(Bloomberg) -- Nomura Holdings Inc.’s Chief Executive Officer Kentaro Okuda rewarded investors for sticking with a turnaround plan as his key investment banking and trading division returned to profit. The firm announced a buyback of up to 100 billion yen ($677 million). 

A strong showing in fixed income trading helped lift revenues in global markets, while an uptick in dealmaking and in its mainstay retail business also boosted earnings, Japan’s biggest brokerage said in a statement Wednesday. 

“The negative aspects have been addressed as their retail business recovers while their wholesale operations have bottomed out,” said Satoru Matsumoto, an S&P Global Ratings analyst, cautioning the job isn’t finished. “Costs are high, and they are falling short of generating profit commensurable with them. We are continuing to watch that.”

The result is a much needed boost for Okuda’s turnaround effort after earnings declined in his first three years in office. In recent months, he has turned to job cuts in trading and investment banking to trim costs after a slump in international activity. Elsewhere, Okuda has unveiled steps to build out profits in investment management and grow in private markets. 

Net income of around 50 billion yen in the three months ended Dec. 31 came in just above the average estimate of three analysts. Earnings a year earlier were boosted by a one-off gain as the brokerage sold part of its stake in consulting firm Nomura Research Institute. 

The latest results put Nomura on course to post an annual profit growth for the first time since he became CEO in April 2020. The firm was profitable in each of its three overseas regions for the first time in three years, as global markets saw client activity pick up in the latter half of the past quarter with the interest rate outlook becoming clearer. Business momentum in part prompted the buyback, Chief Financial Officer Takumi Kitamura said at a press briefing. 

A closely watched measure of costs at Nomura’s wholesale division improved to 89% from 96% in the previous quarter. In November, the brokerage unveiled an additional $100 million in cost cuts for the division, which houses global markets traders and investment bankers, as Okuda warned it was “significantly behind” its earnings targets. 

Net revenue from Nomura’s global markets business rose 11% as fixed income trading rebounded and as equity trading eeked out minor gains. 

Nomura said investment banking had its best quarter since the year ended March 2017 when comparisons became possible, underscoring the brokerage’s dominance in Japan. The performance there bucks the doldrums elsewhere where dealmakers have struggled with weak activity.

Rivals due to report earnings next include Deutsche Bank AG on Feb. 1 and London-based Barclays Plc on Feb. 20.

Revenue from the division serving retail investors at home rose 27% from a year earlier as it joined rival Daiwa Securities Group Inc. in enjoying a rebound linked to Japan’s rising stock markets. Daiwa earlier reported a surge in profits, driven by its retail brokerage and trading businesses.

Last year, Nomura slashed earnings targets across its main businesses and planned a review to revive profitability. Okuda in 2022 tapped Christopher Willcox to oversee the wholesale business, counting on the Wall Street veteran to bolster the key division. 

--With assistance from Taiga Uranaka.

(adds comment from analyst and Nomura’s CFO)

©2024 Bloomberg L.P.