Nomura Holdings (NMR.US) has seen its price-to-book ratio reach the 1x mark for the first time since 2016, meeting a key benchmark set by the Tokyo Stock Exchange in its shareholder value enhancement initiatives. On Tuesday, Nomura's Tokyo-listed shares rose as much as 1.1% to ¥1,189.5, hitting their highest level since October 2008 and pushing its P/B ratio above 1x. At the time of writing, the stock closed up 0.72% at ¥1,185.0.

As part of corporate governance reforms and capital efficiency improvements, the Tokyo Stock Exchange has been urging companies with P/B ratios below 1x to take corrective action. Before Tuesday, Nomura lagged behind several Japanese brokerages that had already met this key metric—Daiwa Securities Group surpassed the 1x benchmark in January 2024, while Matsui Securities, Monex Group, Toyo Securities, and Marusan Securities all maintained P/B ratios above 1x.

**Strong Q2 Earnings Performance** Since hitting its year-to-date low on April 7, Nomura’s shares have surged approximately 77%. Better-than-expected Q2 earnings further accelerated the stock’s rally in November. Boosted by equity trading and M&A advisory businesses, Japan’s largest brokerage reported a net profit of ¥921 billion (down 6.4% YoY) for the quarter ending September 30, significantly exceeding analysts’ consensus estimate of ¥701 billion.

Nomura’s Q2 results showed an annualized return on equity (ROE) of 10.6%, marking the second consecutive quarter above 10% (12% in Q1) and exceeding the company’s 8%-10% target range. Senior analyst Hideyasu Ban noted that the above-target ROE "alleviates concerns about downside risks to earnings."

Before stock splits and dividend adjustments, Nomura’s shares had reached an all-time intraday high of ¥3,510 in February 2000, briefly making it the world’s second-largest securities firm by market cap, surpassing Goldman Sachs. However, the 2008 financial crisis led to two consecutive years of net losses, exposing the vulnerability of its brokerage-heavy business model during market downturns. Since then, Nomura has shifted toward more stable, less market-dependent businesses like asset management and M&A advisory.

**Business Expansion to Sustain Profit Recovery** Amid Japan’s stock market boom and a surge in retail investing, CEO Kentaro Okuda aims to sustain Nomura’s profit recovery, which began last year. Increased household investments and corporate client activity have driven earnings above expectations in recent quarters.

Following the Q2 results, CFO Hiroyuki Moriuchi stated, "We believe the latest performance demonstrates that our sustained efforts in recent years are bearing fruit." Okuda has pledged to strengthen businesses from wealth management to asset management and dealmaking to solidify the recovery.

"Having built a stronger, more stable earnings foundation, we now aim for significant long-term growth—I can clearly sense this momentum," Okuda said on Tuesday.

After multiple cost-cutting rounds, Nomura has shifted to expansion mode. This week, it completed the $1.8 billion acquisition of Macquarie Group’s U.S. and European public asset management businesses. In wealth management, Okuda highlighted efforts to deepen ties with high-net-worth clients, including those who built wealth through IPOs and stock options, while leveraging digital tech and AI for cost-efficient personalized services.

Nomura is also expanding in private markets, broadening offerings in public and alternative investments for individuals and institutions. Okuda noted that shifting corporate mindsets from asset ownership to other strategies are creating opportunities, particularly in investment banking, with Japanese M&A volumes hitting record highs.

**Optimism Amid Past Challenges** Okuda’s upbeat tone contrasts with last year’s cost-cutting announcement, when Nomura faced setbacks including regulatory penalties for market manipulation and an employee’s alleged involvement in a robbery and attempted murder at a client’s home—incidents that led to pay cuts for Okuda and other executives.

While accelerating growth, Okuda emphasized that Nomura "will never compromise on safety," focusing on early risk detection amid lingering market volatility. He also referenced the $2.9 billion loss from Bill Hwang’s Archegos collapse, stating the firm has since strengthened its risk management framework.

With profit recovery gaining momentum, analysts see further upside for Nomura. Tokai Tokyo Intelligence Laboratory’s Tatsuo Majima recently raised his price target from ¥1,000 to ¥1,700, citing improved recurring income and earnings stability. Others note that potential economic stimulus under Japan’s Sanae Takaichi government could benefit equities, possibly fueling a revaluation for Nomura as Japan’s top brokerage.