Nomura Holdings Management Discusses F1Q13 Results - Earnings Call Transcript

Nomura Holdings, Inc. (NMR)

F1Q13 Earnings Call

July 26, 2012 7:00 AM ET

Executives

Atsushi Yoshikawa – Group COO; and CEO, Wholesale Division

Junko Nakagawa – CFO

Analysts

Masao Muraki – Deutsche Securities

Takehito Yamanaka – Credit Suisse Securities

Mitsumasa Okamoto – Merrill Lynch Securities

Katsunori Tanaka – Goldman Sachs Asset Management

Natsumu Tsujino – JP Morgan

Azuma Ohno – Barclays

Presentation

Operator

Good day, everyone, and welcome to today’s Nomura Holdings Fist Quarter Operating Results for Fiscal Year Ending March 2013 Conference Call. Please be reminded that today’s conference 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 questions-and-answer session will be held after the presentation.

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. Atsushi Yoshikawa, please go ahead.

Atsushi Yoshikawa

Good evening. This is Atsushi Yoshikawa, newly appointed Group COO and CEO of the Wholesale division. Let me first briefly introduce myself. I was the CEO of the Asset Management division, as well as the President of Nomura Asset Management from April 2008 to June 2011. After that, I have been working on the buildup of the Americas business as CEO of Americas since last July. Since joining Nomura, I have been working in the Retail business, the equity businesses of Singapore, Hong Kong, New York, as well as investment banking, Asset Management and the regional management of the Americas, and I would like to fully utilize my experience.

The competitive and regulatory environment surrounding global financial institutions is changing dramatically. And the Wholesale division as Asia’s – a global investment bank, we would like to further promote the joint operation between Japan and Asia.

We are based in Asia where a strong economic growth is expected and we would like to fully leverage on the strength and take in the growth of Asia and continuously expand our revenue-generation capabilities. And by providing services and products, which only Nomura can provide to our clients in Japan, Asia and the West, we would like to differentiate ourselves from our peers.

With that, I would like to ask Ms. Nakagawa, our CFO, to go over the highlights of the first quarter’s results. We will take your questions after the presentation. Nakagawa-san, please go ahead.

Junko Nakagawa

This is Junko Nakagawa, CFO. I will now give you an overview of our financial results for the first quarter of the fiscal year ending March 2013 using the presentation titled Consolidated Results of Operations.

Please turn to page three. Net revenue for the first quarter was ¥369.3 billion, a 26% decline from the previous quarter. On a year-on-year basis, revenues increased to 12% due to the conversion of Nomura Land and Building into a subsidiary. Income before income taxes declined 68% sequentially to ¥19.7 billion. Net income was ¥1.9 billion, down 91% quarter-on-quarter.

Retail and Asset Management remained resilient amid the challenging market conditions, driving firm-wide earnings. Wholesale faced a difficult quarter. However, Fixed Income performed well, underpinning the division’s revenues. We also completed the $1 billion cost reduction in Wholesale ahead of schedule. And by lowering our cost base, we were able to limit the impact from the decline in market liquidity and revenue opportunities.

Please turn to pages four and five. Here, we show the overview of our results at the Group level and by business segment. I will give you an update of the performance on each segment from pages six onwards and let me start with the Retail business on pages six and seven.

The market environment turned difficult following the rebound in the prior quarter. Retail investors shied away from taking on risk, leading to a 10% decline in net revenue to ¥82.7 billion. Income before income taxes dropped 40% to ¥12.2 billion. Sales of investment trusts and equities were softer due primarily to market factors. However, we reported stronger sales of fixed income products particularly foreign bonds. Our continued focus on providing consulting-based services to meet the needs of our clients translated into net asset inflows of ¥647.2 billion during the quarter marking our ninth consecutive quarter of net inflows. While we expect the market environment to remain tough for the foreseeable future, we will continue to provide consulting-based services to advise our Retail clients and meet their individual needs.

Please turn to pages eight and nine for Asset Management. Asset Management delivered stable earnings reporting net revenue of ¥16.4 billion, up 5% sequentially, and income before income taxes of ¥5.4 billion, a 30% increase compared to the first quarter last year.

As shown in the graph on the bottom left of page eight, assets under management totaled ¥23.3 trillion at the end of June, down from the end of March due to market factors. From this quarter, we are disclosing gross assets under management, which is the total of our five Asset Management firms. Net asset under management excludes the overlap between the companies and is the figure which we used to disclose until last year.

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