Daiwa Securities Group Inc., Japan’s second-largest brokerage, said it will eliminate as many as 50 derivatives jobs in Hong Kong and may shrink investment banking and equity research in the city as part of an expanded cost-cutting program.
The firm will close its Hong Kong desk for over-the-counter trading of equity, currency and interest-rate derivatives, affecting 30 to 50 staff, Tokyo-based spokeswoman Kana Shirakawa said by phone today.
The reductions are in addition to the 500 positions eliminated in Asia and Europe since last October as Daiwa follows bigger rival Nomura Holdings Inc. (8604) in widening cost cuts to cope with losses abroad. Tokyo-based Daiwa has posted pretax losses outside of Japan for 11 straight quarters.
“Additional cost cuts must be unavoidable after Daiwa incurred losses overseas in the fiscal first quarter,” said Azuma Ohno, a Tokyo-based analyst at Barclays Plc, who has an “underperform” rating on the shares. “Daiwa is seeking to improve the bottom line of its businesses abroad through cutbacks including job reductions as competition intensifies in Asia’s investment-banking market.”
The Nikkei newspaper reported the plans earlier, and said Daiwa aims to widen a target for expense cuts to 70 billion yen ($897 million) from 60 billion yen.
Shares of Daiwa fell 0.7 percent to 303 yen at the midday trading break in Tokyo. The benchmark Nikkei 225 Stock Average (NKY) slid 0.7 percent.
Chief Executive Officer Takashi Hibino is scaling back abroad as global economic growth slows and Europe’s sovereign debt crisis destabilizes markets. Daiwa Capital Markets Hong Kong Ltd. eliminated 60 positions across departments earlier this year, about 10 percent of the unit’s staff.
Daiwa employed 14,744 people worldwide as of June 30, down 1,151 from a year earlier, according to company data.
The latest reductions won’t affect the personnel that Daiwa gained through its $1 billion purchase of Belgian bank KBC Groep NV (KBC)’s convertible-bond and Asia equity derivatives units in 2010, Shirakawa said. Daiwa bought those assets to expand broking and investment-banking operations globally after ending a decade- long venture with Sumitomo Mitsui Financial Group Inc.
Cost cutting helped Daiwa post net income of 2.7 billion yen in the three months ended June, compared with a loss of 9.4 billion yen a year earlier. The company continued to lose money abroad, reporting a pretax loss of 5 billion yen.
Nomura last month pledged to trim an additional $1 billion of costs as it pares a global push following its 2008 purchase of Lehman Brothers Holdings Inc. operations in Europe and Asia. The firm is eliminating about 100 investment banking jobs in Europe, three people with knowledge of the plans said last week.
Daiwa and Nomura were embroiled in an insider-trading investigation this year. Regulators found that employees at both firms leaked information to traders ahead of share sales they managed in 2010.
In Daiwa’s case, the actions were found to be isolated and the company wasn’t punished. Nomura received an order to improve its business and the company’s top two executives resigned.
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