Japan's Top Five Securities Firms See Significant Profit Increase

May 01, 2024 | News On Japan

TOKYO - The earnings reports from Japan's five major securities firms are in, showing strong performances boosted by the rising stock market.

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The stock market, which hit its highest levels in 34 years last month, has benefitted these firms significantly. SMBC Nikko Securities announced on April 30th that it had reversed a previous loss of 39.8 billion yen, posting a profit of 16.2 billion yen this period. The other four firms also reported significant profit gains.

Increased stock prices have led to higher revenue from transaction fees on stocks and investment funds. Additionally, the launch of the new NISA in January has broadened their customer base.

However, despite the rise in revenue, it still does not compare to the levels seen during the bubble period.

Why the Change?

"In the past, fees were a major source of revenue for securities firms. However, since the 2000s, the rise of online brokerages, which operate without physical branches, has led to rapid fee reductions," states a 40-year-old investor, explaining why they switched to online securities.

"Affordability matters," adds a 20-something investor.

In the fall of last year, SBI Securities and Rakuten Securities made a significant move by eliminating trading fees for domestic stocks altogether.

Cost-conscious individual investors have migrated to these online platforms, eroding the traditional fee-based business model.

"I initially opened my account a long time ago at a physical securities firm where I could get detailed advice in person, which was beneficial. But now, I find online brokerages more convenient," shares another 40-year-old investor.

What's Next for the Business Model?

Experts suggest that traditional brokerages need to differentiate from online platforms and establish business models targeting wealthier clients.

"Transitioning from transaction-based fees to asset management, where clients entrust large sums, could be crucial," suggests Shingo Ide, Chief Researcher at Nissay Basic Research Institute. "Wealthy clients, for example, might deposit sums like 100 million or 1 billion yen, which can secure steady income for securities firms with less labor."

Globally, some securities firms focusing on wealth management for the affluent are already achieving extraordinary profits, and Japanese majors are expected to adopt similar strategies.

Source: ANN

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