S&P Lowers Nomura Securities to 'A-'; Outlook Negative.

TOKYO--(BUSINESS WIRE)--S&P's CreditWire 10/29/98--Standard & Poor's today downgraded Nomura Securities Co. Ltd.'s (Nomura) long and short-term counterparty ratings to single-'A'-minus and 'A-2', from single-'A'-plus and 'A-1', respectively (see list of related entities below). The ratings are removed from CreditWatch where they were placed on Sept. 4, 1998. The outlook is negative.

The downgrade reflects Nomura's weak operating performance, its higher risk profile due to the adverse market environment, the recent financial and structural problems facing its overseas operations, and greater competition in its home market. Given the weak confidence in the Japanese financial system, Nomura's funding flexibility has also been constrained. Supporting factors are its relatively low leverage and favorable domestic franchise.

Nomura's operating performance has been weak over the past several years, with net losses recorded in fiscals 1994 and 1996. For the interim period ended September 1998, Nomura again reported net losses, totaling Y205 billion, and is likely to record net losses for the full fiscal year. Until recently, the company's overseas business activities had helped to offset its weak performance in the domestic market. In recent months some of these operations have come under tremendous pressure due to adverse changes in the global market environment. Nomura's U.S. mortgage-backed securities business must not only cope with reduced market liquidity but also with the departure of some key executives. Nomura's principle finance business in Europe, which contributed Y158 billion in profits in fiscal 1997, could face similar liquidity challenges in the future.

While good overseas results have offset the decrease in the domestic stock brokerage business, Nomura's inflexible cost structure continues to be a major disadvantage in the highly cyclical operating environment. Nomura has reduced its fixed cost base but is still constrained by its inflexible policy regarding personnel-related costs. Even with ongoing restructuring efforts, the company will likely remain exposed to expense control pressures during this economic downturn.

Despite a temporary deterioration in its domestic market share, attributable to administrative sanctions against the company, Nomura's position remains solid, as evidenced by the quick recovery of market shares in both the brokerage and underwriting businesses. Nomura's market position, however, is increasingly challenged by the recent tie-ups between its competitors and the rapid entry of strong foreign players. However, the strength of existing relationships with clients should limit the degree of deterioration.

Nomura's funding flexibility is constrained by weakened market confidence in the Japanese financial system. Nomura has addressed this weakness by reducing its reliance on Japanese banks, shifting to long-term financing, and entering into committed line of credit arrangements with a wider pool of banks. Standard & Poor's believes increased exposure to short-term capital market financing will put further pressure on Nomura to produce good results.

Nomura's leverage, measured by its adjusted assets to equity ratio, remains relatively favorable compared with its international peers.

The downgrade of Nomura Trust & Banking Co. Ltd.'s long and short-term ratings to triple-'B'-plus and 'A-2' from single-'A' and 'A-1', respectively, reflects the downgrade of Nomura Securities.

OUTLOOK: NEGATIVE.

If the company's restructuring plan, coupled with the growth of Japan's securities market, does not work to improve its weak profitability, this could lead to further rating actions. Furthermore, if the current adverse market environment continues or becomes more severe, this could also negatively impact the company's ratings, Standard & Poor's said.---CreditWire -0-

REVISED RATINGS             TO               FROM
Nomura Securities Co. Ltd.
Counterparty credit rtg   A-/Negative/A-2    A+/Watch Neg/A-1
Sr unsecd                 A-                 A+/Watch Neg
CP                        A-2                A-1/Watch Neg
Nomura Holding America Inc.
Counterparty credit rtg   A-/Negative/A-2    A+/Watch Neg/A-1
Sr unsecd (gtd by Nomura Securities Co. Ltd.)
                          A-                 A+/Watch Neg
CP (gtd by Nomura Securities Co. Ltd.)
                          A-2                A-1/Watch Neg
Nomura International PLC
Counterparty credit rtg   A-2                A-1/Watch Neg
Euro CP (gtd by Nomura Securities Co. Ltd.)
                          A-2                A-1/Watch Neg
Nomura Bank International PLC
Counterparty credit rtg   BBB+/Negative/A-2   A/Watch Neg/A-1
CD                        BBB+/A-2            A/Watch Neg/A-1
Sr unsecd                 BBB+                A/Watch Neg
Nomura Europe Finance N.V.
Counterparty credit rtg   A-                  A+/Watch Neg
Sr unsecd (gtd by Nomura Securities Co. Ltd.)
                          A-                  A+/Watch Neg
Nomura Trust & Banking Co. Ltd.
Counterparty credit rtg   BBB+/Negative/A-2   A/Watch Neg/A-1
CD                        BBB+/A-2            A/Watch Neg/A-1
Nomura Global Funding PLC
MTN (gtd by Nomura Securities Co. Ltd.)
                          A-/A-2              A+/Watch Neg/A-1