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By Makiko Yamazaki and Takashi Umekawa
TOKYO (Reuters) -Nomura Holdings Inc said it would incur $2.9 billion worth of pain from the collapse of U.S. investment fund Archegos but added that while it was beefing up risk controls, it had no plans to scale back its U.S. business.
Taking the second-largest hit from the Archegos debacle after Credit Suisse, Japan's biggest brokerage and investment bank posted a fourth-quarter net loss of around $1.4 billion, its largest quarterly loss since the 2008 global financial crisis.
Some $2.3 billion in Archegos-related losses were booked in the quarter while another $570 million will be logged this financial year.
Last month's implosion of Archegos, a family office run by Bill Hwang that failed to meet margin calls on heavily leveraged stock bets, has rekindled tough questions about whether Nomura has what it takes to achieve its goal of breaking into the top league of global investment banks by expanding in the United States.
But Nomura said Archegos was an isolated incident.
"We are not planning to make major changes to our global business strategy," Nomura CEO Kentaro Okuda told a media briefing. "We will work to build a solid U.S. platform while enhancing risk management."
Nomura said it has exited over 97% of its Archegos-related positions and a full review of its prime brokerage and other financing-related businesses had found no other similar cases. It also has no plans to shy away from business with family offices who remain important clients, it added.
On Monday it announced it would beef up its U.S. management team with the appointment of Christopher Willcox, the former head of JP Morgan Asset Management, as co-CEO of the group's holding company for the Americas.
Before Archegos' collapse, Nomura had been on track for record annual profit, bolstered by a buoyant U.S. trading business. That was set to have been a hard-fought victory in its decade-long, stop-start efforts to successfully expand outside Japan.
Instead, it posted net income of 153.1 billion yen ($1.4 billion), a second consecutive year of profit but down 29% from the previous year and below analyst estimates that had ranged from 160 billion to 225 billion yen.
While Nomura's wholesale division saw a 30% drop in pretax profit for the full year, its retail division saw an 87% increase in pretax profit while its asset management division saw profits climb 2.6 times.
Within its wholesale division, net revenue at its investment banking arm tripled to 36.1 billion yen on a slew of mergers and acquisitions, including Renesas Electronics Corp's $5.9 billion acquisition of Dialog Semiconductor.
Among global investment banks, Credit Suisse has suffered the most from Archegos, booking 4.4 billion francs ($4.8 billion) in related losses for January-March with another 600 million francs expected this quarter.
UBS, Switzerland's biggest bank, surprised on Tuesday with a $774 million hit from Archegos.
Morgan Stanley lost nearly $1 billion, while Goldman Sachs Group Inc and Deutsche Bank exited without losses, Reuters and other media outlets have reported.
Prior to its collapse, Archegos had grown to become one of the ten most profitable clients for Nomura's U.S. operations, people familiar with the matter have told Reuters, adding that the bank had seen increased business with Hwang as a strategy to win more business from other large U.S. hedge funds.
Nomura reported earnings after the market close. Its shares have lost 19% since it flagged in March it was expecting a loss of about $2 billion from Archegos.
($1 = 108.3200 yen)
(Reporting by Makiko Yamazaki and Takashi Umekawa; Editing by Edwina Gibbs)