By Thomas Wilson and Emi Emoto
TOKYO (Reuters) - Nomura Holdings Inc's (T:8604) overseas business remains on track to return to profit by March for the first time in seven years despite Britain's vote to leave the European Union, its chief operating officer said.
Investors were seeking liquidity and hedging products in response to ultra-low interest rates and volatile foreign exchange markets, compensating for any Brexit-linked headwinds, Tetsu Ozaki said in an interview on Thursday.
"We didn't expect these conditions but our clients' needs have increased more than we imagined," Ozaki said, referring to post-Brexit market volatility. "We said we wanted to (return the overseas business to profitability), and that direction won't change."
Ozaki, 58, had said in April - before the Brexit vote - that Nomura's overseas business would return to the black by March, ending losses of 385 billion yen ($3.8 billion) racked up since 2010.
Since then, Japan's biggest brokerage had seen demand for liquidity and products for hedging rates and currency fluctuations as clients and investors grappled with an "unprecedented environment" of negative yields and forex volatility, he said.
"As the macro interest rate and foreign exchange environment becomes harder to read, skills in providing liquidity are in demand. Commercial banks are more cautious in this environment," Ozaki said.
BREXIT IMPACT
Still, the full impact of Brexit on financial institutions like Nomura with bases in the United Kingdom is unclear.
One major concern is the future of "passporting" rights, which allow British-based banks and financial companies to sell services across the EU. Dealmakers have also said Brexit could send a chill through mergers and acquisitions, with some companies likely to put M&A on hold.
Soon after Ozaki's promotion to COO in April, Nomura axed a brokerage unit and hundreds of jobs in Europe and the Americas, and outlined cuts to its wholesale business to staunch overseas losses.
The cuts dealt a blow to the brokerage's global ambitions, but Nomura said it would stick to Chief Executive Koji Nagai's strategy of focusing on M&A advisory and primary equity and debt businesses in the Americas.
The brokerage is also strengthening its wealth management business in Asia ex-Japan, where it sees strong long-term growth chances.
Nomura expects the move will help it expand its investment banking operations in the region.
"Asia's a region with a strong risk appetite," said Ozaki, a 34-year veteran of the company.
"The wealthy are increasingly quickly and they have more money to invest. We expect sovereign wealth fund-related businesses, as well as cross-border investment and M&A, to increase."