Nomura to Shut Mortgage-Backed Securities Unit

October 15, 2007 No Comments »

Nomura Holdings, Japan’s largest brokerage, said today that it will shut down its U.S. based mortgage-backed securities unit amid the ongoing mortgage crisis.

Nomura expects to book a $621 million loss in the unit, and a pretax loss of $340 to $510 million for the July-September second quarter, including $128 million to reorganize its U.S. business operations.

“Nomura has faced challenges in the U.S. residential mortgage-backed securities market which have led to these disappointing results,” Nomura President and CEO Nobuyuki Koga said.

As a result, more than 400 jobs in the United States will be lost, roughly 30% of its 1300 member U.S. workforce.

The company said it has reduced much of its subprime exposure, cutting its U.S. residential mortgage-backed security exposure to about 14 billion yen from 266 billion yen, of which only 100 million yen is subprime-related.

“This should all but clear up our problems in the United States, and we believe we can build a structure that will allow us to achieve a speedy recovery from the second half,” Chief Financial Officer Masafumi Nakada told a news conference.

The company said the restructuring will result in a total charge of about 15 billion yen, but should reduce its annual expenses by 25 billion yen.

Over the past six months, Nomura sold $1.7 billion in U.S. subprime mortgages at a loss thanks to rising delinquencies and secondary mortgage market fallout.

In August, Nomura Securities closed its nonconforming mortgage conduit and laid off staff in its fixed-income research department.

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