Nomura Holdings Inc., Japan’s largest brokerage, will report an increase in quarterly profit as gains from trading outweighed declines in investment banking, two people with knowledge of the matter said.
Net income climbed to about 18 billion yen ($221 million) for the three months ended March 31 from 11.9 billion yen a year earlier, said the people, declining to be identified before earnings are announced. The average estimate of nine analysts surveyed by Bloomberg was for profit of 14.4 billion yen.
The rebound in trading income that gave Nomura its second straight quarterly profit gain also let U.S. rivals including Bank of America Corp. post earnings that beat analysts’ estimates. Financial markets rallied worldwide last quarter as Europe’s debt crisis eased, U.S. unemployment fell and Japan rebuilt from last year’s earthquake and tsunami.
“It’s positive to see the profit increase,” said Shiro Yoshioka, an analyst at Japaninvest Group Plc in Tokyo. “But investors can’t be too optimistic as it’s due to the market pickup, and Nomura hasn’t shown the next strategic driver to boost earnings in the future.”
The profit figure is preliminary and may change when Nomura’s board meets this week to confirm the results, the people said. Keiko Sugai, a Tokyo-based spokeswoman for the brokerage, declined to comment. Nomura is scheduled to announce fiscal fourth-quarter earnings at 3 p.m. in Tokyo on April 27.
Shares of Nomura rose 2.4 percent to 344 yen at the close of trading in Tokyo. The stock was the most traded on the Tokyo Stock Exchange today. Nomura has advanced 54 percent since Nov. 24, when it reached the lowest in at least 37 years.
Fourth-quarter profit of 18 billion yen would bring net income for the year ended March 31 to about 7.5 billion yen. That’s more than the 3.9 billion yen median estimate of analysts surveyed by Bloomberg, while lower than the 28.7 billion yen posted for the previous fiscal year.
The Japanese brokerage is cutting $1.2 billion of expenses that swelled after it bought Lehman Brothers Holdings Inc.’s Asian and European businesses following the U.S. firm’s 2008 collapse. Nomura deepened the cost reductions after posting a 46.1 billion yen loss in the quarter ended September, its first since the start of 2009.
Credit Suisse Group AG, the second-largest Swiss bank, today posted a 96 percent decline in first-quarter profit to 44 million Swiss francs ($48 million) after booking accounting charges related to its own debt and costs for 2011 bonuses. That beat analysts’ average estimate for a 297.9 million-franc loss.
Moody’s Investors Service cut Nomura’s debt rating to the lowest investment grade on March 15, saying global competition raises questions over the profitability of the securities firm. Daiwa Securities Group Inc., Nomura’s biggest domestic competitor, was lowered to the same grade, Baa3, in November.
Trading profit at Nomura rose to about 88 billion yen for the quarter from 68.7 billion yen a year earlier, according to the average estimate of four analysts. Investment banking fees probably fell to 18 billion yen for the quarter from 27.8 billion yen a year earlier, according to the four analysts.
The company revamped trading operations last quarter by splitting the global markets unit into fixed-income and equity businesses. It appointed Steve Ashley as global head of fixed income in January following the resignations of two bankers, including former global markets chief Tarun Jotwani. Nomura hired traders in the U.S., Europe and the Middle East, including head of Treasury trading J.J. Lando, who joined from Goldman Sachs Group Inc. last year as a managing director in New York.
Also in the period, the firm appointed Koji Nagai as president of brokerage unit Nomura Securities Co., a post that was previously held by Chief Executive Officer Kenichi Watanabe. It also set up teams to expand business in China, India and Southeast Asia.
“The impact of restructuring efforts will emerge more clearly in the current quarter,” said Yoshioka at Japaninvest. “On the other hand, market conditions have become a bit unpredictable.”
Japan’s benchmark Nikkei 225 Stock Average climbed 19 percent last quarter, its best start to a calendar year since 1988. It has since retreated about 5 percent. The world’s third-largest economy probably resumed growing in the quarter from a contraction in the final three months of 2011, according to economists surveyed by Bloomberg.
While Nomura lifted its rankings for advising on global mergers and managing bond sales last quarter, investment banking fees may have been hampered by companies issuing fewer shares, according to data compiled by Bloomberg. Global equity offerings fell 26 percent in the three months from a year earlier, the data show. In Japan, share sales declined 58 percent.
Nomura was No. 10 underwriter for global equity sales in the three months, arranging 19 transactions valued at $2.9 billion, maintaining its position from a year earlier when it managed 25 deals worth $7.1 billion, according to Bloomberg data. Its ranking for international bond underwriting climbed three spots to 26th. On mergers and acquisitions, Nomura was No. 8 global adviser for the quarter, up from 14th a year earlier.