Japan's Nomura triples profit in Q1 as end of deflation spurs wealth management

By Anton Bridge

TOKYO (Reuters) - Nomura Holdings, Japan's largest brokerage and investment bank, reported a 195% jump in first-quarter profit on Tuesday as the rally in global markets and return of domestic inflation bolstered demand for its wealth management services.

The results show the progress Nomura has made in shifting toward a fees-based profit model in order to secure more consistent revenue that is less subject to market swings.

Nomura said net profit in the April-June period was 68.9 billion yen ($446 million) versus 23.3 billion yen a year earlier.

The end of deflation in Japan has encouraged retail clients to move into investment products, Nomura's chief financial officer Takumi Kitamura told a media briefing.

"The major update to our business structure since last spring and the shift in our customers' mindset from savings to investment has meant we were able to achieve strong results," Kitamura said.

Alongside this, the global market rally led to improved client sentiment and higher sales of U.S. and global stock funds, Nomura said.

Pre-tax income in the wealth management segment grew 84% compared to the same period the previous year to reach its highest since the 2015/16 financial year.

Nomura has a dominant position in wealth management in Japan and the business accounted for roughly half its pre-tax profit in the previous financial year.

Inflows into Nomura's investment management business pushed assets under management to a record 92.5 trillion yen while its wholesale business, which houses its investment banking and trading businesses, grew revenue by 28% compared to the same period the previous year.

Investment banking was strong in Japan due to a series of delistings, business reorganisations and cross-border transactions. However international deals slowed.

"Our investment banking numbers compare a little unfavourably to those of U.S. investment banks', but seasonal factors are at play and we outperformed when they were struggling," Kitamura said.

Cost-cutting measures introduced over the past year to improve flagging profitability also bore fruit this quarter.

Return on equity (ROE), a measure of profitability, at the group level shot up to 8.1% over April-June, far exceeding the 5.1% Nomura achieved over the year ended March 2024.

($1 = 154.6300 yen) (This story has been corrected to say the wholesale revenue grew 28% compared with the same quarter the previous year, not 22%, in paragraph 9)

(Reporting by Anton Bridge; Editing by David Dolan, Tom Hogue, Christian Schmollinger and Emelia Sithole-Matarise)