Soft approach to restructuring

Nomura Securities prefers to reshape itself bit by bit, rather than in one quick stroke. Job cuts are a case in point for Japan’s top broker. Less than a year since the last round, Nomura will reportedly fire about 100 traders and bankers in the EU and US. It should keep its blade sharp for more cuts.

Most reductions will probably come from its European business. Nomura has booked billions of dollars in losses in the region since acquiring Lehman Brothers operations in 2008. Even fixed-income trading, which has traditionally been its strength, has slowed. Wholesale revenue was down more than a quarter last year.

Plans announced late in 2018 to move its global trade clearing centre away from London served as a warning of more job cuts. Brexit piles on costs by requiring separate resources for Europe. Disruption worries prompted Nomura to move employees to Frankfurt in 2018.

Nomura expects its first full-year loss in a decade in the year that ended in March. Its investment banking unit booked an ¥81.4bn ($736m) goodwill impairment charge, mostly on its remaining Lehman Brothers assets plus etrading company Instinet. Low interest rates caused losses in its fixed-income trading in Asia and the US. On home ground, Nomura’s retail business suffered as revenues fell over a fifth on market volatility. Peers, such as Daiwa, have focused on Asia for growth overseas.

Nomura will have to swing its sword faster. It has targeted minimum pretax returns on equity of 5% by 2020. The figure is currently negative. Nomura has few alternatives to cutting jobs. It also needs to cut base pay and adjust formulas that reward seniority over achievement.

Long-suffering shareholders must be getting edgy. The share price is down 35% in the past year yet still looks pricey at 12 times forward earnings, 20% plus more than Daiwa. Nomura needs much more cut and thrust to its restructuring plans. /London, March 29