Fixed income boosts Nomura as Europe bites

City A.M. Reporter
NOMURA Holdings, Japan’s largest investment bank, posted its fourth straight quarterly profit yesterday, as an upswing in its fixed income operations helped it counter weak equity markets and the fallout from an insider trading probe.

The results were weaker than expected as the company restructures operations following an ill-fated expansion overseas through the 2008 acquisition of parts of Lehman Brothers.

But finance chief Junko Nakagawa said the benefits of a $1bn cost-cutting programme outlined in August and largely focused on Europe could show up in the company’s results by the final quarter of its fiscal year to the end of March.

“You will be able to see the real effect of cost-cutting plan in quarter four or at the beginning of the next fiscal year starting in April 2013,” Nakagawa told a media briefing.

Nomura, whose top competitor in Japan is Daiwa Securities Group, reported a net profit of 2.81bn yen for the July-September second quarter, against a loss of 46.09bn yen in the same period last year.

The results were supported by a boost in bond trading and other fixed income products, a major factor also bolstering banks elsewhere, including Morgan Stanley and JP Morgan.

Net revenue in fixed income operations doubled to 88.6bn yen from a year earlier, helping Nomura’s wholesale division swing to a pretax profit of 200m yen from a year earlier 70.7bn yen loss. The wholesale business includes investment banking.

The strong fixed income performance helped the wholesale division generate a 68 per cent increase in net revenue to 137.1bn yen and helped offset a four per cent slide in net revenue from equity trading.

Still, Nomura also lost underwriting business due to an insider trading scandal, which triggered a shake-up of top management. Its European operations also showed deepening pretax losses as the company accounted for cost cutting.