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Nomura (NMR) Aims Extra Cost Reduction in Wholesale Banking

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In a presentation at Nomura Holdings, Inc.’s (NMR - Free Report) annual investment forum, its CEO, Kentaro Okuda, said that the firm is aiming to cut an extra $100 million in costs in the wholesale banking division. With this aim, the firm’s run rate cost target by March 2025 has become $5.1 billion.

The reason for the additional cuts is that the progress of the wholesale division toward the firm’s earnings target (by 2024-2025, NMR targets to achieve a return on equity of 8-10%) is “significantly behind.”

NMR has been struggling to control expenses in recent months in the wholesale division. In the last two quarters, the segment’s pretax profit declined. Notably, the division recorded losses in the previous two quarters because expenses exceeded revenues.

In order to achieve the latest cuts, Nomura will review corporate functions, among other measures.

Beside this, one of the most important reasons for the wholesale division’s dismal performance is the slow abroad business (because the performance in Japan has been robust), according to Okuda.

While the brokerage firm has been taking steps to improve results abroad, the firm’s profits have fallen since 2020 because of overseas losses.

Thus, according to Okuda, in addition to the cost cuts, an important concern for the wholesale business is ensuring the recovery of the macro products business, along with efficient resource allocation.

Further, to lift the performance of the division, NMR will have to tap into structural changes in the home market to increase revenues and gain operating leverage. Also, the firm needs to grow in the private and risk-light businesses.

Notably, since becoming CEO in 2020, Kentaro Okuda has been making efforts to put the company on a growth trajectory. Okuda has been focusing more on the private markets rather than the firm’s traditional business with public markets.

Cost control has always been a key focus point for Nomura. The company achieved its 2022 cost-reduction target of Y140 billion through the reduction in IT-related costs, the standardization of corporate functions and efforts to lower consulting and outsourcing costs.

Moreover, the firm has completed 66% of a Y50-billion cost reduction program, which it aims to execute by March 2025.

Over the past six months, shares of NMR have gained 15.7% on the NYSE compared with a 1.6% growth recorded by the industry.


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Currently, NMR carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Restructuring Efforts by Other Finance Firms

Barclays PLC (BCS - Free Report) has been planning to reduce expenses by $1.25 billion through the elimination of 1,500-2,000 jobs, specifically in its segment, Group Execution Services, known as BX.

BCS operates through two divisions — Barclays UK and Barclays International. BX is a group-wide service company that offers support to both divisions by providing technology, operations and functional services across the Group.

Throughout 2023, finance firms globally have had to navigate their way through the current tough economic environment. Hence, to remain profitable amid the high interest rate environment, companies are undertaking several restructuring efforts, including reducing costs and cutting jobs.

Earlier this month, Citigroup Inc. (C - Free Report) commenced the elimination of various job positions as part of its major organizational overhaul process. The job cuts involved approximately 10% of Citigroup’s senior manager roles aggregating to around 300 managers.

Citigroup stated, “Today we shared with our colleagues the next layer of changes across many of our businesses and functions as we continue to align Citi’s organizational structure with our new, simplified operating model. As we’ve acknowledged, the actions we’re taking to reorganize the firm involve some difficult, consequential decisions, but we believe they are the right steps to align our structure with our strategy and ensure we consistently deliver excellence to our clients.”

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