BofA Securities upgraded Nomura Holdings Inc (TYO:8604) to Buy from Neutral and increased its price objective to ¥1,650 from ¥1,490, citing what it describes as a more sustainable return on equity (ROE) trajectory and an improving mix of earnings driven by steady growth across the firm's wealth management and investment banking operations.
In its note, the brokerage said it expects Nomura to report first-quarter net profit of ¥108.2 billion, a marked improvement versus the prior quarter. That rebound is attributed to a recovery in equity-method income, higher trading revenue and the absence of several one-off charges that had weighed on fourth-quarter results.
BofA signaled growing confidence that Nomura can maintain an underlying ROE of about 11%, a level the bank believes justifies a higher valuation multiple. While acknowledging the volatility inherent in investment banking results, BofA highlighted that recent profit growth at Nomura is increasingly backed by recurring revenue streams - specifically asset-based fees, wealth management and investment banking - which make earnings less reliant on swinging trading income.
The broker estimated an annualized first-quarter ROE of 11.6%, or 10.8% when excluding one-off gains. That marks the third straight quarter in which BofA’s adjusted ROE estimate has hovered around the 11% threshold. In response to these developments, BofA also raised its earnings-per-share forecasts for fiscal years 2027 through 2029, reflecting expectations for stronger trading and asset management revenue.
On shareholder returns, BofA noted that if first-quarter results align with its estimates, Nomura’s first-half dividend could reach ¥31 per share. The brokerage described that dividend level as implying a yield that remains attractive relative to many insurance peers, even after the stock’s recent rally. BofA further said it expects the company to announce an additional share buyback later in the fiscal year, although it does not anticipate that buyback to be announced alongside the first-quarter release.
Overall, the upgrade reflects BofA’s view that Nomura’s earnings base is becoming less dependent on volatile trading outcomes and more supported by recurring, fee-based businesses, together with a ROE profile that may allow investors to apply a higher valuation multiple.