Nomura Is Assessing Cause of Potential Loss Tied to U.S. Client

(Bloomberg) -- Nomura Holdings Inc. has begun assessing the cause of the possible loss tied to a U.S. client and it’s too early to say how it might impact profit, an executive said.

The executive, who asked not to be identified, spoke a day after Japan’s biggest brokerage warned that it faces a “significant” potential loss stemming from transactions with the client, which Bloomberg has identified as Bill Hwang’s Archegos Capital Management.

It’s hard to tell when Nomura might determine the amount of any loss and whether it would book a charge for the current quarter, the executive said. Nomura has had a long relationship with Hwang, the executive said, while adding that he can’t say for sure when it started.

Nomura shares dropped as much as 4.1% in Tokyo on Tuesday morning after declining a record 16% in the previous session. The losses threaten to derail an earnings rebound for the Japanese firm, which has benefited from a boom in trading and investment banking during the pandemic.

Nomura said Monday that the estimated amount of the claim against the U.S. client was about $2 billion. The estimate may change depending on unwinding of the transactions and market price fluctuations, it said in a statement. Nomura’s profit jumped to a 19-year high of 308.5 billion yen ($2.8 billion) in the nine months ended December.

When asked how much it had unwound positions with Archegos, the executive declined to comment, saying he can’t discuss individual cases. Nomura provided the $2 billion figure to avoid any unwanted speculation in the market, the executive added.

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