Daiwa Securities Group Inc.’s fourth-quarter profit rose 16 percent, beating analysts’ estimates as brokerage commissions and trading income jumped while overseas losses narrowed.
Net income climbed to 38.5 billion yen ($323 million) in the three months ended March 31 from 33.2 billion yen a year earlier, Tokyo-based Daiwa said in a statement on Tuesday. That exceeded the average estimate of 35.4 billion yen based on a Bloomberg survey of eight analysts.
Chief Executive Officer Takashi Hibino is betting that Japanese stocks will keep rising as more people shift their savings to investments, boosting brokerage commissions. With Japan’s population declining, the nation’s second-largest securities firm is also seeking new revenue sources overseas by investing in peers in Asia.
“Daiwa’s retail business remains in good form,” Masao Muraki, a Tokyo-based analyst at Deutsche Bank AG, said before the results. “But the shift in demographics may cause the business to shrink in four or five years’ time, so Daiwa sees inorganic growth abroad as one option to avoid that.”
Chief Financial Officer Mikita Komatsu told reporters after the earnings that the company seeks to break even overseas in the current fiscal year. Its pretax loss from abroad narrowed to 170 million yen last quarter from 1.7 billion yen a year earlier.
Nomura Holdings Inc., Japan’s biggest brokerage, missed its goal of returning to profit outside Japan last fiscal year, people with knowledge of the matter said ahead of an earnings report scheduled for Thursday. The pretax loss was due to a one-time event and Nomura will keep its target to earn 50 billion yen from overseas this year, the people said.
Daiwa’s brokerage commissions rose 16 percent last quarter from a year earlier to 19.3 billion yen, the statement showed, as Japanese stocks continued a rally that’s been fueled by monetary easing and a weakening yen. The Nikkei 225 Stock Average jumped 10 percent in the three months ended March, the most in five quarters, and is close to a 15-year high.
Shares of Daiwa closed 0.2 percent lower Tuesday before the earnings, paring this year’s gain to 9 percent. Nomura has advanced 15 percent in 2015.
Revenue increased 19 percent last quarter to 175.5 billion yen, Daiwa said. Trading income advanced 19 percent to 41.8 billion yen, and underwriting fees gained 12 percent to 6.5 billion yen.
“The shift from deposits to investments will gain momentum,” Hibino said this month in an address to 681 graduates who joined the firm. Japanese households, which hold most of their financial assets in cash, are starting to move to riskier investments as the central bank tries to spark inflation.
Net income fell 12 percent to 148.4 billion yen in the year ended March, the report showed.
Daiwa executives will visit Malaysia, Thailand, Vietnam, Myanmar, the Philippines, Singapore and Hong Kong from next month to discuss opportunities including taking stakes in local securities firms, CFO Komatsu said in an interview this month.
Daiwa may raise its holding in Saigon Securities Inc., the only Southeast Asian brokerage that it has an investment in, the CFO said, while adding that nothing has been decided.