Japan's Nomura Holdings Inc on Monday flagged a potential $2 billion loss at a US subsidiary arising from transactions with a US client, and separately said it would cancel a planned hefty bond issuance due to the possible loss.
The news sent Nomura's shares down more than 16% briefly in early trade after a deluge of sell orders at market open.
The estimated amount of the subsidiary's claim against the client is approximately $2 billion based on market prices as of March 26, Japan's biggest brokerage and investment bank said in a statement.
This estimate could change depending on the unwinding of the transactions and fluctuation in market prices, it said.
Nomura's announcement came after a series of block trades on Friday in the United States that investors said caused big drops in the stocks of a number of companies.
A person familiar with the matter told Reuters on Saturday that Goldman Sachs Group Inc was involved in the large block trades. The trades were linked to sales of holdings by family office Archegos Capital Management, a separate person with knowledge of the matter told Reuters.
Traders on Monday said it was not clear whether the latest loss at Nomura is related to Archegos.
The potential loss could hit Nomura which has expressed confidence in sustaining high earnings after reporting its best third-quarter profit in 15 years on solid global markets and investment banking.
Its US business, which includes investment banking and equity and bond trading, has been the main driver of that performance.
The Nikkei business daily reported that the loss at the US business is likely to be related to trades by its prime brokerage unit, without stating where it obtained the information.
"Nomura Holdings should be able to absorb losses of this size," one broker told Reuters, declining to be identified as they were not authorised to speak to the media.
"It does raise a question of whether there are losses at other Japanese investment banks that just haven't been revealed yet, but at this point it looks like this problem only affects Nomura. This is not something that will bring down the entire equity market."
In a separate statement on Monday, Nomura said it would cancel the planned issuance of $3.25 billion worth of senior notes, as the potential loss at the US unit could impact the company's consolidated financial results.
Nomura said it is still assessing the impact of the potential loss on its consolidated earnings.