Daiwa Securities Group Inc. (8601) doubled compensation for its top executives last fiscal year and Nomura Holdings Inc. (8604) resumed paying cash bonuses as profit surged amid a market rally driven by Japan’s economic stimulus policies.
Average compensation for Daiwa’s top 12 officials rose to 67.3 million yen ($674,000) each for the year ended March, according to documents sent to shareholders before they meet on June 26. Nomura is paying the cash bonuses to executives after waiving them in the previous year, reports to shareholders show.
The rewards underscore the turnaround in fortunes for Japan’s two biggest securities firms since Shinzo Abe became prime minister in December on a pledge to end deflation. Rising fees and commissions helped net income at the Tokyo-based companies climb to the highest since before Lehman Brothers Holdings Inc.’s 2008 bankruptcy triggered a global recession.
“The rise in compensation shows that the long, bitter winter after the Lehman shock is over, thanks to Abenomics,” said Mamoru Nagano, a professor of economics and international finance at Seikei University in Tokyo, referring to the nickname for Abe’s policies of fiscal and monetary stimulus coupled with deregulation.
“It’s positive to see that Japanese bank executives are receiving compensation linked to their firm’s performance as it gives them an incentive to form more aggressive strategies for growth,” including through mergers or alliances, Nagano said.
Daiwa booked 807 million yen for Chief Executive Officer Takashi Hibino and 11 other executives for the fiscal year, including base salaries and stock options as well as performance-related payments to be made later, the document shows, without providing a breakdown by individual. In the previous year, the bank paid 14 top managers 424 million yen, an average of 30.3 million yen each.
“Earnings and share performance were good, and compensation rose in tandem with the move,” Misato Kinoshita, a spokeswoman at Daiwa, said by phone yesterday. She confirmed the calculation for the average remuneration per executive.
Nomura booked 656 million yen of compensation, including base salaries, bonuses and deferred remuneration, for CEO Koji Nagai and seven other executives in the year ended March, according to its report to shareholders. Averages per individual couldn’t be calculated because some executives, including Nagai’s predecessor Kenichi Watanabe, resigned in July after staff leaked information used for insider trading.
Standard & Poor’s today raised the outlook for Daiwa’s debt rating to stable from negative, saying the banking group has made “steady progress” on cutting costs to improve profitability.
Daiwa posted net income of 72.9 billion yen last fiscal year, following a 39.4 billion yen loss in the previous period. Nomura’s profit surged to 107.2 billion yen from 11.6 billion yen a year earlier. Both were the highest since the year ended March 2007.
Securities firms have been among the biggest beneficiaries of the equity-market recovery fueled by Abe’s fiscal spending and the Bank of Japan’s plans to double the monetary base. The Topix Securities and Commodity Futures Index has doubled in the past six months, the best performer on the benchmark Topix.
The rebound in Japanese stocks has stalled in the past two weeks, with the Topix losing about 15 percent since its most recent peak on May 22 and slumping 3.2 percent at the close of trading today. Daiwa shares fell 7.6 percent to 790 yen, paring this year’s advance to 66 percent. Nomura dropped 7.6 percent to 719 yen and is up 43 percent in 2013.
Daiwa’s senior executives aren’t the only employees to benefit from the stock rally. The firm boosted the June bonus pool for investment bankers and staff by 83 percent to 22 billion yen, the most in three years, company figures showed last month.
CEO Hibino plans to increase the number of retail bankers and branches by 50 percent over the next few years in anticipation that households will shift savings to equities. Daiwa has 3,000 to 4,000 financial advisers at its 123 branches in Japan, and will increase headcount mainly by allocating graduates, he said last month.
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