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.