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Nomura Holdings Inc ADR NMR

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Morningstar’s Analysis

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

Michael Makdad Senior Equity Analyst

Analyst Note

| Michael Makdad |

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.

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Company Profile

Business Description

Nomura is Japan’s largest broker, about twice the size of rival Daiwa Securities and roughly three times the size of the securities units of the three megabanks. It is also the largest asset-management company in Japan, with a similar size differential compared with its rivals. Despite its topnotch brand name in retail broking and asset management in Japan, Nomura has struggled to compete effectively in the institutional securities business against larger global rivals. In 2008, Nomura bought European and Asian assets of the failed Lehman Brothers, which led to a sharply higher cost base but did not provide commensurate revenue. Nomura has reduced the scale of these businesses but maintains its ambition to compete globally with the top players.

13-1, Nihonbashi 1-chome, Chuo-Ku
Tokyo, 103-8645, Japan
T +81 352551000
Sector Financial Services
Industry Capital Markets
Most Recent Earnings Jun 30, 2021
Fiscal Year End Mar 31, 2022
Stock Type
Employees 26,647