Nomura profits surge as Japan’s stock market breaks bubble-era record

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Net profits for bank and broker Nomura surged almost 670 per cent from a year earlier in its latest quarter, as Tokyo stocks eclipsed their 1980s bubble-era high and Japanese companies raced to raise funds and do deals.

Japan’s biggest brokerage and investment bank said on Friday that net income in its fourth quarter, which runs to the end of March, came in at ¥56.8bn ($363mn), compared with just ¥7.4bn in the same period a year ago, when markets were frozen by fears of a banking crisis.

Now, renewed global interest in Japanese stocks as an alternative to investment in China, along with efforts by Japan’s government to convince households to plough some of their $7.5tn in cash savings into risk assets, made Tokyo stocks some of the world’s strongest performers in January to March. 

The surge in stock trading in its final fiscal quarter helped Nomura increase annual profits for the first time since Kentaro Okuda took over as chief executive in 2020. It booked net income of ¥166bn, compared with ¥93bn in its last financial year.

The bank’s share price has increased more than 40 per cent this year as the Nikkei 225, the country’s benchmark stock index, surged 14 per cent.

Nomura was also boosted by a rebound in fixed-income trading, which lifted revenues by 40 per cent year on year, pushing the wholesale banking division back to a pre-tax profit after a loss in the last quarter of 2023. 

Investment banking revenue increased despite a “decline in global fee pools”, said Nomura, with a particularly strong performance in Japanese equity capital markets. 

Since taking the reins, Okuda has struggled to turn around the bank and was forced to cut profits targets last May. 

Not only did Nomura have to swallow billions in losses from the implosion of Archegos — the family office run by former hedge fund manager Bill Hwang — but its investment banking business had to deal with the ripples from the banking crisis in the US last year and the collapse of Credit Suisse.

Okuda has pushed the wholesale business unit to reduce its reliance on volatile trading and increase revenues from more stable sources, such as wealth management, which also performed strongly in its fourth quarter.

In November, the Nomura chief said he would target another $100mn in cost cuts in the wholesale banking division as he tries to attain a target of 8 to 10 per cent return on equity for the bank. ROE was 5.1 per cent for its year to March, compared with 3.1 per cent the year before.

On Friday, the bank said costs had increased “mainly due to yen depreciation, bonus provisions in line with performance, and higher fixed costs due to inflation”.