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(Bloomberg) — Morgan Stanley posted record revenue in Japan driven by gains in share and bond trading as it pledged to help boost investment in the country.
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Net revenue at Morgan Stanley MUFG Securities Co., the US firm’s majority-owned brokerage venture with Japan’s largest banking group, rose 13% in the year ended March 2024 to 135.8 billion yen ($923 million), according to filings. That was the highest since the unit was established in 2010 and its second straight year of record revenue performance.
The bank is “committed to helping both global and Japanese investors” grow their activities in the country, said Alberto Tamura, chief executive officer of Morgan Stanley MUFG Securities, in response to queries from Bloomberg News about the results. The end of deflation, corporate governance overhauls and structural changes are “finally bearing fruit to power Japan’s economy,” he said.
The firm’s net income grew 0.4% to an 11-year high of 32.7 billion yen, outperforming rival global banks that also ended their financial year in March. BNP Paribas SA’s local brokerage posted a 33% drop in profit to 21.2 billion yen as costs grew. JPMorgan Chase & Co.’s Japanese securities arm saw its profit fall 32% to 18.8 billion yen. Representatives from JPMorgan and BNP Paribas declined to comment on their results.
A record-breaking equity rally until earlier this year has boosted trading at financial firms, while the Bank of Japan’s tightening policy shift has largely benefited their bond market operations. The country’s stock market is showing signs of a recovery after a steep selloff earlier this month that was partly triggered by concerns over the more hawkish policy, with bulls focusing on improving corporate profits.
Among Tokyo-based securities subsidiaries of foreign banks whose financial year ended Dec. 31, Goldman Sachs Group Inc. was the most profitable as it reaped gains from fixed income trading.
Foreign banks’ earnings can be uneven partly because individual firms have some ability to decide how much profit from global operations they should book to each geographical area, according to Bloomberg Intelligence analyst Hideyasu Ban.
Morgan Stanley MUFG Securities was one of two joint securities firms created after Mitsubishi UFJ Financial Group Inc. invested $9 billion in the US bank at the height of the global financial crisis. They reorganized some operations in the securities houses this year, with the aim of overtaking Japan’s top brokerage Nomura Holdings Inc.
That goal suffered a setback recently when they were hit with regulatory penalties for breaching client confidentiality rules.
–With assistance from Ken McCallum.
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