Nomura job cuts begin as CEO cuts costs

It will simplify its corporate structure by reducing the number of functions by half

By BLOOMBERG

TOKYO • Nomura Holdings Inc unveiled plans to cut US$1 billion (RM4.08 billion) of costs at its struggling wholesale business, as Japan’s largest securities firm embarks on yet another sweeping overhaul of its international operations.

The company didn’t give specifics on job cuts as it presented the effort to investors yesterday after the market close in Tokyo. But the axe has already begun to fall, with about 100 positions being culled in Europe, the Middle East and Africa on top of reductions in Hong Kong and Singapore, people with knowledge of the matter said.

“To restart this company” as a new Nomura, “I have to commit myself to proceeding quickly with efforts to build a muscular base”, CEO Koji Nagai told investors.

“We realised that as long as we continue with the way we have done business thus far, Nomura won’t be able to get itself out of the current situation.”

Nomura’s operations outside Japan have lost money for four straight quarters, buffeted by its stop-start international expansions as well as the headwinds in Europe. Low interest rates, sluggish economies and fierce competition from the US have left rivals including UBS Group AG, BNP Paribas SA and Deutsche Bank AG confronting weak results, senior departures and even merger talks in the region.

In Europe, the Japanese bank has struggled to generate profits ever since it bought Lehman Brothers Holdings Inc’s operations there in 2008.

The bank’s job cuts there will mostly target rates and credit traders in London, one of the people said, asking not to be identified as the numbers aren’t public.

Eight out of nine employees in the Singapore equity research operation have been let go, the people said. Nomura also cut at least 10 jobs at its equities business in Hong Kong, one of the people said.

Nomura said it will “rightsize” its wholesale business, which is led by Steven Ashley and made up of investment banking and global markets divisions.

That includes scaling back areas including secondary trading in emerging markets as well as Group of 10 rates, foreign exchange and flow credit cutting costs in flow business in Europe, the Middle East and Africa by 50%; and optimising cash equities including by consolidating its Instinet electronic trading platform in Asia.

Most of the wholesale cost cuts will be completed by March 2020, Nomura said.

The company also said it will eliminate at least 30 of its 156 retail brokerage branches dotted across Japan.

Nagai commissioned the review in January after the bank posted its biggest quarterly loss since the global financial crisis, thanks partly to a goodwill write down on its acquisition of Lehman assets.

External pressures are also at play. In fixed income, “there’s heavy competition from US banks in Europe”, said Meziane Lasfer, Professor of Finance at Cass Business School in London. A smaller player such as Nomura “that doesn’t have the scale, can’t invest so it’s better to come out of the market”, he said.

Nomura also said it will simplify its corporate structure by reducing the number of functions by half.

Excluding the internal audit team, Nomura has 10 corporate areas ranging from finance to risk management and compliance.

These will be streamlined into five to avoid duplication and reduce costs.

“To put the latest reform of our platform into one word, it’s simplification,” Nagai said. “The urgent task right now is for us to proceed with the reconstruction of the platform with full force to put the company back on a growth path as soon as possible.” — Bloomberg