Nomura Holdings Inc on Thursday cut its core pre-tax income target for the next financial year by a quarter as higher interest rates and global financial turmoil dented investment banking fees and derailed its offshore expansion plans. The sharp revisions came after the banking crisis roiled financial markets and hammered Nomura’s investment banking business, which it had hoped would become one of the core profit drivers in its midterm plan.
The weaker targets dim CEO Kentaro Okuda’s hopes to end a troubled history of occasional major financial hits followed by major restructurings, forcing Japan’s biggest brokerage and investment bank to pledge further cost cuts. Okuda, however, said at an investor event on Thursday he would stick with his strategy of beefing up products related to private markets, such as private debt and services for wealthy private clients, in pursuit of more stable sources of revenue.
Nomura is now aiming for annual pre-tax income of 288 billion yen ($2.13 billion) for its three core divisions in the fiscal year ending in March 2025, down from the 350 billion yen to 390 billion yen range planned a year ago. That would compare with the 106.4 billion yen the three divisions – retail, investment management and wholesale – posted for the year through March 2023.
The guidance was still higher than the average 242 billion yen forecast for company-wide pretax profit in a Refinitiv poll for the year to March 2025. The Japanese bank said it would aim to cut costs by 50 billion yen by March 2025, mainly by streamlining administrative and systems operations.
Recent cost growth was mainly due to higher fixed wages for bankers at the wholesale unit, which houses its investment banking and trading businesses, driven by inflation and a weaker yen.
“We first need to address the core structural issues of cost inefficiencies, lack of scale and lack of diversification,” Christopher Willcox, the head of the wholesale unit, said at the investor event. “And that plan is already underway.”The last major overhaul took place in 2019, which included $1 billion in cost cuts and scaling back of some of its lower growth business in Europe at the wholesale unit, as well as cuts of 30 billion yen at the retail unit.
Nomura has avoided major layoffs of bankers despite its investment banking woes. It recently hired two investment bankers to lead its coverage of mobility and automotive clients in Europe and the United States through its sustainability-focused Greentech division.