The pre-tax income from Nomura’s wholesale segment has dropped 30% to JPY64.3 billion (US$591m) in the FY20/21 ended in March year-on-year (YoY) after the Japanese bank booked a loss of US$2.3 billion arising from Archegos Capital Management, which it referred to as a ‘US client’ in its financial statements.

The largest brokerage in Japan has also estimated an additional loss of US$570 million from the family office collapse as of 23 April, which will be recorded in its consolidated results for the FY21/22.

This adds up to a total blow of nearly US$2.9 billion at Nomura, higher than the US$2 billion it first flagged on 29 March, taking the second-hardest hit after Credit Suisse’s CHF4.4 billion loss.     

Until today, Nomura has offloaded over 97% of its outstanding positions related to the collapse of Archegos, which was headed by Bill Hwang.

We remain committed to strengthening management and enhancing our risk management framework

“We take the matter with the US client very seriously,” said Nomura’s CEO Kentaro Okuda (pictured). “We remain committed to strengthening management and enhancing our risk management framework as we continue to build our operating platform to deliver consistent earnings across our global franchise.”

The loss led to the worst quarterly performance at the Japanese bank since the 2008 financial crisis as it delivered a net loss of JPY155.4 billion from January to March. On a full-year basis, its net income dipped 29% to JPY153.1 billion YoY.

At wholesale level, the equities net revenue decreased 41% to JPY133.6 billion triggered by the Archegos debacle despite a ‘strong performance’ of cash and derivatives through to Q3. In the meantime, net revenues from fixed income and investment banking increased 31% and 35% to JPY441.9 billion and 115.8 billion in FY20/21, respectively.

By region, America booked a loss of JPY126 billion as a result of the event from a net revenue of JPY80.5 billion at global markets in Q3 while Japan, Emea and Asia ex-Japan saw a slight decline of its net revenue to JPY52.9 billion, JPY37.2 billion and JPY35.2 billion, respectively.

The other two divisions – retail and asset management – posted a bright spot with a 10% and 46% rise in net revenues at JPY368.8 billion and JPY134.8 billion in FY20/21, respectively.

Additionally, Nomura Asset Management posted a steady growth in assets under management (AuM) for its main ESG products like the Nomura BlackRock Circular Economy Stock Fund, Nomura Environmental Leaders Strategy Fund and Global ESG Balance Fund at Nomura Asset Management, reaching JPY643 billion as at end of March 2021. 

Archegos impact

On 26 March, Nomura issued a close-out event notice to Archegos after the US investment company failed to meet margin call triggered by a plunge in stock prices related to its prime brokerage transactions.

The Japanese lender began to unwind its positions related to Archegos the following week along with other investment banks including Credit Suisse, Morgan Stanley and UBS.

“We conducted a full review of existing prime brokerage transactions and reviewed positions in other financing-related businesses, confirming no other similar transactions,” stated Nomura in its Q4 results. It also conducted a review of risk management framework centered on prime brokerage business as part of the responses to the crisis.

In a move to beef up the leadership at US subsidiaries, the bank appointed Christopher Willcox, the former head of J.P. Morgan Asset Management, as CEO and president of Nomura Securities International and Nomura Global Financial Products. He will also be co-CEO of Nomura Holding America, effective from 3 May.

Click here to review Nomura Holdings’ Q4 FY20/21 presentation.