Daiwa Securities: A Record Q1 and the ORIX Bank Catalyst
Profit growth across all divisions, a record-high ROE, and a newly completed banking acquisition signal a structural shift.
8601.T · Earnings Call · 2026-08-03
Daiwa Securities Group reported its strongest first quarter in history, with profit growing across every division and ROE reaching 12.7%. The results, released on August 3, reflect a company that believes it is riding a structural wave of capital market engagement, not just a favorable market backdrop. “In the first quarter of fiscal year 2026, we achieved profit growth across all divisions with ROE reaching 12.7%.” — Kotaro Yoshida, Managing Executive Officer and CFO · 2026-08-03
The numbers are compelling: net operating revenue rose 11.4% to ¥220.3 billion, ordinary income jumped 31.4% to ¥88 billion, and profit attributable to owners reached ¥56.4 billion. More tellingly, base income—the company's stable earnings KPI—soared 83.8% year over year to ¥62.8 billion, far ahead of the midterm plan's run-rate. “We are progressing at a pace that significantly exceeds the final year target of JPY 150 billion set in the medium-term management plan.” — Kotaro Yoshida, Managing Executive Officer and CFO · 2026-08-03 This wasn't just a one-off beat; the company emphasized that the structural shift of savings into investments is accelerating, and Daiwa is positioned to capture it.
The ORIX Bank Pivot
The most consequential strategic move this quarter was the completion of ORIX Bank as a wholly owned subsidiary—the group's 100th subsidiary. “Also, today, we completed the process of making ORIX Bank, our 100th subsidiary.” — Kotaro Yoshida, Managing Executive Officer and CFO · 2026-08-03 The acquisition, first announced in May, is central to Daiwa's wealth management growth strategy. In Q&A, CFO Yoshida elaborated on the integration, noting that while direct negotiations have been limited by gun-jumping rules, the financial logic remains intact:
Maybe the cost of the integration and the earnings side will be offset against each other.
This pragmatic stance suggests the market should not expect a major earnings drag from the integration, as the cost of merging Daiwa Next Bank and ORIX Bank is likely to be balanced by revenue synergies.
The ORIX Bank keyword is new to Daiwa's vocabulary—it didn't appear in the past year's keyword trajectory, marking a genuine strategic pivot rather than incremental tinkering. The acquisition gives Daiwa access to ORIX Bank's ¥5.3 trillion deposit base (as of June), strengthening its gateway function for the savings-to-investment shift.
Wealth Management: Record Asset-Based Revenue
Wealth management delivered net operating revenue of ¥88.2 billion, up 8.8%, and ordinary income of ¥37.2 billion. The star was asset-based revenue, which hit a record ¥35.8 billion, driven by trust agency fees and wrap-related income. The fund wrap business continues to grow, with contracted AUM reaching ¥6.765 trillion, a record. The average tenure of wrap customers is now 11–12 years, indicating the sticky, long-term nature of this capital. “The customers with the disposal of the unrealized gains in 2026, about 95% of the fund wrap customers, the account holders had the positive unrealized gain. The June end of this year, 99% of the customers or more than that have the surplus or the positive unrealized gain.” — Kotaro Yoshida, Managing Executive Officer and CFO · 2026-08-03 This resilience was even more notable given market volatility from geopolitical risks—clients didn't panic, and the advisory model proved its worth.
Asset Management, a core Asset Management pillar, also shone. Securities Asset Management saw ordinary income surge 37.6% to ¥15.7 billion, a record, as publicly offered investment trust AUM surpassed ¥43 trillion. The operating leverage is powerful because costs are largely fixed. “In terms of the Securities Asset Management, as you know, from the earnings that we get from AUM and in terms of the cost, it's more a lot of fixed cost. It means that against the increase of the earnings, the cost increase is limited.” — Kotaro Yoshida, Managing Executive Officer and CFO · 2026-08-03 The addition of Global X (U.S. ETF provider) has added a differentiated product lineup, and the Japan Post Insurance alliance continues to bring in advisory contracts.
Global Markets and the Road Ahead
Global Markets delivered ordinary income of ¥18.1 billion, up 2.3% sequentially, with equities benefiting from strong order flows and favorable position management. However, CFO Yoshida tempered expectations for Q2, noting that July has been slower: “After June, entering into the month of July, do we see any big change? Not a big one.” — Kotaro Yoshida, Managing Executive Officer and CFO · 2026-08-03 He emphasized that client flows remain solid, but the high base from Q1 makes sequential growth challenging.
The Wealth Management segment, by contrast, is tracking at about the same pace as Q1 average, suggesting continued momentum. The company also noted that the current quarter has seen strong demand for hedging products in FICC, as interest rate volatility and currency swings increase.
Overall, Daiwa's Q1 was a clear upside inflection, and the ORIX Bank acquisition provides a new growth vector. The synergies may not be immediate, but the strategic logic is sound. Risks include market volatility, integration execution, and potential dilution from AT1 issuance to support the bank's capital adequacy, which CFO Yoshida acknowledged is under consideration: “We have been continuing to consider this and we are planning. In terms of the schedule, it's not decided yet.” — Kotaro Yoshida, Managing Executive Officer and CFO · 2026-08-03 This capital stack issue is worth watching, but the underlying earnings power is evident.
Daiwa enters the reminder of FY2026 with a strong hand. The question is whether it can sustain this pace—and whether the ORIX Bank integration truly pays off. If the structural shift thesis holds, this could be the start of a new earnings plateau.