Nomura Holdings has posted a net income of JPY67.6 billion (US$649.1m) for the second quarter of FY20/21 which ended on 30 September, a 51% decrease year-on-year (YoY), as its retail growth was offset by the loss from asset management and wholesale segments.

The quarterly figure led to a net income of JPY210.2 billion for first half of FY20/21, up eight percent YoY. 

Net revenue during the 2Q dropped by 20% quarter-on-quarter (QoQ) (four percent YoY) while non-interest expenses rose by two percent to JPY285.4 billion, or 12% YoY.

Retail activity was robust with 2Q pre-tax profit at JPY22.8 billion, up 51% QoQ or 4.3x more that from a year ago. Meanwhile, pre-tax profit from asset management and wholesale was down 20% and 25% to JPY11.4 billion and JPY65.5 billion respectively. This nevertheless represented a rise of 13% and 350% YoY respectively.

For wholesale, the main hub for the derivatives business, net revenue generated from global markets decreased by 17% to JPY192.3 billion while that from investment banking increased by 74% to JPY28.1 billion QoQ.  

By region, 42.3% of the net revenue came from Americas where ‘equities revenues grew significantly driven by a robust derivatives business’ and 15% from Asia ex-Japan where equity derivatives revenues increased and FX/EM and credit had a solid quarter.

The SRP database registers one credit-linked note and a JPY/AUD-linked note distributed by Nomura International Funding and Nomura Securities during the six months ended 30 September.

The credit-linked note, available for institutional investors, is tied to Rolls Royce with a tenor of around three years and a sales volume of US$4.93m. If the automobile company remains solvent, the product offers a semi-annual coupon of 7.2% pa. At maturity it offers 100% capital return. However, if a credit event takes place, the product offers 100% capital return diminished with the amount written off due to the credit event.

The dual currency note, issued by Kfw Bankengruppe, offers a fixed quarterly coupon of 1.3% pa in JPY with a tenor of 18 months and sales volume of JPY2.45 billion. At maturity, if the final spot rate rises above the valuation rate, for example - the initial rate of JPY10.75, it will offer full capital return in JPY. Otherwise, it will return the initial capital converted into AUD at the initial spot rate.

Daiwa Securities Group

The profit attributable to the parent company of the Japanese investment bank dropped by 13.1% to JPY15.2 billion in the quarter ended 30 September QoQ, or by 11.9% YoY. This led to a profit of JPY32.8 billion for the six months from April to September – a 1.7% decrease YoY.  

Net operating revenue at retail also saw an increase to JPY40.7 billion due to ‘multiple large equity underwriting deals,’ making up 36.8% of the total, up 15.8% QoQ. Net operating revenue for wholesale dropped by 7.6% to JPY47.6 billion as the growth of global investment banking was offset by a decline of fixed income, currency and commodities (FICC) revenue.  

FICC contributed nearly half of the net operating revenue to global markets under the wholesale division.

“Although customers order flows in both structured bonds and derivatives recovered, trading remained stagnant in domestic FICC,” the company said in a statement.

Asset management posted net operating revenue of JPY12.2 billion, down 4.8% QoQ, while the revenue from investments surged by 254.4% to JPY3.6 billion.  

At the same time, financial expenses fell by 26% to JPY11.5 billion QoQ, or by 79.9% YoY.

On-balance sheet, derivatives assets and derivative liabilities remained stable at JPY3.33 trillion and JPY3.18 trillion as at 30 September.

Daiwa Securities Co, a major subsidiary of the bank, posted a net income of JPY7 billion, up 27.5% QoQ or 183.1% YoY.

It distributed 29 unlisted registered notes from April to October, representing a market share of 4.5% by a sales volume of approximately JPY48.2 billion, as the SRP database shows. There were 15 products issued by BNP Paribas, which issued four out of 23 notes for the securities house during the same period in 2019.

For the 29 products in 2020, the Nikkei 225 and S&P 500 remained the most popular underlyings with reverse convertible, knockout and worst of options deployed most as payoff. There were 21 products with a tenor between one to three years.

Click to read the 2Q report for Nomura Holdings and Daiwa Securities Group.