Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Group-wide net revenue increased by 2% over the last quarter, reaching JPY454.4 billion.
- Pre-tax income grew by 12% to JPY102.9 billion, and net income rose by 21% to JPY68.9 billion.
- Wealth management and investment management saw client assets continue to grow, with stable recurring revenue and business revenue reaching all-time highs.
- Investment management net revenue increased by 9% to JPY47.7 billion, with income before income taxes up 31% at JPY23.2 billion.
- The asset management business had another strong quarter with net inflows lifting assets under management to a record high of JPY92.5 trillion.
Negative Points
- Wholesale net revenue slipped by 4% to JPY244.8 billion.
- Investment banking net revenue dropped by 25% from the strong prior quarter to JPY37.2 billion.
- Group-wide expenses remained roughly flat at JPY351.5 billion, with compensation and benefits increasing by 4% to JPY184.5 billion.
- EMEA region ended up in a loss position for the quarter.
- CET1 capital ratio decreased, raising concerns about capital efficiency and future financial stability.
Q & A Highlights
Q: What are the main products driving the revenue growth in fixed income, particularly in spread products?
A: The main driver is securitized products in the United States, accounting for 60% of the spread business robustness. Nomura's securitized products have a strong market share, and the business has shifted towards origination, which is less influenced by market fluctuations. Additionally, the increase in Level 3 RWA is due to yen depreciation and increased client trading demand, particularly in the securitization business.
Q: How is the wealth management segment performing, particularly in terms of asset acquisition and client sentiment?
A: Wealth management has seen significant growth in discretionary investments, driven by a high Nikkei average and positive client sentiment. Clients are increasingly keeping unrealized gains to reinvest, creating a virtuous cycle. The segment has also seen a notable increase in high-net-worth clients.
Q: What is the outlook for the CET1 ratio after the finalization of Basel III, and when can we expect the disclosure of the CET1 target?
A: The CET1 ratio is not expected to change significantly after the finalization of Basel III. Although the ratio has come down slightly, the overall outlook remains stable. The target level for CET1 ratio will be disclosed within the year.
Q: How is the investment banking (IB) pipeline looking, and what schemes are contributing most to revenue?
A: The IB pipeline is robust, particularly in the insurance sector and FPOs in Japan. Offerings and buybacks are central to revenue growth. The CET1 ratio is expected to remain stable, and the target level will be disclosed within the year.
Q: How is the international market performing, particularly in EMEA, and what is the outlook for the rest of the year?
A: EMEA experienced a loss due to one-off reasons and reallocation of human resources. However, signs of recovery have been observed since June. The international market generated JPY17 billion in profit, but there is room for improvement. The goal is to generate more profit to reduce the effective tax rate.
Q: What is the current sentiment in wealth management, particularly in July, given the market conditions?
A: Despite a decline in the Nikkei stock average, wealth management remains strong. Clients are cautious but continue to invest when stock prices drop. The decline in the market is seen as an opportunity to differentiate from competitors, and July's performance is strong.
Q: Why was Nomura able to conduct a share buyback early, and are there any plans for additional buybacks?
A: The early share buyback was due to placing the order early and anticipating a performance recovery. There are no specific plans for additional buybacks in the first quarter, but share buybacks remain an important option in the capital policy.
Q: How is the acquisition of emerging-wealth clients progressing, and is there a need to revise the recurring asset target?
A: The acquisition of emerging-wealth clients is progressing well, particularly through workplace services. The recurring asset target may be revised upward, but internal discussions are needed to ensure the targets remain appropriate.
Q: What is the breakdown of the JPY460 billion net inflow of cash and securities in the retail segment?
A: The exact breakdown is not available at the moment, but the significant inflow suggests clients are moving their cash to Nomura accounts to buy securities. Further details will be provided by the IR office.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
