Pay cuts fail to offset falling revenues at Nomura International

Nomura cut compensation at its European business for the year to March 2016, but it still made a substantial loss. Recently released results for London-based Nomura International reveal that the bank reduced its European compensation bill by 13% in the 12 months to March. Unfortunately, revenues at the bank fell by 28% to $1.3bn over the same period.

With revenues plummeting, Nomura's European operations - which include sales and trading and corporate finance activities, made another loss last year. Discluding a one-off charge of $309m relating to the settlement with Italian bank Monte dei Paschi di Siena, Nomura made an operating loss of $414m. This was better than the previous year (a loss of $472m), but only just.

The bank attributed its poor performance to a combination of the "tough and challenging market environment" and "geopolitical pressure" in Europe. The red ink helps explains the bank's decision to close its European equities operation in April 2016. Cost savings from this closure aren't reflected in the newly released figures.

The real question, therefore, is whether the restructured Nomura will be able to turn a profit in Europe next year. A $414m loss on $1.3bn of revenues looks like an intractable issue for the most committed cost cutter. 10 weeks ago, Nomura COO Tetsu Ozaki said the bank's international operation (including the U.S.) was due to become profitable by March 2017. However, doubts have been raised about Nomura's ability to generate a profit in Europe if it incurs large restructuring charges in relation to Brexit.

In notes accompanying the new figures, Nomura promises to "closely monitor developments" relating to Britain's Brexit negotiations, and to "evaluate appropriate actions to safeguard client interests as the terms of the UK's future relationship with the EU become clearer." If that clarity suggests Nomura needs to relocate people from London, Nomura already has a fully licensed office in Paris.

Contact: SButcher@eFinancialCareers.com