Daiwa Securities profit tumbles, global market revenues fall

Daiwa Securities Group has posted a JPY11.8 billion (US$81.7m) profit in Q1 FY22 ended in June 2022, down 49.6.5% year-on-year (YoY).

Net operating revenues dropped 16.3% to JPY106.1 billion 'due to deterioration of the market environment', according to the firm's Q2 FY22 earnings report.

The company’s retail division saw operating revenues and ordinary income falling due to a decrease in revenues from customer order flow but maintained ordinary income of JPY6.2 billion 'led by steady progress in shifting to wealth management business model and cost reduction'.

'Equity revenues dropped as both Japanese and foreign equity trading volume decreased,' stated the earnings report about the retail division.

Year-to-date, Daiwa Securities has distributed 60 structured notes issued by BNP Paribas, Credit Agricole, HSBC and Natixis with total sales of JPY76.4 billion, which translated to a market share of 5.8%, according to SRP data.

The securities house is the fourth largest distributor by volume after Mitsubishi UFJ Morgan Stanley Securities, Mizuho Bank and Shinsei Bank.

In 2021,Daiwa marketed 70 structured notes sold at JPY110.4 billion, representing a 4.1% market share. They were issued by BNP Paribas, HSBC, Credit Agricole and Société Générale.

The wholesale division reported earnings and expenses for both global markets and global investment banking deteriorating due to a decrease in client activities.

Global markets revenues dropped 22.7% to JPY24.5 billion across equity and fixed income, currency and commodities (FICC). Equity revenues decreased as customer order flow decreased from market uncertainty and increase in volatility, and sluggish position management.

In Japan, revenues from Japanese government bond (JGB) stayed solid. However, credit revenues stayed low due to widening of credit spreads and sluggish position management for derivatives. For overseas, in the US, revenues increased due to a rise in interest rates and volatility.

Global investment banking revenues declined 23.9% to JPY11.5 billion YoY. 

Net operating revenues and ordinary income in the asset management and investment divisions increased led by the expansion of real estate asset management business, and private equity investments, respectively.

The Japanese securities house posted an annualised return on equity (ROE) reached 3.4% in Q1 FY22, a decline from 7% in FY21, and JPY2.37 trillion derivatives assets and JPY2.24 trillion derivatives liabilities, which represented a stable level compared with a year ago.

Click here to view Daiwa Securities Group's Q1 FY22 earnings report.