Nomura Rises Most This Year on Profit Growth Surprise

Nomura Holdings Inc. shares rose the most in almost three months in Tokyo trading after Japan’s largest brokerage posted unexpected quarterly profit growth and said it will buy back more shares.

The stock climbed as much as 4.1 percent, the biggest intraday gain since Nov. 4, and traded at 643.9 yen as of 10:45 a.m. in Tokyo. Net income climbed 45 percent to 70 billion yen ($592 million) for the three months ended Dec. 31, led by investment banking and asset management, Nomura said Thursday.

Nomura continued to benefit from a Japanese stock-market rally last quarter, while further losses overseas prompted its chief financial officer to signal cost cuts. To secure stable profit, Chief Executive Officer Koji Nagai is bolstering investment banking and electronic trading services abroad and focusing more on asset management at home.

“The earnings weren’t bad,” Takehito Yamanaka, a Tokyo-based analyst at Credit Suisse Group AG, said by phone. “As well as its domestic business, it did well on overseas M&A advisory and seems to have more deals in the pipeline.”

Last quarter’s profit was almost double the 37.2 billion-yen average estimate of analysts surveyed by Bloomberg. It was the highest since the three months ended March 2013.

Nomura said it will spend as much as 30 billion yen purchasing up to 1 percent of its shares in the next two months. That’s the third buyback announced by the Tokyo-based firm in the past year.

Abenomics Boost

Investment banking fees increased 82 percent from a year earlier, yesterday’s report showed. Asset management fees rose 20 percent and brokerage commissions climbed 3.7 percent.

Nomura’s domestic business has been driving earnings since Prime Minister Shinzo Abe came to power at the end of 2012 with a promise to end decades of deflation through economic stimulus, driving demand for Japanese stocks.

Additional monetary easing by the Bank of Japan in October boosted the stock rally last quarter. The Topix index gained 0.5 percent this morning, extending its gain over the past year to about 16 percent. Nomura has dropped about 13 percent in the past 12 months as it still struggles to make money overseas.

The Japanese bank had a 7 billion-yen pretax loss from operations abroad last quarter, swinging from a profit in the previous three months. Its fixed-income trading suffered from the drop in interest rates and increase in market volatility that hurt Wall Street banks.

Cost Cuts

“We will have to review our business performance more strictly than in the past,” Chief Financial Officer Shigesuke Kashiwagi said of the overseas operations on a conference call with analysts Thursday night. “It’s possible that there will be cost cuts across front, middle and back offices.”

He reiterated a target to post 50 billion yen in pretax profit abroad in the year ending March 2016.

Nomura eliminated about 12 jobs from its Asia equities division in Hong Kong to focus on more profitable businesses, a person with knowledge of the matter said this month. At the same time, the company plans to recruit about 20 senior bankers in the U.S. and Asia to boost its mergers and acquisitions advisory business, global investment banking head Kentaro Okuda said in an interview this month.

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