Nomura Holdings Inc ADR (NMR)

NMR 
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Nomura Holdings, Inc. (NMR)

F3Q2012 (Qtr End 12/31/2011) Earnings Call

February 1, 2012 12:00 pm ET

Executives

Takumi Shibata - Group COO, Chairman & CEO, Wholesale

Junko Nakagawa - CFO

Analysts

Masao Muraki - Deutsche Bank

Natsumu Tsujino - JPMorgan

Takehito Yamanaka - Credit Suisse

Katsunori Tanaka - Goldman Sachs

Jun Shiota - Daiwa Securities Capital Markets

Presentation

Takumi Shibata

Hello everyone this is Takumi Shibata, group COO. I will speak first followed by Miss. Nakagawa, our CFO who will go over the Q3 highlights. After the presentation we will be happy to take your questions.

In Q3, all of our business segments were profitable on a pre-tax basis and we reported higher revenues and income compared to last quarter. Despite the tough market conditions, the retail segment continued to respond to client needs through its consulting-based strategy while our Asset Management business continues to capture diverse investor flows and both divisions delivered stable earnings and saw results from their efforts to reduce costs as well.

The Wholesale Division reported stronger revenues in all regions and business lines driven by improved trading revenues and further growth across our global investment banking platform. On this call last quarter we announced that we plan to reduce our expenses by $1.2 billion. And we explained that we will adjust our cost structure to make it suitable for the revenue environment in 2011 instead of 2009. And thereby lower our breakeven point and improve our business execution capabilities.

Since then, we are swiftly implementing the announced cost reductions and we expect to have over 80% completed by the end of March this year. During the third quarter, we started to see some of the effects of the cost reduction program, but we expect the full effect to start contributing to our performance from the next fiscal year. In anticipation of changing market conditions and tighter regulations, we reduced risk assets and enhanced our risk management. We will continue to expand our offering of products and services that add value to our clients while maintaining our robust financial positions and ample liquidity as Asia’s global investment bank.

The recent management changes reflect our determination and although they were amicable departures, our intention is to create a flat management organization that allows for simpler communication lines and faster decision making processes while we also streamline our cost structure. While we expect the environment to continue to remain challenging for the time being, our focus is to continue expanding revenues by leveraging our geographic advantage as Asia’s global investment bank and proactively responding to the needs of our global clients.

With that, I would like to hand you over to our CFO, Mr. Junko Nakagawa, to give you an overview of our Q3 results.

Junko Nakagawa

This is Junko Nakagawa, CFO. Based on the presentation, I would like to go over the highlights of the Q3 results for fiscal year March 2012.

Please turn to page 3. Both revenues and income increased during the third quarter and all divisions were profitable on a pre-tax basis. As we contend with the debt crisis in Europe and challenging market conditions, Nomura’s long-term commitment to being a client-driven organization remains unchanged and we are adapting swiftly to the new revenue environment, expanding revenues and reducing cost by $1.2 billion as previously announced in order to lower our breakeven point.

Please turn to page 4. Our net revenue increased 34% quarter-on-quarter to become 404.9 billion yen and income before income taxes was 34.5 billion yen and net income was 17.8 billion yen. For the fiscal year to date, for the first three quarter our net revenue was 1.04 trillion yen which was an increase of 25% compared to the same period in the prior year due primarily to Nomura Land and Building becoming a subsidiary of Nomura Holdings.

Pre-tax income was 24.2 billion yen which was down 57% from the previous year due to the difficult second quarter in Wholesale. We reported a net loss for the year-to-date of 10.5 billion yen due to a 13.3 billion yen impact from the changes in the Japanese tax system. Excluding that the net income for the period was 2.8 billion yen.

On pages 5 and 6, we describe the highlights of this fiscal period as well as the segment information and as for the results of each segment, we will explain from page 7 onwards. Let me start with the retail segment on pages 7 and 8. Retail revenues was 79.7 billion yen, which was down 5% Q-on-Q. Pre-tax income was 10.1 billion yen, down 6% Q-on-Q.

Despite the tough market conditions, we continued our efforts in consulting sales and we’re able to achieve a net asset inflow for seven consecutive quarters and we limited the decline of revenues to a minimal level.

In bonds, we were able to achieve a broad range of investment needs and our sales grew for four consecutive quarters. The sales of foreign currency bonds trended strongly, while JGBs and domestic corporate bonds also were steady.

Please turn to pages 9 and 10 for Asset Management. Net revenues in Asset Management were 15.3 billion yen, down 4% from the last quarter. Income before income taxes declined 10% to 4.2 billion yen.

While assets under management have remained flat since the second quarter, Asset Management contained costs and continued to deliver stable profits. Although investors shied away from the public stock investment trust market due to current conditions, investment advisory assets under management were roughly unchanged from the prior quarter.

Read the rest of this transcript for free on seekingalpha.com