Source : investing, 2024/10/22, Tuesday
On Tuesday, Bank of America Securities re-covered Nomura Holdings (NYSE:NMR), issuing a neutral rating and setting a target rate of $5.79. The company highlighted a fair price-to-book value (P/B) ratio of 0.78x Nomura, based on return on equity (ROE) 7% rate, cost of capital of 9%, and no growth expected. However, due to short-term uncertainty surrounding potential regulatory sanctions.
Bank of America Securities applied a 10% discount on the P/B ratio, lowering its price target.
The analyst from Bank of America Securities noted that while Nomura’s earnings growth has been stable since mid-fiscal 3/24.
the company’s earnings have shown significant volatility historically. The analyst pointed out that the wholesale business.
which is about twice the volume of wealth management (WM) business in terms of total revenue, contributes to this volatility.
especially due to volatility in global markets within the wholesale sector.
Despite the growth in asset-based earnings from wealth management and investment management.
as well as the investment bank’s fees, these factors are not expected to significantly affect the short-term volatility faced by global markets. This assessment suggests that while there are positive aspects to Nomura’s work.
the potential impact of regulatory sanctions is a noteworthy concern that tempers expectations.
Nomura’s wealth management and investment management business has been identified as areas of continuous growth. However, the company’s analysis suggests that this growth is overshadowed by the short-term volatility of global markets.
which is heavily influenced by the wholesale side of the business.
Bank of America Securities’ price target of $5.79 for Nomura Holdings reflects a cautious stance.
while acknowledging the company’s stable earnings growth in certain areas and the challenges it faces with market volatility and regulatory uncertainties. A neutral rating refers to a stock’s wait-and-watch approach, where the market evaluates the potential outcomes of Nomura’s regulatory issues.
In other recent news, Nomura Holdings faces possible sanctions from Japan’s Securities Control Commission (SESC) for alleged market manipulation activities. Meanwhile, JPMorgan Chase & Co. resumed Nomura’s coverage.
with a neutral rating set, acknowledging the company’s potential to excel depending on the business environment. However, JPMorgan Chase & Co. also noted that Nomura appears to lag behind Daiwa Securities Group in terms of profit stability and capital allocation efficiency.
In earnings news, Nomura reported a steady increase in net income and net income for the first quarter of the fiscal year ending March 2025. The company’s net revenue increased by 2% to 454.4 billion yen, income before tax by 12% to 102.9 billion yen.
and net income by 21% to 68.9 billion yen. The wealth management and asset management sectors saw growth, while the wholesale segment saw a decline in net revenues.
In terms of market expectations, major brokerages, including JPMorgan Chase & Co., Citigroup Inc., Wells Fargo, Goldman Sachs Inc., Nomura, Deutsche Bank, Morgan Stanley, and Barclays.
expect the Federal Reserve to cut interest rates in the coming months. The consensus points to a 25 basis point cut, following recent economic indicators such as rising unemployment in the United States and rising retail sales in July.
InvestingPro’s recent data provides additional context for Bank of America Securities analysis for Nomura Holdings (NYSE:NMR).
The company’s P/B ratio of 0.67 as at the last twelve months ending in the first quarter of 2025 is closely aligned with Bank of America Securities’ estimate of P/B fair ratio of 0.78x.
supporting their valuation approach. Nomura’s current P/E ratio of 11.09 and the ratio of P/E futures of 10.91 indicates that the stock is trading at relatively modest valuations.
which may be attractive to value investors despite the short-term uncertainty highlighted in the report.
InvestingPro’s advice reveals that Nomura has maintained dividend payments for 33 consecutive years.
demonstrating a commitment to shareholder returns even in volatile market conditions. This track record may provide some stability for investors concerned about the volatility of the company’s earnings. In addition, Nomura’s liquid assets that exceed short-term liabilities indicate a strong financial position.
which could help the company deal with the potential regulatory sanctions mentioned in the Bank of America Securities report.
For investors looking for a more comprehensive analysis.
InvestingPro offers 7 additional tips to Nomura Holdings, providing deeper insights into the company’s financial health and market position.
