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Nomura to Cut Jobs, Close Branches to Boost Wholesale Unit

Zacks Equity Research

Hurt by losses in the past few quarters, Nomura Holdings NMR plans to achieve $1 billion costs savings in its Wholesale business. It intends to meet this target through layoffs and branch closures over the "medium term", with 60% of the overhaul completed by the end of next fiscal year (March 2020).

The company incurred net loss of $907 million in the nine months ended December 2018 due to which it seeks to shut down at least 30 of its 156 retail brokerage branches across Japan.

At its annual investor day held on Apr 4, Nomura stated that its Wholesale business is suffering from lower trading revenues in fixed income and constant corporate expenses, which led to the decline in segment’s revenues by 24% in fiscal year ended March 2019.

Japan’s largest brokerage firm is also planning to trim its international business due to struggles in global trading operations. Also, Nomura seeks to transform its business portfolio by digitizing the trading platform and focusing on origination business, while reducing operations in the secondary markets.

The company said in a press release, “Nomura is facing a major structural shift in its business, driven by changes in the regulatory environment, advances in digitalization, as well as evolving client needs due to Japan’s declining birth rate and aging population.”

Group Co-COO, Toshio Morita said that the company would now be closely aligned to client’s needs, which is expected to boost revenues in the future.

Instability in global equity and bond markets, and weak investment banking performance have greatly affected Nomura’s performance. Thus, the brokerage firm’s efforts to transform its business platform by tapping on growing areas seem impressive.

Shares of Nomura have lost nearly 24.4% over the past six months compared with the industry’s decline of 9.4%.

Currently, Nomura carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Some better-ranked stocks in the same space worth considering are Itau Unibanco Holding S.A. ITUB, Bank Of Montreal BMO and Banco Santander Brasil SA BSBR. All these stocks carry a Zacks Rank #2 (Buy).

Itau Unibanco’s Zacks Consensus Estimate for current-year earnings has been revised 2.6% upward for 2019 in the past 60 days. Also, its share price has increased 10.9% in the past two years.

Bank Of Montreal’s current-year earnings estimates have been revised 1.4% upward over the past 60 days. Further, the company’s shares have jumped 2.9% in the past 24 months.

Banco Santander Brasil’s Zacks Consensus Estimate for current-year earnings has been revised 2.2% upward over the past 60 days. Moreover, in the past two years, its shares have gained 47.1%.

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Bank Of Montreal (BMO) : Free Stock Analysis Report
 
Itau Unibanco Holding S.A. (ITUB) : Free Stock Analysis Report
 
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Nomura Holdings Inc ADR (NMR) : Free Stock Analysis Report
 
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