Wires

UPDATE 3-Japan's Nomura logs 17-year quarterly profit peak on stake sale and trading

Takashi Umekawa

trading@

* Swings to net profit of 138.6 bln yen from 11.2 bln loss

* Sale of stake in Nomura Research boosts bottom line

* Wholesale division registers fourfold growth in pretax profit

* Retail division still weak, pretax profit plunges 57% (Adds background, analyst comment)

TOKYO, Oct 29 (Reuters) - Japan's Nomura Holdings posted its strongest quarterly profit in more than 17 years, lifted by the sale of a stake in an affiliate as well as trading gains and improved performance at its wholesale division.

Nomura, the country's biggest brokerage and investment bank, has been in heavy cost-cutting mode after a bleak performance at its wholesale business led to the company's first annual loss in a decade last year.

Pretax income for the wholesale business, which serves corporations and institutional investors, has since rebounded sharply. It registered nearly fourfold year-on-year growth to 18.9 billion yen ($173.5 million) in its second quarter, helped by equities trading and investment banking.

This helped to lift Nomura to post a net profit from a loss in the same period last year despite a 57% plunge in retail investment pretax profit. Retail operations in the three months to Sept. 30 were hurt by worsening investor sentiment against the backdrop of the U.S.-China trade war.

Chief Financial Officer Takumi Kitamura struck a cautiously optimistic tone at a post-earnings briefing on Tuesday.

"While our bottom line was very much buoyed by the sale of shares in Nomura Research Institute, the main business didn't do too badly in a difficult market environment," he said.

The company posted a profit of 138.6 billion yen in the quarter, against a loss of 11.2 billion yen a year earlier, helped by a one-off profit of 73.3 billion yen on the sale of the 13.5% stake in Nomura Research Institute.

This was the company's third straight quarter of overall net profit and a second consecutive quarter of pretax profit for its international business.

RETAIL DECLINE

Nomura announced a plan in April to cut more than $1 billion in costs from the wholesale business and shut some of its domestic retail branches.

Kitamura on Tuesday said that Nomura had achieved about 60% of the 140 billion yen in targeted cost cuts.

Though its business is on a stronger footing than last year, Nomura's reputation took another hit when it was censured by regulators in May after it was found to have leaked information related to listing and delisting criteria to clients.

That led to the government leaving it out as an underwriter in a Japan Post share sale and Chief Executive Koji Nagai taking a 30% pay cut for three months.

Nomura's reduced costs and improved business focus helped the wholesale operations, said Shunsaku Sato at Moody's Japan. He noted, however, that profitability at the unit was up from very low levels last year and was flat against the previous quarter.

Revenue in the retail business was down 10% year on year at 76.9 billion yen, while revenue from net trading gains surged by 39% to 105.6 billion yen. ($1 = 108.9200 yen)

(Reporting by Takashi Umekawa; Additional reporting by Sayantani Ghosh in Singapore; Editing by Edwina Gibbs)