Nomura Holdings, Japan’s largest brokerage and investment bank, recently reported a substantial increase in its first-quarter net profit, buoyed by a strong Japanese stock market and renewed investor interest. The company’s assets under management and retail client assets also reached record highs during this period. Nomura’s stellar performance was driven by factors such as a market tailwind, corporate efforts to improve capital utilization, and positive policy changes by the Bank of Japan. Despite this remarkable achievement, CEO Kentaro Okuda faces the challenge of meeting the ambitious core pretax income target set for the year ending March 2025. This article delves into the details of Nomura’s success and the outlook for the future.

Strong Market Tailwind and Corporate Drive

The Japanese stock market experienced renewed interest from investors, primarily due to hopes of an end to deflation and corporations’ drive to make better use of their capital. As a result, Nomura witnessed significant growth in assets under management and retail client assets, both reaching all-time highs. Chief Financial Officer Takumi Kitamura attributes this robust performance to a favorable market tailwind, facilitated by several factors, including policy adjustments by the Bank of Japan, an increase in corporate activities, and the introduction of a new tax exemption scheme for individual investors.

The Bank of Japan’s Policy Changes

The Bank of Japan’s policy changes played a crucial role in driving investor sentiment and market momentum. The relaxation of its cap on bond yields was a significant move, which is expected to increase market volatility. This development could potentially present new opportunities for Nomura Holdings to capitalize on market fluctuations and serve its clients effectively. Kitamura believes that this policy change will act as a “major tailwind” for the company, further strengthening its market position.

Quarterly Profit and CEO’s Goals

Nomura’s first-quarter net profit reached an impressive 23.33 billion yen ($163.42 million), representing a substantial increase from 1.696 billion yen during the same period the previous year. However, this figure remains only a fraction of the company’s ambitious core pretax income target of 288 billion yen set for the fiscal year ending March 2025. CEO Kentaro Okuda faces the challenge of meeting this bullish goal, especially considering the three years of profit declines since he assumed the top position in 2020.

Performance of Wholesale Division

While the retail business experienced strong gains, the wholesale division, which includes investment banking and trading operations, reported a pretax profit of just 2.1 billion yen, significantly lower than the 25.3 billion yen recorded in the previous year. The division’s fixed income trading was impacted by reduced market volatility. To counter these challenges, Nomura must strategize and devise plans to enhance profitability in its wholesale division.

Investment Banking Business and Cost-Cutting Plans

Amidst the challenges faced by the wholesale division, Nomura’s investment banking business showed signs of recovery. The company successfully engaged in major deals, including Pattern Energy Group’s 300 billion yen sale of its Japanese assets to NTT Group and JERA. To strengthen its financial position further, Nomura remains committed to its cost-cutting plans. The company aims to reduce costs by 50 billion yen by March 2025, primarily through streamlining administrative and systems operations. Kitamura reaffirmed that the cost-cutting efforts are on track, with about 60% of the total target expected to be achieved by the end of March next year.

Future Outlook and Opportunities

Despite the challenges and uncertainties ahead, Nomura Holdings stands poised to capitalize on potential opportunities in the Japanese bond and stock markets. The Bank of Japan’s policy relaxation, along with the corporate drive for better capital utilization, could continue to drive market momentum and increase investor interest. Kitamura remains optimistic about the company’s future, and with the right strategies, Nomura has the potential to achieve its ambitious goals.

Conclusion

Nomura Holdings’ impressive jump in first-quarter net profit is a testament to the company’s ability to thrive in a dynamic market environment. The strong performance of the Japanese stock market, driven by renewed investor interest and corporate efforts to improve capital utilization, has significantly contributed to the company’s success. However, challenges lie ahead, particularly in achieving the ambitious core pretax income target set by CEO Kentaro Okuda. As Nomura continues to navigate market fluctuations and make strategic decisions, it remains committed to its cost-cutting plans and leveraging opportunities to further strengthen its position as Japan’s leading brokerage and investment bank.