Daiwa Securities Is Japan's Second-Largest Independent Brokerage Firm

We look favorably on Daiwa’s decision not to chase its larger rival Nomura in international business and focus instead on its core businesses in Japan, where it has a defensible position. We think Daiwa’s record in the second half of the 2010s of achieving stronger returns than Nomura is evidence of the soundness of this decision. Nomura has made progress improving its overseas profitability, but our forecasts still project a higher return on equity for Daiwa than for Nomura over the coming five years. We also think Daiwa is slightly ahead of Nomura in realigning its retail business away from a transaction-fee-based model toward one focusing on wealth management.