TOKYO: Nomura Holdings Inc said on Wednesday its quarterly net profit fell 12 percent as Japan’s top investment bank was hurt by volatility in global markets caused by China’s economic slowdown and worries about U.S. interest rates rising.
On a quarter-on-quarter basis, which shows the impact of the volatility more clearly, its net profit tumbled 32 percent and net revenue slid 21 percent as Japanese investors shunned funds and the stock market and low interest rates hit foreign bond sales.
The results, which come after similarly weak quarterly performances from top Wall Street investment banks Goldman Sachs and Morgan Stanley, show Nomura’s goal to build a business model that relies less on the market has made a little progress.
Nomura’s July-September net profit was 46.6 billion yen ($387.14 million), compared with 52.9 billion yen in the previous year. The profit compared with a mean estimate of 11.3 billion yen from three analysts, according to Thomson Reuters data.
A loss of 34.5 billion yen that Nomura booked after it settled a lawsuit with Italian bank Monte dei Paschi over a derivatives trade lowered the quarterly profit. But its tax expenses declined by about 54 billion yen in the quarter after it booked deferred tax assets.
Net revenue at Nomura’s three core business segments – retail, asset management and wholesale – fell on a quarter-on-quarter basis and they either fell or grew just marginally on a year-on-year basis. To defend itself from market volatilities, Chief Executive Koji Nagai has been pushing to increase revenue from managing clients’ long-term assets and lessen the practice of relying on commission from trading stocks and bonds.
Nomura’s recurring revenue, or commissions from managing investment trusts and discretionary investments, was flat on a quarter-on-quarter basis at an annualized 78.3 billion yen. A bright spot was Nomura’s investment banking operations, where revenues were up 18 percent quarter-on-quarter to 34.2 billion yen.
Nomura was involved in the two biggest equity deals in Japan during the latest quarter – sales of Toyota Motor Corp’s “Model AA” class shares and Sony Corp’s shares and convertible bonds, which together absorbed more than 800 billion yen from the market. Nomura was ranked No.1 underwriter for equity deals for the nine months through September in Japan, according to Thomson Reuters data.
