Nomura Q1 net profit skids 32 pct

Retail investors check out of uncertain markets

TOKYO, July 28, (RTRS): Nomura Holdings Inc, Japan’s largest brokerage, said first-quarter profit fell nearly a third as customers held onto savings rather than bet on assets like stocks and bonds, hit by uncertain global markets and negative interest rates.

The brokerage said on Thursday its April-June net profit slid to 46.8 billion yen ($447 million) from the same period a year ago. The biggest single factor: an 83 percent slump in pretax profit from its retail business.

Nomura was reporting earnings for the first time since April’s big job cuts in overseas businesses, long a drag on earnings. Those cost cuts helped catapult overseas businesses to a healthy first-quarter profit.

“For individual customers, it wasn’t only negative rates but big moves in foreign exchange and stock prices,” said Chief Financial Officer Takumi Kitamura, speaking at an earnings briefing. “Because of these conditions, customers’ concerns are increasing.”

Japan’s savers, traditionally reluctant to shift cash into investments, remain cautious following the Bank of Japan’s move to cut a key interest rate below zero in February. Tough market conditions in the first quarter reinforced that hyper-cautious stance.

Nomura said profit at its retail division tumbled in the quarter to 8.7 billion yen — the first time quarterly pretax profit at the business has fallen below 10 billion yen since 2009.

Brokerages

Other Japanese brokerages including Daiwa Securities Group Inc and Sumitomo Mitsui Financial Group Inc’s SMBC Nikko — the country’s no.2 and no.3 respectively — have also reported first-quarter profit fell compared to last year.

Nomura, like other brokerages, typically doesn’t issue profit forecasts, citing the unpredictability of market movements. On Thursday, CFO Kitamura said that minus rates would eventually support a move from savings to investments.

Helped by its lower cost base and growing fixed income revenue, the firm’s overseas operations — which racked up losses of 385 billion yen over the last six years — recorded a pretax quarterly profit of 16.9 billion yen, a jump from 2.7 billion yen a year earlier.

“There’s been a global uptick in FICC (fixed income, currencies and commodities) and they’re bound to benefit,” said Makarim Salman, analyst at Jefferies in Tokyo, referring to Nomura. “But I’m wary of looking at one quarter and thinking that everything is fixed.”

Nomura said overseas business was also helped by increased demand for interest rate and forex hedging products amid volatile market conditions.

Chief Operating Officer Tetsu Ozaki said earlier this month that Nomura’s overseas business would return to the black in the current fiscal year, by focusing on lower-cost business such as mergers and acquisitions advisory service.

Meanwhile, Nomura also announced on Thursday it’s planning a buy-back of up to 2.6 percent of its shares for up to 45 billion yen ($430 million), funding the purchase from its cash reserves.