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Pedestrians cross a street in front of the Urbannet Otemachi building, which houses the headquarters of Nomura Holdings Inc., in Tokyo, Japan, on Monday, March 29, 2021. Nomura’s warning of a “significant potential loss of an unidentified US customer It is related to the decommissioning of operations by Bill Hwangs Archegos Capital Management, according to people familiar with the matter.
Photographer: Kiyoshi Ota / Bloomberg
Photographer: Kiyoshi Ota / Bloomberg
The CEO (CEO) of Nomura Holdings (HD) Kentaro Okuda Group has performed well in the first year since taking office. Family Office in the United States,Until the problems surrounding Arquegos Capital Management were discovered.
On the 29th, a few days before the first anniversary of CEO Okuda’s inauguration (57), Nomura HD could suffer damages of $ 2 billion (about 220 billion yen) due to transactions with customers in a subsidiary of USAPublished. The business partner is Arquegos, according to people familiar with the matter.
Kentaro Okuda, CEO of Nomura HD
Arquegos is a family office that manages and manages the property of former US hedge fund trader Tiger Management, Bill Juan. Last week, the bank was forced to sell $ 20 billion in shares it held after failing to respond to a margin call (request for additional margin).
Nomura HD’s stock price fell 16% on the 29th, the highest since its listing. The market capitalization of around 380 billion yen has been lost, threatening a tipping point that will lead to the arrival of a new era of sustainable earnings that executives have hoped for. According to a report by Jeffreys Financial Group, if this loss becomes reality, there is a risk of erasing most of Nomura HD’s pre-tax earnings in the second half of the fiscal year ending March 2021.
“I think Nomura often learns from other companies in terms of controlling loss limits,” said Hideyasu Ban, an analyst at Jeffreys Securities. “In a broad sense, I think it is inevitable that top management is responsible for this matter,” he said.
A Nomura HD executive who responded to the interview on condition of anonymity said on the 30th that the company had a long-standing relationship with Mr. Juan. It is unknown when the deal began.
Juan closed Tiger Asia Management and Tiger Asia Partners in 2012 after being sued by the US Securities and Exchange Commission (SEC) for manipulating the insider trading and stocks of Chinese banks. Juan and these companies paid $ 44 million and was barred from working in the investment advisory industry as a condition of the deal.
Nomura HD executives said they were beginning to examine the possible causes of the loss. He declined to comment on how many charges he has left in relation to Arquegos.
Big winner
Nomura’s arm in the Americas has won the most outside of Japan this year
Source: Nomura
With Okuda, who became CEO in April last year, commercial and investment banking operations in Japan and abroad were strong, and consolidated net income from April to December 2008 began applying US GAAP. It had reached a record 308.5 billion yen. since the fiscal year ending March 2002.
“The unexpected loss may have ended a relatively good honeymoon for Okuda,” said Morning Star analyst Michael McDadd. Nomura HD posted a consolidated net loss for January-March 2008.However, after Mr. Okuda took office, business performance turned into excellent performance. The driving force this time was troubled American business.
Nomura HD says that this matter does not affect the business performance and financial strength of the company and its US subsidiary, but among analysts, it has a negative impact on the business performance and shareholder profitability of the fiscal year that ends March 31, 2009. It is inevitableThere is also a view. The company’s share price on the 30th fell 0.7% from the previous day, and the rate of increase over the past year was reduced to 25%.
No comment was obtained from a Nomura HD spokesperson.
Increased interest in risk management
Shinichi Tamura, an analyst at Bloomberg Intelligence (BI), said in a report on the 30th: “As the next development after the initial reaction, such as stock prices, not just the final amount of the loss and the detailed details of the transaction, but also the interest in risk management It may increase. ” “If the loss is a transaction with a specific customer, it is a one-time / transitory event, but if there is an issue with risk management, there may be concerns about the impact on similar transactions.”
Is it transitory or will the impact be extended? National authorities are also trying to determine the situation. On the 29th, FSA executives told reporters that proper post-processing of transactions was important and then they would confirm risk management.
Chief Cabinet Secretary Katsunobu Kato said at a press conference the same day: “We will refrain from commenting on the details of individual transactions of individual financial institutions and their impact on finances, but we will continue to share information with financial institutions. relevant authorities, the Bank of Japan and relevant authorities. We will keep an eye on the situation. “
Japan Exchange Group (JPX) CEO Akira Kiyota on the 30thAt the press conference, he said that he had met with Okuda on the 29th and said: “I hope the market is not caught in the big turmoil.” He also said that if you consider it an individual hedge fund case, it would be different from the chain moves that occurred during the Lehman shock.
Nomura HD continued to post losses in its overseas business and fell into the red two years ago. We have initiated structural reforms to reduce costs by 140 billion yen in the three years to the fiscal year ending March 2010. Takumi Kitamura, Chief Financial Officer (CFO), said “I feel like the whole company has gotten muscular. “, which has led to an increase in profitability.It has shown appreciation. The rate of progress as of February isIt is said to exceed 90%.
Essays reaching the first anniversary
Masao Muraki, an analyst at SMBC Nikko Securities, commented on Nomura HD’s performance, which hit a record for the April-December quarter in an interview on the 26th before the Arquegos issue was discovered. curtailment effect. ”In addition to the market environment, management efforts such as structural reforms were also assessed to contribute.
The trial that affected Mr. Okuda just before his successful first year of inauguration. Immediately after taking office, he set out to strengthen his private market strategy, which can be called “Okuda’s color.”The strategy was just beginning to emerge. “What we have launched has not been fully realized. On the other hand, it seems too early to look for results in the first year of the mandate,” said Muraki, which generated expectations in the market.
“Nomura’s overseas business, especially in New York, can generate large profits, but adverse events can lead to large losses,” said Morningstar McDadd. “It can toughen the willingness to take risks in some areas that have been aggressive recently, like US-traded stock options,” he said.
