UPDATE 2-Daiwa posts Q3 profit, boosted by Sanyo stake sale

* Net profit 26.4 bln yen vs 54.2 bln yen consensus estimate

* Losses on trading, property hurt

* Helped by sale of Sanyo Elec stake, share underwriting

* Shares end down 3.8 pct prior to announcement
(Recasts, adds executive comments)

By Junko Fujita

TOKYO, Jan 29 (BestGrowthStock) – Daiwa Securities Group (8601.T: ),
Japan’s No. 2 brokerage, reported a smaller-than-expected
quarterly profit as losses on trading and property erased part of
the gain from the sale of its stake in Sanyo Electric.

Daiwa, which competes with Nomura Holdings (8604.T: ), posted a
26.4 billion yen ($294 million) net profit for October-December,
also helped by fees for managing a rush of share offerings by
Japanese firms.

The result marked its third straight quarterly profit and a
big improvement over the 53 billion yen loss a year earlier at
the height of the financial crisis.

But it fell far short of market expectations. Three analysts
surveyed by Thomson Reuters I/B/E/S forecast on average a profit
of 54.2 billion yen.

Daiwa said its profits were dented by losses on real estate
investments, its trading operations, and a tax-related charge.

In the third quarter, Daiwa sold a stake in Sanyo Electric
(6764.T: ), the world’s largest rechargeable battery maker, to
Panasonic Corp (6752.T: ). Other investors in Sanyo — Goldman
Sachs (GS.N: ) and Sumitomo Mitsui Financial Group (8316.T: ) — also
sold stakes to Panasonic.

Corporate Japan raised $33.5 billion by selling new equities
in the latest quarter, five times more than a year earlier,
according to Thomson Reuters data.

Daiwa handled the share sales of NEC Corp (6701.T: ), Mazda
Motor (7261.T: ), T&D Holdings (8795.T: ) and others. It ranked as
the No. 3 underwriter for stocks and convertible bonds for the
quarter, lagging Nomura and Morgan Stanley (MS.N: ) (Read more about the money market today. ), according to
Thomson Reuters.

“The investment banking business and sale of our Sanyo stake
helped us post profits,” Daiwa Chief Financial Officer Nobuyuki
Iwamoto told a news conference.

But the end of a 10-year-old investment banking joint venture
with Sumitomo Mitsui Financial Group (SMFG) (8316.T: ) has raised
concerns among investors over how well Daiwa will be able to meet
rising competition for investment banking deals.

SMFG, Japan’s third-largest bank, is now expanding its
brokerage business after buying Nikko Cordial Securities. And
Nikko Cordial has already started eating into Daiwa’s market
share.

Nikko Cordial was the No.4 yen bond underwriter in the
October-December quarter, surpassing Daiwa, which ranked No.5,
according to Thomson Reuters data. Daiwa was the top yen bond
underwriter for the July-September period.

Daiwa shares closed down 3.8 percent on Friday before the
announcement, compared with the 1.9 percent loss for Tokyo’s
brokerage sector subindex (.ISECU.T: ). The shares have fallen
about 50 percent over the past six months, in line with the
index.

Investing Research

(Reporting by Junko Fujita; Editing by Muralikumar Anantharaman
and Edwina Gibbs)

UPDATE 2-Daiwa posts Q3 profit, boosted by Sanyo stake sale