NOMURA IS to cut further its presence in Europe and shift its focus to Asia as Japan’s leading investment bank struggles to return its overseas operations to profitability.
Koji Nagai, who took over as chief executive last month, presented his management strategy for the first time yesterday, vowing to reshape the bank into an organisation that can generate stable annual pre-tax profits of 125 billion yen in its wholesale business by March 2016.
“We are placing priority on a strategy to compete,” he said.
Nomura is implementing a $1 billion cost-cutting exercise, which will focus on shrinking the European equities business. The fresh cuts come in the wake of $1.2 billion of costs it has eliminated since November, mainly in the European business.
Nomura’s costs had ballooned after it acquired the Asian and European arms of Lehman Brothers in 2008 and its high cost structure led the wholesale division to post nine consecutive quarters of losses. The bulk of the latest cuts – 45 per cent – will also come in Europe, with the Americas comprising 21 per cent, Asia excluding Japan 18 per cent and Japan 16 per cent. More than half of the cuts will be made in IT and other back-office functions, while personnel expenses will form the remainder.
Mr Nagai is expanding on the cost cuts and the shift to Asia started by his predecessor, Kenichi Watanabe, who was responsible for the bank’s acquisition of parts of Lehman in 2008.
In terms of business units, the retrenchment will focus on the equities and investment banking businesses, which have been hard hit by Europe’s debt crisis. “I believe Europe won’t recover much in the short term,” Mr Nagai said.
Nomura had slashed costs in Europe under previous management but its wholesale division, which comprises the global markets and investment banking businesses, still made an Y8.6 billion loss in the three months to the end of June.
The aim under the latest plan is to reduce costs in the wholesale division to the $6 billion level, or a 25 per cent reduction from the peak that costs had ballooned to in the wholesale division after the Lehman acquisitions. – Copyright The Financial Times Limited 2012
