Nomura Holdings Inc ADR American Depositary Shares

The conference is now in presentation mode. Your line is muted. Good day everyone and welcome to today's Nomura Holdings first quarter operating results for fiscal year ended March 2027 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, In certainties 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 speaking. I would like to start right away to report the results from Q1 year ending March 2027. In this quarter, all divisions achieved higher revenue and income-before-income taxes than in the previous quarter and already reached 15.4%. We believe the results of the structural reforms implemented over the past few years are now steadily being reflected in our performance and that we are making good progress towards our 2030 management vision. I would like to highlight three key points. Second, our international businesses saw sharp growth, particularly in our priority areas. Income before income taxes in our three overseas regions reached a record high since this quarter began in fiscal year 2008-09, adding greater debt to profits. Third, we launched Deposit Sweep Service to strengthen our banking business, and we are still laying the groundwork for future growth. We now look at first quarter results for each division. Please turn to page 7. All percentages discussed from now on are based on quarters on quarter comparison. On the top left, you can see the wealth management net revenue increased 9% to 145.4 billion yen, while income before income taxes increased 16% to 71.1 billion yen. Thus, revenue and income increased for the fiscal sector. Thank you for watching. Accurate perceptions of client activity as major equity markets hit all-time highs ensured growth in high-quality flow that in turn translated into growth in recurring revenue assets and thereby supported revenue growth. Solid cost controls also enabled the division to generate a high ratio of pre-tax profit margin of 49%. The recurring revenue cost coverage ratio came in at 76%, representing steady progress for the target in our 2030 vision. Please turn to page 8, where you can see an update on total sales by product. Total sales fell versus the previous quarter to 8.5 trillion yen. But sales predicated on long-term diversified investment roads, thereby ensuring high-quality inflows that will translate into recurring revenue. By product, stocks registered a decline of 36% owing to the absence of major tender offers, but remained high in absolute terms. Bonds registered a rise of 14% as rising yen interest rates ensured solid demand for Japanese bonds. Investment trusts and discretionary investments which constitute recurring revenue assets registered substantial growth of 22% and 38% respectively, supported by services tailored to client requirements and the sort of product lineup that only Nomura can offer. Insurance also registered substantial growth of 36% on strong demand for pension and estate planning. Next slide. I would like to look at KPIs on page 9. On the top left, you can see the recurring revenue assets, so a net inflow of 539.6 billion yen. As a result, as shown on the top right, recurring revenue assets totaled 31.7 trillion yen at the end of June, representing an all-time high. Recurring revenue also registered an all-time high despite the absence of half yearly investment advisory fees. As shown on the bottom right, workplace client assets, which we have established as a new KPI, saw steady growth to 10 trillion yen at the end of June on consistently high inflows from Next, let's take a look at investment management. Please turn to page 10. On the top left, you can see that net revenue rose 14% to 98.3 billion yen, and that income before income tax rose 148% to 45 billion yen. In both cases, this was the best performance since the division was established in April 2021. On the bottom left, you can see that business revenue was solid at 86.2 billion yen. Asset management fees registered an all-time high owing to growth in assets under management. Furthermore, there were steady inflows of funds into newly established emerging market equity funds actively managed by Nomura Asset Management International. and collaboration between Japanese and overseas offices with respect to acquired operations also generated rapid results and made a larger contribution to revenue. Investment gain or loss also benefited from much better performance at American-centric investments. Expenses also fell on the disappearance of impairments and one-time acquisition-related costs posted in the previous quarter. Let's now turn to page 11, an examine or asset management business, which is the key source of business revenue for the division. The graph on the upper left shows that asset under management reached an all-time high of 156.4 trillion yen at the end of June supported by favorable market conditions. As shown at the bottom left, net outflows amounted to 1.33 trillion yen. Net inflows into investment trusts, excluding ETFs and MRFs, totaled around 500 billion yen owing to actively managed Japanese equity trusts. and newly established actively managed emerging market equity funds but net outflows from ETFs totaled around 940 billion yen mainly from Japanese equity ETFs amid rising equity markets. Domestic investment advisory and international businesses so net inflows in Japan mainly into actively managed Japanese equity investment trusts Next, Wholesale Division, page 12, please.

On the top left, you can see that wholesale net revenue rose 20% to 369.1 billion yen, while income for income taxes rose 116% to 93.3 billion yen. In both cases, this was the best performance since the division was established in April 2010. Global markets net revenue rose 26% driven by equities. Investment banking net revenue fell versus the strong previous quarter but registered an all-time high for the first quarter of the fiscal year. The revenue to modified risk-weighted asset ratio rose to 9.3% on flexible allocation of resources in response to market conditions and steady efforts to tap revenue opportunities under the self-funding framework. Please turn to page 13 for an update on each business line. Net revenue in the global markets rose 26% to 318.7 billion yen. Please look at the middle section on the right. Fixed income revenue rose 11% to 139.2 billion yen. In macro products, rates revenue rose in EMEA on client activity, while FX emerging markets revenues rose substantially in AEJ on increased client flows. In spread products, credit revenue rose substantially in Japan and AEJ on increased client activity triggered by tighter spreads, while securitized products revenue came in flat. International wealth management revenue also grew steadily on expansion of client base, thereby helping to ensure more diverse sources of revenue for global markets. Equities revenue registered strong growth rising 41% to 179.4 billion yen owing to the strategic global rollout of businesses that have already been established in certain regions as well as favorable market conditions. Equity products saw strong revenue growth across all regions as increased client flows drove growth in derivatives. Elsewhere, accurate perceptions of client activity enabled AEJ to drive growth in execution services. Let's turn to page 14 for investment banking. As you can see on the top left, investment banking net revenue fell 9% to ¥50.4 billion, but It hit an all-time high for the first quarter of the fiscal year, exceeding 50 billion yen for the first time since fiscal year 2016-17, the earliest period for which data is available. Byproducts advisory revenue fell versus the strong prior quarter but benefited from growth investment and portfolio realignment in Japan and from multiple deals outside of Japan, including renewable energy-related deals that are an area of particular focus. In financing and solutions, etc., ECM remained at the top of the league table in Japan with contributions from multiple major deals. The business also responded to diverse needs, including the issuance of bond-type class shares. Elsewhere, ECM was widely involved in bond issuance by a broad range of Japanese and overseas issuers, while solutions businesses also continued to perform solidly. Next, banking division, please turn to page 15. As shown on the top left, net revenue was up 5% to 15.2 billion yen and income before income taxes was up 19% to 3.6 billion yen. Starting from this quarter, we disclosed net revenue broken down into banking revenue and trust and agent service revenue. As you see, In the middle of the right, banking revenue rose 19% to 4.1 billion yen. The balance of deposits and number of accounts grew steadily owing to the marketing of deposit sweep service launched on April 27 and collaboration with wealth management. Also, revenue from lending operations grew on a steady increase in loans outstanding and valuation gains on securities holdings also contributed to revenue growth. Trust and agent service revenue was 11.2 billion yen. Revenue trended solidly via growth in investment trust balances backed by the launch of new investment trusts and market factors. Next, we turn to KPIs on page 16. On the top left, loans outstanding were 1,247 billion yen. Loans outstanding Outstanding grew centered on Nomura Web Loans, reflecting a growing recognition of securities-backed loans and an increase in the value of collateral accompanying the market's rise, as shown at the bottom of the slide. The investment trust balance and assets under administration have been growing steadily on the acquisition of mandates for newly established investment trusts. and as fund inflows have continued on the back of marketing strategy enhancements. Next expenses, page 17 please. Group-wide expenses were 475.2 billion yen, an increase of about 1% or 5.7 billion yen from the previous quarter. Performance-linked bonus provisions and other compensation and benefits rose, but at the same time other expenses were held down, leading to the capture of benefits from operating leverage. Next financial position, page 18 please. As shown in the table on the bottom left, the end of June common equity capital ratio was 12.9% up 0.1% from 12.8% at the end of March. That completes our overview of the first quarter results. In closing, in May this year, we raised our numerical target range for ROE to 10 to 12% or more by 2030 and our target for income before income taxes in 2030 to at least 750 billion yen. ROE of 15.4% in the first quarter was the highest since the April to June quarter of 2020 when wholesale with relatively volatile earnings was Making a major contribution to profits amid quantitative easing measures being taken around the world in response to COVID-19 pandemic In recent years, the net revenue structure has been changing as exposure to any one particular division has declined and the generation of profits has become more balanced Across divisions, stable revenues have expanded roughly 60% from a year earlier, indicating steady reinforcement of income before income taxes level. In wholesale, revenue sources are becoming more diversified, driven by growth in equity products and securities products, as well as the expansion of the international wealth management business. Although performance may fluctuate to some extent in response to market conditions, we believe the quality of our profits has been steadily improving because of restructuring efforts made to date. Let me comment briefly on the situation since July. Market environment has been characterized by continued uncertainty amid the renewed heightening of geopolitical risk and equity markets have seen corrections and increased volatility. Despite these circumstances, net revenue and wealth management has been roughly on par with the first quarter. Funding flows to products and services Predicated on long-term diversified investments remain firm. In wholesale, net revenue has slowed somewhat of late. This is partly in reaction to strong net revenue in the first quarter mainly in equities but also owing to seasonal factors specific to the summer. Nevertheless, the pipeline for the division as a whole remains favorable. We think market volatility is likely to increase in the second half of the year with midterm elections to be held in the U.S. and in view of monetary policy trends in key markets. Key nations, we plan to monetize opportunities while engaging in appropriate risk-taking and maintaining strict discipline in terms of cost controls. Thank you for your continued support.