Nomura raises annual profit target 50% after record year

[TOKYO] Nomura Holdings raised its midterm profit targets following a year of record earnings, as chief executive officer Kentaro Okuda pushes for stable growth at Japan’s biggest brokerage. 

The Tokyo-based company seeks to post at least 750 billion yen (S$6 billion) in annual pretax income by the year ending March 2031, exceeding its previous goal of more than 500 billion yen, it said in a presentation to investors last Thursday (May 28).

It also plans to deliver a yearly return on equity – a key profitability measure – of at least 10 to 12 per cent, up from its earlier target of 8 to 10 per cent or more.

“Earning power has improved steadily” since the company released its 2030 vision two years ago, Okuda said in the presentation. “We continue working towards sustainable growth and further improvement in our ability to generate profits.”

Shares of Nomura rose last Friday morning, almost erasing losses for the year. The stock has underperformed domestic rivals including Daiwa Securities Group, even after the company posted a second straight year of record net income.

Japanese securities companies have been benefiting from the country’s financial market recovery, which has boosted trading and investment banking. 

Nomura also announced cost cuts totalling US$500 million, underscoring Okuda’s focus on keeping expenses under control while the company pushes to lift the top line. Measures include building an operational model enabled by artificial intelligence and reviewing the information technology architecture.

“Our goal is not to simply cut costs indiscriminately,” Okuda said at a briefing on Friday. “We will pursue cost control and growth investments – including inorganic initiatives – in an integrated manner.”

Still, Okuda said, the higher targets do not assume any large-scale acquisitions. “We believe the company can achieve sufficient growth through expansion of its existing businesses alone,” he said. 

SEE ALSO

Nomura stock hit after research affiliate writedown, Europe loss

Nomura posts record full-year profit on Japan market rebound

Nomura shares are down 0.5 per cent this year, trailing a 16 per cent gain in the benchmark Topix index. 

The brokerage’s wholesale division – which includes trading and investment banking – lifted its return on equity target for fiscal 2030 to more than 10 per cent, from the previous 8 to 10 per cent.

Headed by Wall Street veteran Christopher Willcox, who previously led JPMorgan Chase’s asset management unit, Nomura’s wholesale division last fiscal year posted its highest pretax profit as stock trading and merger advisory revenue grew.

Private markets

The presentation materials also signalled that Okuda will press ahead with his initiative to steer Nomura towards private markets for growth. That is coming as concerns persist around the globe on the business of allowing investors to gain exposure to loans made by non-banks.

The investment management division is targeting an expansion in its assets under management by about a third to 180 trillion yen by March 2031, with private assets accounting for as much as 6 per cent – or roughly 11 trillion yen. Those investments currently make up 3 per cent of the total, implying that Nomura plans to sell more of such products to clients.

Nomura’s asset management arms, including operations acquired from Macquarie Group last year, are looking to increase their combined private credit assets to US$5 billion or more by March 2031 from around US$500 million now, the brokerage said.

Nomura also intends to use artificial intelligence to offer more personalised services to a broader range of clients, while wealth and investment managers will rely more on AI assistants, Okuda said in the presentation. 

Other goals

• The wholesale division targets boosting revenue from its equity business by 20 to 30 per cent in the coming five years, and from its global advisory business by 50 per cent
• It plans to expand into commercial real estate as well as credit businesses related to Central and Eastern Europe, the Middle East and Africa
• The division aims to lower its cost-to-income ratio to below 80 per cent over that period compared with its previous “approximately 80 per cent” target, meaning tighter control on expenses
• The wealth management division seeks to expand its recurring revenue assets under management to 41 trillion yen, higher than the previous 37 trillion yen target and compared with 27.9 trillion yen as at the end of March
• The investment management segment aims to earn as much as 150 billion yen in annual pretax profit by the year ending March 2031, above the previous 100 billion yen goal.

BLOOMBERG