Nomura to up cost cuts by $1 billion

Retrenchment, scandal prompt global paring

AFP-JIJI

Nomura Holdings announced Monday that it would cut an additional $1.0 billion, or about ¥78.5 billion, in costs globally in a bid to repair its balance sheet as the nation’s biggest brokerage recovers from an embarrassing insider trading scandal.

The firm said it planned to usher in the cuts by March 2014, chopping expenses from its wholesale division, which includes its investment banking, equities and fixed-income businesses.

In July, Nomura said profit for the first quarter ended in June shrank almost 90 percent owing to weakness in its retail and wholesale trading business.

Like many investment banks, Nomura has struggled with yo-yoing stock and bond prices, poor merger prospects and tighter regulations in the wake of the global financial crisis.

The brokerage held a meeting with about 450 managers in Tokyo on Friday to outline the plan, which is to be presented to shareholders this week.

Nomura confirmed that job cuts were part of the planned reductions but declined to elaborate.

The mainstream media have reported that the bulk of the cuts will come from slashing jobs from the money-losing European business Nomura acquired from Lehman Brothers in 2008.

Nomura began an aggressive expansion drive when it picked up Lehman’s businesses — and thousands of employees — after the Wall Street giant’s collapse.

But the bulked-up brokerage lost some key executives amid the ensuing corporate culture clash.

The resignation last month of Chief Executive Kenichi Watanabe, a key driver behind the bank’s expansion, was widely viewed as the end of Nomura’s ambitions to be a global heavyweight.

Watanabe quit in the wake of a damning internal report that said Nomura sales staff improperly tipped off clients about share sales as information often flowed freely between the sales staff and Nomura’s investment banking and research side, a practice that is usually barred.

Insider trading, although illegal, is widespread and carries only token fines.

Japanese authorities are carrying out a wide-ranging probe into the practice amid renewed pressure to address their lax regulations and legal loopholes, which have repeatedly stained Japan’s corporate governance veneer.