JPMorgan tops foreign banks’ earnings in Japan on deals boom

[TOKYO] JPMorgan Chase out-earned global rivals in Japan last year after capitalising on a dealmaking spree fuelled by the Asian nation’s push to improve corporate governance.

Net income at the US lender’s local securities subsidiary more than doubled to 45.6 billion yen (S$398 million) in the year ended Mar 31, the highest in at least seven years, according to filings. That marked a rebound from the previous year’s retreat, reflecting a jump in merger advisory and underwriting business.

Japanese companies have stepped up acquisitions as well as sales of non-core units in recent years, providing more opportunities for investment banks. The trend has also stoked competition for talent at global firms from Citigroup to Deutsche Bank.

Morgan Stanley’s local securities unit posted a record 153.2 billion yen in revenue for the year ended Mar 31, partly on increased income from bond and stock underwriting and sales. Still, net income fell 2.3 per cent to 31.9 billion yen as the firm set aside liability reserves in line with its increased trading volumes.

BNP Paribas’s brokerage arm saw its profit slip 2.9 per cent to 20.6 billion yen in the same period as brokerage commissions slid.

The figures follow varied results at other major international banks, which closed their books earlier on Dec 31, as they contended with volatile markets.

Japan saw the most extreme market moves in decades last August, after the Bank of Japan (BOJ) raised interest rates. Stocks tumbled the most since the October 1987 crash and swings in bond prices hurt some traders, though equities have since recovered.

“Volatility in the Japanese government bond market increased sharply as the BOJ moved to normalise its monetary policy,” said Alberto Tamura, president of Morgan Stanley MUFG Securities. Together with the rebound in stocks, that led to “higher sales and trading activities in Japan in an eventful year”. BLOOMBERG