Nomura Holdings Inc ADR American Depositary Shares

Good day, everyone, and welcome to today's Nomura Holdings fourth quarter and full year operating result 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 predictions. Such factors include economic and market conditions, political events and investor 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 Kitamura, CFO of Nomura Holdings. I will now give you an overview of our financial results for the fourth quarter and fiscal year ended March 2nd. Please turn to page two. First of all, our full year results. As you can see on the bottom left, group net revenue increased 21% year-on-year to $1,892.5 billion, while income before income tax grew 72% to $472 billion. Net income increased to 2.1 times the year-on-year. Earlier level to a record high 340.7 billion. Earnings per share came to 111.03 yen and return on equity was 10% making a strong performance. As shown on the bottom right, all three main segments performed solidly and three segment income before income taxes grew by 80% to 426.6 billion. I think it is important to highlight that earnings clearly show the fruits of our medium to long-term initiatives. Wealth management recurring revenue grew by 30% on a continued net inflow into recurring revenue assets via the provision of comprehensive asset management services coupled with growth in client assets thanks to an upturn in market conditions. Investment management saw a 20% increase in business revenue thanks to a high level of assets under management which reflected an eighth consecutive quarter of net inflows. Both divisions saw steady growth in stable revenues. Meanwhile, wholesale revenues grew in all business lines and all regions thanks to the diversification of revenues, particularly overseas. Income before income taxes rose sharply on the back of revenue growth across all divisions as well as thoroughgoing cost controls. As a result, income before income taxes reached an 11-year high in wealth management, a 15-year high in wholesale revenues, and the highest level at the Investment Management Division since it was established in April 2021. Turning to page 3, as you can see on the left-hand side, all divisions achieved income-before-income taxes targets for the fiscal year ended March 25, presented at May 23, Investor Day. Profitability also improved sharply in 2021. The three international regions, as you can see on the right-hand side, their combined income before income taxes came to 137 billion yen, marking the highest level since we first disclosed geographic information in the year ended March 2003. Our group-wide effective tax rate also fell to 26% as some international entities made use of tax losses carried forward. Please turn back to page 2 again. In view of our strong performance for the period ended March 2025, we expect to pay an ordinary dividend of... 24 yen per share, in addition to the 100th anniversary commemorative dividend of 10 yen per share we previously announced, making a total year-end dividend of 34 yen. This works out as an annual dividend of 57 yen per share and a payout ratio of 49 percent. Today, we resolved to set up a share buyback program in order to raise capital efficiently and ensure flexible capital management policy and to deliver shares on exercise of stock-based compensation. The program will run from May 15 to December 30 and have an upper limit of 100 million shares with the upper limit of the aggregate amount of repurchased press being 60 billion yen. Next, let me give you an overview of our fourth quarter results. Please turn to page four. All the percentage figures I mentioned from now on are quarter-on-quarter comparisons. First of all, group net revenue fell 10% to 452.7 billion. Income before income taxes fell 29% to 97.7 billion. And net income was down 29% as 72 billion. Earnings per share came to 23.39 yen. Compared with the previous quarter, when performance was robust, conditions were more difficult today. amid rise in yen rates and a decline in the stock market. However, we achieved annual rise ROE of 8.2%, exceeding the fourth consecutive quarter. the lower bond of our ROE target of 8% to 10% or more by 2030. As you can see on the bottom right, three-segment income before income taxes totaled $90.1 billion. Amid uncertain market conditions, the quarter saw a decline in flow revenue in web management and lower fixed income revenues in wholesale, but stable revenues, specifically recurring revenue and business revenue, increased further, and equities and investment banking both achieved strong results. Next, please turn to page 7 and I will present an overview of each business in the fourth quarter. In wealth management, net revenue fell 10% to 104.5 billion and income before income taxes fell 20% to 37 billion. We generated record high stable recurring revenue of 51.6 billion yen on a boost from investment advisory fees booked half yearly and also achieved cost savings of 4%. as a result of which our recurring revenue cost coverage ratio for the quarter rose sharply to 76%. Flow revenue, etc., fell 20% to $52.9 billion, owing to a 45% decline in primary stock subscriptions and a slowdown in secondary stock transactions and investment trust purchases amid inflation. and uncertain market outlook. Quarterly earnings tend to fluctuate owing to prevailing market conditions at a given time, but on a full-year basis, you can see that the division achieved revenue growth of 12% or around 49 billion yen in value terms while keeping cost increases down to a modest 1 billion yen. This can be seen as the fruits of our ongoing effort to reduce costs. As a result, leverage enabled us to achieve growth of 39% in income-before-income taxes, Please turn to page 8 for an update on total sales by product. Total sales rose 3% quarter-on-quarter to $5.4 trillion. Sales of stock rose 6% to $3.9 trillion, in part owing to a large lot purchase. Sales of bonds increased 16% with a contribution from Toyota Motor Credit Corporation's primary deal. Secondary sales of stocks, excluding the large lot purchase, and sales of investment trusts fell as investors stayed on the sidelines amid range-bound trading in equity markets and an uncertain outlook. Next, on page 9, we look at progress in KPIs. In wealth management, priority was given to four KPIs in the fiscal year, net inflows of recurring revenue assets, recurring revenue assets, flow business clients, and workplace services. As you can see, targets were attained in all four KPIs. In particular, net inflows of recurring revenue assets seen on the top left came to $1,374 billion, sharply exceeding the target of $800 billion and contributing to growth in recurring revenue. On the bottom right, we see that 3.88 million units of workplace services were provided. and efforts to broaden the client base centered on ESOP-related services have been going well. Please turn to page 10 for investment management. Net revenue was down 6% to $43 billion, while income before income taxes fell 18% to $15.5 billion. Net revenue fell owing to investment gain loss. Private equity investment firm Nomura Capital Partners recognized unrealized valuation gains as the value of portfolio companies appreciated, but investment valuation gains and losses related to American century investments turned slightly downwards. Business revenue, which is a stable type of revenue, came to $43.3 billion, a record high for the fifth straight quarter. Assets under management were down at in March owing to market factors, while asset management fees where little changed from the strong previous quarter revenue rose in the aircraft leasing business. Please turn to page 11 for an update on the asset management business, which is a key source of business revenue. As seen on the top left, assets under management at the end of March were $89.3 trillion, exceeding the KPI target of $89 trillion for the fiscal year ended March 25. On the bottom left, net inflows came to $314 billion marking the eighth straight quarter of net inflows. Investment trust business accounted for about 270 billion of inflows. There were outflows of 420 billion from MRFs, hinting at prominent shifts of funds to new investments, while ETFs saw inflows of around 670 billion into Japanese stocks, mainly at the time of the market downturn in March, and there were inflows into investment trusts including Japan's first publicly placed investment trust investing in private infrastructure company stocks as well as balanced funds. On the lower right, we see that alternative assets under management came to a record high of 2.6 trillion. Yen appreciation had an adverse effect, but there were about 170 billion in net inflows owing to inflows to the investment trusts we mentioned earlier that invest in private infrastructure company stocks and additional investments by institutional investors in response to capital calls.

Next, please look at page 12 for wholesale performance. Wholesale net revenue fell 11% to 259.2 billion yen and income before income taxes declined 40% to 37.5 billion yen. Equities revenues rose for the fifth straight quarter and investment banking revenues increased on contributions from EMEA. Fixed income revenues slowed relative to the previous quarter when they were strong. On the top left, the cost-to-income ratio was 84% and the ratio of revenue to modified RWA was 7.6% for the full year, beating the fiscal year KPI targets of 86% and at least 6% respectively. Net revenue rose 22% and growth in expenses was held to 10%, producing income-before-income taxes of 3.1 times the previous year's level. Please turn to page 13 for an update on each business line. First, global markets net revenue declined 13% to 206.9 billion yen. Fixed income net revenue fell 24% to 105.8 billion yen, partly in response to a strong performance through the previous quarter. Rates revenue fell as client activity slowed in the latter half of the quarter. Credit revenues were unfavorable, owing to spread widening. On the other hand, FX, EM and securitized products revenues were down from the previous quarter when revenues were strong but remained firm. Equities net revenue rose for the fifth straight quarter to 101.1 billion yen. Revenues were particularly strong in the Americas and derivatives revenues rose sharply on the backdrop of high volatility and increased client activity. Execution services revenue were up thanks to increased volume. Next, page 14 for investment banking. Net revenue was 52.3 billion yen, the highest quarterly net revenue on record, going back to the fiscal year ended March 2017, which is the span over which comparisons are possible. Advisory revenues were strong in the fourth quarter, with several large-scale cross-border and tender offer deals executed in Japan, as shown on the top right, overseas deals related to renewables. and beverages mainly in emia contributed to revenues advisory revenues accounted for half of investment banking net revenue revenues in financing and solution fell from the previous quarter when the ecm deals were strong in japan but we executed several deals in the fourth quarter including a global po for japan post bank and ssa bonds including spanish government government bonds next page for 15 for non-interest Expenses. Group-wide expenses amounted to 355 billion yen, down 2%. Compensation and benefits declined 10% to 172.3 billion yen, mainly owing to a decline in bonus provisions linked to the top line. Please turn to page 16 for an update on our financial position. As shown on the bottom left, the Tier 1 capital ratio was 16.2% and the common equity Tier 1 ratio was 14.5% at the end of March. both down about two percentage points from the end of December. This reflects the start of the implementation of new capital requirements from the end of March as part of the Basel III finalization. We aim to maintain the common equity tier one ratio at 11% or higher over the medium term and thus should be able to comfortably meet capital requirements even after the new rules are implemented. This concludes our overview of our first fourth quarter results. To sum up, in May last year, we issued our Management Vision 2030 titled Reaching for Sustainable Growth. The numerical targets set forth in that vision included includes consistently achieving re of eight to ten percent or more and generating more than 500 billion income before income taxes in the year since we presented that management division we have made tremendous progress in building up a franchise capable of delivering sustainable growth for normal group it is worth highlighting the steps we have taken to achieve sustainable growth of sustainable revenue as discussed earlier recurring revenue in wealth management and business revenue in investment management have risen to record levels And just this week, we reached an agreement to acquire the Macquarie Group's U.S. and European public asset management business. This acquisition makes investment management larger in size and also more global, setting up a major step change in the division's growth. Also, just this month, we established a new banking division that will leverage the strengths of our banking and trust banking functions so that we can provide our clients with more diverse, high-quality services. In taking on these initiatives in Japan and globally, our aim is to put Nomura Group more solidly on the path to city growth. Our management team attaches great importance to capital efficiency. Basel III finalization took effect at the end of March, and our common equity to one capital ratio is comfortably higher than the target we have set for ourselves of 11% over the medium term. The decision regarding today's share buyback was made after considering both the current capital levels and the prevailing stock price levels. Going forward, we intend to use our surplus capital to invest in strategically selected growth areas while also rewarding our shareholders. The market environment has been turbulent and uncertain ever since the Trump administration revealed its reciprocal tariff policy, but it is precisely at times like these that Nomura Group has an especially vital role to play. In April thus far, wealth management has seen a slowdown in net revenue as clients have retreated to the sidelines. But during the three-day period of consecutive steep declines in the stock market, the division as a whole saw more buying than selling, with some investors choosing to buy on the correction. Our sales partners provided our clients with timely and appropriate information that helped limit the extent of overdone selling among our client base. and recurring revenue assets in private wealth management and wealth management domains have continued seeing net inflows. In wholesale, the upsurge in market volatility has been accompanied by robust trading activity in equities and FX emerging markets. Net revenue in division is currently on track to be higher than in the fourth quarter of the Fiscal year just ended. I believe Nomura Group's talented and abundant human resources, robustly healthy financial position, and powerful global reach will manifest our strength, especially in times of uncertainty like now. As we celebrate our 100th anniversary, we will continue to strive for further growth and we appreciate your continued support.