Nomura Holdings Inc. (8604), Japan’s largest securities firm, posted third-quarter profit that more than doubled as a stock-market rally boosted brokerage commissions and trading income.
Net income climbed to 48.3 billion yen ($471 million) for the three months ended Dec. 31 from 20.1 billion yen a year earlier, the Tokyo-based company said in a statement today. The result compared with the 46 billion-yen average estimate of nine analysts surveyed by Bloomberg News.
Japanese stocks were the best performers in the developed world last year as fiscal and monetary stimulus spurred the economy, helping Nomura reap higher income from trading shares for individuals. In investment banking, the firm led by Chief Executive Officer Koji Nagai is facing competition from lenders such as Mitsubishi UFJ Financial Group Inc. to advise companies that are seeking takeovers abroad.
“Trading volumes and prices were high, particularly from mid-December, which boosted brokerage commissions, investment trust sales and asset management,” said Shinichi Ina, a Tokyo-based analyst at UBS AG. “We want to see whether Nomura will win big deals as competition from Japanese lenders’ securities units mounts.”
Revenue fell 2.5 percent from a year earlier to 447.4 billion yen in the quarter, today’s statement showed. Brokerage commissions jumped 45 percent to 121.4 billion yen and asset management fees gained 20 percent to 42.1 billion yen. Trading profit climbed 23 percent to 108.5 billion yen.
Fees from investment banking, which includes managing stock and bond sales for clients and providing advice on mergers and acquisitions, rose 22 percent to 15.8 billion yen.
Shares of Nomura closed 3.9 percent lower at 739 yen before the earnings were released as the benchmark Topix index slid 2.6 percent. Nomura jumped 44 percent in the past 12 months and the Topix advanced 31 percent. The average daily volume of trading on the Tokyo Stock Exchange’s first section surged 23 percent last quarter from a year earlier.
With inflation emerging in the world’s third-largest economy, Japanese are starting to shift their savings into stocks and investment trusts. Nomura’s assets under management reached a record 96 trillion yen as of Dec. 31, today’s report showed.
To meet increased demand from individual investors, Nomura plans to hire 100 experienced sales staff for the domestic retail brokerage in the year starting April, spokesman Kenji Yamashita said last month. Nomura is also expanding its asset management operations abroad, saying this month that it will buy ING Groep NV’s Taiwanese investment unit, becoming the first Japanese asset manager to operate in the market.
Last quarter’s earnings were boosted by a 12.5 billion-yen gain from the firm’s investment in Ashikaga Holdings Co. (7167), a Japanese regional bank that went public in December, today’s report showed.
Nomura continued to struggle abroad, posting an 8.2 billion-yen pretax loss from overseas in the three months compared with a pretax profit of 4.3 billion yen a year earlier. CEO Nagai completed a $1 billion cost-saving program in September as part of a goal to make all operations abroad profitable by the year ending March 2015.
Wall Street firms had a mixed quarter, with a bond-trading slump denting revenue at Goldman Sachs Group Inc. (GS:US) and Citigroup Inc., while Morgan Stanley’s equity trading and brokerage operations benefited from the U.S. stock rally, company reports showed this month. JPMorgan Chase & Co., the biggest U.S. bank, said quarterly profit fell on costs of legal settlements.
While Nomura was the top bond and stock underwriter in Japan last year, its ranking for mergers advisory slipped to fifth from fourth, data compiled by Bloomberg show.
The firm missed out on Tokyo Electron Ltd.’s $6.8 billion merger with Santa Clara, California-based Applied Materials Inc. last year to a brokerage venture owned by Mitsubishi UFJ and Morgan Stanley, which topped Japan’s mergers advisory rankings in 2013. That venture also advised Suntory Holdings Ltd. on its $15.9 billion acquisition of U.S. distiller Beam Inc., the world’s biggest merger announced so far this year. Nomura didn’t work on the deal.
“It’ll be a challenge for Nomura to overcome the competition,” said Koichi Niwa, a Tokyo-based analyst at SMBC Nikko Securities Inc. “We could see more initial public offerings and global acquisitions this year, and it’s critical for Nomura to enlarge the market overall and obtain deals.”
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