Most of the top Japanese banks and securities houses have posted initial quarterly and annual figures for the period ended March 31, 2017, with sizable increases seen in the structured products business segments of some of the biggest institutions.
Mitsubishi UFJ Morgan Stanley Securities reported that Q1 (which is the fourth quarter in the Japanese calendar) performance significantly increased from the previous quarter, supported by the recovery of investor trade flow. Ordinary income and attributable profit climbed to the highest in six quarters to JPY23.8bn (US$0.21bn) and JPY5.5bn, increases of 53% and 57%, respectively.
Net operating revenue was 18% higher at JPY 92bn, with the increase in commission revenue due to increases in flotations and distribution fees reflecting strong sales of investment trusts, MUFG said. Net trading income from both bonds and stocks was also strong, up 23% to JPY43bn, amid steadily facilitating client trade flow.
Notably, the company said that foreign bonds for individual investors marked high in the quarter ended March 31, significantly exceeding the past five quarters (annual increase of 52% to JPY598bn), primarily due to strong performance in structured bonds.
Investment trusts, mainly Australian and US stock-related ones, recovered to climb 8% on an annual basis to JPY491bn, with the launch of an AI related trust also contributing to the recovery.
The securities firm reported an 8% increase in total assets under management of JPY35.1trn, 46% of that in stocks, 39% in bonds and 18% in investment trusts. Each of those individually grew by 15%, 5% and 3% to JPY2.33trn and JPY1.01trn, respectively.
Tokai Tokyo Financial Holdings posted pre-tax profit of JPY5.8bn for the first quarter, up 166% on an annual basis, with the annual standing at JPY16.2bn, down 10% from the 2015 financial year.
Notably, sales of foreign currency bonds and structured bonds was down 2% quarter-on-quarter, but up 34% on an annual basis for the whole year at JPY266bn. JPY207bn of those were from structured bonds, climbing 52% on an annual basis, while foreign currency bonds sales were down 6% to JPY 59bn. The retail segment generated 57% of revenues.
Total assets under custody climbed 4% year-on-year to JPY4.28trn, with stocks and bonds adding 9% and 4%, respectively. Investment trusts assets slimmed by 6% to JPY914bn.
Shinsei Bank reported consolidated net income of JPY50.1bn for the 2016 financial year, down 17% on an annual basis. Noninterest income totalled JPY106.2bn, a JPY11.9bn increase compared to JPY94.2bn recorded in fiscal year 2015. Asset management product sales related revenue in the Retail Banking Business decreased, the bank said. These were down 26% on an annual basis to JPY7.1bn. Retail banking revenue, which houses the bank's structured deposits services, slid 54% to JPY2.5bn.
Daiwa Securities's ordinary income for the 2016 financial year slid 17.9% on an annual basis to JPY136bn. Proceeds from issuance of bonds grew 7% to JPY423bn, while the redemptions of bonds climbed 24% to JPY415bn, the company noted.
Sales of equity and equity investment trusts rose under the favourable market condition after US presidential election, Daiwa reported, but net operating revenue decreased by 13.7% to JPY188bn and ordinary income decreased 51.9% to JPY29bn compared with FY 2015.
Meanwhile, Okasan Securities reported ordinary income of JPY15.4bn, 81% of which was generated by the company's securities operations, while the asset management business added 9%.
Between them, the five banks have distributed over 3,400 structured products, according to the SRP database, all of them in Japan, including 163 tranches so far in 2017. They have accounted for 47% of sales volume in the country this year, as well as 37% of issuance.
Structured products issuance in Japan in the first quarter of 2017 was nearly 8% higher on an annual basis, with 337 products, while sales volumes are up almost 15%, according to the SRP database. Over 70% of the sales volume this year has been in products with knockout features, up from 49% in 2016 and 57% in 2015.
Click on the respective links to view the full reports from Mitsubishi UFJ, Shinsei Bank, Daiwa Securities and Tokai Tokyo. Okasan Securities' results are available on the company's website here.
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