Nomura recently published the financial results for the first two quarters. The company had a slowdown in Q2, but the numbers remain impressive, because of the exceptional Q1 results.
The pre-tax income only from the international operations hit ¥107.7bn ($1bn) in the first six months of 2020, a record for the company. This was due to the strong recent increase in global deal-making and the growing contribution of its business from overseas. The bank, which is going through a global cost-cutting program, had a net income of ¥67.6bn for the July-to-September period. However, that was lower by 53%, compared to the previous period, when business was going well due to the resurgence of global trading and the equity market levels.
The combined net profit of Nomura (Q1 & Q2) was ¥210bn, an 8.1% increase from the last year. The bank has spent years trying to recover from the 2008 financial crisis, when it acquired some operations from Lehman Brothers, which went bankrupt. Thus, it is not trying to compete with other “bulge bracket” investment banks, such as JP. Morgan or Goldman Sachs. Under its chief executive, Kentaro Okuda, it has developed itself as a global niche player: focused only on business lines with growth potential and high market share. Nomura is not taking any risks anymore.
The results showed a mixed performance across the business units. The company’s net revenue declined by 20%, reaching ¥369 billion (~$3.5 billion). The pre-tax income for the quarter was ¥83.6 billion (~$792 million), and the net income of ¥67.6 billion (~$640 million) was attributed to the company’s shareholders.
The overall revenue came specifically from three divisions of Nomura: asset management, retail, and also wholesale. Retail maintained its quarterly growth trend, but unfortunately, the asset management and wholesale departments declined.
Kentaro Okuda, Group CEO commented: “Despite the continued uncertainty in the business environment due to the pandemic, we reported record high Group income before income taxes for the first half. The total pre-tax income for the three international regions was also a record high, accounting for more than 40% of firmwide results in the first half.”
During the past few months, Japanese companies were involved in a lot of deals, that were accelerated by the Covid-19 pandemic. All of these helped Nomura have one of its strongest half-yearly performances in more than two decades. Moreover, Nomura is looking to hire more people for its M&A division, as the demand for financial advice is going up. During the Covid-19 pandemic, the uncertainty is high, so people are looking for advice on almost every transaction, more than they used to. The company declared that they will be recruiting earlier this year, since they need help immediately in this department.
The analysts from Nomura are optimistic, as they expect the trend of Japan-driven merger and acquisition activity to continue from now on. There are a lot of companies that prefer to grow via overseas deals, one example could be the Seven & i Holdings’ $21bn acquisition in August of Speedway, the petrol station business from the USA. Nomura was also a lead adviser for the acquisition of NTT Docomo by its parent company, a $40bn deal. It is believed that this pattern will become a model even for other “parent-child” Japanese companies. In particular, the pandemic created an acceleration in business restructurings, to adapt to the new challenges.
Nomura said there was a 20-30% rise in Japanese companies exploring M&A opportunities, domestic and overseas. The corporate clients that are interested in M&A’s have increased substantially. A lot of the Japanese companies had large reserves of cash when the Covid-19 pandemic started. They also had strategic relationships with banks that would allow them to borrow, in order to support the acquisition.
Takumi Kitamura, the CFO, said: “The amount of M&A consultation from our clients is 20-30 per cent higher than our usual pace. Considering the current and new environment with the Covid-19, the demand for M&A and other finance needs such as [equity capital markets] and [debt capital markets] remain strong. This is not temporary”. Data show that some Japanese companies are keen to start cross-border deals in Europe and the US as soon as possible, while the Chinese companies are starting to lose territory.
Ana Cosniceru
The pre-tax income only from the international operations hit ¥107.7bn ($1bn) in the first six months of 2020, a record for the company. This was due to the strong recent increase in global deal-making and the growing contribution of its business from overseas. The bank, which is going through a global cost-cutting program, had a net income of ¥67.6bn for the July-to-September period. However, that was lower by 53%, compared to the previous period, when business was going well due to the resurgence of global trading and the equity market levels.
The combined net profit of Nomura (Q1 & Q2) was ¥210bn, an 8.1% increase from the last year. The bank has spent years trying to recover from the 2008 financial crisis, when it acquired some operations from Lehman Brothers, which went bankrupt. Thus, it is not trying to compete with other “bulge bracket” investment banks, such as JP. Morgan or Goldman Sachs. Under its chief executive, Kentaro Okuda, it has developed itself as a global niche player: focused only on business lines with growth potential and high market share. Nomura is not taking any risks anymore.
The results showed a mixed performance across the business units. The company’s net revenue declined by 20%, reaching ¥369 billion (~$3.5 billion). The pre-tax income for the quarter was ¥83.6 billion (~$792 million), and the net income of ¥67.6 billion (~$640 million) was attributed to the company’s shareholders.
The overall revenue came specifically from three divisions of Nomura: asset management, retail, and also wholesale. Retail maintained its quarterly growth trend, but unfortunately, the asset management and wholesale departments declined.
Kentaro Okuda, Group CEO commented: “Despite the continued uncertainty in the business environment due to the pandemic, we reported record high Group income before income taxes for the first half. The total pre-tax income for the three international regions was also a record high, accounting for more than 40% of firmwide results in the first half.”
During the past few months, Japanese companies were involved in a lot of deals, that were accelerated by the Covid-19 pandemic. All of these helped Nomura have one of its strongest half-yearly performances in more than two decades. Moreover, Nomura is looking to hire more people for its M&A division, as the demand for financial advice is going up. During the Covid-19 pandemic, the uncertainty is high, so people are looking for advice on almost every transaction, more than they used to. The company declared that they will be recruiting earlier this year, since they need help immediately in this department.
The analysts from Nomura are optimistic, as they expect the trend of Japan-driven merger and acquisition activity to continue from now on. There are a lot of companies that prefer to grow via overseas deals, one example could be the Seven & i Holdings’ $21bn acquisition in August of Speedway, the petrol station business from the USA. Nomura was also a lead adviser for the acquisition of NTT Docomo by its parent company, a $40bn deal. It is believed that this pattern will become a model even for other “parent-child” Japanese companies. In particular, the pandemic created an acceleration in business restructurings, to adapt to the new challenges.
Nomura said there was a 20-30% rise in Japanese companies exploring M&A opportunities, domestic and overseas. The corporate clients that are interested in M&A’s have increased substantially. A lot of the Japanese companies had large reserves of cash when the Covid-19 pandemic started. They also had strategic relationships with banks that would allow them to borrow, in order to support the acquisition.
Takumi Kitamura, the CFO, said: “The amount of M&A consultation from our clients is 20-30 per cent higher than our usual pace. Considering the current and new environment with the Covid-19, the demand for M&A and other finance needs such as [equity capital markets] and [debt capital markets] remain strong. This is not temporary”. Data show that some Japanese companies are keen to start cross-border deals in Europe and the US as soon as possible, while the Chinese companies are starting to lose territory.
Ana Cosniceru