Daiwa posts $283 million Q3 loss, cuts more jobs

TOKYO (Reuters) - Daiwa Securities Group (8601.T), Japan's second-biggest brokerage, booked its fourth consecutive quarterly loss on Tuesday on a drop in trading commissions and the firm expanded a cost-cutting plan to a total of 500 overseas jobs.

The loss underscores the challenges facing Daiwa as it scrambles to cut costs to cope with dwindling revenues in Japan and establish a niche in overseas markets where it lacks the scale to go head-to-head with the biggest banks.

For the October-December quarter, Daiwa reported a net loss of 21.6 billion yen ($283 million), worse than the 19.4 billion yen loss in July-September and the consensus for a 14 billion yen loss from four analysts polled by Thomson Reuters I/B/E/S.

Net operating revenue fell 16 percent to 70.3 billion yen, reflecting a slide in commissions that Daiwa attributed to low stock volumes in Japan and a conservative trading stance taken by its institutional clients to cope with volatile markets.

"Across the market investors are wary of taking risks. We think the operating environment will remain tough for some time," Daiwa's chief financial officer, Nobuyuki Iwamoto, told a news conference.

For the full business year to March 2012, the average net income prediction of seven analysts surveyed is for a 44 billion yen loss. Daiwa does not release its own outlook.

Daiwa, whose chief rival in Japan is Nomura Holdings (8604.T), said it would now look to carve 60 billion yen out of its cost base, up from a 40 billion yen target announced in late October. The new plan will include 200 additional job cuts for a total of 500 positions eliminated overseas.

Nomura is expected to report that it roughly broke even when it announces results on Wednesday, as gains on the sale of restaurant chain Skylark offset continued weakness in its overseas trading and investment banking operations.

RARE BRIGHT SPOT

Daiwa was hit hard by the stock market slump. Japan's benchmark Nikkei average .N225 fell 3 percent in the October-December quarter, while the daily trading average on the Tokyo Stock Exchange fell below 1 trillion yen in December for the first time in more than eight years.

The downbeat conditions prompted retail investors, a key source of Daiwa's income, to pull their money out of the market. Equity mutual funds suffered a third consecutive month of net outflows in December for the first time in nearly 13 years.

In addition to the pressure on its vast retail network, Daiwa has continued to struggle to revive its wholesale operations after ending a 10-year investment banking joint venture with Sumitomo Mitsui Financial Group (8316.T) in 2009.

In a rare bright spot, Daiwa managed an uptick in equity-related underwriting commissions thanks to nabbing the bookrunner role for the 200 billion yen convertible bond sale by telecommunications firm KDDI Corp (9433.T).

But its investment banking arm, Daiwa Securities Capital Markets, still fell deep into the red, registering a quarterly net loss of 27 billion yen.

Daiwa shares have fallen about 4 percent over the past three months compared with a 3 percent drop in the benchmark Nikkei average .N225.

Prior to the results, Daiwa's stock closed up 0.7 percent. The Nikkei rose 0.1 percent.

($1 = 76.3900 Japanese yen)

(Reporting by Nathan Layne; Editing by Muralikumar Anantharaman)