(Feb 6): Nomura Holdings Inc’s shares jumped to their highest in 16 years, after Japan’s biggest brokerage doubled third-quarter profit and beat market estimates on robust trading and cost cuts. 

The stock climbed as much as 7.7% to ¥1,077 (US$7.08 or RM31.32) in Tokyo on Thursday morning, the highest level since October 2008. Net income doubled from a year earlier to ¥101.4 billion in the three months ended Dec 31, hitting a four-year peak.

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 benefiting 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. 

“Overall, it was a very strong performance,” said Michael Makdad, a senior analyst at Morningstar Inc. “Nomura is now generating earnings above its cost of capital in a favourable environment.”

Nomura joined Wall Street rivals in benefiting from market volatility in the quarter. Revenue from the global markets business — one of the biggest drivers of income at the firm — rose 39% from a year earlier to the highest since at least 2016, the results showed after the market close on Wednesday. 

Fixed-income revenue climbed 35%, while equities saw a 45% gain. Both exceeded the average performance of the five largest US banks, according to Bloomberg Intelligence senior analyst Hideyasu Ban. 

The wholesale group led by Christopher Willcox made further inroads on cost savings. A closely watched measure of costs for the division that houses trading and investment banking operations fell to a four-year low of 79% of net revenue. 

“While market conditions aren’t bad, we believe cost control and risk management will remain key,” chief financial officer Takumi Kitamura said at a news briefing. “We will stay focused as we aim to accomplish a record profit.”

Revenue at Nomura’s domestic wealth management division grew 13% for the eighth straight quarter of gains. Nomura and its rivals including Daiwa Securities Group Inc 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.

Daiwa also beat quarterly profit estimates last month.

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. 

Chief financial officer Kitamura said the impact on earnings was limited. 

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. 

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Nomura profit beats estimates on trading boom, cost cuts 

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