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.