Nomura suffers surprise drop in quarterly profits after large one-time charge

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A Nomura Holdings logo is pictured in Tokyo, Japan on December 1, 2015. REUTERS / Toru Hanai

  • US “Legacy Transactions” Fees
  • Nomura’s CFO declined to release details citing litigation
  • Nomura has long aspired to be seen as a global player

TOKYO, Oct.29 (Reuters) – Nomura Holdings Inc (8604.T), Japan’s largest brokerage and investment bank, saw net profit nearly wiped out in the second quarter due to one-time loss from transactions concluded over ten years ago.

He recorded a charge of around 39 billion yen ($ 345 million) which he said was related to legacy transactions in the United States before the global financial crisis of 2007 and 2008.

The loss follows the collapse of the $ 2.9 billion US investment fund Archegos – news of which emerged in March and which also led Nomura to announce on Friday that he had set up a new committee of the board of directors to improve its risk management.

“It is really disappointing that we recorded such a loss after the case at the end of March,” CFO Takumi Kitamura said in a briefing.

He declined to disclose details of the most recent charge, saying it is currently the subject of litigation.

“It is difficult to avoid the risk of litigation as long as we are doing business abroad. But we must control the risks to prevent such cases from happening.”

Nomura’s profit from July to September is well below forecast at 3.2 billion yen ($ 28.3 million), down 95% from the previous year.

The bank has had a long, troubled history in its attempts to expand overseas and compete with its global rivals, including the acquisition of assets from the bankrupt Lehman Brothers in 2008, which it later canceled. .

The bank was also among the hardest hit by the Archegos debacle, which it said was an isolated incident rather than an indictment of its broader ambitions.

“To try to compete globally, Nomura is taking risks but has yet to successfully execute a coherent long-term strategy,” said Michael Makdad, Morningstar analyst.

“Sometimes those risks explode, sometimes sooner and sometimes later, and the explosions more than make up for the big profits he gets in good neighborhoods.”

Pre-tax profit of Nomura’s wholesale division, which houses its trading and investment banking business, fell 62% to 25 billion yen for the same period a year earlier.

In addition to the charge for the historic transaction, it also recorded a weaker performance from its trading activities in global markets – much of which is fixed income trading – after a dynamic 2020 due to the high market volatility due to COVID-19. pandemic.

One bright spot was Nomura’s investment banking unit, which saw its net income increase by 26% thanks to a record wave of transactions globally. While it was a relatively small player in global mergers and acquisitions, the acquisition of Greentech, a cleantech M&A advisor now renamed Nomura Greentech, helped strengthen the presence of Nomura in the US market.

Nomura this month named Greentech founder Jeff McDermott as global co-head of investment banking.

The bank also announced on Friday that it would repurchase up to 50 billion yen or up to 2.5% of the outstanding shares.

Nomura’s shares have lost more than 20% since disclosing the loss of Archegos in March, just days before its fiscal year ended.

($ 1 = 113.5,300 yen)

Reporting by Makiko Yamazaki and Sam Nussey; Editing by Edwina Gibbs

Our standards: Thomson Reuters Trust Principles.


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