Nomura Holdings Inc ADR American Depositary Shares

Good evening. This is Takumi Kitamura, CFO of Nomura Holdings. I will now give you an overview of our financial results for the first half and second quarter of the year ending March 2024 using the document titled Consolidated Results of Operations. Please turn to page 2. Group-wide net revenue for the first half period increased 16% year-on-year to 716.7 billion yen. Income-before-income taxes grew 138% to 103 billion yen, while net income rose 3.2 times to 58.9 billion yen. Diluted EPS was 18.62 yen, and ROE was 3.6%. The six-month period started with international market participants taking a wait-and-see stance as the U.S. faced bank failures and debt ceiling problems that was followed by uncertainty in fixed income markets as the outlook for the federal funds rate changed. dramatically, and oil prices spiked, lifting the U.S. 10-year Treasury rate to a 16-year high. Overall, equity markets remained robust, but towards the end of the first half, investors became nervous over a correction in tech stocks, driven by concerns of higher rates for the longer. Japan, meanwhile, witnessed several bright spots for the first time in a while. We saw signs of moving out of deflation, speculation of the BOJ shifting its monetary policy stance, and expectations of reforms in the corporate sector aimed at boosting profitability. All these factors converge to bring in money flows from overseas, lifting the Nikkei stock average to a high level. The market rally is also prompting a nascent shift in willingness to of corporates to invest for growth. Amid this environment, three-segment income before income taxes increased 79% to 89.2 billion yen, as shown on the bottom right. Retail saw a marked increase in client engagement in the high-net-worth shapes, where we significantly increased the number of sales partners through a reorganization which ended this spring aimed at better meeting the needs of our clients, spurred On by the Japan stock market rally, retail reported a strong increase in income before income taxes, which stood at 52 billion yen. Investment management booked 2.3 trillion of net inflows, lifting assets under management at end of September to a record high of 76.5 trillion. As a result, stable business revenue increased by 9%. Investment gain loss, which impacted performance last year, improved. and investment management returned to profit with income before income taxes of 26.8 billion. In wholesale, equities posted a 10% gain in revenues, and investment banking reported a revenue increase of 24%. However, fixed income revenues declined 15% as macro products such as international rates and forex and emerging markets slowed, yen depreciation and inflation overseas impacted costs, and Income before income taxes declined 77% to 10.4 billion. Today, we also announced a dividend of 8 yen per share for shareholders on record as of end of September. Next, let's look at second quarter results. Please turn to page 3. The percentages quoted from now all refer to quarter-on-quarter changes. Net revenue increased 5% to 367.8 billion. Income before income taxes grew 23% to 56.7 billion. Net income was up 51% at 35.2 billion. EPS was 11.21 yen and ROE was 4.3%. Three-segment income before income taxes jumped 111% to 60.5 billion yen. As shown on the bottom right, all divisions reported stronger pre-tax income. Please turn to page 6 for an overview of retail performance in the second quarter. Net revenue in retail increased 7% to $98.9 billion, and income before income taxes grew 27% to $29 billion, both representing the strongest results in six years since the October to December quarter in 2017. As I mentioned, the reorganization we did earlier in the year led to more client interactions in the quarter. The number of flow business clients increased substantially over the last year, and we saw robust sales of Japanese stocks and investment trusts. This led to a further 4% increase in flow revenue from the already strong previous quarter. We booked net inflows of recurring revenue assets, one of our KPIs across all products and services during the quarter. Favorable market conditions helped lift recurring revenue to a record high of $38.9 billion. With net revenue gaining 7% and expenses up just 1%, our recurring revenue cost coverage ratio rose to 56%. Base 7 shows sales by product. This quarter, we have changed how we calculate bond sales. We now exclude repo transactions for corporate clients because they were clouding true performance given they are short-term and transaction values fluctuate widely each quarter. Figures from last quarter and earlier have been reclassified to make comparisons possible. Under the new definition, Total sales increased 20% from the strong prior quarter to 5.1 trillion. Sales of stocks increased 25% to 3.48 trillion. Sales of Japanese stocks grew strongly as sales partners met the needs of clients and the stock market rallied. Primary transactions also started to recover. Bond sales increased 15% to $750 billion driven by a large contribution from the sale of foreign bond for Toyota Motor Credit Corporation in July. Investment trust sales increased 4% to $620 billion. With client risk appetite on the rise, we reported inflows into a wide range of products, particularly overseas growth stock funds. Please turn to page 8 for an update on KPIs. The top left shows net inflows of recurring revenue assets of 128.6 billion. Recurring revenue assets shown on the top right were roughly flat at 20.2 trillion but remained high at over 20 trillion yen throughout the quarter, driving strong growth in recurring revenues as represented by the red line. The bottom left shows the number of flow business clients at 1.25 million at the end of September, up 16% over the last year as we see the results of significantly increasing sales partners in the high net worth space to strengthen our approach to clients we weren't sufficiently providing services to in the past. Please turn to page 9 for investment management.

Net revenue increased 70% to 45.1 billion yen and income before income taxes grew 6.4 times to 23.2 billion yen. The bottom left shows stable business revenue at 33.4 billion yen, the highest since the division was established in April 2021. Investment gain loss was 11.7 billion yen, rebounding from a negative last quarter due to an improvement in American Century Investments' related investment gain loss. Please turn to page 10 for an overview of the asset management business, which forms the basis for the business revenue. As you can see on the top left, Asset under management at the end of September stood at 76.5 trillion yen, a record high for second straight quarter. The bottom left shows net inflows of around 600 billion yen, with the investment trust business accounting for 480 billion yen. ETFs such as the Nikkei High Dividend Stock and TSC Bank Industry Stock Funds reported inflows of 270 billion yen. while funds for the Bank Channel and DC plants booked ¥200 billion of inflows. The investment advisory and international businesses reported inflows of ¥120 billion. Japan booked inflows into yen bonds and alternatives, while internationally we saw inflows into a usage India stock fund. The bottom right shows alternative assets under management of nearly ¥1.7 trillion, underscoring progress in private markets. Please turn to page 11 for wholesale. Net revenue increased 7% to 204.1 billion yen while fixed income was roughly unchanged from last quarter. Equities and investment banking both reported stronger revenues. Expenses increased mainly due to yen depreciation up only 4% thanks to our cost reduction efforts. As a result, income-before-income taxes improved from last quarter to 8.3 billion yen. Please turn to page 12 for an update on each business line. Global markets net revenue increased 6% to 170.7 billion yen. Fixed income revenues were roughly unchanged at 96.9 billion yen. Macro products represented an improvement in FXEM in AEJ and EMEA, while rates revenues slowed in EMEA and the Americas on an uncertain outlook, and Japan declined from the strong last quarter. Spread products revenues increased driven by securitized products in the Americas, and credit remained solid in each region despite uncertainty around rate hikes and elevated volatility in emerging bond markets. Equities net revenue grew 17% to 73.8 billion yen. Equity products revenues increased, driven by derivatives and financing in the Americas and AEJ. Execution services saw a strong increase in Japan revenues. Primary transactions also contributed, and we saw growing interest from Japanese and overseas institutional investors toward Japanese equities. Please turn to page 13 for investment banking. Net revenue increased 10% to 33.4 billion yen, driven by financing and solutions. As shown on the right, We executed a number of Japan-related DCM transactions, such as an international secondary offering for Social Next and a public offering Euro-Yen convertible bond by JFE Holdings. In DCM, we supported many fundraising transactions across regions, including a green bond issuance by NTT Finance and a bond issuance by the Export-Import Bank of Korea. Revenues from the advisory business load as America's anemia revenues declined due to lower global fee pools. Japan revenues increased on contributions from completed transactions. Please turn to page 14 for an overview of non-interest expenses. Group-wide expenses increased 3% to 311 billion yen. Compensation and benefits were up 5% at 167.1 billion yen. The main factors behind the increase were yen depreciation, booking of severance-related expenses in international business, and higher bonus provisions for retail due to strong performance. Commissions and floor brokerage increased 9% on higher trading volumes. Look at page 15 for an update on our financial position. The table on the bottom left shows Tier 1 capital of 3.4 trillion yen and risk-weighted assets of 18.2 trillion yen, both up from the end of June. As a result, our Tier 1 capital ratio at the end of September was 18.6%, and our CET1 capital ratio was 16.5%, roughly unchanged from the end of June. and highlighting that we continue to hold sufficient capital. That concludes today's overview of our second quarter results. This quarter, we saw results from our strategic efforts and were able to expand our base of stable revenues. We stringently managed costs resulting in pre-tax income across all three divisions with performance rebounding after bottoming out in the fourth quarter. Retail delivered on our competitive advantage of providing high value added consulting services with solutions and services matched to the needs and characteristics of each client and we started to expand and deepen our client base. Investment management continued to steadily build up assets under management in our area of strength in public markets while making progress in alternatives, real assets and other private markets. In wholesale, international wealth management, although still a relatively small business, expanded its product offering and continued to bring in new money with client assets increasing 15% during the quarter. Stock prices have undergone a correction in October, but retail flow business client numbers continue to grow. We are collaborating across the group, structuring the organization to deliver tailor-made services to corporate and owner clients as well as high-net-worth individuals, and we have also positioned ourselves to strengthen our services for salaried employees. Business remains solid in October, with revenues trending in line with the second quarter. Wholesale performance remains challenged in international markets, but Japan is seeing strong performance in fixed income driven by rates and credit, and the investment banking retained good momentum. We expect international macro products, which had a tough second quarter, to start seeing revenue opportunities if the outlook for interest rates becomes a little clearer. While uncertainty remains, particularly overseas, we will continue to stringently manage our cost base and we work to expand our earnings. Thank you.

The first question. is by Mitsubishi USA Morgan Stanley Securities. Tsujino-san, please go ahead. Thank you very much. Thank you very much, first of all. International severance-related expenses had been booked. Can you quantify the impact? And how will it impact personal expenses in the coming quarters? So that is my first question. And other real estate related expenses, telecommunications. I see that expenses are up gradually, partly impacted by the exchange rate. Revenue is growing, but at the same time, expenses are growing as well. So can you give us the outlook for the future direction? Those are my questions for the time being, two questions. Thank you very much. First of all, on the severance-related expenses, totally a few tens of billions of yen. I will refrain from making any detailed comments, but that's the overall size. The big factor why personal expenses are growing, on one hand, severance related expenses have been paid out and therefore that will push down personal expenses going forward. But these people will stay for a few months after the communication. So it's not the case that after communication the expenses will go down immediately. So we are hopeful that the impact will begin to be realized from the third quarter and the effect of reduction is expected to be quite significant and real estate related and Telecommunication related expenses seem to be increasing partly due to the GPN. If we exclude yen depreciation, frankly speaking, the cost level is not increasing so significantly. In terms of IT telecommunications related costs, we are repeating the system's number and the number of apps. And regarding real estate, we are conducting a discussion on the desirable layout of offices. It's not the case that we will be making immediate measures that will lead to sudden and immediate reduction of expenses, but we are conducting a study so that we can suppress the real estate expenses as well. Thank you. On China, there are press reports that you will be scaling down your operations. will there be expenses or one time off expenses to be booked because of that thank you very much regarding china we are not reviewing our china strategy but the joint venture we established in china partly because of the pandemic is not expanding as we had originally expected and After the pandemic has resolved, we are currently in the phase of re-verifying the business plan for this joint venture. So in 1982, we entered China. So over 40 years, we have been serving a variety of clients in that market. In the mid to long run, we will not be changing our strategy so significantly. But regarding the joint venture, in order to realize mid to long-term business, we hope to engage in constructive discussions with our partner. Thank you very much.

I'm from SMBC, Nicole. I have two questions. First, page 12. markets, departments, revenue situation. July is weak month according to your previous explanation, but October seems to have come down according to your explanation. But from July through October, what has been the progress? And moving forward, what are the upside potential and downside? And what is your view? That is my first question. The second question, is about page 8 domestic retail channel formation effects are being enjoyed fully but investment trust recurring revenue net inflow the net inflow number is strong this time but client base contributing to the inflow what's the age and the size of assets and other attributes so what segment of clients contribute to the increasing inflow and also flow transaction clients are increasing, then who are the clients there and what other types of transactions that are becoming more active could you give some more colors? Thank you. Thank you, Muraki-san, for the questions. Firstly, regarding the second quarter's performance, global markets performance, the july was weak we had a weak start so last earnings release i said it saturation is slow and august and september the performance gradually improved september being the strongest in that sense october is around the same level as July, that's our expectation, and November and December. Well, the third quarter for us is strong seasonally, so we have expectations for stronger third quarter. Regarding upside moving forward, central bank is likely to take various actions ECB did not raise rates yesterday and in the USA the tone of central bank seems to be changing so macro related business such as fixed income has been struggling but we can have an expectation for improvement. And also, we have strong market share in securitized products. For a while, we saw the slow performance. And on a daily basis, we are looking at numbers, but it appears we are starting to see change. So, in the third quarter, we can have high expectation for improvement in terms of downside what is our view the current higher for longer that continue may continue in that situation then from our business perspective we may be challenged in conducting business That is my answer to your first question. Regarding your second question about retail business, recurring revenue net increase for all products and services, net increase has been achieved, especially investment trust, discretionary service, loan insurance, so for all products steadily we saw a smooth increase. As for clients, actually for all types of client segments, but for insurance, high net worth individuals, the AUM from high net worth is big, so we see particularly strong growth in high net worth clients. As for flow business clients, compared to the same period of last year, 16% increase has been observed. So as you see in the earnings material, but basically for all types of products, we see the same trend. And for all types of clients, we see the same trend. But in terms of revenue, big revenue contribution in the sense of growth. High net worth individuals, the contribution is relatively big. So flow revenue from their accounts that partners open up and compared with the pre-reformation, 30% increase can be 30% has been increased. When we look at the revenues from clients who our partners have had touch points, but as for clients who our partners did not contact, the revenue from them has been flat. So market conditions have been good, but the last one mile is where our sales partners face problems. our clients, and that's where the upside is being generated. Thank you. That's all. Thank you very much. So domestic retail and equity and JGB trading, IB. So you found it positive in your presentation. And a high level, from high level perspective, rather than China and India and America's. And rather than wholesale, management resources are being refocused into retail and investment management. So is there that kind of potential or possibility? How should I think about the allocation of resources? Thank you for your question. In the sense of portfolio mix, retail division has recovered. what we should be strengthening is first expansion of im all along as i have said inorganic growth opportunities are not something that we deny in the long term where are potential areas for growth we are in search of growth areas But IEM and relevant areas are the areas that we would like to scale up. But in the short term, in the sense of resource allocation, it depends on the situation of that time. But in the medium to long term, we believe we have a growth potential in the areas I mentioned. And if we cannot find opportunities, then the return to a shareholder will be the option to choose, as I always explain. Thank you very much.

Watanabe of Daiwa Securities. Oh, it's you, Watanabe-san. Thank you very much. Yes, I have two questions. First, retail personnel, 1,600 yen who have been reallocated, are they being utilized 100%? You said that they weren't fully in operation in April to June, but what about the July, September quarter? And then page eight, you have the recurring revenue asset and recurring revenue. In Q2, it has increased quite significantly, although the revenue Recurring revenue assets has declined slightly. Why did recurring revenue increase? Wholesale hiring, 96% is the actual, which is higher than the 86% goal, and you have been looking at revenues as you decide on hiring. Are you progressing with the recruitment as planned for GMs? Thank you very much. First of all, on your first question, whether the personnel that we have been reallocated have been operating in full. In the past quarter, yes, they more or less have become operable. What about July, August, September? There wasn't much fluctuation in all three months. They were in action at high level in all of those three months. And in comparison to revenue assets, recurring revenue seems to be growing quite significantly. I think that was part of your question, but we, take the numbers at the end of the month so it's the comparison between end of the month so maybe the asset appears to be declining slightly or unchanged but average balance 19.5 trillion q1 q2 20.3 trillion so on quarterly average q2 was significantly higher. So, that being said, recurring revenue is growing and there's the loan business and the insurance business and investment trust or revenue outside of the discretionary investment has also been quite sanguine. And secondly, GM hiring. I believe that was your second question. Yes, we are progressing as planned in terms of reorganizing the team, especially the sales team expansion has led to increased engagement with our customers. And steady progress has been achieved. Yes expense ratio of 96% which is quite high. As you have pointed out with its original son. Who asked that question. This expense also includes to severance related expenses and in the time to come as some of the expense line items will begin to drop. And therefore, although the expense ratio has been high for some time, we are making efforts to reduce this. Thank you very much. Thank you very much. I have a follow-up question. First of all, on recurring revenue, no one-time off factor, and for Q3 it will be around the same. And secondly, you were quite active in trying to hire teams. from outside, are there prioritizing products or regions where you will be actively in hiring? In terms of recurring revenues, the timing of booking revenue, there's a time lag in the booking timing. So, there could be some time lag, but the recurring asset which will be the source is steadily expanding and therefore we shall be able to book healthy recurring revenues as well. On the second question, are there any priorities in terms of products or regions? Again, the Americas, market share. strong in terms of market share, and we want to continue to take advantage of that strong market share. Japan, for our products, as you know, we have strength. But in the Americas, we will lever on our strength. And in Asia, we have significant market share in a few products. And therefore, those are the areas where we will focus as we try to expand business. Europe, performance is not growing as expected, but we are trying to make remedies there as well. Thank you very much. Well understood. Thank you.

I'm from SBI Securities. First question is related to page 7, total sales of equities. Could you elaborate on the number for equities total sales? 3.4 trillion is a strong number that I see for the first time in a while. And the primary, according to your explanation, seems to be included in this number. But in terms of secondary, from 3.4 trillion, 93.9 billion should be subtracted and the remainder is secondary number yes that's the right understanding okay if that is the case first quarter primary about 50 billion was the primary number then 2.7 trillion for q1 and 3.3 trillion for q2 so more than 20 percent is the total sales related to secondary is it the right understanding yes the number seems very strong jpx prime equities daily average it's flat and matsui's number q and q six percent increase so your number is very strong but the second quarter what happened you have explained the reallocation of sales partners and touch points were increased and there was a tailwind from markets. So, the equities held have been replaced with other shares and some people use cash to buy equities. So, what were the activities that you observed? Thank you for your question compared to the first quarter. In the second quarter, the reasons behind the strong growth, I believe that's your question. In the first quarter, April and May were quiet months. And then in June, market jumped and our business became active at that timing. And in the second quarter, July, August, and September, as mentioned earlier, throughout the quarter, the business stayed at a high level. Looking at the market environment, needless to say, but market stayed at the high level, though there were corrections here and there, but many clients, expected upside potential so market environment and also needs from clients we understood needs from clients and we prop our sales staff i believe proposed domestic equities to clients looking at the second quarter the bank stocks are up but such names and names are stocks that benefit from weak yen And the low PBR, low ROE stocks that are expected to recover from here were recommended to customers, though customers have various preferences. Equities have been strong and we made proposals to meet the needs and those factors combined to result in the number in front of us. Thank you very much. I have two more questions. Page 24. Retail divisions data is shown. So, business was robust, but fee, brokerage fee is flat. Is it because first quarter was strong? Thank you for your question. In the first quarter, rapid increase was observed, but rather than buying, there were many selling activities as a result fee. wise we see the flat progress okay understood my second question now accounts with balance it's about 5.4 million accounts but in the second quarter 1.25 million then account versus balance accounts with balance and flow clients numerators and denominators may be different but this environment and reallocation of partners when they are considered, then do you expect the number of low clients to be increased further? Is it possible? Yes, we are aiming higher. However, 5.3 million accounts with balance, we cannot expect all of them to be active. But as Otsuka-san said, there is still more room for growth. So to capture such opportunities, our sales partners have been reallocated. So by facing clients, we are looking to grow the number of flow clients. Thank you very much for your detailed answer. That's all from me. Thanks.

City Group Securities, my name is Niwa. I hope you can hear me. Yes, we can hear you very well. Thank you very much. I have two questions, ROE and wholesale profits. First, midterm ROE, how well are you progressing? Eight to 10% in your midterm plan, and capital cost, 8%. That had been your comment. Under this environment, ROE was slightly over 4%. In that sense, we somewhat feel that the environment is harsh. You are trying to manage the group in terms of capital cost. Do you think you will reach 8% by March 2025? If not, are you going to think about other measures?

Is there a plan B?

If there is any additional factors, please share those factors with us. Second, I want to have a clear image of expansion of wholesale profitability, and I am looking at page 11. Risk asset is not being used to its fullest potential. High profitability versus margin not going up. Risk asset, 64% is allocated to wholesale. If there's any risk assets not put into use, which products or which regions are not being fully utilized. If the improvement situation continues, do you think that the profits in this area will go up or is that difficult? So if you have done any analysis on the use of risk assets, please share such analysis with us. Thank you for your questions. Under this situation ROE 4.3, you're right we are facing difficulties this is not a satisfactory level at all and that is our true feeling retail and I am have attained steady growth and in wholesale in Japan for the first time in some time IB and GM are very excited and we have high expectations. Wholesale global markets are not recovering. Fixed income is our core of the core, macro, interest rate business, forex and emerging. There's still sluggishness and slowness in these areas mostly caused by the market environment, but the performance is very slow. It was slower than we had expected in terms of rate prospects, and I think it's the same for everyone, but inflationary pressure is prolonging and is higher in terms of degree than expected, and therefore that is probably impacting our results. Gradually, the uncertainties will probably be resolved. But when? I don't think it will be so far out into the future. But just waiting for the market to recover is not what a disciplined management ought to be. So we will try to reduce expenses and at the same time maximize top-line growth. So next year, between 8 to 10 percent next year, we don't think that target is impossible and we are hopeful that we will be able to achieve that target. And is there a plan B? For example, Share buyback along to reach 8 to 10%. That's difficult. So we will take different measures in order to maximize ROE to the extent possible. The second point is with regards to margin of wholesale risk. asset. You're looking at the revenue against risk asset. 6.4 isn't that bad, but why is the bottom not really performing well? We are in this environment we are in. RWA is not being used to its full in wholesale. Wholesale is doing quite significant risk control, so are they putting the risk resources into full use? I think they are working with vigilance, so the answer is no. Then which product and which region? I think the wholesale is facing difficulties in all regions, fixed income, especially fixed income. I think there are signs of comeback in securitized products, but it's not as bullish as the past. And globally, for all products, we are on the vigilant side. I hope I answered your question. Thank you very much. I have one follow-up question. If I had understood your point correctly, until when will you wait? You will be controlling equity and capital. We do understand that there's much uncertainty, but around this time last year, there was uncertainty. That was the general view, and that was probably the view of Nomura. But the clouds aren't moving. And you said that you will seek M&A opportunities. On the other hand, those opportunities haven't realized. So will you be setting time horizons as you make plans or March 2025? Is that one milestone? So can you elaborate on the timeline? Thank you very much. Our main products in global markets, main business. There are a few main products. Are they all doing bad? That's not really the case. Two quarters successively bad performance. We've experienced that level, but this time it's been sluggish for one year. from q3 last year to q2 this year for one year there has been continued slowness and it's quite unprecedented for us one year has passed so we are thinking what we need to do at this stage we can't comment on specific timing like by when, but this sluggishness has continued for one year, so we are thinking of what we need to do. So we will respond by taking necessary measures. March 2025, are you aware of that timing? Yes, of course. We have that timeline in mind. Thank you. Thank you very much. And thank you for commenting on something that might have been difficult for you to comment. Thank you.

Thank you everyone for attending this event. Looking back on the last six months, as you commented, retail, IM, these business lines have performed strongly. On the other hand, wholesale was slow. On the other hand, Looking back on the first half of last fiscal year, the situation was quite the opposite. Retail and IM were struggling. Wholesale, on the other hand, were covering for the other divisions. That was the situation of the first half of last year. But you may say at that level, but I believe we benefited from the portfolio effect. But this is... comment about the low level, but we want to raise the level higher with each division growing the revenues and bottom line so that we can raise the entirety of portfolio to a higher level. We are working on various measures. Some of them are starting to show results, while others have not, and some initiatives have not. been materialized in its impact on P&L, but we would like to keep you updated on the result that we can capture, and I hope you will keep cheering for us. Thank you for your time today. Thank you.