Japan’s second-largest brokerage and investment bank Daiwa Securities Group reported its highest quarterly profit since 2005 in its second-quarter earnings on Tuesday, thanks to a one-off gain linked to its stake in Aozora Bank.
Net profit in the July-September period soared 80.5% to 53.8 billion yen ($352 million), helped by non-operating income of more than 20 billion yen from a stake Daiwa has built in Aozora Bank since May.
However, the group’s move to focus on wealth management services stalled as that segment’s revenue and ordinary income fell for the second consecutive quarter, despite being up year on year.
Ordinary income was 15.9 billion yen over July-September, having fallen from 22.4 billion yen in January-March.
Daiwa has sought to move away from its traditional brokerage business to generate more stable fee-based income from asset and wealth management services.
However the wealth management unit was hit by market volatility. Turmoil in Japanese stocks in August, which saw the biggest single-day rout since 1987, brought down flow revenue.
Nevertheless Daiwa was a beneficiary of the gradual move away from cash and deposits toward investment among Japanese households.
Ordinary income in Daiwa’s asset management division hit a record high of 24.7 billion yen as fund inflows grew, particularly into the updated tax-efficient investment accounts for domestic investors introduced in January this year.
Daiwa and Aozora announced a business and capital alliance in May this year and Daiwa is now Aozora‘s largest shareholder, holding 23.65% of its shares, according to LSEG data as of August 2024.
Reuters
