Nomura Earnings Call: Record Year, Softer Quarter

Nomura Holdings Inc Adr ((NMR)) has held its Q4 earnings call. Read on for the main highlights of the call.

Nomura Holdings delivered a broadly upbeat earnings call, celebrating record full-year profits and a key return-on-equity milestone while openly acknowledging a weaker fourth quarter. Management framed the tone as positive but cautious, stressing that strong structural gains in wealth and investment management are offset by near-term pressures from higher costs, impairments and choppy markets.

Record Profits and Early ROE Target Achievement

Nomura reported full-year group net revenue up 15% year on year to JPY 2,167.7 billion, with income before income taxes climbing 14% to JPY 539.8 billion and net income up 6% to a record JPY 362.1 billion for a second year. Return on equity reached 10.1%, beating the group’s 8%–10% plus target two years ahead of schedule, while the four-segment income before taxes hit an all-time high of JPY 506.9 billion.

Wealth Management Momentum and Recurring Revenue Strength

Wealth Management remained a standout, with income before income taxes rising 23% year on year and Q4 income up 5% quarter on quarter to JPY 61.2 billion. Recurring revenue reached a record JPY 56.8 billion, supported by net inflows of JPY 422.8 billion for a 16th straight quarter of inflows beating outflows, and the recurring revenue cost coverage ratio hit 72% with margins above 40%.

Investment Management AUM and Revenue Gains

Assets under management surged to an all-time high of roughly JPY 136.9–137 trillion, reflecting strong market performance and product demand. Q4 net revenue in Investment Management jumped 42% quarter on quarter to JPY 86.2 billion, with business revenues at a record and alternative AUM rising to JPY 3.6 trillion, around JPY 300 billion higher than in December.

Wholesale Strength and Equity Product Performance

The Wholesale division contributed meaningfully to full-year earnings, with revenue growing across all regions and Global Markets plus Investment Banking posting record revenues that drove a 21% year-on-year income increase. In the fourth quarter, equities revenue rose 6% quarter on quarter to JPY 127.2 billion, with equity products hitting record levels even as other areas faced volatility.

Banking Business Expansion and Deposit Strategy

Nomura’s banking operations showed steady expansion, with net revenue growing 6% quarter on quarter to JPY 14.5 billion and loan balances building over the year. Management highlighted progress on deposit sweep implementation and the broader development of a banking platform aimed at supporting future growth and deepening client relationships.

Capital Returns and Shareholder Payouts

Shareholder returns remained a central theme as management proposed a JPY 24 per-share ordinary dividend for Q4, bringing the annual dividend to JPY 51 and a payout ratio of 41%. Including restricted stock units, total payout reached 58% for the year, and even excluding them remained above 50%, complemented by a previously announced JPY 60 billion share buyback.

Solid Capital Base and CET1 Position

The group’s Common Equity Tier 1 ratio stood at 12.9% at end-March, just 0.1 percentage point lower than in December and signaling a solid capital buffer. Management stressed that near-term business expansion should have limited impact on CET1, with growth largely self-funded and capital deployment carefully calibrated to balance stability and returns.

Client Base Growth and Robust Sales Activity

Client engagement remained strong, with Q4 total sales around JPY 11.7 trillion, helped by major tender offers and healthy flow business. The number of flow-business clients increased by roughly 200,000 quarter on quarter to 1.74 million, while demand for Japanese equities and foreign products was solid and investment trust plus discretionary investment flows stayed elevated.

Q4 Earnings Decline and ROE Slowdown

Despite the strong annual picture, fourth-quarter performance showed clear pressure, with group income before income taxes falling 20% quarter on quarter to JPY 107.7 billion and net income down 19% to JPY 73.9 billion. Q4 ROE slipped to 8% and EPS to JPY 24.34, underscoring a notable slowdown in profitability as one-offs and market headwinds weighed on results.

Wholesale and Banking Profitability Under Pressure

Quarterly profitability in Wholesale and Banking came under strain, as Wholesale income before income taxes dropped 31% quarter on quarter to JPY 43.2 billion with net revenue down 2% to JPY 308.1 billion. Fixed income revenue fell 8% to JPY 125.3 billion, while Banking income before income taxes declined 27% to JPY 3.0 billion, highlighting sensitivity to market and funding conditions.

Rising Expenses and Cost-Income Ratio Spike

Groupwide expenses climbed about 13% quarter on quarter to JPY 469.5 billion in Q4, driven by extraordinary items including impairments and regulatory-related compensation changes. As a result, the reported Q4 cost-income ratio rose to around 86%, versus about 83% for the full year, a level management described as above normal and targeted for improvement as one-off effects roll off.

Impairments and One-off Losses Drag on Q4

The quarter’s results were further dampened by impairment losses tied to an investee within Investment Management and roughly JPY 12 billion of impairment on a forestry asset management investment. These charges were among the extraordinary expenses that reduced Q4 income and highlighted the risks inherent in certain alternative and strategic holdings.

Net Outflows and Asset Management Flow Challenges

While AUM hit record highs, the period saw overall net outflows of JPY 279 billion and sizable advisory-related outflows of around JPY 1 trillion, mainly linked to acquisition-targeted businesses. Management also pointed to industry-wide trends in the U.S. of funds moving from active to passive strategies, warning that reversing these flow dynamics will likely take time.

Private Credit Exposure and Concentration Risks

Nomura quantified its private credit exposure at roughly USD 2.4 billion, including about USD 800 million in lender financing, USD 1.2 billion in direct lending and USD 400 million in Investment Management holdings. Executives emphasized that exposures are diversified, yet they flagged the need to monitor credit cycles and concentration risks closely as the private credit market evolves.

Market and Geopolitical Headwinds in March

Geopolitical tensions, notably in the Middle East, combined with end-of-year risk controls to dampen March trading activity and revenues, particularly in Americas macro products. This cautious stance contributed to muted Q4 results as the firm adopted conservative positioning late in the quarter to protect capital amid elevated uncertainty.

De-risking After Prior Trading and Crypto Losses

Management revisited earlier losses related to crypto and certain market-making activities, explaining that exposures have since been reduced and risk appetite recalibrated. While this de-risking limited Q4 impact by curbing more aggressive positioning, it also marked a structural shift toward a more conservative trading profile in sensitive product areas.

Guidance and Outlook Emphasize Steady Growth and Discipline

Looking ahead, Nomura reaffirmed its 2030 roadmap, including a sustained ROE target of 8%–10% plus and income before taxes above JPY 500 billion, metrics already exceeded in the latest year. The firm plans to keep CET1 near current levels as growth remains largely self-funded, maintain its dividend framework, lean on steady Wealth and Investment Management franchises and allow one-off costs to fade while focusing on cost discipline and selective investments.

Nomura’s earnings call painted the picture of a firm with strong structural engines in wealth, investment management and equities, yet facing short-term margin and flow headwinds. For investors, the message was one of measured confidence, with robust capital, generous shareholder returns and clear ROE targets offset by a reminder that higher costs, impairments and market volatility still need careful navigation.