Nomura seeks ¥302bn in new capital to shore up balance sheet

Nomura, Japan’s biggest brokerage, has announced plans to raise up to ¥302bn (£2.19bn) in new capital to shore up a balance sheet weakened by losses from the financial turmoil.

The bank said yesterday that it would sell up to 375 million shares overseas and 341.4 million in Japan in its first sale of ordinary stock for 20 years.

Nomura had to act to strengthen its capital buffer after four straight losses and the purchase of Lehman Brothers’ European business undermined confidence in the bank’s financial position.

Nomura last month unveiled a record ¥343bn net loss for the third quarter of 2008 as it was hit by exposures to Iceland, Bernard Madoff and the cost of the Lehman deal.

When Nomura bought the Lehman business five months ago it said it had avoided the mistakes made by US banks. But it was unable to avoid fall-out from the severe market dislocation at the end of last year.

The bank has also had to lay out large sums to retain Lehman bankers, though insiders say the deal is now starting to pay off with healthy volumes of business coming through the door.

Nomura shares rose 3.1 per cent yesterday but have fallen 36 per cent this year.

Analysts said the bank needed to act to announce the capital raising to help stem the falls in its share price.

Japan’s banks missed out on the worst of the credit market turmoil that wrecked Lehman but they have been lining up to raise capital in recent weeks. Mitsubishi UFJ Financial, the country’s biggest public bank, raised $4.5bn (£3.1bn) in December, and its rival, Mizuho Financial, announced an $850m capital raising yesterday on top of $3.8bn in December.

The stock sale will dilute Nomura’s existing shares by 36 per cent. The estimate for the value of the share sale was based on its closing share price last Thursday.

The company said that the selling price would be set between 9 March and 11 March. Nomura had initially signalled that it would raise up to ¥300bn, but yesterday’s announcement included a provision for it to raise as much as ¥302bn if there was enough demand for the new shares.

In the third quarter, Nomura booked a ¥32.3bn loss linked to Mr Madoff’s alleged $50bn investment fraud, a ¥41.3bn loss on Icelandic bank bonds, and ¥60.3bn of costs related to the Lehman acquisition.