Daiwa Securities Group Inc. shares rose the most in more than three years after Japan’s second-largest brokerage posted higher profit and unveiled plans to buy back shares.
The stock gained as much as 9.3% on Wednesday morning, the biggest intraday gain since March 2020. Net income climbed 52% last quarter to 29.8 billion yen ($198 million), led by its retail business along with a rebound in trading and dealmaking, results showed Tuesday.
Daiwa joins larger rival Nomura Holdings Inc. in benefiting from a Japanese equity market recovery that prompted individual clients to trade stocks and purchase investment products. Prime Minister Fumio Kishida is trying to encourage people to invest more of their savings through measures such as tax breaks, a move that stands to benefit securities firms.
“Our consolidated earnings are clearly becoming more stable as we steadily move ahead with a structural overhaul,” Chief Financial Officer Eiji Sato said at a news briefing. “That’s adding to our confidence that we are heading in the right direction in terms of business strategy.”
The firm said it plans to buy back as much as 35 billion yen of shares, or about 2.4% of its outstanding stock.
An improvement in the retail business has also contributed to a recovery for SMBC Nikko Securities Inc. The main brokerage subsidiary of Sumitomo Mitsui Financial Group Inc. turned to profit after losing money for five straight quarters, results showed Tuesday.
A stock market rebound in the country has spurred companies to issue shares, boosting equity underwriting business for Japanese securities firms. The benchmark Topix index climbed to a 33-year high in the quarter, although the rally has since lost steam.
Daiwa shares are now trading at the highest level in eight years. Financial stocks rallied for a second day in Tokyo on Wednesday, a day after the Bank of Japan said it will be more flexible in its control of bond yields. A revival of Japan’s bond market will likely boost fixed-income business, creating room for financial companies to hire bankers, Daiwa Deputy President Keiko Tashiro said in September.
The Japanese central bank may consider scrapping its negative interest-rate policy as early as April depending on the result of spring wage negotiations between Japanese companies and labor unions, Sato said at the briefing.
Key Figures From Daiwa:
- Revenue from stock underwriting more than doubled from a year earlier, while bond underwriting also rose
- Income from mergers advisory and others rose 20%
- Global markets trading posted 9.2 billion yen in ordinary profit, vs a loss in the same period a year ago
- The retail division’s ordinary profit surged 96% to 12 billion yen, compared with 29 billion yen in pretax income at Nomura
- Daiwa’s overseas business posted 3.9 billion yen in ordinary income, representing the 30th straight quarter of profit
- Europe turned a profit due to a recovery in M&A revenues; ordinary income in Americas, its biggest overseas market, fell due to a drop in fixed income, currencies and commodities revenues
