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Nomura (NMR) Announces Share Repurchase Worth $1.4 Billion

Zacks Equity Research

Nomura Holdings, Inc. NMR recently announced that it will reduce its stake in its affiliate — Nomura Research Institute — after admitting that the latter was involved in a market-sensitive information leak. Per a statement issued on Tuesday, Japan’s biggest brokerage company will use the proceeds from this reduction to buy back shares worth nearly 150 billion yen ($1.4 billion). The news was first reported by Bloomberg.

Nomura’s stake in NRI will now be 23.1%, down from 36.6%.

Simultaneously, the company has withdrawn a proposal to nominate its chairman to key board roles in an effort to strengthen governance just days before its annual shareholder meeting, which is scheduled on Jun 24.

Last month, the Financial Services Agency (“FSA”) issued a "business improvement order" against Nomura after the company confirmed that some damaging information related to listing and delisting of stocks had been leaked. An employee at NRI, who was on a Tokyo Stock Exchange panel, was looking at the overhaul of the exchanges’ section of listed stocks. He probably leaked information about the potential changes to a chief strategist at the firm’s main securities unit. Later on, employees at Nomura shared that information with institutional clients.

Following the FSA’s order, Nomura said that its CEO, Koji Nagai, would take a 30% pay cut for three months to take responsibility for the same. However, Nagai still pledged to remain the CEO.

Per a statement issued recently, Nomura withdrew its proposal to re-elect chairman Nobuyuki Koga as the head of compensation and nominating committees. In fact, the company has been asking shareholders to vote in favor of outside director Hiroshi Kimura for these positions.

Notably, proxy advisory firms Glass Lewis and Institutional Shareholder Services (“ISS”) are also urging shareholders to vote against Koga. Glass Lewis said that oversight of executive performance and pay “is likely more complicated and less rigorous when an inside director chairs the committee.”

The ISS also recommends that shareholders vote against the re-election of Nagai because Nagai “should be held responsible for the information leakage incident.”

Shares of Nomura have lost 8.9% on the NYSE over the past six months against 8.5% growth recorded by the industry it belongs to.

Currently, Nomura carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the finance space are Hilltop Holdings Inc. HTH, Cadence Bancorporation CADE and M&T Bank Corporation MTB. Each of these stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past 60 days, Hilltop Holdings witnessed an upward earnings estimate revision of 11.5% for the current year. Its share price has increased 19.6% in the past six months.

Cadence Bancorporation’s Zacks Consensus Estimate for earnings in 2019 has been revised 8.8% upward over the past 60 days. Its shares have gained nearly 14.2% in the past six months.

Over the past 60 days, M&T Bank witnessed a marginal upward earnings estimate revision for the current year. Its share price has rallied 18.3% in the past six months.

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