Nomura Holdings, Inc.

The conference is now in presentation mode Your line is muted Good day, everyone, and welcome to today's Nomura Holdings second 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, 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. and Yutaka Nakajima. 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 first half and second quarter of the fiscal year ending March 2027. Please turn to page 2. The first half of this fiscal year got off to a volatile start with crude oil prices at one point exceeding $110 per barrel because of the turmoil in the Middle East. Thereafter, stock markets and major markets then registered all-time highs driven by rises in AI and semiconductor-related stocks, and Client Transactions picked up too. Later on, though, the outlook became increasingly uncertain again. With a combination of rising interest rates, renewed geopolitical risk and equity market corrections, our ROE came in at 13.3% in the first half of the fiscal year, representing a solid performance in light of changing market conditions that testifies to our improved earning power. I would like to highlight the following three points in particular. First, Thank you for joining us. to around 31 trillion yen, while assets under management in investment management rose by 50 trillion yen to around 150 trillion yen, particularly reflecting the impact of acquisition. As a result, stable revenue increased roughly 1.6-fold year on year. Third, structural reforms have led to a steady improvement in ROE. Based on these results, the interim dividend, with a record date of September 30th, will be 35 yen per share, representing a payout ratio of 41%. I would now like to run through second quarter results. Please turn to page 3. Earnings remained solid in the second quarter despite uncertain market conditions and ROE came in at 10.9%. Group-wide net revenue came in at ¥607.5 billion, down 12% quarter-on-quarter. Income before income taxes fell 30% to ¥148 billion, while net income fell 29% to ¥103.7 billion. Earnings per share for the quarter came to... and Yutaka Nakajima. Although performance moderated from the first quarter, we achieved our quantitative target for ROE of 10 to 12 percent or higher toward 2030, which we raised in May 2026. Stable revenue also expanded as we responded steadily to long-term asset formation needs. We will now look at second quarter results for each division, starting with wealth management. Please turn to page 8. All percentages discussed from here out are based on quarter-on-quarter comparison. On the top left, you can see that wealth management net revenue fell 3% to 141.5 billion yen, while income before income taxes fell 8% to 65.6 billion yen. Favorable developments in the asset management business ensured strong performance despite uncertain market conditions, and margin on income before income taxes remained high. On the bottom left, you can see that recurring revenue rose 13% to an all-time high of 66.7 billion yen. Net inflows of recurring revenue assets also rose to an all-time high of 755.4 billion yen, reflecting increased inflows. Flow revenue fell 13% but remained high in absolute terms, with several major deals countering a lull in equity market trading. The recurring revenue cost coverage ratio came in at 79%, testifying to the improved stability of earnings within the division. Please turn to page 9 where you can see an update on total sales by product. Total sales fell 13% versus the previous quarter to 7.4 trillion yen. Despite increased uncertainty about the outlook amid rising interest rates in Japan and the United States, purchases of assets for long-term diversified investment continue to gain traction. Sales of equities fell 21% but remain high in absolute terms. Bond sales rose 66% with increased sales of public and corporate bonds thanks to rising yen interest rates and contributions from a major primary deal, too. Sales of investment trusts, which constitute recurring revenue assets, fell 14%. Investors adopted a wait-and-see stance towards thematic funds, but there were sustained inflows into assets designed to be held over the long term, including Japan equity funds and balanced funds. Discretionary investments rose 9%, with SMA contract value reaching all-time high. Insurance also registered growth of 14% on demand for pension and estate planning. Next, we take a look at KPIs on page 10. On the top left, you can see that net inflows into recurring revenue assets rose 40% quarter-on-quarter to an all-time high of 755.4 billion yen. This shows that we are having success in the steady accumulation of recurring revenue assets irrespective of market conditions. Recurring revenue assets, which you can see on the top right, were down slightly at the end of the quarter because of market factors, but recurring revenue rose to an all-time high thanks to steady growth in recurring revenue assets over the course of the quarter and by investment advisory fees received semi-annually. As shown on the bottom right, assets under custody in workplace services remain solid, supported by continued inflows from employee share ownership plans. Next, let's take a look at investment management. Please turn to page 11. On the top left, you can see that net revenue fell 14% to ¥84.8 billion and that income before income taxes fell 39% to ¥27.4 billion. While not as strong as in the previous quarter, revenues nevertheless remained high in absolute terms. On the bottom left, you can see that business revenue, which constitutes stable revenue, came in at ¥82.3 billion. Asset management fees remained solid. Furthermore, assets under management in actively managed Japanese equity fund established in July exceeded 150 billion yen, while fund inflows enabled assets under management in flagship balanced funds to rise to almost 2 trillion yen. Investment gain fell to 2.5 billion yen, reflecting a lower contribution from American Century Investments-related gains. Let's now turn to page 12 and examine our asset management business. The graph on the upper left shows that assets under management remain high at quarter end. As shown at the bottom left, net inflows over the quarter amounted to 478 billion yen. Net inflows into investment trusts totaled roughly 1 trillion yen, with inflows into private equity, balanced funds, and actively managed Japanese equity funds, including newly established funds. Domestic investment advisory and international businesses Next wholesale, please turn to page 13.

Following the division's record high results in the first quarter since its establishment, net revenue for the second quarter was 308.9 billion yen, down 16%, while income before income taxes was 46.1 billion yen, down 51%. On the bottom left, you can see that global markets revenue fell amid increasingly uncertain market conditions, but investment banking revenue increased with contributions from its major products. Please turn to page 14 for an update on each business line. Net revenue in the global markets business fell 20% to 254.2 billion yen. Please look at the middle section on the right. Fixed income revenue fell 14% to 119.2 billion yen. In macro products, rates revenue declined amid and many more. While FX emerging revenues fell relative to strong performance in the first quarter in spread product, credit client activity was subdued as spreads widened. However, securitized products revenue rose mainly in the Americas and thereby offset some of the declining macro products revenue. International wealth management revenue also remained high thanks to growth in assets under management. Equities revenue fell 25% to 135 billion yen. In equity products, financing revenue performed solidly, but derivatives revenue declined from the first quarter when it benefited from a wide range of revenue opportunities. Execution services revenue fell as well on lower market trading volumes. While there was some quarterly volatility, sustained growth in the revenue base for equities and international wealth management helped to diversify and stabilize revenue within wholesale. Let's now turn to page 15 and look at investment banking. As you see, on the top left, investment banking net revenue rose 9% to ¥54.7 billion. Major products such as advisory and financing solutions, etc. saw growth in revenue and we ranked first in both Japan-related ECM and ECM league tables for April through September periods this year. Advisory revenue benefited from growth investment and portfolio realignment deals in multiple sectors including sponsor-related deals and infrastructure deals. In financing and solutions, etc., ECM continued to benefit from major public offerings and CB deals in Japan and acted as book runner for nine of the ten biggest deals in Japan in the first half of the fiscal year. In the ECM, we addressed strong funding demand from domestic companies through a wide range of financing methods. We also supported bond issuance overseas, including SSA bonds. Solutions business also continue to perform strongly mainly in Japan. Next, Banking Division, please turn to page 16. As shown on the top left, net revenue was up 7% to 16.4 billion yen and income before income taxes was up 20% to 4.4 billion yen. As you can see in the middle on the right, banking net revenue rose 11% to 4.5 billion yen. The deposit sweep service grew steadily in terms of contracts and balances, while funding costs were also kept in check thanks to growth in balance of deposits. Revenue from investment activities also increased on contribution from growth in holdings of securities and other investments as well as rising market interest rates. Trust and agent service net revenue rose 6% to 11.9 billion yen. Trust fees increased steadily as new trust boosted investment trust balances resulting in solid revenue growth. Next, KPIs on page 17. As you can see, on the top left, loans outstanding totaled 1,361,000,000 yen. The expansion of client touchpoints through the deposit sweep service has also contributed to greater awareness of our services. Against this backdrop, both the number of loan accounts opened and the loan balance has continued to grow steadily, particularly for Nomura Web Loan. Next, expenses. Please turn to page 18. Group-wide non-interest expenses came to 459.5 billion yen, a decline of around 3% from the previous quarter. Performance-linked bonus provisions and other compensation and benefits fell by around 5%, and trading-related expenses also normalized. Expenses continue to be appropriately managed relative to revenue. Next, our financial position. Please turn to page 19. As shown in the table on the bottom left, The end of September, common equity tier 1 capital ratio was 12.6%, down 0.6 percentage point from 13.2% at the end of June. This completes our overview of second quarter results. Finally, to summarize our earnings performance, we achieved ROE of 10.9% in the second quarter and 13.3% in the first half. Even as market conditions normalized, we achieved ROE in excess of 10%, demonstrating the fruits of restructuring for our business model. Let me comment briefly on the condition in October to date. While the market outlook remains uncertain amid concerns about renewed inflation associated with geopolitical risks and rising interest rates, the global economy has remained broadly resilient. In wealth management, revenue has been at roughly the same level as in the second quarter amid these conditions, while we have seen some cautious trading on the part of some of our clients. Inflows into products and services designed for medium- to long-term asset management remain solid, supported by preparations for inflation and growing demand for long-term diversified investment. In wholesale, concerns over geopolitical risks and persistently high interest rates have sent some market participants to the sidelines. The division has got off to a somewhat slower start than in the previous quarter. Conditions vary across businesses. Within global markets, some products have been subdued, while equities have remained solid and rates have been recovering. Investment banking is also off to a slow start, but the pipeline remains solid. We plan to monetize business opportunities while engaging in appropriate risk-taking and maintaining thorough cost controls. That concludes my presentation. Thank you.