Business / Corporate

Daiwa closes convertible-bond principal trading desk in London

Bloomberg

Daiwa Securities Group Inc. has closed its principal trading desk in London for convertible bonds as Japan’s second-largest brokerage reviews the profitability of its operations abroad.

The firm shut the business this month, spokeswoman Misato Kinoshita said Wednesday, while declining to comment on the size of the trading operation in the British capital.

Daiwa is shifting its focus to domestic investment banking and retail brokerage services while scaling back overseas.

The strategy has helped to bolster profitability and was one of the reasons Moody’s Investors Service raised the company’s credit rating last week.

“This is part of structural reform that Daiwa has been progressing in order to stabilize its overseas businesses,” Kinoshita said. “We will continue the reform.”

Daiwa is shrinking trading and sales operations in London, with at least six people at risk of redundancy, a news report said earlier.

Principal trading, or market making, is the business of using a firm’s capital to buy and sell securities with customers, while profiting on the spread and movement in prices. Fixed-income trading revenue at banks worldwide has been hampered in recent years by declining volatility.

Moody’s raised Daiwa’s credit rating by two levels to Baa1, prompted by profit improvements stemming from its shift in business strategy, the rating company said Oct. 14.

Daiwa reduced the number of employees overseas to 1,500 as of June from a peak of 2,487 three years earlier, Moody’s said.

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