Nomura and Daiwa Securities Report Typical Profit Levels As Conditions Normalize From Strong 2020

We maintain our fair value estimates of JPY 585 for Nomura Holdings and JPY 620 for Daiwa Securities after their April-June earnings reports. Our fair value estimates are equivalent to 0.69 times book value for Nomura and 0.72 times for Daiwa; and are 7% and 8%, respectively, above Friday’s closing prices. We continue to think that Daiwa will earn a slightly higher average ROE over the cycle with less volatility than Nomura despite Nomura’s scale and brand-name advantages--but Nomura has improved in the past two years, as seen in more positive net inflows of retail customer assets even as it has restrained retail-segment costs. We think that Nomura could earn better returns with less volatility if it were to pare its overseas wholesale business a bit more.