Nomura Reports Sluggish Q2 Results, Weighed Down by Market Uncertainty

Falling emerging market currencies and trade tensions resulted in sluggish trading in the firm’s retail sector.

Nomura Holdings, Inc., Japan’s biggest investment banking and brokerage group, announced its consolidated results for the second quarter and first half of its fiscal year ending March 31, 2019.

During the second quarter, the firm experienced mixed results. However, overall the figures revealed a sluggish quarter for the group. Firstly, net revenue came in at ¥282.9 billion ($2.5 billion). This is up from the first quarter – although only just – increasing by four percent. On a yearly basis, net revenue has fallen by 20 per cent.

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Income before income taxes for the second quarter was down across the board. Coming in at ¥500 million, this is a drop of 97 percent from last quarter. Comparing this figure to the same time period last year, it’s an even bigger fall of 99 percent.

Retail revenues fall amid market uncertainty

Taking a look at the firm’s performance in its retail operations, Nomura experienced a net revenue of ¥85.7 billion. This is down eight percent quarter-on-quarter and 16 percent year-on-year.

According to the report, the fall in retail revenue was largely due to retail investors taking a “wait-and-see” approach as emerging market currencies fell during the second quarter. This was partly thanks to the financial crisis in Turkey and rising US/China tensions, creating uncertain market conditions. As a result, the trading of stocks, investment trusts and bonds was sluggish during the quarter.

Koji Nagai, CEO of Nomura
Koji Nagai
Photographer: Tomohiro Ohsumi/Bloomberg

Commenting on the results, Nomura President and Group CEO Koji Nagai said: “clients remained risk averse in the second quarter amid concerns over US-China trade friction and falling emerging market currencies. This led to a slowdown in our Retail and Wholesale performance.

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“While our core businesses were all profitable, we incurred one-off expenses related to progress in winding up a subsidiary and a settlement with the U.S. Department of Justice, resulting in an overall loss for the quarter.”

Fixed income revenues strengthen on the back of returning market volatility

Moving over to wholesale operations, the unit booked a net revenue of ¥147.7 billion. When compared to the first quarter of the fiscal year, this was up by eight percent. However, when comparing it to the same time period last year, it was still down by seven percent.

The unit was largely supported by an improvement in fixed income revenues in Asia (excluding Japan). This is largely due to a return in market volatility, which saw an increase in client activity. Equities revenues also remained largely unchanged on a quarter-on-quarter basis.

“Our Retail business booked net inflows of cash and securities as we continued to transform our business model. Assets under management in Asset Management reached a record high. Our Wholesale business rebounded, driven by an improvement in our Fixed Income business in Japan and Asia ex-Japan.

“We will continue to capture business opportunities while prudently managing risks. We remain focused on building a solid operating platform capable of delivering consistent performance under any future conditions,” Koji Nagai added.

First-half performance of Nomura

During the six months to September, which is the first half of the company’s fiscal year, Nomura reported a net revenue of ¥554.9 billion. Similar to the quarterly results, this was down 22 percent from the same time period last year.

Income before income taxes was also down on a year-on-year basis, falling by 91 percent to reach ¥14.1 billion. In the first half, diluted net loss attributable to Nomura Holdings shareholders per share was ¥1.78.

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