Nomura Holdings Inc ADR American Depositary Shares

everyone and welcome to today's Nomura Holdings second quarter operating results for fiscal year ending March 2025 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 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 result, performance, or achievement of the company to be materially different from the result, performance, or other expectations implied by those projections. Such factors include economic and market conditions, political events and invested sentiment, liquidity of secondary market, 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. Let me give an overview of our financial results of the second quarter of the fiscal year ending March 2025 using the document. Please turn to page 2. Group-wide net revenue increased 6% quarter-on-quarter to 483.3 billion. Income before income taxes grew 29% to 133 billion yen. Net income was 98.4 billion, representing a 43% increase over the last quarters. We had a very strong quarter. Income before income taxes and net income were both at their highest level since the quarter ended June 2020. All three international regions were portable, and some international entities made use of tax loss carried forward, lowering our effective tax rate to 27%. EPS was 32.26 yen, and annualized ROE was 11.6%, which is at the upper limit of our 2030 quantitative target of ROE of 8 to 10% or more. Three-segment income before income taxes shown on the bottom right was 122.5 billion, marking the sixth straight quarter of gains. We were able to deliver operating leverage as all divisions booked higher revenues and we maintained our control of costs. In wholesale, our cost-to-income ratio improved to 83% and income-before-income taxes doubled. Before going into each business in detail, let's first take a brief look at the results of the first half on the fiscal year. Please turn to page 3. The bottom left shows net revenue of 937.8 billion, 31% higher than the first half of the previous year. Income before income taxes grew 129% to 235.9 billion, while net income increased by 186% to 167.3 billion. EPS was 54.58 yen and ROE was 10.1%. The bottom right gives a breakdown of income before income taxes. All divisions reported strong gains with few-segment income-before-income taxes totaling 209.1 billion. This represents more than 70% of March 2025 KGI target of 288 billion yen announced at our Investor Day in May last year. In wealth management, asset management-type business gained further grounds to record a 30% increase in recurring revenue, while investment management's asset management business continues to gain traction with business revenue at a record high since the division was established. Both divisions continue to build up stable revenues where we generate revenues based on the level of client assets. In wholesale, All business lines, fixed income, equities and investment banking and all regions reported stronger revenues compared to the same period last year, underscoring progress in diversifying our revenue sources. As revenues grew 30%, we controlled costs to deliver income before income taxes 6.4 times higher than the previous year. Based on this performance, today we announced a 23 yen dividend per share for shareholders of record as of the end of September, giving a dividend payout ratio of 40.6%. Now let's take a look at the second quarter performance by segment. Please turn to page 6. The percentages I refer to here are all quarter-on-quarter comparisons. Wealth management net revenue increased 2% to $116.7 billion and income before income taxes grew 7% to $45.3 billion. Income before income taxes was the highest in nine years since the quarter ended June 2015. During this quarter, we witnessed a sharp market adjustment in early August, followed by volatile market conditions. However, our sales partners advised and followed up closely with our clients based on their portfolios and market data, allowing clients to remain relatively calm. As we had already been advising clients with a view to medium to long-term investing and diversification, our clients' unrealized gains have increased. and we were able to achieve strong net inflows of recurring revenue assets amid this adjustment phase. As a result, recurring revenue increased 10% to a record high of $50.3 billion. While bonus provisions were up in line with top-line performance, we continued to control non-personnel expenses, giving a recurring revenue cost coverage ratio of 70%, beating our March 2031 target long ahead of schedule please join to pay 7 for update on total sales by product total sales declined 900 billion yen to 5.9 trillion yen but this is because last quarter included a tender offer of over 1 trillion yen excluding that sales of stock increased from last quarter We executed multiple primary transactions and took orders from clients taking advantage of the market volatility from August to buy on the dip, resulting in sales of over 4 trillion yen. Sales of investment trusts and discretionary investments slowed from the strong prior quarter but remained robust compared to the fourth quarter of the last fiscal year. Sales of insurance products increased on demand for retirement funds and estate planning, while sales of products and Thank you very much. 826.2 billion, outstripping our annual target of 800 billion yen. As of the end of September, recurring revenue assets were 23.4 trillion, a decline from last quarter due to market factors, but quarterly average remained roughly unchanged. Recurring revenue was at a record high due to changes to our product mix and the fact that some half-yearly fees are received in the second quarter. The number of workplace services provided shown on the bottom right was 3.79 million, which is also ahead of our KPI target of 3.66 million.

Please turn to page 9 for investment management. Net revenue was up 18% at 56.1 billion yen, while net income-before-income taxes grew 38% to 31.9 billion yen. As you can see in the bottom left, Sable business revenue was 39.4 billion yen, marking a record high for quarterly revenue since the division was established. The asset management business remained strong, while assets under management at the end of September dipped, From last quarter, the quarterly average was roughly unchanged. We reported ongoing inflows into products where investment management expertise is required, such as active fund management and private assets, giving us a better product mix and higher investment management fees. Investment gain loss was up 95% at 16.7 billion yen, driven by a significant increase in American century investment-related valuation gain loss. Please turn to page 10 for an update of the asset management business which generates business revenue. As you see on the top left, asset management at the end of September stood at 88.8 trillion yen down from last quarter due to market factors, but the quarterly average was roughly the same. The bottom left shows another quarter of net inflows of 1.1 trillion yen, 650 billion yen of which was into investment trust business and 470 billion yen into the investment advisory and international business. In the investment trust business, MRFs reported over 440 billion yen of outflows, hinting at a prominent shift of funds to new investments. Excluding ETFs and MRFs, investment trusts booked inflows of 570 billion yen into private assets. balance funds and global equities across diverse distribution channels including Nomura Securities, regional financial institutions and other securities brokers. ETFs booked inflows of 520 billion yen mostly into Japan equities. In the investment advisory and international businesses, the international business made a strong contribution driven by inflows into U.S. high-yield bond fund next please turn to page 11 for an overview of wholesale performance net revenue increased eight percent to 263.4 billion yen as shown on the bottom left global markets revenues grew six percent while investment banking revenues were up 14 percent At the same time, wholesale expenses declined 3%. Although bonus provisions increased in line with top-line performance, severance-related expenses included in last quarter were no longer present, and this combined with yen appreciation to lower costs. As a result, income-before-income taxes significantly increased by 114% to 45.3 billion yen, and our cost-to-income ratio improved to 83%. Please turn to page 12 for an update on each business line. Global markets net revenue increased 6% to 221.1 billion yen. This quarter saw a spike in volatility on the back of uncertainty over the U.S. economy, a sell-off in tech stocks and geopolitical risks. Amid this environment, we were able to provide liquidity to the market and monetize robust client floats. Fixed income net revenue increased 2% to 127.8 billion yen. Macro products had a good quarter while wet rates booking stronger revenues from an uptick in client activity in Japan and America than FXEM. Performance improving in AEJ in spread products created slow in Japan from a strong prior quarter and Securitized products revenues declined primarily in America. Equity's net revenue was 93.2 billion yen, up 14% over the first quarter. Financing and derivatives had strong quarter in Japan and Asia, while equity products revenues grew substantially. Please turn to page 13 for investment banking. net revenue increased 14% to 42.3 billion yen. In Japan, we supported several corporate actions aimed at boosting corporate value, resulting in record high revenue since the fiscal year ended March 2017. When comparisons are possible, by-product advisory revenues grew internationally, driven by EMEA's involvement in High-profile transactions such as the acquisition of BritVic by Carlsberg's UK subsidiary, although Japan slowed from the strong performance last quarter, we supported multiple tender offers and management buyouts. Revenues in financing and solutions were up markedly. ECM revenues doubled on the back of offerings to sell cross-share holdings, while DCM executed many large insurances, including SoftBank Corp. Bond Type Class Shares, Sekisui Houses, Subordinated Bonds, and Infroneer Holdings Green Bond Type Class Shares are first in Japan. Please turn to page 14 for non-interest expenses. Group-wide expenses were roughly flat at 350.3 billion yen. Compensation and benefits were unchanged at 184.7 billion yen. Although bonus compensations increased in line with performance, as mentioned, Severance-related expenses declined from last quarter. Commissions and floor brokerage increased due to high trading volumes, but other expenses declined 6% on lower professional fees. Please send to page 15 for an update on our financial position. Table on the bottom left shows. Tier 1 capital of 3.4 trillion yen, a decrease of approximately 150 billion yen from the end of June. In addition, risk-weighted assets declined by 900 billion yen to 19.2 trillion yen, resulting in a tier 1 capital ratio of 17.6% and the common equity tier 1 ratio of 15.7%, both roughly the same as last quarter. That concludes our overview of our second quarter results. To sum up, despite the market volatility this quarter, we achieved annualized ROE of 11.6%, the second quarter of results, to consistently achieve 2030 quantitative target of ROE of 8 to 10% or more. ROE of 11.6% is the highest since the quarter ended December 2020. At that time, wholesale accounted for 60% of three-segment income before income taxes, but now earnings are well balanced across three divisions, giving us a higher quality ROE. Recurring revenue in wealth management and business revenue in investment management, both of which are sources of stable revenues, have increased by nearly 80% since the 2020 December end quarter, lifting our repeat business baseline ROE. We have also diversified our revenue mix in wholesale by growing our equity products and securitized products businesses into second and third pillars to complement our macro products business. In October, both wealth management and wholesale slowed down from the strong second quarter as clients increasingly sat in the sidelines given various political events. That said, wealth management revenues are still trending at a high level, contributing to baseline ROE while wholesale revenue diversification continues. As demonstrated in the second quarter, we will continue to control costs and take on appropriate risk in line with market conditions as we aim to boost our bottom line. Thank you very much for your continuous support.