Nomura Holdings Inc ADR American Depositary Shares

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Good day everyone and welcome to today's Nomura Holdings third quarter operating results for fiscal year ending March 2026 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 results, performance or achievements of the company to be materially different from the result, performance or other expectations implied by these projections. Such factors include economic and market conditions, political events and investor sentiments, 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'd like to begin the conference. Mr. Hiroyuki Moriuchi, Chief Financial Officer, please go ahead.

This is Moriuchi CFO. Thank you for joining us. I will now give you an overview of our financial reels for the third quarter of the fiscal year ending March 2026. Please turn to page 2. Return on equity was 10.3%, reaching the quantitative target for 2030 of 8% to 10% or more for the seventh consecutive quarter. Group-wide net revenue came in at 551.8 billion yen, up 7% over the last quarter. Income before income taxes fell 1% to 135.2 billion, while net income fell 1% to 91.6 billion. EPS for the core were 30.19 yen. The four main divisions performed solidly but the segment other incurred losses because of the downturn in market conditions for the digital asset related businesses. For all four divisions in total, pre-tax income rose 8% to 142.9 billion. This is the highest level in 18 and a half years since the first quarter of the fiscal year ended March 2008. Wealth management achieved growth of around 30% versus the previous quarter which was itself a strong quarter. Investment management saw business revenue rise to an all-time high since the establishment of the division thanks to the consolidation of the public asset management business of the Macquarie Group, which we acquired in December 1, 2025. But profits fell because of weaker investment gains and one-time expenses associated with this acquisition. In wholesale, both equities and investment banking performed solidly, generating record revenues. Banking also generated solid revenues from lending activities as well as trust and agent services. In view of our strong momentum, we resolved to set up a share buyback program in order to enhance shareholder return and capital efficiency. The program will run from February 17th to September 30th of this year with an upper limit of 100 million shares and 60 billion yen in amount. Before we go into details for each business, let us first take a look at earnings in the first nine months of the fiscal year. Please turn to Phase 3. As shown on the bottom left, income before income taxes rose 15% year-on-year to 432.1 billion yen. Net income rose 7% to 288.2 billion. Earnings per share came in at 94.67 yen and return on equity came in at 10.8%. Please see the bottom right for a breakdown of income before income taxes. Pre-tax income at four main divisions rose 10% to 381.3 billion yen. On a nine-month basis, income before income taxes is running slightly ahead of the target of over 500 billion yen in our 2030 management vision. Looking at individual divisions, wealth management continued to generate strong profits and year-on-year recurring revenue cost coverage ratio rose sharply, improving revenue stability. Profits fell in investment management because of one-time expenses associated with the Macquarie acquisition, but existing operations continued to generate organic growth, thereby steadily broadening the division's business foundations with a view to future growth. Moreover, at all wholesale business lines, they performed well, thereby actively driving group-wide earnings. Banking saw costs rise ahead of the introduction of the new deposit sweep service in the next fiscal year, but loans outstanding and investment trust balances rose smoothly. We will take a look at the third quarter results. Please turn to page 7. All percentages discussed from now on are based on a quarter-on-quarter comparison. On the top left, you can see that wealth management debt revenue increased 14% to $132.5 billion, while income before income taxes of $58.5 billion represents a growth of 29% versus the previous quarter, which was itself a strong quarter. The margin of over 40% on income before income taxes was not only high in absolute terms, but was ahead of the streak, too. On the bottom left, you can see that recurring revenue rose to an all-time high of $52.7 billion. The first and third quarters tend to be slack quarters for recurring revenue because investment advisory fees are only booked in the second and fourth quarters. But this was completely offset this quarter thanks to net inflows of recurring revenue assets in excess of 500 billion yen. Flow revenue also increased sharply to 79.8 billion. Accurate assessment of market movements and client needs along with supplying of new products helped to ensure strong revenue. Recurring revenue cost coverage ratio also rose one percentage point to 71% amid ongoing cost control initiatives. Please turn to page eight where you can see an update on total sales by product. Total sales rose around 300 billion yen to 6.6 trillion yen thanks to growth across a wide range of products. Equities registered growth of 4% thanks to increased secondary trading during market correction phases as well as major primary deals. Bonds registered a decline of 25%. Yen-denominated bond sales came in flat as rising interest rates boosted yields and ensured solid demand, but foreign bond sales were hit by the disappearance of primary deals booked in the previous quarter. Investment trusts and discretionary investments which make up recurring revenue assets saw steady growth in sales and insurance sales remain strong. This demonstrates that the shift from savings to investment has now firmly taken root. Next, we take a look at the KPIs on page 9. On the top left, you can see that recurring revenue assets saw net inflow of 5.5 gig and 3.9 billion yen. Although there were some liquidity needs prompted by record highs in major markets, we secured the largest net increase on record. Our efforts to expand the recurring business are steadily producing results, strengthening our confidence. Meanwhile, as shown on the top right, recurring revenue assets totaled 28.1 trillion yen at the end of December, which also presents an all-time high as shown on the bottom left the number of flow business clients rose by around 270 000 to 1.53 million foreign market conditions led to an upturn in client activity and primary deals such as the sbi shinsaibank ipo also encouraged trading activity Next, let's take a look at investment management on page 10. On the top left, you can see that net revenue came in flat at $60.9 billion, and the income before income taxes fell 42% to $17.9 billion, mainly because of one-time expenses associated with the Macquarie acquisition, together with weaker gain associated with American Century investments, which came under investment gains and losses. On the bottom left, you can see that business revenue, which constitutes stable revenue, rose to an all-time high of $57.8 billion, benefiting from revenue from the acquisition that we completed in December last year, as well as from solid performance in asset management business in Japan. However, investment gains fell because of smaller gains related to American Century Investments and the disappearance of gains in the sales of portfolio companies at Nomura Capital Partners. Although profits for the division fell because of weaker investment gain and one-time expenses associated with the acquisition, the impact was offset in consolidated accounts via the reversal of the valuation allowance for deferred tax assets. Let's now turn to page 11 and examine our asset management business, which is a key source of business revenue for the division. The graph on the upper left shows that assets under management reached an all-time high of $134.7 trillion at the end of December. As shown on the bottom left, net inflows amounted to $115 billion, representing the 11th consecutive quarter of net inflows. Net inflows to domestic investment trust business totaled $71 billion. Although there were outflows from ETFs for profit-taking amid rising equity markets and from Japanese equity investment trusts due to early redemptions, they were offset by inflows into newly established Japanese equity active funds, private assets, and balanced funds. Net inflows into domestic investment advisory and international businesses totaled $44 billion, with the outflows from U.S. high-yield bonds and the business we acquired but influenced mainly inter-yen denominator bonds in Japan. As shown at the bottom right, alternative asset under management rose to a new high of 3.3 trillion. This represents growth of about 400 billion versus the end of September, more than half of which stems from net inflows. Next, let's take a look at wholesale on page 12. On the top left, you can see that wholesale net revenue rose 12% to $313.9 billion, while income before income taxes rose 17% to $62.3 billion. The breakdown on the bottom left shows that global markets net revenue rose 9% while investment banking net revenue rose 9%.