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Nomura Holdings, Inc. (NMR) reported net revenue of ¥401.7 billion ($5.1 billion) for fiscal second quarter 2013 (ended September 30, 2012). This reflects a surge of 33.2% from net income of ¥301.6 billion ($3.8 billion) reported in the year-ago period.
Results reflect a rise in total revenue, partially offset by increases in operating expenses. Moreover, performance of the Wholesale division was solid in the quarter. Further, strong capital ratios were the other positives.
Performance in Detail
Total revenue improved 22% to ¥461.2 billion ($5.9 billion) from ¥ 377.8 billion ($4.8 billion) in the prior-year quarter. The surge was driven primarily by increases in net gains on trading activities as well as gain on private equity investments and gains on investments in equity securities along with other revenue.
Operating expenses for the quarter totaled ¥366.3 billion ($4.7 billion), up 5.8% year over year. The increase was primarily a result of substantial rise in the company’s other expenses (including a goodwill impairment charge of ¥8.3 billion) as well as higher information processing and communications expenditure.
Income before taxes was recorded at ¥35.4billion ($0.4 billion) as against a loss of ¥44.6 billion ($0.6 billion) in the year-ago period.
Retail Division: Net revenue for the quarter came in at ¥80.8 billion ($1.0 billion), down 3.8% year over year. Further income before taxes stood at ¥11.0 billion ($0.14 billion), up 2.8% from the prior-year quarter. However, non-interest expenses declined 4.8% year over year to ¥ 69.8 billion ($0.9 billion).
Asset Management: Net revenue for the quarter came in at ¥15.4 billion ($0.2 billion), down 3.8% year over year. Further income before taxes stood at ¥4.6 billion ($0.06 billion), down 2.1% from the prior-year quarter. However, non-interest expenses declined 2.7% year over year to ¥ 10.9 billion ($0.1 billion).
Wholesale Division: Net revenue for the quarter came in at ¥137.1 billion ($1.74 billion), soaring 68% year over year. However, non-interest expenses stood at ¥136.9 billion ($1.73 billion), down 10.0% from the prior-year quarter. Further, income before taxes came in at ¥0.2 billion ($0.003 billion) as against loss of ¥70.7 billion ($0.9 billion) in the prior-year quarter.
Total assets as of September 30, 2012 came in at ¥35.4 trillion ($0.44 trillion), down 0.8% from ¥35.7 trillion ($0.45 trillion) as of March 31, 2012.
Total shareholders’ equity came in at ¥2.09 trillion ($0.03 trillion), down 0.5% from ¥2.10 trillion ($0.03 trillion).
As of September 30, 2012, Tier 1 capital ratio stood at 15.1% as against 15.0% as of June 30, 2012. Total capital ratio was 17.2% compared with 17.4% as of June 30, 2012.
Concurrent with the earnings release, Nomura declared a quarterly dividend of ¥2 ($0.03) per share to shareholders of record as of September 30, 2012. The dividend will be paid on December 3, 2012.
Going forward, we expect Nomura’s decent top-line growth and sound financial position to prove beneficial to its overall growth in the future. Further, steady capital deployment activities will continue to reinforce investor’s confidence in the stock. However, rising expenses keep us on the sidelines. Moreover, we are concerned about the increasing competition, volatility in the Japanese economy and the effects of the deepening Euro-Zone crisis.
Shares of Nomura retain a Zacks #4 Rank, which translates into a short-term Sell rating. One of its peers, Piper Jaffray Companies (PJC - Snapshot Report) retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating.