(Bloomberg) — Nomura Holdings Inc. is reviewing costs at its retail business after earnings from the brokerage’s usually profitable division trailed its smaller rival Daiwa Securities Group Inc. for a second straight quarter.
Chief Financial Officer Takumi Kitamura is “taking a closer look into the cost structure” of the unit with retail head Go Sugiyama, he said at an earnings briefing on Wednesday after Japan’s largest brokerage announced that pre-tax profit from the segment slumped 74% to 4.9 billion yen ($36.8 million) from a year earlier.
“Transformation could take some time,” Kitamura said, citing digitalized marketing and other ongoing efforts to boost revenue at the retail division.
The results lag Daiwa’s ordinary profit of 6.3 billion yen from retail for the three months ended June. It’s the second time Daiwa’s figure has been higher than Nomura’s since at least the April to June quarter of 2011, based on publicly available comparable data.
Nomura’s retail unit has for years played the role of a shock absorber for overseas mishaps, and on average, the business — which has thousands of staff offering individual clients individual advice and other services — has generated more than a quarter of Nomura’s annual revenue over the past 10 years.
In its earning statement, Nomura said clients stayed on the sidelines due to market uncertainty, which resulted in lower flow revenue. Sales of Japanese stocks were also slower, although global stock investment trusts saw fund inflows.
Analysts have said Nomura needs to boost the competitiveness of its retail business and shift more aggressively into wealth management to make it more resilient to market turbulence.
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