Nomura profit falls on brokerage commissions, banking fees

[TOKYO] Nomura Holdings Inc's third-quarter profit fell 49 per cent as brokerage commissions and investment-banking fees slumped and the firm posted another loss abroad.

Net income declined to 35.4 billion yen (S$419 million) for the three months ended Dec 31 from 70 billion yen a year earlier, Japan's biggest brokerage said in a statement on Tuesday. That missed the 38.7 billion yen average estimate of five analysts surveyed by Bloomberg.

Nomura joins Daiwa Securities Group Inc in posting lower profit as global market volatility sapped investor demand. Bank of Japan governor Haruhiko Kuroda's surprise decision last week to introduce negative interest rates triggered a rebound in the country's equities that could renew domestic clients' appetite to invest more of their savings.

"Negative rates are a positive for Nomura," Masao Muraki, senior analyst at Deutsche Bank AG in Tokyo, said before the results.

"The depreciation of the yen and high stock prices will boost the valuation of individual clients' assets and make them more willing to invest."

Overseas Losses

Revenue fell 14 per cent in the third quarter from a year earlier to 434.5 billion yen, the results showed. Brokerage commissions dropped 17 per cent to 102.3 billion yen, while investment-banking fees slid 31 per cent to 20 billion yen. Trading income declined 3.9 per cent to 105.2 billion yen.

Nomura posted a pretax loss of 19.9 billion yen on its overseas operations in the three months, widening from seven billion yen a year earlier. It has now lost 63 billion yen abroad in the first nine months, prompting chief financial officer Shigesuke Kashiwagi to say the firm will postpone a goal of earning 50 billion yen overseas in the fiscal year.

The drop in brokerage commissions came as stock trading volume slumped. Transactions at exchanges in Tokyo and Nagoya dropped about 8 per cent in the last three months of 2015 from a year earlier, according to Japan Exchange Group Inc data.

The Nikkei 225 stock average has risen 4.2 per cent in the three trading days since Jan 29, when the central bank said it will start charging banks 0.1 per cent interest on some of their deposits at the institution, a move that could prompt them to put their money elsewhere.

The gauge is still down 6.7 per cent this year. Nomura gained 9.4 per cent in the past three sessions, paring this year's decline to 1.5 per cent.

"Individual investors who froze their assets are now looking to buy and sell Japanese shares for their next game plan," said Toru Komatsu, chief executive officer at Komatsu Portfolio Advisors Co, which advises wealthy individuals in Japan.

"Kuroda's announcement surprised and excited them, and we have to wait and see if they will cool down."

Nomura's CEO Koji Nagai is expanding in the US by hiring staff and making acquisitions. In December, Nomura agreed to pay about US$1 billion for a 41 per cent stake in US money manager American Century Investments from Canadian Imperial Bank of Commerce.

BLOOMBERG