NOMURA HOLDINGS INC Q2 FY2027 earnings call

• Financial Performance: ROE was 10.9% in Q2 and 13.3% for the first half, exceeding targets despite market volatility. Group-wide net revenue was ¥607.5 billion (down 12% QoQ). Stable revenue expanded roughly 1.6-fold year-on-year over the half.
• Wealth Management Trends: Recurring revenue assets saw net inflows of ¥755.4 billion (all-time high). Bond sales surged 66% due to rising yen interest rates, while equity sales fell 21%. Discretionary investments and insurance also grew.
• Wholesale Market Dynamics: Global markets faced headwinds from subdued credit activity and lower equity trading volumes. However, investment banking ranked first in Japan-related ECM and secured major advisory/financing deals.
• Operational Efficiency: Non-interest expenses decreased 3% QoQ to ¥459.5 billion. The firm is focusing on structural reforms (SRC) and AI-driven efficiency to improve the wholesale expense ratio, currently at 85%.
• October Outlook: Revenue levels remain steady. Inflows into long-term diversified investment products remain solid as clients prepare for inflation and geopolitical risks. Investment banking pipeline remains strong despite a slow start.

• Wealth Management: Net revenue of ¥141.5 billion (down 3% QoQ), contributing to stable revenue growth. Recurring revenue hit an all-time high of ¥66.7 billion. Income before income taxes fell 8% to ¥65.6 billion.
• Investment Management: Net revenue fell 14% to ¥84.8 billion, with income before income taxes dropping 39% to ¥27.4 billion. Business revenue (stable) remained solid at ¥82.3 billion.
• Wholesale (Global Markets & Investment Banking): Global markets net revenue fell 20% to ¥254.2 billion; Investment banking net revenue rose 9% to ¥54.7 billion. Combined Wholesale net revenue was ¥308.9 billion (down 16% QoQ).
• Banking Division: Net revenue increased 7% to ¥16.4 billion, with income before income taxes up 20% to ¥4.4 billion.

• Dividend Policy: Interim dividend set at 35 yen per share (payout ratio 41%), reflecting confidence in earning power.
• ROE Target: Confirmed achievement of quantitative target for ROE of 10-12% or higher toward 2030.
• Expense Ratio Improvement: Management aims to reduce the wholesale expense ratio below 80% through structural measures, AI implementation, and achieving operating leverage via revenue scale.
• Capital Allocation: No large-scale M&A expected for overseas asset management other than seed capital; focus remains on organic growth and selective deployment of capital.

• Geopolitical and Macroeconomic Uncertainty: Rising interest rates, renewed geopolitical risks, and potential inflation impacts are causing market corrections and cautious client behavior.
• Credit and Counterparty Risk: While no direct hits were reported from specific hedge fund leverages (e.g., CoreWeave), the firm monitors credit side exposures closely, particularly in data center financing.
• Cost Inflation: Upfront investments in headcount (especially for IWM and equity domains) and general inflationary pressures on IT and personnel costs have temporarily impacted cost ratios.
• Market Volatility Impact on Seed Investments: Valuation losses in seed pilot investments contributed to P&L volatility, though these are viewed as necessary R&D for future product origination.

Q: SMBC Nikko asked about the impact of recent events (CoreWeave, French gov bonds, leverage) on Oct revenues and the outlook for overseas M&A/share buybacks. / A: CFO stated Nomura’s positions were not directly hit by specific leverage issues but noted October is eventful (US elections, Middle East). Regarding capital, overseas asset management will focus on organic growth without large M&A, using capital generously but selectively, while wealth management focuses on organic sales.