Japan's Nomura announces major buyback after record investment banking revenue

By Makiko Yamazaki

TOKYO (Reuters) - Nomura Holdings said on Wednesday it would buy back up to 4% of its own shares after reporting record net revenue from its investment banking division, fuelled by buoyant fundraising deals in a stock market boom in Japan.

Japan's biggest brokerage and investment bank will buy back shares worth up to 100 billion yen ($677 million), the largest amount since 2019, as the bank "is increasingly confident in an earnings turnaround," Chief Financial Officer Takumi Kitamura told reporters.

October-December net profit dropped 24% to 50.5 billion yen, largely reflecting one-off gains from a partial stake sale in an affiliate that boosted year-earlier earnings.

Net revenue from investment banking jumped 30% to 45.4 billion yen, the highest since 2017, when comparable data was available, thanks to a surge in equity offerings last year in Japan, as companies took advantage of the stock market's rise to more than 30-year highs to procure funds for growth opportunities.

A rare call by the Tokyo bourse for action plans to improve capital efficiency also accelerated the unwinding of shareholdings in affiliates and partners, a practice known as cross-shareholding that investors say hinders governance and hampers returns.

Nomura's advisory business was also strong in Japan, where the M&A market stood out against a worldwide decline last year, as low interest rates, stricter governance rules and shareholder pressure fuelled corporate restructuring and management buyouts.

"We expect more actions from companies to beef up governance and improve capital efficiency," Kitamura said, adding that the bank has received various requests for advice from management. "We believe the momentum in the Japan business will continue."

Nomura's wholesale division, which houses its investment banking and trading businesses, turned to a pretax profit of 23 billion yen from a year-before loss of 1.9 billion yen.

The fixed-income trading business also showed signs of recovery as growing prospects of interest rate cuts by the U.S. Federal Reserve prompted market participants to adjust positions.

Still, April-December nine-month pre-tax profits for its three core divisions - retail, investment management and wholesale - came only at 159.7 billion yen, far short of its annual target of 288 billion yen in the fiscal year ending in March 2025.

($1 = 147.7200 yen)

(Reporting by Makiko Yamazaki; Editing by Kim Coghill, Shri Navaratnam and Sharon Singleton)