Nomura Holdings, Japan’s largest brokerage and investment bank, has reported a substantial increase in net profit for the second quarter, driven by a thriving domestic stock market that resulted in a surge in equity offerings and retail brokerage fees.
Nomura’s strong presence in Japan, where the stock market is currently trading at 33-year highs, allowed it to offset sluggish dealmaking and trading activities overseas.
For the period spanning July to September, the company recorded a net profit of 35.2 billion yen ($235 million), marking a notable rebound from the previous year when global financial markets experienced a sharp downturn that negatively impacted its asset management and investment banking divisions.
In the current year, Japanese companies have demonstrated an increasing willingness to raise funds, either through equity or debt markets. Stricter governance regulations and shareholder pressure are compelling companies to explore strategic alternatives.
As a result, Nomura’s investment banking business witnessed a 19% increase in net revenue, primarily attributed to robust equity offerings and active dealmaking in Japan.
Takumi Kitamura, Chief Financial Officer, stated, “Encouraged by the strong stock market, Japanese companies are becoming more proactive in making investments for growth.”
Japan stands as the only major global market experiencing M&A growth this year, with the value of deals involving Japanese companies up by 14%, totaling $111 billion for the first nine months of 2023, according to data compiled by LSEG.
Nomura’s domestic retail division’s profit experienced a five-fold increase, benefiting from the end of a prolonged period of deflation. Additionally, growing corporate interest in deploying capital more effectively has heightened investor appetite for Japanese stocks.
The company has also announced its intention to reallocate more bankers to wealth management to better serve affluent families and entrepreneurs.
Nevertheless, pretax profit within Nomura’s wholesale division, housing its investment banking and trading businesses, witnessed a 59% decline. This decline can be attributed to a series of rate hikes by the U.S. Federal Reserve, which led market participants to adopt a more cautious approach to trading in overseas fixed-income securities.