Market Turmoil Brings Benefits For Japan's Nomura, Daiwa - Fitch

Editorial Staff

2 June 2021

The turmoil in global markets which followed the pandemic outbreak proved a boon for large Japanese securities firms, showing that volatility can often be their best friend, a report from ratings agency Fitch has found.

The agency added that operating profit/average equity ratio rebounded for Nomura Holdings and Daiwa Securities Group. Nomura’s gain was blunted somewhat by its exposure to failed US hedge fund/family office Archegos, it added.

However, Fitch expects Nomura’s and Daiwa’s “moderate profitability” to remain an important weakness for their ratings, because any structural improvements require business restructuring and cost controls to be handled successfully.

The agency predicts that firms will maintain “sound capitalisation in the next few years” with higher common equity Tier 1 ratios than many global peers. “Their liquidity profiles remain a strength, underpinned by appropriate funding management and solid relationships with domestic banks,” it said.

Nomura has been pushing into the wealth management space in recent years. In the case of Daiwa, which is reportedly expecting to win a slice of China’s fast-growing asset management business, the firm has a majority-owned joint venture in Beijing, Daiwa Securities Co.