Nomura suffers unexpectedly big profit slump on market headwinds

By Makiko Yamazaki

TOKYO (Reuters) -Nomura Holdings Inc, Japan's biggest brokerage and investment bank, on Wednesday suffered a worse-than-expected slump in first-quarter net profit as volatile financial markets battered its investment banking and asset management businesses.

The downbeat performance comes despite Nomura's efforts in the last few years to change its earnings structure to be less vulnerable to market swings, by diversifying its portfolio and increasing advisory services.

"We've had tough earnings," Chief Financial Officer Takumi Kitamura said at a briefing. "But we are confident in our current strategy. We are heading in the right direction."

April-June profit tumbled 96.5% from a year earlier to 1.696 billion yen ($12.73 million), missing a 22.59 billion yen average of two analyst estimates compiled by Refinitiv.

It was the worst quarterly earnings for Nomura in more than a year, since it slipped into a net loss due to collapsed investment fund Archegos in early 2021.

As fears of slowing global economic growth sent financial markets into a tailspin, Nomura's investment management business logged an 11.7 billion yen loss on portfolio writedowns, while profit for its retail business dropped 74% from the third-quarter.

Investment banking revenue fell 33% from a year earlier as aggressive U.S. Federal Reserve interest rate rises and geopolitical tension rattled global financial markets and turned businesses cautious about stock and debt offerings.

Companies' reduced appetite for deals sapped momentum in the merger-and-acquisition advisory business, which had been a growth driver for investment banking since Nomura bought Greentech, an M&A adviser in clean technology, in 2020.

But Kitamura said at the briefing that advisory fees remained at relatively high levels above 10 billion yen and that deal pipelines have been strong.

One bright spot was fixed-income trading, which benefited from higher volume as market volatility led investors to rebalance their portfolios. Overall net revenue from trading jumped 80%.

($1 = 133.1900 yen)

(Reporting by Makiko Yamazaki; Editing by Shri Navaratnam, Kim Coghill, Elaine Hardcastle)