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Analyst Blog

Nomura Holdings, Inc. reported fiscal third-quarter 2014 (ending Dec 31) earnings per share of ¥12.65, up from ¥5.33 reported in the prior year period.

Results benefited from a decline in operating expenses, partly offset by lower revenues. Moreover, performance of the Retail and Asset management divisions were solid in the quarter. Further, strong capital ratios and a healthy balance sheet were the other positives.

Net income attributable to shareholders was ¥48.3 billion ($0.48 billion), up from ¥20.1 billion ($0.25 billion) in the year-ago quarter.

Performance in Detail

Total revenue fell 3% year over year to ¥447.4 billion ($4.5 billion). The decline resulted from a decrease in other revenues.

Operating expenses for the quarter totaled ¥292.5 billion ($2.9 billion), down 22% year over year. The fall was primarily due to a substantial deduction in other expenses.

Segment Detail

Retail Division: Net revenue for the quarter came in at ¥128.0 billion ($1.3 billion), up 34% year over year. However, non-interest expenses increased 6% year over year to ¥80.3 billion ($0.8 billion).

Asset Management: Net revenue for the quarter came in at ¥21.2 billion ($0.2 billion), up 13% year over year. However, non-interest expenses increased 7% year over year to ¥12.3 billion ($0.1 billion).

Wholesale Division: Net revenue for the quarter came in at ¥188.7 billion ($1.89 billion), down 0.2 year over year. However, non-interest expenses rose 11% to ¥160.9 billion ($1.6 billion) from the year-ago quarter.   

Balance Sheet

Total assets as of Dec 31, 2013 came in at ¥43.6 trillion ($0.41 trillion), up from ¥37.9 trillion ($0.36 trillion) as of Mar 31, 2013, mainly due to increase in trading assets.

Total shareholders’ equity came in at ¥2.5 trillion ($0.03 trillion), up from ¥2.3 trillion ($0.03 trillion) as of Mar 31, 2013.

As of Dec 31, 2013, Nomura’s total capital ratio was 14% and its Tier 1 ratio was 12% under Basel III.

Our Viewpoint

Going forward, we expect Nomura’s sound financial position to prove beneficial to its overall growth in the future. Further, steady capital deployment activities will continue to reinforce investors’ confidence in the stock. However, rising expenses keep us on the sidelines. Moreover, we are concerned about the intense competition, volatility in the Japanese economy and the sluggish economic backdrop.

Nomura currently carries a Zacks Rank #3 (Hold). Some better-performing stocks in the same industry include Deutsche Bank AG (DB - Analyst Report), Barclays PLC (BCS - Analyst Report) and HDFC Bank Ltd. (HDB - Analyst Report). All these have a Zacks Rank #2 (Buy).

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