Nomura unveils massive $1.0 bln cost cuts

Nomura Holdings said Thursday it would slash $1.0 billion in costs to repair its balance sheet as Japan's biggest brokerage signalled the end of its ambitious plan to become a global powerhouse. The Tokyo-based securities giant, which is trying to move past an embarrassing insider trading scandal, said it would usher in the sweeping cuts by March 2014 across its global operations. About two-thirds of the reductions would come from regions including the United States and Europe, it said, adding that Nomura would focus on the Asian market as it looked to triple its pre-tax profit over the next four years. The move marked the final nail in the coffin of Nomura's ill-fated plan to transform into a global investment banking giant after buying some operations of defunct Wall Street titan Lehman Brothers during the 2008 financial crisis. The resignation last month of chief executive Kenichi Watanabe, a key driver behind the firm's expansion, had also been widely viewed as a fatal blow to Nomura's heavyweight ambitions. On Thursday, Nomura said it would "position Asia including Japan as home market" and "shift to a global business model centred on Asia". "The global economy is facing various, serious challenges and is in the midst of a big paradigm shift," new chief executive Koji Nagai said Thursday. "The challenges which our corporate and individual clients face are getting more serious and the need for high-valued financial services is rapidly increasing. "What Nomura must do is acutely sense the changes in our clients' needs... and flexibly adapt." Focusing on Asia was the right strategy because of "abundant funds" available for investment in a region with mature and emerging markets that were driving the global economy, the firm said. Nomura revealed few specifics of its cost cuts, saying only that about 45 percent of the reductions would be from "personnel expenses". It also said information technology costs would be trimmed as it "improves business efficiencies, and rationalises (the) management structure". The firm's shares closed 2.3 percent higher at 266 yen in Tokyo. Nomura last year unveiled separate cost savings of about $1.2 billion -- and chopped hundreds of jobs -- after posting a net loss of 46.1 billion yen ($588 million) in the July-September quarter of 2011, reversing a net profit of 1.1 billion yen in the same period a year earlier. The loss was Nomura's first in 10 quarters and underscored how market turbulence and the eurozone crisis had dented its brokerage and investment banking business. Nomura's net profit in the fiscal year to March plunged about 60 percent on-year to 11.6 billion yen, although its full-year revenue rose by nearly 34 percent to 1.85 trillion yen. Like many investment banks, Nomura has struggled with yo-yoing stock and bond prices, poor merger prospects and tightening regulation in the wake of the global financial crisis. The firm's aggressive expansion drive followed the acquisition of some European operations from Lehman Brothers -- and thousands of its employees -- following the US company's collapse. However the bulked-up Nomura lost some key executives as a corporate culture clash hit and the merger was a drag on its finances, while the company was more recently hammered by a damaging insider trading scandal. Watanabe quit in the wake of an internal report that said Nomura sales staff improperly tipped off clients about share sales while information often flowed freely between sales and Nomura's investment banking and research side, which is usually barred. Insider trading, although illegal in Japan, is widespread and carries only token fines. But authorities are carrying out a wide-ranging probe into the practice amid renewed pressure to crack down on lax regulations and legal loopholes, which have dented Japan's corporate governance image.