MONEX Group Consolidated Q3 Results Confirm Growth & Profitability Despite Lower Volumes

MONEX Group (MONEX), a leading listed Japanese financial services firm has reported its consolidated financial results for the third quarter of the fiscal year ending March 2014 (as per Japanese reporting procedures). The firm issued preliminary results earlier in the week which were reinforced with full details announced in the consolidated results for the period.

The firm saw promising results during the third quarter, with total operating revenue and total income up 7.8% and 9.1% respectively, from figures reported a quarter earlier. The results come on the back of harsh movements in the Japanese yen weakening over 20% throughout 2013, a currency pair favoured by Japanese-based FX traders, the bulk of MONEX’s Forex trading client base.

MONEX operates across the globe through its various subsidiaries, as detailed in the financial summary. At its Japanese division, MONEX is classified among the top 5 multi-asset online brokerage firms. According to information from the respective companies, MONEX is the second-largest broker in terms of client assets (as of September 30, 2013).

In addition, during the third quarter the firm saw an uptake in its institutional solutions for brokers and banks operating in the margin trading arena, and provided 16 white labels to firms across 7 countries. In addition, it provided financial institutions in Asia and the Middle East with its multi-asset trading terminal offering; equities, futures and options.

Japan Highlights

In its Japanese subsidiary, MONEX saw an inflow of equity traders coming on the back of new initiatives coupled with the bull rally in global stocks.

MONEX opened 62,000 Nippon Individual Savings Account (NISA) accounts as of December 31, 2013 for domestic Japanese investors. From September 2013, MONEX offered decreased commissions, in addition a function that automatically calculates taxes for Japanese investors. The new initiatives directly impacted the business and increased new account openings and the amount of stocks that were transferred to MONEX during the quarter.

During the quarter MONEX saw an increase in the number of users viewing its selection of webinars, the firm offered a range of topics including; Japanese equity, tax seminars and Chinese equity. There were a total of 29,201 viewers, an increase of 101% from figures reported a quarter earlier.

Total revenue for the firm’s Japanese business was up 11% at $91.6 million.

US Highlights

MONEX operates across different asset classes in the US through its subsidiaries, TradeStation and IBFX offering both exchange traded and OTC instruments.

The firm fared well in terms of assets in custody, in the third quarter MONEX held over $3.5 billion in client assets, with 80,595 trading accounts. MONEX’s TradeStation is among the top 5 US brokers, the firm has 10% of market share (according to data supplied by each brokerage firm) and is on par with E*Trade, however it outperforms its peers significantly with the highest amount of earnings on commission per trade at $1,336, with its closest competitor, TD Ameritrade, earning $218.

In its Global FX division the firm witnessed a slump in revenues in line with declining trading volumes. Revenue was just short of the $15 million mark with trading volumes during the quarter above the formidable $100 billion notional (1 million standard trading lots).

Total revenue for the firm’s US business was down 6.2% at $38.9 million.

China & Hong Kong Highlights

MONEX’s Hong Kong regulated firm, BOOM Securities offers access to over 15 global equity markets, the firm serves traders in Hong Kong and targets mainland China investors through its Beijing representative office. Revenues for the third quarter were up 39% at $0.9 million (HK$7 million).

MONEX is bullish on China with interest in the newly formed Shanghai Pilot Free Trade Zone for foreign investment and FX trading.

Total revenue for the firm’s Chinese and Hong Kong business was up 9.6% at $1.4 million.

The next steps

MONEX’s future strategy is twofold, on the one hand, the firm wants to further establish its current product offering and consolidate its businesses, the firm has offered its multi-asset TradeStation platform to investors in its Japanese and Hong Kong units. In addition it aims to consolidate its Global FX Liquidity pool to increase profitability.

On the other hand, MONEX aims to streamline its business operations with cost reduction its key focus going forward. In its financial summary it states that it aims to reduce over $22 million by 2018.

MONEX’s results are in line with competing firms operating in the margin FX environment, however, the interesting point relating to MONEX in comparison to other brokers is the stock and futures brokerage unit that deals in listed instruments. Since the bull rally across Europe and USA, investors have favoured blue-chip stocks, hence the increase in revenue and profitability at the Tokyo-based firm. Rival GMO Click saw positive results for the third quarter, as reported earlier this week.

Market analysts believe the yen will stay around the 100-105 market during 2014, as a weaker yen supports growth in Japan, driven by the large export market. Could the yen weakness maintain interest among the Mrs. Watanabe traders?