Nomura Holdings, Japan's leading brokerage, has announced a third quarter loss of ¥342.9 billion ($3.8 billion). The financial services company said the losses were driven by a series of "one-off" losses from exposure to Madoff funds, Icelandic banks, monoline insurers, real estate, investment securities and the acquisition of Lehman Brothers' Asia Pacific operations, as well as tumultous market conditions.
"One-off" losses amounted to a deficit of ¥243 billion before tax in the third quarter ending on December 31, 2008. Trading losses caused by turmoil in the financial markets were responsible for a further ¥147 billion in pre-tax losses. Meanwhile, net revenue fell steeply to negative ¥49.7 billion, a 138.8% decline from the second quarter's figure of ¥128.1 billion.
Standard and Poor's have since downgraded Nomura Holdings' long-term counterparty credit rating from A- to BBB+. "The one-notch downgrades reflect larger-than-expected losses by the group as a result of the unprecedented financial turmoil in the third quarter," S&P revealed in a statement. Moody's Investors Services has placed Nomura Holdings on review for possible downgrade.
Nomura's global markets division booked a pre-tax loss of ¥295.5 billion. Credit and derivatives trading losses from exposure to Madoff totalled ¥32.3 billion, while losses from its exposure to Icelandic banks amounted to ¥43.1 billion.
The acquisition of Lehman's Asia Pacific franchise increased non-interest operating expenses by 12.6% year-on-year to $277.2 billion. The firm also had an exposure of $502 million to monoline insurers through credit derivatives, up from $234 million at the end of the previous quarter.
Global investment banking fared little better with a pre-tax loss of ¥19.9 billion. The acquisition of Lehman's operations increased non-interest expenses by 59.5% year-on-year to ¥73 billion.
Nomura acquired Lehman Brothers' Asia-Pacific operations after the former US investment bank filed for Chapter 11 bankruptcy on September 15. Total third quarter expenses related to the acquisition amounted to ¥60.3 billion. Nomura said, however, that Lehman's franchise had strengthened its presence in the cross-border mergers and acquisitions market.
In response to the results, Nomura plans to expand its client base, move away from non-core businesses, reduce its assets and cut expenses. The company has also announced that it will not pay a fourth quarter dividend and will adjust its dividend policy for the following financial year, beginning on April 1 2009.
More on Structured Products
Investors’ capital at risk if underlying is below barrier level at maturity
Veteran equity derivatives banker founds London-based firm Alpima
Separating market risk from credit risk in ratings methodologies makes little sense
Lookback feature aims to mitigate sudden falls in first few months of the term
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.