Nomura Holdings Inc ADR American Depositary Shares

Good day everyone and welcome to today's Nomura Holdings first quarter operating results for fiscal year ending March 2020 for conference call. Please be reminded that today's conference call is being recorded at the request of the hosting company. If you have any objections, you may disconnect at this point in time. During the presentation, All the telephone lines are placed for listen-only mode. The question and answer sessions will be held after the presentation. Please note that this telephone conference contains certain forward-looking statements and other projected results, which involve known and unknown risks, delays, uncertainties, and other factors not under the company's control, which may cause actual results, performance, or achievements of the company to be materially different from the results, performance, or other expectations implied by those projections. Such factors include economic and market conditions, political events and investor sentiment, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions. With that, we would like to begin the conference. Mr. Takumi Kitamura, Chief Financial Officer, please go ahead.

Good evening, this is Takumi Kitamura, CFO of Nomura Holdings. I will now give you an overview of our financial results for the first quarter of the year ending March 2024. Please turn to page 2 of the document. Groupwide net revenue was 348.9 billion, up 7% quarter-on-quarter. Pre-tax income increased 104% to 46.3 billion. Net income was 23.3 billion yen, 3.2 times higher than the previous quarter. EPS was 7.4 yen, and annualized ROE was 2.9%. During the first half of the quarter, international market participants sat on the sidelines due to the bankruptcies of U.S. regional banks and the debt ceiling issue. Concerns of systemic risk dissipated in the second half of the quarter, and the fast pace of rate hikes in the U.S. that started over a year ago began to show signs of changing. In Japan, the move towards ending deflation and speculation over the changes to the BOJ monetary policy, combined with expectations of structural reforms to boost profitability at Japanese corporates, led to inflows of risk capital from abroad, lifting the Nikkei average to a 33-year high and bringing some bright news for the first time in a while. Amid this environment, as you can see on the lower right, three-segment income before income taxes increased 140% quarter-on-quarter to $28.7 billion. Our Japan-related businesses had a strong quarter, particularly our retail business. Now let's turn to the performance of each business. Please turn to page 5 for an overview of retail results. All the percentages quoted hereinafter are quarter-of-quarter comparisons. RetailNet Revenue increased 22% to $92.1 billion, and income before income taxes increased 133% to $22.9 billion. Since 2019, retail has been reforming its channels by allocating sales staff in line with the characteristics of clients. With a segment-based business strategy and expanded product and service offering, in March, we completed our reorganization with a major reshuffle of our people to better meet the needs of our clients. Under this optimized organizational structure, we provided detailed consulting services resulting in a stronger sales across all products and services and higher revenues. As shown on the bottom left, recurring revenue increased 2% to $34.2 billion, while bonus provisions increased in line with higher revenues. We stringently controlled non-personal expenses and maintained a recurring revenue cost coverage ratio of 50%. Flow revenue was $57.8 billion, an increase of 38% driven by significantly stronger sales of stocks and investment trusts. Please turn to page 6 for an overview of sales by product. Total sales for the quarter reached $5.4 trillion, up 21%. Of this, $2.8 trillion was sales of stocks. We saw the results of our efforts from last year to promote the attractiveness of investing in Japanese stocks, and a tailwind from the market rally from May led to a significant increase in sales of Japanese secondary stocks. Sales of investment trusts increased. 56% to 600 billion, with inflows into Japan and global stockpiles as shown on the bottom right. Please turn to page 7 for an update on KPIs. Net inflows of recurring revenue assets was negative 71.4 billion as some corporate clients sold out, excluding the corporate clients section which is affected by these large transactions. Net inflows were 10 billion yen. As shown on the right, recurring revenue assets reached a record high of $20.3 trillion, supported by the market rally. The bottom left shows flow business client numbers up 10% year-on-year at $896,000, mainly due to improved market segment and the reorganization of our people to provide services to inactive clients. Please turn to page 8 for an overview of investment management results. Net revenue declined 30% to $26.5 billion. Income before income taxes dropped 78% to $3.6 billion. As shown on the bottom left, investment loss was $6 billion, while private equity from Nomura Capital Partners booked unrealized gains. We posted unrealized losses related to investment in American Century Investments. However, business revenue grew 13% to $32.5 billion. The asset management business continued to deliver stable revenues and performance in our aircraft leasing business group. Please turn to page 9. As you can see on the top left Assets under management at the end of June were a record 76.1 trillion, which is higher than our March 2025 target of 75.8 trillion. Of course, market factors had a big part to play in this, but net inflows were 1.7 trillion, marking the highest level in 31 quarters since the second quarter of the year ended March 2016. Net inflows on the bottom left show the investment trust business posting inflows of $650 billion. MRF assets under management increased by $730 billion on inflows of idle funds created due to profit-taking, while Japan's stock-related ETFs booked net inflows of $40 billion. Main investment trusts excluding MRFs and ETFs reported outflows of $120 billion. Sales of U.S. and Japan stock funds continued, but we saw upflows from the Reopen Japan fund, with early redemptions planned due to rise in net asset value and from foreign bond funds. The Investment Advisory and International Businesses booked inflows of 1 trillion. In Japan, we won mandates for yen bond and global stock funds, while internationally inflows were driven by high-yield bond funds. As you can see on the bottom right, Alternative asset under management exceeded 1.5 trillion.

Please turn to page 10 for an update on our wholesale business. Net revenue increased 7% to 190.9 billion yen, and income before income taxes was 2.1 billion yen, improving from a loss last quarter. The graph on the bottom right shows Japan revenues of 69.2 billion yen, representing the strongest quarter since the third quarter of the year ended March 2016. Internationally, while the Americas improved from the previous tough two quarters, overall it was a challenging quarter as market participants remained on the sidelines in the first half of the quarter due to macroenvironment uncertainty. Please turn to page 11 for an overview of performance by business line. First, global markets. Net revenue increased 7% to 160.4 billion yen. Fixed income revenue was 97.4 billion yen, up 11%. Spread products made a significant contribution to revenues. In credit, the interest rate differential between Japan and overseas drove a strong increase in revenues from foreign-denominated bonds in Japan, while international regions also reported higher revenues. due to credit spread tightening and strong client activity. Macro product performance was roughly unchanged from last quarter. FXEM slowed in AEJ on lower volatility and slower client activity, while rates improved in the Americas and continued to perform well in Japan. Equities revenues increased 2% to 63 billion yen, although international client activity was slowed. Our Japan equity-related business continued to see inflows from outside Japan, and both cash equities and derivatives booked revenue growth. Please turn to page 12 for investment banking. Net revenue increased 3% to 30.5 billion yen. Despite ongoing declines in global fee pools, our advisory business booked stronger revenues on contributions from completed M&A deals in 2018. EMEA in focus sectors such as consumers and retail and healthcare. As shown on the right, we supported multiple sustainability-related transactions. In our financing and solutions business, ECM and DCM both slowed, but this was offset by our solutions and ALF businesses, resulting in flat revenues quarter on quarter. Please turn to page 13 for an overall overview of expenses. Group-wide non-interest expenses were roughly unchanged from last quarter at 302.6 billion yen. Excluding the impact of yen depreciation, expenses actually declined slightly from last quarter. Compensation and benefits was up 2% at 158.7 billion yen due to yen depreciation and a rise in base pay in our international business. Other expenses declined 7% mainly due to lower professional fees. Lastly, please look at page 14 for our financial position. The table on the bottom left shows tier 1 capital of 3.3 trillion yen up about 140 billion yen from the end of March. Risk-weighted asset increased by 570 billion yen from the end of March to 17.9 trillion yen. As a result, our CET1 capital ratio at the end of June was 16.5%. The waterfall chart on the bottom right shows changes to risk-weighted asset credit risk increased by 500 billion yen mainly due to yen depreciation. While market risk was also impacted by yen depreciation, the increase was limited to around 70 billion yen as we managed risk prudently amid the uncertain market environment. That concludes the data overview of our first quarter results. To sum up, we saw results from our ongoing initiatives this quarter and a tailwind from the Japan market rally helped improve performance both quarter-on-quarter and year-on-year. Retail completed its reorganization to better understand and client needs and was able to deepen its business across both interpersonal and non-face-to-face channels while also expanding its client base. Investment management delivered a broad range of products across both public and private markets to global investors, resulting in inflows that helped lift assets under management to a record high. Wholesale had a challenging quarter as volatility in international markets dropped and market participants were in risk-off mode. However, we saw some bright spots in our Japan-related businesses. We believe the momentum in the JGB and Japan stock markets will continue on the back of adjustments to Bank of Japan monetary policy, corporate actions by Japanese companies to improve profitability and capital efficiency, and a new NISA scheme due to be significantly expanded next year. Our retail business has remained solid in July, performing above the monthly average of the first quarter. In wholesale, our international business got off to a slow start, but fixed income and equities in Japan are doing well, and ECM deals and investment banking are showing signs of improving. We are having very active dialogue with clients and will continue to work to deliver the best solutions leveraging the full capabilities of the group. We are also making progress on the 50 billion yen cost reduction program announced at our investor day. We have already identified about 60% of the total to be implemented by March 2024 and we expect to see the full benefits of the cost reduction to start appearing next fiscal year. uncertainties remain in the international environment, we will continue to manage risk prudently and ensure stringent cost control while focusing on expanding our earnings. Thank you.