A scandal involving alleged stock market manipulation by SMBC Nikko Securities Inc. has damaged the firm's corporate bond underwriting business just as issuers and investors are increasingly adopting environmental, social and governance targets into their business strategies.
The securities arm of Sumitomo Mitsui Financial Group Inc. underwrote ¥273.2 billion ($2.1 billion) in domestic bond deals this year through May 23, down 60% from ¥674 billion in the same period last year. That’s the biggest drop among Japan’s five major brokerage firms, according to Bloomberg data. Its market share fell from 15.8% to 7.3%.
Tokyo prosecutors charged SMBC Nikko and six individuals earlier this year in relation to a trading scandal allegedly involving attempts to underpin share prices for trades known as block offers. A company spokeswoman said the incident has had an impact on the bond business, adding "we sincerely apologize for causing our customers and others trouble.”
The scandal is also hurting its underwriting volume of ESG bonds, which fell 47% to ¥51 billion this year, according to Bloomberg data.
The brokerage last month said it lost ¥600 million on a before-tax basis in the three months ended March 31 as the scandal caused some companies to take business away from the brokerage.