Daiwa Inc ((JP:8601)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Daiwa Inc. painted a complex picture of the company’s current financial landscape. While there were notable achievements in asset-based revenue, overseas operations, and the investment division, Daiwa faced significant challenges in global markets, profit reduction, and the performance of its wholesale division. Despite these hurdles, the company demonstrated resilience, particularly within its Retail Division, indicating potential for future growth.
Record High Asset-Based Revenue in Retail Division
Daiwa Securities Group reported an exceptional performance in its Retail Division, achieving record high asset-based revenue. This success was attributed to a surge in equity investment trust sales and a substantial number of wrap account contracts. This achievement underscores the division’s pivotal role in the company’s overall financial health.
Positive Performance in Overseas Operations
The company’s overseas operations have been a bright spot, with ordinary income climbing to JPY 6.4 billion, marking a 67.1% increase from the previous quarter. This growth was driven by robust revenue streams from Europe and strong results in the Americas, highlighting Daiwa’s successful global expansion strategy.
Significant Increase in Investment Division Revenue
Daiwa’s Investment Division also reported impressive results, with net operating revenues rising by 83.1% to JPY 8.3 billion. The ordinary income in this division saw a 12.8% increase, reflecting a strong performance that contributes positively to the company’s financial outlook.
Retail Division’s Strong Start in January
The Retail Division continued its strong trajectory into January, with a significant 40% increase in income from equity transactions and investment trust sales compared to the third quarter. This momentum suggests a promising start to the new year for Daiwa’s retail operations.
Decline in Global Markets Revenue
However, not all areas experienced growth. The Global Markets division faced a downturn, with net operating revenues declining by 8.6% and ordinary income dropping by 44.4%. This decline was mainly due to decreased customer flows and reduced trading activity in Japanese equities.
Decrease in Profit Attributable to Owners
The earnings call revealed a decrease in profit attributable to the parent company’s owners, which fell by 4.5% to JPY 28.4 billion. This decline poses a challenge for the company as it seeks to enhance shareholder value amid fluctuating market conditions.
Challenges in Wholesale Division
The Wholesale Division faced its own set of challenges, reporting a decrease in revenues from the debt underwriting business. This was largely due to rising interest rates and a reduced number of long-term bond issuances, which have pressured the division’s financial performance.
Forward-Looking Guidance
Looking ahead, Daiwa Securities Group Inc. remains cautiously optimistic about its prospects. The company reported a 2.5% increase in net operating revenues to JPY 147.8 billion, although profit attributable to owners saw a reduction. Daiwa aims to surpass its cost of capital with a targeted ROE of over 8% to 9% by the fiscal year’s end. The group is focused on enhancing the sustainability and diversity of its income structure, with strategic initiatives in wealth management and business portfolio expansion. There is a positive outlook for maintaining growth in both the Retail and Wholesale Divisions, contingent on favorable market conditions.
In summary, Daiwa Inc.’s earnings call showcased a mixed but promising financial performance. While challenges persist, particularly in global markets and the wholesale division, the company’s achievements in asset-based revenue and overseas operations provide a solid foundation for future growth. The Retail Division’s ongoing success further reinforces Daiwa’s potential to navigate and thrive in the evolving financial landscape.
