(Corrects the figure for private credit exposure in Nomura’s wholesale division to $400 million from $200 million in paragraph 14.)
By Anton Bridge
TOKYO, April 24 (Reuters) – Nomura, Japan’s largest investment bank and brokerage, on Friday reported a record annual profit for the second year in a row and said the U.S.-Israeli war on Iran has not disrupted structural growth factors in its home market.
The firm has been engaged in a multi-year effort to focus on stable fee-based revenues that are less vulnerable to fluctuating market conditions.
“Markets have been favourable up to now, but there are various risk factors at present,” Chief Financial Officer Hiroyuki Moriuchi said at a briefing.
“For M&A and equity capital markets, some decision making may be held up, but looking at the mid- to long-term, the structural challenges facing Japanese companies, such as a declining population and overseas expansion aims, are unaffected by the situation in the Middle East,” Moriuchi said.
Nomura’s net income for the January-to-March quarter rose 3% from a year earlier to 73.9 billion yen ($462.60 million). Full-year income rose to 362.1 billion yen from 340.7 billion yen a year earlier.
The wholesale division, which includes Nomura’s investment banking and trading arms, booked its highest annual revenue since it was established in April 2010.
The end of deflation in Japan and intensifying labour shortages are encouraging companies to restructure and invest for growth. Nomura has acted as financial advisor for many of Japan’s largest M&A transactions as well as equity and debt fundraisings.
In the last quarter it advised on the 859.7 billion yen business integration between Gunma Bank and Daishi Hokuetsu Financial Group, as well as Nippon Steel’s 600 billion yen convertible bond offering.
“We may see more M&A activity emerging in response to conditions in the Middle East if supply chains change significantly,” Moriuchi said.
“I don’t expect activity to fall significantly in the mid- to long-term.”
Outside of its more market-sensitive wholesale division, Nomura has sought to expand its wealth management and investment management businesses to build a base of recurring fee revenues.
As part of this, the firm has been pushing alternative assets, which include private equity, private credit and real estate. Its alternative assets under management reached a record high of 3.6 trillion yen at the end of March.
While a wave of redemption requests at U.S.-based private credit funds has sparked fears of writedowns at global financial institutions, the private credit industry in Japan is in its infancy.
“We’re not a commercial bank, so we don’t have much exposure,” a Nomura spokesperson said, adding that the firm had “about $2 billion in our wholesale division and $400 million in investment management.”
“We are diversified across regions and sectors and properly mark-to-market, so we are able to keep it under control.”
($1 = 159.7500 yen)
(Reporting by Anton Bridge and Miho Uranaka; Editing by Jacqueline Wong, Muralikumar Anantharaman and Thomas Derpinghaus)
