Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

Nomura Holdings Inc. turned in laudable first-quarter results Friday, but Japan's largest brokerage needs to keep its eye on the overseas ball. 

Cost cutting and a revival in domestic retail broking helped Nomura offset the fixed-income trading slump that's beset Wall Street rivals and local peer Daiwa Securities Group Inc.

Buoyant results at home don't mean Nomura can forget about its overseas growth strategy, however.

For the three months ended June 30, net income climbed to 56.9 billion yen ($513 million), from 46.8 billion yen a year earlier. Mr. and Mrs. Watanabe were to thank for much of that. Things were less rosy in wholesale, where pretax profit dipped 46 percent from the same period a year ago, although notably, stayed in the black. Some softness was to be expected, considering Nomura has exited much of its equity business in Europe, laying off hundreds of staff over the past 12 months.

Homeward Bound
Pretax profit from Nomura's largely domestic retail business rose 187 percent to almost 25 billion yen in the three months ended June 30. Income from wholesale went the other way
Source: Company filings
Note: Wholesale operations are largely overseas businesses, including Lehman Brothers, which Nomura bought after the financial crisis.

But domestic retail investors can't always be counted upon, and that doesn't just come down to the nation's peculiar demographics.

Individual investors can be fickle. Chief Financial Officer Takumi Kitamura noted in the press briefing after Nomura's results that selling pressure had emerged as Japan's Nikkei-225 Stock Average neared the 20,000 level.

That recent rise in trading turnover could evaporate at short notice.

Domestic Chop
Stock-market turnover in Japan is off the peak it reached late last year
Source: Bloomberg

That means Nomura must keep its international operations -- primarily its wholesale division -- profitable.

Currently, the strategy seems mainly to involve plans to hire North American M&A bankers, something Daiwa has been doing more aggressively too. Daiwa said earlier this week it was purchasing U.S. investment bank Signal Hill Holdings LLC, and is increasing its stake in New York-based Sagent Advisors LLC.

M&A advisory makes sense given that both Nomura and Daiwa have close ties with cash-rich Japanese firms that will need to expand offshore to grow.

Considering Nomura has had some expensive misadventures overseas before, nobody is expecting a large build-out. But some measured buying here and there wouldn't go amiss, especially as Nomura, with a common equity Tier 1 capital ratio of 18.1 percent, can afford to spend.

A more clearly articulated offshore strategy is crucial if Nomura wants to keep its post-earnings glow.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. It should also help Nomura bulk up its bond franchise globally. 

To contact the author of this story:
Nisha Gopalan in Hong Kong at

To contact the editor responsible for this story:
Katrina Nicholas at