Whether the record pace set in Q1 will be maintained in H1

In Q1, profit before finance costs was ¥686.7 billion, up 31% year on year, profit before tax was ¥211.5 billion, up 32%, and net income was ¥145.6 billion, up 39%. The results presentation explained that all four major divisions achieved higher revenue and profit than in the previous quarter, indicating an improvement that was not dependent on a single division. The increase in net income from ¥104.565 billion in the same quarter of the previous year to ¥145.561 billion also supports the improvement at the bottom-line level.

By division, profit before tax was ¥71.1 billion for Wealth Management, ¥45.0 billion for Investment Management, ¥93.3 billion for Wholesale and ¥3.6 billion for Banking. While aggregate profit from the major divisions increased substantially, “Other” posted a loss of ¥7.025 billion. Consolidated profit before tax of ¥211.5 billion therefore does not directly represent the underlying earnings of the individual businesses.

The company cited expansion of its recurring-revenue businesses, growth in assets under management, increased client activity, favourable market conditions, expansion of its overseas business and the absence of one-time costs recorded in the previous quarter as factors behind the increase in profit. However, it did not provide a bridge breaking down the 31% year-on-year increase for the company as a whole by factor amount, and operating profit was not disclosed. Accordingly, H1 will require further confirmation of the factors driving the change from profit before tax to net income and the extent to which higher costs absorbed revenue growth.

At the next results announcement, a comparison with standalone Q2 profit before finance costs of ¥686.7 billion, profit before tax of ¥211.5 billion and net income of ¥145.6 billion will be useful. Even if these figures are not reached, growth against the previous year, continued profit growth in the four major divisions and improvement in “Other” should be assessed separately. The Q1 materials did not provide a full-year forecast, the profit required for the remaining period or assumptions for foreign exchange rates, interest rates and market conditions. Full-year sustainability should therefore not be judged from H1 results alone.