Japan's largest securities house Nomura Holdings unveiled a 71 per cent slump in third-quarter profits today hit by the costs of shutting its US residential mortgage business and the tumbling confidence in the Japanese stock market.

Net income fell to ¥22.6 billion (£106 million) in the three months to the end of December from ¥79.1 billion a year earlier. The fall was worse than analysts had forecasted with most predicting profits of about ¥27 billion. Deutsche Bank had expected ¥34.7 billion.

Revenue fell 27 per cent to ¥432.8 billion in the quarter as investment banking fees fell by a third while operating costs increased 20 per cent to ¥230 billion.

In Europe revenues increased 19 per cent to £614 million and profits soared 60 per cent to £237 million over the first nine months of its financial year.

In Tokyo, much of the profit fall was down to the failure of the plan by the chief executive, Nobuyuki Koga, to re-enter the US market. He closed the Chicago office last year and took a ¥73 billion writedown on its exposure to mortgage loans in the second quarter, leading to the bank's first loss in four years.

Nomura said in October that it would cut 400 jobs in the US and booked a further ¥15 billion in costs related to closing its residential mortgage division there.

In line with other Japanese brokers such as Mizuho Financial and Daiwa Securities it has been hit by the turmoil in the Japanese stock market, which has put corporate clients off flotations and share issues. But by cutting its losses to sub-prime investments relatively early on in the credit crunch it managed to avoid an even worse disaster.

Nomura is now hunting for acquisitions in emerging markets in Eastern Europe and in Asia, hoping to advise Japanese firms looking to do overseas acquisitions and similarly western companies looking to buy into Japan.

The group confirmed that it had held takeover talks in December with Collins Stewart, the UK stockbroker, but these came to nothing.

The company ranked seventh, from fifth a year earlier, among financial advisers for Japanese mergers and acquisitions in the quarter, trailing JPMorgan Chase & Co. and other overseas banks. It worked on 37 transactions worth a combined £3.2 billion, compared with 10 deals for JPMorgan worth £5.6 billion in total.

Shares in Nomura have fallen 23 per cent since October and lost 2 per cent today.

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