By Thomas Wilson
TOKYO (Reuters) - Nomura Holdings' domestic-oriented retail arm posted its biggest quarterly profit jump in nearly four years as Japanese investors lapped up investment trusts and boosted stock trading, sending the brokerage's net profit up over a fifth.
A sustained recovery in Nomura's retail business, which had posted its lowest profit in five years for the year ended March, augurs well for Japan's biggest investment bank and brokerage which is also seeing a renaissance of its overseas operations.
Helped by inflows into Indian stock funds and low-risk products as well as a buoyant Japanese stock market that attracted investors, pretax profit at Nomura's retail business nearly trebled for April-June, its best performance since July-September 2013.
That helped Nomura record a net profit of 56.9 billion yen ($512.75 million) for the period, up from 46.8 billion a year earlier.
Bolder Japanese investors poured money into investment trusts amid a buoyant Japanese stock market, Chief Financial Officer Takumi Kitamura told an earnings briefing on Friday. Japanese stocks rose 6 percent during the quarter.
"They weren't just watching (stocks rise). Their activity grew livelier, including selling, and that has helped our profit," Kitamura said.
Strength at the retail unit helped mask a drop in pretax profit at Nomura's wholesale division, which counts corporations and institutional investors as clients and has been an engine of the recovery at Nomura's overseas business.
A slowdown in revenue from trading stocks and bonds and fewer investment banking mandates saw the division's pretax profit fall by nearly half to 25.4 billion yen.
The unit was affected by the same factors as Wall Street banks - notably Goldman Sachs - which saw a slump in bond trading amid low volatility in other markets and declining customer activity.
Japan's No.2 brokerage group, Daiwa Securities Group , said on Thursday its April-June net profit dropped 21 percent as revenue from bond trading fell.
Nomura's overseas business posted an 8.3 percent drop in pretax profit from last year to 15.5 billion yen. But that still marked a continuation of the recovery for the operations, which made a profit for the first time in seven years in the year ended in March.
The brokerage bought Lehman Brothers' equities and investment banking business in Europe and Asia in 2008 at the height of the global financial crisis, in a bid to expand from its domestic stronghold.
Some analysts voiced caution over the performance of Nomura's retail arm, emphasising its exposure to external factors such as exchange rates. In the first quarter, the yen weakened against the dollar, boosting Japanese stocks and providing a tailwind to the retail division.
"The retail operation's fate is somewhat tied to yen-dollar rate," said Raymond Spencer, an analyst at Moody's in Tokyo. "When the yen weakens, you generally see better performance in retail, and the opposite is also true,"
Nomura does not give a profit forecast, but CFO Kitamura said that July revenue at its retail and asset management units remained at levels seen in the first quarter.
($1 = 110.9700 yen)
(Reporting by Thomas Wilson; Editing by Muralikumar Anantharaman)
Disclaimer: No Business Standard Journalist was involved in creation of this content
