Executive Summary / Key Takeaways

• Nomura Holdings, Inc. (NRSCF) is demonstrating strong financial momentum, achieving its 2030 quantitative target of consistently delivering an annualized Return on Equity (ROE) of 8% to 10% or more for five consecutive quarters, with Q1 FY2026 reaching 12%.
• The company's strategic pivot towards stable, recurring revenue streams in Wealth Management and Investment Management, alongside a diversified Wholesale division and the newly established Banking division, is yielding tangible results, driving broad-based revenue and profit growth across all segments.
• Key strategic initiatives, including the acquisition of Macquarie Group (MQBKY)’s US and European public asset management business and ongoing technological enhancements like the core banking system upgrade and passkey authentication, are set to bolster its global footprint, operational efficiency, and competitive differentiation.
• Despite an uncertain global market environment marked by geopolitical risks and tariff policies, Nomura's disciplined risk management, cost controls, and focus on client-centric solutions are enabling it to capitalize on opportunities, particularly in Japan's evolving corporate landscape.
• Nomura maintains a robust capital position, with a Common Equity Tier 1 (CET1) ratio of 13.2% at the end of June 2025, comfortably within its target range, and is committed to shareholder returns through ordinary dividends and a JPY60 billion share buyback program.

A Century of Strategic Evolution: Nomura's Integrated Global Vision

Nomura Holdings, Inc., founded in 1925, stands as a venerable institution in the global financial services landscape, built on a tradition of disciplined entrepreneurship and a commitment to creative client solutions. The firm operates an integrated global network, connecting markets East and West to serve individuals, institutions, corporates, and governments. Its strategic vision, "Management Vision 2030: Reaching for Sustainable Growth," launched in May 2023, underscores a clear ambition: consistently achieve an ROE of 8% to 10% or more and generate over JPY500 billion in income before income taxes. This vision is not merely aspirational; recent performance indicates a tangible realization of these long-term objectives.

Nomura's foundational strength lies in its diversified business model, now structured across four key divisions: Wealth Management, Investment Management, Wholesale (encompassing Global Markets and Investment Banking), and the newly established Banking division. This multi-faceted approach allows Nomura to capture opportunities across various market cycles and client needs. Historically, the firm has demonstrated resilience, with its international business achieving its highest income before income taxes since geographic information was first disclosed in the fiscal year ended March 2003, and three-segment income before income taxes reaching a 17.5-year high in Q3 FY2025.

Technological Edge and Operational Modernization

In an increasingly digital financial world, Nomura recognizes the critical role of technology as a competitive differentiator and an enabler of operational excellence. The company has made concrete strides in modernizing its infrastructure and enhancing its digital capabilities. A significant operational achievement was the completion of the Nomura Trust and Banking's core banking system upgrade in May 2025, with preparations for the adoption of sweep accounts in the next fiscal year progressing smoothly. This upgrade is designed to enhance operational efficiency and improve service delivery, laying the groundwork for more seamless client interactions and product offerings.

Furthermore, Nomura is actively bolstering its security posture in response to evolving cyber threats. Following instances of illegal trades in client accounts due to phishing scams, the firm has accelerated the implementation of more sophisticated security measures. A key initiative is the rollout of a passkey authentication system, utilizing more secure biometric authentication, scheduled for fall 2025. This move aims to significantly enhance client account security and rebuild trust, directly addressing the JPY6.6 billion in compensation related to phishing scams recognized in Q1 FY2026. The company's existing security protocols have been externally validated as meeting industry standards, but this proactive investment signals a commitment to leading-edge client protection.

Beyond traditional banking and security, Nomura is also embracing the burgeoning digital asset space through its subsidiary, Laser Digital. Launched in 2022, Laser Digital turned profitable within two years, demonstrating its ability to capitalize on emerging market trends. Management views the environment as positive for Laser Digital, anticipating that crypto assets will become a more regular asset class. This venture represents a strategic move to diversify revenue streams and capture growth in the innovative digital asset sector, positioning Nomura at the forefront of financial technology adoption. These technological advancements, while not always yielding immediately quantifiable "superior energy yield" type metrics, are foundational to improving client experience, ensuring operational resilience, driving cost efficiencies, and opening new avenues for revenue generation, thereby strengthening Nomura's competitive moat.

Strategic Pillars and Performance Momentum

Nomura's recent financial performance underscores the effectiveness of its strategic initiatives, particularly the emphasis on stable revenue generation and diversified growth. For the first quarter of fiscal year 2026 (ended June 2025), Group net revenue surged 16% quarter-on-quarter to JPY523.3 billion, with income before income taxes growing 64% to JPY160.3 billion and net income increasing 45% to JPY104.6 billion. This robust performance was broad-based, with all four divisions, including the newly independent Banking division, achieving growth in both revenues and profits.

Wealth Management: A Foundation of Recurring Revenue

The Wealth Management division is a cornerstone of Nomura's stable revenue strategy. In Q1 FY2026, net revenue increased 6% to JPY105.8 billion, and income before income taxes rose 8% to JPY38.8 billion. This growth was fueled by a 16% increase in flow revenue from primary bond sales and secondary stock transactions, even amidst a sharp stock market decline in April. Crucially, recurring revenue assets saw a net inflow for the 13th consecutive quarter, reaching JPY278.9 billion, partly driven by a newly established Japan stock investment fund. The recurring revenue cost coverage ratio over the last four quarters reached a high of 69%, reflecting diligent cost management. Management noted improved client sentiment in July, leading to rising recurring revenue and continued asset inflows.

Investment Management: Expanding Global Reach

The Investment Management segment is strategically expanding its scale and global presence. Q1 FY2026 saw net revenue up 18% to JPY50.6 billion, and income before income taxes rising 39% to JPY21.5 billion. This was significantly boosted by a sharp improvement in investment gain and loss, reaching JPY9.9 billion, primarily from American Century Investments and private equity investments from Nomura Capital Partners. Assets under management (AUM) hit a record high of JPY94.3 trillion at the end of June 2025 due to market recovery. While business revenue saw a slight decline, asset management fees remained solid. The recently announced agreement to acquire Macquarie Group’s US and European public asset management business is a transformative step, expected to make this division substantially larger and more globally integrated.

Wholesale: Diversification and Resilience

The Wholesale division, comprising Global Markets and Investment Banking, is demonstrating resilience and diversification. In Q1 FY2026, net revenue rose 1% to JPY261.1 billion, and income before income taxes increased 12% to JPY41.9 billion. Global Markets revenues were up 8%, with fixed income seeing substantial growth in Europe (rates) and Asia (FX emerging), and strong momentum in US securitized products. Investment Banking revenues, while down 27% quarter-on-quarter after a particularly strong Q4 FY2025, still achieved the highest Q1 level since FY2016/17, driven by robust M&A activity in Japan. Nomura's top ranking in Japan-related M&A league tables and 11th position globally from January through June 2025 underscore its strong advisory franchise.

Banking Division: A New Growth Vector

The Banking division, established as an independent entity in April 2025, is already contributing to the group's performance. In its inaugural quarter (Q1 FY2026), it reported net revenue of JPY12.8 billion, a 12% increase, and income before income taxes of JPY3.6 billion, up 19%. Key performance indicators such as loan outstanding and investment trust balance remained buoyant, with income from lending activities and trust and agent services holding firm.

Capital Strength and Shareholder Returns

Nomura maintains a robust financial position, critical for supporting its growth initiatives and navigating market uncertainties. At the end of June 2025, Tier 1 capital stood at approximately JPY3.4 trillion, with a Common Equity Tier 1 (CET1) ratio of 13.2%. This ratio is comfortably within the company's target range of 11% to 14%, even after accounting for an increase in risk assets and the impact of the Macquarie acquisition agreement. Management has affirmed its commitment to a total return ratio of 50% or more to shareholders, excluding commemorative dividends. For the fiscal year ended March 2025, Nomura announced an annual dividend of JPY57 per share (including a JPY10 commemorative dividend for its 100th anniversary), resulting in a payout ratio of 49%.

Additionally, the company initiated a share buyback program of up to JPY60 billion, running from May 15 to December 30, 2025, to enhance capital efficiency and provide flexible capital management.

Competitive Positioning and Market Dynamics

Nomura operates in a highly competitive global financial services industry, facing established giants like JPMorgan Chase & Co. (JPM), Goldman Sachs Group, Inc. (GS), Morgan Stanley (MS), and Citigroup Inc. (C). Nomura's primary competitive advantage lies in its deep-rooted presence and expertise in the Asia-Pacific region, particularly Japan. This regional focus allows it to cultivate strong client relationships and navigate local regulatory landscapes more effectively than some global peers. For instance, while American peers may appear stronger in certain fixed income products like commodities, a segment where Nomura has no presence, Nomura has demonstrated its ability to capture client flows and monetize market volatility in areas like FX emerging markets in Asia and rates in Europe.

However, Nomura faces challenges in matching the sheer scale and technological innovation speed of some larger U.S. competitors. While its IT modernization efforts are significant, firms like JPMorgan often demonstrate faster innovation in digital tools for retail banking, potentially leading to stronger customer loyalty and cash flow generation. Nomura's strategic adaptability is evident in its retail network and focus on "quality customers," but it trails in overall market share capture in broader global segments. The firm's product mix, particularly in fixed income, can also lead to perceived weakness compared to peers who benefit from a broader array of offerings.

The competitive landscape is also shaped by broader industry trends. The growth in AI-driven infrastructure and utility investments presents opportunities for Nomura's investment banking segment through increased deal flow. However, the firm must continuously enhance its technological capabilities to fully capitalize on these trends and avoid being outpaced by rivals with more advanced analytical tools. Customer behavior shifts towards digital platforms also necessitate ongoing investment in technology to maintain relevance and capture new client segments, such as through its workplace business initiatives.

Risks and Outlook

Despite the positive momentum, Nomura acknowledges a turbulent and uncertain market environment. Geopolitical risks, including the introduction of reciprocal tariffs by the United States, continue to create volatility. The company's EMEA business, for example, experienced a loss in Q1 FY2026 due to weak Laser Digital performance affected by market conditions and inflated personnel costs from European compensation regulations. Furthermore, while the firm's CET1 ratio is within target, management notes that the lower bound of 11% could become tight if risk-weighted assets (RWA) continue to increase significantly as business opportunities are pursued, necessitating stringent financial resource management.

Looking ahead, management's outlook remains cautiously optimistic. Wealth Management is expected to continue its strong performance, with client sentiment improving and recurring revenue assets seeing sustained inflows. In Wholesale, equity products are performing well in global markets, and corporate actions in Japan are maintaining a high level of activity in investment banking. The planned closing of the Macquarie acquisition by the end of December 2025 is proceeding smoothly, with no critical issues identified, promising a significant boost to the Investment Management division. Nomura is also actively pursuing inorganic opportunities and may allocate capital to areas demonstrating strong performance, such as wholesale. The firm's commitment to cost controls, despite inflationary pressures outside Japan, is expected to continue driving operating leverage.

Conclusion

Nomura Holdings is demonstrating a compelling investment thesis, rooted in its strategic transformation towards stable, diversified growth and enhanced operational efficiency. The company's consistent achievement of its ROE targets, coupled with robust financial performance across all divisions in Q1 FY2026, signals that its long-term vision is translating into tangible results. By strategically expanding its Investment Management division through acquisitions, modernizing its technological infrastructure, and leveraging its deep regional expertise, Nomura is actively strengthening its competitive position in a dynamic global financial landscape. While geopolitical uncertainties and intense competition remain pertinent risks, Nomura's disciplined approach to risk management, commitment to cost control, and focus on client-centric solutions position it favorably for sustained growth. Investors should recognize Nomura's balanced approach to capital allocation, rewarding shareholders while investing in strategic growth areas and technological leadership, as a key indicator of its future potential.