Nomura Q3 2025 Earnings Call Transcript

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February 5, 2025
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Operator

Good day, everyone, and welcome to today's Nomura Holdings Third Quarter Operating Results for Fiscal Year ending March 2025 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 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 result, performance or achievement of the company to be materially different from the result, performance or other expectations implied by those projections. Such factors include economic and market conditions, political events and investor sentiment, liquidity of secondary market, level and 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.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Good evening. This is Takumi Kitamura, CFO. Let me explain our financial results for the third quarter of the fiscal year ending March 2025 using the document titled Consolidated Results of Operations. Please turn to Page two. Group wide net revenue increased 4% quarter on quarter to $5.00 2,000,000,000 yen.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Income before income taxes grew 4% to 138,300,000,000.0 yen. Net income was 101,400,000,000.0 yen, representing a 3% increase over last quarter. EPS came to and annualized return on equity came to 11.8%. This was the seventh straight quarter of profit growth, building on what was already a strong previous quarter, reflecting the positive outcomes of strategic initiatives undertaken to date. Improving profitability in our international operations has been a management priority and we have made steady progress.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

In global markets, we made progress with portfolio diversification and in each region, we were able to increase revenue across a wide range of products. Profit contributions from Laser Digital, numerous digital assets subsidiary, have also begun and income before income taxes in the three international regions came to 51,800,000,000.0 yen, increasing by 30% over last quarter. The international business came to account for nearly 40% of our group wide income before income taxes and our effective tax rate fell to 25% as some international entities made use of tax loss carryforwards. Three segment income before income taxes shown on the bottom right was JPY 127,500,000,000.0. This was in fact the highest level in seventeen point five years since the quarter ended June 2007.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

In wholesale, income before income taxes increased deeply led by the international operations, while in wealth management and investment management, stable revenues rose to record high levels amid net inflows. Before going into each business in detail, let's first take a brief look at the results for the first nine months of the fiscal year. Please turn to Page three. As shown at the bottom left, net revenue for the period came to 1,439,800,000,000.0 yen, up 29% from the same period in previous fiscal year. Income before income taxes grew 106% to 374,200,000,000.0 yen, while net income increased by 146% to 268,800,000,000.0 yen.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

EPS came to 87.66 yen and ROE was 10.4%. The table at the bottom right gives a breakdown of income before income taxes. All divisions reported strong gains with three segment income before income taxes totaling 336,500,000,000.0 yen This means that nine months into the fiscal year, we have already gone nearly 50,000,000,000 yen over the target of $288,000,000,000 yen for the fiscal year ending March 2025, which we announced at our Investor Day in May 2023. Net revenue in wealth management increased by 18% led by the provision of comprehensive asset management services. Net inflows and improved performance lifted recurring revenue assets such as investment trusts and discretionary investments to a record high resulting in an increase by 30% of recurring revenue.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

In investment management, the asset management business has shown strong performance with assets under management climbing to a record high and business revenue also at the highest level since the division was established. Both divisions continued to build up stable revenues, meaning revenues linked to the amount of client assets. In wholesale, all business lines, fixed income, equities and investment banking and all regions reported stronger revenues compared with the same period last year, underscoring progress in diversifying our revenue sources. Also worth highlighting is that we were able to realize greater operating leverage in all divisions, thanks to continued cost controls. Revenues across the three divisions rose by 27%, while costs increased only 12% with the result that income before income taxes came to 2.1 times the previous year's level.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

The income before income taxes margin improved from 16% to 26%. Now, let's take a look at third quarter performance by segment. Please turn to Page six. The percentages I refer to here are all quarter on quarter comparisons. Wealth management net revenue was flat quarter on quarter at JPY 116,300,000,000.0 and income before income taxes grew 2% to JPY 46,200,000,000.0.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

This was the seventh consecutive quarter of growth in income before income taxes, which reached its highest level in the nine point five years since the quarter ended June 2015. As shown in the lower left, flow revenue fell slightly to JPY65.9 billion. There was a slight decline in revenue related to Japanese stocks and bonds, but we saw revenue growth in investment trusts and foreign stocks. Recurring revenue rose to a record high of JPY 50,400,000,000.0. Recurring revenue as a category includes investment advisory fees that are recognized every second quarter and fourth quarter, which means that these fees were absent in this quarter.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

However, we were able to completely absorb the impact through our efforts across a wide range of other recurring business, including investment trusts, insurance and discretionary investments. Thanks to continuous cost reduction, the division's net non interest expenses held at roughly JPY70 billion with the result that the recurring revenue cost coverage ratio rose to 72%, up two percentage points from the last quarter. This added further to the stability of earnings in the division. Please turn to Page seven for an update on total sales by product. Total sales declined by 11% quarter on quarter to 5,200,000,000,000.0 yen Within that, sales of stocks fell by 12%.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Demand for Japanese stocks slowed as investors stayed largely on the sidelines in October, ahead of major political events in The U. S. And Japan and the market subsequently stage range bound. In bonds, we saw an increase in sales of Japanese government bonds to retail investors as rising yen interest rates made them more attractive. Sales of foreign bonds fell however, in part due to the absence of major primary transactions, but also because demand for other products increased including foreign stocks and a newly established publicly offered investment trust that invests in private credit.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Sales of investment trust increased by 9%. We saw growth in demand for U. S. Growth stock investment trust as well as the aforementioned trust that invests in private credit. Sales of insurance products and discretionary investments declined quarter on quarter, but held up fairly well in absolute terms.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Investment trust, discretionary investments and insurance products are all product categories in which clients tend to be responsive to the advice and suggestions of our sales partners and all have continued selling well. Pei Shei, you will see that we are ahead of target in all of our KPIs for the fiscal year. The bar chart at the top left shows net inflows of recurring revenue assets of JPY282.2 billion. Net inflows of recurring revenue assets in the first three quarters of the fiscal year exceeded JPY1.1 trillion, already going well beyond our full year target of JPY800 billion. Yen At the top right, you can see that recurring revenue assets at the end of the quarter came to 24,900,000,000,000.0 yen which is higher than our target of 22.3% The figure at the bottom left shows the number of flow business clients at 1,480,000, up 230,000 from a quarter ago.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

We have already reached our full year target of $1,460,000 We saw contributions from effective approaches by our sales partners in client facing channels from new client acquisitions in conjunction with the Tokyo Metro IPO and other primary transactions and from clients entering into transactions of their own accord through their news accounts.

Executive

Please turn to Page nine for investment management. Net revenue was down 18% at JPY45.7 billion, while income before income taxes fell 41% to JPY18.9 billion. A major factor was a decline in American Century investments related to valuation gain counted under investment gains and losses. At the lower left, you will see that business revenue, a stable revenue source came to JPY 42,000,000,000, the highest level since the division was established. The asset management business had another strong quarter with net inflow for the seventh straight seventh quarter in a row and assets under management climbing to a record high of JPY93.5 trillion.

Executive

Revenue also increased Q on Q for the aircraft leasing business of Nomura, Babcock and Brown. Please turn to Page nine for an update on the Asset Management business, which is the key source of business revenue for Investment Management. Assets under management at the December stood at trillion. As shown in the chart at the lower left, net inflow came to JPY $260,000,000,000, which looks low in comparison to the previous three quarters, but investment trust business saw an inflow of JPY $490,000,000,000 and the product mix improved, thanks to inflows into private assets, global equities and privately placed investment trust where management fees are relatively high. At the lower right, you will see that alternative assets under management rose past JPY 2,500,000,000,000.0.

Executive

This was an increase of JPY 400,000,000,000 in the three months since the September with JPY 180,000,000,000 of that sales inflows. Next, please turn to Page 11 for Wholesale. Net revenue increased 10% to JPY 290,500,000,000.0. Global Markets revenues increased for the seventh straight quarter, while Investment Banking revenues were at the highest level for the period over which comparisons are possible stretching back to the the fiscal year ended March 2017. As shown on the bottom right, the three overseas regions of Americas, EMEA and EJ all performed well with combined net revenue up 23% With segment revenue growing and expenses only rising 5%, the cost to income ratio improved to 79%.

Executive

Income before income taxes of JPY 62,400,000,000.0 represents the highest level in the four quarters four years since the quarter ended December 2020. Please turn to Page 12 for an update on each business line. First, Global Markets net revenue increased 8% to two thirty nine billion yen. There was a slow start to the quarter in October ahead of major political events in Japan and The U. S, but net revenue improved month on month.

Executive

Fixed income net revenue increased 9% to JPY 139,900,000,000.0. In macro products, revenues from FXEM increased in EMEA and AEJ. In spread products, revenues from securitized products were at a record high, particularly in The Americas. And with increased visibility over U. S.

Executive

Rate cuts, there was strong demand for a wide range of sub products including in the origination and financing businesses. Credit revenues increased in EMEA and AEJ. Equity's net revenue increased 6% to JPY 99,100,000,000.0. Equity products revenues were particularly strong in The Americas and the revenues also grew in AEJ as we expanded our franchise. Please turn to Page 13 for Investment Banking.

Executive

Net revenue increased 22% to JPY 51,500,000,000.0 with multiple M and A and ECM deals contributing to revenue increase in all regions. Byproduct advisory revenues grew sharply as we work to monetize transactions in Japan, EMEA and The Americas, including several financial sponsor and cross border deals. Revenues in financing and solutions also increased. ECM revenues were particularly strong, driven by deals related to the unwinding of Cross Share Holdings and several large IPOs, including Kansai Electric Power and major IPOs, including Tokyo Metro, Ryugaku Holdings and Kyokushare Holdings. These are shown on the right.

Executive

ALF revenues rose on contributions from several refinance and acquisition finance deals. Please turn to Page 14 for non interest expenses. Group wide expenses rose 4% to JPY3603.7 billion. Compensation and benefits were up 33% to 3% at JPY190.9 billion mainly due to an increase in stock based compensation following the rise in our share price. Other expenses totaled JPY50 billion, up by around JPY9 billion from the previous quarter due to a rise in professional fees and transaction related expenses and an increase in expenses related to the disposal of software.

Executive

Please turn to Page 15 for an update on our financial position. The table on the bottom left shows Tianan capital of roughly 3,600,000,000,000.0, up by JPY 200,000,000,000.0 from the September. Risk weighted assets also rose by JPY 800,000,000,000.0 to JPY 19,900,000,000,000.0, resulting in a Tier one capital ratio of 18.1% and a common equity Tier one ratio of 16.3% as of the December. This concludes our view of our third quarter results. To wrap things up, we achieved annualized ROE this quarter of 11.8%, the highest since the quarter ended December 2020.

Executive

At that time, wholesale accounted for about 60% of three segments, income before income taxes. And the profit structure was quite skewed with rates products accounting for nearly all of the wholesale earnings. Now earnings are well balanced across all three divisions. This did not happen overnight. We think the path that we have strategically followed is finally leading to tangible results.

Executive

Recurring revenue in wealth management and business revenue in investment management, both of which are sources of stable revenues, increased to an annualized level of JPY $370,000,000,000, lifting baseline pretax ROE to around mid 4% range. Pretax ROE comes to around 6% when we take into account recurring business such as financing in wholesale. We think further accumulation of such highly stable and recurring profits will increase the stability of earnings and boost our intrinsic earnings power. We aim to achieve consistent ROE of 8% to 10% or more by 02/1930. This means we want to achieve 8% even when market conditions are challenging and we will aim to achieve more than 10% when market conditions are favorable.

Executive

We will endeavor to build a franchise that can always aim higher while striving to lower our cost of capital by steadily achieving our minimum ROE target of 8%, backed by the accumulation of stable recurring ROE as mentioned earlier. Wealth management and wholesale have gotten off to a somewhat slow start in January compared with the third quarter, but the revenue levels remain acceptable. We continue to aim for bottom line growth while delivering operating leverage as we maintain cost controls. As we announced today, for an effective use of management resources, our subsidiary Nomura Properties has signed a sale agreement for the transfer of the land and building of the training center it owns at Takanawa. The execution of the sale is scheduled from mid March to mid April this year.

Executive

And following the completion of the asset transfer, we expect to book a pretax income of approximately JPY 56,000,000,000. In closing, Nomura will celebrate its one hundredth anniversary on 12/25/2025, to express our sincere gratitude to our shareholders for their support over the years. We will pay a commemorative dividend of per share to shareholders of record as of 03/31/2025. We plan to steadfastly forge ahead in pursuit of our purpose. We aspire to create a better world by harnessing the power of financial markets.

Executive

Thank you.

Operator

We have a question and answer session now.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

And The first question is from SMBC Nikko Securities, Mr. Muraki. Muraki san please go ahead. Thank you. This is Muraki from SMBC Nikko.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Two questions please. First, about wholesale fixed income business. On Page 12, at this time The U. S, The Americas had securitization in Europe rates and FX was strong. And other U.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

S. Players and click at the other brokers, U. S. Securitization seems to have been very strong according to their comments. So the environment was good, but also the reason for the strong revenue environment, how do you see the sustainability of this current strong revenue environment?

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

What are the upside and downside risks of the environment? And Khitomer san, you commented in the past about the securitization business and there are some liquidity regulations that have effect on this securitization business. So when you think about the profitability of fixed income business, are you happy with the current profitability in line with the regulations? My second question is the sale of the real estate, which you have announced. And from an asset efficiency perspective, there is real estate and also the stocks of NRI, which you have been selling in several phases.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Are there any other targets to further improve asset efficiency? And what is the process? What kind of frequency do you plan to sell assets? Are you going to sell it one go or are you going to sell it step by step? Is that how we should assume it?

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Any hints there please? Thank you. This is Kitamura. Thank you, Moraki san. Your first question about wholesale fixed income.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Yes, as you pointed out in The U. S, securitization business was very strong, securitized products. And our securitized products business consists of loans, sales, secondary trading. It's all mixed together. And for the loan part, the funds become stagnant.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

So we are trying to improve the turnover of the funds as much as possible in our business. And after we originate the loans, we promptly sell those positions and we control the amount that we hold on our book. And as we always say to the business side, please recycle resources. In terms of profitability, it depends on what we use as the denominator to calculate, but we have secured sufficient ROE, we believe. And in relation to securitized products, we are diversifying our portfolio within the securitization book.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

So it's not just mortgage. We also have CLO, private credit. We have various product lines in the securitization business. So we are further diversifying this business. So whether we are satisfied with this current level of profitability, yes, securitized products and FX rates have recovered quite nicely this year, this period.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

But for rates products, I think there is some more upside that we can take, frankly. In Q3, we are seeing signs of recovery. And compared to the bottom two years ago, we are definitely in a recovery trend. But there still is room to generate earnings in this business. We are not fully leveraging our capabilities, we think.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

And your second question about the real estate and properties that we own and the sale of those properties. As you know, in 12/25/2025, we have the one hundredth anniversary coming up and our new headquarters building will be completed in 2026. So we have training facilities in this new headquarter building. So we decided to sell the Takanawa property considering the usage of the properties. And the current we also consider the state of the current real estate market and the future usage and we chose to sign the disposal or sale and disposal contract at this time.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

And you asked about NRI stocks and other stocks and the disposal of such stocks.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

We

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

currently do not expect to change the ratio of our holdings at this moment. Thank you. Thank you. This is Maraki again. On Page 22, you show the P and L by region.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

And the other day, in The U. S, wholesale was quite strong and Europe was a challenge according to the CFO. But this time, there's laser digital profit contribution that's booked in Europe, I think. And for wholesale ROE, the target is 6% to 8% on a pre tax level. And for Europe and The Americas, is it within that range that you are targeting?

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Yes. Thank you for the question. The disclosed numbers are categorized by legal entity. So it's a bit different from the business performance that we track. And as you point out, in Europe this quarter, billion of pretax income.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

And yes, laser, the contribution from laser is in that and it makes up a certain portion. Meanwhile, the wholesale business, as I said earlier, is showing signs of recovery, especially for fixed income. We replaced the positions last year and the trading environment has been improving. So our earnings capability is recovering significantly. I think there is still room for improvement, but we are seeing signs of improvement and that is encouraging.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

In The U. S, we do have strong earnings capability. Understood. Thank you.

Executive

The next question comes from BOA Securities, Ms. Tsujino. Please go ahead. Thank you. I'd like to ask you about your ideas about shareholder return.

Executive

This time, the full year dividend or 40% of dividend payout ratio, In addition to that, yen will be added. On the other hand, total return ratio of 50% or more is your policy that I believe you will continue. And there, commemorative dividend will be excluded from there. Then as far as I know based on the information we have, the 40% return ratio is the number. So for the full year, what is the sense that I should have?

Executive

Earlier, you mentioned the gain on sale of property. When that's included, then that proceeds some of which might be used for dividend payout whether it is paid out in the fourth quarter or in the first quarter. I do not have clarity, but many things are now moving. So this time, you announced only the commemorative dividend. But at the April, when you announced full year results, then remaining portion in order to achieve 50% or more of return, you may announce buyback or any other additional shareholder return.

Executive

Can we expect such announcement? And if profit is or proceed is booked in March or sorry, if the proceed is booked in April, then in order to reach 50%, the number you have to secure is now you have conducted share buyback. So the amount of buyback could be smaller than in the past. So R56 billion could be received in April given that possibility moving forward, Kitamura san, you think about that plan. Is it the right understanding?

Executive

So that's my first question. Okay, Ms. Tsujino. So

Executive

thank

Executive

you for analyzing the headache I've been having. Regarding the 10 yen payout of commemorative dividend per share, that has nothing to do with the regular dividend payout. It's for the pure purpose of commemoration. So the 50% or more of return ratio based upon profit, that policy remains unchanged. And regarding the timing of recognition of proceeds from sale, that's not clear as of yet, But proceeds from sale will be used for shareholder return.

Executive

In the fourth quarter, so we still have two more months before we close the fourth quarter, so we will monitor what the final numbers we'll be looking like and we will determine the most appropriate ways of conducting shareholder return policies. We may use shareholder return share buyback partially. So we would like to be open to various options, though I did not give you a straight answer, but that's how I am thinking right now. Regarding my second question, Mr. Kitamura, regarding investment trust in wealth management, investment trust sale in November grew greatly, then in December it settled down.

Executive

So private credit fund was originated newly. And moving forward, as for private credit products, are you going to be conducting the marketing in a more stable manner? Then in that case, investment trust sales that will involve different profile or products. So the sales might be put on a quite different trajectory from here or is it not going to be the case? Could you give me some sense?

Executive

Thank you, Ms. Tsujino. As you say, private products are what we are strengthening right now and our clients are becoming increasingly familiar with private products. But just because products are private, we do not sell just about anything. That's not the ideal approach of sale.

Executive

Since we deal with private products, product governance is essential from our viewpoint. We would like to apply the screening, so that we can only deliver offer products that we are confident about. So the frequency of launch of such products, even if you want to offer such products, since we want to be careful in screening products, it may not be so frequent. And we would like to refer to the risk appetite of clients. So that's how we are going to recommend or offer products to customers.

Executive

Thank you. Thank you, Mr. Kitamura. Your answer gave me reassurance. Thank you.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

The next question is from Mr. Watanabe from Daiwa Securities. Watanabe san, please go ahead. Thank you. This is Watanabe from Daiwa.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Two questions, please. First is about wealth management. With the tightening of rules when visiting clients, has that had an impact on your sales pre bill activities? And if you look at the flows, there seems to be almost no impact I think, But any thoughts there, please? Second question is about your expenses costs.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

And in Wealth Management, you achieved revenue growth, but the absolute amount of cost has declined. And going forward, do you think you can maintain the cost to income ratio? And in wholesale, cost income ratio 79% and it's recovered to 79% and you've achieved the target of 80%, but will you increase cost going forward? So any thoughts on the direction of cost, please? Thank you.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

This is Kyamara. First, about wealth management client visits and the rules. Realistically, there has been not that much impact on our business, I think. And we already have a relationship of trust with clients and we do communicate with such clients. And of course, some customers have given us very harsh criticism, but they still continue business with us in a lot of cases.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

And that's why we were able to achieve the numbers that we are showing this time. Meanwhile, with the tightening of rules when visiting clients, The acquisition of new customers has slowed down slightly, I've heard. So in that sense, there has been some impact. We want our customers to feel comfortable in dealing with Nomura and we will work, we will do our utmost to regain our trust. Your second question is about costs.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

In wealth management, we have a very stable cost control and we worked on cost reduction quite early and those results are showing up in the numbers and they are sticking. And going forward, on the IT architecture side, I think there still is room for change, for improvement. And in doing so, we will need some improvement investments. So in the short term, there's a chance that costs may go up a little, but that cost increase will be offset by the cost reductions in the future. And that's why we will be making these investments.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

We will try to control the total amount as much as possible and make some investments to achieve future cost reductions. And in wholesale, we are finally at 79% cost income ratio. And we finally have a decent number. And this was thanks to top line growth as well as thorough cost control. And we will continue to control our costs.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

This isn't just about one fiscal period and we want to give comfort to our stakeholders. So we will continue our cost reduction efforts. And compared to wealth management, we started a little later, two quarters late. So we expect to see the results in our P and L going forward. Meanwhile, there's very strong inflationary pressure outside of Japan, even more than in Japan.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

So while we control our costs, that will be somewhat offset by inflation, which is unfortunate. But we will continue working on cost control. Thank you. Thank you. This is Watanabe.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

About wealth management, the IT architecture investment that you mentioned, when will this take place from when to when and how much will be the size? If you have any ideas, please. Yes, this is Kitamura. It's already started partly actually. And this year, we have not started a full fledged investment, but next year, we will make some investments.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

And this is an investment, so it will not immediately show up in our P and L. There will be a time lag. And as for size, I don't think we disclosed that. So apologies, we will refrain from commenting. But we will, of course, be mindful of the bottom line when making these investments.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Understood. Thank you very much.

Operator

Now we move to

Operator

next question.

Operator

As we couldn't confirm your affiliation, please state your company name and your name

Executive

I'm

Executive

Arrey from JPMorgan Securities. I have two questions. First question is about The U. S. Business revenue and profit.

Executive

Looking at the geographical profit or revenue of wholesale, U. S. Top line seems to be growing significantly. On the other hand, looking at profit in Page 22, the profit amount is coming down. So how should I interpret these numbers?

Executive

My second question is regarding the investment banking pipeline accumulation. And given the situation in January, what is the revenue forecast for the fourth quarter and next fiscal year? So those are my two questions. Thank you. Thank you very much for your questions.

Executive

Regarding your first question, Page 22, the numbers on Page 22. So these numbers are based upon legal entities and they do not necessarily show wholesale numbers. American Century Investments related investments gain loss numbers are included here. And as I mentioned, as I touched upon investment management division, investment gain is positive, but compared to last year, the gain amount is down and majority of that comes from ACI related loss. So aside from that factor, Americas pretax profit has greatly increased.

Executive

That's our analysis. As for IB pipeline, all in all, continuously centering around Japan, we see strength, especially M and A and ECM transactions, especially advisory business recently has enjoyed increasing customer activities I mean, the changing environment. And M and A pipeline is staying at an elevated level. As for overseas, we have solid pipeline. And the deregulation the regulatory move of Trump administration as well as a tax decrease, those moves will be beneficial to M and A industry.

Executive

However, our overseas IB business is not full line. So our performance will not be in completely parallel with industry trend, but we are focused on accumulating our pipeline. As for ECM, we continue to see high level performance whether it is PO or IPO in terms of pipeline. Indeed, due to market changes, our pipeline is affected, but under the current environment, our pipeline remains at a high level. And this fiscal year, we see the sale of strategically held shares even though we see the peak to be reached at some point in the future, but the current trend is expected to continue for some time?

Executive

Thank you. That's my answer. Thank you very much, Mr. Kitamura.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

The next question is from SBI Securities. Mr.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Otsuka?

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Hello. This is Otsuka from SBI Securities. Hope you can hear me. Yes, thank you. Two questions.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

First is about laser digital that you mentioned. How much was the profit, please? If you could give me some color or hints. That's my first question. Apologies, we cannot disclose the numbers.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

But Laser Digital started business in 2022 and it's only been two years since then and it turns profitable. And going forward, I think there's signs of positive signs, especially with the Trump market, which is a tailwind. And in the mid to long term, crypto assets will become a more regular asset class and that trend is going to continue. So the environment is positive for Laser Digital. When it comes to crypto and digital assets, there is a lot of volatility.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

And in this quarter, we achieved strong numbers, but there will be volatility going forward. And we will that's why we will also another reason why we will refrain from disclosing the numbers. On Page 22, Europe, Q on Q improvement in profit. And I think is it included here? No, not all of it, no.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Not all of it, no. Not all of it, this is laser. I see. So you have your core businesses and the market factors was a bigger factor, I believe. There's laser contribution and there's also the wholesale business like rates etcetera.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

And we cannot give you the exact breakdown. Okay, I understand. My second question, Page 26. You talked about the Hiroshima mandate, which didn't have the Hiroshima case, which didn't have much impact, negative impact from that incident. But for net inflows of cash and securities, was there no impact from the Hiroshima Incident?

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

And you have achieved strong numbers, but Q2, Q3, there wasn't much change. And for wealth management overall, it is negative. But are there any other factors aside from the incident? Yes. Thank you.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

On Page 26, Oskosan, you mentioned the negative number or is wealth management negative overall? And this includes the actions by the corporate clients. So this is kind of an irregular number. I think you should focus more on the retail only line. And since a few years ago, we have started adding this retail only disclosure and that's the reason for that.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

And if you look at the retail only line, you can see how it was positive in this quarter as well. And we achieved inflows for nine consecutive quarters. So I don't see any major issues here. Thank you. Yes, this $467,000,000,000 1 hundred and 60 8 billion dollars if we look at the retail only, is there any reason for this?

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Well, October is October was somewhat slow. There was the prime minister election in Japan and the U. S. Presidential elections in early November and customers were waiting and seeing. And if we look at within the quarter, October was relatively slow.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

Okay, I understand. Thank you very much.

Executive

The next question comes from Citigroup Securities, Mr. Niwa. Thank you. I am Niwa from Citi. I have two questions.

Executive

So I'm deviating from the earnings release, but regarding the policy holding and 02/1930 management ambition of yours. Regarding the policy holding of shares, the policy holdings held by Nomura, what is your policy in the securities report? I do understand you have provided explanation, but environment is changing now. So could you comment on the policy, which may not be necessarily needed? So what is your view and how should I think about your policies holdings?

Executive

And regarding ROE target for 02/1930, for you to conduct upward revision, what criteria needs to be met? So the vision seems to be where that's not appropriate because the target seems to be too low right now. Then why are you not raising the target making upward revision? Could you comment on those? Thank you.

Executive

Thank you for the question, Mr. Niwa. Regarding your first question, I didn't understand the intention of your first question. So are you saying that we should increase the policy holding of shares? What was your intention, Mr.

Executive

Niwa? Niwa speaking. So my intention my message was you could completely eliminate policy holding of shares. Kinamira speaking. So we have disclosed our position, but quite quickly we are setting down our position and ratio against Tier one capital right now is 2.8% or only around 3%.

Executive

And the 3% is affected by the stock price increase. So we have been quite aggressive in selling down our position in policy holdings and that's our stance. And we have a target number of shares to hold and we are quite proactive in selling those positions. But in the sense of the number of names, when it comes to the sale of unlisted, nonlisted stocks, it's difficult because we do not have market. So we have been quite aggressive in selling the shares held.

Executive

But even though we have made progress and we have no intention of slowing down our initiatives, but it will be quite a challenge for us to completely eliminate the holdings. However, in terms of direction, shares which do not have to hold, we do not intend to hold. Regarding your second question, why we are not raising the target? Well, our target was set May '2 years ago, ROE of 8% to 10% plus. So rather than focusing on that range from 8% to 10% plus, but what's more important is for us to achieve profit no matter what the market environment is, no matter poor the market environment is, we would like to achieve at least 8% in ROE steadily.

Executive

So that's the background of our target. So in the past, as we held 8% to 10% target, Many people told us, many people asked us how are we going to achieve the target. They didn't see the pathway towards achieving the target. We received such quite harsh comment. So we have made efforts to achieve our ambition.

Executive

In the last two quarters, we could achieve level above 11%. So when situations change, people's comments also change. That's how I felt. But baseline ROE and recurring business expansion are our focus so that we can increase our underlying ROE. That is our first step.

Executive

And on top of that, if market environment is favorable than 10% plus, just like 11% this time or we could aim even higher? That's our thinking. Did that answer your question? Thank you very much.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

The next question is from Bank of America Securities, Sijun san. Thank you. Sijun again. About Laser Digital profit, this is in Europe. And in terms of segments, where is it booked?

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

And from an accounting perspective, which line which item is it? Yes, this is Tamara. In terms of segment, it is in others of others. Sorry for the complication. And in terms of the accounting item, it is trading P and L.

Takumi Kitamura
Takumi Kitamura
CFO, Executive Officer & Chief Transformation Officer at Nomura

That answer your question? So it's basically trading in P and L. Okay, that's another difficulty for me. Okay, I understand.

Operator

It's time to finish, and we would like to conclude question and answer session. If you have some more questions, please ask our Nomura Holdings IR department. In the end, we would like to make closing address by Nomura Holdings.

Executive

This is Kitamura. Thank you, everyone. In the second and third quarters, we could achieve ROE exceeding 11%. And our medium to long term initiatives that we have worked on seem to be delivering results that gives us confidence as management members. But we are not overly optimistic.

Executive

We will stay focused on stabilizing top line and we will stay focused on diversifying revenue streams while controlling cost and controlling or managing risks. So we will stay attentive to all those things. JPY 268,800,000,000.0 of net profit has been achieved recently and highest level record high of net profit maybe just around the corner. But by working on the teams that I have worked on, we would like to keep up our efforts so that we can deliver a good performance. Thank you very much for your continued support.

Executive

Thank you.

Operator

Thank you for taking your time. And that concludes today's conference call. You may now disconnect your lines.

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    • Takumi Kitamura
      Takumi Kitamura
      CFO, Executive Officer & Chief Transformation Officer
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Earnings Conference Call
Nomura Q3 2025
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