Nomura to curb commodities business, cut jobs

Japan's largest brokerage, Nomura Holdings Inc, is trimming its global commodities and energy-trading business and cutting jobs just when the markets are booming and competitors are expanding to capitalise on the opportunity. The bank's trading personnel were told late on Tuesday that the company was downsizing the business, particularly for oil and soft commodities, and affected staff had already been informed, two company sources told Reuters.
"The oil-trading team in Asia made money last year and it is a shock that they are down-sizing the operation," said one of the sources, who declined to be identified because he is not authorised to speak to the media. "It has more to do with restrategising the bank's business as a whole."
Asked to comment, a Singapore spokesman for the company said: "Nomura continually reviews its cost base to ensure that it is appropriately-sized for market conditions." The bank gave no exact reason for the move, but a source said expected job losses would be in the low double-digits. Still, the restructuring will not result in Nomura exiting the energy business entirely, another company source said.
"Nomura is not completely exiting the energy trading business despite the restructuring," the source said. The move follows a reshuffle among its senior management team, including the appointment of a new head of global markets, Tarun Jotwani, which includes the fixed income division that the commodities trading unit come under.
Nomura has had a presence in Singapore's oil-trading hub for about 10 years, stepping up its commodities business after taking over Lehman Brothers' unit about three years ago in the wake of the global financial crisis. It has an energy trading team of at least four in Asia, including Executive Director Shaun Lim, the head of the desk who was hired over a year ago, a distillates trader, and several support staff.
Market watchers and competitors were surprised at Nomura's move to downsize its energy business, particularly less than a year after expanding in the same sphere, and in a bullish environment. Nomura was among the most bullish on the market, forecasting oil prices could peak at $220.00 a barrel, if both Libya and Algeria halted production on escalating Middle East tensions. At the Asian close by 0830 GMT, April Brent was valued at $113.12 a barrel.
Commodity and oil prices have rallied from last year, with oil surging to fresh two-year highs, peaking at near $120.00 a barrel last week, while gold soared to a record of $1,444.40 an ounce and has held above the $1,400-mark since February 21. Less than a year ago, Sean Brecker, Nomura's head of commodities trading in Asia excluding Japan, had said he planned to boost its Asian business, and expected the region to grow for the next decade or so.
In the past one or two years, players such as ANZ Bank, Macquarie, Standard Chartered and Citigroup, have expanded their presence in the Asian energy and commodities sphere, in the aftermath of the global financial crisis. "The surprise is that they choose to downsize the global operation. Europe probably wasn't doing too well, but in Asia, they were okay last year and made decent money in a tough environment that saw bigger players suffering huge losses," a Singapore-based derivatives trader said.
Most banks, including Nomura, operate their commodity-trading desks on a combination of hedging volumes from customers, mostly end users, and their own proprietary trading. In the oil sector, end users such as airlines, shippers and refiners, were still recovering from the financial crisis and customer-flow volumes were at moderate levels, traders said. The trading environment was also difficult, they added, as price levels were rangebound most of the time, limiting the margin of error for traders at the wrong end of price movements.