Nomura Securities Loses $1.5B

Nomura Securities Co. unveiled a net loss of 205.5 billion yen, or $1.5 billion. Nomura plans to cut up to 2,000 jobs in response to the loss announced on Thursday.

That news prompted Moody's Investors Service to cut the bank's long-term debt rating. In a statement, Moody's said it believes further losses in the bank's real estate and emerging markets portfolios, along with reorganization costs, "will prevent Nomura's overseas businesses from contributing sustainable and predictable earnings in the near future."

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Nomura's U.S. operations - Nomura Holding America Inc. - lost $1.16 billion for the six months through Sept. 30. The bank earmarked $1.2 billion in additional capital for U.S. operations and proprietary trading in emerging markets. U.S. operations were badly hit by losses in fixed-income assets.

Nomura, whose American depositary receipts trade under the symbol "NRSCY," said it will step up plans to move more of its business into lower-risk areas such as the portfolio advisory business in Japan and asset management. The bank also said it will streamline and integrate product lines "within a global control and management structure."

In a statement, Junichi Ujiie, president and chief executive, said: "With these plans we are certain we will continue to commit to the global capital market as a leading global investment bank." He also said that Nomura is aiming to reach a 240 billion yen pretax profit by the fiscal year ending March 2001.

A spokeswoman in London said most job cuts will be in Tokyo, but the bank had not ruled out reductions in the United States and Europe. She said, "There will be a minimal adjustment of the core professional staff." The bank also aims to cut its expense base by 20 percent.

The news of massive losses at Nomura will step up debate about what, if anything, should be done to better monitor and control international credit risk.

On Oct. 2, the world's second-largest bank, UBS AG, came under fire after predicting exposure to the U.S. hedge fund Long-Term Capital Management and other credit risk would carve some $915 million from its income this year. The disclosure brought the bank under the scrutiny of the Swiss financial authorities and cost the bank chairman his job.

Written By Suzanne Miller