No­mura falls af­ter de­lay­ing over­seas profit goal

The Pak Banker - - COMPANIES/BOSS -

No­mura Hold­ings Inc. plunged the most in more than four years in Tokyo trad­ing af­ter third-quar­ter net in­come fell and Ja­pan's big­gest se­cu­ri­ties firm post­poned a tar­get for mak­ing over­seas op­er­a­tions prof­itable. The shares de­clined 11 per­cent, the most since Novem­ber 2011, to 593.3 yen at the lunch break in Tokyo. The bench­mark Topix in­dex slid 3.3 per­cent as this year's global equity rout deep­ened. Net in­come de­clined 49 per­cent to 35.4 bil­lion yen ($296 mil­lion) in the three months ended De­cem­ber as bro­ker­age com­mis­sions and in­vest­ment­bank­ing fees slumped, the Toky­obased com­pany said to­day.

No­mura will post­pone its over­seas pre­tax profit tar­get of 50 bil­lion yen for the year end­ing in March, Chief Fi­nan­cial Of­fi­cer Shige­suke Kashi­wagi said. Chief Ex­ec­u­tive Of­fi­cer Koji Na­gai's in­abil­ity to stem losses over­seas casts doubt on his strat­egy of ex­pand­ing in coun­tries in­clud­ing the U.S. at a time when global mar­ket volatil­ity is ris­ing.

"No­mura's earn­ings were worse than ex­pected and in­vestors are con­cerned that cur­rent mar­ket con­di­tions will con­tinue to hurt bro­ker­ages," said Makoto Kikuchi, CEO of My­ojo As­set Man­age­ment Co. in Tokyo. "The re­sult also showed how dif­fi­cult it is to profit from over­seas busi­ness. There are tough com­peti­tors out there."

Kashi­wagi sig­naled that last quar­ter's weak­ness is per­sist­ing into this year. Busi­ness with Ja­panese in­di­vid­ual clients "wasn't that good" in Jan­uary as the mar­ket tur­moil dis­suaded in­vestors from trad­ing, the CFO said on a call with an­a­lysts Tues­day. In whole­sale op­er­a­tions, trad­ing was slow as risk aver­sion led to a drop in vol­umes, he said.

Net in­come missed the 38.7 bil­lion-yen av­er­age es­ti­mate of five an­a­lysts sur­veyed by Bloomberg. Third- quar­ter rev­enue fell 14 per­cent from a year ear­lier. Bro­ker­age com­mis­sions dropped 17 per­cent and in­vest­ment­bank­ing fees slid 31 per­cent. Trad­ing in­come de­clined 3.9 per­cent.

No­mura has about eight times as many em­ploy­ees out­side Ja­pan as Daiwa Se­cu­ri­ties Group Inc. and has re­tained its global am­bi­tions even as banks like Bar­clays Plc and Stan­dard Char­tered Plc re­trench. Un­like Daiwa, it re­frained from an­nounc­ing a share buy­back in the earn­ings sea­son, though Kashi­wagi said the com­pany wouldn't rule out do­ing so in the fu­ture if the tim­ing is right.

Daiwa dropped 4.4 per­cent to 725.4 yen in morn­ing trad­ing, eras­ing this year's gain. No­mura is down 13 per­cent in 2016. No­mura posted a pre­tax loss of 19.9 bil­lion yen over­seas in the three months ended De­cem­ber, widen­ing from 7 bil­lion yen a year ear­lier and tak­ing nine-month losses abroad to 63 bil- lion yen. The com­pany hasn't been prof­itable over­seas on an an­nual ba­sis since the year ended March 2010. Kashi­wagi said he ex­pects the 50 bil­lion-yen tar­get to be achieved at some point be­fore March 2020.

CEO Na­gai is ex­pand­ing in the U.S. by hir­ing staff and mak­ing ac­qui­si­tions. In De­cem­ber, No­mura agreed to pay about $1 bil­lion for a 41 per­cent stake in U.S. money man­ager Amer­i­can Cen­tury In­vest­ments from Cana­dian Im­pe­rial Bank of Com­merce. The Ja­panese firm is seek­ing to hire about 20 in­vest­ment bankers in the re­gion this year, in­clud­ing peo­ple with clients in the tech­nol­ogy, con­sumer and health-care in­dus­tries, Ken­taro Okuda, global head of in­vest­ment bank­ing, said in an in­ter­view late last year. No­mura had 12,787 em­ploy­ees out­side of Ja­pan as of Dec. 31, 44 per­cent of to­tal staff, and Daiwa em­ployed 1,603 peo­ple over­seas, about 11 per­cent of the to­tal, ac­cord­ing to com­pany fil­ings.

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