Nomura’s First-Quarter Profit Falls Less-Than-Estimated 32% (2)

(Bloomberg) -- Nomura Holdings Inc.’s first-quarter profit fell less than analysts estimated as an increase in trading income and a rebound abroad damped the impact of a slump in brokerage commissions.

Net income declined 32 percent from a year earlier to 46.8 billion yen ($446 million) in the three months ended June 30, Japan’s biggest securities firm said Thursday. That beat the 14.3 billion yen average estimate of five analysts surveyed by Bloomberg. Nomura said it will buy back up to 2.6 percent of its shares for about 45 billion yen.

Nomura joins Daiwa Securities Group Inc. in posting lower profit after Japanese individuals and companies stayed away from stock trading and fundraising as the nation’s equities fell on a surging yen. The Tokyo-based firm had its first quarterly profit abroad in a year, providing good news for Chief Executive Officer Koji Nagai after Nomura’s six years of losses overseas prompted him to cut costs.

“Japanese brokerages struggled with their domestic businesses in the quarter as individual investors’ risk appetite deteriorated,” said Takehito Yamanaka, a Tokyo-based analyst at Credit Suisse Group AG.

Trading Bounce

Here are key figures from the report:

• Revenue fell 18 percent from a year earlier to 418.4 billion yen.

• Brokerage commissions dropped 41 percent to 76.3 billion yen.

• Trading profit increased 12 percent to 140.1 billion yen.

• Investment banking fees slid 29 percent to 17.3 billion yen.

• Asset management fees decreased 12 percent to 52.6 billion yen.

• Overseas pretax profit widened to 16.9 billion yen from 2.7 billion yen a year earlier.

Pretax profit from wholesale business more than doubled from a year earlier. Fixed-income revenue rebounded due to “an uptick in client activity and improved trading conditions,” Nomura said in a presentation. Retail operations saw an 83 percent decline in profit before taxes as “choppy market conditions” kept investors away, it said.

Nomura and Daiwa have been counting on Japanese shifting more of their savings to investments to boost returns that are diminishing amid the central bank’s negative interest-rate policy. Yet households are still holding onto cash as the yen climbs and stocks retreat after four years of gains.

Customers Wondering

Chief Financial Officer Takumi Kitamura told reporters that the retail environment remains “harsh,” and Nomura is keen to advise customers “who are wondering where to put their money.” Assets the firm holds for individual clients dropped to 95.3 trillion yen as of June, the lowest in two years, the results showed.

Nomura sent an e-mail to its retail customers this month encouraging them to put summer bonuses in bank accounts that offer 0.1 percent on one-year deposits -- 10 times more than Mitsubishi UFJ Financial Group Inc. -- in the hope that they eventually move the cash to riskier investments.

Shares of Nomura closed 1.4 percent lower before the results were released, extending this year’s decline to 39 percent. While the benchmark Topix index has lost 16 percent in 2016, it has rebounded slightly this quarter as investors expect more economic stimulus from the government and central bank, whose policy board began a two-day meeting Thursday.

Daiwa’s first-quarter profit fell 45 percent to 24.6 billion yen as brokerage commissions, underwriting fees and trading income slumped, the Tokyo-based firm reported Wednesday.

Overseas Rebound

Both companies’ overseas operations returned to profit in the quarter. Nomura’s rebound was driven by Asia and the U.S., while it lost money in Europe. In April, the firm said it will restructure its European equity business and trim operations in the U.S. -- efforts that CEO Nagai expects will save about $700 million of costs.

Here are Nomura’s overseas employee numbers as of June 30:

• Europe: 3,170 -- down 254 from March

• Americas: 2,481 -- down 22

• Asia: 6,769 -- down 86

Investment banking deals shrank in Japan last quarter. Nomura underwrote 14 share sales valued at 94 billion yen, down from 16 deals worth 146 billion yen a year earlier, according to data compiled by Bloomberg. It worked on 24 completed mergers and acquisitions worth $6.5 billion, compared with 36 transactions valued at $9.6 billion a year earlier, the data show.

(Updates with employee numbers in the second-to-last paragraph.)

--With assistance from Gareth Allan and Takako Taniguchi To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net. To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Russell Ward

©2016 Bloomberg L.P.