Japan's Nomura to shut down American mortgage-backed securities business

Photo: Japan's Nomura to shut down American mortgage-backed securities business

The U.S. residential mortgage-backed securities business of Nomura Holdings Inc. is to be shut down thanks to the subprime mortgage crisis.

Nomura said in a statement Monday it will book a 73 billion yen (US$621 million) loss in its residential mortgage-backed securities business.

The group now expects a group pretax loss of 40-60 billion yen (US$340-510 million) for the July-September quarter, including about 15 billion yen (US$128 million) to reorganize its U.S. business, according to the statement.

The company also said it will cut more than 400 jobs in the U.S. - about 30 percent of its work force there - by March 2008, mostly in its broker-dealer operations and back offices.

"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 in the statement.

The Japanese group has already written off about US$620 million related to its U.S. subprime mortgage-related business.

Nomura's woes follow a string of losses at major U.S. and European banks from exposure to risky loans made to individuals with poor credit histories.

Mortgage-backed securities are created by bundling together these home loans and repackaging them as securities that can be bought and sold.

Citigroup Inc., Merrill Lynch and UBS AG have all warned that loan-related losses will significantly hurt their third-quarter results. Citigroup has booked US$5.9 billion in losses, while Merrill Lynch has booked US$5 billion.

The ratings agency Standard & Poor's said its rating on the Nomura group would not be affected by its loss, citing its generally solid performance in other segments like domestic operations.

Nomura shares fell 0.5 percent to 2,080 yen in Tokyo. The announcement was made after the close of trading.