Nomura Holdings Inc, Japan’s leading brokerage and investment bank, recently reported a staggering 76% decline in its quarterly net profit. The company’s investment banking business was hit hard by concerns about a global banking crisis that roiled the global markets. Wall Street investment banks like Goldman Sachs Group (NYSE:GS) also saw a decline in dealmaking fees due to a slump in global mergers and acquisitions activity, which reached its lowest level in over a decade during the last quarter.
According to Chief Financial Officer Takumi Kitamura, the environment was exceptionally severe for investment banking, and the results were not satisfactory. Nomura’s January-March profit plummeted to 7.4 billion yen ($55.37 million) from 30.96 billion yen the previous year. Its wholesale division, which houses its investment banking and trading businesses, suffered a pre-tax loss of 14.2 billion yen for the second consecutive quarter. Costs also increased at the division due to global inflation and a weaker yen, prompting Kitamura to state that the company could not retain or hire people unless it raised salaries in the inflationary environment.
Net profit for the year ending in March decreased by 35% from the previous year to 92.8 billion yen, missing the average analyst estimate in a Refinitiv poll by 32%. These lacklustre results raise doubts about Nomura’s ambitious midterm plan announced last year, which called for annual pre-tax income of up to 390 billion yen for its three core divisions in the year ending March 31, 2025.
Kitamura stated that the company would primarily streamline legacy system infrastructure to reduce costs. He expressed hope for a return in deals once the markets become clearer about the inflation and interest rate outlooks later this year. Nomura also plans to boost its dividend payout ratio to at least 40% from 30% and buy back up to 1.1% of its own shares worth 20 billion yen.
In summary, Nomura’s financial results indicate that the company’s investment banking business was severely impacted by the global banking
($1 = 133.6400 yen)