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Japan’s Nomura said profits more than doubled in its latest quarter, to their highest point in four years, a day after the bank’s chief executive took a pay cut as he accepted accountability for a bond trading scandal.
The country’s biggest brokerage and investment bank said after Friday’s Tokyo market close that net income for the July to September quarter had come in at ¥98.4bn ($640mn), compared with ¥35.2bn a year earlier and beating analysts’ estimates compiled by Bloomberg of ¥63bn.
The quarter was marked by extreme market volatility — with Japanese stocks hitting record highs in July before the Nikkei Average tumbled 12 per cent in a day in August — but the bank’s wealth management, investment banking and trading arms continued to outperform, as retail investors bought the dip.
However, the strong quarter was clouded by a trading scandal that has led to Nomura losing some bond and underwriting business, according to people familiar with the matter.
The scandal, revealed by regulators in September, involved the manipulation of Japanese government bond futures using so-called layering, or the practice of placing buy or sell orders that were never intended to be executed.
On Thursday, Nomura said it had been fined ¥21.8mn ($143,000) by Japan’s banking regulator. Chief executive Kentaro Okuda, as well as other top executives, agreed to a voluntary two-month 20 per cent pay cut due to the incident.
However, the bank indicated that the impact on returns had so far been limited to its Japanese debt capital markets business, and strong performances in equities and advisory were compensating.
Nomura’s reputation has been further tarnished by news on Thursday of the arrest of a former employee on suspicion of the robbery and attempted murder of an elderly couple who were clients of its brokerage.
“It is extremely regrettable that a former employee of ours has been arrested,” chief financial officer Takumi Kitamura told reporters.
The quarterly results marked six straight months of growth and are a boost for Okuda, who has been trying to cement a turnaround after a series of scandals in recent years.
As well as the implosion of Archegos, the family office run by former hedge fund manager Bill Hwang, which cost Nomura billions of dollars, its investment banking business has had to deal with the ripples from the banking crisis in the US last year and the collapse of Credit Suisse.
As part of his efforts to stabilise returns, Okuda has pushed the wholesale business unit to reduce its reliance on volatile trading and increase revenues from more stable sources, such as wealth management.
He also wants Nomura to expand its global asset management capacity in preparation for a generational shift in Japanese investment habits.
“We are seeing results from our medium- to long-term initiatives to grow stable revenues and diversify our revenue sources, reaffirming our current strategic direction,” Okuda said on Friday.
“We delivered our best wealth management results in nine years on the back of record high recurring revenue,” he added.
https://www.ft.com/content/d308be6b-82d6-4031-a9c3-4a4dc6b2ff89
