Nomura Holdings, Inc. (ADR) (NYSE:NMR) controls one fifth of the Japanese public investment trust market and its retail and asset management businesses remain highly profitable. If global markets recover, Japanese investors will move away from their savings accounts and look for better investment opportunities. In this scenario, Nomura Holdings, Inc. (ADR) (NYSE:NMR) should grow its assets under management at a respectable rate.
Nontheless, I do not foresee a major improvement in the global economy, especially after the Fed’s indication of reducing stimulus.
The company posted better results for its third quarter. Consolidated gross profit reached $20.3 billion, a 15.6% jump year over year, while net income grew 12% to $4.93 billion. Mizuho Financial Group Inc. (ADR) (NYSE:MFG) leverages on the Japanese economy, which, as I have discussed, was showing slight recovery despite its volatility. Since domestic credit quality and asset prices have improved, the bank is experiencing better times. Plus, boosting trading profits and a bull market in Japanese securities have helped the company’s big stock portfolio.
However, a great part of the last decade found Mizuho Financial Group Inc. (ADR) (NYSE:MFG) under tough circumstances and it is hard to find many reasons to be optimistic about the company in the near-term. Despite the economy, the main issue for Mizuho Financial Group Inc. (ADR) (NYSE:MFG) is that it lacks competitive advantages against its peers and has no moat to rely on.
The company could greatly suffer if things do not go according to plans. The bank is currently facing macroeconomic headwinds in its home country. Low loan demand and problems with credit quality in its portfolio keeps new customers away. In addition, net interest margin is already low for the bank, dragging profitability.
Conclusion
Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU) remains exposed to Japan’s high volatility levels. However, I am very confident about the company’s alliance with Morgan Stanley (NYSE:MS), which should improve results.
It is difficult for me to make a case for investing in Nomura Holdings, Inc. (ADR) (NYSE:NMR) at anything but very low prices. The current scenario might not be the best for the company either, as it is uncertain.
Mizuho Financial Group Inc. (ADR) (NYSE:MFG) is not yet inspiring confidence. The company’s portfolio credit quality problems and low loan demand in Japan make me stay away from this stock for now.
Louie Grint has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Louie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Japanese Banks and the New Interest Rate Context: How Will They Perform? originally appeared on Fool.com is written by Louie Grint.
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