TOKYO -- Nomura Holdings Inc, Japan's largest brokerage, posted a record $3.8 billion quarterly loss, hit by costs related to buying Lehman Brothers' operations, soured trades and exposure to Iceland and accused swindler Bernard Madoff.

Nomura said it would cut some executive bonuses and salaries, not pay a dividend for the current quarter and may sell businesses as it integrates the Asian, European and Middle East operations it bought last year from failed Wall Street bank Lehman Brothers.

At the time, the Japanese firm said it hoped to leverage Lehman's infrastructure, clients and employees to expand beyond its mature home market.

But it has had to pay large sums to keep Lehman talent and absorb other costs just as the financial crisis triggered huge losses on its investments and dented all its major business segments.

Nomura booked 243 billion yen ($2.73 billion) in one-off losses for October-December, mainly from Lehman, its stake in Fortress Investment Group, and its exposure to crisis-hit Iceland and former Wall Street trader Bernard Madoff.

"The latest results highlight the fact that the balance of income and costs at Nomura in the current environment is not good and it needs to cut costs," said Wataru Kasatani, financial sector analyst at Meiji Dresdner Asset Management.

LOSSES

Nomura posted a 342.9 billion yen ($3.8 billion) net loss for October-December, versus a year-ago 21.8 billion yen profit.

Chief Financial Officer Masafumi Nakada told a news conference the results were "regrettable."

"In the process of integrating Lehman's operations, we will remove the businesses we don't need and strengthen the ones we think are necessary," he said.

The loss was much larger than an average forecast for 211 billion yen from three analysts surveyed by Reuters Estimates. It was Nomura's fourth quarterly loss in a row and its biggest.

Standard & Poor's cut credit ratings for Nomura Holdings and its companies, citing the bigger-than-expected losses amid the unprecedented financial turmoil, and Moody's placed the broker's ratings under review for possible downgrade.

Nomura booked 147 billion yen losses from trading in the fiscal third quarter, hit by extremely volatile stock and currency markets, Nakada said.

It booked 60.3 billion yen as one-time costs related to the Lehman buy, including payments to retain former Lehman staff. Nomura said it expects to book a similar amount for the fourth quarter. The brokerage also booked 62.3 billion yen for losses caused by the drop in value in Fortress shares.

"I'm saying this is temporary because we are not likely to repeat the same losses from Iceland or Madoff again, Nakada said.

Nomura announced last month it had a 27.5 billion yen exposure to Madoff, the Wall Street trader and former Nasdaq stock market chairman accused of running a worldwide fraud that authorities say may have cost investors $50 billion.

It has previously warned of its exposure to Fortress and Iceland.

SEEKING GROWTH

Nakada said Nomura may boost its capital again for growth, following the sale last month of 410 billion yen worth of bonds.

The group may also merge the operations of Joinvest Securities Co, its online broker, with Nomura Securities. Joinvest's monthly trading value almost halved to 368 billion yen in December from a year earlier.

Investors have shied away from buying stocks and companies are not rushing to issue shares, hitting fee income at Nomura and rivals such as Daiwa Securities Group Inc (8601.T).

Average daily turnover on the Tokyo Stock Exchange's main board dropped to 1.9 trillion yen in October-December from 2.7 trillion yen a year earlier, according to exchange data.

Japanese companies raised $6.6 billion from selling shares and equity-linked products during the fiscal third quarter, up 14 percent from a year earlier.

For the 2008 calendar year, Japanese firms sold $15 billion worth of shares and convertible bonds, down 40 percent from 2007, and the lowest in a decade, according to Thomson Reuters data.

Ahead of the results, Nomura shares closed up 4.9 percent, in line with the broader market .N225.

The broker's stock fell 45 percent in October-December, underperforming the benchmark index's 21 percent drop.