Photographer: John Taggart/Bloomberg

Morgan Stanley Tops Goldman Sachs With Biggest Japan Profit

  • Was most profitable foreign brokerage in the nation last year
  • Boosted sales of structured products, managed biggest IPOs

Morgan Stanley beat Goldman Sachs Group Inc. to become the most profitable foreign securities firm in Japan last fiscal year after it boosted structured-product sales and managed the two biggest initial public offerings.

Net income at Morgan Stanley MUFG Securities Co. rose 32 percent to 29 billion yen ($263 million) in the year ended March 31, the most among 10 large global banks that submitted annual financial statements, according to regulatory filings obtained or seen by Bloomberg.

The venture with Mitsubishi UFJ Financial Group Inc. and controlled by the New York-based firm posted its biggest revenue in three years as Japan’s introduction of negative interest rates prompted clients to seek assets with better returns than government bonds. It also underwrote the debut share sales of Kyushu Railway Co. and Line Corp., the largest in Japan last year.

“We are committed to growing our businesses in Japan where the national-level reforms offer exciting potential,” Chief Executive Officer Jonathan Kindred said in an emailed statement. He was referring to initiatives such as the government’s efforts to make Tokyo a global financial hub.

Morgan Stanley’s fees for fixed income-related sales and trading, a category that includes structured products, climbed 22 percent to 43.7 billion yen, according to the filing to the Financial Services Agency.

Goldman Sachs generated the second-highest revenue as well as profit, which totaled 22.1 billion yen in the year ended Dec. 31. The firm’s headcount dropped by 46 over the 12 months, bringing it roughly level with JPMorgan Chase & Co.

This year, Goldman Sachs is advising Toshiba Corp. on the sale of its memory-chip business, a transaction that may fetch about $19 billion, and it’s working with the Ministry of Finance on its sale of an additional stake in Japan Post Holdings Co.

BNP Paribas

JPMorgan posted the third-largest profit, followed by Deutsche Bank AG, while BNP Paribas SA had the third-biggest revenue. The French bank has also been growing in structured products, hiring about 30 people in Tokyo since January, and it plans to recruit more this year, people with knowledge of the matter said earlier this month.

UBS Group AG was among three firms that posted losses in part because of one-time charges. The Swiss bank incurred a goodwill impairment charge of 41.9 billion yen as it restructured its business model, Tokyo-based spokeswoman Eiko Noda said in an emailed statement. “The firm is on target for the current year," she said.

Below are earnings and headcount for foreign brokerages with the most revenues in Japan, based on their latest annual regulatory filings. Citigroup Inc. is excluded because it only posted nine-month results after changing its earnings period to a calendar year.

(billion yen)
(billion yen)
(change on year) 
Morgan Stanley     126.3           29.0           649  (-7)
Goldman Sachs*122.6           22.1           764  (-46)
BNP Paribas95.5           15.0           382  (+4)
JPMorgan95.2           21.9           765  (+4)
Deutsche Bank77.7           16.7           509  (-20)
Credit Suisse52.8            5.9           514  (+41)
Merrill Lynch*50.0           (2.7)           654  (-64)
Barclays 39.4           (8.7)           429  (-74)
Societe Generale*37.6            9.0           259  (+32)
UBS*23.9         (52.2)           412  (-52)

Note: Figures are for year ended March 31, except banks with (*), which report for year ended Dec. 31.

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