Daiwa Securities Group's European operations swung to a pre-tax loss of ¥2.4 billion (approximately £13 million) in the first half of its fiscal year, reversing a profit of ¥1.1 billion in the same period a year earlier, according to the company's latest financial statements.
The Tokyo-based bank's European arm, which includes its London headquarters, reported a 10% decline in revenue to ¥23.5 billion for the six months ended September 30. The deterioration reflects challenging market conditions and the impact of a reduced workforce, which fell to 675 employees from 725 a year ago.
Headcount Reduction and Strategic Shift
The headcount reduction is part of a broader restructuring effort by Daiwa to streamline its international operations. The bank has been scaling back its European presence, focusing on core client relationships and profitable business lines. The London office remains the largest European hub, but the company has also reduced staff in other European cities.
Despite the loss, Daiwa reiterated its commitment to its European franchise, stating that it continues to serve institutional clients in equities, fixed income, and investment banking. The bank's global restructuring, announced earlier this year, aims to cut costs by ¥30 billion annually by March 2025.
Market Conditions and Outlook
The loss comes amid a challenging environment for European investment banks, with subdued trading volumes and geopolitical uncertainty weighing on revenues. Daiwa's results mirror trends seen at other Japanese banks operating in Europe, which have faced similar headwinds.
Looking ahead, Daiwa said it expects market conditions to remain volatile but expressed confidence in its cost-saving measures and focus on higher-margin businesses. The company did not provide specific guidance for the second half but indicated that it would continue to evaluate its international strategy.
The European loss contrasts with Daiwa's overall group performance, which remained profitable, supported by strong retail and asset management businesses in Japan. The group's net income for the first half rose 4% to ¥52.6 billion.
Impact and Next Steps
The reduced headcount and strategic pivot are likely to have a lasting impact on Daiwa's European operations, potentially affecting its market share in certain products. However, the bank's focus on cost discipline and client-centric services may help it navigate the current downturn.
Daiwa's next earnings report, due in February 2024, will indicate whether the restructuring is yielding the desired results and whether the European arm can return to profitability.
