(Feb 5): Nomura Holdings Inc’s profit rose more than analysts expected, as Japan’s biggest brokerage reaped the benefits from robust trading and investment banking business and made progress on cost cuts.

Net income doubled from a year earlier to ¥101.4 billion (US$661 million or RM2.9 billion) in the three months ended Dec 31, the company said in a statement on Wednesday. That beat the ¥72.4 billion average estimate of five analysts.

Chief executive officer Kentaro Okuda has steered Nomura to an earnings recovery, even as it grapples with the fallout from a pair of scandals in recent months. Japanese brokerages are benefitting from elevated trading and dealmaking activity, along with a growing investment appetite among individual clients seeking to protect their wealth from the emergence of inflation at home.

Nomura joined Wall Street rivals in benefiting from market volatility stemming from events including the US presidential election. Revenue from the global markets business rose 39% from a year earlier, the fifth consecutive quarter of gains. Fixed-income trading gained 35%, while equities saw a 45% increase. 

Investment banking revenue rose 14%, the seventh straight quarter of increase.

The wholesale group led by Christopher Willcox made further progress on cost cutting. A closely watched measure of costs for the division that houses trading and investment banking operations fell to 79% of net revenue from the previous quarter’s 83%.

Revenue at Nomura’s domestic wealth management division grew 13% for the eighth straight quarter of gains. Nomura and its rivals are aggressively expanding their wealth business as the emergence of inflation spurs Japanese households to invest more of their US$7.3 trillion in cash and deposits.

Pre-tax profit from abroad almost tripled to to ¥51.8 billion, as Nomura made money in all regions.

Shares of Nomura closed 0.2% higher before the results. The stock has gained more than 50% in the past six months.

Nomura was thrust into public scrutiny last year after a wealth management division employee allegedly attempted to rob and kill an elderly couple at their home in Japan. The incident prompted the company to unveil steps including more closely supervising visits of retail bankers to clients’ homes.

Separately, Japan’s financial regulator fined the brokerage in October for manipulating the nation’s government bond futures market in 2021. Nomura dismissed the trader involved.

The manipulation scandal led some of Japan’s largest financial institutions to temporarily halt trading securities with the firm. The finance ministry also briefly suspended Nomura’s special entitlements as a primary dealer, while some companies took their corporate bond underwriting business elsewhere.

CEO Okuda took a pay cut for each of the two incidents, which threaten to blemish Nomura’s 100th anniversary this year.

Uploaded by Magessan Varatharaja