Another blow to Nomura’s global ambitions


Japan’s biggest brokerage will stop offering cash prime-brokerage services in the United States and Europe, and has given some clients about six months to find a new provider, according to people familiar with the matter, who asked not to be identified discussing the private information,

TOKYO: Just weeks after Nomura Holdings Inc vowed to push ahead with its global ambitions, unswayed by deep losses from the implosion of Archegos Capital Management, the firm is pulling the plug on a chunk of its hedge fund business.

Japan’s biggest brokerage will stop offering cash prime-brokerage services in the United States and Europe, and has given some clients about six months to find a new provider, according to people familiar with the matter, who asked not to be identified discussing the private information.

The pullback comes after Nomura notched up some of the biggest losses from the implosion of the US family office built by Bill Hwang, taking a US$2.9bil (RM12.06bil) hit.

While the impact on earnings from the prime-brokerage retreat may be muted, it adds to a list of stumbles for the firm as it takes on global risk to offset slower growth at home. It also comes as a blow to chief executive officer Kentaro Okuda, a company lifer who took charge a year ago and once ran the North American business.

“There is no change in Nomura’s prime-brokerage business in Asia including Japan, ” a spokeperson said. The bank will try to offer some cash prime-brokerage services in Europe and the United States by using other products and it will continue to have clients in the United States and Europe, the person said.

Nomura, which trails only Credit Suisse Groupe AG among banks posting the biggest losses from the family office collapse that saw almost US$20bil (RM83.15bil) vanish in two days, is grappling with how to rebuild its business in the wake of the scandal.

Soon after the debacle began unfolding, Okuda publicly signalled he would stick to a plan to build up a presence in the United States even after the Archegos meltdown led to the Japanese firm’s biggest quarterly loss since 2009.

Shares of Nomura remain about 24% below this year’s peak reached in late March, when news of the Archegos saga first surfaced.

In the weeks after the scandal, Nomura outlined what it called “remedial measures” to bolster risk management. To help its expansion plans in the United States, which has the world’s biggest pool of banking fees, Nomura tapped Wall Street veteran Christopher Willcox to co-head of its Americas unit and pledged to add non-Japanese outside directors.

Nomura in April suspended senior executives at its investment bank in connection with Archegos, including global prime brokerage head Dougal Brech and Joshua Kurek, head of the US prime brokerage business. It now has a new global head of credit risk in Patrick McGarry.

Outside prime, Nomura is grappling with departures. The heads of equity capital market for Asia ex-Japan and Greater China have left along with a number of junior investment bankers in Asia after bonus payouts in May.

The brokerage has also suspended coverage of dozens of companies, including Nintendo Co and Rakuten Group Inc, following the departure of two highly ranked stock analysts in Tokyo, at a time when it’s seeking to reinforce research as part of broader growth plans. — Bloomberg

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