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Larger than expected losses reported by Nomura - 72.87 billion yen drop in the second quarter

October 29, 2008
By Ken Worsley


According to the Nikkei, a survey of six analysts done by Thomson Reuters predicted a 2.81 billion yen quarterly loss for Nomura in the second quarter of fiscal 2008. Yesterday, Nomura released its figures, and they show a 72.87 billion yen loss in the July-September quarter. During that time, the firm’s revenue dropped 21% to 84.89 billion yen, as the global financial crisis put a pinch on brokerage commissions and the sales of investment products.

For the six months ending September 30, Nomura saw a 51.7% fall in total revenue, with a 49.5% slide in net revenue. As of September 30, the firm reports assets at 24.8 trillion yen, down by 477.9 billion yen at the end of March. The decrease is attributed to a decline in collateraized agreements. Liabilities stood at 22.9 trillion yen as of September 30, down 300 billion yen from the end of March - again, due to a decrease in collateralized financing.

Nomura’s first-half net loss stood at 149.5 billion yen.

Nomura CFO Masafumi Nakada was quoted by the Nikkei as saying, “The market environment will be a big factor [in returning to profitability]…With our relatively advantageous financial health, we have time and opportunities…In a normal business environment, [Nomura and Lehman] together have the potential to generate a pretax-level profit of around $5 billion.”

Nomura certainly does boast adequate capitalization and liquidity, but Nakada’s statement is telling in that it does not hint at a “normal business environment” coming just around the corner. Nomura is hinting that further losses could come due to exposure to Iceland’s financial troubles. Still, Nomura is clearly thinking long-term, and believes it can carry these costs, as well as the expenses incurred through the integration of former Lehman staff.

While Nomura has stated that 95% of former Lehman employees have joined the firm, Rothschild (which consulted on the sales of Lehman’s Asia operations to Nomura) announced on Monday that it had hired away three former Lehman M&A bankers.

Even Bloomberg, which expects to see Nomura expereince its largest annual loss when fiscal 2008 is said and done, reported that “Nomura probably will report a break-even result or loss for the quarter that ended Sept. 30” the day before the 72.87 billion yen loss was reported.

Filed Under Banking, Finance 

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Comments

One Response to “Larger than expected losses reported by Nomura - 72.87 billion yen drop in the second quarter”

  1. Steven Towns on October 31st, 2008 9:25 am

    Just thinking about Nomura, whose losses approached revenues, the former which exceeded the above mentioned consensus estimate by more than 25x, although not sure if they were looking for something on an adjusted basis. Anyway, more importantly, given its regional acquisitions of the former Lehman Brothers, one has to wonder how much of a drag the new overhead will be until some fee generation takes place. In spite of ongoing credit market turmoil, it sure seems like a better time than ever to cherry pick or at least acquire wholly key subsidiaries on the cheap.

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