Nomura Holdings Inc, Japan's largest investment bank, is cutting an additional $1 billion in costs in the second major restructuring of its loss-making overseas operations in less than a year.
The cuts are to come from its wholesale division, which houses investment banking, equities and fixed income operations, and would be completed by the next financial year that runs through March 2014, Nomura said. The new plan will come on top of a $1.2 billion cost savings move launched last year.
The streamlining marks the first attempt by new CEO Koji Nagai to shore up its troubled overseas operations, built in large part on its acquisition of the Asian and European businesses of failed Wall Street bank Lehman Brothers in 2008.
Nagai disclosed the new plan to a gathering of senior managers earlier on Friday, according to executives who briefed media on the meeting.
He had flagged the cost cuts a month earlier when he took the helm from Kenichi Watanabe who was ousted following an insider-trading scandal. Nagai had vowed to take bold action and rebuild the bank from the "ground up".
The $1 billion figure was at the high end of market expectations, said Credit Suisse analyst Takehito Yamanaka, who had estimated Nomura would need to slash $700 to $750 million in costs to reach a targeted return on equity of 4 percent.
"The number is big but the suggested time horizon is a bit different than my expectations," Yamanaka said, referring to the March 2014 deadline for completing the cuts. "But that will all depend on the progress. We don't have details, so at this point it would be premature to call the plan slow."
Nomura shares climbed 0.4 percent on Friday, outperforming a 1.6 percent drop in the main Nikkei share index <.N225>.
CUTS ACROSS THE BOARD
Nomura said the cuts would target front, middle and back-office workers but offered few other details, saying a full disclosure of its new strategy would come on Thursday when it will hold an event for investors in Tokyo. The previous cost savings plan saw about 1,000 job losses, sources have said.
Sources had told Reuters that Nomura was planning to cut hundreds of jobs, mainly in cash equities and investment banking, with the largest portion of the cuts to come from Europe, which has been hit hard by the region's debt crisis.
Tough market conditions have already prompted a number of its rivals - including Morgan Stanley <MS.N> and Deutsche Bank <DBKGn.DE> - to embark on another round of cuts. Traditional cash equity jobs have been at the front of the line for cuts across the industry given the slump in volumes.
Nagai told the meeting of 450 managers that Nomura had no intention of retreating from overseas markets, despite posting losses overseas for nine straight quarters.
The CEO also said the broker would aim for pre-tax profits of 250 billion yen ($3.2 billion) from its wholesale, retail and asset management divisions by the year to March 2016. Those divisions generated a combined profit of 46 billion yen in the past business year. ($1 = 78.5500 Japanese yen)