By Makiko Yamazaki
TOKYO (Reuters) -Nomura Holdings Inc said it is targeting an up to 90% jump in core pretax income in three years as Japan's biggest brokerage and investment bank plans to beef up advisory services in pursuit of revenue less vulnerable to market swings.
"We will work to expand businesses with stable revenue amid extremely high market volatility," Chief Executive Kentaro Okuda told a meeting with investors on Tuesday.
Nomura said it would aim for annual pretax income of 350 billion yen to 390 billion yen ($2.7 billion to $3.0 billion) for its three core divisions in the year to March-end 2025.
That would compare with the 205.2 billion yen the three divisions posted for the year through March 2022. The guidance also outstripped average estimates for company-wide pretax profit from three analysts surveyed by Refinitiv for both the year to March 2025 and the following year.
"It's doable in a strong market, but in the current environment with geopolitical concerns like the Ukraine war it seems to be a stretch," said analyst Michael Makdad of Morningstar Inc about Nomura's target.
It was also surprising that Nomura expected its fixed-income business to account for less of wholesale revenue in the medium- to long-term, given that the business has typically been a bigger revenue generator, Makdad said.
Enhancing stable revenue sources has been critical for Nomura, which has had a troubled history in attempts to expand globally with occasional major financial hits, including a $2.9 billion loss from the collapse of U.S. investment fund Archegos.
One of its growth drivers is the advisory business in global investment banking, particularly for sustainability-related deals driven by Nomura Greentech, a merger-and-acquisition advisor in clean technology. Nomura hopes to beef up advisory revenue by more than 50% over the next three years.
"We are now steering our business to focus on ESG," Okuda said at a subsequent news conference, referring to environmental, social and governance issues.
It also plans to boost wealth management businesses in Asia.
Shares of the bank finished little changed in Tokyo trade at 474 yen. The benchmark Nikkei index also finished flat.
NEW DIGITAL ASSET COMPANY
Nomura also said it will create a digital asset company this year allowing institutional investors to trade products linked to cryptocurrencies, stablecoins, decentralized finance and non-fungible tokens.
It said it wants to build a platform that can compete with crypto-native firms and operate across the crypto industry offering market-making for digital assets, providing investors with yield-generating crypto products and quantitative trading strategies, as well as operating a venture capital arm.
It will add 100 employees by 2024.
Global banks have been cautiously moving into crypto for several years, some building it within existing operations and others setting up new businesses.
Singapore's DBS Group (OTC:DBSDY) Holdings Ltd in 2020 launched a standalone cryptocurrency trading platform offering corporate investors and accredited investors crypto trading services for several digital assets.
($1 = 128.9100 yen)