Nomura Investors Are Cool to Plan to Raise Capital

HONG KONG — Shares in Nomura Holdings were set to slump on Friday after the Japanese brokerage surprised investors and analysts with plans for a giant share sale intended to improve its capital base and fund investments in Japan and abroad.

Nomura announced late Thursday it would raise up to ¥511 billion, or $5.6 billion, by selling about 800 million shares — its second share sale in six months, and is its largest equity sale ever.

Nomura bought the Asian, European and Middle Eastern operations of collapsed banking giant Lehman Brothers last year. Nomura said in a statement that it would use the cash from the new share sale to make investments in various subsidiaries and “strengthen the company’s business foundation in Asia (including Japan), Europe, and the U.S.”

By late morning Friday in Japan, Nomura’s shares were untraded and those of other financial institutions slumped in Tokyo on concerns that Nomura’s move could signal another round of share issues by other banks and brokers in anticipation of tougher capital rules.

“The share sale is huge and will cause dilution,” said Azuma Ohno, a Tokyo-based analyst at Credit Suisse told Reuters. “Nomura needs to explain how it will offset the loss by showing clearly how to boost its overseas business.”

Nomura has had to contend with high integration costs of the Lehman acquisition, as well as one of the toughest economic backdrops in Asia, as Japan’s economy — the world’s second-largest after the United States — is struggling to emerge from recession.

Although Japan’s banks mostly steered clear of the toxic U.S. mortgage-related assets that dragged many of their counterparts in other regions to their knees, they were badly hurt by the post-Lehman slump in Japan’s stock market. That has forced them to raise capital and revise downward the value of their sizeable stock holdings.

“Investors are increasingly wary major financial companies will enter another round of equity sales,” said Tsutomu Yamada, at Tokyo-based kabu.com Securities Co. told Bloomberg News. “With non-performing loans increasing, Japan’s financial sector is like a hanged man whose legs are being pulled.”

Shares of Mizuho Financial Group slumped 4.9 percent on Friday morning. Mitsubishi UFJ Financial Group dropped 6.1 percent, and Sumitomo Mitsui Financial Group fell 5.1 percent.

Together, these three so-called megabanks have raised about $19 billion by selling shares since the end of December.

The Nikkei 225, Japan’s benchmark index, sagged 2.9 percent by late morning.

Nomura Investors Are Cool to Plan to Raise Capital