Nomura (NMR) Q1 2027 Earnings Call Transcript

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DATE

Wednesday, July 29, 2026 at 2:30 a.m. ET

CALL PARTICIPANTS

• Chief Financial Officer - Hiroyuki Moriuchi

TAKEAWAYS

• Return on Equity (ROE) -- 15.4%, representing the highest level since the April to June quarter of 2020.
• Wealth Management Net Revenue -- JPY 145.4 billion, representing a 9% increase quarter over quarter.
• Wealth Management Pre-tax Income -- JPY 71.1 billion, increasing 16% from the previous quarter as the asset management transformation altered the revenue structure.
• Recurring Revenue -- JPY 59.2 billion, an all-time high driven by the division's shift toward consulting-based services.
• Recurring Revenue Assets Net Inflow -- JPY 539.6 billion, marking the 17th consecutive quarter of net inflows.
• Investment Management Net Revenue -- JPY 98.3 billion, a 14% increase from the previous quarter.
• Investment Management Pre-tax Income -- JPY 45 billion, a 148% rise representing the best performance since the division was established in April 2021.
• Assets Under Management (AUM) -- JPY 156.4 trillion, an all-time high at the end of June supported by favorable market conditions.
• Investment Management Net Outflows -- JPY 1.33 trillion, primarily reflecting JPY 940 billion in outflows from Japanese equity ETFs despite JPY 500 billion in inflows for actively managed funds.
• Wholesale Net Revenue -- JPY 369.1 billion, growing 20% quarter over quarter.
• Wholesale Pre-tax Income -- JPY 93.3 billion, a 116% increase marking the best performance since the division's establishment in April 2010.
• Equities Revenue -- JPY 179.4 billion, growing 41% quarter over quarter due to derivatives expansion and strong client flows in Asia Oceania.
• Fixed Income Revenue -- JPY 139.2 billion, up 11% behind increased client activity in EMEA rates and AEJ emerging markets.
• Investment Banking Revenue -- JPY 50.4 billion, a 9% decline from the previous quarter but an all-time high for a first fiscal quarter since 2016.
• Banking Net Revenue -- JPY 15.2 billion, up 5% quarter over quarter following the April 27 launch of a deposit sweep service.
• Loans Outstanding -- JPY 1,247 billion, reflecting increased recognition of securities-backed loans and higher collateral values.
• Group-wide Expenses -- JPY 475.2 billion, up 1% from the previous quarter due to higher performance-linked bonus provisions.
• Common Equity Tier 1 (CET1) Capital Ratio -- 12.9%, a 0.1 percentage point increase from 12.8% at the end of March.
• 2030 Management Vision Targets -- ROE of 10% to 12% or more and income before income taxes of at least JPY 750 billion.
• Recurring Revenue Assets -- JPY 31.7 trillion, a record high as of June 30.
• Revenue to Modified Risk-Weighted Asset Ratio -- 9.3%, reflecting flexible resource allocation and a self-funding framework in the Wholesale division.
• Workplace Client Assets -- JPY 10 trillion, established as a new KPI reflecting steady inflows from employee stock ownership plans.

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RISKS

• Moriuchi stated, "market volatility is likely to increase in the second half of the year with midterm elections to be held in the U.S. and in view of monetary policy trends in key nations," indicating potential impacts on revenue sustainability.
• Moriuchi noted that since July, "net revenue in wholesale has slowed somewhat of late," partly due to seasonal factors and market corrections.

SUMMARY

Nomura Holdings, Inc. (NYSE:NMR) reported its highest return on equity since 2020, driven by structural reforms and record performance across international regions. Management highlighted the expansion of recurring revenue in the Wealth Management division and record pre-tax income in the Wholesale segment, fueled by strong global equity demand. The company launched a new deposit sweep service to integrate banking and wealth management while making progress toward its 2030 vision of generating at least JPY 750 billion in annual pre-tax profit. Management stated that current financial resources remain sufficient for both growth investment and shareholder returns, with the Common Equity Tier 1 ratio improving to 12.9%.

• CFO Moriuchi attributed the record international performance to the revitalization of International Wealth Management, stating, "in this fiscal year, not only in terms of revenue, but in terms of income, IWM is making a huge contribution."
• Equity revenue growth was evenly split, with Moriuchi noting that "finance and trading represent 50% each of revenue growth in terms of contribution."
• Moriuchi explained the EMEA region's persistent losses by its function as a booking center, stating, "If we stop EMEA, we cannot do business in other international regions."
• The company noted that July performance in the Wealth Management division has remained roughly on par with the first quarter despite broader market corrections.
• Management is executing a headquarter relocation that will transition expenses from rent to depreciation, though annual costs are expected to stay flat or decline slightly in the medium term.
• The company maintains a self-funding framework for the Wholesale division to manage concentration risk, with Moriuchi stating, "we do not want the concentration into wholesale... so we want to avoid concentration risk."

INDUSTRY GLOSSARY

• AEJ: Asia ex-Japan, a geographic region focusing on Asian markets excluding Japan.
• CET1 Ratio: Common Equity Tier 1 ratio, a measure of a bank's core equity capital compared to its total risk-weighted assets.
• DCA: Deferred Compensation Awards, a form of employee compensation that is earned in one period but paid out at a future date.
• ECM/DCM: Equity Capital Markets and Debt Capital Markets, referring to the groups responsible for underwriting stock and bond issuances.
• EMEA: Europe, Middle East, and Africa, a regional reporting segment.
• IWM: International Wealth Management, the segment of Nomura focusing on high-net-worth clients outside of Japan.
• RWA: Risk-Weighted Assets, used to determine the minimum amount of capital that must be held by banks and other institutions to reduce the risk of insolvency.

Full Conference Call Transcript

Operator: Good day, everyone, and welcome to today's Nomura Holdings First Quarter Operating Results for Fiscal Year ended March 2027 Conference Call. Please be reminded that today's conference call is being recorded at the request of the hosting company. 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 results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these projections.

Such factors include economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions. With that, we'd like to begin the conference. Mr. Hiroyuki Moriuchi, Chief Financial Officer, please go ahead.

Hiroyuki Moriuchi: This is Moriuchi , CFO, speaking. I would like to start right away to report the results from Q1 year ending March 2027. In this quarter, all divisions achieved higher revenue and income before income taxes than in the previous quarter and ROE reached 15.4%. We believe the result of the structural reforms implemented over the past few years are now steadily being reflected in our performance and that we are making good progress further 2030 management vision. I would like to highlight 3 key points. First, growth in our recurring revenue business contributed to the steady strengthening of our stable revenue base. Second, our international businesses saw sharp growth, particularly in our priority areas.

Income before income taxes in our 3 overseas regions reached a record high since disclosure began in fiscal year 2008, '09 adding greater depth to profits. Third, we launched deposit sweep service to strengthen our banking business, and we are still laying the groundwork for future growth. Through these initiatives, we feel confident that heading towards 2030, the stability of our earnings base has steadily improved and our ability to generate profit has also been enhanced. We now look at first quarter results for each division. Please turn to Page 7. All percentage discussed from now on are based on quarter-on-quarter comparison.

On the top left, you can see the Wealth Management net revenue increased 9% to JPY 145.4 billion, while income before income taxes increased 16% to JPY 71.1 billion. Thus, revenue and income increased for the fifth consecutive quarter as asset management business transformed the division's revenue structure. On the bottom left, you can see the recurring revenue rose to an all-time high of JPY 59.2 billion. Net inflows of recurring revenue assets also remained strong, reaching an all-time high of JPY 539.6 billion. Flow revenue was strong, too.

Accurate perceptions of client activity as major equity markets hit all-time highs ensured growth in high-quality flow that in turn translated into growth in recurring revenue assets and thereby supported revenue growth. Solid cost controls also enabled the division to generate a high ratio of pretax profit margin of 49%. The recurring revenue cost coverage ratio came in at 76%, representing steady progress towards the target in our 2030 vision. Please turn to Page 8, where you can see an update on total sales by product. Total sales fell versus the previous quarter to JPY 8.5 trillion, but sales predicated on long-term diversified investment growth, thereby ensuring high-quality inflows that will translate into recurring revenue.

By product, stocks registered a decline of 36%, owing to the absence of major tender offers, but remained high in absolute terms. Bonds registered a rise of 14% as rising yen interest rates ensured solid demand for Japanese bonds. Investment trusts and discretionary investments, which constitute recurring revenue assets registered substantial growth of 22% and 38%, respectively, supported by services tailored to client requirements and the sort of product lineup that only Nomura can offer. Insurance also registered substantial growth of 36% on strong demand for pension and estate planning. Next, I would like to look at KPIs on Page 9.

On the top left, you can see the recurring revenue assets saw a net inflow of JPY 539.6 billion, which represents the 17 consecutive quarters of net inflows. As a result, as shown on the top right, recurring revenue assets totaled JPY 31.7 trillion at the end of June, representing an all-time high. Recurring revenue also registered an all-time high despite the absence of half yearly investment advisory fees. As shown on the bottom right, workplace client assets, which we have established as a new KPI, saw steady growth to JPY 10 trillion at the end of June on consistently high inflows from ESOPs. Next, let's take a look at investment management. Please turn to Page 10.

On the top left, you can see that net revenue rose 14% to JPY 98.3 billion and that income before income taxes rose 148% to JPY 45 billion. In both cases, this was the best performance since the division was established in April 2021. On the bottom left, you can see that business revenue was solid at JPY 86.2 billion. Asset management fees registered an all-time high owing to growth in assets under management. Furthermore, there were steady inflows of funds into newly established emerging market equity funds actively managed by Nomura Asset Management International and collaboration between Japanese and overseas offices with respect to acquired operations also generated rapid results and made a larger contribution to revenue.

Investment gain and loss gain or loss also benefited from much better performance at American Century Investments. Expenses also fell on the disappearance of impairments and onetime acquisition-related costs posted in the previous quarter. Let's now turn to Page 11 and examine our asset management business, which is the key source of business revenue for the division. The graph on the upper left shows the asset management show that asset management -- assets under management reached an all-time high of JPY 156.4 trillion at the end of June, supported by favorable market conditions. As shown at the bottom left, net outflows amounted to JPY 1.33 trillion.

Net inflows into investment excluding ETFs and MRFs totaled around JPY 500 billion, owing to actively managed Japanese equity trusts and newly established actively managed emerging market equity funds, but net outflows from ETFs totaled around JPY 940 billion, mainly from Japanese equity ETFs amid rising equity markets. Domestic investment advisory and international businesses saw net inflows in Japan mainly into actively managed Japanese equity investment trusts and private assets, but net outflows overseas, including sustained outflows from mutual funds in line with U.S. market trends as well as outflows from U.S. high-yield bonds. As shown at the bottom right, alternative AUM rose to a new high owing to net inflows. Next, Wholesale Division, Page 12, please.

On the top left, you can see that wholesale net revenue rose 20% to JPY 369.1 billion, while income before income taxes rose 116% to JPY 93.3 billion. In both cases, this was the best performance since the division was established in April 2010. Global Markets net revenue rose 26%, driven by equities. Investment Banking net revenue fell versus the strong previous quarter, but registered an all-time high for the first quarter of the fiscal year. The revenue to modified risk-weighted asset ratio rose to 9.3% on flexible allocation of resources in response to market conditions and steady efforts to tap revenue opportunities under the self-funding framework. Please turn to Page 13 for an update on each business line.

Net revenue in the global markets rose 26% to JPY 318.7 billion. Please look at the middle section on the right. Fixed income revenue rose 11% to JPY 139.2 billion. In macro products rates, revenue rose in EMEA on client activity, while FX emerging markets revenues rose substantially in AEJ on increased client flows. In spread products, credit revenue rose substantially in Japan and AEJ on increased client activity triggered by tighter spreads, while securitized products revenue came in flat. International Wealth Management revenue also grew steadily on expansion of client base, thereby helping to ensure more diverse sources of revenue for global markets.

Equities revenue registered strong growth, rising 41% to JPY 179.4 billion, owing to the strategic global rollout of businesses that have already been established in certain regions as well as favorable market conditions. Equity products saw strong revenue growth across all regions as increased client flows drove growth in derivatives. Elsewhere, accurate perceptions of client activity enabled AEJ to drive growth in Execution Services. Let's turn to Page 14 for Investment Banking.

As you can see on the top left, Investment Banking net revenue fell 9% to JPY 50.4 billion, but it hit an all-time high for the first quarter of the fiscal year, exceeding JPY 50 billion for the first time since fiscal year 2016, '17, the earliest period for which data is available. Byproducts advisory revenue fell versus the strong prior quarter, but benefited from growth investments and portfolio realignment in Japan and from multiple deals outside of Japan, including renewable energy-related deals that are an area of particular focus. In financing and solutions, et cetera, ECM remained at the top of the league table in Japan with contributions from multiple major deals.

The business also responded to diverse needs, including the issuance of bond type class shares. Elsewhere, DCM was widely involved in bond issuance by a broad range of Japanese and overseas issuers, while solutions businesses also continued to perform solidly. Next, Banking division. Please turn to Page 15. As shown on the top left, net revenue was up 5% to JPY 15.2 billion and income before income taxes was up 19% to JPY 3.6 billion. Starting from this quarter, we disclosed net revenue broken down into banking revenue and trust and agent service revenue. As you see in the middle of the right, banking revenue rose 19% to JPY 4.1 billion.

The balance of deposits and number of accounts grew steadily, owing to the marketing of deposit sweep service launched on April 27 and collaboration with wealth management. Also, revenue from lending operations grew on a steady increase in loans outstanding and valuation gains on securities holdings also contributed to revenue growth. Trust and agent service revenue was JPY 11.2 billion. Revenue trended solidly by a growth in investment trust balances backed by the launch of new investment trust and market factors. Next, we turn to KPIs on Page 16. On the top left, loans outstanding were JPY 1,247 billion.

Loans outstanding grew centered on Nomura web loans, reflecting a growing recognition of securities-backed loans and an increase in the value of collateral accompanying the market rise as shown at the bottom of the slide. The investment trust balance and assets under administration have been growing steadily on the acquisition of mandates for newly established investment trust and as fund inflows have continued on the back of marketing strategy enhancements. Next, expenses. Page 17, please. Group-wide expenses were JPY 475.2 billion, an increase of about 1% or JPY 5.7 billion from the previous quarter.

Performance-linked bonus provisions and other compensation and benefits rose, but at the same time, other expenses were held down, leading to the capture of benefits from operating leverage. Next, financial position. Page 18, please. As shown in the table on the bottom left, at the end of June, common equity Tier 1 capital ratio was 12.9%, up 0.1 percentage points from 12.8% at the end of March. That completes our overview of the first quarter results. In closing, in May this year, we raised our numerical target range for ROE to 10% to 12% or more by 2030 and our target for income before income taxes in 2030 to at least JPY 750 billion.

ROE of 15.4% in the first quarter was the highest since the April to June quarter of 2020 when wholesale with relatively volatile earnings was making a major contribution to profits amid quantitative easing measures being taken around the world in response to COVID-19 pandemic. In recent years, the net revenue structure has been changing as the exposure to any one particular division has declined and the generation of profits has become more balanced across divisions. Stable revenues have expanded roughly 60% from a year earlier, indicating steady reinforcement of income before income taxes level.

In wholesale, revenue sources are becoming more diversified, driven by growth in equity products and securitized products as well as the expansion of the international wealth management business, although performance may fluctuate to some extent in response to market conditions, we believe the quality of our profits has been steadily improving because of restructuring efforts made to date. Let me comment briefly on the situation since July. Market environment has been characterized by continued uncertainty amid the renewed heightening of geopolitical risk and the equity market have been -- have seen corrections and increased volatility. Despite these circumstances, net revenue in Wealth Management has been roughly on par with the first quarter.

Fund inflows to products and services predicated on long-term diversified investments remain firm. In wholesale, net revenue has slowed somewhat of late. This is partly in reaction to strong net revenue in the first quarter, mainly in equities, but also owing to seasonal factors specific to the summer. Nevertheless, the pipeline for the division as a whole remains favorable. We think market volatility is likely to increase in the second half of the year with midterm elections to be held in the U.S. and in view of monetary policy trends in key nations, we plan to monetize opportunities while engaging in appropriate risk taking and maintaining strict discipline in terms of cost controls. Thank you for your continued support.

We have a question and answer session now.

Kazuki Watanabe: I'm Watanabe from Daiwa Securities. I have 2 questions. First, about wholesale revenue. In July, you've explained that it slowed down somewhat. In comparison to Q1, I believe there are seasonality factors. But on year-on-year basis, with revenue in July an increase, revenue sources are diversified. And what is your outlook on wholesale revenue? The second is on capital policy based on payout ratio of 40% with Q1 revenue DPS of close to JPY 20 securities. Is that the right understanding? As income increases with the capital accumulation, ROE will be under downward pressure. Will there be adjustment of capital, including buyback? These are 2 questions.

Hiroyuki Moriuchi: Thank you, Watanabe-san, for your questions. About wholesale revenue, it slowed down a little in July. Every year, because of seasonality in July and in August, according to the past trends, in almost all years, we see some slowdown in summer. Having said so, in terms of year-on-year, how does it compare? Currently, it is more or less flat. So that is my response to your first question. And regarding the second question on shareholder return policy, to be honest, it is only at the end of Q1 and payout ratio perhaps may be too premature to be discussed. Growth investment and enhancement of shareholder return will have to be balanced.

In view of that balance, we would like to take this into further consideration. I hope this answers your questions.

Kazuki Watanabe: Regarding the first question, equity especially was strong in Q1. Is this momentum -- will this momentum be sustained in Q2 and beyond?

Hiroyuki Moriuchi: Thank you for that question. As you rightly pointed out, in the first quarter, equities were very strong, including bulge brackets peers also enjoyed multiple favorable conditions that were unique according to these peers. On our part, because of the activities of the market over short term to long term, perhaps there may be a small normalization. In any event, it continues to be the case that equities remain strong. So even though there may be small normalization in comparison to the past level, there may be an upward correction of the baseline.

Operator: The next question comes from SMBC Nikko Securities, Mr. Muraki. -- please.

Masao Muraki: I'm Muraki from SMBC Nikko. I have 2 questions. First question is about revenue. This time, Page 13, I'm looking at the graph on Page 13, and the performance was driven by equity product revenue. So compared to a year ago, it's about double JPY 120 billion. So in what way was the revenue generated driven? I'd like to deepen my understanding, if possible, derivatives, structured products and prime finance. So I'd like to know the breakdown. That's my first question. My second question is regarding resource usage.

I ask this question every time, but Page 20, overall balance sheet shows that securities-backed lending and trading assets combined, it's about JPY 4 trillion and JPY 0.7 trillion when I look at the pure loan, so balance sheet has grown bigger. In terms of U.S. peers from hedge fund clients, so there is a very strong need for financing. So they have increased resources, but they cannot keep up with the increasing demand from clients. In your case, leverage ratio came down, but it's 0.6%. So compared to regulation, there is still headroom in your case. In this situation, resource management and risk management, what is your approach to them?

Hiroyuki Moriuchi: Thank you, Mr. Muraki for your question. Regarding your first question, equities, equity products breakdown. So what was the driver for the revenue growth? The detailed breakdown cannot be disclosed, but roughly speaking, finance-related business such as corporate derivative or prime business and trading type business such as flow trading and cash business and structured trade. So finance and trading represent 50% each of revenue growth in terms of contribution to revenue growth. It just so happens that in the past, we started with cash and gradually centering on the U.S.A., we have expanded product lineup. And geographically, looking at the success in the U.S.A., in Asia, we have strengthened our business.

Market theme was captured and monetized into revenue in Asia as well. As for lineup of products, in addition to derivatives, financing execution services, and we have expanded product lineup. So that's been our situation. The second question, our balance sheet has grown bigger, but our financial resources, especially leverage exposure. And when it comes to risk management, what is our approach? I believe that was your question. Regarding the balance sheet growing bigger, the reason for that is simply put. Equity business contribution is big as a factor. Equity business has been quite active and that led to increase in balance sheet. And as for management of financial resources, as you pointed out, leverage exposure still has some headroom.

Regarding leverage exposure, unlike CET1 , by issuing AT1, leverage exposure can be expanded if we try to do so. But as you know, Muraki-san, regarding wholesale division, we have self-funding framework within which we have certain guideline about financial resources. And within the guideline, we are -- we would like wholesale to grow business. The intent here is our financial resources precious. So within certain limit or framework, within wholesale, we would like wholesale to control resource, so the resource can be focused on the high-margin projects deals so that the revenue to RWA ratio can be increased. That is our aspiration. And group-wide business portfolio within the group-wide portfolio, we do not want the concentration into wholesale.

So we want to avoid concentration risk. So in wholesale, -- sometimes we are flexible in providing wholesale -- in providing resources to wholesale. But basically, we are aiming to drive growth within the framework set within wholesale. That's how we manage portfolio and risk management risk. And that's going to be our continued approach. So it's not just wholesale that conducts business that use resources. For example, in terms of IM inorganic opportunities, they will use RWA and Nomura Trust and Banking division. So these businesses will use more leverage exposure moving forward. So financial resource control will become increasingly important. I hope that answers your questions.

Masao Muraki: Regarding your first point, so you say the derivatives business did well, but derivatives in the 50% of equity business, so it belongs to flow trading. And now derivatives represent a significant portion of the latter part, 50%.

Hiroyuki Moriuchi: So regarding the breakdown, there is some mixture. So we would like to check the specific details and then have you keep you updated at some point in the future.

Natsumu Tsujino: This is Tsujino from BofA. I have 3 questions. First, regarding compensation and benefits. Since last year, there were some special factors, onetime factors that led to increase in compensation and benefits. And from this fiscal year onwards, I believe you've discussed that you expect a decline in compensation and benefits. Going forward, how will it trend in Q2 because of changes in bonus, et cetera, will there be a temporary increase in compensation and benefits, which will come down subsequently? That is my first question. And the second question is about global markets from July onwards. In comparison to Q1, it is a bit slow. Wholesale, it is almost flat.

But global markets, when we focus only on global markets, FIC in Q1 has increased substantially year-on-year. FIC is relatively flat. When we look at the market, FIC sudden decline is not likely. So FIC versus equity, if FIC slows down in summer and if it is lower than Q1. But unless equity suffers from very sharp decline on a year-on-year basis, I don't think there will be a leveling off or plateauing. So could you add color to FIC and equity separately? And another question is about IM profit, excluding investment gain and loss. And then about JPY 20 billion is increased Q-on-Q. And the forestry asset is JPY 12.1 billion decrease. Acquisition cost, JPY 5.5 billion decline.

And so that should lead to improvement. But to begin with, in Q4, Nomura Babcock was extremely strong. And because of such factors, the performance was not so bad, which means that Nomura Babcock this time, how normalized was it? How much normalization was there in Nomura Babcock? Could you discuss these developments?

Hiroyuki Moriuchi: Tsujino, thank you for your questions. About increase in compensation and benefits, onetime factors occurred last year, as you rightly pointed out. And as we also provided information on this, there were several onetime factors, one of which is deferred compensation-related factor. And this is a replacement of cash compensation. So this was onetime factor last year. And gradually, this cost will be leveled off. That is, I believe, how we explained in the third quarter presentation. Actually, as a matter of fact, what we call DCA deferred compensation regarding that cost, assuming that earnings remains the same, then DCA declines, but earnings are improving, rising.

So deferred compensation included compensation and benefits are also increasing because of the industry -- the nature of the industry, there is some fixed level of compensation and benefits. But in line with the performance, there is also additional compensation and benefits linked to performance. So to an extent, there is some increase linked to performance. And performance has been very strong. So rather than likely decline, at this pace, we anticipate some increase. Having said so, in Q1, there are so many onetime factors for compensation and benefits, but there is a stock compensation that will be vested in short term, and that was booked in Q1. And because of that, there was a onetime effect.

Regarding the second question about the recent July equity fixed income breakdown. Year-on-year, it is about the same. And that led to your estimate that equity may have fallen. Right now, regarding equities due to market corrections, in comparison to the previous quarter, it is coming down. However, it is still at a high level is maintained for equities. As for fixed income, there are investors on the sidelines trying to see the monetary policy of Western countries. And because of market volatility, it is leading to more volatile revenue.

As for credit and securitized products in the previous quarter from the very high level in the previous quarter, and since there are deals that affect the performance, the number of deals may affect the performance, and that may have had some effect. And I believe you've had a question related to IM as your third question, factors that led to increase in revenue. In terms of Q-on-Q performance, Babcock had some seasonal factors, and there was a slight decline. Babcock products typically have a stronger performance in Q3, Q4. In Q1, there was a slight decline. As for contingency fees, there were some strong results, including Vietnam, Taiwan and AUM increased. Seed investments, this is similar to proprietary investment.

And this seed investment also had a good performance. In the meantime, there are some offsetting factors, but I hope this addresses your question.

Natsumu Tsujino: About seed investment, do you mean there was a mark-to-market?

Hiroyuki Moriuchi: Yes, that is correct.

Operator: Next person asking the question is Sato-san from JPMorgan Securities.

Koki Sato: I am Sato from JPMorgan Securities. I have 2 questions. First question is about wholesale division's revenue, especially revenue to RWA ratio. 9.3% was the result of Q1. So on a quarterly basis, it's the highest level. And the other day, 2030 compared to 2030 target, the Q1 result was quite high in terms of the ratio. And you've explained the equities business did quite well. But regarding the risk asset mix, -- could you add some color to the risk asset mix? When I do calculation backward, adjusted risk assets have not increased much. Actually, it may have decreased somewhat. So I'd like to understand if there is any change to the mix?

The second question, in the second half of year, you are scheduled to relocate the headquarters. And what is your latest outlook on the relocation cost this time, Well, headquarter, new headquarter-related equipment cost increase was mentioned. And by September, the investment into the retained floor space, about JPY 150 billion or so. And accounting-wise, it might be an amortization or depreciation. If there is such cost, then what is going to be the total cost associated with relocation?

Hiroyuki Moriuchi: Sato-san, thank you for your questions. First, regarding your first question, revenue to RWA ratio, the level has gone up, but RWA level remains unchanged. So what is the mix? So that was your first question. I understand. Regarding the mix, equity products and SPPC was securitized products. And IWM, International Wealth Management resources have been increased. In the area of equities, the resource allocation has been increased. And how we should think about the current situation? Towards 2030, we have macro business centering on rates and equity business and spread business, credit and SPPC.

The rough breakdown will be kept -- and in the medium to long term, we would like to grow all of them in a balanced manner. But particularly, we would like to grow equity business more in the medium to long term. So in the medium, long term, our portfolio mix target, the target is not going to change much. On the other hand, when it comes to short term, market -- depending on the themes or situation of markets, the demand for certain products sometimes greatly increase. This time, equities market has been quite active. So financial resources have been reallocated from other businesses to equities business. This is a sign that wholesale self-funding worked.

So where there is opportunities for revenue generation, headquarters have urged wholesale to make a revenue by shifting resources and they are living up to the headquarters' expectations. And U.S. peers included in equities business, demand is bigger than the capacity of balance sheet of each firm. So in this kind of situation, the level of profitability remaining with the firms, I believe, has trended up somewhat. That's my answer to your first question. Regarding your second question about headquarters cost. In the most recent quarter, there was some cost incurred, but headquarter relocation itself will be proceeded with gradually. So the associated costs will be incurred gradually. So this fiscal year and next we expect certain volume of cost.

However, impact on this year's performance is considered to be relatively small, while I would like to refrain from speaking about specific number, but at the right timing, we would like to explain the relevant cost.

Koki Sato: So you can give me qualitative remark, but Otemachi properties and other properties, now you are paying rent. Then after you've completed relocation and you've exited the existing buildings, then you've returned the floor, then on a net basis, cost is going to stay flat.

Hiroyuki Moriuchi: Thank you for the follow-up question. Well, regarding headquarters, the expense will switch from rent expense to depreciation after relocation. But in the medium to long term, the headquarter-related cost will stay flat or annual cost, I believe, will end up being a bit lower, though I do not have a specific number here. So when it's -- when we are ready to disclose, we'd like to follow up with this.

Wataru Otsuka: I'm Otsuka from SBI. I hope you can hear me.

Hiroyuki Moriuchi: Yes, we can hear you loud and clear.

Wataru Otsuka: Page 25. I have 2 questions, and I would like to have a response after the first question. I'm looking at Page 25. As for revenue in international operations, you have 3 regions. And this quarter, JPY 39.8 billion from Americas. In comparison to the past, for example, in fiscal 2020, this level was achieved. But Asia and Oceania, JPY 47.2 billion. This is a huge amount that was not seen before. What are the factors? And how sustainable is this level of income? As for EMEA or Europe, market was performing well, but losses continue to be incurred. Competitors, Paribas and Deutsche in Markets ID division, they are reporting profits.

Of course, the businesses are different between Nomura and them. But in Europe, despite a favorable market environment, losses are incurred. Could you comment on these?

Hiroyuki Moriuchi: Thank you for your question, Mr. Otsuka. As for international operations, the U.S. is at a high level, but this was a level similar to what was achieved in the past year. As for Asia, Oceania, this high level of income is quite unusual, and you would like to understand the background. This fiscal year, as we have been discussing, equity contributed hugely to increase in revenue. In addition, FX and emerging also enjoyed a very large increase in revenue. Credit flow credit was also relatively strong. In addition to these, what is different from the past is IWM, International Wealth Management. Since around 4 to 5 years ago, we began to revitalize the business.

And initially, there was a J-curve, and we had to restructure several franchises. But since around 2 years ago, we began to see blossoming of these efforts. And in this fiscal year, not only in terms of revenue, but in terms of income, IWM is making a huge contribution. In relation to this, although there is some fluctuation, but in comparison to other products from GM, we expect a more stable growth continuously. As for EMEA, you've mentioned other competitors and why the sustained loss-making situation, we would like to strengthen business. We are making efforts to grow business. As for the magnitude of losses on a 2- to 3-year range, it is being reduced.

This fiscal year, rates are showing relatively strong growth in fixed income and equity, both have enjoyed increase in revenue. On the other hand, -- in particular, we are focusing on growing equities and the regional diversification and regional expansion are being pursued. We are making progress gradually. But when it comes to EMEA, especially in our international operations, as booking center booking hub, we are using EMEA transfer pricing. Of course, we are assigning appropriate pricing. But as a legal entity, there are some costs that need to be incurred. In that respect, amongst 3 international regions, EMEA is a special region. It is a profit center as well as a cost center or functioning similar to corporate center.

And therefore, in comparison to other regions, there is some added burden for EMEA. As for wholesale self-funding framework, based on that framework, there is some dynamic reallocation of financial resources. In this time, in wholesale, as we have repeatedly mentioned, U.S. equity and Asian equities are capturing very good opportunities in large number. And therefore, there was an intentional shift of resources to that area. And that also is resulting in these numbers.

Wataru Otsuka: So does that mean that seen from outside, these are losses? Is it a profit center? It appears only as a cost center. But seen from the management, you believe that this is something you have to persevere.

Hiroyuki Moriuchi: If we stop EMEA, we cannot do business in other international regions. That is what is meant by booking center. For wholesale overall, I believe it would be more accurate to look at the entire picture of wholesale. It may be difficult to take such a view. But globally, in managing our business, we are looking at global products for wholesale rather than looking at region by region. So we hope you will be able to see wholesale business in that perspective.

Wataru Otsuka: The second question is on Page 29 about cash and securities. Rather inflows of cash and securities, it was very large at JPY 8 trillion. There was an outflow in the previous quarter. In comparison to previous quarter, there were fluctuations. To the extent possible, could you discuss what the reasons behind are and what inflows, outflows there were?

Hiroyuki Moriuchi: Thank you for your question. It may be difficult to discern here, but a large negative this time is because there were several major corporate actions. And as a result, there was a large amount of funding that was paid out. So this was a unique situation. If we look only at retail, inflows of cash and securities, it is a positive of more than JPY 400 billion. Therefore, it is not as if this is indicating a major trend. I believe it would be better to understand that there was some special factor or unique factor.

Wataru Otsuka: If you have any numbers you can discuss regarding retail, it may be completely equal, but in wealth management, what kind of funding inflow, what kind of product inflow did you see on Page 8? There were various descriptions of strong performance of equities. So if you could add color to that, please.

Hiroyuki Moriuchi: Thank you for that question. Generally speaking, as for the trends in retail, as you rightly mentioned, total sales on Page 8, I believe that shows the trend very clearly.

Wataru Otsuka: I see. Then investment trusts were sold in discretionary investment was also doing well because of cash in?

Hiroyuki Moriuchi: Yes, that is correct.

Operator: Next question comes from Niwa-san from UBS Securities.

Koichi Niwa: Can you hear me?

Hiroyuki Moriuchi: Yes. Niwa-san, please go ahead.

Koichi Niwa: I have 2 questions. Regarding Page 19, Wealth Management and ROE of the total company. First, Page 19, Wealth Management's recent situation inflow has been strong according to your explanation, but the market environment is uncertain. So in this situation, how should I put it? What is the key points of advice? In other words, about what are your customers concerned about? Even if the current uncertain environment continues, could we expect the stable revenue to continue? So could I have some more colors regarding some episodes that you can share with us regarding the dialogues you have had with clients? The second question, 15% or more of ROE achieved in first quarter.

My question is, was there areas where you could have done better in terms of revenue? ROE exceeded target, and it's very good. But if hypothetically, if you could have done this and that, then do you believe you could have delivered more revenue? For example, wholesale allocation, if you had given more resources beyond the self-funding to global markets. So what would have been the result second quarter onward. But could you have delivered bigger revenue had you allocated more resources to certain businesses? So also, I'd like to know about the sustainability of revenue.

Hiroyuki Moriuchi: Thank you very much, Niwa-san. Regarding your first question, the market is now uncertain, but what are the key points to look at to understand business. So that's how I understood your question. In that sense, as you pointed out, our wealth management business has recurring revenue and flow revenue. In terms of flow revenue, flow revenue is influenced by market sentiment. So we would like to stay close to our clients and conduct consulting-based services, and that's what we've been doing. And regarding recurring revenue, which is relatively stable in Wealth Management, we are working to grow recurring revenue.

So we have recurring revenue, and that's supported by the net increase in recurring assets and also recurring revenue cost coverage ratio. So those are the key points to pay attention to. Regarding your second question, ROE of more than 15%, especially in the area of wholesale regarding resource allocation, were there areas where we could have done better. As you say, if we had infinite amount of resources, then we could have received more demand from clients. We could have captured more demands from customers because demands are quite strong. So in that sense, well, we had to be selective in choosing which deal to do. And that placed a burden on our business divisions.

But still concentration risk for group as a whole and concentration risk on certain products within wholesale has been controlled. so that in the medium, long term, we can grow in a sustainable manner. So for that, the approach we took was unavoidable. That's our understanding. I hope I answered your question.

Koichi Niwa: Regarding the second point, I'd like to ask a follow-up question. It's another hypothetical question. But if without what you have described, then what would have been the ROE level. So what would have been the highest level of ROE you could have achieved hypothetically? But it's a very difficult question to answer.

Hiroyuki Moriuchi: So with consent understanding from shareholders, we hold excess capital. So in addition to regulatory capital, so we have internal target of 11%, and we have a buffer above that. Regarding capital usage, sometimes we allocate capital to wholesale beyond self-funding. But when actually there is a need for capital, can we recoup the capital? So the flexibility of resource is what we have to pay attention to because once resource is given to business division, the capital is not returned easily. If it's used for client business, there is certain duration given that for future opportunities, then we will have to retain certain buffer.

So if we had captured all opportunities, then we would have achieved ROE above 15.4%, but that might have undermined the future growth opportunities. So it's a hypothetical question, but it is a difficult question to answer.

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

Hiroyuki Moriuchi: Thank you very much for your participation. In this quarter, there were market themes, market opportunities that is certainly the case. And in order to capture these opportunities, we are engaged in business portfolio restructuring and structural reform in the past 2, 3 years. These were translated into actual good performance. Towards good 2030, we were able to make a good start immediately after a revision of our target. Summer is a slow season typically, Q2 and beyond, we would like to make sure that we continue to achieve strong performance, and we appreciate your continuous support. And thank you very much once again for your patience.

Operator: Thank you for taking your time, and that concludes today's conference call. You may now disconnect your lines.

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