses

Monday, 29 April 2019 00:00 - - {{hitsCtrl.values.hits}}

TOKYO, REUTERS: Japan’s Nomura Holdings Inc. reported an annual loss for the first time in a decade and said it would not pay Directors’ bonuses, amid rising pressure to right its wholesale business and drastically pare back costs.

The bleak results underscore the challenges of Nomura, which recently announced a restructuring plan that includes cutting $1 billion in costs from its wholesale business and shutting about 20% of its domestic retail branches.

Nomura posted a net loss of JPY 100.4 billion ($897 million) for the year ended March, wider than an average estimate of JPY 81.4 billion from seven analysts polled by Refinitiv.

In the fourth quarter, profits were almost wiped out for Japan’s biggest investment bank and brokerage, sinking about 96% from a year earlier to JPY 800 million.

“The result was very much disappointing,” Chief Financial Officer Takumi Kitamura told reporters at an earnings briefing.

“We are making an effort to get our business back at the cruising speed as soon as possible,” Kitamura said.

As part of its cost-cutting plans, Nomura has already said it will shut more than 30 of its 156 retail branches at home. It also plans to axe about 100 jobs in London, the centre for its European investment banking business, Reuters has reported.

On Thursday, Nomura said it would not pay the performance-linked portion of compensation to dozens of executives for the year ended March given the lacklustre financial performance.

Pre-tax profit at Nomura’s key retail unit plunged 85% year in the fourth quarter.

“Stock prices have recovered in some degree since January but our customers remain wait-and-see,” Kitamura said.

But it is the wholesale business which serves corporations and institutional investors that has been the biggest drag for Nomura. The segment swung to a pre-tax loss of JPY 13 billion in the fourth quarter, from a JPY 44.2 billion profit a year ago.

The segment has been squeezed by lower trading revenue in fixed income. The sizeable loss speaks to the scale of the challenge ahead for Nomura and its CEO Koji Nagai.

But Nagai has no plan to follow the lead of Wall Street rivals and seek a tie-up with a commercial lender, he recently told Reuters, eschewing a model that has redefined investment banking since the global financial crisis.

While it lacks the lending firepower of a commercial bank, Nomura’s independence means it is not confined by the banking relationships of other lenders and can do deals with anyone in Japan, Nagai has said.