Nomura Profit Beats Estimates on Brokerage Commissions

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Nomura Holdings Inc.’s fourth-quarter profit rose to the highest in two years, beating analysts’ estimates as Japan’s stock-market rally spurred brokerage commissions and asset-management fees.

Net income climbed 34 percent from a year earlier to 82 billion yen ($691 million) in the three months ended March 31, the Tokyo-based brokerage said in a statement on Thursday. That exceeded the 58.6 billion yen average estimate of eight analysts surveyed by Bloomberg.

Japan’s biggest brokerage follows Daiwa Securities Group Inc. in posting higher quarterly earnings, buoyed by domestic business after the Nikkei 225 Stock Average surged to a 15-year high. In its operations abroad, Nomura posted a fifth straight annual loss as it set aside money for lawsuits, while keeping a goal to make 50 billion yen profit overseas this year.

“A good quarter from Nomura,” said Makarim Salman, a senior analyst at Jefferies Group LLC in Tokyo. “However, as with Daiwa, we are looking for the next level of energy in the business. For Nomura, overseas improvement could provide this.”

Revenue rose 13 percent last quarter from a year earlier to 510 billion yen, the statement showed. Brokerage commissions jumped 38 percent to 123.7 billion yen. Asset-management fees increased 28 percent to 54.3 billion yen.

Toyota Deal

Nomura is benefiting from households shifting more of their savings to investments. Client assets under management climbed 19 percent to a record 109.5 trillion yen as of March 31, the report showed. Chief Executive Officer Koji Nagai wants to expand the total to 150 trillion yen by March 2020.

Trading profit advanced 3.9 percent to 134.3 billion yen last quarter, while investment-banking fees slipped 5.1 percent to 25.8 billion yen.

Nomura, Japan’s No. 1 equity underwriter, won a deal to manage Toyota Motor Corp.’s sale of up to 500 billion yen of shares to long-term investors, the automaker said this week. The securities firm is ranked third for arranging corporate bond sales in Japan this year, and is second among advisers on mergers in the country, data compiled by Bloomberg show.

For the year ended March, net income rose 5.2 percent to 224.8 billion yen, the highest in nine years.

Shares of Nomura closed 2.2 percent lower before the results were released, trimming this year’s gain to 12 percent. The Nikkei 225 lost 2.7 percent Thursday, after the central bank refrained from adding monetary stimulus, and is down 3.3 percent from its 15-year high reached on April 23.

Overseas Loss

Daiwa two days ago reported fourth-quarter profit climbed 16 percent to 38.5 billion yen as brokerage commissions and trading income jumped, while overseas losses narrowed.

In its operations abroad, Nomura posted a pretax profit of 3.9 billion yen in the three months, less than 15.9 billion yen a year earlier. For the full year, it had a loss of 16.4 billion yen overseas, narrowing from 24.7 billion yen previously.

That meant CEO Nagai, 56, missed a target of becoming profitable in Europe, Asia and the U.S. in the period. He had set the goal shortly after taking the post in 2012 as he pledged to cut $1 billion of costs and trim staff, mainly from wholesale operations outside of Japan. Nomura shuffled management of its global markets division this month, appointing new heads for Europe and the U.S.

Legal Provisions

Chief Financial Officer Shigesuke Kashiwagi attributed the annual overseas loss to money set aside for litigation. He declined to identify the lawsuits or say whether such costs may increase in the future.

“It’s very regrettable,” Kashiwagi said at a news briefing on the results. The firm could have made a profit abroad if it wasn’t for the provisions, he said.

Nomura is defending claims by the U.S. Federal Housing Finance Agency that it sold defective mortgage-backed securities to Fannie Mae and Freddie Mac before the 2008 financial crisis.

In Italy, prosecutors asked a Milan court to indict Nomura, Banca Monte dei Paschi di Siena SpA and their former employees for using an investment strategy to hide losses at Italy’s third-biggest bank, people with knowledge of the request said last week. Paschi said earlier in April that it’s considering raising damages claims against Nomura.

Kashiwagi maintained the separate target for 50 billion yen in overseas pretax profit this fiscal year.

Achieving the goal “will be an immediate priority, but it won’t be so easy as the market environment has zero visibility,” said Masao Muraki, an analyst at Deutsche Bank AG in Tokyo. “If the firm carries it out, that would be a catalyst for raising the share price.”

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