8601.T

• Overall Performance

  • Q1 FY2026 delivered historically high revenue and profit, with profit growth across all divisions.
  • Base income, the key stable earnings KPI for the midterm management plan, reached 62.8 billion yen, an 83.8% increase year-over-year, and the division is progressing significantly ahead of the final year target of 150 billion yen.
  • Steady progress is being made on building an earnings base that is less susceptible to external market conditions.

• Strategic Execution

  • The structural shift of Japanese funds into financial and capital markets, driven by rising inflation, growing asset building needs, and corporate governance reforms, continues, and the group has successfully translated this shift into results via disciplined strategy execution.
  • In Wealth Management, Total Asset Consulting focuses on identifying client pain points and needs across investment management, asset succession, real estate, and corporate transactions, driving growth in both balance-based and flow-based revenue. Wrap account contracted AUM reached a record high 6.765 trillion yen.
  • In Asset Management, accumulated AUM growth has lifted profitability, strengthening the stable stock-type business model.
  • In Global Markets and Investment Banking, the group has captured structural changes from capital market reforms and shifting client needs to secure revenue opportunities.

• Completed Acquisition

  • The acquisition of 100% ownership of ORIX Bank has been completed, representing an important step forward in advancing the group's wealth-centered growth strategy.

• The full fiscal year 2026 is the final year of the group's midterm management plan, and Q1 FY2026 marked a strong positive start to achieving the plan's goals.
• Current trading pacing: Wealth Management is tracking roughly in line with Q1 FY2026 average levels; Global Markets has started the second quarter below Q1's high average level, though client flows remain solid.
• Management reaffirmed that the group is on track to exceed the midterm management plan's base income target of 150 billion yen for the final year of the plan.

1. Wealth Management Division: Net operating revenue was 88.2 billion yen (up 8.8% quarter-over-quarter from Q4 FY2025), ordinary income was 37.2 billion yen (up 12.4%). Record high asset-based revenue hit 35.8 billion yen. Wrap-related revenue reached a new all-time high, up 1.1 billion yen. The fixed cost coverage ratio based on asset-based revenue rose to 125.7%, and total expense coverage ratio improved to 77.3%. Daiwa Next Bank, a Wealth Management subsidiary, had net interest income of 13 billion yen (up 16.2%), ordinary income of 7.2 billion yen (up 15.8%), with deposit balances expanding to 5.3 trillion yen.
2. Asset Management Division:
   • Securities Asset Management: Net operating revenue was 21.2 billion yen (up 7.8%), ordinary income was 15.7 billion yen (up 37.6%), a record high. AUM of publicly offered investment trusts surpassed 43 trillion yen, a record high.
   • Real Estate Asset Management: Net operating revenue was 13.3 billion yen (up 47.2%), ordinary income was 9.8 billion yen (up 0.2%). AUM surpassed 1.8 trillion yen, hitting the FY2030 target ahead of schedule.
   • Alternative Asset Management: Net operating revenue was 6.3 billion yen, ordinary income was 4.8 billion yen, with capital gains generated from exits of certain portfolio investments.
3. Global Markets and Investment Banking Division:
   • Global Markets: Net operating revenue was 53.8 billion yen (up 4.9%), ordinary income was 18.1 billion yen (up 2.3%). Solid client order flows in Japanese and foreign equities and effective position management secured high revenues; FICC order flows declined from Q4 FY2025's high level but remained solid.
   • Global Investment Banking: Net operating revenue was 22.6 billion yen (down 6.1%), ordinary income was 3.2 billion yen (up 52.5%), driven by contributions from several large-scale deals.

Consolidated overall: Net operating revenue was 220.3 billion yen (up 11.4% QoQ), ordinary income was 88 billion yen (up 31.4% QoQ), profit attributable to owners of the parent was 56.4 billion yen (up 13.2% QoQ). ROE reached 12.7%. Overseas total ordinary income hit a record high of 13.1 billion yen (up 90% YoY), with Asia/Oceania and the Americas both hitting record high ordinary income, while Europe's M&A business was sluggish.

• Persistent uncertainty remains in the current global market environment.
• Geopolitical risks have led to sluggish M&A business performance in Europe's regional operations.
• Elevated market and interest rate/currency volatility creates uncertainty for client flow levels, though the group has not observed major disruptive changes to date.

Q: Asked for an update on July 2026 Global Markets equity earnings after a reported Q1 slowdown, plus updates on the ORIX Bank acquisition including capital adequacy impact, profit contribution post-goodwill amortization, merger timeline, and dual subsidiary management pre-merger. / A: Q1 2026 equity revenue was evenly split across April and May, with June slightly stronger, supported by strong foreign and domestic equity order flow from both foreign institutional and Japanese retail investors. July started slower than Q1 levels but order flow remains solid. For ORIX Bank, no major updates from the May 2026 announcement due to gun jumping regulations limiting pre-close negotiations. Management targets a merger as soon as possible after stakeholder negotiations, and early synergies from fund flows between Daiwa Next Bank and ORIX Bank are already achievable. Standalone 5-year average net income is ~20 billion yen, with upside potential from rising rates, and integration costs are expected to offset most near-term earnings gains. AT1 bond issuance to offset capital adequacy impacts remains under consideration but no schedule is set.

Q: Asked if there are any large one-off integration costs tied to the ORIX Bank acquisition, plus post-Q1 exit plans for alternative assets and FICC performance updates after Q1. / A: No large one-off integration costs for the ORIX Bank acquisition are expected; only minor miscellaneous expenses will arise. Alternative asset gains in Q1 came from several portfolio exits, with additional exit plans in Q2 that cannot be disclosed publicly. FICC remains solid post-June, with growing demand for currency and interest rate hedging supporting derivative income. No major changes in activity are expected in early Q2, though a typical seasonal slowdown is likely during the summer holiday period.

Q: Asked to explain the high and sustained profitability of the Securities Asset Management segment, including whether the Q4 FY2025 decline was a one-off disruption. / A: High profitability stems from the segment's mostly fixed cost base: as AUM grows, incremental revenue flows almost entirely to profit, a trend that has held for 1-2 years. Sustained net inflows from attractive product offerings, growing advisory balances from the Japan Post Insurance alliance, and improved earnings from the acquired U.S.-based Global X ETF business all support ongoing profitability growth. The Q4 FY2025 profit decline was partially driven by one-off equity method accounting impacts related to asset valuation adjustments.

Q: Asked about changes in wrap account customer behavior amid recent market volatility, growth appetite for flow revenue, and current customer balance trends. / A: Over 99% of wrap account customers held positive unrealized gains at end-June 2026, and the average holding tenure has grown to ~11-12 years, consistent with the product's long-term focus. No panic withdrawals or sudden cancellation surges have occurred even during recent geopolitical market drops, as customers are properly educated on long-term holding. Wrap accounts are a popular destination for surplus funds from real estate gains or business liquidation, and the group prioritizes steady client-centric growth over chasing short-term flow revenue gains aligned with its Total Asset Consulting strategy.