8604.T

• Overall Quarterly Performance

  • All divisions achieved higher revenue and income before income taxes compared to the prior quarter, with group return on equity (ROE) reaching 15.4%, the highest first quarter level since 2020.
  • Structural reforms implemented over the past several years are now delivering steady results, and the firm is making good progress toward its 2030 management vision.
  • Group net profit generation is now more balanced across divisions, with stable revenues expanded roughly 60% year-on-year, strengthening the overall earnings base.

• Strategic Progress

  • Growth in recurring revenue businesses has steadily strengthened the company's stable revenue base.
  • International businesses saw sharp growth in priority areas, with income before income taxes across the three overseas regions reaching a record high since disclosure began in FY2008/09.
  • The new deposit sweep service was launched in April 2027 to strengthen the banking business, laying groundwork for future long-term growth.
  • Product and geographic expansion of the equities business, plus diversification of revenue sources in Wholesale, have improved the quality of wholesale profits despite ongoing market-related volatility.

• Operational and Financial Health

  • Group-wide expenses increased only 1% quarter-on-quarter to 475.2 billion yen, as cost discipline offset higher performance-linked compensation, capturing operating leverage benefits.
  • The common equity Tier 1 capital ratio stood at 12.9% at quarter-end, up 0.1 percentage points from the end of March 2027, maintaining strong capital adequacy.

• Management maintained its updated 2030 targets, raised in May 2027: a ROE target range of 10% to 12% or higher, and income before income taxes of at least 750 billion yen.
• The firm expects continued seasonal slowing of wholesale revenue in July and August 2027, following the very strong first quarter performance, particularly in equities; on a year-on-year basis, wholesale revenue is currently roughly flat, with the overall deal pipeline remaining favorable.
• Management anticipates increased market volatility in the second half of the fiscal year driven by U.S. midterm elections and global monetary policy trends; the firm plans to capture opportunities while maintaining appropriate risk taking and strict cost discipline.
• Medium-term, the firm will continue prioritizing balanced growth of all Wholesale business lines, with a focus on faster expansion of the equities business in line with its 2030 strategic targets.
• Over the medium to long term, annual headquarter-related costs are expected to remain flat or decline slightly after the planned headquarters relocation, as rent expenses are replaced by depreciation costs.

1. Wealth Management: Net revenue increased 9% quarter-on-quarter to 145.4 billion yen, contributing 23.7% of total group net revenue. Income before income taxes increased 16% to 71.1 billion yen. Recurring revenue hit an all-time high of 59.2 billion yen, with net inflows of recurring revenue assets also reaching an all-time high of 539.6 billion yen. Recurring revenue assets totaled 31.7 trillion yen (all-time high) at quarter-end, and workplace client assets grew to 10 trillion yen.

2. Investment Management: Net revenue rose 14% quarter-on-quarter to 98.3 billion yen, contributing 16.0% of total group net revenue. Income before income taxes rose 148% to 45.0 billion yen, marking the best performance since the division's 2021 establishment. Assets under management reached an all-time high of 156.4 trillion yen, with alternative AUM hitting a new high on net inflows. Core investment excluding ETFs and MRFs saw net inflows of ~500 billion yen, offset by net outflows of 940 billion yen from Japanese equity ETFs.

3. Wholesale: Net revenue rose 20% quarter-on-quarter to 369.1 billion yen, contributing 60.1% of total group net revenue. Income before income taxes rose 116% to 93.3 billion yen, the best performance since the division's 2010 establishment. Within Wholesale, Global Markets net revenue rose 26% to 318.7 billion yen (Fixed Income: +11% to 139.2 billion yen; Equities: +41% to 179.4 billion yen). Investment Banking net revenue fell 9% quarter-on-quarter to 50.4 billion yen, but this was an all-time high for a first fiscal quarter. The revenue to modified risk-weighted asset ratio hit 9.3%.

4. Banking: Net revenue rose 5% quarter-on-quarter to 15.2 billion yen, contributing 2.5% of total group net revenue. Income before income taxes rose 19% to 3.6 billion yen. Banking revenue rose 19% to 4.1 billion yen, with steady growth in deposit balances, account counts, and loan outstanding, driven by the new April 2027 deposit sweep service.

• Forward-looking results are subject to external risks beyond the company's control, including unfavorable economic and market conditions, geopolitical events, shifts in investor sentiment, secondary market liquidity changes, interest rate level and volatility swings, currency exchange rate fluctuations, security valuation changes, and competitive market shifts, any of which could cause actual results to differ materially from management projections.
• Ongoing heightened geopolitical uncertainty and recent market corrections have increased equity market volatility, creating potential headwinds for near-term revenue generation.
• The firm proactively manages concentration risk by capping Wholesale balance sheet growth within the self-funding framework, avoiding excessive group-wide exposure to volatile wholesale markets that could undermine long-term stable growth.
• EMEA operates as a combined profit and global booking/cost center, creating a structural drag on reported regional profits that is expected to persist gradually as the business grows.

Q: After the very strong Q1 equities performance in Wholesale, can the momentum be sustained into Q2 and beyond? / A: Management confirms that Q1 equities strength reflected favorable market conditions shared with peer bulge bracket firms. Some normalization from the Q1 peak is expected, but the overall baseline for equities revenue has shifted upward, so equities will remain strong at a higher level than prior periods.

Q: What drove the strong Q1 growth in equities revenue, and what is the firm's approach to balance sheet and risk management for the growing Wholesale business? / A: Roughly 50% of Q1 equities revenue growth came from financing-related businesses (corporate derivatives, prime finance) and 50% from trading (flow, cash, structured products), with geographic expansion across the U.S. and Asia driving broad-based product lineup growth. While the firm has regulatory capital headroom, Wholesale operates within a self-funding framework that limits balance sheet growth to focus resources on high-margin opportunities and avoid group-wide concentration risk; capital will also be allocated to other priority areas (investment management inorganic growth, banking) going forward.

Q: What drove the record high income in Asia & Oceania international operations, and why does EMEA continue to report losses despite favorable market conditions? / A: The record Asia & Oceania result was driven by strong equities revenue, large FX and emerging market revenue gains, and the maturing of the International Wealth Management (IWM) franchise, which now contributes sizable stable profits after years of restructuring; IWM is expected to deliver sustained stable growth going forward. EMEA's reported losses reflect its role as a global booking hub that bears shared corporate costs for the entire international wholesale business, not just weak operating performance; losses have narrowed gradually over the past 2-3 years as the equities business grows, and the firm prioritizes looking at Wholesale profitability on a global rather than regional basis.

Q: With Q1 ROE far exceeding the 2030 target, would the firm have delivered higher revenue if it allocated more resources to Wholesale, and is the current strong revenue sustainable? / A: Client demand for Wholesale services was strong enough that additional resources would have generated higher near-term revenue and ROE. However, the firm intentionally maintains a capital buffer to preserve flexibility for future opportunities across all business lines, and avoids excessive concentration risk that would undermine long-term sustainable growth; the current constrained approach supports the firm's 2030 strategic goals.