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Trading

Nomura roadmap for turnaround includes painful cuts, shift away from secondary trading

Japanese brokerage giant Nomura Holdings announced plans Thursday to revive a business that suffered hefty losses last year by making painful cuts to its cost structure at home and abroad, narrowing its geographic focus and shifting toward business segments that don't require significant capital.

The roadmap called for a shift from secondary trading operations to advisory/primary segments such as mergers and acquisitions and equity capital markets, a focus on the "large single markets" of Japan, the U.S. and China and a push to integrate digital innovation across Nomura's operations.

Vowing there will be no "sacred cows," Nomura executives said targets to be achieved include slashing the number of Nomura's domestic branch offices, which currently stand at 156, by 30 or more; cutting a billion dollars in operating costs and sharply downsizing the company's business in London and Europe.

If past efforts to revamp the company had flagged, Nomura executives Thursday said failure to follow through this time is not an option.

"We are in the middle of the river, where it is the deepest and the water is the fastest," Nomura Group CEO Koji Nagai said. "This time there is no turning back."

The company will have to focus more on meeting the needs of corporations, and less on the retail segment, which involves significant capital and a high level of market risk, he said.

"The traditional trading-dependent investment banking model has been effectively destroyed," Mr. Nagai said. Fee compression is a secular trend while Japanese retail clients are becoming longer-term investors, trading less frequently, he noted.

Meanwhile, the proportion of assets controlled by the growing ranks of Japanese investors aged 75 or older — a time of life marked by decumulation rather than accumulation — has also weighed on Nomura's business in recent years.

The company has suffered outflows of cash and securities for the past two fiscal years, mostly due to withdrawals by clients 75 and older.