Nomura Holdings Inc. slashed its entertainment budget for executives, people familiar with the matter said, as it stepped up efforts to rein in costs after some tough-going quarters.
(Bloomberg) — Nomura Holdings Inc. slashed its entertainment budget for executives, people familiar with the matter said, as it stepped up efforts to rein in costs after some tough-going quarters.
The firm decided to cut the spending plan by about 30% for the current fiscal year following weak earnings in the first half, said the people, who asked not to be identified because the information is private. The move affects executive officers and senior managing directors, though it’s unclear if managers outside of Japan are also hit, they said.
Like its global peers, Japan’s biggest brokerage is tightening its belt as Chief Executive Officer Kentaro Okuda tries to restore profit growth. Nomura has been reviewing costs at its key retail business following a slump, and recently let go of several senior investment bankers in Asia and Europe amid a sluggish dealmaking environment.
“It is not our policy to comment on individual cost line items but we are always committed to constantly reviewing and maintaining vigilant control of costs,” Nomura said in an emailed response to Bloomberg questions.
Nomura’s net income fell 64% in the first half ended Sept. 30 from a year earlier, though earnings showed signs of a recovery in the subsequent quarter ended Dec. 31.
Entertaining is traditionally an important part of doing business in Japan, where activities such as wining and dining and playing golf help to build client relations. Such spending dropped 25% when the pandemic struck in 2020, the most recent National Tax Agency figures show.
“Entertainment spending is one of the discretionary expenses Nomura can restrain first, before it takes more significant steps like cutting personnel expense such as bonuses,” said Michael Makdad, an analyst at Morningstar Inc. in Tokyo, noting the firm’s rising cost-to-income ratio.
“A temporary cut in entertainment spending probably shouldn’t affect business much, but over the medium term it is needed as part of the process to solicit deals, cultivate new customers, and expand business with existing customers,” Makdad said.
Nomura’s non-interest expenses climbed more than 14% in the third quarter from a year earlier to 310.1 billion yen ($2.3 billion), according to filings. The cost ratio at its wholesale division ballooned to 101% of revenue last quarter from 80% a year earlier.
Financial institutions globally are finding ways to trim expenses amid persistent inflation and the slowdown in dealmaking. BNP Paribas SA plans to move most of its Hong Kong staff out of offices in the city center to reduce costs, people familiar with the matter said this week. Citigroup Inc. is set to join Wall Street rivals JPMorgan Chase & Co. and Goldman Sachs Group Inc. in cutting jobs.
(Updates with comment from analyst in the seventh paragraph)
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