TOKYO — Nomura Holdings Inc., Japan's largest investment bank by market capitalization, said Monday it would close its New York-based residential mortgage-backed securities business, marking the latest fallout from the ongoing turmoil caused by the meltdown of subprime mortgages in the U.S.
Nomura said it would take a loss of $621 million on write-downs of residential mortgages and an additional charge of about $85 million for restructuring the business. That will swing Nomura to a pretax loss of as much as $511 million in the quarter ended Sept. 30, 2007. In the same quarter a year earlier, Nomura posted a net profit of about $2.1 billion.
"This is an extremely regrettable result," said Nobuyuki Koga, Nomura's president and chief executive officer. He added that while Nomura was retreating from the U.S. residential mortgage market, it planned to expand its electronic trading arm, called Instinet, and its asset management arm in the U.S.
Nomura's announcement comes in the wake of high-profile losses from major U.S. and European banks caused by exposure to subprime mortgages. Those mortgages, extended to borrowers with spotty credit histories, were packaged together with other mortgages and sold as bonds that are now in portfolios around the world. That has raised concerns about the value of assets in institutions ranging from banks and life insurers to hedge funds.
Two weeks ago, Swiss banking giant UBS AG said it would write down as much as $3.4 billion in securities, including some tied to subprime mortgages. Later, New York-based Citigroup Inc. said it would write down $3.3 billion and Merrill Lynch & Co. announced write down of about $5 billion.
Citigroup is scheduled to announce its third-quarter earnings on Monday in New York.
Prior to Monday's announcement, Nomura had written off about $620 million in residential mortgage-backed securities over a period of two quarters. The investment bank now has very little exposure to the field left on its books. Nomura said it has just $119 million in residential mortgages, of which less than $1 million is classified as subprime, to dispose of.
Nomura said it would reduce its U.S. headcount by 400 people, or 30%, to 900 people in the reorganization, which is expected to be finished by the end of March 2008.
Nomura shares traded in Tokyo fell 0.5% to Y2,080. The announcement was made after the close of trading in Tokyo.
