Nomura Q3 2024 Earnings Call Transcript

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Provided by Quartr
January 31, 2024

There are 3 speakers on the call.

Operator

Good day, everyone, and welcome to today's Nomura Holdings Third Quarter Operating Results for Fiscal Year Ending March 2024 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.

Operator

Please note that this telephone conference contains certain forward looking statement 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 achievement of the company to be materially different from the results, performance or other expectations implied by those projections. Such factors include economic and market conditions, political events and the investor sentiment, liquidity of secondary market, level and the 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.

Operator

Please go ahead.

Speaker 1

Good evening. This is Takumichi Damura, CFO of Namura Holdings. First, I would like to extend my heartfelt condolences to those affected by the Noto Peninsula earthquake and pray for a swift recovery from this disaster. I will now give you an overview of our financial results for the Q3 of the fiscal year ending March 2024 using the document titled consolidated results of operations. Please turn to Page 2.

Speaker 1

Group net revenue increased 9% quarter on quarter to 400 0.2000000000 yen while income before income taxes grew 39 percent to JPY 78,700,000,000. Net income was up 43% at JPY 50,500,000,000. And as you can see on the top right, performance bottomed out in the Q4 last year and has continued to improve since. The 3rd quarter proved to be somewhat of an emotional roller coaster for market participants over the possibility of the FRB moving away from its tightening stance. This combined with tensions in the Middle East, resulted in elevated volatility in equity markets and heightened uncertainty.

Speaker 1

Inflation in the U. S. Slowed towards the end of the quarter raising hopes of an exit from the sharp rate hikes over the past 2 years and driving robust performance in equity markets. In fixed income markets, we also started to see a recovery in the issuance of securitized product as interest rates fell and credit spreads tightened. Interest in Japan remained high.

Speaker 1

Activity picked up among not only institutional investors, but also corporates and individuals over expectations of a monetary policy shift, various actions by corporates to improve capital efficiency and reduce strategic shareholders and investment momentum in the lead up to the introduction of the new NISA Ski. Amid this environment, we play to our strength by fully leveraging our extensive client franchise in Japan and our global network to deliver products, services and solutions tailored to the needs of our clients. This resulted in strong momentum across our 3 core businesses. Before I go into the details of performance of each business, please take a look at the bottom right, which shows 3 segment for income taxes of JPY 70,500,000,000 up 16% over the last quarter. Our international wholesale business reported an uptick in client activity towards the end of the quarter and all international regions had a profitable quarter.

Speaker 1

Diluted earnings per share for the quarter was 16.1 yen and return on equity was 6.2%. While this represents a positive trend towards improved We are still not where we want to be. With this momentum in performance and given our sufficient capital base, today, we resolved to set up a share buyback program in order to raise capital efficiency and secure a flexible capital management policy and to deliver shares on exercise of stock based compensation. The program will run from February 16 to September 30 and had an upper limit of 125,000,000,000 shares with the upper limit of the aggregate amount of the repurchase price being JPY 100,000,000,000. On Page 3, update of results for the 9 months to December.

Speaker 1

Net revenue for the period was RMB 1,116,900,000,000, up 11 as compared to the same period last year. Income before income taxes increased 43% to RMB 180 JPY 1,800,000,000 while net income grew 28 percent to JPY 109,100,000,000. EPS was JPY 34.6 9 yen and ROE 4.5 percent. As shown on the right, 3 segment income before income taxes rose 69% to RMB 159,700,000,000. Income before income taxes and retail jumped 3.5x and investment management increased 50 percent.

Speaker 1

Now to business performance in the 3rd quarter starting with retail on Page 6. All the percentages I mentioned from this point and beyond refer to changes compared to the Q2. Retail net revenue increased 4% to RMB102,600,000,000 and income before income taxes was RMB31.9 billion, marking the highest level in 8 years since July to September quarter 2015. The reallocation of our partners last spring has delivered steady results and we are starting to see good signs in terms of quality and quantity of our Dialogue with clients. As you can see on the bottom left, flow revenue increased 7% to JPY 64,000,000,000 spurred on by strong equity related revenues due to favorable market conditions and primary transactions such as the offering by Dentsu.

Speaker 1

Recurring revenue, an area of strategic focus, was in line with last quarter's record high. Although revenues were up 4%, expenses increased by only 1%, and our recurring revenue cost coverage ratio remains high at 55%. Please turn to Page 7 for a breakdown of sales by product. Total sales were down 9% at 4,700,000,000,000 yen but remained high and strong. Sales of stocks were 3.1 1000000000 essentially higher than the level seen before the Q1 with this quarter being a notably strong won for primary subscriptions.

Speaker 1

Insurance sales were at a record high. As we continue to provide consulting for our clients of our portfolio, we are seeing more clients use insurance products for estate planning and retirement funds, which is another benefit from reallocating our partners. Please turn to Page 8 for an update on KPIs. Net flows of recurring revenue assets shown on the top left was RMB 51,400,000,000. This was lower than last quarter as the market rally and rising value of products prompted large sales and exits.

Speaker 1

However, excluding corporate section, net inflows remain high at 151,500,000,000. The top right shows recurring revenue assets at a record high of 21,000,000,000,000 and recurring revenue, which represents stable revenues, remained strong. Flow business client numbers shown on the bottom left were particularly strong this quarter as we saw the benefits of reassigning sales partner and enhanced dialogue with clients on the back of primary transactions. Flow business client numbers at the end of December were trending 15% above the same period last year at 1,456,000, which is approaching our March 2025 KPI targets. Our business for salaried employees or workplace business continued to grow steadily.

Speaker 1

The number of

Speaker 2

Page 9 for an update on Investment Management. Net revenue decreased 14% to JPY 38,900,000,000 and income before income tax This declined 33 percent to JPY 15,600,000,000. As you see on the bottom left, stable business revenue was JPY 33,300,000,000 In line with last quarter, which was a record high since the division was established in April 2021, investment gain loss declined to 5.6 billion as American Century Investments related to valuation gain loss slowed. Please turn to Page 10 for an update on an asset management business, which is The source of business revenue, as shown on the top left, assets under management totaled JPY 78,500,000,000,000 at the end of December, representing a record high for the 3rd straight quarter. This is above our March 2025 KPI target of 75,800,000,000,000 yen.

Speaker 2

On the bottom left, net inflows were 330,000,000,000 yen with the Investment Trust business reporting 60,000,000,000 yen of outflows. This was due to an increase in sales to lock in profits on the back of the market rally. MRFs And other money market funds reported JPY 70,000,000,000 of inflows as individuals parked more idle funds. The investment Advisory and international businesses booked inflows of JPY 385,000,000,000 Japan reported inflows into yen bond funds, While internationally, we saw inflows into U. S.

Speaker 2

High yield bond funds and India equity funds, alternative asset managed Assets under management shown on the bottom right stood at JPY 1,600,000,000,000, down slightly due to yen appreciation at the end of the quarter. That said, inflows continued and we are making progress with our private market initiatives. Please turn to Page 11 for Wholesale. Net revenue increased 6% to JPY 217,000,000,000. Income before income taxes was JPY 23,000,000,000 up 178 percent.

Speaker 2

Performance is improving after having bottomed out in the Q4 of last fiscal year. Although bonus provisions increased in line with performance, wholesale non interest expenses decreased 1% as severance related expenses declined And we saw the benefits of cost reductions carried out through to last quarter as a result of our cost income ratio dropped to 89%. Please turn to Page 12 for an overview of the results by business line. Global Markets net revenue was roughly flat at 171,600,000,000 yen. Fixed income revenues increased 7% to JPY 103,500,000,000.

Speaker 2

As I mentioned earlier, during the first half of the quarter, Market participants remained on the sidelines over the uncertainty surrounding monetary policy and geopolitics, but we executed client orders while stringently managing risk. Heading into the second half of the quarter, as we gained clarity on the outlook For interest rates, market participant activity improved and we saw an increase in revenue opportunities. While market conditions weren't easy, we booked Stronger revenues across all core products such as rates, FX and EM, securitized products and credits. Equity's net revenue So 8% to JPY 68,200,000,000 Equity products had a strong quarter in the Americas, but revenues were lower in Japan and AEJ on muted volatility and client activity. Execution Services continue to deliver solid performance in Japan, While contributions from primary transactions and higher trading holdings on the back of heightened interest in Japanese equities From domestic and foreign institutional investors, please turn to Page 13 for Investment Management Investment Banking results.

Speaker 2

Net revenue was JPY 45,400,000,000 up 36% and driven by strong performance in Japan and EMEA. This represents The best quarter since the 1st fiscal year ended March 2017 when comparisons are possible. As shown on the left, Advisory and financing and solutions both reported revenue growth. In advisory, we topped the 2023 M and A league table supporting numerous transactions including management buyouts of VENICE Holdings and Outsourcing and Bain Capital sale of its stake in Nichi Holdings to Nippon Life Insurance. In financing transactions, we supported the efforts of corporate to strengthen their corporate governance through deals such as a large offering by Dentsu and international offering by Asahi Group.

Speaker 2

We provided a diverse range of solutions for issuers taking up the challenges of structuring new fundraising methods such as bond type class shares issued by SoftBank and the digitally tracked green bond issued by Hitachi. Please turn to Page 14 for an overview of non interest expenses. Group wide expenses increased 3% to 321,500,000 yen compensation and benefits increased 2% to 170,600,000 yen Although severance related expenses declined, the increase is due to yen depreciation and higher bonus provisions in line with improved performance. Please turn to Page 14 for an overview of our financial position. Tier 1 capital shown on the table on the bottom left was JPY 3,400,000,000,000 risk weighted assets By JPY 18,400,000,000,000, our Tier one capital ratio was 18.3% and we had the common equity Tier one ratio, Capital ratio of 16.2 percent underscoring that we continue to maintain a robust financial position.

Speaker 2

That concludes The overview of our 3rd quarter results to sum up spurred on by structural changes in the Japanese market. In the Q3, we are able we were able to deliver steady results by leveraging our strength centered on our home market and the strategic initiatives we have been implementing. Retail had its best set of results in nature and investment banking revenues were at record levels As we provided a wide range of support for various corporate actions by Japanese companies, the Nikkei has continued to rally into 2020 And we get a real sense that the new Nissan scheme has been a catalyst to kick start a full fledged shift from saving to Asset formation, in just 3 weeks to last week, we saw NISA sales at over 1 third of annual sales for 2023. We expect Japanese corporates to step up efforts to enhance their corporate governance and raise capital efficiency and many corporates are Seeking advice, factoring in expectations of policy action by the Bank of Japan, we expect to see the good momentum of our Japan business Continue. Our international business, in particular, macro products has had a tough time due to monetary tightening over the past 2, yes.

Speaker 2

However, as interest rates finally peak out, we started to see signs of improvement toward the end of the quarter In 2024, as market participants idle funds and pent up demand takes off, we expect this positive trend to continue, albeit with different intensity in each region. In January, retail revenues have remained around similar levels to the 3rd quarter, While wholesale revenues are outpacing the 3rd quarter driven by solid performance in rates in Americas and equity derivatives in each region. When tailwinds are behind us in both Japan and overseas, it is a good time to tackle long term issues In order to build a business platform capable of achieving sustainable growth, we will expand our risk light businesses and create a structure for Consistent revenues while taking steps to further improve our ROE. Thank you.

Operator

We have a question and answer session now. Result.

Speaker 1

Press

Speaker 2

Shaft 7.

Speaker 1

The first question is by SMBC Nikko Securities, Muraki san. Please go ahead. I, Muraki, SMBC. Nico, I have two questions. Page 13, Investment Banking for Japan.

Speaker 1

In the presentation, You mentioned the Densou Asahi deals. These are deals that are related to Strategic Holdings and BENESSE was a deal to de list and make it non public. Can you Describe the midterm potential fee pool of these deals and the revenues that we are expecting in the mid to long run. And of course, in the case of Dentsu, there are various stakeholders and interested parties. So it took time for you to structure the deal.

Speaker 1

But if You have these more of these deals in the Q4 or Q1. Do you think that you will be able to sustain such high level of revenues through reference? And what is the structural demand? And for the time being, what's the pipeline? Do you think the pipeline is enough to sustain this level of revenue?

Speaker 1

That's my first question. 2nd, Page 15, capital policy. 3, finalization impact, which you had disclosed most recently, JPY700 1,000,000,000 of capital buffer exists. But why at this timing of quarter 3 gross, this is gross prior to stock option offsetting. And why did you decide on that?

Speaker 1

If you think about the stock option, Is this within the profit level? It could have been set at a higher level. So why at this timing and what kind of discussion has taken place in order to decide on this ceiling amount? Thank you very much. First of all, on the IB pipeline, In Japan and some other regions, we think that there will be deals as the backdrop there is a requirement for governance reform.

Speaker 1

In other words, top management of corporates are beginning to think more seriously about governance. So the funds that used to be affiliated with strategic holdings can be freed up for more strategic investment for growth. On the other hand, there could be MBOs in order to step down from the market. That kind of action is being taken by corporates and we think that This will be a continued trend. You specifically mentioned the Gensu deal.

Speaker 1

Reduction of such policy holdings Further, the delisting of parent and subsidiary, we think that this kind of trend will continue. Quarter after quarter, will there be constant flow of these deals? Of course, there could be uncertainties, but Such kind of strategic holdings, it's estimated at 50,000,000,000,000,000 yen, 60,000,000,000,000 yen.

Speaker 2

So

Speaker 1

in order to free up those holdings, we think that we will likely see continuation of these transactions. Secondly, Basel III In fact, at the CEO forum, we said that we think that we have sufficient buffer. And why at this timing? We wanted to secure flexibility as we have been saying, but strategic policy to date and in Q3, we were encouraged by the performance. So those are the biggest factors that we decided to do this resolution at this particular timing.

Speaker 1

We are a financial institution and we have various corporate related information. So we cannot just arbitrarily set up such buyback scheme. There was a window of opportunity at this timing, and that's one of the reasons why we made a decision. 100,000,000,000 yen, is that high or low? I I think that it's an appropriate level.

Speaker 1

The business side hasn't used up its capital. And as mentioned by Muraki san, there could be more. We will, however, look at business opportunities and opportunities for growth. And JPY 100,000,000,000 was the level that we decided upon to strike a balance between those requirements. Thank you.

Speaker 1

Thank you very much. Related to The first question, you mentioned governance, but what's Nomura's policy? This hasn't really impacted the bottom line, but the sales proceeds of the strategic holdings is there. You offset that with the unrealized losses, but You've sold many of your policy holdings, but what's the strategy? Which stocks did you sell?

Speaker 1

And What about listed group companies? Are you continuing your discussions on what to do with those holdings? Thank you very much. In our case, as you have mentioned, realized gains and losses and unrealized gains and losses are offset. So it's a fact that we have sold some holdings, but we will refrain from disclosing the names.

Speaker 1

In June, the securities report will be published. So you will know that we have sold some of our holdings. Our strategic holdings, regarding sales, Since a few years ago, we have been engaged very seriously. On regular basis, we are monitoring the purpose of those holdings and we have been engaged in measures to reduce The amount, this major policy hasn't changed and because of the rally in the stock price, the amount outstanding may have not gone down, but the number of names has decreased. Against tier 1 capital, the ratio is currently 2.7%.

Speaker 1

It's as low as 2.7% already. And this isn't the end point. We are going to reduce the number of names and we've made that commitment publicly. And I don't intend to talk about our peers, but as a financial institution In terms of sales of strategic holdings, we are one of the financial institutions that are doing this very actively. Thank you very much.

Speaker 1

So you will continue to discuss your holdings in listed companies.

Speaker 2

The next question comes from Otsuka san from SBI Securities. Thank you. I'm Mosuka from SBI Securities. I have two questions, but could you answer each of my question 1 by 1? Okay.

Speaker 2

1st, retail division's numbers, could you teach me how to understand the numbers? Page 67, in the Q3 in Page 7, total sales number seems to have come down, but Page 6, revenue has increased. So there may be I want to know the mix of various elements there. And also in Page 6, plus 1,200,000,000,000 yen. But net increase of investment trust Page 8, recurring asset net increase, but looking at the net inflow of cash and securities, I would have expected bigger increase, but in the Q4 is there going to be more net inflow For net inflows of cash and securities, that's my first question.

Speaker 2

Thank you. The total sales come down. However, the numbers are looking robust. Why is it? In the Q3, many products were handled.

Speaker 2

Secondary buying activities were small, but in the primary area, primary products more than offset the weakness in the secondary area. And the second Question about the pace of increase in net inflows of cash and securities, 1,200,000,000,000 yen of increase. Of course, this is not just As a result of buying activities, but the deposit of equity or stock certificates, so that's involved. So it's difficult to do the matching perfectly. So for example, our sales partners who visit our clients and to build trust.

Speaker 2

They are working on such activities, but Sometimes that results in immediate buying activities, but sometimes clients' assets in the form of equity or stock certificate, we receive the deposit Both certificate sometimes. So in that sense, there isn't a perfect linkage to buying activities by customers. And regarding the recurring asset net inflow, that's not included in the stock certificates. So As you say, it's difficult to see consistency among different numbers. Okay.

Speaker 2

Then qualitative question. Including net inflows of cash and securities, the numbers is positive. Then moving forward, this is a tailwind for the business. Is it the right way to understand it? Well, increase in net Cash and Securities, it is a positive thing for us.

Speaker 2

If we just receive the deposit, It doesn't automatically create revenue, but this is likely to result in the next action. So is it negative or positive? It's definitely positive for us. Thank you. Understand.

Speaker 2

My second question, Page 12, Wholesale's GM, the revenue as you explained, It hits the bottom, I understand. But the absolute level, how should I understand the absolute level? So FYEQ combined, 271,000,000,000 yen, it's not bad. But could you comment on whether there is further room for growth in terms of outlook? Thank you.

Speaker 2

Page 12, if you look at the numbers, equities are stable, though they are ups and downs, but relatively stable. But equities are expected to show solid performance. The challenge is with fixed income. The last one year, We struggled with fixed income. As you know, Hosokasan, our core products are limited, especially our dependence on macro products is heavy.

Speaker 2

And the biggest Revenue driver is rates effects, but with many countries Conducting unprecedented rate hikes, customer flows have been weak and All of our positions that we managed didn't work well. As a result, we couldn't generate revenue the last one year. But from here, of course, we cannot be overly optimistic, but the interest rate hikes seem to have Peaked out already. In that sense, business environment compared to last year, all in all, seems to be favorable. And our global market structure has been refreshed and strengthened.

Speaker 2

So we would like to capture customers' needs and by Making through market making activities, we'd like to monetize clients' needs. And you evaluated 3rd quarter is not that rather good, but there is More room for us to deliver more results. Okay, understand. Regarding fixed income, What is the outlook for Japan? It could depend on the actions by the BOJ, but what is your outlook for Japan?

Speaker 2

Thank you. Our firm view is that in April, yield curve control and minus negative interest rate will be eliminated. That's our view. But towards the normalization of interest rates, the market participants are paying attention to that. And but compared to several years ago, that situation is a lot more favorable and people have their anticipations of various thoughts towards the market and that is not bad for as a business environment.

Speaker 1

The next question is by BofA Securities, Yaginuba, Bank of America. I have two questions. First of all, wholesale cost to income, There has been drastic improvement and especially in the quarter that ended, overseas was a driver and cost control was successful. Is that sustainable in Q4 and the next fiscal year? What is the prospect regarding the compensation, Personnel expenses and Page 18, value at risk, this is a detailed question.

Speaker 1

Interest related VAR is becoming smaller. Based upon the change in interest rate Ecosystem, do you have a robust system in place for risk control? Thank you very much. Wholesale cost income ratio has come down quite significantly. Yes, that is a fact, as you know.

Speaker 1

And at the 2nd quarter financial results presentation, I said that even if we do headcount reduction, That's not reflected immediately in the personnel expenses. The reason why in Q2 cost was high, there was double count in terms of headcount reduction cost and salary paid to those who are still remaining. And I said that the benefit will be gaining to be reflected from Q3 according to my recollection and That impact is coming into play and we are constantly reviewing the headcount. And in Q4 and in the quarters to follow-up, we will continue various structural reform measures are in place. It's gone down to 89%, but it still is a high level.

Speaker 1

So we will continue our efforts in this area. And BAW VAR. Generally speaking, trading position is somewhat controlled. End of December, VAR, same level as the previous quarter. We were waiting for the market environment to become more stable and We want to capture business opportunities, but your question was whether we have a robust risk control system?

Speaker 1

The answer is yes. A few years ago, there was a little it wasn't a minor event, it was a major event. But since that event, we have been conducting corporate wide efforts to strengthen our risk management system. That's been ongoing for a few years. 1st line of defense, 2nd line of defense, we have put in place such robust risk control system.

Speaker 1

We have started a project to reinforce our risk control and it's already in BAU. So while risk control is in place, we will also gained revenues. So we will continue our measures in risk control as we continue to increase our revenues. Thank you very much.

Operator

Now we move to next question. As we couldn't confirm your affiliation, please state your company name and your name after hearing a muted announcement. Now unmuted.

Speaker 2

I'm Watanabe from Daiwa Securities. I have two questions. First, Page 12, fixed income monthly revenue trend. In the 2nd quarter telephone conference, Your understanding was that you were expecting a tough time, but what was the situation in the December quarter and the spread product seems to be improving on a year on year basis. What was the reason behind it?

Speaker 2

The second question, Page 11, wholesale cost Related question, at the Investment Forum, the division cost run rate of 5,100,000,000 was announced, but what's the run rate cost for the Q3 and also macro products and outlook is improving. Is it possible for you to change your outlook? So those are my two questions. Thank you. Firstly, first question, fixed income's monthly revenue trend.

Speaker 2

In October was a tough month, a bit more than 20% and November, December about 40%. So end of Q2 at the telephone conference, I said we anticipate a struggle. But yes, we faced a difficult situation as the numbers show. And for spread products, as you said, The spread product is improving, especially credit business. Continuously, the Spread is tightening and in this situation the business is performing solidly.

Speaker 2

One of the revenue drivers is securitized products. The market has come back And the number of issuance of bonds is increasing. So Finally, the market started to move, especially in December due to the increase in bond issuance. 2ndry trading was boosted. So the recovery there contributed.

Speaker 2

And wholesale cost, No matter where the revenue level lies, naturally when revenue goes up, Variable cost changes as well, but We are continuing with cost control without feeling complacent. Through structural reform and so on, we are Suppressing fixed costs, while we cannot help increasing variable cost, but through cost control initiatives, We are looking to reduce cost base and that efforts will continue. Thank you very much. 2nd question, Q3 cost run rate, do you have a quantitative information you can share with me? And Back to your first question, the interest rate level is high in the USA, but are you seeing the return of activities?

Speaker 2

Yes, we are our understanding is the activities are starting to return. Overall, the last one year market was frozen. So whether it is a full fledged recovery, we are not there yet. But in the sense of outlook, The outlook is getting brighter. Also, Run rate in the Q3, at the CEO forum, we mentioned The number, but in the sense of the run rate base, there is no change.

Speaker 2

Okay. I understand. Thank you very much.

Speaker 1

The next question is by Niwa san of Citigroup Securities. Please go ahead. Citigroup Securities. This is Niwa speaking. Can you hear my voice?

Speaker 1

Yes. Thank you very much. Domestic retail and tax rate For Japan retail,

Speaker 2

activity

Speaker 1

3 segments wealth management, corporate owners, high net worth and mass affiliate Mass affluent, what was the situation in the Q3? Has there been any change? And What are some of the actions triggered by the new NESA scheme? That's my first question. Secondly, this is a small point, but tax rate, All the international regions were profitable.

Speaker 1

I thought that it would go down according to my calculation. If this situation continues, how should we interpret the tax rate applied for Q4 and the quarters to follow. Thank you very much. For Japan Retail, We were strong in all areas, wealth management, mass affluent, high net worth, We were strong, especially we did well in high net worth.

Speaker 2

And

Speaker 1

since the beginning of this month, this trend has followed on We allocated, we assigned partners to high net worth, so we were quite strong. Not to say that we were not as strong in mass affluent. We did well in mass affluent as well. But and then on NISA related business, We are not only focusing on NISA, but the client's interest is heightening. We feel that from their reaction.

Speaker 1

Using NISA in just 3 weeks, last year's One third is the progress rate in terms of sales. So Client sentiment is very warm, heating up, but While we will make use of NESA scheme, Our objective is our clients increasing financial assets. That's the most important mission. So portfolio allocation, equity, fixed income, distributed investment have long term targets as they manage their investment. And if they experience successes that would lead to the next business opportunity, we're not just trying to increase the number of accounts.

Speaker 1

That is not our goal. 3,600,000 is quite an amount. We hope that they make use and detailed Tailormade Consulting will be provided to our clients, which is our strength. And Tax rate, it may appear to be high slightly. There are a few technical factors behind, which simultaneously occurred.

Speaker 1

So if this trend continues, the tax rate may come down slightly. Thank you. I have a follow-up question. Recurring asset for Japan retail target In March 2025, JPY 21,600,000,000,000, I believe was your target. Haven't you already reached that level?

Speaker 1

Or is it because of the increase in stock price? What is your forecast? Thank you very much. The recurring Revenue coverage expense coverage is 55%. We want to further elevate this ratio, but in order to do that, recurring assets outstanding will have to be increased.

Speaker 1

That's not the only factor behind the recurring revenue, but it is a very important component. So we want to further increase recurring asset. At the CEO forum, we said that it's at 55%. We want to raise this to 80%, which means that it is indispensable for us to increase recurring assets. Thank you.

Speaker 1

Thank you very much. That gives me more nuance. Thank you.

Operator

As there is no more question, we would like to finish question and answer session. Now we would like to make the closing address by Nomura Holdings.

Speaker 2

Thank you everyone for attending the telephone conference. And we received various questions, But the last one year, we struggled and now wholesale is seeing a sign of recovery. So towards the improvement, So we feel a real sense of improvement and we have capital buffer here. So This time, we've announced the buyback without a doubt. In the background is our confidence on recovery of business.

Speaker 2

Still 6.2% is our ROE level, so There is more work to be done.

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Key Takeaways

  • Group net revenue rose 9% quarter-on-quarter to ¥400.2 bn and income before taxes jumped 39% to ¥78.7 bn, while net income climbed 43% to ¥50.5 bn and ROE stood at 6.2%.
  • The board approved a ¥100 bn share buyback (up to 125 million shares) running from February to September to boost capital efficiency.
  • The retail division delivered its highest quarterly income in eight years, with net revenue up 4% and a recurring-revenue cost coverage ratio of 55%, driven by strong NISA flows and enhanced client engagement.
  • Investment management achieved a record ¥78.5 trn AUM (up 3rd quarter in a row) with ¥330 bn of net inflows, though investment gains eased as American Century-related valuation gains slowed.
  • Wholesale revenues rose 6% to ¥217 bn and pretax profit surged 178%, helped by a decline in non-interest expenses, a cost-income ratio of 89%, and improving activity in fixed income and equity markets.
A.I. generated. May contain errors.
Earnings Conference Call
Nomura Q3 2024
00:00 / 00:00