Equity derivatives bolster Nomura’s wholesale income

The bank’s quarterly income, which reached the fifth highest level in 19 years, led to accumulated pre-tax income of JPY230.2 billion in the first nine months of FY20/21, a 1.8x increase YoY. This translates to 65.9% of the total generated from wholesale, retail and asset management.

Net revenue rose by one percent to JPY223.1 billion QoQ or up 20% YoY – 84% from global markets and 16% from investment banking.

The bank led by CEO Kentaro Okuda (pictured) expanded its wealth management business beyond Asia ex-Japan with the launch of its International Wealth Management (IWM) unit in September 2020, which collaborates with the two divisions under wholesale to develop products for high-net-worth individuals including structured products.

Approximately 36.1% of the net revenue was derived from the Americas where ‘equity derivatives had a good quarter and securitized products revenues grew significantly’.

The Japanese market contributed to 29.6% of the net revenue - ‘fixed income slowed QoQ while equities revenues increased driven by derivatives’. Asia ex-Japan and Emea represented 18.2% and 16.1%, respectively.

Global markets

Equities and fixed income brought in net revenues of JPY89.4 billion and JPY98.1 billion to global markets, respectively.

‘Cash equities and derivatives both continued to grow from strong prior quarter driven by robust client flows,’ stated Nomura in its Q3 FY20/21 report.

Equities revenues were down QoQ but derivatives performance remained strong in the Americas while equities reported stronger revenues in both cash equites and derivatives on the back of robust client flows in Asia ex-Japan.

In Japan, fixed income revenues declined from the previous quarter, but ‘continued demand for high yield products resulted in robust performance in structured rates/credit’. The bank also reported that ‘equities booked stronger revenues in both cash equities and derivatives driven by continued demand for Japanese and US equities’.  

Nomura Holdings

The main business within Nomura Group recorded a net profit of JPY98.4 billion in Q3 FY20/21, up 45.6% QoQ or 72.3% YoY as its revenues increased by 8.7% to JPY455.9 billion QoQ, or a decrease of 8.4% YoY.

Commissions, asset management and portfolio service fees, fees from investment banking contributed to 21.2%, 12.9% and 7.9%, respectively.

In the meantime, interest expenses grew by 7% to JPY53.8 billion QoQ, but were down by 66.9% YoY - non-interest expenses were down 5.1% to JPY270.8 billion QoQ or up 2.1% YoY.

There are 80 live products distributed by subsidiaries of Nomura Holdings - led by Nomura Securities - in Japan (40), Germany (eight), US (six), Mexico (three), South Korea and UK (two each), and the Netherlands and Ireland (one each). The remaining 19 are for institutional investors, SRP data shows.  

One of the products striking in Q3 FY20/21 is the デュアル債/DC JPY/AUD M20220427 – a callable dual currency note tied to the performance of JPY/AUD issued by KfW with J.P. Morgan as the derivative manufacturer, which has a tenor of 1.5 year and offers a fixed coupon of 1.3%. The product was sold JPY2.29 billion in Japan and will mature on 27 April 2022. 

The main issuers of the live products distributed by Nomura’s subsidiaries include Nomura Securities, Mitsubishi UFJ Trust & Banking and Municipality Finance. The majority of the products sold in Japan are unlisted notes ranging from 18 months to 30 years while three are continuous call overwriting funds.

Several Nomura’s subsidiaries including Nomura International, Nomura Financial Products Europe, Nomura Singapore, Nomura Securities and Nomura Bank (Luxembourg) joined in late January the multi-dealer repackaging programme, Single Platform Investment Repackaging Entity (Spire).

 Click the link to view the Q3 FY20/21 presentation of Nomura Holdings.