Nomura’s Profit Falls on Investment Banking Slump
July 30, 2010, 4:21 AM EDTBy Takahiko Hyuga
(Updates with overseas loss in eighth paragraph, CFO comment in 10th.)
July 30 (Bloomberg) -- Nomura Holdings Inc., Japan’s biggest brokerage, said profit fell 80 percent in the first quarter on a slump in investment banking and trading.
Net income of 2.3 billion yen ($26.6 million) for the three months ended June 30 was the lowest in five quarters, according to a statement from the Tokyo-based company today. The result compares with profit of 11.4 billion yen a year earlier, and the average of four estimates from analysts surveyed by Bloomberg for a loss of 334 million yen.
A 31 percent drop in investment banking fees during the quarter contrasts with a rebound at UBS AG and a surge in trading income at Morgan Stanley. Chief Executive Officer Kenichi Watanabe, who led the 2008 acquisition of Lehman Brothers Holdings Inc.’s Asian and European operations, today reported the company’s biggest pretax loss for overseas businesses in five quarters.
“The results are unimpressive, with weaker investment banking revenue and lower trading gains,” said Jun Oishi, a Tokyo-based analyst at Keefe, Bruyette & Woods Inc. “The near- term profit outlook remains uncertain; over the mid-to-longer- term, we’ll be looking for an expanded product line in Europe and Asia ex-Japan, and for its expansion efforts in the U.S. to translate into reasonable profit.”
Banking Fees
Investment banking fees slid to 20.4 billion yen, from 29.7 billion yen a year earlier, the company said. First-quarter revenue fell 14 percent to 314 billion yen.
Nomura underwrote 202.4 billion yen of share sales in Japan for the quarter, compared with 553.9 billion yen a year earlier when it arranged a share sale for Sumitomo Mitsui Financial Group Inc., according to data compiled by Bloomberg.
Brokerage commissions jumped 16 percent to 118 billion yen for the quarter, while trading profit sank by 50 percent to 60 billion yen, the company said today.
Nomura posted a pretax loss on overseas operations of 28.5 billion yen.
Analysts’ estimates for Nomura’s net income ranged from a profit of 2.2 billion yen to a loss of 3.8 billion yen.
“We will continue our efforts to become a global top-tier investment bank,” Chief Financial Officer Masafumi Nakada said today at a briefing in Tokyo. “We’ve been around the break-even point, and we need to boost our revenue.”
Morgan Stanley
Morgan Stanley last week said net income rose to $1.96 billion in the second quarter from $149 million a year earlier. Revenue rose to $8 billion from $5.2 billion a year earlier.
UBS, Switzerland’s biggest bank, and Deutsche Bank AG, Germany’s largest, reported second-quarter profits that surpassed analysts’ estimates.
The Swiss bank posted net income of 2.01 billion Swiss francs ($1.81 billion), its third straight profit, on a rebound at the investment bank. Deutsche Bank said earnings rose 6.4 percent from a year ago to 1.16 billion euros ($1.5 billion), buoyed by retail and transaction banking.
Stock-trading revenue at Morgan Stanley rose 82 percent during the quarter, helping the New York-based firm beat analysts’ net income estimates.
Nomura ranked 19th in advising global mergers and acquisitions for the quarter, according to data compiled by Bloomberg. It was the No. 10 underwriter for global equity offering.
The Japanese brokerage plans to offer research coverage for 600 companies in the U.S. in a bid to boost revenue from the world’s biggest equity market, it told investors in May. It has already increased fixed-income division employees in the country to more than 270 from 50 and is investing 250 billion yen to expand in the U.S.
--With assistance from Shingo Kawamoto in Tokyo. Editors: Brett Miller, James Gunsalus
To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net
To contact the editor responsible for this story: Brett Miller at bmiller30@bloomberg.net
