Bank fees hit Daiwa profit - ResearchInChina

Date:2008-01-31liaoyan  Text Size:

DAIWA Securities Group Inc, Japan's second largest securities firm, said third quarter profit fell 35 percent as investment banking fees plunged.

Net income fell to 17.3 billion yen (US$162 million) in the three months to December 31, Tokyo-based Daiwa said in a statement, Bloomberg News reported. Profit beat the median 15 billion yen estimate of three analysts surveyed by Bloomberg News.

Daiwa lost ground to larger Nomura Holdings Inc and global competitors including JPMorgan Chase & Co in a Japanese market for equity sales that shrank about 70 percent in the quarter. Chief Executive Shigeharu Suzuki is seeking to broaden ties with investment-banking partner Sumitomo Mitsui Financial Group Inc to win advisory and underwriting business elsewhere in Asia.

"Japanese brokerages are stuck in a blind alley at home," said Yuri Yoshida, a Tokyo analyst at Standard & Poor's. "Daiwa needs to take better advantage of its ties to Sumitomo Mitsui and use the bank's stronger overseas client network and brand to profit from global investment banking."

Daiwa's market value declined 24 percent in 2007, underperforming the 11 percent slide by Japan's benchmark Nikkei 225 Stock Average. Shares of the brokerage rose 1.2 percent to 912 yen in Tokyo yesterday, trimming its loss this year to 10 percent.

Revenue fell to 215.4 billion yen for the quarter, from 242.8 billion yen a year earlier, Daiwa reported.

"We achieved modest results even in a market chaotic due to the US mortgage turmoil," Nobuyuki Iwamoto, Daiwa's chief financial officer, said at a press briefing in Tokyo. "Business won't necessarily be smooth in 2008."

Underwriting fees plunged to 5.1 billion yen in the quarter, from 25.1 billion yen in the same period a year earlier, as export profits let Japanese companies finance expansion without raising funds. Export growth marked 6.9 percent in December after reaching 9.7 percent a month earlier.

Daiwa Securities SMBC Co's share of domestic stock sales fell to 4.7 percent in the three months as it arranged 13 transactions worth 30.4 billion yen and dropped to sixth place among equity underwriters, according to data compiled by Bloomberg.

A year earlier the venture ranked second with 23 percent of the market as it handled 28 sales.



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