Nomura’s Archegos losses reached $ 2.9 billion when the chief intermediary was suspended

Nomura said its total loss from the Archegos Capital implosion would reach nearly $ 2.9 billion, as people close to the Japanese bank said they had indefinitely suspended their global head of major brokerage operations.

The financial blow to the country’s largest brokerage is considerably higher than the loss of approximately $ 2 billion that Nomura initially marked when the debacle involving the highly leveraged family office first appeared in late March.

Bill Hwang’s loss of Archeos, which Nomura has not officially designated and referred to as a “U.S. customer,” led the bank to the largest quarterly loss since the 2008 global financial crisis. Nomura promotes that it would 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 brokerage unit that had nurtured Hwang as a customer. and who had previously worked at Credit Suisse. The Japanese bank said on Tuesday that it did not plan to make major strategic changes to the wholesale banking unit under which its core brokerage business would be located.

The loss of Nomura by Archegos, the consequences of which have affected Swiss credit, Morgan Stanley, UBS and two of Japan’s largest mega-banks, left $ 2.3 billion in profits for the year ended March 31. But the process of developing Archegos ’positions, which Nomura said was 97% complete, has created an additional $ 570 million loss that analysts said would affect its performance in the quarter ending June .

Nomura’s losses due to the collapse of Archegos are only second to those of Credit Suisse. UBS reported Tuesday in loss of $ 774 million in operations linked to the Hwang fund.

They have recovered questions about whether the Japanese bank’s efforts to pursue growth abroad have prompted it to take more risks than it can bear, given the relatively small scale of its operations in the US.

Nomura said Tuesday that it had appointed Christopher Willcox, the former head of JPMorgan Asset Management, as co-executive of its U.S. unit.

With concern still about whether other family offices have also expanded the scale of funding granted to Archegos, Nomura said in a presentation that accompanied the results that he had conducted a full review of existing major brokerage transactions. “We. . . reviewed positions in other financing-related companies that did not confirm any other similar transaction, ”the presentation said.

The net loss of ,4 155.4 billion ($ 1.4 billion) in the January-March quarter shattered Nomura’s hopes of what was to be a record profit year, driven largely by strong performance of its historically volatile business in the United States.

Without the collapse of Archegos, investors said, the bounce of Nomura in 2020 would have been a dream start for Kentaro Okuda. His former head of investment banking started a year ago as CEO and was the first leader in the company to step out of the core national brokerage business.

Instead, Okuda’s first full-year earnings announcements began with an apology and commitment to improving risk management.

Nomura’s net profit for the full year ended March was $ 1.4 billion, 29% less than in fiscal 2019. Despite the success of the wholesale business, the profits of the full year in Nomura’s retail and asset management segments grew 87% and 158% year-over-year, respectively.

Shunsaku Sato, a senior credit officer at rating agency Moody’s Japan, said the gains “highlighted the importance of the two segments’ profit contributions to stabilizing the company’s overall profitability.”