Nomura Holdings Inc. has warned of a “significant” loss from an unnamed US client just days ahead of Kentaro Okuda’s one-year anniversary as Japan’s largest brokerage. The loss is tied to the huge disposal of leveraged secretive bets by Bill Hwang’s Archegos Capital Management, according to people familiar with the matter.
The warning has resulted in Nomura’s share price plunging 16% on Monday, wiping $3.5 billion from its market value. According to Jefferies Financial Group report, the $2 billion loss incurred by one single client mostly erasing the company’s second-half year’s pretax profits, ending 31st of March. This blow has no doubt ended Nomura’s recent hope of heralding sustainable profits to begin a new era.
Analyst Hideyasu Ban at Jefferies in Tokyo said, Nomura still has plenty to learn from other companies in terms of risk management. And top management should be held responsible for what has happened.
According to an executive at Nomura, assessment has begun on the cause that led to the loss and it’s too early to project the impact on profit. Analysts expect the impact will likely force Nomura to scale back share buyback plans and cut dividends. On Wednesday, the share price fell for a third consecutive day, down 1% in Tokyo open, trimming its annual gain to 30%.
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