By Thomas Wilson
TOKYO (Reuters) - Japan's biggest brokerage Nomura Holdings (T:8604) posted its first quarterly loss since 2011 on Wednesday and detailed deep cost cuts designed to get its global business back into the black.
Volatile financial markets and the Bank of Japan's negative interest rate policy, which hit Nomura's fixed-income business, helped tip the group's wholesale division into the red for January to March, and its overseas operations have now bled money for six straight years.
Nomura said it would target $700 million in cuts to its wholesale division within two years in a bid to return its overseas business to profit by March 2017.
Earlier this month, it axed a brokerage unit and hundreds of jobs in Europe and the Americas but did not give details of how much it would save. The cutbacks signaled an admission that its latest drive to achieve a long-cherished ambition to become a global player had run into trouble.
The fourth-quarter net loss of 19.2 billion yen ($173 million) reported on Wednesday compared with a net profit of 82.0 billion yen a year earlier, and included a 16 billion yen charge for redundancy packages.
Pressed for further details of the cuts, Chief Operating Officer Tetsu Ozaki declined to give details of the scale of job losses, but said that the Europe, Middle East and Africa region would bear around 70 percent of the cuts, with the rest centred on the Americas.
"We have a strong sense of urgency, and we are saying we will turn [the overseas business] profitable this year," Ozaki told reporters, adding that there would be no retreat back to Nomura's "mother market" of Japan.
Nomura's overseas operations lost 79.6 billion yen in the 12 months to March, affected by the tough market conditions that have made it harder for global banks like Goldman Sachs (N:GS) and Morgan Stanley (N:MS) to turn a profit. The result took Nomura's overseas losses to $3.5 billion in six years.
The dismal fourth-quarter performance was led by losses to Nomura's wholesale division, which bled 22.8 billion yen between January and March as negative interest rates, introduced by Japan's central bank to try and spur the economy and inflation, hit its fixed-income business.
The policy caused radical moves in bond yield curves and volatility that were "unhedgeable," Steven Ashley, joint head of the wholesale division said.
The wholesale losses squeezed Nomura's full-year net profit to 131.6 billion yen, over 40 percent below the earlier year and well behind the estimate of analysts polled by Thomson Reuters Starmine.
Separately, Nomura announced plans to spend up to 20 billion yen buying back its shares. The company's shares finished down 0.4 percent ahead of the earnings release, in line with Tokyo's benchmark Nikkei index <.N225.>.
Nomura's shares have risen over 20 percent from a three-year low since the company announced its cost cuts earlier this month.