Nomura Holdings Inc ADR American Depositary Shares

Good evening. This is Takumi Kitamura, CFO of Nomura Holdings. First, I would like to extend my heartfelt condolences to those affected by the Noto Peninsula earthquake and pray for a swift recovery from this disaster. I will now give you an overview of our financial results for the third quarter of the fiscal year ending March 2024 using the document titled Consolidated Results of Operations. Please turn to page two. Group net revenue increased 9% quarter-on-quarter to $480. While income before income taxes grew 39% to 78.7 billion, net income was up 43% at 50.5 billion yen. And as you can see on the top right, performance bottomed out in the fourth quarter last year and has continued to improve since. The third quarter proved to be somewhat of an emotional roller coaster for market participants over the possibility of the FRB. moving away from its tightening stance. This, combined with tensions in the Middle East, resulted in elevated volatility in equity markets and heightened uncertainty. Inflation in the U.S. slowed towards the end of the quarter, raising hopes of an exit from the sharp rate hikes over the past two years and driving robust performance in equity markets. In fixed-income markets, we also started to see a recovery in the issuance of securitized product as interest rates fell and credit spreads tightened. Interests in Japan remain high, activity picked up among not only institutional investors, but also corporates and individuals over expectations of a monetary policy shift, various actions by corporates to improve capital efficiency and reduce strategic shareholders, and investment momentum in the lead-up to the introduction of the new NISA scheme. Amid this environment, we play to our strength. by fully leveraging our extensive client franchise in Japan and our global network to deliver products, services, and solutions tailored to the needs of our clients. This resulted in strong momentum across our three core businesses. Before I go into the details of performance of each business, please take a look at the bottom right, which shows three-segment income before income taxes of 70.5 billion yen, up 16% over the last quarter. Our international wholesale business reported an uptick in client activity towards the end of the quarter, and all international regions had a profitable quarter. Diluted earnings per share for the quarter was 16.1 yen and return on equity was 6.2%. While this represents a positive trend towards improved performance, we are still not where we want to be. With this momentum in performance and given a sufficient capital base, today we resolve to set up a share buyback program in order to raise capital efficiency and secure a flexible capital management policy and to deliver shares on exercise of stock-based compensation. The program will run from February 16th to September 30th and have an upper limit of 125 billion shares with the upper limit of the aggregate amount of the repurchase price being 100 billion yen. On page 3, update of results for the nine months to December, net revenue for the period was $1,116.9 billion, up 11% compared to the same period last year. Income before income taxes increased 43% to $181.8 billion, while net income grew 28% to $109.1 billion. EPS was 34.69 yen and ROE 4.5%. As shown on the right, three-segment income before income taxes rose 69% to 159.7 billion. Income before income taxes and retail jumped 3.5 times and investment management increased 56%. Now to business performance in the third quarter starting with retail on pay six. All the percentages I mentioned from this point and beyond refer to changes compared to the second quarter. Retail net revenue increased 4% to 102.6 billion, and income before income taxes was 31.9 billion, marking the highest level in eight years since July to September quarter 2015. The reallocation of our partners last spring has delivered steady results, and we are starting to see good signs in terms of quality and quantity of our dialogue with clients. As you can see on the bottom left flow, revenue increased 7% to 64 billion yen, spurred on by strong equity-related revenues due to favorable market conditions and primary transactions such as the offering by Denso. Recurring revenue, an area of strategic focus, was in line with last quarter's record high. Although revenues were up 4%, expenses increased by only 1%, and our recurring revenue cost coverage ratio remains high at 55%. Please turn to page 7 for a breakdown of sales by product. Total sales were down 9% at 4.7 trillion yen but remained high and strong. Sales of stocks were 3.1 trillion yen, substantially higher than the level seen before the first quarter, with this quarter being a notably strong high. One for primary subscriptions. Insurance sales were at a record high. As we continue to provide consulting for our clients' overall portfolio, we are seeing more clients use insurance products for estate planning and retirement funds, which is another benefit from reallocating our partners. Please turn to page 8 for an update on KPIs. Net flows of recurring revenue assets shown on the top left was $51.4 billion. This was lower than last quarter as the market rally and rising value of products prompted large sales and exits. However, excluding corporate section, net inflows remain high at $151.5 billion. The top right shows recurring revenue assets at a record high of $21 trillion and recurring revenue, which represents stable revenues, remains strong. Flow business client numbers shown on the bottom left were particularly strong this quarter as we saw the benefits of reassigning sales partner and enhanced dialogue with clients on the back of primary transactions. Flow business client numbers at the end of December were trending 15% above the same period last year at $1,456,000, which is Approaching our March 2025 KPI targets, our business for salaried employees or workplace business continued to grow steadily. The number of services delivered was approximately 3.6 million driven by growth in ESOP participants.

Page 9 for an update on investment management. Net revenue decreased 14% to 38.9 billion yen. Income before income taxes declined 33% to 15.6 billion yen. As you see on the bottom left, stable business revenue was 33.3 billion yen in line with last quarter, which was a record high since the division was established in April 2021. Investment gain loss declined to 5.6 billion yen as American Century Investments' related valuation gain loss slowed. Please turn to page 10 for an update on an asset management business, which is the source of business revenue. As shown on the top left, assets under management totaled 78.5 trillion yen at the end of December, representing a record high for the third straight quarter. This is above our March 2025 KPI target of 75.8 trillion yen. On the bottom left, net inflows were 330 billion yen, with the investment trust business reporting 60 billion yen of outflows. This was due to an increase in sales to lock in profits on the back of the market rally. MRFs and other money market funds reported 70 billion yen of inflows as individuals parked more idle funds. The investment advisory and international businesses booked inflows of 385 billion yen, Japan reported inflows into yen bond funds, while internationally we saw inflows into U.S. high-yield bond funds and India equity funds. Alternative assets under management shown on the bottom right stood at 1.6 trillion yen, down slightly due to yen appreciation at the end of the quarter. That said, inflows continued and we are making progress with our private market initiatives. Please turn to page 11 for wholesale. Net revenue increased 6% to 217 billion yen. Income before income taxes was 23 billion yen, up 178%. Performance is improving after having bottomed out in the fourth quarter of last fiscal year. Although bonus provisions increase in line with performance, wholesale non-interest expenses decreased 1% as severance-related expenses declined, and we saw the benefits of cost Reductions carried out through to last quarter. As a result, our cost-income ratio dropped to 89%. Please turn to page 12 for an overview of results by business line. Global markets net revenue was roughly flat at 171.6 billion yen. Fixed income revenues increased 7% to 103.5 billion yen. As I mentioned earlier, during the first half of the quarter, market participants remained on the sidelines over the uncertainty surrounding monetary policy and geopolitics, but we executed client orders while stringently managing risk. Heading into the second half of the quarter, as we gained clarity on the outlook for interest rates, market participant activity improved and we saw an increase in revenue opportunities. While market conditions weren't easy, we booked stronger revenues across all core products such as rates, FXEM, securities products, and credits. Equities net revenue sold 8% to 68.2 billion yen. Equity products had a strong quarter in the Americas, but revenues were lower in Japan and AEJ on muted volatility and client activity. Execution services continue to deliver solid performance in Japan, while contributions from primary transactions and higher trading volumes on the back of heightened interest in Japanese equities from domestic and foreign institutional investors Please turn to page 13 for investment management, investment banking results. Net revenue was 45.4 billion yen, up 36%. Driven by strong performance in Japan and EMEA, this represents the best quarter since the first fiscal year ended March 2017 when comparisons are possible. As shown on the left, advisory and financing and solutions both reported revenue growth. In advisory, we topped the 2023 M&A League table, supporting numerous transactions including management buyouts of Benesse Holdings and outsourcing and paying capital sale of its stake in Ichi Holdings to Nippon Life Insurance. In financing transactions, we supported the efforts of corporates to strengthen their corporate governance through deals such as a large offering by Denso and an international offering by Asahi Group. We provided a diverse range of solutions for issuers, taking up the challenges of structuring new fundraising methods such as bond-type class shares issued by SoftBank and a digitally tracked green bond issued by Hitachi. Please turn to page 14 for an overview of non-interest expenses. Group-wide expenses increased 3% to 321.5 billion yen. Compensation and benefits increased 2% to 170.6 billion yen. Although severance-related expenses declined, the increase is due to yen depreciation and higher bonus provisions in line with improved performance. Please turn to page 15 for an overview of our financial position. Tier 1 capital shown on the table on the bottom left was 3.4 trillion yen. Risk-weighted assets were 18.4 trillion yen. Our Tier 1 capital ratio was 18.3%, and we had a common equity Tier 1 capital ratio of 16.2%, underscoring that we continue to maintain a robust financial position. That concludes the overview of our third quarter results. To sum up, spurred on by structural changes in the Japanese market, In the third quarter, we were able to deliver steady results by leveraging our strengths centered on our home market and the strategic initiatives we have been implementing. Retail had its best set of results in eight years and investment banking revenues were at record levels as we provided a wide range of support for various corporate actions by Japanese companies. The Nikkei has continued to rally into 2024, and we get a real sense that the new NISA scheme has been a catalyst to kick-start a full-fledged shift from saving to asset formation. In just three weeks to last week, we saw NISA sales at over one-third of annual sales for 2023. We expect Japanese corporates to step up efforts to enhance their corporate governance and raise capital efficiency, and many corporates are seeking advice. Factoring in expectations of policy action by the Bank of Japan, we expect to see the good momentum of our Japan business continue. Our international business, in particular macro products, has had a tough time due to monetary tightening over the past two years. However, as interest rates finally peak out, we started to see signs of improvement toward the end of the quarter in 2024 as market participants idle funds and pent-up demand takes off. We expect this positive trend to continue all year. with different intensity in each region. In January, retail revenues have remained around similar levels to the third quarter, while wholesale revenues are outpacing the third quarter, driven by solid performance in rates in Americas and equity derivatives in each region. When tailwinds are behind us in both Japan and overseas, it is a good time to tackle long-term issues. In order to build a business platform capable of achieving sustainable growth, we will expand our risk-light businesses and create a structure for consistent revenues while taking steps to further improve our ROE. Thank you.

I am Muraki, SMBC. Nico, I have two questions. P 13 investment banking for Japan in the presentation. You mentioned that then so I thought he deals. These are deals that are related to strategic holding and the next day. Deal to the east and make it known public. Can you. describe the mid-term potential fee pool of these deals and the revenues that you are expecting in the mid to long run? And of course, in the case of Denso, there are various stakeholders and interested parties, so it took time for you to structure the deal. But if you have more of these deals, In the fourth quarter or first quarter, do you think that you will be able to sustain such high level of revenues through reference? And what is the structural demand? And for the time being, what's the pipeline? Do you think the pipeline is enough to sustain this level of revenue? That's my first question. Second, page 15, capital policy, ball three, Finalization impact, which you had disclosed most recently, 700 billion of capital buffer exists. But why at this timing of quarter three growth? This is growth prior to stock option offsetting. And why did you decide on that? If you think about the stock option, Is this within the profit level? It could have been said at a higher level. So why at this timing and what kind of discussion had taken place in order to decide on this ceiling amount? Thank you very much. First of all, on the IB pipeline, in Japan and some other regions, we think that there will be deals As the backdrop, there's a requirement for governance reform. In other words, top management of corporates are beginning to think more seriously about governance. So the funds that used to be affiliated with strategic holdings can be freed up for more strategic investment for growth. On the other hand, there could be MBOs in order to step down from the market That kind of action is being taken by corporates, and we think that this will be a continued trend. You specifically mentioned the dense ordeal. Reduction of such policy holdings further the delisting of parent and subsidiary. We think that this kind of trend will continue. Quarter after quarter, will there be constant flow of these deals? Of course, there could be uncertainties, but such kind of strategic holdings, it's estimated at 50 trillion, 60 trillion yen. So, in order to free up those holdings, we think that we will likely see continuation of these transactions. Basel III impact. At the CEO forum, we said that we think that we have a sufficient buffer. And why at this timing? We wanted to secure flexibility, as we have been saying, but strategic policy to date, and in third quarter, we were encouraged by the performance. So those are the biggest factors that we decided to do this resolution at this particular timing. We are a financial institution, and we have various corporate-related information, so We cannot just arbitrarily set up such buyback scheme. There was a window of opportunity at this timing and that's one of the reasons why we made a decision. 100 billion yen, is that high or low? I think that it's an appropriate level. The business side, hasn't used up its capital, and as mentioned by Muraki-san, there could be more. We will, however, look at business opportunities and opportunities for growth, and ¥100 billion was the level that we decided upon to strike a balance between those requirements. Thank you. Thank you very much. Related to the first question, you mentioned governance, but What's Nomura's policy? This hasn't really impacted the bottom line, but the sales proceeds of the strategic holdings is there. You offset that with the unrealized losses, but you've sold many of your policy holdings. But what's the strategy? Which stocks did you sell? And what about listed group companies? Are you continuing your discussions on what to do with those holdings? Thank you very much. In our case, as you have mentioned, realized gains and losses and unrealized gains and losses are offset. So it's a fact that we have sold some holdings, but we will refrain from disclosing the names. In June, the securities report will be published. you will know that we have sold some of our holdings. Our strategic holdings regarding sales, since a few years ago, we have been engaged very seriously. On a regular basis, we are monitoring the purpose of those holdings, and we have been engaged in measures to reduce the amount. Major policy hasn't changed, and because of the rally in the stock price, the amount outstanding may have not gone down, but the number of names has decreased. Against Tier 1 capital, the ratio is currently 2.7%. It's as low as 2.7% already, and this isn't the end point. We are going to reduce the number of names, and we've made that commitment publicly. And I don't intend to talk about our peers, but as a financial institution, in terms of sales of strategic holdings, we are one of the financial institutions that are doing this very actively. Thank you very much. So you will continue to discuss your holdings in listed companies? Yes, of course. Thank you very much.