Q1 2027 Daiwa Securities Group Inc Earnings Call Transcript
Key Points
- Record-high ROE of 12.7% and strong profit growth across all divisions in Q1 FY2026.
- Wealth Management Division achieved record asset-based revenue of JPY35.8 billion, driven by successful portfolio-based proposals and net asset inflows.
- Asset Management Division saw record-high ordinary income of JPY15.7 billion, supported by continued net inflows and favorable market conditions.
- Global Markets Division benefited from expanded client flows and significantly increased equity revenues amid a strong market environment.
- Overseas operations reached a record-high ordinary income of JPY13.1 million, up 90%, with notable strength in Asia, Australia, and the Americas.
- Real estate asset management AUM surpassed JPY1.8 trillion, achieving the FY2030 target ahead of schedule.
- The KPI for stable earnings reached JPY62.8 billion, up 83.8% year-over-year, significantly exceeding the pace needed for the mid-term plan target.
- Daiwa X Bank's deposit balance expanded to JPY5.3 trillion, with higher interest income due to increased policy rates.
- The company completed the process of making Aurex Bank a 100% subsidiary, advancing its wealth management growth strategy.
- M&A-related commissions declined by 27.9% year-over-year, reflecting sluggish M&A activity in Europe due to geopolitical risks.
- Global Investment Banking net operating revenues decreased by 6.1% quarter-over-quarter, despite higher ordinary income.
- SG&A expenses rose by 3.3%, driven by higher trading-related expenses and increased personal expenses from wage hikes and performance-based bonuses.
- FICC order flows in both domestic and foreign bonds declined from the previous quarter's high level, indicating potential softening in fixed income activity.
- The company acknowledges ongoing market uncertainty, with global markets starting below the high first-quarter average, suggesting potential volatility ahead.
- The Wealth Management Division's fixed cost coverage ratio improved but remains below 100%, indicating reliance on flow-based revenue to cover fixed costs.
- The company's reliance on favorable market conditions for equity revenues and capital gains in alternative asset management may not be sustainable in a downturn.
Hello, this is Yoshida from the WC Curious Group.
Thank you very much for taking the time out of your busy schedule to join our conference call today. I will now explain the financial results for the first quarter of the fiscal year 2026, which we announced today based on the presentation materials posted on our website.
Please turn to page 4.
First, I will provide a summary of our consolidated financial results.
The percentage changes in figures are compared to the fourth quarter of fiscal year 2025. In the first quarter of fiscal year 2026, we achieved profit growth across all divisions with ROE reaching 12.7%. Net operating revenue was JPY220.3 billion, up 11.4%. Ordinary income was JPY88 billion, up 31.4%. And profit attributable to owners of the parent was JPY56.4 billion, up 13.2%. The Wealth Management Division, in addition to risk client activity, so its portfolio-based proposals gained traction, resulting record high asset-based revenue of JPY35.8 billion.
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