Nomura Holdings Inc ADR American Depositary Shares

Good day, everyone, and welcome to today's Nomura Holdings fourth quarter and full year operating resource 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. Should 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 session will be held after the presentation. Please note that this telephone conference contains certain forward-looking segments 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 achievement 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 investment 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 fourth quarter and full year of the fiscal year ended March 24. Please turn to page two. First, our full year results. As you can see on the bottom left, Dividend revenue increased 17% year-on-year, 1,562,000,000 yen. Pre-tax income grew 83% to 273.9 billion yen. EPS was 52.69 yen and ROE for the year was 5.1%. The first half of the year kicked off with the failure of regional banks in the U.S. and issues around the U.S. debt ceiling. This, coupled with monetary tightening of central banks around the world and spiking oil prices, led to continued uncertainty in fixed-income markets. Equities markets were generally solid, but concerns around the higher rates for longer resulted in a correction centered on high-tech stocks towards the end of the half-year period. As we moved into the second half of the year, inflation in the U.S. eased. and we started to see an exit from the sharp rate hikes in the past two years. Into 2024, the Fed hinted at three rate cuts leading to robust trading among market participants. In spite of some market jitters since mid-March, the business environment has generally been favorable. Interest in the Japanese market surged over the past year due to deflation ending, speculation of a shift on BOJ policy and structural reforms, The Nikkei hit a record high, and introduction of the new NISA scheme in 2024 looks to have finally prompted a full-fledged shift from savings to asset building. Against this backdrop, three-segment income-before-income taxes increased 123% to 236.8 billion yen, underpinned by gains across all business divisions. Retail income before income taxes grew 3.7 times to 122.7 billion yen, representing the highest level in eight years since fiscal year 15-16. Sales were higher across all products and services thanks partly to the market rally, but also to the major realignment of our people in spring last year, delivering results quicker than expected. Our shift to an asset management recurring business model is progressing smoothly. stable recurring revenue has roughly doubled in the past eight years, while divisional costs have declined by nearly 10%, resulting in an increase in our recurring revenue cost coverage ratio from 28% to 55%. Investment management has seen steady growth in its asset management business. Annual net inflows were 3.8 trillion yen, taking assets under management to 89 trillion yen. Both numbers are trending above our fiscal year 24-25 KPI target. Business revenue, which represents stable revenues, increased 14% year-on-year, Investment gains doubled over the past year. As a result, pre-tax income increased 38% year-on-year to 60.2 billion yen. Wholesale income before income taxes increased 84% to 53.9 billion. Our international business faced challenges during the first half of the year, but momentum picked up in the second half. Global markets' net revenue increased 8% year-on-year on improved performance in spread products such as securitized stocks. products and credit as well as in equity products. Investment banking was up against a difficult environment as global fee pools remained depressed, having dropped by over 40% since the peak in fiscal 21 and 22. That said, we leveraged our robust client base in Japan and our global franchise to support many transactions throughout the year. As a result, investment banking net revenue was at the highest level since the year ended when comparisons are possible. Today, we also announced a dividend of 15 yen per share for shareholders on record as of end of March. This translates to an annual dividend of 23 yen per share. Next, please turn to page 3 for an overview of our fourth quarter results. All the percentage figures I mentioned from now on refer to quarter-on-quarter comparisons. Group net revenue increased 11% to 445.1 billion yen, and pre-tax income grew 17% to 92.1 billion. Net income was up 12% to 56.8 billion. EPS was 18.02 yen and ROE 6.8%. As you can see on the bottom right, three-segment income before income taxes was 77.1 billion yen, as retail revenue growth momentum continued since bottoming out in the April to June quarter of 22, and the asset management business and investment management performed well. Please join to Phase 6 for an overview of results in each business, starting with retail. Net revenue growth. In retail grew 6% to $108.8 billion and income before income taxes increased 21% to $38.8 billion. Stable recurring revenue reached a record high of $41.8 billion, partly driven by advisory fees booked every six months. Our recurring revenue cost coverage ratio for the quarter was 60%. Flow revenue reached $67 billion. We saw strong growth in sales of equities and investment trends. thanks to the successful realignment of our sales partners combined with Japan's stock market rally and uptick in investor sentiment on the back of introduction of the new NISA scheme. Please turn to page 7 for an outline of sales by product. Total sales jumped 33% to 6.2 trillion yen. Sales of equities surged 43% to 4.5 trillion and sales of secondary stocks grew strongly. Investment trust sales were up 26% to 760 billion yen. As shown on the bottom right, we booked inflows into publicly offered funds that invest in private equity and global equity funds. Please turn to page 8 for an update on progress against KPI targets. Net inflows of recurring revenue assets were 103.5 billion as shown on the top left. Although the corporate client section reported a slowdown in inflows as clients sold to lock-in gains, net inflows excluding this were 235.3 billion, demonstrating continued strong momentum. Recurring revenue assets reached a record high of 23 trillion yen, as you can see here on the top right. This led to an uplift in stable recurring revenues. Flow business fine numbers shown on the bottom left stood at approximately $1.69 billion, which is above our KPI target for the year ending March 25. In addition to the positive impact of realigning our sales partners, the market rally and introduction of new NISA scheme led to more investment opportunities and uptick in trading bank clients. Our workplace business is trending well. We now provide around 3.63 million services. Next, please turn to page 9 for investment management. Net revenue increased 12% to $43.6 billion, and income before income taxes grew 14% to $17.8 billion. As you can see on the bottom left, stable business revenue was $38 billion, the highest quarterly revenue since the division was established in April 21st. The asset management business had a strong quarter, and Nomura, Babrock, and Brown continued the revenue growth with higher sales of aircraft leases. Investment gains was $5.6 billion, roughly unchanged from last quarter. Please turn to page 10 for an update on the asset management business, which generates the division's business revenues.

The top left shows assets under management at the end of March at 89 trillion yen, marking the fifth straight quarter of record highs and trending well above our March 2025 KPI target of 75.8 trillion yen. On the bottom left, you see net inflows for the quarter of 1.1 trillion yen, of which the investment trust business booked 780 billion yen of inflows and investment advisory and international businesses booked 350 billion yen of inflows. Investment trust business booked 300 billion yen of inflows into Japan bond and stock ETFs, and inflows of 260 billion yen into MRFs and other money market funds. underscoring a gradual buildup of individuals' idle funds. Excluding ETFs and MRFs, we booked 230 billion yen of inflows mostly into publicly offered funds that invest in private equity and global equity funds. The investment advisory and international businesses reported outflows from Japan equity funds amid the market rally, while internationally we continue to book inflows into U.S. high-yield bond funds and India equity funds. On the bottom right, alternative assets under management grew steadily to 1.9 trillion yen, driven by private equity funds I just mentioned. Please turn to page 11 for an update on our wholesale business. Wholesale net revenue grew 17% to 254.2 billion yen. The first half of the quarter started off with an optimistic mood among market participants over expectations of rate cuts, but towards the end of the quarter, inflation re-emerged and there were growing concerns over geopolitical risks. Amid this, we were able to support our clients, and both global markets and investment banking booked stronger revenues. As you can see on the bottom right, all regions posted higher revenues. Expenses rose 20% to 233.6 billion yen. In addition to higher variable costs in line with performance, a number of special factors and year-end factors also had an impact. Specifically, we booked a loss provision of around 14 billion yen arising from transaction failures with a broker counterparty cost for equity compensation linked to our share price increase. Due to a rise in our share price and four year-end factors, costs for decommissioning IT and other intangible fixed assets increased. These factors resulted in a total cost increase of just over 20 billion yen. As a result, wholesale income before income taxes declined 10% to 20.6 billion yen. Our fourth quarter cost income ratio was 92%, but excluding the special factors and the year-end factors I just mentioned, it was between 80% and 85%, which shows we have been able to keep costs under control. Please turn to page 12 for an update on each business line. increased 19% to 204.4 billion yen. Fixed income net revenue was up 18% at 122.6 billion yen, driven by uptick in market activity in EMEA and the Americas. Byproduct, macro products delivered stronger revenue, the rates business revenue increasing EMEA and the Americas. On improved performance of agency mortgage and on contributions from SSA bonds, in spread products, securitized products revenue grew for the fifth straight quarter. Credit revenues slowed in Japan due to a drop in foreign bond investments due to the sharp yen depreciation, and AEJ revenues were also down due to the muted performance in the China market. Equities net revenue increased 20% to 81.9 billion yen. Equity products had a good quarter. with Japan revenues increasing strongly on contributions from sales of shareholdings and Euro-Yen CB transactions. EMEA and AEJ also posted higher revenues. Please turn to page 13 for investment banking. Net revenue grew 10% to 49.8 billion yen, which is the best quarterly revenue performance since the year ended March 2017 when comparisons are possible. All these international regions booked stronger revenues. Although Japan slowed from a particularly strong prior quarter, revenues remained elevated. Advisory also slowed from a strong previous quarter, but as you see, on the top right, we collaborated globally and were involved in many cross-border deals. Financing and solutions revenues were up as ALF performance improved and international solutions transactions and sales of shareholdings in Japan contributed to revenues. Please turn to page 14 for an overview of non-interest expenses. Group-wide non-interest expenses increased 10% to 353 billion yen. Compensation and benefits edged up 4% to 177.1 billion yen. Although bonus provisions were down, the increase was due to the higher deferred compensation I mentioned earlier. Other expenses totaled 57.9 billion yen. This includes higher business-related third-party fees and the 14 billion yen loss provision I mentioned earlier. Please turn to page 15 for an update on financial position. The table on the bottom left shows Tier 1 capital of 3.5 trillion yen and risk-weighted assets of 19 trillion yen, giving a Tier 1 capital ratio of 18.2% and a common equity Tier 1 ratio of 16.2%. As such, our financial position remains robust. That concludes the overview of our fourth quarter results. To conclude, over the past year, each business was able to deliver steady results as we tapped into our strength in our home market with structural changes as a tailwind, and we leveraged revenue opportunities in our international business. In 2024, we have seen a full-fledged shift in individuals' money from savings to asset building. As Nikkei reached a record high, the new NISA scheme launched and inflation appeared. In just three months, the amount of sales of NISA through us is nearly the same as last full year. In February, there were days when our contact centers fielded over 50,000 inquirers. This shows the increasing incredibly large interest there is in investing now. From April, we have changed the name of our retail division to Wealth Management to better reflect the reality of the business. Although the market is going through a correction in April, it is in times of uncertainty like this that information and advice takes on greater added value and the role we have to play becomes more important now. By providing comprehensive asset management services while operating in the markets, we have been able to maintain revenues at the level of the strong fourth quarter. In wholesale, we have confirmed that our franchise can capture revenue upside as the markets recover. Revenues are growing in securitized products, equity products, and risk-light businesses such as investment banking and international wealth management. We have also made progress in diversifying our revenue mix. revenues of approximately 250 billion yen was to some extent inflated by yen depreciation, but on a dollar basis excluding currency translation, revenues have recovered to the level they were at two years ago when central banks started tightening. Business has been strong in April, driven by raised credit and America's equity products with revenues maintaining at fourth quarter level and the performance momentum continuing. We continue to stringently manage our cost base. The 20 billion yen cost reduction target in retail is likely to be fully completed by March 2025. And in wholesale, we are implementing various cost reduction programs across front to back and have been able to mostly offset increased costs from strategic hiring and higher fixed cost due to inflation. We will continue to tightly control costs through structural reform initiatives. So that's our first fourth quarter in the full year performance.