(Bloomberg) -- Japan brokerages reported robust results as the appetite to invest in the markets stayed strong despite volatility.
Daiwa Securities Group Inc.’s profit surged as gains from wealth and asset management drove performance on the back of increased investor interest in the stock market. At Mitsubishi UFJ Securities Holdings Co., a unit of Japan’s largest banking group Mitsubishi UFJ Financial Group Inc., profit also jumped as sales of securities grew.
Net income at Daiwa jumped more than 80% from a year earlier during the three months ended Sept. 30 to ¥53.8 billion ($352 million), Japan’s second-biggest brokerage said in a statement. That compares with the average forecast of ¥38.8 billion by three analysts polled by Bloomberg News.
Under its mid-term plan, Daiwa aims to raise its pretax profit to at least ¥240 billion for the year ending March 2027. The firm also intends to hire more bankers for its M&A business, as well as for Japanese equity trading to capitalize on the upturn in the nation’s stock market.
Markets may remain volatile with the US presidential election coming up next month, Daiwa’s Chief Financial Officer Kotaro Yoshida said at an earnings briefing. But he also said that clients were largely calm when Japanese shares tumbled in August.
This was reflected in Daiwa’s results. Ordinary income from wealth management rose almost 21% as it sold more investment trusts from US to India stock funds as well as Japanese and foreign bonds. Ordinary income from asset management surged over 57% to a record high, with the firm saying it experienced strong capital flows into overseas equity funds.
In its global markets and investment banking division, however, ordinary income fell 36%.
Daiwa’s Europe operations fell into the red in the second quarter, though losses narrowed significantly from the previous three months. Both its Americas and Asia/Oceania operations saw double-digit increases in their ordinary income.
Penalty
In June, the Financial Services Agency penalized MUFG’s banking unit and two securities joint ventures for violating client confidentiality rules.
The FSA ordered MUFG Bank Ltd., Morgan Stanley MUFG Securities Co. and Mitsubishi UFJ Morgan Stanley Securities Co. to improve their operations. The revelations prompted some of the group’s corporate customers to take bond underwriting business elsewhere.
Shinjiro Yamamoto, Mitsubishi UFJ Securities Holdings’ global chief financial officer, said there was an impact from this scandal, but that was offset by strong stock underwriting and equity trading.
--With assistance from Russell Ward and Taiga Uranaka.
(Updates with more details throughout)
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