UPDATE 3-Nomura Q3 profit slides 71 pct on market slump

(Adds executive comment, details, background)

By Nathan Layne and Emi Emoto

TOKYO, Jan 31 (Reuters) - Nomura Holdings Inc (8604.T: Quote, Profile, Research), Japan's largest brokerage, said its profit fell 71 percent in the quarter ended Dec. 31, as share prices slumped and equity finance deals dropped off.

Nomura and second-ranked Daiwa Securities Group (8601.T: Quote, Profile, Research) are headed for double-digit profit declines for the year ending March as tumbling Japanese stocks cut into brokering commissions, putting off mergers and acquisitions (M&As) and share offerings.

Nomura posted its first quarterly loss in four-and-a-half years in the July-September quarter due to bad bets on the U.S. subprime loan market and the cost of cutting jobs in quitting the U.S. residential mortgage-backed securities market.

The broker rebounded to profitability thanks, in part, to fees from managing Sony Financial Holdings's (8729.T: Quote, Profile, Research) $3 billion initial public offering (IPO) in October, but a fully fledged recovery could prove elusive with Japanese stocks near 28-month lows.

"I have to say that this was a harsh set of results," Nomura Chief Financial Officer Masafumi Nakada told a news conference.

Group net profit at Nomura came to 22.65 billion yen ($213 million) in the October-December third quarter, down from 79.1 billion yen a year earlier but an improvement on the second quarter's 10.5-billion-yen loss.

Deutsche Securities had forecast a third quarter profit of 34.7 billion yen.