Daiwa’s profit hits 13-year high as equities business surges

Daiwa Securities Group’s latest quarterly profit rose more than analysts expected to the highest in 13 years, as Japan’s second-largest brokerage benefited from a global stock trading boom.

Net income rose 81% from a year earlier to ¥56.4 billion ($360 million) in the fiscal first quarter ended June 30, the Tokyo-based firm said in a statement Monday. That topped the ¥51.1 billion average estimate of five analysts and is the highest since the April-June quarter of 2013.

Brokerages around the world posted bumper results as market volatility fueled by the war in the Middle East and artificial intelligence-related news drove clients to step up their trading of stocks and other securities. Daiwa’s larger Japanese rival, Nomura Holdings, reported its highest quarterly profit in 24 years last week, though investors signaled doubts over the sustainability of the equity trading rally that fueled the earnings.

The global markets business is off to a slower start in the current quarter, although client flows remain solid, Daiwa’s Chief Financial Officer Kotaro Yoshida said at a briefing in Tokyo.

Revenue from equity trading jumped 84% from a year earlier to ¥28.7 billion, the highest on record. Fixed-income revenue rose 51%, climbing for a third consecutive quarter.

Investment banking, including advice on mergers and acquisitions, saw a 31% increase.

Wealth management revenue gained 40%, a sign that Japanese individuals continued to invest more of their savings to guard against inflation.

Shares of Daiwa fell 1.8% on Monday morning before the results, as Japanese stocks declined. The shares are up 29% this year.

Daiwa has taken a series of steps this year to accelerate growth, including its acquisition of Orix’s banking subsidiary in Japan to deepen a foray into commercial lending. It has completed the deal and earnings consolidation will begin from the second quarter, the firm said Monday.

Still, like Nomura, Daiwa lost money in Europe last quarter, while remaining profitable in other markets abroad. Daiwa said its first pretax loss in Europe in a year was due to weak M&A performance stemming from geopolitical risks.