The five largest Japanese securities companies are seeing a significant increase in profits

New NISA launch expands customer base

The stock market, which reached a 34-year high last month, has benefited these companies significantly. SMBC Nikko Securities announced on April 30 that it had reversed an earlier loss of 39.8 billion yen and posted a profit of 16.2 billion yen in the period. The other four companies also reported significant earnings gains.

Rising stock prices have led to higher income from transaction costs on stocks and mutual funds. Furthermore, the launch of the new NISA in January has broadened their customer base.

However, despite the increase in revenues, they are still not comparable to the levels during the bubble period.

Why the change?

“In the past, fees were an important source of revenue for securities firms. However, since the 2000s, the rise of online brokers, who operate without physical branches, has led to rapid rate reductions,” says a 40-year-old investor. , which explains why they switched to online securities.

“Affordability is important,” adds an investor of 20 years.

In the fall of last year, SBI Securities and Rakuten Securities took a major step by completely eliminating trading fees for domestic stocks.

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

“I opened my account a long time ago with a brick-and-mortar brokerage firm, where I could get detailed personal advice, which was helpful. But now I find online brokers more convenient,” says another 40-year-old investor.

What’s next for the business model?

Experts suggest that traditional brokers need to differentiate themselves from online platforms and establish business models that target wealthier customers.

“The move from transaction-based fees to asset management, where clients entrust large amounts of money, could be critical,” said Shingo Ide, principal investigator at the Nissay Basic Research Institute. “For example, wealthy clients can deposit amounts like 100 million or 1 billion yen, which can provide stable income for securities companies with less labor.”

Globally, some securities firms that focus on asset management for the wealthy are already making outsized profits, and Japanese majors are expected to adopt similar strategies.

Source: ANN