Nomura Holdings, Japan’s leading brokerage and investment bank, has announced a remarkable 195% increase in net profit for the first quarter of the fiscal year, reflecting a significant turnaround in its financial performance. The company reported a net profit of 68.9 billion yen (approximately $446 million) for the April-June period, a dramatic rise from 23.3 billion yen during the same period the previous year. This substantial growth highlights Nomura’s success in navigating through a period of global market volatility and domestic economic change.
The increase in profitability can be attributed to several key factors. First, the rally in global financial markets has played a crucial role in boosting Nomura’s earnings. As global markets have surged, there has been a corresponding increase in investor confidence and activity, which has translated into higher demand for financial services. Additionally, the return of inflation in Japan, after a prolonged period of deflation, has encouraged retail investors to shift their focus from traditional savings accounts to investment products. This shift has been beneficial for Nomura, which has capitalized on this trend by enhancing its wealth management services.
Chief Financial Officer Takumi Kitamura highlighted that the company’s strategic shift towards a fee-based profit model has been instrumental in achieving these results. By moving away from a reliance on transaction-based revenue, Nomura has been able to secure a more consistent and predictable stream of income. This model has proven resilient in the face of market fluctuations and has positioned the company for stable growth.
The positive impact of the global market rally is evident in the performance of Nomura’s wealth management segment. Pre-tax income in this division grew by an impressive 84% compared to the previous year, reaching its highest level since the 2015/16 financial year. This growth has been driven by increased client investment in U.S. and global stock funds, reflecting the overall boost in market sentiment.
Nomura’s dominance in the Japanese wealth management sector is a key factor in its strong performance. The wealth management division accounted for approximately half of the company’s pre-tax profit in the previous financial year. This dominant position is supported by a record 92.5 trillion yen in assets under management, driven by strong inflows into investment products.
The wholesale segment, which includes investment banking and trading activities, also demonstrated solid growth, with a 22% increase in revenue compared to the same period last year. Investment banking in Japan saw robust activity due to a series of business reorganizations, delistings, and cross-border transactions. However, the international investment banking environment faced a slowdown in deal activity, which somewhat tempered the segment’s overall performance. Despite this, Kitamura noted that Nomura performed relatively well compared to some U.S. investment banks, particularly during challenging periods.
In addition to these operational improvements, Nomura has also benefited from a series of cost-cutting measures implemented over the past year. These measures have been aimed at improving profitability and operational efficiency. As a result, the company’s return on equity (ROE) for the April-June period surged to 8.1%, significantly higher than the 5.1% achieved in the fiscal year ending March 2024. This increase in ROE reflects the success of Nomura’s efforts to enhance its financial performance and shareholder value.
Overall, Nomura Holdings’ impressive first-quarter results underscore the effectiveness of its strategic shift towards a fee-based revenue model and its ability to adapt to changing market conditions. The company’s strong performance in wealth management, coupled with effective cost management and a favorable market environment, positions it well for continued success in the coming quarters.