Profits at Nomura, Macquarie hit by fewer deals, frail markets

Tokyo/Sydney: Japan's Nomura Holdings and Australia's Macquarie painted a bleak first quarter picture of meager deals and frail markets.

It wasn't dire enough, however, to halt their global expansion or blunt Nomura's aspirations to join Goldman Sachs and other US and European rivals among the investment banking elite.

"We want to make it into the top group as soon as we can," Nomura's chief financial officer Masafumi Nakada told reporters in Tokyo after revealing the investment bank's lowest profit in six quarters — since it lost over $2 billion, burdened by costs of acquiring the European and Asian assets of failed US investment bank Lehman Brothers in 2008.

Macquarie earlier warned its investment banking, trading, securities and advisory businesses were unlikely to match the previous year's level, sending its shares down 3 per cent.

The banks' downbeat updates mirror grim results from peers such as Goldman, Citigroup and Bank of America Merrill Lynch as shaky financial markets cut into fees from trading, underwriting and advising on deals.

Out of control

"The market was out of control so business was inevitably affected," said Azuma Ohno, a brokerage analyst at Credit Suisse Securities in Tokyo. "Overall, it wasn't a bad result."

Nomura said hedge funds and other institutional investors pulled back from markets after volatility spiked in the wake of the European debt crisis. Nomura's profits from trading halved and its overall net profit slumped 80 per cent in April-June from a year ago to just 2.3 billion yen (Dh97 million).

Its trading and investment banking business had a pretax loss of 41.1 billion yen on sales of 108.6 billion yen, down 49 per cent. Retail business revenue rose 35 per cent to 37.7 billion yen on sales of 111 billion yen, up 16 per cent.

In a trading update ahead of its AGM, Macquarie said April-June earnings were slightly ahead of a year ago, but were pinched by falling global markets and Eur-ope's debt crisis. It warned it might not be able to make good on a forecast made in April of improved annual results across its businesses.

"Macquarie is more of a traditional investment bank now. If markets are subdued, they will more than stumble," said Simon Burge, chief investment officer at Above The Index Asset Management. "In effect, unlike earlier when they could control the pace, now the market does."