Nomura hit as US expansion limits profits

NOMURA plans to expand into China in the next 18 months, according to the chief operating officer of its wholesale business Jesse Bhattal, who spoke as the firm’s fourth quarter results missed forecasts.

“It is one of the most important geographies. We would like to over the next 12 to 18 months have a local market presence in China,” Bhattal said.

But the bank will need to convince investors that expansion will provide the jumpstart needed after yesterday’s results.

The bank reported a net profit for the fourth quarter of 2010 of ¥13.39bn (£101.3m) – well short of consensus forecasts of ¥17.4bn. In line with US convention, it regards the fourth calendar quarter as its third financial quarter, and will report “full-year” results in March.

The bank has struggled since buying up the non-US assets of Lehman Brothers. During the past 18 months it has added more than 1,000 staff in the US in a bid to break into the top tier of investment banking. But it has yet to reap the rewards of its investment. Its wholesale business, which includes investment banking, was particularly badly hit: the division recorded a ¥22bn loss over the nine months to December. Nine-month fees from investment banking fell 11.8 per cent to ¥79.2bn.

The disappointing profits were in part on the back of costs rising in relation to revenues: nine-month non-interest expenses fell 2.6 per cent to ¥775.5bn, whereas nine-month revenues fell 4.8 per cent.

Overall, its nine-month pre-tax profit was down 27.2 per cent to ¥55.8bn. The bank’s asset management division, however, helped to prop up its earnings, bringing in ¥17.1bn for the nine months to December, a rise of 25 per cent on the previous nine months.