The warning by the Japanese investment bank Nomura that losses in the billions could arise at a US subsidiary was “rather unfortunate,” said an analyst on Tuesday.
Nomura on Monday reported a potential loss of $ 2 billion from transactions with a customer in the United States. The bank’s shares in Japan fell following the announcement, falling more than 16% on Monday. Those losses extended through Tuesday, with stocks falling 0.66% that day.
“It’s pretty unfortunate for Nomura,” Pramod Shenoi, director of financial research in Asia Pacific at research firm CreditSights, told CNBC’s Street Signs Asia.
Shenoi said, “$ 2 billion … is a lot of money, and that means that any type of income will be all but wiped out for the second half of the year.”
While Nomura did not name the US client, the Japanese company’s announcement followed a $ 20 billion explosion in family office Archegos Capital Management. Archegos was forced to divest its positions in stocks like media companies ViacomCBS and Discovery, as well as several Chinese internet ADRs like Baidu and Tencent.
Credit Suisse also warned Monday of a potentially “significant” slump in its first quarter results after leaving positions at an undisclosed company.
Until Monday’s announcement, Nomura had a strong fiscal year, Shenoi said. He also described the timing as “interesting” as it was set just days before the fiscal year ended on March 31st.
“Nomura has indeed had an outstanding fiscal year so far,” said Shenoi.
He stated that the bank’s restructuring in April 2019 helped Japanese retail business – one of Nomura’s “core franchises” – and international wholesale business.
The analyst warned that in the medium term, regulators and rating agencies would monitor closely how Nomura manages risk and how much capital it holds.
– CNBC’s Elliot Smith contributed to this report.