Daiwa has another good quarter

Bloomberg

Daiwa Securities Group Inc. said Friday it posted a second straight quarterly profit, exceeding analysts’ estimates as the brokerage cut costs and trimmed staff.

Net income was ¥2.7 billion for the three months that ended June 30, compared with a loss of ¥9.4 billion a year earlier, Japan’s second-largest brokerage said. The result beat the median estimate of seven analysts for a ¥1.4 billion profit.

Daiwa Chief Executive Officer Takashi Hibino is trimming costs to cope with losses abroad, eliminating at least 500 positions in Europe and Asia since October. Daiwa’s earnings recovery may get a boost after it landed deals including Japan Airlines Co.’s initial public offering, while bigger rival Nomura Holdings Inc. was penalized as part of an insider-trading investigation.

“We’ll be looking closely for any further efforts to cut costs,” said Natsumu Tsujino, an analyst at JPMorgan Chase & Co.

Revenue was little changed at ¥113.8 billion last quarter from ¥113.6 billion a year earlier, Daiwa said. Costs fell to ¥82.8 billion from ¥94 billion a year earlier. Personnel expenses declined to ¥37.1 billion from ¥42.3 billion.

Trading profit dropped to ¥24.4 billion from ¥26.2 billion, the company said. Brokerage commissions slid to ¥8.8 billion from ¥10.5 billion. Underwriting fees slipped to ¥3.3 billion from ¥3.8 billion.

Daiwa was named global coordinator of Japan Airlines’ IPO, with Nomura and other firms to help underwrite the domestic offering, the carrier said Friday. Nomura was demoted from global manager, two sources said July 18.

Nomura, whose top two executives resigned last week to take responsibility for the insider-trading scandal, was ordered by regulators to improve its securities operations.

Daiwa has also been caught up in the insider-trading probe after an employee gave tips on Nippon Sheet Glass Co.’s 2010 public share offering to an overseas hedge fund.

The brokerage said last week it didn’t “systemically” leak information on public offerings to clients. Daiwa said it will cut CEO Hibino’s pay by 10 percent for three months.