Nomura Holdings Inc ADR American Depositary Shares

Good day, everyone, and welcome to today's Nomura Holdings, fourth quarter and full-year operating results for fiscal year end of 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 teleconference 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 results. 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 results for the fourth quarter and full year for the fiscal year ended March 2026. Please turn to page 2. First of all, our full year results. As you can see on the bottom left, DRIP net revenue increased 15% year on year to 2,167.7 billion yen, while income before income taxes grew 14% to 539.8 billion yen, and net income increased 6% to 362.1 billion yen, setting a record year. We achieved full-year ROE of 10.1% on target for the second year in a row since we set our ROE target range of 8 to 10% or more by 2030. Four-segment income-before-income taxes reached an all-time high of 506.9 billion yen. Wealth management and wholesale drove company-wide earnings while both divisions achieving their highest income since their respective establishments. Wealth management achieved growth of 23% in income before income taxes as the recurring revenue-based business model gained further momentum, and major KPIs also saw substantial growth. Investment management saw its asset under management rise by more than 50% over the year to around 137 trillion yen, with a substantial increase in the stable business revenue base. Meanwhile, wholesale saw revenue growth across all regions, and both global markets and investment banking achieved record high revenue, resulting in income growth of 21%. As for banking, it has steadily expanded its business base since the division was established. and is making solid progress toward implementing deposit sweep. In view of our strong performance for the period ended March 26, we expect to pay an ordinary dividend of 24 yen per share. This brings the annual dividend to 51 yen per share for a dividend payout ratio of 41%. Next, let me give you an overview of the fourth quarter results. Please turn to page three. All the percentages I mentioned from here on are quarter-on-quarter comparisons. First of all, group net revenue rose 5% to 577.2 billion yen. Income before income taxes fell 20% to 107.7 billion yen, and net income was down 19% at 73.9 billion yen. Earnings per share came to 24.34 yen, and ROE was 8%. While four-segment net revenue rose, income fell due to factors including a decrease in the amount of profit recognized from affiliates in the other segment, as well as an impairment loss at an investee company in investment management. Next, please turn to page 7, and I will present an overview of each business in the fourth quarter. As you can see in the top left, in work management, net revenue was more or less flat versus the previous quarter at 133.1 billion yen, while income before income taxes exceeded the strong previous quarter, rising 5% to 61.2 billion yen. The recurring revenue cost coverage ratio reached 72%, and the division achieved a high level of profitability, with the margin on income before income taxes remaining above 40%, which is higher than the industry average. As shown on the bottom left, recurring revenue reached an all-time high of 56.8 billion yen. Net inflows of the current revenue assets remained at a high level, exceeding 400 billion yen once again this quarter. Blow revenue was down slightly, but at 76.4 billion remained high in absolute terms, second only to the level of the previous quarter as we were able to effectively support customers' need amid volatile market conditions. Next, I will give you an update on total sales by product. Please turn to page 8. total sales rose 75% quarter-on-quarter to around 11.7 trillion yen. This was largely due to major tender offers totaling 4 trillion yen, but even excluding this factor, total sales remained at a high level by product. Excluding the tender offers, sales of Japanese stocks remained high thanks to a contribution from primary deals. Sales of bonds fell by 5%. While demand for foreign products was solid, sales of Japanese bonds fell slightly in the absence of primary deals. Sales of investment trusts and discretionary investments, which constitute recurring revenue assets, saw some fluctuations but remained at a high level as the flow from savings to investments continued. In insurance, meanwhile, sales of foreign currency denominated products declined on weaker yen. Next, we take a look at KPIs on page 9. Net inflow of recurring revenue assets shown on the top left were 422.8 billion yen, the 16th straight quarter for inflows to exceed outflows. Recurring revenue assets at the end of March, shown on the top right, were down owing to market factors, but recurring revenue came to 56.8 billion yen, a record high even when factoring out the receipt of half-yearly investment advisory fees. As shown on the bottom left, number of flow business slides rose by around 200,000 from the previous quarter, reaching 1.74 million. Business has been growing against a backdrop of high market volatility, primarily in face-to-face channels. Next is investment management. Please turn to page 10. As seen on the top left, net revenue increased 42% to 86.2 billion yen, and income before income taxes was more or less flat at 18.1 billion yen. Business revenue, which is a stable type of revenue, was at an all-time high owing to growth in existing business and expansion of international business through acquisitions. At the same time, expenses related to acquired businesses and losses on impairment of equity stake in an invested company were recognized. as an explanation of the breakdown of net revenues can be found on the bottom right. Solid asset management business and the aircraft leasing business Nomura Babcock and Brown both contributed to the increase in business revenue, while investment gains related to American Century Investments rose quarter on quarter. Moving on to page 11, we look at our asset management business as a backbone of business revenues. The graph on the upper left shows that assets under management hit an all-time high of 136.9 trillion yen at the end of March. Shifting our focus on the bottom left, we see there were net outflows of 279 billion yen. In the domestic investment trust business, which had inflows of 816 billion yen, funds went mostly into Japanese equity products in the ETF category and into balance funds Japan Equity Active Funds, and private asset-related products in the investment trust category. In the domestic investment advisory international business, outflows came to about 1 trillion yen, mainly from business targeted for acquisition. In line with the industry trends in the U.S., we expect funds to continue flowing from active-type mutual funds for now, but we aim to grow assets under management by boosting total sales and bringing net flows of new close to neutral as soon as possible with enhancements to making capabilities and expansion of active ETF SMA business opportunities. Alternative assets under management on the bottom right create to a record high 3.63 billion yen, an increase of about 300 billion yen from the end of December, of which fund inflows account for more than half.

Next wholesale. Please refer to page 12. On the top left, you can see that wholesale net revenue fell 2% to 308.1 billion yen, and income before income taxes declined 31% to 43.2 billion yen. Looking at the breakdown on the bottom left, global markets net revenue slid 2%, and investment banking net revenue fell 3%. This question by business line can be found on page 13. Global markets net revenue was down 2% at 252.5 billion yen. Please find the middle section on the right. Fixed income revenue declined 8% to 125.3 billion yen. In macro products, rates revenue was weak in the Americas with weak volatility rising but rose in Japan. FX emerging revenue offset some of the weakness in rates revenue as client flows were accurately captured. In spread products, Securitage products revenue remained high mainly in Americas and fell quarter on quarter in AEJ. Credit revenue was unchanged despite widening spreads. Equity's revenue was up 6% to 127.2 billion yen. Equity products revenue reached a record high as revenue rose sharply in Japan and AEJ on strong financing and derivatives performance. Execution services revenue rose in all regions, benefiting from a pickup in client activity. Please go to page 14 next. As shown on the bottom left, investment banking net revenue came to 55.6 billion yen, down 3%, but still at the high level. Byproduct in advisory, revenue growth momentum continued based on involvement in many M&A deals, chiefly in Japan. The range of deals was varied and included domestic realignment, privatization, and cross-border deals. In financing and solutions, ECM revenue rose partly on contributions from large-scale CB and PO deals. Solutions business continued to perform well as it tapped demand for unwinding of closed-shelf holdings. Let's continue to banking on page 15. On the top left, banking net revenue was up 6% at 14.5 billion yen, and income before income taxes was down 27% at 3.0 billion yen. Loans outstanding accumulated steadily during the quarter as recognition of loan products on offer grew. The investment trust balance grew thanks to both market factors and establishment of new trusts. Income fell as expenses rose, including spending on IT and a part of the standardization of business processes and recognition of taxes and public charges. We would like you to view this as an upfront investment aimed for future business expansion. Next expenses on page 16. Group-wide expenses were 469.5 billion yen, a quarter-on-quarter increase of about 13% or 53 billion yen. Extraordinary factors that boosted expenses include impairment losses associated with the liquidity staking, invested company compensation and benefits accompanying changes to remuneration regulation, and effects from changes to the method of presentation of financial statements. When these factors are excluded, we think it's evident that the cost structure in place is appropriate for the revenue growth. We aim to balance revenue growth and cost controls while making steady investment in growth. Next, page 17 for financial position. As you can see in the bottom left, the common equity tier 1 ratio stood at 12.9% at the end of March, down 0.1 points from 13.0% at the end of December. This concludes our overview of our fourth quarter results. In closing, we announced reaching Lastly, please allow me to briefly talk about the situation related to private credit. First, our group's exposure is properly diversified and managed, breaking down our exposure. In wholesale business, lender financing for private credit funds comes to about $800 million, and direct lending to SMEs comes to about $1.2 billion. While in investment management, investment holdings related to private credit come to about $400 million. Lender financing is backed by a diversified corporate credit portfolio and the credit fund counterparties are by and large supported by long-term capital provided by institutional investors and the like. Direct lending is diversified across more than 40 companies and investment management investments are also suitably diversified and have been performing stably. In closing, We announced Reaching for Sustainable Growth, our vision for business in 2030 in May 2024, and set as numerical targets a consistent attainment of ROE of 8 to 10% or more and income before income taxes of more than 500 billion yen, with our targets attained now in the span of two years. Great strides have been made to build the franchise required to realize sustained growth of the Nomura Group. I would like to briefly touch upon the situation as of now in April. In wealth management, net revenue is largely at the same level as in the fourth quarter. Uncertainty remains in the market due to geopolitical risk, but the flow of funds into products and services assuming the long-term diversification of investments remains firm. and client sentiment has been recovering. In wholesale, net revenue has been trending much higher than in the fourth quarter. With equity markets rebounding sharply from the end of March and rising to new all-time highs, client activity has picked up and equity product revenue has been strong. The rate has also been steadily monetizing client flows amid moderate market volatility. We aim to monetize business opportunities while keeping mindful of appropriate risk levels and cost controls. Your continued support is appreciated. Thank you.