Nomura Holdings, Japan's biggest brokerage, reported a 31 percent rise in third quarter net profit on Wednesday after gains in Tokyo stocks boosted fees.

Nomura, which is expanding in Asia, Europe and the United States after buying a big chunk of Lehman Brothers in 2008, posted a net profit of 13.39 billion yen ($164.6 million) for the three months ended December 31, compared with 10.2 billion in the same period a year earlier.

In the previous quarter ended September 30 the brokerage eked out 1.1 billion yen in net income.

Japan's benchmark Nikkei average gained 9.2 percent in the most recent quarter compared with a 7.3 percent rise in New York's Dow industrials and a 6.3 percent increase in London's FTSE benchmark.

Nomura has chosen a riskier path than its main domestic rival, Daiwa Securities Group, which rather than compete globally with the elite of investment banks, such as Goldman Sachs and Morgan Stanley, is instead trying to turn itself into a major regional Asian company.

Daiwa's new president, Takashi Hibino, who will run the brokerage from April 1, warned that expanding through big mergers was risky for financial firms.

Nomura offered many of its new employees guaranteed bonuses to keep them from leaving after the Lehman deal and must now look for ways to control costs as tighter financial capital requirements loom and in order to match the profitability of U.S. securities houses such as Goldman Sachs, analysts say.

Nomura's third quarter result fell short of the consensus forecast of a 17.4 billion yen profit from four analysts surveyed by Thomson Reuters I/B/E/S. For the full business year to the end of March, the average net income prediction of eight analysts is 36.7 billion yen. Nomura does not release its own outlook.

Nomura's shares closed 4 percent higher before the earnings announcement, in line with a rise in the securities subindex.

($1=81.34 Yen)

(Reporting by Tim Kelly and Junko Fujita; Editing by Michael Watson)

Japan Morgan Stanley