Nomura Holdings Inc. said Tuesday it stayed deep in the red for the third straight quarter as ongoing fallout from the global financial turmoil squeezed Japan's biggest brokerage just as it embarked on a major overseas offensive.
Nomura, which bought Lehman Brothers' operations in Asia, Europe and the Middle East, posted a bigger-than-expected group net loss of 72.9 billion yen ($785.6 million) for the July-September quarter.
The result, which widely missed the 2.81 billion yen loss projected by a Thomson Financial survey of analysts, is likely to raise concerns about the company's full-year outlook.
The figure was also worse than the 11.7 billion yen ($126 million) loss the company posted in the fiscal second quarter of last year but slightly better than 76.6 billion yen ($825.5 million) loss in the April-June period.
Revenue slumped 28 percent to 128.1 billion yen ($1.38 billion) from 176.7 billion yen ($1.89 billion).
Following the earnings release, Standard & Poor's downgraded its credit rating outlook on Nomura Holdings and unit Nomura Securities Co. to "negative" from "stable."
"Considering the ongoing turmoil in the global financial markets, it is possible that the value of Nomura group's trading assets and the credit quality of various counterparties could further deteriorate, leading to additional losses for the group," S&P analyst Yuri Yoshida said in a statement.
The company blamed the poor results on deteriorating market conditions that caused individuals to curtail trading activity and kept companies from issuing stocks and bonds.
During the quarter, Tokyo's benchmark Nikkei 225 index lost 22 percent of its value amid growing uncertainties about the global economic outlook.
Although Japanese financial firms were relatively sheltered from subprime-related losses overseas, analysts nonetheless offered a dismal prognosis for the sector.
"For this year, the commission fee income will be really bad for the (Japanese) securities companies because everybody knows that there really aren't a lot of deals in the (investment banking) areas," said Yuin Lim, an analyst at CLSA Ltd. in Hong Kong. "The volumes for even the brokerage side are low."
Nomura said it booked trading losses in credit, derivatives and equities during the quarter. It also cited write-downs of real estate assets, as well as a 17 billion yen ($183.2 million) loss stemming from its investment in securities issued by collapsed U.S. investment bank Lehman Brothers Holdings Inc.
However, the Japanese financial giant reiterated hopes for its Lehman acquisitions, saying it is now "positioned to rebuild global markets and international wholesale operations to expand revenue."
The company said Tuesday it will spend $2 billion on the purchase and add 8,000 former Lehman employees to its global payroll.
For the six months through September, Nomura reported a net loss of 149.46 billion yen ($1.61 billion) on revenue of 515.6 billion yen ($5.56 billion). It posted 64.23 billion yen ($692.2 million) in net profit during the same period the previous year.
Nomura does not release earnings forecasts.
Its financial results are based on U.S. accounting standards.