Nomura confirms $2.3 billion loss in Archegos debacle

TOKYO: Japanese financial group Nomura Holdings on Tuesday confirmed losses of $2.3 billion for fiscal 2020-2021 linked to the sudden liquidation of holdings by US hedge fund Archegos.

Shockwaves rippled through global financial markets and institutions last month when the fund sold at least $20 billion in stocks as it sought to cover obligations to its lenders.

The debacle hit firms including Credit Suisse, Morgan Stanley and several leading Japanese banks.

Nomura had already estimated it faced losses of around $2 billion linked to its exposure.

It has not directly named Archegos, saying only that the losses were linked to "transactions with a US client".

In a statement issued alongside its earnings Tuesday, it announced it had "booked a loss of 245.7 billion yen ($2.3 billion) in its consolidated financial results for the year ended March 31, 2021".

It also announced it expects additional losses of approximately $570 million for the fiscal year ending March 2022.

"Nomura has unwound over 97 percent of its outstanding positions related to this event," it added.

US family-owned hedge fund Archegos, run by former Tiger Asia director Bill Hwang, had taken huge bets on a few stocks with money borrowed from banks.

When several important positions reversed and Archegos could not respond to margin calls, it triggered one of the biggest sudden losses in Wall Street history.

The scale of Nomura's losses show "the magnitude of the company's risk concentration", said Shunsaki Sato, vice president-senior credit officer at Moody's Japan, in a note.

The additional losses realised in April "will drag down Nomura's earnings in fiscal 2021", he added.

For the last fiscal year, Nomura reported net income fell 29 percent to 153.1 billion yen.

On Monday, Nomura appointed a new CEO at the US subsidiary involved in the losses.

The firm also said Tuesday it had launched a "wide-ranging investigation of facts" surrounding the debacle and various reviews of its outstanding exposure and risk-management processes.