The Japanese firm has posted a soaring profit in Q4 FY20 while its asset management arm posted a 33.3% decrease in sales volume despite a stable issuance.
Daiwa Securities increased its net profit by 102.5% to JPY50.6 billion (US$4.6 billion) in Q4 FY20 ended in March 2021 quarter-on-quarter (QoQ), or up 3.5x year-on-year (YoY) as retail sales and distribution of products ‘recovered significantly from a bottom in the first quarter’. The firm’s structured products brought a full-year profit of JPY108.3 billion, an increase of 79.6% YoY.
Wholesale ordinary income dropped 3.9% to JPY20.6 billion in Q4 QoQ, but up 6.3x YoY, mainly due to a record-high income from global markets on a yearly basis. ‘In Japan, customer order flows in both structured bonds and derivatives expanded,’ stated Daiwa’s Q4 FY21 report. In addition, the flows of derivatives also grew in the equity market.
The asset management division derived ordinary income of JPY10.1 billion in Q4, up 30.9% QoQ or 49.3% YoY, marking the highest on both quarterly and yearly basis. The growth was supported by a steadily rise in assets under management, which reached JPY21 billion in Q4 mainly due to stock investment trusts, according to the report.
Consolidated derivatives transactions recorded assets at JPY2.46 trillion and liabilities at JPY2.33 trillion as at end of March, down 34% and 34.3%, respectively, YoY.
Structured products
Daiwa Securities, which is a major retail and wholesale arm of the group, saw 34 structured notes striking between January and May – the products were issued by BNP Paribas (14), Credit Agricole (10), Société Générale (8) and HSBC (2). Eighteen of them marketed in Q4 FY21 have a tenor of less than three years and track the performance of the S&P 500 and Nikkei 225 indices - they collected a total of JPY39.6 billion, SRP data shows.
Daiwa Asset Management, which is the most active structured fund issuer in Japan, on the other hand launched 21 structured funds based on call overwriting strategies from January to March. The products were linked to various fund underlyings including the UBS (CAY) Swiss High Divident Equity Twin Alpha Fund and Daiwa Money Asset Mother Fund.
One of the products, the 通貨選択型ダイワ米国リートαクアトロ/US REIT Quattro α, was the best-selling structure during the quarter at JPY15.13 billion tracking Credit Suisse Universal Trust (Cayman) III Daiwa American REIT Quattro Income Fund and Daiwa Money Portfolio Mother Fund. The income product invests in American REIT and offers a monthly coupon based on the premiums of call options generated on the funds and on an exchange rate of JPY/BRL.
Carrying an initial charge of 3.3% and annual management fee of 1.59%, the product is also distributed by third parties comprising Akatsuki Securities, Credit Suisse Securities, Daiwa Securities, Monex Securities, Rakuten Securities and SBI Securities, according to the SRP data.
Daiwa Asset Management rolled out 37 structured funds throughout FY20 starting from April 2020 – the firm’s structured funds amount to 58 structures worth JPY138.1 billion. Despite an increase of four products compared with FY19, the sales volume was down 33.3%, SRP data shows.
On a yearly basis, the best-selling product is 通貨選択型ダイワ米国リートαクアトロ/US REIT Quattro α with sales at JPY18.23 billion launched on 11 September 2020.
Click here to view Daiwa Securities Group’s Q4 FY20 report.