Archegos Fiasco Stalks Nomura’s Wall Street Dream


Nomura has had only two profitable years in Europe and the U.S. over the past 15 years.



Photo:

Kiyoshi Ota/Bloomberg News

Nomura’s Wall Street dream remains elusive as ever. Less grandiose—but more profitable—ambitions close to home might be a better use of the company’s resources and expertise.

The collapse of family investment firm Archegos last month was the latest setback to the Japanese bank’s ambitions to be a global investment bank: On Tuesday it reported 245.7 billion yen, the equivalent of $2.3 billion, of losses arising from the transactions with a U.S. client for last quarter. Nomura acted as a prime broker, lending money to trading clients, for the fund run by former Tiger Asia manager

Bill Hwang.

The amount was less than the $5.5 billion lost by

Credit Suisse,

but significantly more than the losses booked by other U.S. banks such as

Goldman Sachs,

which moved fast to sell assets tied to Archegos.

The losses aren’t going to sink Nomura—it has ample capital supported by its strong domestic business—but they bring into question the bank’s decades of efforts to transform itself into a bulge-bracket Wall Street firm.

The Archegos disaster is only the latest episode of Nomura’s troubled journey abroad. The company had written down all the goodwill from its two iconic overseas expansions: the 2007 purchase of institutional broker Instinet, and its 2008 acquisition of Lehman Brothers’ Asian and European operations after the U.S. bank’s collapse.

Nomura has had only two profitable years in Europe and the U.S. over the past 15 years. The appointment of

Kentaro Okuda,

who used to run the bank’s operations in North America, as its chief executive in 2019 doesn’t seem to have changed the company’s luck.

In contrast, its asset-management and retail-brokerage businesses at home have been strong. Profit before tax for the two segments more than doubled from a year earlier for the fiscal year ending in March. The company is also much stronger in deal making at home: It is the top equity underwriter in Japan, according to Dealogic.

Asia is another bright spot outside of Japan. Profit there grew 148% year-over-year during the past fiscal year. Perhaps Nomura should set its sights closer to home.

Write to Jacky Wong at [email protected]

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