UPDATE 2-Nomura doubles profit target, aims to grow client assets by 2020

Fri Aug 1, 2014 7:02am EDT

Related Topics

* Aims for EPS of Y100; previous goal Y50 by 2016

* Targets Y150 tln retail client assets

* To boost inheritance services as population ages (Adds CEO comments, first-quarter earnings)

By Ritsuko Ando

TOKYO, Aug 1 (Reuters) - Nomura Holdings Inc doubled its profit target on Friday, saying it aims to take advantage of Japan's emergence from years of deflation and sluggish economic growth to attract more customer funds.

Japan's biggest brokerage and investment banking group said it is targeting earnings per share (EPS) of 100 yen (97 US cents) by Tokyo Olympics year 2020.

That compared with a previous goal of 50 yen by March 2016, surpassed two years early thanks to a spike in stock-trading commission during a market rally, sparked by economic pledges from Prime Minister Shinzo Abe.

But optimism towards so-called Abenomics has since cooled. In April-June, the Nikkei stock average rose 2.3 percent compared with 10 percent a year earlier. In the same period, Nomura's EPS fell to 5.26 yen from 17.24 yen.

Chief Executive Koji Nagai, addressing an investor meeting, acknowledged the initial euphoria over Abenomics had now waned, but said Nomura aimed to take full advantage of signs the country was emerging from nearly two decades of deflation.

"The biggest single risk is that Abenomics takes a fall," he said.

The latest EPS target assumes the Nikkei will close around 25,000 yen in 2020, from 15,523.11 on Friday.

"As we move into inflation, individuals will shift into securities," said Nagai, who was picked as CEO two years ago to restructure a company stricken by an insider trading scandal.

Nagai referred to data showing individuals held 33 percent of tradable securities in 1989 before Japan's asset-inflated bubble economy burst. They now hold just 16 percent.

Nomura said it aims to increase the amount of assets it manages on behalf of retail clients - individuals and small companies - to 150 trillion yen by the business year ending March 2020 from 95 trillion yen at the end of June.

INHERITANCE

Retail clients account for around 60 percent of Nomura's pretax profit, and Nagai said an ageing population meant Nomura needed to overhaul its strategy to keep that segment growing.

Nagai has already been encouraging salespeople to shift away from "churning" investment trusts - the practice of earning commission by encouraging clients to frequently switch investment funds with the prospect of greater returns.

Nomura staff are now being coached to sell more longer-term funds and insurance products. Nagai said the brokerage would aim to further grow its customer base by expanding wealth-management and inheritance services.

Nagai said an ageing population meant Japan's inheritance-related market, currently worth 50 trillion yen a year, would likely grow further in coming years which he called "the age of inheritance."

Nomura also said it would aim to grow its business outside of Japan, to take advantage of opportunities in faster-growing economies and build on the growth of its global fixed-income business.

The company said it would aim for its wholesale segment, which includes overseas and investment banking, to earn 210 billion to 230 billion yen in pretax profit by 2019/20, roughly double the 111.8 billion yen it reported in the year that ended in March.

Shares of Nomura closed 0.1 percent higher ahead of the outlook announcement, compared with a 0.6 percent decline in the Nikkei.

($1 = 102.9800 Japanese Yen) (Editing by Christopher Cushing)

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