(Updates with Daiwa earnings in third, tenth paragraphs.)
Oct. 29 (Bloomberg) -- Nomura Holdings Inc.’s quarterly profit rose less than analysts estimated as demand for Japanese stocks waned, signaling an earnings boom stemming from Prime Minister Shinzo Abe’s economic stimulus may be losing momentum.
Net income climbed to 38.1 billion yen ($391 million) for the three months ended Sept. 30 from 2.8 billion yen a year earlier, Japan’s biggest securities firm said in a statement today. The result missed the 42 billion-yen average estimate of nine analysts surveyed by Bloomberg.
From the previous quarter, earnings fell for the second straight period as stock trading volumes declined. Nomura and Daiwa Securities Group Inc., which posted an increase in quarterly profit today, have been benefiting from demand for domestic equities and company share sales spurred by Abe’s fiscal and monetary stimulus.
“Market activity decreased in the second quarter, causing a slowdown in investment trust sales,” said Shinichi Ina, an analyst at UBS AG in Tokyo. “There’s a lot of uncertainty going into the year-end. We’re in the phase where we are testing whether Abenomics will have a lasting effect.”
Revenue for the second quarter fell 7.1 percent from a year earlier to 428.4 billion yen, reflecting the sale of a stake in Nomura Real Estate Holdings Inc., the bank said. Brokerage commissions jumped 46 percent to 105.6 billion yen and trading profit climbed 24 percent to 110.2 billion yen. Investment banking fees rose 35 percent to 23 billion yen.
Net income fell from 65.9 billion yen in the April-June period. Nomura attributed the slowdown to the impact of market uncertainty and declining client activity in Japan, according to presentation materials posted on its website.
Japan’s Nikkei 225 Stock Average has gained 38 percent this year, making it the best performer among major developed markets. Still, it has lost 8.3 percent from a May 22 peak and dropped 0.5 percent today as investors examine whether Abe will successfully implement deregulation policies to augment government spending and monetary easing.
The average daily volume of shares traded on the first section of the Tokyo Stock Exchange dropped 37 percent last quarter from the previous three months, according to data compiled by Bloomberg.
Shares of Nomura closed 0.7 percent lower at 737 yen before the earnings release, paring this year’s gain to 47 percent. Daiwa, Japan’s second-biggest brokerage, slid 0.9 percent to 875 yen today and has jumped 84 percent in 2013.
Net income at Daiwa climbed to 35.5 billion yen for the three months ended Sept. 30 from 7.4 billion yen a year earlier, led by gains in brokerage commissions and trading profit, the Tokyo-based company said. That was in line with the 36 billion- yen average estimate of five analysts.
Daiwa increased its half-year dividend from 3 yen to 17 yen, the highest since it began paying it on an interim basis nine years ago, the bank said.
The company was Japan’s top equity underwriter last quarter, arranging transactions valued at 320 billion yen, data compiled by Bloomberg show. Nomura’s deals included a 125 billion yen share sale by Dentsu Inc., Asia’s biggest advertising company. The brokerage ranked No. 2 a year earlier.
Nomura was first in Japan bond underwriting and 17th in merger and acquisition advising in the three months, according to the data.
“Nomura is performing solidly,” Koichi Niwa, a senior analyst at SMBC Nikko Securities Inc., said before the results. “We expect more deals coming from the equity capital and merger and acquisition markets.”
Chief Executive Officer Koji Nagai is cutting $1 billion in costs that mounted after Nomura’s 2008 acquisition of Lehman Brothers Holdings Inc.’s European and Asian operations. Nagai took the reins in August 2012 after Kenichi Watanabe quit to take responsibility for client information leaks used for insider trading.
Nomura’s pretax loss from overseas operations narrowed 37 percent to 18.7 billion yen from 29.6 billion yen, today’s statement showed.
Daiwa CEO Takashi Hibino is also trimming costs, while adding retail staff and branches in anticipation that Japanese households will shift their savings to equities. He targets cost savings of 70 billion yen by March 2015.
Brokerage commissions at Daiwa more than doubled from a year earlier to 18.6 billion yen, the bank said. Trading profit gained 50 percent to 34.1 billion yen, while underwriting fees slipped 15 percent to 7.8 billion yen.
In contrast with the profit gains at Daiwa and Nomura, Deutsche Bank AG, Europe’s largest investment bank by revenue, today said third-quarter profit tumbled 94 percent to 41 million euros ($56 million) as income from debt trading slumped.
UBS AG, Switzerland’s biggest bank, said it probably won’t be able to reach its targeted 15 percent return on equity in 2015 after the nation’s regulator demanded the company hold more capital.
--With assistance from Monami Yui and James Gunsalus in Tokyo. Editors: Russell Ward, Nathaniel Espino