Nomura suspends executives, replaces risk head in Archegos rout

Nomura is among several global banks shaken by transactions with Archegos.
Nomura is among several global banks shaken by transactions with Archegos.PHOTO: REUTERS

TOKYO (BLOOMBERG) - Nomura Holdings suspended a group of senior executives at its investment bank and replaced a top risk official as it reels from billions of dollars of losses on trades with Archegos Capital Management.

Dougal Brech, global head of the prime-brokerage division that caters to hedge funds, has been suspended along with US prime head Joshua Kurek and co-head of global equities Michael Caperonis, people familiar with the matter said. Douglas Lyons, global head of credit risk, will stay at the Tokyo-based firm but will be replaced by Patrick McGarry, said the people, who requested anonymity as the details aren't public.

Nomura is among several global banks shaken by transactions with Archegos, an obscure investment firm set up to manage the fortune of trader Bill Hwang. Japan's biggest brokerage, which lost some US$2.9 billion (S$3.85 billion) on its dealings with Archegos, has hired external lawyers to conduct a "comprehensive, impartial review," according to a presentation to investors on Tuesday (April 27), and appointed a new head of its US subsidiary earlier this week.

Shares of Nomura rose as much as 2.9 per cent on Wednesday morning (April 28) in Tokyo and were trading up 1.8 per cent at 11.50am, taking declines to about 18 per cent since the Archegos debacle broke.

Nomura’s losses from trades with Archegos exceed the US$2 billion it flagged a month ago and have complicated its global ambitions. The bank logged a fourth-quarter net loss of 155.4 billion yen (S$1.89 billion), its biggest since the global financial crisis.

In a surprise appearance at Tuesday’s earnings briefing, chief executive officer Kentaro Okuda signaled he will persist with plans to build a presence in the US even after the Archegos meltdown, saying there is no major change in the firm’s overall strategy for its wholesale business.

The remarks underscore Nomura’s long-standing ambitions to succeed in the US, home to the biggest banking fee pool, to stave off stagnation in Japan. To help with the push, Mr Okuda named Wall Street veteran Christopher Willcox as co-head of its troubled Americas unit and pledged to add more non-Japanese outside directors.

Some analysts agree that the Japanese firm might be able to embark on a path to recovery after its earnings had handled most of the negatives such as the Archegos losses and impairments.

“Nomura sees Archegos as an idiosyncratic event and so they’re going to tweak their risk management framework” but leave their strategy unchanged, Michael Makdad, an analyst at Morningstar, said on Bloomberg Television on Wednesday. “For the near term the business environment for Nomura looks quite good,” he said, citing a strong investment banking pipeline and volatility-fueled trading.

The Financial Times reported Mr Brech’s suspension earlier. Aoife Reynolds, a spokeswoman for Nomura in London, declined to comment. Mr Brech also declined to comment. Caperonis, Kurek and Lyons did not respond to requests for comment via LinkedIn.