July 26, 2018 / 10:38 AM / a month ago

UPDATE 2-Nomura profit tumbles 91 pct to two-year low on overseas losses

* Q1 net profit 5.2 bln yen vs 56.9 bln year-ago

* Wholesale division posts 7.4 bln yen pretax loss

* Overseas business loses 7.7 bln yen before tax

* CFO says no big improvement in mkt conditions seen this qtr (Writes through; adds details of results, CFO and analyst comment)

By Thomas Wilson

TOKYO, July 26 (Reuters) - Japan's Nomura Holdings posted its worst quarterly performance in over two years as its wholesale division and overseas unit clocked losses due to a slump in bond trading and as individual investors bought and sold fewer stocks.

The loss highlighted the inability of Japan's biggest brokerage and investment bank to achieve stable profits in its overseas operations even 10 years after it bought parts of Lehman Brothers' business in Europe and Asia in an attempt to expand outside of its domestic stronghold.

Nomura reported a net profit of 5.2 billion yen ($46.99 million), a 91 percent slump compared to a year earlier. That fell well short of the 52.5 billion yen profit forecast by Tokai Tokyo Research Center Co's Tatsuo Majima.

Its wholesale arm lost 7.4 billion yen before tax, its first quarterly loss since January-March 2016, driven by a slowdown in its rates, foreign exchange and emerging markets businesses that pushed down bond trading revenues.

That, in turn, dragged Nomura's overseas business into a 7.7 billion yen pretax loss, with the bank losing money in each of its three overseas regions - the Americas, Europe and Asia and Oceania.

Chief Financial Officer Takumi Kitamura said Nomura would continue its efforts to keep a lid on costs. The brokerage had made deep cuts two years ago in Europe and the United States.

"We would not have stayed at this level if we hadn't done anything," he told an earnings briefing. "We will look to strengthen our top line, and continue strategic cost reductions."

The grim performance at Nomura's wholesale unit, which serves corporations and institutional investors, was in stark contrast to recent results by Wall Street banks.

There, volatility caused by escalating trade tensions and central bank policy changes have put trading desks at the likes of Goldman Sachs Group Inc and Morgan Stanley on track for their best year since 2011.

Nomura's relatively small scale means it faces a tough task in expanding revenues while controlling costs, Moody's analyst Shunsaku Sato told Reuters.

"They have more of a revenue problem than an expense problem, but they are trying to control costs while expanding business, which is often difficult to do," he said.

Pretax profit at Nomura's retail unit, which serves mostly domestic individual investors, slumped by a fifth to 19.9 billion yen, its lowest for two years. The brokerage blamed worries over U.S.-China trade friction for a one-third drop in equities sales.

CFO Kitamura said he did not expect market conditions to get better.

"No major improvement has been seen, even in the July-September quarter," he said.

Reporting by Thomas Wilson; Editing by Muralikumar Anantharaman

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