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)
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