(Recasts, adds CFO comments, details)
By Nathan Layne
TOKYO May 1 With losses from ill-fated
expansions still fresh in their minds, executives at Daiwa
Securities Group and other top Japanese brokerages are
waiting to see if the "Abenomics" boost has staying power before
they invest aggressively again.
The industry has enjoyed bumper profits largely as a result
of a 60 percent rally in the Nikkei average since mid-November,
sparked by hopes the economic policies of Prime Minister Shinzo
Abe would jolt the economy out of its two-decade slumber.
That rise has pumped up the industry's bread-and-butter
businesses of broking stocks and mutual funds.
Daiwa, Japan's second-largest brokerage, reported on
Wednesday that its net profit totalled 48.7 billion yen ($500
million) in the January-March period, blowing past analysts'
expectations to mark its best quarter in seven years.
Despite the dramatic upswing in the market - trading volume
has ballooned and hit a record high in April following the
central bank's surprise monetary easing - neither Daiwa nor its
bigger rival Nomura Holdings Inc has indicated it has
any intention to expand.
"We are not thinking that these good conditions will carry
on forever," Nomura's Chief Financial Officer Shigesuke
Kashiwagi said last Friday after Nomura reported a
near-quadrupling of quarterly profit on a 27 percent jump in
Nomura's caution stems in part from its purchase of chunks
of failed Wall Street bank Lehman Brothers in the wake of the
global financial crisis of 2008, a move that saddled it with a
high-cost structure that took years to get under control.
Nomura is still working through a $1 billion cost-cutting
programme launched last year, about half of which was targeted
at its European operations. Daiwa has also reduced hundreds of
overseas jobs and its cautious about expanding outside Japan.
Daiwa Chief Financial Officer Mikita Komatsu said on
Wednesday the broker was not looking to hire more people or make
big investments, and would instead focus on using its existing
operations to capitalise on renewed interest in Japanese shares.
"We may pick our spots when it comes to investing in
opportunities overseas, but you won't see any major
investments," Komatsu said at an earnings briefing. "We consider
it our core mission to expand the investor base in Japan."
Japan's top brokers have all started to position themselves
to capture clients generated by a new tax-free investment scheme
aimed at prompting individuals to shift more of their $15
trillion in personal assets into equities and mutual funds.
The programme will allow brokerage and bank account holders
to invest as much as 1 million yen a year without paying tax on
any returns. The Japanese government has set a target of
attracting inflows of more than $260 billion by 2020.
The scheme is one factor behind optimism at SMBC Nikko
Securities, which stands out as the only leading broker with
solid expansion plans.
Japan's third-largest brokerage said last month it wants to
add another 25 branches to expand its retail network by more
than 20 percent over the next three years. It is also planing to
boost its staffing by 600 to 8,600.
"For the first time in a long time we've got the winds at
our back," Akira Inoue, head of finance at SMBC Nikko, told a
briefing on Tuesday.
($1 = 97.4100 Japanese yen)
(Reporting by Emi Emoto and Chikafumi Hodo; Editing by Daniel