Nomura Pulls Out of U.S. Mortgage Market - zt nytimes

Nomura Pulls Out of U.S. Mortgage Market
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By REUTERS
Published: October 15, 2007
TOKYO, Oct 15 (Reuters) — Nomura Holdings, Japan’s largest brokerage, said today that it would pull out of the United States residential mortgage-backed securities market and cut a quarter of its American work force, pushing it to a big quarterly loss.

Nomura is the latest global investment bank forced to swallow bigger losses on products tied to the mortgage market, which was thrown into turmoil this year by rising defaults on subprime home loans.

The brokerage firm now expects to post a group pretax loss of 40-60 billion yen ($340-$511 million) for the second quarter because of losses on residential mortgage-backed securities and charges to cut its American work force to 900 from 1,217 as of June.

Nomura, which has been buying residential mortgages and bundling them for resale as securities, said it would focus its efforts in the United States on expanding its asset management business and electronic brokerage unit Instinet.

Nomura had said earlier this year that it may pull out of the mortgage-backed securities business as part of a reorganisation of its American unit, which lost 74 billion yen on a pretax basis in the two quarters to June as it wrote down the value of its mortgage loan portfolio.

An analyst at JP Morgan Securities, Natsumu Tsujino, said today’s announcement could be seen as Nomura wiping the slate clean.

“This would seem to eliminate subprime-related uncertainty,” Mr. Tsujino said. “In reality this should get rid of the bad news.”

Nomura said it would beef up its risk management and rejigger its strategy to focus on those areas in the United States that played to its strengths. Its broker dealer and proprietary dealing businesses were likely targets to be downsized, it said.

“We found out that there was a limit to the measures that could be taken to cope with changes in the U.S. without having a thorough understanding of the market,” the president of Nomura, Nobuyuki Koga, said.