Nomura Holdings Inc. is banking on Japan's tax-friendly investment program and changing monetary policy to boost income after posting a double-digit decline in net profit in its fiscal third quarter, ending Dec. 31, 2023.
Japan's largest investment bank expects the enhanced tax exemptions made available to individual investors from January under the Nippon Individual Savings Account (NISA) program to help its stock brokerage business. An anticipated normalization of monetary policy and possible rate cuts by the US Federal Reserve would also help Nomura's fixed income operations.
"We're getting tailwinds in Japan," Nomura CFO Takumi Kitamura said during a Jan.31 online conference. "Interest rates [in the US] should have hit a peak, so the business environment is becoming favorable."
Global interest rates are near a peak, according to analysts, and the Fed may start easing later this year to achieve a soft landing of the US economy. The Bank of Japan is expected to drop its negative benchmark interest rate, which has been in place since 2016. The global economic growth outlook has improved, and the International Monetary Fund upgraded its projection for world economic growth by 0.2 percentage point to 3.1% in 2024 on Jan. 30.
Income slip
Nomura's net income slid 24.5% year over year to ￥50.5 billion between October and December 2023. The investment management business' pretax profits plunged 53.1% year over year to ￥15.6 billion, weighing on results. Higher labor costs and sales promotion expenses dragged, it said.
The retail sector fared better, with a 141% year-over-year rise in pretax profit to ￥31.9 billion.
Fee income from equity underwriting and distribution more than doubled to ￥17.9 billion from ￥8.1 billion.
Nomura's dominant wholesale business retained its No.1 spot in M&As involving Japanese-based businesses in 2023, including take-private transactions and cross-borders deals. Fee income from M&A and financial consultancy grew to ￥21 billion in the fiscal third quarter from ￥14.3 billion a year ago. This led to ￥23 billion in pretax profit from a loss of ￥1.9 billion, it said.
Nomura will buy back up to 125 million of its own shares for up to ￥100 billion from Feb.16 to Sept. 30. Its return-on-equity declined to 6.2% in the three months to December from 8.5% a year ago.
Labor costs increased 2.1% year over year to ￥170.6 billion, accounting more than half its total costs. While headcounts in Asia and Oceania shrank as of December from a year prior, they grew in Europe and the Americas.
