Nomura sees end to overseas business losses; analysts see tough markets ahead
Japan‘s biggest brokerage Nomura Holdings Inc plans to keep a lid on costs as it chases a profit at its loss-making overseas business for the first time in six years, a target some analysts see as tough amid looming financial market jitters.
Nomura on Thursday told investors at a presentation in the capital that its still targeting pretax profit target of 50 billion yen ($404 million) from its overseas business in the current financial year through next March.
The brokerage had hoped to restore the business, which accounts for 60 percent of its wholesale revenue, to profitability last fiscal year. But that plan was derailed by provisions for legal costs related to overseas lawsuits.
“Firm management of cost control is key to ensuring we achieve our international profitability target,” said Nomura’s head of global markets Steven Ashley, speaking to reporters at the event.
Cost controls, as well as increased business with pension funds and insurers thanks to an improved credit rating and more international mergers and acquisitions, are helping progress towards the achievement of its overseas target, Nomura said. The brokerage previously said it has cut $2 billion in costs since the 2008 financial crisis.
Nomura also said it aims to reach $2 billion in revenue, up from the current $1.6 billion, from its investment banking division within three years, with equal amounts coming from domestic and foreign markets.
But some analysts see the 50 billion yen profit target as challenging for Nomura, through no fault of its own. They say the possibility of a U.S. interest rate hike in the coming year could fuel uncertainty in financial markets and lead to decreased order volumes for brokerages in general.
“Thinking about the current environment, achieving the goals for this fiscal year is still challenging,” said Masao Muraki, an analyst at Deutsche Bank in Tokyo. “The overseas earnings environment remains unclear.”
For the year that ended on March 31, Nomura reported a pretax loss of 16.4 billion yen for its international operations, its fifth straight year of losses. But it said it would have returned to profit were it not for legal cost provisions.
Earlier this month, a U.S. judge ordered Nomura and Royal Bank of Scotland Group Plc to pay a combined $806 million for making false statements in selling mortgage-backed securities to Fannie Mae and Freddie Mac. .
Nomura has said it plans to appeal the judgment. ($1 = 123.7000 yen)
Source: Reuters – Nomura sees end to overseas business losses; analysts see tough markets ahead
