Everybody is trying to copy the US wealth out of thin air scheme. Here's another copycat.
TOKYO — Nomura, the Japanese brokerage firm that burst onto the global investment banking scene last year by buying pieces of the failed U.S. bank Lehman Brothers, booked a record annual loss Friday, casting a pall over its bold and risky bid to build up a world franchise.
Nomura, which acquired the Asian, European and Middle Eastern businesses of Lehman in September, said acquisition costs from that deal and extensive trading losses drove its net loss to a record 709 billion yen, or $7.2 billion, for the year ended March 31.
The broker’s bigger-than-expected losses included 150 billion yen in write-downs related to merchant banking and real estate assets. One-time costs, including those related to retaining Lehman employees and integrating operations, came to another 230 billion yen.
Nomura, the largest brokerage house in Japan, has also been exposed to the fallout from the economic collapse in Iceland and the Ponzi scheme operated by Bernard L. Madoff.
Its results contrast with those of Goldman Sachs, JPMorgan Chase, Bank of America and Credit Suisse, all of which have surprised investors with upbeat first-quarters in recent weeks.
Nomura also joins a string of Japanese banks, as well as sovereign wealth funds from Asia and the Middle East, that have seen damage stemming from multibillion-dollar investments in Western financial giants made just before the U.S. subprime problems grew into a full-blown credit crisis.
Investors like Temasek Holdings in Singapore, which invested $8.3 billion in Merrill Lynch, and the Abu Dhabi Investment Authority of the United Arab Emirates, which provided Citigroup with $7.5 billion, now sit on huge paper losses as banking problems have battered the value of their holdings.
These sovereign wealth funds, which channel capital from crude-oil windfalls and national savings into investments worldwide, have turned more cautious in recent months, shying away from the high-profile deals that marked their rise to prominence last year.
Japanese banks and brokerage firms were among those that lined up to recapitalize struggling American and European firms as the credit crisis unfolded. Initially shielded from many of the subprime woes, the Japanese financial firms appeared to be returning to the world stage.
But those banks and brokerages have now been hit with extensive losses of their own as the market turmoil continues. Mizuho Financial Group, which invested $1.2 billion in Merrill Lynch, said Thursday that it would book a record $5.9 billion annual loss. Sumitomo Mitsui Financial also faces a $3.9 billion loss for the year ended March 31, partly from its stake in Barclays, the British bank.
Despite the dismal numbers, Nomura is “paving the way for future growth,” the bank’s chief executive, Kenichi Watanabe, said in a statement. “We are now focused on returning to profitability by leveraging our newly enhanced global franchise.”
The Lehman acquisition has started to help Nomura make inroads in global investment banking, where it previously struggled. This year, the bank helped advise a Chinese state-owned aluminum group, Chinalco, in its planned $19.5 billion investment in the mining company Rio Tinto, and has also been involved in deals in India and South Korea.
But amid an overall slump in mergers and acquisitions, Nomura’s net revenue for the year fell 60 percent to 312 billion yen. The last time Nomura plunged so deep into loss was in 1998, when it booked an annual loss of 397 billion yen.
The bank did not provide an earnings forecast for the coming year. In the last financial year, Nomura booked a net loss of 67 billion yen.
The turmoil has spurred Nomura to shore up its capital base with a global offering of 278 billion yen in March. The bank said Friday that an initial accounting of its Tier 1 capital came to 1.4 trillion yen and a ratio of 11.3 percent.
Standard & Poor’s, the ratings agency, said the figures showed that Nomura still had “adequate capital, ample liquidity and profitability, given its strong business base in the domestic market.” It left Nomura’s rating of BBB+ unchanged but said the bank’s challenge was to reduce expenses “to an adequate level in this severe business environment, as a substantial recovery in earnings is unlikely.”
Nomura said Friday that it was aggressively cutting costs, reducing the number of global employees by more than 2,100 from its peak numbers in October to about 25,600 people. The bank denied a recent report, however, that it planned to eliminate several hundred more jobs in Britain and move out of a former Lehman Brothers office there.
The bank’s shares gained 1.2 percent to close at 605 yen on the Tokyo Stock Exchange before earnings were released. Nomura’s share price has slumped almost 60 percent since September. |
