Nomura Sustains Profit as Trading Gains Offset Retail Slump

(Bloomberg) -- Nomura Holdings Inc. posted profit for a third straight quarter as trading revenues made up for a slump in the domestic retail business.

Net income was 138.6 billion yen ($1.3 billion) in the three months ended Sept. 30 compared with an 11.2 billion yen loss a year earlier, Japan’s biggest brokerage reported Tuesday. The firm made money abroad for the second straight quarter, following a five-quarter slump.

The result may ease pressure on Chief Executive Officer Koji Nagai, who is trying to sustain a recovery in the firm’s global operations and reverse weakness in the retail business at home. Signs of progress on cost cuts have propelled the shares to a 10-month high.

A one-time, 73.3 billion yen boost from the sale of a stake in the firm’s Nomura Research Institute Ltd. affiliate buoyed the results.

“Our assessment is that we did fairly well despite tough market conditions and our being in the middle of undertaking structural overhauls,” Chief Financial Officer Takumi Kitamura said.

At the wholesale division -- which includes trading services for global corporate clients and investment banking -- pretax profit more than tripled from a year earlier to 18.9 billion yen, led by equity revenues. Fixed income revenues slipped from a strong previous quarter, the bank said.

Nomura joins global investment banks that successfully navigated trade tensions and an economic slowdown. Wall Street firms including Morgan Stanley and JPMorgan Chase & Co. all beat market expectations for trading during the quarter.

At home, Nomura’s retail business posted a 57% drop in pretax profit to 5.3 billion yen. Share trading volumes in Japan have remained subdued as the U.S.-China trade conflict and slowing global growth discourage individual investors. A review of the firm’s sales structure also affected the results, it said.

As well as trimming unprofitable businesses outside of Japan, Nagai, 60, has been closing domestic branches as part of his third major cost-cutting campaign in seven years. He is trying to reorganize the domestic sales force to strengthen services for wealthy individuals.

Kitamura said the rearrangement of the sales force has gone smoothly. On the wholesale side, the firm has completed almost 70% of its planned cost cuts, he said at a briefing in Tokyo.

Shares of Nomura closed down 1% before the results were released. The stock has climbed 50% since this year’s low in early June.

Other Key Figures

  • Revenue rose 28% from a year earlier to 573.9 billion yen
  • Trading revenue increased 39%
  • Brokerage commissions fell 13%
  • Investment banking fees rose 17%

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