Bank of America Corp. (BAC:US) led a fivefold increase in profit at foreign banks’ Japan securities units last fiscal year as they accelerated job cuts and increased fees and commissions during the country’s stock-market rebound.
Combined net income at the Japanese units of 10 global banks rose to 32.8 billion yen ($332 million) for the year ended March 31 from 5.7 billion yen a year earlier, according to regulatory filings obtained by Bloomberg News. The banks eliminated about 1,000 Japan jobs in total over the period.
In Tokyo, the resurgence in fee income at global firms from Goldman Sachs Group Inc. (GS:US) to Deutsche Bank AG (DBK) is stretching into the current year as Prime Minister Shinzo Abe’s economic policies stimulate trading and prompt companies to raise funds. At the same time, the world’s biggest banks have been cutting staff to sustain profits amid stricter regulations following the 2008 global financial crisis.
“The business environment is still active, and bankers are getting busier because their firms have reduced headcount,” said Katsunobu Komizo, 68, president at Executive Search Partners Co., Japan’s biggest recruiter focusing on banks. “Foreign firms can make the most of their global presence for equity underwriting and advising on cross-border acquisitions. There’s more room for growth.”
Combined headcount at the Japanese brokerage units of Bank of America, Deutsche Bank, Goldman Sachs, Citigroup Inc. (C:US), Morgan Stanley (MS:US), JPMorgan Chase & Co., Barclays Plc (BARC), UBS AG (UBSN), BNP Paribas SA (BNP) and Credit Suisse Group AG (CSGN) fell to 6,551 from 7,564, according to their statements filed to the Financial Services Agency by July 31. That’s a 13 percent reduction, steeper than the previous year’s 7.8 percent cut.
Net income at Bank of America’s Merrill Lynch Japan Securities Co. unit climbed to 44.8 billion yen from 5.1 billion yen a year earlier, its FSA filing showed. That made it the biggest earner among the 10 firms. Trading profit increased 68 percent and fees from investment banking, including mergers advisory, rose 58 percent.
Personnel costs at the unit fell 23 percent. It employed 842 staff as of March, down 186 from a year earlier, according to the filing. Merrill Lynch Japan also earned about 35 billion yen from the sale of a stake in its private banking business to Mitsubishi UFJ Financial Group Inc. (8306)
Japan’s benchmark Topix Index (TPX) climbed 21 percent last fiscal year and has gained another 15 percent since March as unprecedented monetary easing weakens the yen, boosting exporters’ profits. Toyota Motor Corp. (7203) said last week that quarterly net income almost doubled and it plans to increase capital spending and research and development by 10 percent.
“It’s clear that Japanese companies’ earnings are recovering, thanks to the weaker yen and broader market upturn,” Takeo Kusunose, head of investment banking in Japan at Bank of America’s Merrill Lynch, said in an interview in Tokyo today. “But some uncertainty remains as to whether this recovery will be sustained over the medium to long term.”
Revenue at Goldman Sachs’s Japan brokerage rose 5 percent to 77.7 billion yen last year, while net income slipped 11 percent to 4.2 billion yen. The U.S. bank’s ranking for managing Japanese share sales has climbed from eighth last year to No. 3 in 2013, trailing only Nomura Holdings Inc. (8604) and Daiwa Securities Group Inc. (8601), Japan’s two biggest securities firms, data compiled by Bloomberg show.
“Our businesses in Japan are continuing to show solid growth on the back of a pickup in corporate financing demand and the sharp increase in client trading activity we’ve been seeing since last year,” Masanori Mochida, president of Goldman Sachs in Japan, said in an e-mail to Bloomberg News.
Profit at Deutsche Bank’s local securities unit climbed 39 percent to 6.4 billion yen. JPMorgan (JPM:US) posted net income of 4.7 billion yen, compared with a loss of 8.8 billion yen a year earlier. Barclays’s profit rose 5.5 percent to 5.8 billion yen.
“In the first half, we have exceeded all our targets and expectations across all of our markets businesses,” Tamio Honma, head of the institutional client group at Deutsche Securities Inc. in Tokyo, said in an e-mail. “Equities performance has been particularly strong.”
Morgan Stanley MUFG Securities Co.’s profit declined 4 percent to 33.2 billion yen from a year earlier. Revenue fell 13 percent to 106.2 billion yen, which is still the biggest amount among the 10 overseas banks.
Not all the banks were profitable last year. UBS had a loss of 55.9 billion yen, compared with a 2.8 billion yen profit a year earlier. BNP Paribas’s loss narrowed to 8.2 billion yen from 8.8 billion yen, while Credit Suisse’s loss widened to 3.2 billion yen from 219 million yen.
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