The Japanese investment banking firm of Nomura Holdings Inc. announced today it will abandon the U.S. residential mortgage-backed securities market.
Tokyo-based Nomura is overhauling its American operations.
The company said it reduced its U.S. mortgage exposure from $2.4 billion to just $0.4 billion during the second quarter. Currently, the level of exposure stands at just $0.1 billion of investment grade securities with just a fraction of that amount being subprime-related. The company said it will hold on to the remaining securities.
"When we announced our first quarter financial results in July, we said that we would act quickly to securitize and sell off our U.S. residential mortgage exposure and that we were considering exiting the business," Nomura Chief Financial Officer Masafumi Nakada said in a press conference today, according to a transcript of his presentation. "We continued to reduce our exposure in August amid the market turmoil and are now able to say that we have virtually completed our exit."
Nakada explained that the RMBS business is complex and time intensive while the estimation of its remaining portfolio value was very difficult.
About 400 jobs are expected to be eliminated by the move -- leaving approximately 900 employees, the statement said. The remaining employee count represents about half the level it was at in March.
Nomura said it will take $129 million charge as a result of the move.
"This now virtually clears out the problems in our U.S. business," Nakada added. "We are confident that our financial position remains very strong and there are no problems financially with running our U.S. operations."