Nomura Leads Japanese Brokerages Higher on Buyback, Earnings

Nomura Holdings Inc. (8604) rose the most in more than 10 months in Tokyo stock trading after Japan’s biggest brokerage said it will buy back shares and raise dividends as it posted a lower-than-estimated decline in quarterly earnings.

The shares jumped 6.3 percent, the most since June 10, to 625 yen at the close. Fourth-quarter profit fell 26 percent from a year earlier to 61.3 billion yen ($600 million), beating analysts’ estimates for 41 billion yen, the Tokyo-based company reported yesterday. An index of securities firms was the biggest gainer on the Topix (TPX) index, which rose 1.7 percent.

Nomura said yesterday that it plans to buy back as much as 2.6 percent of outstanding shares after net income climbed to an eight-year high in the year ended March. The securities industry remains the worst performer on the Topix this year on concern that a Japanese stock market retreat will make it difficult for brokerages to maintain profit growth.

“Nomura rose more than other brokerages as the size of the share buyback, earnings and dividend payments were bigger than expected,” Masao Muraki, an analyst at Deutsche Securities Inc. in Tokyo, said by phone today. “In the long term, it will be hard for investors to buy into the securities industry unless market conditions take a favorable turn.”

The drop in Nomura’s quarterly earnings was the first since the three months ended June 2012, as lower brokerage commissions overshadowed gains from investment banking and trading.

Profit Outlook

Muraki estimates Nomura’s profit will decrease to 178.8 billion yen this fiscal year. Net income climbed 99 percent for the 12 months ended March 31 to 213.6 billion yen, the Japanese firm reported yesterday. It plans to pay a 17 yen-a-share dividend for the year, up from 8 yen a year earlier.

Shares of Daiwa Securities Group Inc. (8601) advanced 3.1 percent, the most in a month, to close at 789 yen after Japan’s second-biggest brokerage yesterday posted the highest full-year profit in a quarter-century.

Net income for the year ended March more than doubled to 169.5 billion yen, the Tokyo-based company said. Fourth-quarter profit slid 32 percent, the first decline in nine quarters, to 33.2 billion yen as underwriting, trading and brokerage commissions fell.

Japan went from being the best-performing major stock market in 2013 to the worst this year, with the Nikkei 225 Stock Average falling 11 percent as the effect of Prime Minister Shinzo Abe’s economic stimulus measures fades. The Bank of Japan’s policy board yesterday cut its economic growth forecast for the year ending March 2015 to 1.1 percent from 1.4 percent.

Lower Revenue

Nomura’s revenue fell 37 percent last quarter from a year earlier to 450.8 billion yen, yesterday’s report showed. Brokerage commissions declined 29 percent to 89.9 billion yen. Investment banking fees climbed 24 percent to 27.2 billion yen, and trading profit rose 21 percent to 129.2 billion yen.

Investment banking was strong because a large number of transactions were completed in the quarter, and it may be difficult to maintain the momentum, Nomura Chief Financial Officer Shigesuke Kashiwagi told analysts on a conference call yesterday. “We still have many equity capital markets deals in our pipeline and some cross-border deals,” he said.

Fixed-income and equity trading operations began the current quarter “in low gear,” Kashiwagi said. For the retail brokerage business, last quarter was “very tough” and the company has to be patient before seeing a pickup, he said.

To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net

To contact the editors responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net Russell Ward, Teo Chian Wei

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