“These are real concrete changes that are not going to
be reversed as a result of an election”
WELLS FARGO ANALYST MIKE MAYO, P21
Nomura falls to loss after tough Q3
NOMURAûSUFFEREDûITSûlRSTûQUARTERLYûLOSSûINûTWOû
ANDûAûHALFûYEARSûONûAûSLIDEûINûWHOLESALEûPROlTû
and one-off charges, on top of a third
consecutive quarterly loss for its
international business.
Japan’s largest brokerage and investment
bank made a net loss of ¥11.2bn (US$99m)
for the July-September quarter, the second
OFûITSûlNANCIALûYEAR ûVERSUSûAûNETûPROlTûOFû
¥51.9bn a year earlier.
The results were heavily impacted by
one-off factors, most notably a ¥19.8bn
charge related to a settlement with the
53û$EPARTMENTûOFû*USTICEûOVERûTHEûSALEûOFû
residential mortgage-backed securities.
Still, underlying earnings were
DISAPPOINTINGû0RE
TAXûPROlTûINûTHEû
wholesale division, comprising global
markets and investment banking,
plummeted 71% from a year ago to ¥4.9bn
ANDûPROlTSûFROMûBOTHûRETAILûANDûASSETû
management more than halved.
Revenues from global markets dipped 7%
TOûcBNûWITHûlXEDûINCOMEûREVENUEû
down 8% to ¥69.6bn and equities falling 6%
to ¥54.2bn. Both of those were weaker than
the big US banks, which on average reported
a 3% dip in FICC revenue and an 8% rise in
equities during the quarter. Nomura
attributed its weakness to challenging
conditions in emerging markets following
interest rate rises in the US.
)TûMANAGEDûTOûTURNûAûPROlTûOFûcBNûINû!SIAûEX
Japan, although more disappointing results in
Europe and the Americas left its international
division with a loss of ¥32.2bn for Q3.
4HEûLATESTûlGURESûONCEûAGAINûRAISEû
questions about the viability of Nomura’sbusiness outside Japan, a familiar theme
since it acquired Lehman Brothers’ equities
and investment banking businesses in
Europe and Asia in 2008.
It looked as if a corner had been turned in
!PRILûLASTûYEARûWHENû.OMURAûPOSTEDûITSûlRSTû
ANNUALûPROlTûOVERSEASûINûSEVENûYEARS ûBUTûITSû
international business slipped back into the
REDûDURINGûTHEûLASTûlSCALûYEAR
Nomura has recently been scaling up in
the United States as it looks to grab more
market share in the world’s most lucrative
investment banking market, although
analysts have previously queried the stop-
start nature of its expansion plans. It
continues to look at opportunities to bulk up
in US advisory and investment banking,
which could include an acquisition.
Thomas BlottMacquarie shines but other
Australian banks feel heat
MACQUARIE GROUP is set to beat last year’s
RECORDûANNUALûEARNINGSûASûPROlTûFROMûITSû
capital markets-facing businesses almost
DOUBLEDûDURINGûTHEûlRSTûHALFûOFûITSûlSCALûYEAR
Macquarie upgraded its guidance for the
full year, forecasting a 10% rise in annual
PROlTû)TûPREVIOUSLYûSAIDûITSûANNUALûEARNINGSû
would be “broadly in line” with last year’s
RECORDûPROlTûOFû!BNû53BN
The Australian investment bank booked a
ûRISEûINûNETûPROlTûTOû!BNûFORûTHEûSIXû
months to September 30, underpinned by
impressive gains in its global markets and
capital markets divisions.
#OMBINEDûPROlTSûFORûTHEûTWOûDIVISIONSû
climbed 95% to A$1.11bn, due to a strong
showing across equity and debt capital
MARKETS û-!ûADVISORYûANDûlXEDûINCOMES û
currencies and commodities trading.
Macquarie Capital, its advisory arm,
REPORTEDûAûûINCREASEûINûNETûPROlTûTOû
A$406m with fee income up across M&A and
capital markets advisory, the bank said.
It singled out its role advising the consortium
led by road operator Transurban on its A$9.3bn
acquisition of a 51% interest in the WestConnex
motorway project from the New South Wales
government, and its role as joint lead manager
to Transurban on a A$4.2bn entitlement offer as
CONTRIBUTINGûTOûAûSTRONGûlRSTûHALF
Its commodities and global markets group
REPORTEDûANûûINCREASEûINûPROlTûTOû!Mû
with revenues from commodities trading
almost doubling, rising to A$811m versus
A$436m during the same period last year.
Revenues from credit, interest rate and foreign
exchange trading were up 32% at A$178m,
while equities slipped 22% to A$242m.
AUSTRALIA & NEW ZEALAND BANKING GROUP and
NATIONAL AUSTRALIA BANK set the tone for a
challenging earnings season last week as
both banks recorded falls in cash earnings
with costs related to the country’s Royal
Commission weighing on their
performance.
!.:SûCASHûPROlTûFROMûCONTINUINGû
OPERATIONSûFORûTHEûlNANCIALûYEARûTOûTHEûENDûOFû
September fell 5% to A$6.49bn (US$4.6bn).
Its performance was dragged down by higher
charges, mostly stemming from the Royal
#OMMISSIONûINTOûTHEûCOUNTRYSûlNANCIALûSERVICESû
sector. This included A$55m in external legal
costs as well as A$419m in refunds to customers
and related remediation charges.
.!"ûSAIDûITSûANNUALûCASHûPROlTûFELLûûTOû
A$5.7bn as it recognised A$360m in
customer-related remediation charges in the
second half of the year, as well as booking
A$755m in restructuring costs.
Both ANZ and NAB along with rivals
Commonwealth Bank of Australia and
Westpac Banking Corporation had already
mAGGEDûHIGHERûCOSTSûSTEMMINGûFROMûTHEû2OYALû
Commission, which has detailed widespread
wrongdoing by the big four lenders.
Thomas BlottFed offers
new rules on
derivatives
The US FEDERAL RESERVE has offered up new
rules that will change how exposure
amounts are calculated for derivative
contracts under the regulatory capital
rules.
The proposal is a joint regulating
EXERCISEûWITHûTHEû&EDERALû$EPOSITû
)NSURANCEû#ORPûANDûTHEû/FlCEûOFûTHEû
Comptroller of the Currency.
The new approach, called the
standardised approach for counterparty
credit risk, would provide important
improvements to risk-sensitivity and
calibration relative to the current method,
and also would provide a less complex and
non-model-dependent approach, the
agencies said.
Banks have argued that current rules do
not appropriately recognise the effect of
collateral to reduce risk, including the risk-
reducing nature of variation margin. They
ALSOûDOûNOTûPROVIDEûSUFlCIENTûNETTINGûFORû
derivative contracts that share similar risk
factors.
The proposed rules, if adopted, should
address those concerns, the Fed said.
They will also be more consistent
with international standards issued
by the Basel Committee on Banking
Supervision.
Philip Scipio