Nomura Holdings Inc. and Daiwa Securities Group Inc. shares jumped after first-quarter profit grew more than analysts estimated as a stock-market rally fueled brokerage commissions.
Nomura climbed 3.6 percent, the most in two weeks, to close at 891.4 yen in Tokyo trading Thursday. Daiwa advanced 6 percent, the most since November, to 964.5 yen. The Nikkei 225 Stock Average rose 1.1 percent.
Japan’s biggest brokerages have been capitalizing on citizens switching from savings to investment since Prime Minister Shinzo Abe took office in December 2012 with a vow to end years of deflation. While consumer prices are barely rising even after monetary easing, the Nikkei 225 has doubled, prompting companies such as Toyota Motor Corp. to offer new shares that the brokerages can sell to customers.
“The better-than-expected results prompted investors to start looking at the potential strengths of the securities industry,” said Koichi Niwa, a Tokyo-based analyst at SMBC Nikko Securities Inc. “Both firms were able to obtain deals in equity capital markets and grab business for existing and new individual clients.”
Nomura’s net income more than tripled to 68.7 billion yen ($553 million) in the three months ended June 30 from 19.9 billion yen a year earlier, the company said after the close of trading Wednesday. Net income at Daiwa rose 30 percent to 44.8 billion yen, the highest in eight quarters.
Analysts had estimated Nomura would earn 59 billion yen in the quarter, according to the median of seven estimates. Daiwa’s result exceeded a 36 billion yen projection.
Revenue at Nomura gained 10 percent in the quarter from a year earlier to 508.4 billion yen, the report showed. Brokerage commissions jumped 36 percent and investment banking fees climbed 24 percent. Asset management fees rose 30 percent.
Trading profit fell 21 percent as fixed-income business slowed amid a decline in liquidity, the company said.
SMBC Nikko’s Niwa said the results also showed that Nomura and Daiwa’s overseas businesses lack strength.
More than half of Nomura’s profit before taxes came from its retail operations, underscoring Chief Executive Officer Koji Nagai’s reliance on domestic business. While the firm made money abroad for a second straight quarter with pretax profit of 2.7 billion yen, that was a fraction of its 50 billion yen goal for overseas business for the year.
“It wasn’t enough, but at the same time we withstood the Greece issue and many events happened in the quarter,” Chief Financial Officer Shigesuke Kashiwagi said on a call with analysts Wednesday. “It may seem like we have a long way to go, but we’ll just push on and we won’t take risks” to achieve the target for overseas, he said.
Japan’s equity market will continue to perform steadily as the economy is recovering and individuals are keen to buy equities, Kashiwagi said.