Nomura posts sharpest drop in quarterly profit in 4 years on Americas loss

By Thomas Wilson

TOKYO (Reuters) - Nomura Holdings Inc, Japan's biggest brokerage and investment bank, posted its largest slide in quarterly profit in almost four years as its Americas unit lost money and retail clients grew cautious amid volatile markets.

Nomura set aside 30 billion yen ($274 million) in provisions for "legacy transactions" preceding its 2008 purchase of Lehman Brothers' European and Asian operations, leading to a pretax loss at its Americas unit, the company said on Thursday. It did not provide any further details.

At its key retail unit, which serves mostly individual Japanese investors, pretax profit fell by nearly a fifth from a year earlier as trading slowed amid turbulent market conditions, underscoring how closely Nomura's fortunes are tied to factors beyond its control.

 

"The U.S. interest rate hike and stronger yen weighed on stock prices, and particularly in March there were remarkable moves to hold back from trading stocks and investment trusts," CFO Takumi Kitamura told reporters at a briefing.

Earlier in the day, Nomura reported a January-March net profit 22.7 billion yen ($207.6 million), down 63 percent from a year ago, the sharpest decline since April-June, 2014.

It closed the financial year with an 8 percent drop in net profit to 219.3 billion yen, short of an average forecast of 256.58 billion yen from five analysts polled by Thomson Reuters.

Dragged down by the Americas, Nomura's overall overseas operations recorded a pretax fourth-quarter loss of 18.7 billion yen and an annual loss of 0.7 billion yen.

Profitability at its non-Japanese operations has been a long-cherished goal for Nomura, which implemented a painful round of cost cuts two years ago following six straight years of international losses after buying the Lehman assets.

WHOLESALE STRENGTH

The retail and Americas performances masked solid growth at Nomura's wholesale division, which counts corporations and institutional investors as clients. Pretax quarterly profit at the unit grew by more than 50 percent, as bouts of volatility saw clients transact more in capital markets.

The performance echoed that of Wall Street banks such as Morgan Stanley and Goldman Sachs, which have also posted strong profits with capital markets flourishing during the first few months of 2018.

However, on an earnings call, CFO Kitamura said both the retail and wholesale businesses had "gotten off to a slow start" this financial year as market participants were increasingly in a "wait-and-see mode concerning uncertainties surrounding monetary policy and geopolitical risk".

Nomura does not give a net profit forecast. Six analysts polled by Thomson Reuters on an average expect the company to report 251.11 billion yen for the year ending March 2019.

Nomura said it would buy back its own shares worth up to 70 billion yen, or 2.7 percent of its outstanding shares.

Its shares closed down 0.1 percent, against a 0.5 percent gain for the overall Nikkei.

($1 = 109.3500 yen)

(Editing by Himani Sarkar and Jacqueline Wong)