Jan 30, 2023
SMBC Nikko Plunges into Deeper Loss Under Rigging Scandal Cloud
(Bloomberg) -- SMBC Nikko Securities Inc. lost money for the third consecutive quarter, underscoring the continued damage from a trading scandal at the brokerage of Japan’s second-largest banking group.
The securities arm of Sumitomo Mitsui Financial Group Inc. posted a record 14.9 billion yen ($115 million) in net losses for its fiscal third quarter ended Dec. 31, exceeding the previous quarter’s record 5.7 billion yen deficit, according to a statement Monday.
The result is “very severe,” Shinsuke Ushijima, SMBC Nikko’s financial chief, said during a press briefing. The suspicion of illegal market manipulation transactions has caused the firm to lose around 8 billion yen in quarterly net revenue, he said.
The scandal involving the alleged stock price rigging has buffeted SMBC Nikko alongside headwinds in the financial industry where deal-making and equity trading have slumped amid market volatility. The firm will likely include further cost cuts in a medium-term business plan that will be drawn up by the end of March, on top of emergency cost reductions that were announced last summer as earnings deteriorate, Ushijima said.
China Plan Halted
The brokerage said it halted plans to open a subsidiary in China, citing the potential impact from the alleged market rigging.
SMBC Nikko booked almost 3 billion yen in special losses during the third quarter, related to its decision to cancel preparations for the China plan. The company had assessed that the scandal could make it “difficult to win an early approval” from the mainland’s authorities to set up the local unit, Ushijima said.
It also set aside 5.7 billion yen to account for likely fines for market manipulation, according to its statement.
Tokyo prosecutors are seeking 18 months in prison for a former SMBC Nikko executive as well as 1 billion yen in penalties for the firm in relation to the alleged stock market manipulation. The verdict is scheduled for Feb. 13.
--With assistance from Patrick Winters.
(Updates with comments from executive throughout)
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