Nomura Holdings Inc. suffered a slow start to the financial year beginning April 1 as market volatility and higher interest rates outside Japan triggered a steep drop in the broker and investment bank's net income.
Net income plunged 76% year over year to ¥7.4 billion in the January-to-March quarter, Tokyo-based Nomura reported April 26. Revenue was down 5% to ¥324.9 billion.
Nomura faced "volatile markets due to heightened geopolitical risks, inflation and central bank monetary policy tightening," Chief Executive Kentaro Okuda said in the company's fiscal fourth-quarter earnings statement.
Japanese companies have had to face higher interest rates overseas as most global central banks tightened monetary policy, led by the US Federal Reserve. In comparison, the Bank of Japan is likely to keep its ultraloose monetary policy under new chief Kazuo Ueda. IPO activity has also slowed across the world as companies struggle to grow businesses amid the higher interest rates.
Wholesale drag
Nomura's three main business segments reported a total pretax profit of ¥11.9 billion in the three months through March, down 64% from a year earlier, as its wholesale business became a drag.
The wholesale segment suffered a ¥14.2 billion pretax loss in the three months, against a profit of ￥37.0 billion in the same period of the previous year. The loss reflected weak fixed-income and equities in the US, European and Asian markets, except Japan. With thinner fees from dried-up mergers and acquisitions, its investment banking business in the US and Europe also contributed to the loss.
"We had harsh times in investment banking," Takumi Kitamura, Nomura's chief of finance, said during the company's online earnings conference. "The prospects for the markets remain uncertain."
The retail business fared better, with ￥9.8 billion in pretax profit, up from ￥5.2 billion a year ago. This was mainly on a solid growth in equity sales in Japan, contrasting with weak bonds sales to companies. In investment management, Nomura posted ￥16.4 billion in pretax profit, turning around a loss of ￥8.8 billion a year ago.
While Kitamura previously said the brokerage would have to tighten its belt, Nomura's total cost for its operations increased to ￥302.2 billion in the fiscal fourth quarter from ￥291.3 billion during the same three months of the previous year, due mainly to increased labor costs. However, Kitamura said that Nomura could consider hiring talented employees for future growth.
Nomura also announced that it will repurchase up to 35 million of its own shares for as much as ￥20 billion from May 16. The share buyback will continue till March 2024. The company will cancel 70 million of its shares June 1, it said.
As of April 25, US$1 was equivalent to ¥133.95
