Nomura Holdings Inc. will accelerate cost-cutting efforts after overheads hit their highest in at least five quarters between October and December 2022.
Japan's biggest brokerage said costs increased 14.5% year over year to ￥310.1 billion in its fiscal third quarter. It also reported a double-digit decline in pretax profit from its core operations amid volatile markets.
"I have a sense of danger in [growing] costs," Nomura CFO Takumi Kitamura said during an online conference Feb. 1, following the earnings announcement. "We have to embark on cost control firmly."
Previous weakness in the yen against the dollar contributed in part to the increase in costs, said Michael Makdad, an analyst at Morningstar. "So with the yen now back to ￥130 to the dollar, I'm less concerned about costs in yen terms." The Japanese currency touched a low of almost 150 to the dollar in October 2022.
Nomura's combined pretax profit from its three main segments — retail, investment management and wholesale — dropped 43.5% year over year to ￥44.71 billion in the last quarter, according to the company's earnings statement.
Net profit, revenue
Net profit rose 10.9% to ￥66.9 billion over the period, helped by a sale of shares in Nomura Research Institute. Revenue was up 15.5% to ￥393.7 billion.
The wholesale business was the biggest drag on earnings among the core segments. It reported a pretax loss of ￥1.9 billion, its first in six quarters, due to lackluster equities and bonds and investment banking amid rising interest rates. It reported a profit of ￥40.8 billion a year ago.
"For wholesale, I don't have as much visibility," said Makdad. "If interest-rate volatility goes down then the global markets business could struggle, though investment banking may do better in 2023 than it did in 2022."
The retail segment reported a 26% decline in pretax profit to ￥13.3 billion, due partly to weaker sales of stocks and bonds to retail customers. The investment management operation posted a 64% year-over-year gain to ￥33.3 despite outstanding assets under management declining to ￥64.7 trillion from ￥68.5 trillion amid market uncertainty.
Risk-weighted assets at Nomura stood at ￥17.94 trillion as of December 2022, up from ￥17.17 trillion in September 2022, hit mainly by market risks of ￥7.11 trillion. Operational risk remained the same as ￥2.57 trillion during the same period, while credit risk shrank to ￥8.26 trillion from ￥8.71 trillion.
That pushed down Nomura's common equity Tier 1 ratio to 16% from 16.9%. The measure stood at 18.1% at the end of the fiscal third quarter of the previous year.
As of Jan. 31, US$1 was equivalent to ￥130.12.
