Japan's Big 3 Securities Firms Q1 FY2027: SBI tops profit growth

Buoyant markets provided a common tailwind for all three firms. Trading, underwriting and institutional business expanded, lifting revenue and profit across the group.

• Daiwa led revenue growth at 33.1%, followed by SBI at 28.8% and Nomura at 18.6%.
• SBI posted the fastest profit growth at 149.9%, ahead of Daiwa at 114.3%. Nomura's profit rose 32.0%.
• Nomura benefited from growth in its wholesale business as active market trading boosted revenue.
• Daiwa gained from retail trading and large IPOs. Brokerage commissions rose 65.3%, while underwriting commissions climbed 91.8%.
• SBI's private equity investment business expanded sharply, lifting pretax profit by 328.0%.

Profit figures here use the comparative measures provided in the source materials. Company disclosures and accounting definitions differ, so direct comparisons require care. Nomura's operating margin was not available, preventing a like-for-like comparison with Daiwa's 35.2% and SBI's 39.5%.

SBI led on profit momentum. Its profit figure was ¥225.8 billion, above Nomura's ¥211.5 billion and Daiwa's ¥77.5 billion. SBI's 149.9% year-on-year increase also far outpaced Nomura's 32.0% gain.

Private equity was the key differentiator. Pretax profit from the business reached ¥119.9 billion, up 328.0% from a year earlier and accounting for more than half of consolidated pretax profit. SBI also raised its planned interim dividend to ¥30 per share from ¥10.

Nomura had the more modest growth rate by comparison. Its revenue of ¥1.3717 trillion was the largest among the three, but grew 18.6%, below Daiwa's 33.1% and SBI's 28.8%. Net profit rose 39.2% to ¥145.6 billion, slower than Daiwa's 80.6% growth and SBI's 75.0%.

Nomura did not report a decline. Its net profit was the second-largest of the three, behind SBI's ¥148.1 billion. The label of “loser” applies only to the growth-rate comparison.

Nomura continued to rely on market activity, while wealth management and asset management also performed steadily. Its ROE improved to 15.4% from 12.0% a year earlier. The figure points to strong earning power, though rising costs remain worth watching.

Daiwa stood out for growth in trading and underwriting. Brokerage commissions rose 65.3%, and underwriting commissions, including those from large deals, increased 91.8%. Daiwa Next Bank also completed its acquisition of Orix Bank, aiming to expand banking income.

SBI's standout feature was a surge in private equity profit. Its financial services business also supported earnings, giving the group multiple sources of income. Private equity returns, however, can depend on exits and market conditions. The dividend increase signaled a focus on shareholder returns.

Even after a strong quarter, earnings could come under pressure if market conditions turn less favorable. Companies with greater exposure to trading and investment income are particularly vulnerable to market swings.

• Changes in share prices, interest rates or foreign exchange can weaken customer trading and investment returns.
• Quieter markets could reduce commissions and trading revenue.
• Private equity profits depend on the timing of exits, so SBI's rapid growth may not continue.
• If costs keep rising at Nomura, a market downturn could lead to a sharper profit decline.
• Daiwa must integrate its banking acquisition and turn it into a source of stable earnings.
• Regulatory changes and failures in information management are risks for an industry handling customer assets.

Investors should look beyond near-term profit growth to the diversity of earnings sources and each firm's ability to adjust costs.

Nomura retained the top spot in revenue, while SBI ranked first on the profit measure. The largest company by revenue is not necessarily the fastest-growing in profit.

Daiwa led the group in revenue growth. SBI lifted profit through private equity, while Nomura benefited from contributions across a range of businesses, led by wholesale. Competition among securities firms is expanding beyond trading volumes to include investment, asset management and ties with banking.

The work varies by company, even within the same securities industry. Nomura combines wholesale services for institutional investors and companies with asset management and wealth management. Daiwa offers exposure to retail trading, IPOs and expanding banking ties. SBI spans financial services as well as investment businesses and digital fields.

In a buoyant market, results in sales and trading can show up quickly in earnings. Building revenue streams less exposed to market swings remains a challenge for all three. Applicants should consider not only growth rates but also the business area, customer base and evaluation system of the role.