By Makiko Yamazaki
TOKYO (Reuters) -Nomura Holdings Inc, Japan's biggest brokerage and investment bank, reported a 76% drop in its quarterly net profit as worries about a global banking crisis roiled the global markets and hit its investment banking business.
Nomura joined Wall Street investment banks such as Goldman Sachs Group (NYSE:GS) in reporting a slump in dealmaking fees as global mergers and acquisitions activity shrank to the lowest level in more than a decade in the last quarter.
"The environment was extremely severe for investment banking," Chief Financial Officer Takumi Kitamura told a news conference on Wednesday. "We are not at all satisfied with the results."
Investors grew more cautious about volatile markets as a banking crisis that started with the collapse of Silicon Valley Bank spread to Europe with the sale of Credit Suisse Group AG to its Swiss rival UBS Group AG (SIX:UBSG).
Nomura's January-March profit came in at 7.4 billion yen ($55.37 million), down from 30.96 billion yen a year earlier.
Its wholesale division, which houses its investment banking and trading businesses, sank in the red for the second consecutive quarter with a pre-tax loss of 14.2 billion yen.
Costs also ballooned at the division due to global inflation and a weaker yen. "We can't retain or hire people unless we raise salaries in this inflationary environment," Kitamura said.
For the year ended March, net profit fell 35% from the previous year to 92.8 billion yen, missing an average analyst estimate in a Refinitiv poll by 32%.
The lacklustre results throw into doubt Nomura's ambitious midterm plan announced last year, which called for annual pre-tax income of up to 390 billion yen for its three core divisions in the year to March 31, 2025.
Kitamura said the company would rein in costs mainly by streamlining legacy system infrastructure. He also expressed hopes for a comeback in deals once the markets gain more clarity about the inflation and interest rate outlooks later this year.
Nomura said it would boost its dividend payout ratio to at least 40% from 30% and buy back up to 1.1% of own shares worth 20 billion yen.
($1 = 133.6400 yen)