Daiwa puts London bank up for sale in European retreat

DAIWA SECURITIES, Japan's second-largest broking firm, has put its UK banking arm Daiwa Europe Bank up for sale.

The firm yesterday appointed Paribas, the investment bank, to seek a buyer for the business, which employs 150 at its offices in St Paul's Churchyard in London and 50 in Dublin in the areas of fund management, custody, foreign exchange and corporate banking.

The move follows an agreement in July between Daiwa and rival Sumitomo to merge their capital markets activities.

Daiwa managing director Michael Gray said that following that agreement, Daiwa has decided to withdraw from other areas abroad to concentrate on securities.

It has assets of pounds 1.35bn and made profits before tax of pounds 8.3m in the year to the end of March.

The business is valued in Daiwa's March accounts at pounds 160m, although finding a buyer in the current climate could prove tough.

Daiwa's decision to put the business up for sale is the latest sign that Japanese banks are having to retreat in the face of continued difficulties in their domestic market.

Daiwa Securities announced last month it was laying off 50 of its 600 London staff. The firm plans to reduce staff overseas from 1,800 to 1,000 in two years.

Nikko Securities has already decided to cut back its 500-strong London operation following a joint venture agreement with Salomon Smith Barney.

Yesterday Donald Mulford, chairman of Credit Suisse First Boston, also warned of job cuts on the way. "From the standpoint of business, these next six months will be quite difficult and there will be some important adjustments to be made," he said.

The warning came as BankAmerica, the largest US bank, reported lower third quarter operating profits as a result of hedge fund and emerging market losses. Profits fell by 50 per cent to $893m compared with the previous quarter, half of what Wall Street analysts were expecting.

The bank has been badly hit by its exposure to one hedge fund, the New York based DE Shaw. The bank's chief financial officer, James Hance, told Wall Street analysts that the firm was seeking to acquire $20bn worth of bond and related hedge positions from the fund, which it intends to liquidate as soon as possible.

The bank has had to write off $372m, leaving it with a $1bn investment in the firm and a $1.3bn unsecured loan, which is unlikely to be fully repaid.

Bear Stearns, the Wall Street firm that refused to participate in the $3.75bn Long-Term Capital Management bail-out despite having handled the hedge fund's clearing, yesterday reported a 60 per cent fall in earnings to $64m in the third quarter.