Nomura in surprise quarterly profit plunge after hefty one-off charge

By Makiko Yamazaki

TOKYO (Reuters) -Nomura Holdings Inc, Japan’s biggest brokerage and investment bank, saw second-quarter net profit almost wiped out due to a one-off loss from transactions completed more than a decade ago.

It booked a charge of about 39 billion yen ($345 million) that it said was related to legacy transactions in the United States from before the global financial crisis in 2007 and 2008.

The loss follows a $2.9 billion hit from the collapse of U.S. investment fund Archegos – news of which emerged in March.

“It’s really disappointing that we’ve booked such a loss after the matter in late March,” Chief Financial Officer Takumi Kitamura told a briefing.

He declined to disclose details of the most recent charge, saying it was currently under litigation.

“It’s hard to avoid litigation risks as long as we do businesses overseas. But we need to control the risks to prevent such cases from happening.”

July-September profit came in far below forecasts at 3.2 billion yen ($28.3 million), down 95% from a year earlier.

Pretax income for Nomura’s wholesale business, which houses its trading and investment banking division, dropped 62% to 25 billion yen for the same period a year earlier.

In addition to the charge for the legacy transaction, it also saw a weaker performance by its global markets trading business – a large portion of which is fixed income trading – after a buoyant year in 2020 due to high market volatility driven by the COVID-19 pandemic.

One bright spot was Nomura’s investment banking unit, which saw net revenue grow 26% thanks to a record wave of deals globally. While a relatively small player in global M&A, the acquisition of Greentech, an M&A advisor in clean technology deals and now renamed Nomura Greentech, helped boost Nomura’s presence in the U.S. market.

Nomura this month appointed the founder of Greentech, Jeff McDermott, as global co-head of investment banking.

The bank also said on Friday that it would buy back up to 50 billion yen ($440 million) or 2.5% of its shares.

Shares in Nomura have lost more than 20% since it revealed the Archegos loss in March, just a few days before the end of its financial year.

($1 = 113.5300 yen)

(Reporting by Makiko Yamazaki; Editing by Edwina Gibbs)

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