Nomura accelerates cost-cutting after posting 72% YOY growth in fiscal Q3 profit

Nomura Holdings Inc. said it is accelerating cost-cutting efforts after posting a 72.4% year-over-year growth of net profit in the fiscal third quarter on the back of strong markets trading and investment banking business.

Japan's largest brokerage and investment bank now aims to achieve the ¥140 billion cost reduction target by March, one year ahead of the original plan announced two years ago. “We won’t loosen the belt on cost-cutting efforts,” Nomura CFO Takumi Kitamura said on a conference call Feb. 2.

In the three months ended Dec. 31, 2020, net profit rose to ¥98.4 billion from ¥57.1 billion.

Its asset management business showed the strongest growth, rising 140% in pretax profit to ¥22.3 billion. Revenue rose 47% to ¥37.3 billion. Its asset under management rose 10% from a year earlier to ¥61.2 trillion at the end of December 2020, including mutual investment and asset management in and outside Japan.

Its wholesale business gained 78% from a year earlier to ¥76.9 billion in pretax profit in the same period, benefiting from improving operations in the U.S., Asia and Japan. Its revenue grew 20% to ¥223.1 billion, the biggest portion of total revenue. The U.S. operation accounted for 36% of the segment's revenue, the biggest contributor.

Its retail operations shot up 61% to ¥28.3 billion in pretax profit, as strong market conditions offset weak performance of its consulting business. Its revenue in this segment also increased 9% to ¥98.2 billion.

“It’s more sustainable than what we saw in summer 2020,” Michael Makdad, an analyst at Morningstar said. He pointed out, however, that the markets have been “in a kind of ‘Goldilocks phase,’” not expecting the environment to “always be just right for brokers the way it has been in this high-liquidity and high-change pandemic going into post-pandemic phase.” Makdad said Nomura may find it challenging to maintain a return on equity of 14% in coming quarters.

The brokerage house did not give earnings estimate for its fiscal full year ending March 31, citing uncertain prospects for global economies and markets. It also did not offer outlook for the dividend payment for the fiscal full year after paying ¥20 per share in the fiscal first half.