Nomura said its total loss due to the implosion of Archegos Capital would reach nearly $ 2.9 billion, as relatives of the Japanese bank said it had suspended its global head of brokerage operations indefinitely. first order.
The financial blow to the country’s biggest brokerage is considerably larger than the loss of around $ 2 billion that Nomura initially reported when the debacle involving the heavily indebted family office first surfaced in late March.
The losses of Bill Hwang’s Archegos, which Nomura has not officially named and referred to as an “American client,” led the bank to its biggest quarterly loss since the global financial crisis of 2008. It also prompted Nomura to commit. to strengthen its risk management systems.
Two people close to Nomura said that as a direct result of the Archegos incident, the company had indefinitely suspended Dougal Brech, the head of the UK-based prime brokerage unit who had fed Hwang as a client and who had previously worked at Credit Suisse. . The Japanese bank said on Tuesday that it did not foresee any major strategic changes in the wholesale banking unit in which its prime brokerage business is located.
The loss of Nomura to Archegos, the fallout of which hit Swiss credit, Morgan Stanley, UBS and two of Japan’s largest mega-banks left $ 2.3 billion in profits for the fiscal year that ended March 31. But the process of unwinding Archegos’ positions, which Nomura said was 97% complete, created an additional loss of $ 570 million that analysts said would hurt its performance in the quarter ending in June.
Nomura’s losses following the collapse of Archegos are only those of Credit Suisse. UBS reported on Tuesday a loss of $ 774 million on transactions related to Hwang’s fund.
They rekindled the question of whether the Japanese bank’s efforts to continue growing overseas have prompted it to take more risk than it can bear, given the relatively small scale of its operations in foreign countries. United States.
Nomura said on Tuesday it had appointed Christopher Willcox, the former head of JPMorgan Asset Management, to the post of co-chief executive of its US unit.
As concerns continue to revolve around whether other family offices have also been extended to scale the funding granted to Archegos, Nomura said in a presentation accompanying the findings that she had conducted a review. complete of existing prime brokerage transactions. “We.. Reviewed positions in other financing-related activities, confirming no other similar transactions,” the presentation reads.
The net loss of 155.4 billion yen ($ 1.4 billion) for the January-March quarter shattered Nomura’s hopes of what was set to be a record year of profits, in large part thanks to solid performance from its historically volatile US activities.
Without the collapse of Archegos, investors said, Nomura’s 2020 rebound would have been a dream start for Kentaro Okuda. Its former head of investment banking started as managing director a year ago and was the company’s first executive outside of the core domestic brokerage business.
Instead, Okuda’s first full-year earnings announcements began with an apology and a promise to improve risk management.
Nomura’s net profits for the full year ending in March were $ 1.4 billion, down 29% from fiscal 2019. Despite the blow to wholesaling , the annual profits of Nomura’s retail and asset management segments grew 87% and 158% year over year, respectively.
Shunsaku Sato, senior credit officer at Moody’s Japan rating agency, said the gains “underscored the importance of profit contributions from both segments in stabilizing the company’s overall profitability.”