Nomura Holdings Inc ADR (NMR)

NMR 
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Nomura Holdings, Inc. (NMR)

Q1 2011 Earnings Call

April 28, 2011 4:30 am ET

Executives

Kenichi Watanabe – President and Chief Executive Officer

Junko Nakagawa – Chief Financial Officer

Jasjit Bhattal – President and Chief Executive Officer – Wholesale

Analysts

Masao Muraki – Deutsche Securities Inc.

Takehito Yamanaka – MF Global

Shiyota – Daiwa Securities Capital Markets

Presentation

Kenichi Watanabe

Before we begin, I’d like to extend our sincere condolences to the victims of the East Japan earthquake. And we are praying for recovery as early as possible.

As for Nomura, we did not suffer major damage, major physical damage, although there was some damage and no casualties fortunately. Immediately after the earthquake, from Monday after the earthquake, we have been working on providing liquidity to the market in Japan and focusing on providing liquidity as well as providing opportunities for trading. That’s where we started from, started off.

And Nomura has been actively sending out information not just within Japan, but globally, and in April, we have setup the East Japan Revival Support Bond Fund 1105. And based on the requests from our customers, we decided to setup and launch this investment trust or this fund. And we will be donating part of the custodial fees to support the recovery.

Separate from this, we have made some donations and we have also collected donations from our staff all over the globe and we have sent the donations directly to the various municipalities and the Governors, so that it reaches the disaster-stricken areas quickly. And together with the donations that we made, we would like to support Japanese securities market, capital market and make sure the markets function. And we would like to continue to work on our main lines of businesses to support the market. And we believe that’s the true support that we can provide to the market.

This was the same after Lehman Shock. We contributed to maintain the functions of the capital markets and we believe we had made sufficient contributions to do that. So after this earthquake, we will continue to send out information on a timely basis and support the markets not just the secondary market, but the primary market as well and make sure the market functions. This is one of the measures that we can work on to help rebuild and revive the Japanese market and this is our responsibility.

Together sending out various information, we have been making proposals and that’s just because the current government is fragile, but there are various stakeholders and we have been making proposals to the ruling party as well as the opposing party and the various municipalities and public organizations. And we have been making various proposals of which some of which we have disclosed, some, which we have not. And we are making these proposals to support the securities market and the capital market. And our proposals are such that we would like to use the markets to help revive the economy. But this is not the main topic today.

And first, we will have our CFO, Junko Nakagawa explain about the March ‘11 results briefly and then I will make my presentation, if I may, later on.

Junko Nakagawa

I’d now like to explain the results for March ‘11. Please turn to page five of the PowerPoint presentation.

I’ll explain the highlights of March ‘11. Pretax income and net income we achieved profits in Q4, which was the eighth consecutive quarter that we were profitable. And we were also profitable in all business lines for the full year.

For retail, which was the driver of profits for the group and also asset management, AUM grew and we achieved growth in both revenues and income. For wholesale, the market environment continued to be tough and we lowered our revenues and income year-on-year, but things bottomed in Q1, which was impacted by the sovereign crisis and we recovered from Q1. We have been making investments mainly overseas and rigorously controlling our costs and we were able to reduce our costs year-on-year. Page six please.

Let me explain the highlights of the Q4 results. Net revenue for Q4 was 299.4 billion yen, up 1% Q-on-Q. Pretax income 37.4 billion yen, up 35% Q-on-Q. Retail revenues was 96.2 billion yen, which was flat Q-on-Q.

Asset management revenue 21.9 billion yen, up 2% Q-on-Q. Wholesale revenue 186.3 billion yen, up 8% Q-on-Q. And the breakdown was global markets revenue 137 billion yen, down 3% Q-on-Q, and investment banking revenue 49.4 billion yen, which was up 59% Q-on-Q.

The full year results for March ‘11. The net revenue was 1.13 trillion yen, and pretax income was 93.3 billion yen. Net income for Q4 was 11.9 billion yen and annualized ROE was 2.3%. Net income for the full year was 28.7%. Annualized ROE was 1.4%.

The effective tax rate for the full year was 69%. The reason why it was high was because our operations in Europe and Asia were loss making. And going forward as overseas operations become profitable, we expect the effective tax rate to decline.

On this slide, we describe the revenue breakdown by division. As you can see on the pie chart on the right, for the full year, our domestic revenues made up 58% and overseas revenues was 42%.

I will now just move on to the highlights of each division on Q4. First the retail. The fourth quarter net revenue was 96.2 billion yen and income before income tax was 17.7 billion yen. For the full year, net revenue was 392.4 billion yen and income before income taxes was 101.2 billion yen.

Retail client assets continued to grow steadily until February, but declined slightly from the prior quarter to 70.6 trillion yen due to the market decline following the earthquake in Japan.

Total sales were up 10% quarter-on-quarter as we continued to provide consulting services to meet the need of our retail clients. Sales of stocks were particularly strong, jumping 25% compared to the third quarter, the highest level in eight quarters. Sales of foreign bonds increased by 18%. This is why we continued our core consulting sales and were able to appropriately address the needs of our clients.

Asset management net revenue was 21.9 billion yen for the fourth quarter and income before income taxes was 7.9 billion yen. For the full year, net revenue was 80.7 billion yen and income before income taxes was 25.1 billion yen. Assets under management grew by 600 billion yen to 24.7 trillion yen as of the end of March, driving both net revenue and income before income tax higher quarter-on-quarter.

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