Release Date: January 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Daiwa Securities Group Inc (DSECF) reported a 0.3% increase in net operating revenues for Q3, indicating growth in their financial performance.
• The wealth management division showed a real increase in both revenue and profit, driven by increased sales of equity investment trusts and wrap account service contracts.
• The asset management division achieved a record profit, with gains in real estate and alternative asset management.
• Global markets and investment banking divisions saw significant profit increases, particularly in the ECM business and domestic M&A.
• Overseas operations reported a 72.6% increase in ordinary income, with strong performance in Europe, Asia, and Oceania.

Negative Points

• Ordinary income decreased by 13.5% compared to the previous quarter, excluding certain gains.
• Profit attributable to owners of the parent company decreased by 13.3%.
• SG&A expenses increased by 4.2%, driven by higher personnel expenses and trading-related costs.
• Daiwa Next Bank's ordinary income declined by 22.5% due to factors like spread compression.
• Real estate asset management saw a 21.3% decrease in net operating revenues.

Q & A Highlights

• Warning! GuruFocus has detected 1 Warning Sign with DSECF.

Q: Can you elaborate on the performance of the wealth management division in Q3 2024? A: The wealth management division saw net operating revenues of JPY66 billion, up 8.9%, and ordinary profit of JPY21 billion, up 32%. This was driven by increased client investment activities, particularly in Japanese and foreign equities, and a rise in underwriting deals. The division also benefited from increased distribution commissions for investment trusts and high asset-based revenues, which accounted for 49.3% of the division's net operating revenues. (Respondent: Unidentified_1)

Q: How did the global markets and investment banking division perform? A: The global markets division reported net revenues of JPY40.3 billion, up 10.8%, with ordinary income rising 37.1% to JPY9 billion. Equity revenue increased, supported by foreign equities and sales related to the unwinding of cross-shareholdings. The investment banking division saw net revenues of JPY25.3 billion, up 33.1%, and ordinary income of JPY5.5 billion, up 383.6%, driven by strong underwriting and M&A activities. (Respondent: Unidentified_1)

Q: What were the key drivers behind the asset management division's performance? A: The asset management division achieved net operating revenues of JPY15.1 billion, up 5.9%, although ordinary income slightly decreased by 1.3% to JPY7 billion. The division secured a net capital inflow of JPY190.3 billion from publicly offered investment trusts, marking a record high in publicly offered securities investment trust assets. (Respondent: Unidentified_1)

Q: Could you provide insights into the performance of Daiwa's overseas operations? A: Overseas operations reported a total ordinary income of JPY7.9 billion, an increase of 72.6% quarter-on-quarter. In Europe, P&L improved with recovering M&A revenues, while Asia and Oceania saw record-high ordinary income due to wealth management and strategic investments. In the Americas, FICC revenues increased significantly, boosting profits. (Respondent: Unidentified_1)

Q: What are the expectations for the fourth quarter and beyond? A: The company expects the positive momentum from Q3 to continue into Q4, driven by ongoing customer asset consulting and capital recycling strategies. The focus remains on maximizing customer asset values and building a resilient revenue base against market fluctuations. The company is well-positioned to capitalize on growth opportunities in the Japanese market. (Respondent: Unidentified_1)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.