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Japanese investment bank Nomura’s warning that it could incur billions of dollars in losses at a US subsidiary was “quite unfortunate,” an analyst said on Tuesday.
Nomura on Monday reported a potential loss of $ 2 billion from transactions with a US customer. The bank’s shares in Japan plunged on the announcement, down more than 16% on Monday. Those losses continued through Tuesday, with stocks down 0.66% on the day.
“It’s pretty unfortunate for Nomura,” said Pramod Shenoi, head of Asia-Pacific financial research at research firm CreditSights, “Street Signs Asia” at CNBC.
Shenoi said that “$ 2 billion … is a lot of money and what it does is virtually wipe out any kind of income for the second half of the year.”
While Nomura has not named the US client, the Japanese company’s announcement follows a $ 20 billion explosion at family office Archegos Capital Management. Archegos was forced to liquidate its positions in stocks such as media companies ViacomCBS and Discovery, as well as several Chinese Internet ADRs such as Baidu and Tencent.
Credit Suisse also warned on Monday of a potentially “significant” impact to its first quarter results after exiting positions with an anonymous company.
Until Monday’s announcement, Nomura had a strong financial year, Shenoi said. He also described the calendar as “interesting”, given that it was set a few days before the end of the financial year on March 31.
“Nomura has actually had a great financial year so far,” Shenoi said.
He explained that the bank’s reorganization in April 2019 had helped its retail business in Japan – one of Nomura’s “main franchises” – and international wholesale business.
The analyst warned that in the medium term, regulators and rating agencies would keep a close eye on how Nomura manages risk and the amount of capital it holds.
– CNBC’s Elliot Smith contributed to this report.
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