FORM 6-K

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

Commission File Number: 1-15270

For the month of July 2023

NOMURA HOLDINGS, INC.

(Translation of registrant’s name into English)

13-1, Nihonbashi 1-chome

Chuo-ku, Tokyo 103-8645

Japan

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F      X                Form 40-F              

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):             

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):             

 

 

 

On June 28, 2023, Nomura Holdings, Inc. filed its Annual Securities Report for the year ended March 31, 2023 with the Director of the Kanto Local Finance Bureau of the Ministry of Finance pursuant to the Financial Instruments and Exchange Act.

Information furnished on this form:

EXHIBITS

Exhibit Number

 

1.	English translation of certain items disclosed in the Annual Securities Report pursuant to the Financial Instruments and Exchange Act for the fiscal year ended March 31, 2023.

 

2.	English translation of Management’s Report on Internal Control over Financial Reporting and Confirmation Letter.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		NOMURA HOLDINGS, INC.
Date: July 21, 2023		By:		/s/ Yoshifumi Kishida
				Yoshifumi Kishida
				Senior Managing Director

EXHIBIT 1

Annual Securities Report Pursuant to the Financial Instruments and Exchange Act for the Fiscal Year Ended March 31, 2023

Table of Contents

 

		Page
PART I      Corporate Information			2
Item 1. Information on the Company and Its Subsidiaries and Affiliates			2
1. Selected Financial Data			2
2. History and Development of the Company and Its Subsidiaries and Affiliates
3. Business Overview			4
4. Subsidiaries and Affiliates
5. Employees			5
Item 2. Operating and Financial Review			7
1. Management Challenges and Strategies			7
2. Views on Sustainability and efforts			11
3. Risk Factors			18
4. Operating, Financial and Cash Flow Analyses by Management			33
5. Significant Contracts			67
6. Research and Development, Patent and Licenses, etc.
Item 3. Property, Plants and Equipment
1. Results of Capital Expenditure
2. Our Properties
3. Prospects of New Capital Expenditure, Abandonment and Other
Item 4. Company Information			68
1. Share Capital Information			68
2. Stock Repurchase			74
3. Dividend Policy			75
4. Status of Corporate Governance and Other*			76
Item 5. Financial Information			125
1. Consolidated Financial Statements and Other			126
2. Unconsolidated Financial Statements			256
Item 6. Information on Share Handling, etc.
Item 7. Reference Information
PART II        Information on Guarantor of the Company
Report of Independent Auditors			269

 

An English translation of the underlined items above is included in this document.

* Status of Directors and Senior Management in Item 4.4. Status of Corporate Governance and Other is not translated.

 

1

PART I    Corporate Information

Item 1. Information on the Company and Its Subsidiaries and Affiliates

1. Selected Financial Data.

(1) Selected consolidated financial data for the latest five fiscal years.

 

Year ended March 31		2019				2020				2021				2022				2023
Total revenue (millions of yen)			1,835,118				1,952,482				1,617,235				1,593,999				2,486,726
Net revenue (millions of yen)			1,116,770				1,287,829				1,401,872				1,363,890				1,335,577
Income (loss) before income taxes (millions of yen)			(37,701	)			248,261				230,671				226,623				149,474
Net income (loss) attributable to Nomura Holdings, Inc. (“NHI”) shareholders (millions of yen)			(100,442	)			216,998				153,116				142,996				92,786
Comprehensive income (loss) attributable to NHI shareholders (millions of yen)			(70,136	)			219,943				141,077				309,113				283,267
Total equity (millions of yen)			2,680,793				2,731,264				2,756,451				2,972,803				3,224,142
Total assets (millions of yen)			40,969,439				43,999,815				42,516,480				43,412,156				47,771,802
Shareholders’ equity per share (yen)			794.69				873.26				879.79				965.80				1,048.24
Net income (loss) attributable to NHI common shareholders per share—basic (yen)			(29.90	)			67.76				50.11				46.68				30.86
Net income (loss) attributable to NHI common shareholders per share—diluted (yen)			(29.92	)			66.20				48.63				45.23				29.74
Total NHI shareholders’ equity as a percentage of total assets (%)			6.4				6.0				6.3				6.7				6.6
Return on shareholders’ equity (%)			(3.73	)			8.21				5.73				5.10				3.06
Price/earnings ratio (times)			—				6.76				11.60				11.04				16.52
Cash flows from operating activities (millions of yen)			(361,165	)			(15,943	)			665,770				(1,368,710	)			(974,750	)
Cash flows from investing activities (millions of yen)			(112,503	)			216,336				(139,026	)			(45,301	)			38,945
Cash flows from financing activities (millions of yen)			761,191				332,062				(269,927	)			1,070,715				1,291,697
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of the year (millions of yen)			2,687,132				3,192,310				3,510,011				3,316,408				3,820,852
Number of staffs			27,864				26,629				26,402				26,585				26,775
[Average number of temporary staffs, excluded from above]			[4,492	]			[4,313	]			[4,224	]			[4,339	]			[4,420	]

 

1	The selected financial data of Nomura Holdings, Inc. and its consolidated subsidiaries (“Nomura”) were stated in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

2	Shareholders’ equity per share, Total NHI shareholders’ equity as a percentage of total assets, Return on shareholders’ equity are calculated using Total NHI shareholders’ equity.

 

3	The consumption tax and local consumption tax on taxable transaction are accounted for based on the tax exclusion method.

 

4	Certain contract employees are included in Number of staffs.

 

5	Price/earnings ratio (times) is not stated for the year ended March 31, 2019 due to net loss.

 

2

(2)	Selected stand-alone financial data for the latest five fiscal years

 

Year ended March 31,		2019				2020				2021				2022				2023
Operating revenue (millions of yen)			325,407				348,003				328,625				355,487				472,321
Ordinary income (millions of yen)			95,229				119,658				88,992				114,577				121,963
Net income (loss) (millions of yen)			(12,470	)			281,212				(1,508	)			176,470				174,264
Common stock (millions of yen)			594,493				594,493				594,493				594,493				594,493
Number of issued shares (thousands of shares)			3,493,563				3,493,563				3,233,563				3,233,563				3,233,563
Shareholders’ equity (millions of yen)			2,516,921				2,598,561				2,510,710				2,546,193				2,578,102
Total assets (millions of yen)			7,080,156				7,535,957				7,891,346				8,985,161				9,514,679
Shareholders’ equity per share (yen)			760.13				855.09				819.55				843.62				858.21
Dividend per share (yen)			6.00				20.00				35.00				22.00				17.00
The first quarter			—				—				—				—				—
The second quarter			3.00				15.00				20.00				8.00				5.00
The third quarter			—				—				—				—				—
The end of a term (the fourth quarter)			3.00				5.00				15.00				14.00				12.00
Net income (loss) per share (yen)			(3.71	)			87.80				(0.49	)			57.60				57.95
Net income per share—diluted (yen)			—				85.82				—				55.86				55.95
Shareholders’ equity as a percentage of total assets (%)			35.2				34.3				31.7				28.3				27.1
Return on shareholders’ equity (%)			(0.49	)			11.08				(0.06	)			7.00				6.81
Price/earnings ratio (times)			—				5.33				—				9.22				9.11
Payout ratio (%)			—				22.64				—				37.98				29.30
Dividend on shareholders’ equity (%)			0.81				2.46				4.28				2.64				1.98
Number of staffs			165				173				154				187				167
[Average number of temporary staffs, excluded from above]			[—	]			[—	]			[—	]			[—	]			[—	]
Total Shareholder Return(%)			66.0				78.6				104.4				97.2				99.1
[Comparison index with the above : TOPIX Total Return Index]			[95.0	]			[85.9	]			[122.1	]			[124.6	]			[131.8	]
Highest stock price (yen)			650.0				586.4				721.0				614.8				573.9
Lowest stock price (yen)			393.0				330.7				402.5				460.3				464.3

 

1	Number of staffs represents staffs who work at the Company.

 

2	Stock prices are quoted on the Tokyo Stock Exchange (First Section or Prime Market of the Tokyo Stock Exchange).

 

3	No net income per share—diluted information was provided, as there was net loss per share, although there are dilutive shares for the years ended March 31, 2019 and 2021.

 

4	No Price/earnings ratio (times) or payout ratio was provided due to the net loss for the years ended March 31, 2019 and 2021.

 

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3. Business Overview.

The Company and its 1,432 consolidated subsidiaries and variable interest entities primarily operate investment and financial services business focusing on securities business as their core business. Nomura provides wide-ranging services to customers for both of financing and investment through the operations in Japan and other major financial capital markets in the world. Such services include securities trading and brokerage, underwriting and distribution, arrangement of public offering and secondary distribution, arrangement of private placement, principal investment, asset management and other broker-dealer and financial business. There are also 14 companies accounted for under the equity method as of March 31, 2023.

The reporting of the business operations and results of the Company and its consolidated subsidiaries are based on business segments referred in Note 20 “Segment and geographic information” in our consolidated financial statements included in this annual report. Please refer to the table below in the organizational structure listing the main companies by business segments.

Organizational Structure

The following table lists Nomura Holdings, Inc. and its significant subsidiaries and affiliates by business segments.

Nomura Holdings, Inc.

Retail Division

(Domestic)

Nomura Securities Co., Ltd. and others

Investment Management Division

(Domestic)

Nomura Asset Management Co., Ltd. and others

Wholesale Division

(Domestic)

Nomura Securities Co., Ltd.

Nomura Financial Products & Services, Inc.

Nomura Asia Pacific Holdings Co., Ltd. and others

(Overseas)

Nomura Holding America Inc.

Nomura Securities International, Inc.

Nomura America Mortgage Finance, LLC

Instinet, Incorporated

Nomura Europe Holdings plc

Nomura International plc

Nomura International (Hong Kong) Limited

Nomura Singapore Limited and others

Others

(Domestic)

The Nomura Trust and Banking Co., Ltd.

Nomura Properties, Inc.

Nomura Research Institute, Ltd.⁽¹⁾

Nomura Real Estate Holdings, Inc.⁽¹⁾

 

(1)

Affiliates

 

4

5. Employees

(1) Consolidated company

 

		Year ended March 31, 2023
		Number of our employees
Total		26,775  (4,420)

 

1

Business segments consist of Retail Division, Investment Management Division, Wholesale Division and Other. In Japan, we had employees of 7,799 in Retail Division, 1,093 in Investment Management Division, 1,646 in Wholesale Division, and 4,593 in Other. In overseas, we had employees of 11,644, most of which were in Wholesale Division.

 

2	Number of our employees consists of full-time employees. The number of non-fulltime employees on annual average is in brackets, not including in number of our employees..

(2) The Company

 

						Year ended March 31, 2023
Number of our employees		Average ages		Average service years		Average annual salary
167  (—)		44 years and 1 month		4 years and 5 months		¥14,372,118

 

1	We had employees of the Company, most of which were in Other in business segments.

 

2	Number of our employees consists of full-time employees and the number of non-fulltime employees on annual average is in brackets.

 

3	In addition to the employees above, we had employees of 541, who belong to both the Company and Nomura Securities Co., Ltd.

 

4	Average annual salary includes bonus and non - standard salary.

(3) Nomura employees’ union

None

 

5

(4) The ratio of females in manager roles and so on

 

Subsidiaries		Ratio of female in manager roles				Ratio of male employees taking childcare leave				Gender pay gap (female pay gap)
										All				Permanent				Fixed Term
Nomura Securities Co., Ltd.			14.1%				87.2%				59.9%				57.3%				87.7%
Nomura Asset Management Co., Ltd.			14.4%				111.5%				67.2%				68.9%				72.0%
The Nomura Trust and Banking Co., Ltd.			21.9%				80.0%				72.4%				71.5%				64.5%
Nomura Business Services Co., Ltd.			20.3%				50.0%				—				—				—

 

1	The ratio of female manager roles is as of March 31, 2023, the ratio of male employees taking childcare leave and each gender pay gaps are calculated from March 31, 2022 to March 31, 2023.

 

2	The ratio of female manager roles and each gender pay gaps are calculated according to the Act on the Promotion of Women’s Active Engagement in Professional Life (Act No. 64 of 2015, Japan).

 

3

The ratio of male employees taking childcare leave is calculated the ratio of the childcare leave taken according to the Act on Childcare Leave, Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members (Act No. 76 of 1991) and Article 71-4 items (ii) of Ordinance for Enforcement of the Act on Childcare Leave, Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members (Ordinance of the Ministry of Labor No. 25 of 1991).

 

4

At Nomura Securities Co., Ltd., looking at the gender pay gap among permanent employees by seniority, it is 92.2% for exempt employees, 85.2% for non-exempt employees, 97.8% for Managing Directors, 104.0% for Executive Directors, 96.4% for Vice Presidents, 79.6% for Senior Associates, 81.3% for Associates, and 94.6% for Analysts.

 

5	At Nomura Asset Management Co., Ltd., looking at the gender pay gap among permanent employees by seniority, it is 90.4% for exempt employees and 73.2% for non-exempt employees.

 

6	At The Nomura Trust and Banking Co., Ltd., looking at the gender pay gap among permanent employees by seniority, it is 94.7% for exempt employees, 90.5% for non-exempt employees, 94.7% at Manager levels, 88.2% at Shidou-shoku levels, and 102.0% at Gyoumu-shoku/Shokyu-shoku levels.

 

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Item 2. Operating and Financial Review

1. Management Challenges and Strategies

All matters relating to the future in the sections below are based on the current views as of the date of filing this Securities Report.

(1) Fundamental Management Policy

① Fundamental Management Policy

In Fundamental Management Policy formulated by the Board of Directors, our company has set the following Management Vision and Basic Vision of Group Management.

Fundamental Management Policy of Nomura Holdings, Inc.

 

(Management Vision)   Nomura Group’s management vision is to enhance its corporate value by deepening society’s trust in the firm and increasing satisfaction of stakeholders, including that of shareholders and clients.   As a global investment bank, the Company will provide high value-added solutions to clients globally, and recognizing its wider social responsibility, the Company will continue to contribute to the economic growth and development of society.   To enhance its corporate value, the Company utilizes return on equity (“ROE”) as a management indicator and will strive for sustainable business transformation.   (Basic Vision of Group Management)   (1) Nomura Group will establish its modernized growth model by itself through realizing expansion of its business in new domains. Nomura Group will also establish earning structure not subject to market condition with proper cost control and risk management.   (2) Nomura Group will aim to serve its customers at the highest level in every investment, by paying thorough attention to the needs of its customers and the market and by providing its customers with highly value-added solutions in financial and capital markets.   (3) Nomura Group will emphasize compliance with applicable laws and regulations and proper corporate behavior to carry out compliance and conduct risk management in daily business operations. Each company of Nomura Group shall respect customers’ interests and comply with applicable laws and regulations relating to the business.   (4) Nomura Group seeks to ensure effective management oversight and increase management transparency.   (5) Nomura Group will contribute to expanding securities markets through daily business and continuously engage in educational activities regarding investment in order to broaden participation in the securities market.

We have established the following management vision based on the management goals.

② Management Vision

Our diverse businesses rely on the trust of our clients and all stakeholders. We recognize that raising our corporate value and ensuring sustainable growth of society as a whole are closely linked together. This is why our management vision is to achieve sustainable growth by helping resolve social issues.

(2) Business environment

In the fiscal year ended March 31, 2023, inflation accelerated worldwide. Contributing factors included a sharp increase in commodity prices sparked by the conflict in Ukraine, as well as supply constraints, including semiconductor shortages, arising as Western economies reopened after emerging from pandemic conditions. The major central banks of the world, including the U.S. Federal Reserve Board (U.S. Fed), swiftly tightened monetary policy to address this accelerated and increasingly protracted inflation. Government bond yields rose in major developed economies on expectations for further inflation and monetary tightening measures. In addition, stock markets in major developed economies underwent corrections as the steep rise in market interest rates depressed valuations and as concerns grew that monetary policy tightening would blunt economic growth.

In the second half of the fiscal year, inflation showed signs of leveling off in the major developed economies, and expectations for the U.S. Fed to end its rate hikes led to a rally in stock markets. In response to the Chinese government’s decision at the end of 2022 to end its strict zero-COVID policy, expectations rose for improvement in global economic growth supported by China’s reopening.

Inflation in Japan rose on the back of higher inflation overseas. As rising interest rates overseas also put upward pressure on Japanese government bond yields, concerns mounted that the Bank of Japan would become unable to maintain its yield curve control policy, under which it sets a target level and a tolerable fluctuation range for 10-year Japanese government bond yields. In December 2022, the Bank of Japan widened the range at which yields on 10-year JGBs are allowed to fluctuate, from +/-0.25ppt to +/-0.50ppt. Some market participants interpreted this move as signaling further policy changes. In the Japanese government bond market, yields continued to be subject to upward pressure, fueled by expectations for Bank of Japan policy changes amid persistent speculation that policy revisions would be enacted after the new Bank of Japan governor took charge in April 2023. The disparities between inflation in Japan and abroad, and the divergence in monetary policy that reflects these conditions, led to significant depreciation of the yen versus other currencies, with the dollar-yen rate briefly exceeding 151 yen in October 2022.

 

7

(3) Management vision

Our business environment is undergoing significant changes. We will continue to respond to it flexibly while maintaining an appropriate financial standing and effectively utilizing management resources through improved capital efficiency. In addition, we are never satisfied with ourselves and will constantly implement new initiatives with the aim of expanding existing businesses and providing value-added services to clients.

① Medium-to Long-term Priority Issues

Our vision is to take Nomura to the next stage. To realize this, we launched a strategy of expanding into private markets to complement our businesses in the public markets. We are committed to strengthening the provision of bespoke services and solutions made for each specific client, through a three-pronged approach, namely the expansion of our client base, expansion of products and services, and delivery utilizing digital technology. Based on this strategy, for instance, we are starting to see results from the following efforts. For more information on the strategies in each division, please refer to the challenges and strategies in each division.

i Shifting to asset consulting business

We are shifting to an asset consulting business for domestic individual customers. We provide asset consulting services that we believe provide preferable medium-to long-term solutions for our clients. We support clients in increasing their assets, and we aim to increase the fee income we receive as a result by increasing assets under custody. The steady increase in income from stock assets such as investment trusts, for which fees such as management and administration expenses are charged for assets under management, contributes to additional revenue stability for us. In order to address the diversifying needs of our clients and provide personalized, private services, we reallocated our partners (sales representatives) according to client segmentation based on attributes and needs of our clients, strengthening our segment approach. In addition, we aim to expand our customer base by strengthening business for salaried employees, and expanding our business through alliances with regional financial institutions.

ii Strengthening Investment Management Division

We established our Investment Management Division, in April 2021, aiming to meet our clients’ diverse needs, as part of our management strategy: Expanding our scope of business from public to private. This division aims not only to expand and strengthen traditional investment products but also to provide private investment opportunities such as alternative assets.

Since the establishment of the division, we have expanded our private investment opportunities, including an investment corporation investing in unlisted stocks, an equity acquisition fund for business succession (Search Fund), a private real estate fund in Japan, and a private credit fund and forestry funds overseas. We have also established a publicly offered investment trust that invests in unlisted REITs (Real Estate Investment Trusts) in the U.S., which is also invested by individual investors in Japan. We believe that Nomura’s mission is to challenge a wide range of private asset areas and to create an environment in which investors can easily invest.

iii Stabilizing and growing Wholesale business

In our Wholesale Division, we are diversifying our revenue sources while maintaining a high market share in core products. In addition, we will continue to provide liquidity and solutions to customers. Capital-light origination business, including M&A advisory, grow global business centered on Americas. Especially, in the U.S., we acquired Greentech Capital, LLC, a firm with a solid presence in sustainable technology and infrastructure, and launched Nomura Greentech in April 2020. We will seamlessly provide financial and other solutions to our global customer base. In addition, regarding solutions business that is less susceptible to changes in market environment, we build up experience in structured finance including infrastructure finance.

iv Strengthen Digital Financial Services

Our digital transformation efforts are directly linked to the competitiveness of financial institutions in the future, and we will continue to promote a wide range of initiatives based on our strategy in order to provide highly convenient services to our clients and respond to diversifying needs. We also believe that our people are the source of added value created by the Nomura Group even in a world where digitization and digitalization are advanced. We will continue to strengthen the development of our human resources with the qualities required for the upcoming era, such as consulting capabilities that make full use of both face-to-face and virtual communications. In addition, we established “Digital Company” in April 2022, aiming to strengthen collaboration in the digital domain across group entities, including in our international operations, while also bolstering initiatives in focus areas. Our efforts to promote digitalization are as follows.

 

8

•

Streamline and enhance internal operations

We are working to focus on high value-added analysis and advisory services by promoting the automation and efficiency of internal operations. We also aim to provide services through highly satisfactory communication methods by improving existing services. In addition, we have launched an internal Digital IQ learning program to support digital e-learning with the aim of lifting the base-level knowledge of digital initiatives across the Group. Regarding the initiatives of employee development, please refer to Item 2 “Operating and Financial Review— Views on Sustainability and efforts (5) Human Capital Initiatives.”

 

•

Digitalization of client touchpoints

Our Retail Division utilizes “Remote Consulting” which is an original system supporting sales representatives. By expanding utilization of OneStock which is an asset management smartphone application, FINTOS! which is an investment information application etc. we will develop a platform to deliver services for young people and the working generations, who we have not provided with many products and services.

 

•

Participation in Digital Asset Business

We are also working to create businesses in new areas. In September 2022, we established Laser Digital Holdings AG, a new entity in digital assets business, incorporated in Switzerland. The company will focus on three core areas: Secondary Trading, Venture Capital and Investor Products and will announce new services and product lines as it moves ahead with the staged launch of the business.

v Initiatives for Sustainability

Please refer to Item 2 “2. Views on Sustainability and efforts.”

② Issues in Each Division

The challenges and strategies in each division are as follows:

 

•

Retail Division

Based on the basic concept of “Enriching clients by responding to their concerns about assets”, our Retail Division aims to become a financial institution fulfilling the needs of many people. We will continue working on improving the skills of our partners (sales representatives), and enhance our wide range of products and services in order to accurately respond to diversifying clients’ asset issues such as inheritance or anxiety about lack of funds after retirement. In addition, we will enhance online services and remote consulting service through contact centers.

 

•

Investment Management Division

Our Investment Management Division is responsible for providing products and services that meet the diversifying investment needs of our clients in the broad asset management business. By combining our expertise in traditional assets such as stocks and bonds with offerings in alternative assets such as private equity, we are able to add value and offer advanced services and solutions to meet the diverse needs of our clients. In the public market business, we aim to improve investment performance, expand investment strategies with robust investment capabilities, and enhance the provision of investment solutions. In the private market business, we are scaling up our asset management business, expanding into real asset management, including real estate and infrastructure, and fully realizing our private asset management capabilities in the global market. Amid continued downward pressure on management fees, we are pursuing higher value-added businesses and appropriate cost controls, while expanding investments in growth areas, particularly in the private market area.

 

•

Wholesale Division

Our Wholesale Division faces challenges presented by increasingly sophisticated client needs and technological advancement, coupled with uncertainty in the market and macroeconomic environment. To ensure continuity of service as well as added value to clients, we will continue to enhance collaboration across business lines, regions and divisions while ensuring tight risk control. We will continue to further diversify our business portfolio through targeted growth in both existing and new businesses as well as deploy financial resources to selective, high growth opportunities.

Global Markets aims to provide uninterrupted liquidity to our clients while reinforcing risk control and governance. Additionally, we aim to further diversify our business portfolio, reinforce global connectivity and cross-sell to leverage our global platform and client franchise, pursue growth opportunities such as structured financing and solution business, international wealth management business as well as Global Equities, and continue to build on the strength of our Flow Macro businesses.

 

9

Investment banking aims to provide advisory services and financing to domestic as well as crossborder restructurings and industry-wide consolidations, as well as interest rate and FX solutions related to these transactions as volatile business environments impact our clients’ businesses. While we expand our global advisory business, we will focus on broadening ESG related businesses with initiatives such as further utilization of Nomura Greentech’s expertise and enhancement of our sustainable finance platform.

 

•

Risk Management and Compliance, etc.

We have defined our risk appetite in our Risk Appetite Statement which includes the types and level of risk that the Nomura Group is willing to assume in pursuit of our strategic objectives and business plans. Further, we continue to develop our risk management framework in a way that is strategically aligned to our business plans and incorporates decision-making by senior management, thereby securing capital soundness and enhancing our corporate value.

We have clearly defined in our Risk Appetite Statement that all executives and employees must actively engage in risk management through our Three Lines of Defense framework. Besides, we continuously provide trainings to all executives and employees including those in the group companies to increase our knowledge about risks as financial professionals and develop a corporate culture of correctly recognizing, assessing and managing risks. For more information, see Item 4 “Company Information - 4. Status of Corporate Governance and Other - (1) Status of Corporate Governance - Establishment of Risk Management Framework”.

With regard to compliance, we continue to focus on improving the management structure to comply with local laws and regulations in the countries where we operate. We also continue to review our internal systems and rules so that all executive management and employees can work autonomously with high ethical standards.

In order to ensure not only compliance with laws and regulations, but also that all directors, officers and employees are able to act in accordance with social norms, we have established the “Nomura Group Code of Conduct” as guidelines for actions to be taken, and through associated trainings and other measures, we are working to promote appropriate actions (“Conduct”) based on the Code of Conduct. At the ‘Nomura Founding Principles and Corporate Ethics Day’ held in every August, we reaffirm the lessons learned from past incidents and renew our determination to prevent similar incidents then to maintain and gain the trust society places in us; discussions are held regarding the proper way to conduct after looking back on past incidents, and a pledge is made to comply with the Code of Conduct. In order for us to be able to respond to the changing demands of society, the Code of Conduct is regularly reviewed to constantly examine ourselves and to ensure that our thinking aligns with society’s norms.

By addressing and resolving the above issues, we will strive for the stability and further development of financial markets as well as the sustainable growth of the Nomura Group.

 

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2. Views on Sustainability and efforts

(1) Nomura’s Basic Views on Sustainability

Our Mission is to enrich society through our expertise in capital markets. This is a set of values (Corporate Philosophy) that we hold dear and have inherited since our founding as our company’s raison d’etre and our responsibility towards society. Based on these values, we consider sustainability to be a business activity, and have integrated sustainability into our management strategy. Nomura’s sustainability promotion efforts have value in two ways. One is to support the sustainability efforts of our clients and various stakeholders. The second is to promote sustainability efforts in our own operations such as reducing our environmental impact and enhancing our governance.

 

•

Supporting the sustainability efforts of our clients and stakeholders through business activities

Our core role as a financial services group is to support customers through the flow of funds and capital. We believe it is important to strengthen our functions to promote the sustainable circulation of capital by underwriting green bonds and social bonds issued by companies and financial institutions, providing strategic advisory services such as M&A advisory, and by developing ESG-related funds as investments and providing them to individual investors. In addition, we seek to take advantage of the Group’s comprehensive strengths in providing solutions to social issues by leveraging the functions we have cultivated over many years, including support for business succession, promoting innovation in the fields of regional revitalization, agriculture and medical care, and our expertise and knowledge in the field of research and analysis.

Nomura has been providing financial education programs for people of all ages, ranging from children to adults for more than 20 years, dating back to the 1990s. In April 2022, Nomura established the Financial Well-being Dept. in order to strengthen our financial education capabilities. We will continue to strengthen initiatives to improve the financial literacy of society as a whole.

 

•

Our company’s own efforts to continue being a sustainable corporate group

Nomura has announced its goal of achieving net zero greenhouse gas (“GHG”) emissions for its own operations by 2030, and to seek to achieve net zero GHG emissions attributable to its lending and investment portfolios by 2050. To realize these efforts, Nomura joined the Net-Zero Banking Alliance (“NZBA”) in 2021. Nomura Group participates in and endorses a variety of initiatives besides NZBA to further promote the realization of a sustainable environment and society in cooperation with stakeholders regarding how we will address social issues. In addition, the evolution of human resource management strategies is essential for achieving sustainable growth and increasing corporate value through the resolution of social issues. For this reason, the Nomura Group is pursuing various initiatives to differentiate its human resources management cycle, promote diversity, equity & inclusion (DEI), our employees’ ways of working, wellbeing and create a sense of belonging. (For details, please refer to “(5) Human capital initiatives”.)

(2) Nomura’s Sustainability-Related Governance

Nomura is a Company with Three Board Committees under Japanese law, separating management oversight and business execution to strengthen corporate governance. The oversight function and the executive side play respective roles in recognizing climate change risks and opportunities, promoting various measures, and managing risks.

① Board of Directors

The Board of Directors offers advice on sustainability related reports prepared by executive officers, based on our basic sustainability policy which states: “Nomura will contribute to the creation of a truly enriched society through our business activities based on the principles embodied in the Nomura Group Corporate Philosophy, and actively pursue initiatives to resolve social issues and create a sustainable world.”

Exchange of opinions regarding sustainability also occur out meetings of our outside directors, which are held periodically in order for outside directors to discuss our business and our corporate governance. Such exchange also occurs at our Internal Controls Committee, which is consisted of multiple directors and executive officers, and at our Audit Committee.

② Sustainability Committee

Nomura has established the Sustainability Committee chaired by the Group CEO and which also consists of other persons designated by the Group CEO including the members of the Executive Management Board to deliberate and make decisions on strategies to promote sustainability. The Chief Sustainability Officer leads discussions in the Sustainability Committee to consolidate the Company’s sustainability knowledge and accelerate the formulation and promotion of strategies.

 

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③ Sustainability Forum

In order to ensure opportunities for more flexible and substantive discussions on sustainability, the Sustainability Council, which has been established and operated as a forum for discussion by executives from across departments and regions, has been divided into the Sustainability Business Forum, which deals with topics more closely related to business activities, and the Sustainability Corporate Forum, which deals with information disclosure and policy formulation, with operations beginning in fiscal 2023. Each forum will coordinate with the Sustainability Committee as appropriate to promote flexible approaches to sustainability.

(3) Nomura’s Risk Management on Sustainability

Increasing attention to the management of Sustainability matters makes it imperative that we continue to develop policies and capabilities in these areas, and that we position ourselves in a positive light to interested stakeholders including our shareholders, clients and society at large. Amid rapidly changing circumstances around Sustainability, lack of sufficient focus such as on environmental policies, human rights and diversity, equity & inclusion considerations may also adversely affect our reputation, results of operations and financial condition. In particular, we recognize that climate change risks are likely to have an impact over the medium to long term, and we seek to manage these risks under appropriate management systems.

① Recognition of the Risks Associated with Climate Change

Nomura recognizes risks arising from changes in the environment due to climate change and identifies the potential impact on our business. There are two types of risks associated with climate change: the risk of loss or damage due to extreme weather events such as large typhoons, droughts, and intense heat (physical risk), and the risks associated with decarbonization, such as the inability to respond to changes in government policies, or rapid technological innovations (transition risk). Nomura recognizes the following physical and transition risks associated with climate change.

 

•

Risk that clients will not adequately respond to climate change, resulting in financial damage, decline in creditworthiness and inability to fulfil their contractual obligations

 

•

Risk that climate change causes market fluctuations and losses are incurred due to fluctuations in the market price of Nomura’s financial assets

 

•

Risk of reputational damage if Nomura and counterparties fail to respond appropriately to climate change

 

•

Risk of financial losses or reputational damage due to inadequate or failed internal processes and employee response to climate change

 

•

Risk of inadequate strategies or failed execution of strategies as compared with competitors, and risk of gap between strategies and resources

② Our approach on Risks Associated with Climate Change

Climate risk is recognized as one of risks that are understood to potentially impact Nomura adversely if they materialize. Climate risk is not recognized as a standalone risk, but is understood to be a risk factor affecting various risk areas. Nomura has built an integrated risk management framework that manages the risks caused by climate change by adding new responses to the ones into the existing risk management frameworks.

(4) Metrics and Targets

Nomura Group will use metrics related to greenhouse gas emissions to measure and manage the risks and opportunities associated with climate change, with the approval of the Sustainability Committee, as well as to steadily implement initiatives to align with the Paris Agreement and achieve net zero.

 

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#		Metrics		Target		Results
1		Greenhouse gas (GHG) emissions from its own operations (Scopes 1 and 2)		Net Zero by 2030 (1)		Scope1 : 1,924 t-CO2 (down 11% YOY) Scope2 : 31,710 t-CO2 (down 19% YOY)   (FY2021/22)
2		Greenhouse gas emissions from its lending and investment portfolios (Scope 3, Category 15) (based on the NZBA framework)		Net Zero by 2050 (2)		Power generation sector GHG emissions: 790 kt CO2e Economic emission intensity: 635 t-CO2e/$m   (FY2020/21)
3		Sustainable financing*		US$125bn in sustainable financing over five years by March 2026 (3)		US$21.4 bn   (FY2021/22)

 

*	This target includes capital raised through Nomura’s debt and equity capital markets businesses, private placements of mezzanine debt and equity securities, and debt financing through its Infrastructure and Power Financing Group

(Factors considered in each goal setting)

1: Targets are set based on comprehensive consideration of the results of energy conservation efforts, the spread of renewable energy, and the ratio of installed renewable energy.

2: Based on the NZBA framework, targets are set by referring to the International Energy Agency’s NZE scenarios and the emission factor database provided by PCAF.

3: Target is set by referring to the assumed market size of sustainable finance provided by external vendors.

 

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(5) Human Capital Initiatives

① Evolution of Human Resources Management Strategy and Sustainable Growth

We seek to achieve sustainable growth and to maximize our corporate value. In order to achieve this, we seek to improve our return on equity (ROE) through investing strategically for growth. We believe it is essential to enhance the competitive strength of our employees (human capital) in order to enhance productivity, build value for our clients and shareholders, and enrich our risk management culture by realizing the potential of our dedicated and professional workforce.

Through improving employee engagement with the long-term evolution of our human resources management strategy, we aim to differentiate the intellectual capital ^(*) that our human capital delivers as a team and further enhance the added value provided by the Nomura Group.

* Our intellectual capital refers to the intangibles that are the source of our competitiveness, including organizational capabilities, know-how, client network, and branding.

② Nomura Group’s Human Resources Management Strategy

Our human resources management strategy is based on the values of “Entrepreneurial Leadership”, “Teamwork,” and “Integrity” as defined in our corporate philosophy. These core values set us apart from our competitors in our recruitment, talent development, performance appraisal, and mobility and advancement strategies, as well as our dedication to promoting “Diversity, Equity & Inclusion” (DEI), “Employees’ Ways of Working”, “Wellbeing” and a sense of belonging. This strategy forms the core of our recruitment, talent development and retention initiatives.

i Recruitment

We seek to recruit individuals who share our values of “Entrepreneurial Leadership”, “Teamwork”, and “Integrity” and are aligned with our strong risk management culture. In order to attract and develop such individuals who also can demonstrate strong expertise, we recruit individuals in all roles and at all career levels in all regions including Japan, through both new graduate programs and mid-career hiring.

In Japan, which has the largest number of employees, the number of mid-career hires exceeded the number of new graduates in the fiscal years ended March 31, 2022 and March 31, 2022.

To continue to attract individuals with diverse experience and strong capabilities, we have established alumni networks and recruitment strategies in Japan and India in order to stay connected and regularly re-engage with our pool of alumni who remain active in the industry and communities.

ii Talent development

In order to achieve sustainable growth and to maximize our corporate value and to enhance the competitive strength of our employees in order to enhance productivity, build value for our clients and shareholders, and enrich our risk management culture by realizing the potential of our dedicated and professional workforce, we offer a broad variety of training and development programs to our employees at all career levels across all departments and regions. For example:

Digital IQ learning program - we launched our Digital IQ learning program in 2021 to educate employees globally about digital transformation (DX), providing them with opportunities to learn a variety of digital skills, from basic through to advanced levels.

Nomura Business Academy (NBA) - In Japan, NBA is a platform to support our employees in obtaining professional qualifications relevant to our business such as Securities Analyst Licenses, Financial Planner Licenses and Real Estate Notary qualifications. NBA also supports our employees in improving key business skills such as management and language skills and financial accounting knowledge.

MBA and LLM - For more than 60 years, we have offered tuition assistance programs to employees in Japan in order to support their self-improvement goals through study abroad programs and to obtain their Master of Business Administration (MBA) or Master of Law (LLM) degrees.

 

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Venture company training program - We launched our venture company training program in the fiscal year ended March 31, 2023 in order to provide our employees with work experience at venture companies in Japan. Through this program, we encourage employees to gain experience outside of the Nomura Group and promote a culture of accepting diverse values when they return to the Nomura Group.

M&A University - In our Wholesale Division, our Investment Banking business management has established a knowledge management platform called “M&A University”, through which employees can build and share knowledge and expertise applicable to practical work such as M&A advisory. We also place a special emphasis on technology and digital expertise in the areas of IT operations and finance, and we support our employees in enhancing their ability to add value and productivity by implementing measures that enable them to learn proactively.

iii Performance appraisal

In all regions including Japan, and across all departments and roles, we are making further efforts to enhance our performance-based compensation system, through ensuring the fairness of performance appraisal and benchmarking employee productivity against external market data. We also continue to place a strong importance on evaluating our employee performance through how they have demonstrated our core values of “Entrepreneurial Leadership”, “Teamwork,” and “Integrity”. Since the fiscal year ended March 31, 2021, we have introduced a standard global objective in the appraisal process for each employee to demonstrate ethics, risk management, compliance, and conduct (our “ERCC” performance objective). We aim to raise the awareness of our code of conduct (the “Code”) for each employee and to permeate the concept of the Code throughout our business, thereby creating an environment in which employees can speak up when they see something wrong. Since the fiscal year ended March 31, 2023, we have also incorporated fostering risk management culture into performance appraisal.

iv Mobility and Advancement

We actively encourage an entrepreneurial leadership mindset among our employees and their self-motivated career development. We continue to actively raise awareness of internal opportunities through promoting our global internal job posting system which was significantly enhanced in Japan during the fiscal year ended March 31, 2021. In the fiscal year ended March 31, 2023, more than 200 of our employees proactively found new opportunities which involve transfers across divisions, business or regions.

We also manage a global pool of talents identified as potential successors to key positions. Along with developing internal talent as our potential future management team, we also recruit external talent for those roles. We have various global programs to assess and develop talent, including Nomura Keiei-juku, which is our in-house senior management development program in Japan, as well as various other leadership development programs offered by external organizations both in Japan and overseas, such as the Nomura School of Advanced Management.

v DEI (Diversity, Equity & Inclusion)

We believe that diversity helps improve our competitiveness, innovation, and advanced risk management. In July 2016, we adopted our “Declaration on Diversity and Inclusion” initiative, in which we committed to create a work environment where all employees can demonstrate their capabilities and realize their full potential. We also adopted our “Diversity and Inclusion Statement” in September, 2019, and further updated it with the addition of the concept of equity to become our “Group Diversity, Equity and Inclusion Statement” in October 2022. Equity from our perspective differs from equality, in that it is less about allocating the exact same resources and opportunities to everyone (equality), but more about providing the best resources and opportunities to each of our employees according to their different circumstances and needs, and therefore creating an equitable space where everyone can meet their objectives. We aim to create a workplace that provides fair and equitable opportunities for our diverse employees and which instills a strong sense of belonging.

Our Diversity, Equity & Inclusion Working Group, which consists of representative employees across all regions and businesses globally, aims to create such a work environment across the group through both top-down and bottom-up approaches.

vi Employees’ Ways of Working

We launched our global “Nomura Ways of Working” project, which aims to create a positive working environment where our employees can maximize their performance without time or location constraints, in the fiscal year ended in March 2023. We are promoting this project globally across regions based on four key pillars; culture, people, workplace and technology.

 

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vii Wellbeing

We recognize the importance of our employees’ physical, emotional, mental and financial wellbeing so that they can realize their full potential, stay motivated and excel in the performance of their duties. We seek to improve employee welfare programs, such as childcare and nursing care support, as well as to maintain and promote employee health, so that employees can continue to work with enthusiasm, including the development of appropriate working conditions and a comfortable working environment.

We also recognize the need to reduce Absenteeism ⁽¹⁾ and Presenteeism ⁽²⁾, and improve Work Engagement ⁽³⁾ and have set the following measurements in order to monitor employee wellbeing:

 

 

		Measurements (4)								Targets (4) (Year ended March 31, 2026)
		Year ended March 31, 2022				Year ended March 31, 2023
Absenteeism (millions of yen)			1109.7				794.7				—
Presenteeism (%)			15.2				16.1				10
Work Engagement			53.4				53.7				60

 

(1)

Absenteeism: The impact of absenteeism is measured by financial losses due to absence from work coursed by injury or illness, calculated as the ratio of number of sick leave days taken to total working days during a financial year, multiplied by the total compensation of employees for such financial year. We have not set a specific target because it is important to create an environment where our employees can be absent from work when they feel unwell. We will continuously evaluate and introduce new wellbeing initiatives to improve this metric.

 

(2)	Presenteeism: A condition in which individuals go to work despite being ill or experiencing symptoms of illness, with negative impacts on business execution and productivity. The figure is calculated based on responses to the SPQ (Single-Item Presenteeism Question, Tokyo University 1-Item Version).

 

(3)	Work Engagement: A positive, fulfilling, work-related state of mind. This is measured based on deviation from the results of the national average of annual stress assessment, which is an annual mandatory workplace program in Japan to screen for mental health issues in workers.

 

(4)	The Targets figures are for the Nomura Group, and the Measurements figures are for NSC, our major consolidated subsidiary.

 

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We also support the financial wellbeing of our global employees globally by offering various programs and advices including the granting of compensation awards through employee share ownership plans, defined contribution pension plans and posting financial wellbeing information on our intranet to encourage employees to improve their knowledge.

viii Employee Survey

As part of our ongoing efforts to evaluate and improve our various human resource strategies, we have conducted our Nomura Group Employee Survey annually since the fiscal year ended March 31, 2014. We believe that the survey provides valuable insights regarding employee engagement and perceptions about Nomura. The results are reviewed by our senior management and used for refinement or planning of our human resource strategies, programs and practices. In the fiscal year ended March 31, 2023, 85% of our employees who participated in the Survey gave a positive response to the question “I am proud to work for the firm”.

ix Retention

In 2022, the mobility of human resources increased globally in many industries, including in financial services, and our global employee turnover rate also increased. To enhance engagement, we have established a system to discuss and implement solutions for the issues identified in the Nomura Group Employee Survey on a departmental and organizational basis.

 

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3. Risk Factors

You should carefully consider the risks described below before making an investment decision. If any of the risks described below actually occurs, our business, financial condition, results of operations or cash flows could be adversely affected. In that event, the trading prices of our shares could decline, and you may lose all or part of your investment. In addition to the risks listed below, risks not currently known to us or that we now deem immaterial may also harm us and affect your investment.

INDEX

● Risks Relating to the Business Environment

 

1	Our business may be materially affected by financial markets, economic conditions and market fluctuations in Japan and elsewhere around the world

 

(1)

Governmental fiscal and monetary policy changes in Japan, or in any other countries or regions where we conduct business may affect our business, financial condition and results of operations

 

(2)

Extended market declines and decreases in market participants can reduce liquidity and lead to material losses

 

(3)

Natural disaster, terrorism, military dispute and infectious disease could adversely affect our business

 

(4)

The COVID-19 pandemic may affect our business

 

(5)

Transition from U.S. Dollar LIBOR to alternative rate indices may adversely affect our business

 

2	The financial services industry faces intense competition

 

(1)

Competition with other financial firms and financial services by non-financial companies is increasing

 

(2)

Increased consolidation, business alliance and cooperation in the financial services industry mean increased competition for us

 

(3)

Our global business continues to face intense competition and may require further revisions to its business model

 

3	Event risk may cause losses in our trading and investment assets as well as market and liquidity risk

 

4	Environmental, Social and Governance (“ESG”) factors including climate change and broader associated policy changes in each jurisdiction could adversely affect our business

● Risks Relating to Our Businesses

 

5	Our business may incur losses due to various factors in the conduct of its operations

 

(1)

We may incur significant losses from our trading and investment activities

 

(2)

Holding large and concentrated positions of securities and other assets may expose us to significant losses

 

(3)

Our hedging strategies may not prevent losses

 

(4)

Our risk management policies and procedures may not be fully effective in managing risk

 

(5)

Market risk may increase other risks that we face

 

(6)

Our brokerage and asset management revenues may decline

 

(7)

Our investment banking revenues may decline

 

(8)

Our electronic trading business revenues may decline

 

6	We may be exposed to losses when third parties do not perform their obligations to us

 

(1)

Defaults by a large financial institution could adversely affect the financial markets generally and us specifically

 

(2)

There can be no assurance as to the accuracy of the information about our credit risk, or the sufficiency of the collateral we use in managing it

 

(3)

Our clients and counterparties may be unable to perform their obligations to us as a result of political or economic conditions

 

7	We are exposed to model risk, i.e., risk of financial loss, incorrect decision making, or damage to the firm’s credibility arising from model errors or incorrect or inappropriate model application

 

8	We are a holding company and depend on payments from our subsidiaries

 

9	We may not be able to realize gains we expect, and may even suffer losses, on our investments in equity securities and non-trading debt securities

 

10	We may face an outflow of clients’ assets due to losses of cash reserve funds or debt securities we offer

 

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● Risks Relating to Our Financial Position

 

11	We may have to recognize impairment losses with regard to the amount of goodwill, tangible and intangible assets recognized on our consolidated balance sheets

 

12	Liquidity risk could impair our ability to fund operations and jeopardize our financial condition

 

(1)

We may be unable to access unsecured or secured funding

 

(2)

We may be unable to sell assets

 

(3)

Lowering of our credit ratings could impact our funding

 

13	Equity investments in affiliates and other investees accounted for under the equity method in our consolidated financial statements may decline significantly over a period of time and result in us incurring impairment losses

● Risks Relating to Legal, Compliance and Other Operational Issues

 

14	Operational risk could adversely affect our business

 

15	Misconduct or fraud by an employee, director or officer, or any third party, could occur, and our reputation in the market and our relationships with clients could be harmed

 

16	A failure to identify and appropriately address conflicts of interest could adversely affect our business

 

17	Our business is subject to substantial legal, regulatory and reputational risks

 

(1)

Legal liability may occur due to events such as market downturn and could adversely affect our business, financial condition and results of operations

 

(2)

Extensive regulation of our businesses limits our activities and may subject us to significant penalties and losses

 

(3)

Tightening of regulations applicable to the financial system and financial industry could adversely affect our business, financial condition and results of operations

 

(4)

Deferred tax assets may be impacted due to a change in business condition or in laws and regulations, resulting in an adverse effect on our operating results and financial condition

 

(5)

Defects in our anti-money laundering and counter-terrorism financing measures could have serious consequences such as, administrative penalties or punitive fines

 

18	Unauthorized disclosure or misuse of personal information held by us may adversely affect our business

 

19	System failure, the information leakage and the cost of maintaining sufficient cybersecurity could adversely affect our business, financial condition and results of operations

 

20	Our business may be adversely affected if we are unable to hire, retain and develop qualified personnel

 

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● Risks Relating to the Business Environment

1. Our business may be materially affected by financial markets, economic conditions and market fluctuations in Japan and elsewhere around the world

Our business and revenues may be affected by any adverse changes or volatility in the Japanese and global economic environments and financial markets. In addition, not only purely economic factors but also wars, acts of terrorism, economic or political sanctions, pandemics, forecasts of geopolitical risks and geopolitical events which have actually occurred, natural disasters or other similar events could have an effect on the financial markets and economies of each country. If any adverse events including those discussed above were to occur, a market or economic downturn may last for a long period of time, which could adversely affect our business and can result in us incurring substantial losses. In addition to conditions in financial markets, social conditions such as the long-term trends of population aging and population decline faced by Japan are expected to continue to put downward pressure on demand in the businesses in which we operate, including, in particular, our Retail business. The following are certain risks related to the financial markets and economic conditions for our specific businesses.

(1) Governmental fiscal and monetary policy changes in Japan, or in any other countries or regions where we conduct business may affect our business, financial condition and results of operations

We engage in our business globally through domestic and international offices. Governmental fiscal, monetary and other policy changes in Japan, or in any other countries or regions where we conduct business may affect our business, financial condition and results of operations. In addition, any changes to the monetary policy of the Bank of Japan or central banks in major economies worldwide, which could potentially lead to volatility of interest rate or yields may negatively affect our ability to provide asset management products to our clients as well as our trading and investment activities. For example, in the fiscal year ended March 31, 2023, the U.S. Federal Open Market Committee increased the federal funds rate multiple times as part of its strategy to combat inflation, leading to significant increases in U.S. Dollar interest rates as well as turmoil in the banking sector in the United States and in other countries, causing significant market volatility widely affecting our business and the financial services industry.

(2) Extended market declines and decreases in market participants can reduce liquidity and lead to material losses

Extended market declines can reduce the level of market activity and the liquidity of the assets traded in those markets in which we operate. Market liquidity may also be affected by decreases in market participants, for example, if financial institutions scale back market-related businesses due to increasing regulation or other reasons. As a result, it may be difficult for us to sell, hedge or value such assets. In the event that a market fails in pricing such assets, it will be difficult to estimate their values. If we cannot properly close out or hedge our associated positions in a timely manner or in full, particularly with respect to Over-The-Counter (“OTC”) derivatives, we may incur substantial losses. Further, if the liquidity of a market significantly decreases and the market may become unable to price financial instruments held by us, this could lead to unanticipated losses.

We have established a risk management system that measures these market risk and liquidity risk on a daily basis and takes immediate actions if the pre-set limits are exceeded.

(3) Natural disaster, terrorism, military dispute and infectious disease could adversely affect our business

We have developed a contingency plan for addressing unexpected situations and conduct crisis management exercises which include employee notification tests. We also continue to ensure we can maintain operational resilience (which refers to the ability to continue to provide critical services at a minimum level that should be maintained in the event of a system failure, cyberattacks or natural disaster). This includes the establishment of an emergency command center in the event of an actual disaster to account for the safety of our employees and their families. However, disaster, terrorism, military disputes or widespread infectious diseases afflicting our business, management and employees could exceed the assumptions of our plan and our framework, and we may not always be able to respond to every situation, afflicting our management and employees, facilities and systems, which could adversely affect our business. In addition, there is a possibility that unknown infectious diseases other than COVID-19 pandemic may hinder the operational duties of our management and employees.

(4) The COVID-19 pandemic may affect our business

The COVID-19 pandemic that began in 2020, and governmental measures to prevent its spread, have significantly affected the operating environment, for example causing volatility in global equity prices, interest rates and elsewhere and a widening of credit spreads. While the spread or impact of the disease is gradually subsiding as vaccination efforts progress, ongoing negative effects on markets, economic activity or the operating environment could further adversely affect our business, results of operations and financial condition. We will continue to monitor and manage related risk trends in the business environment as well as our internal crisis management.

 

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(5) Transition from U.S. Dollar LIBOR to alternative rate indices may adversely affect our business

The United Kingdom (“U.K.”) Financial Conduct Authority confirmed on March 5, 2021 that U.S. Dollar LIBOR settings will cease after June 30, 2023. All transaction agreements which refer to U.S. Dollar LIBOR and remain after its cessation are expected to be amended to refer alternative reference rates; or to be altered by adding fallback provisions that are agreed between the contracting parties in advance. These changes could require us to incur additional costs and subject us to risks associated with systematic reform, operational application and client disclosure, or adversely impact the pricing, volatility and liquidity of financial products including derivatives, bonds and loans which reference U.S. Dollar LIBOR. Therefore, our business, financial condition and results of operations could be materially and adversely affected and/or we could be subject to disputes, litigation or other actions with counterparties or relative participants.

2. The financial services industry faces intense competition

Our businesses are intensely competitive, and are expected to remain so. We compete on the basis of a number of factors, including transaction execution capability, our products and services, innovation, reputation and price. We have experienced intense price competition, particularly in brokerage, investment banking and other businesses.

(1) Competition with other financial firms and financial services by non-financial companies is increasing

We face intense competition in the financial services sector from a wide variety of competitors. In Japan, we compete with other independent Japanese securities firms as well as securities firms affiliated with commercial banks and with overseas firms. As a result, our market shares in the sales and trading, investment banking and retail businesses in particular have been affected. In recent years, competition has intensified beyond the traditional financial sector based on the increasing digitalization of the industry, not only with the rise of online securities firms but also FinTech companies and the entry of non-financial companies into the financial services sector. In order to address such changes in the competitive landscape, we have already begun various efforts to these changes in the competitive environment. However, these measures may not be successful in growing or maintaining our market share in this increasingly fierce competitive environment, and we may lose business or transactions to our competitors, harming our business and results of operations.

(2) Increased consolidation, business alliance and cooperation in the financial services industry mean increased competition for us

There has been substantial consolidation and convergence among companies in the financial services industry. In particular, a number of large commercial banks and other broad-based large financial services groups have established or acquired broker-dealers or have consolidated with other financial institutions. These large financial services groups have developed business linkage within their respective groups in order to provide comprehensive financial services to clients, offering a wide range of products, including loans, deposit-taking, insurance, brokerage, asset management and investment banking services within their group, which may enhance their competitive position compared with us. They also have the ability to supplement their investment banking and brokerage businesses with commercial banking and other financial services revenues in an effort to gain market share. In addition, the financial services industry has seen collaboration beyond the borders of businesses and industries, such as alliances between commercial banks and securities companies outside of framework of existing corporate groups and recent alliances with non-financial companies including emerging companies. Our competitiveness may be adversely affected if our competitors are able to expand their businesses and improve their profitability through such business alliances. We also enter into strategic alliances, make investments and launch new businesses. However, if the development and implementation of these business strategies do not proceed as expected, we may not be able to achieve the expected synergies and other benefits or recoup related investments. These new business initiatives and acquisitions may subject us to increased risk as we engage in new activities, transact with a broader array of clients and counterparties and expose us to new asset classes and new markets.

(3) Our global business continues to face intense competition and may require further revisions to its business model

We continue to believe there are significant opportunities in the international markets, but there is also significant competition associated with such opportunities. In order to take advantage of these opportunities, we will have to compete successfully with financial services firms based in important non-Japanese markets, including the U.S., Europe and Asia. Despite our efforts facing competition, we recognized an impairment loss on goodwill attributable to previous overseas acquisitions of ¥81,372 million in the fiscal year ended March 31, 2019. Since April 2019, we have been working to rebuild our global business platform, under which we aim to transform our business portfolio and pivot towards client businesses and growth areas. The acquisition of Greentech Capital, LLC (“Greentech”) in 2020 and transfer of stake of Capital Nomura Securities Public Company Limited in 2023, are examples of reviewing our business platform both organically and inorganically. We will continue to review our entire business portfolio while looking at the competitive environment, and intend to implement our strategies in consideration of potential risks. However, the risk remains that we may be required to incur greater expenses than expected, or to commit greater financial, management and other resources to the strategies than expected, which could adversely affect our business and results of operations. Moreover, the assumptions and expectations upon which the strategies are based may not be correct, which could lead to us realizing fewer benefits than expected or could even harm our business and results of operations overall. Furthermore, to the extent we reduce compensation or headcount as part of this strategy, our ability to attract and retain the employees needed to successfully run our businesses could be adversely affected. We may also be unsuccessful in designing a streamlined management structure, which could harm our ability to properly control or supervise our many businesses across the world.

 

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3. Event risk may cause losses in our trading and investment assets as well as market and liquidity risk

Event risk refers to potential losses we may suffer through unpredictable events that cause large unexpected market price movements such as natural or man-made disasters, epidemics, acts of terrorism, armed conflicts or political instability, as well as adverse events specifically affecting our business activities or counterparties. These events include not only significant events such as the Great East Japan Earthquake in March 2011, the increasing tensions on Korean Peninsula following North Korean nuclear tests in 2017, sudden and unexpected developments in global trade or security policies such as tensions between the United States and China since 2018 and ongoing geopolitical tensions in Asia overall, the COVID-19 pandemic in 2020, and the invasion of Ukraine by the Russian Federation in 2022, but also more specifically the following types of events that could cause losses in our trading and investment assets:

 

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sudden and significant reductions in credit ratings with regard to financial instruments held by our trading and investment businesses by major rating agencies,

 

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sudden changes in trading, tax, accounting, regulatory requirements, laws and other related rules which may make our trading strategy obsolete, less competitive or no longer viable, or

 

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an unexpected failure in a corporate transaction in which we participate resulting in our not receiving the consideration we should have received, as well as bankruptcy, deliberate acts of fraud, and administrative penalty with respect to the issuers of our trading and investment assets.

4. Environmental, Social and Governance (“ESG”) factors including climate change and broader associated policy changes in each jurisdiction could adversely affect our business

Increasing attention to the management of Environmental, Social and Governance (“ESG”) factors in the business makes it imperative that we continue to develop policies and capabilities in these areas, and that we act responsibly towards our stakeholders, including our shareholders, clients and society at large. Amid rapidly changing circumstances around ESG, a lack of sufficient focus on ESG matters such as the environment or human rights may impede our ability to maintain a sustainable business model and support clients facing trends such as the just transition to the low carbon economy or other ESG-related initiatives, and may also adversely affect our reputation, results of operations and financial condition. Reputational risks also include the risk associated with over-stating our credentials, or not delivering on commitments we have made (also known as “greenwashing”).

We consider climate change one of the most important global challenges facing society. The direct impact of climate change, and the resulting changes in the business environment could cause us to incur losses. Climate risks are widely recognized to have two aspects – physical and transition risks. Physical risk refers to the risk of loss or damage driven by extreme weather events, such as hurricane, flood, drought, heatwave or frost, or from the longer term shifts in climate patterns and rising sea levels. Transition risk is the risk associated with the transition to a low-carbon economy, and could result from changing government policies, technologies or changes to consumer demand.

 

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● Risks Relating to Our Businesses

5. Our business may incur losses due to various factors in the conduct of its operations.

(1) We may incur significant losses from our trading and investment activities

We maintain trading and investment positions in fixed income, equity and other markets, both for proprietary purposes and for the purpose of facilitating our clients’ trades. Our positions consist of various types of assets, including securities, derivatives transactions with equity, interest rate, currency, credit and other underliers, as well as loans, and reverse repurchase agreements. Fluctuations in the markets where these assets are traded can adversely affect the value of our positions, in these assets, with downturns potentially negatively affecting long positions and upturns potentially negatively affecting short positions. Although we continue to mitigate these position risks with a variety of hedging techniques, we may also incur losses if the value of these assets fluctuates or if the financial system is overly stressed and the markets move in a way we have not anticipated. In addition, prices of crypto-assets may fluctuate significantly due to various factors such as developments in the industry or in regulation of crypto assets.

Our businesses have been, and may continue to be, affected by changes in market volatility levels. Certain of our trading businesses such as those engaged in trading and arbitrage opportunities depend on market volatility to generate revenues. Lower volatility may lead to a decrease in business opportunities which may affect the results of operations of these businesses. On the other hand, while higher volatility can increase trading volumes, it also increases risk as measured by Value-at-Risk (“VaR”). Higher volatility and wider bid offer spreads may expose us to higher risks in connection with our market-making and proprietary trading businesses. Higher volatility can also cause us to reduce the outstanding positions or size of these businesses where we consider necessary.

For example, in March 2021, following the default of a U.S. prime brokerage client in respect of a margin call, we issued a close-out event notice to such client, and proceeded to wind down positions held as hedges for transactions with the client, leading us to recognize significant trading losses on the unwinding of the underlying positions and a provision for expected credit losses to reflect a shortfall in the value of securities pledged by the client as collateral against financing provided to it. We refer to this event and the losses caused as the “U.S. Prime Brokerage Event.” See Item 4 “Company Information—4. Status of Corporate Governance and Other—(1) Status of Corporate Governance—Risk Management Enhancement Program” for further information on the nature of this event. Despite our actions in response to the U.S. Prime Brokerage Event, including to improve our risk management activities, our business model necessarily involves significant trading activity, and we may record significant losses as a result of such trading activity again in the future.

Furthermore, we commit capital to take relatively large positions for underwriting or warehousing assets to facilitate certain capital market transactions. We also structure and take positions in pilot funds for developing financial investment products and invest seed money to set up and support financial investment products. We may incur significant losses from these positions in the event of significant market fluctuations.

In addition, if we are the party providing collateral in a transaction, significant declines in the value of the collateral or a requirement to provide additional collateral due to a decline in our creditworthiness (by way of a lowered credit rating or otherwise) can increase our costs and reduce our profitability. On the other hand, if we are the party receiving collateral from our clients and counterparties, such declines may also affect our profitability due to decrease in client transactions. See also “—Risks Relating to Our Financial Position—12. Liquidity risk could impair our ability to fund operations and jeopardize our financial condition—(3) Lowering of our credit ratings could impact our funding”.

 

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(2) Holding large and concentrated positions of securities and other assets may expose us to significant losses

We regularly hold large and concentrated positions of certain securities in our businesses such as market-making, block trading, underwriting, asset securitization, prime brokerage, acquiring newly-issued convertible debt securities through third party allotment or providing business solutions to meet our clients’ needs. We have committed substantial amounts of capital to these businesses. This often requires us to take large positions in the securities of a particular issuer or issuers in a particular industry, country or region. Fluctuations in the prices of these securities can significantly affect the prices at which we are able to liquidate them when needed, resulting in us incurring significant trading losses, such as those incurred in connection with the U.S. Prime Brokerage Event. See Item 4 “Company Information—4. Status of Corporate Governance and Other—(1) Status of Corporate Governance—Risk Management Enhancement Program” for further information on the nature of this event. We generally have higher exposure to those issuers engaged in financial services businesses, including commercial banks, broker-dealers, clearing houses, exchanges and investment companies. There may also be cases where we hold relatively large amounts of securities by issuers in particular countries or regions due to the business we conduct with our clients or our counterparties. In addition, we may incur losses due to market fluctuations on asset-backed securities such as residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”).

(3) Our hedging strategies may not prevent losses

We use a variety of financial instruments and strategies to hedge our exposure to financial risks arising from the financial instruments we enter into for proprietary purposes or for our clients. If our hedging strategies are not effective, we may incur losses. We base many of our hedging strategies on historical trading patterns and correlations. For example, if we hold an asset, we may hedge this position by taking a position in another asset which has, historically, moved in a direction that would offset a change in value of the former asset. However, historical trading patterns and correlations may not continue, as seen in the case of past financial crises, and these hedging strategies may not be fully effective in mitigating our risk exposure because we are exposed to all types of risk in a variety of market environments. Moreover, not all hedging strategies are effective, and certain strategies may, if the risk is not otherwise appropriately managed, increase our risk. For example, many of the transactions leading to the U.S. Prime Brokerage Event entailed providing the client with “total return swap” derivatives exposure to certain equities. See Item 4 “Company Information—4. Status of Corporate Governance and Other—(1) Status of Corporate Governance—Risk Management Enhancement Program” for further information on the nature of this event. In order to hedge the total return payments we were obligated to make to the client, we held long positions in the underlying equities. However, this specific hedging strategy was not intended to hedge the risk of a default by the client and the potential need to liquidate the underlying positions in a volatile market environment. When such risk was realized, our hedging strategy of holding the underlying securities meant that we were exposed to such market fluctuations, contributing to the losses we incurred.

(4) Our risk management policies and procedures may not be fully effective in managing risks

Our policies and procedures to identify, monitor and manage risks may not be fully effective. Although some of our methods of managing risk are based upon observed historical market data, the future movements in the financial markets may not be the same as was observed in the past. As a result, we may suffer significant losses through unexpected future risk exposures. Other risk management methods that we use also rely on our evaluation of information regarding markets, clients or other matters, which is publicly available or otherwise accessible by us. This information may not be accurate, complete, up-to-date or properly evaluated, and we may be unable to properly assess our risks, and thereby suffer large losses. Furthermore, certain factors, such as market volatility, may render our risk evaluation model unsuitable for a new market environment. In such event, we may become unable to evaluate or otherwise manage our risks adequately. Moreover, regardless of how well policies and procedures are designed, they must be properly implemented and followed in order to be effective, which may not always occur despite our diligent efforts. Further, potential weaknesses in our organization structures and governance frameworks may lead to misunderstanding over roles and responsibilities.

For example, with respect to the U.S. Prime Brokerage Event, we incurred significant losses through exposures to the client’s counterparty risk and market risks relating to the securities underlying the prime brokerage transactions with the client. We have reviewed and are in the process of completing a number of actions to comprehensively review, revise and strengthen our risk management policies and procedures and the implementation thereof. See Item 4 “Company Information—4. Status of Corporate Governance and Other—(1) Status of Corporate Governance—Risk Management Enhancement Program” for further information on the nature and status of these review procedures. Such actions remain ongoing, however, and when completed, may not be sufficient to prevent similar exposure to such risks in the future, including to identify and rectify potential shortcomings, whether within the same business or among our many other business units, impairing the ability of such policies and procedures to prevent future losses.

 

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(5) Market risk may increase other risks that we face

In addition to the potentially adverse effects on our businesses described above, market risk could exacerbate other risks that we face. For example, the risks inherent in financial instruments developed through financial engineering and innovation may be increased by market risk.

Also, if we incur significant trading losses caused by our exposure to market risk, our need for liquidity could rise sharply while our access to cash may be impaired as a result of market perception of our credit risk.

Furthermore, in a downturn in the market overall or for specific securities, our clients and counterparties could incur significant losses or experience other adverse events of their own, thereby weakening their financial condition and, as a result, increasing the credit risk they pose to us, such as occurred as part of the U.S. Prime Brokerage Event.

(6) Our brokerage and asset management revenues may decline

A market downturn could result in a decline in the revenues generated by our brokerage business because of a decline in the volume and value of securities that we broker for our clients. Also, within our asset management and investment management business, in most cases, we charge fees for managing our clients’ portfolios that are based on the market value of their portfolios. A market downturn that reduces the market value of our clients’ portfolios may increase the amount of withdrawals or reduce the amount of new investments in these portfolios, and would reduce the revenue we receive from these businesses. Also, any changes in our clients’ investment preference on their asset portfolios, including shifting investment assets to stable assets such as deposits and/or passive funds, which bring us relatively low fee revenue, may reduce our revenue as well.

(7) Our investment banking revenues may decline

Changes in financial or economic conditions would likely affect the number and size of transactions for which we provide securities underwriting, financial advisory and other investment banking services. Our investment banking revenues, which include fees from these services, are directly related to the number and size of the transactions in which we participate and would therefore decrease if there are financial and market changes unfavorable to our investment banking business and our clients.

For example, net revenue from our investment banking activities declined during the year ended March 31, 2023 compared to the years ended March 31, 2021 and 2022 primarily due to geopolitical developments and uncertainty regarding the economic outlook, and net revenues may decline further in light of a decrease in M&A activities and other investment banking activities.

(8) Our electronic trading business revenues may decline

Electronic trading is essential for our business in order to execute trades faster with fewer resources. Utilizing these systems allows us to provide an efficient execution platform and on-line content and tools to our clients via exchanges or other automated trading facilities. Revenue from our electronic trading, which includes trading commissions and bid-offer spreads is directly correlated with the number and size of the transactions in which we participate. Competition in electronic trading is intense and the introduction of highly discounted or no-commission trades at competitors has and will continue to exert pressure on our electronic and traditional trading revenue. Moreover, such revenue would decrease if there are financial market or economic changes that would cause our clients to trade less frequently or in a smaller amount. Even if trade volumes increase due to the convenience of electronic trading, this may not be sufficient to offset margin erosion in our execution business, leading to a potential decline in revenue generated from this business. We continue to invest in developing technologies to provide an efficient trading platform, however, we may fail to maximize returns on these investments due to this increased pressure on lowering margins.

6. We may be exposed to losses when third parties do not perform their obligations to us

Our counterparties are from time to time indebted or otherwise owe certain obligations (such as with regards to the posting of collateral) to us as a result of transactions or contracts, including loans, commitments to lend, other contingent liabilities and derivative transactions. We may incur material losses when our counterparties default or fail to perform on their obligations to us due to their filing for bankruptcy, a deterioration in their creditworthiness, lack of liquidity, operational failure, an economic or political event, repudiation of the transaction or for other reasons. The U.S. Prime Brokerage Event, during which a U.S. prime brokerage client defaulted on obligations to us to post additional margin in respect of trading activities as well as to repay amounts lent against collateral held by us, is an example. See Item 4. “Company Information—4. Status of Corporate Governance and Other—(1) Status of Corporate Governance—Risk Management Enhancement Program” for further information on the nature of this event. Although we establish and maintain allowances for credit losses, such allowances reflect management judgments and assumptions based on information available to us, which may provide incorrect or incomplete, and these judgments and assumptions may prove to be incorrect, potentially significantly so.

 

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Credit risk may also arise from:

 

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holding securities issued by third parties, or

 

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the execution of securities, futures, currency or derivative transactions that fail to settle at the required time due to non-delivery by the counterparty of Nomura, such as financial institutions and hedge funds, or to systems failure by clearing agents, exchanges, clearing houses or other financial infrastructure.

Issues related to third party credit risk may include the following:

(1) Defaults by a large financial institution could adversely affect the financial markets generally and us specifically

The commercial soundness of many financial institutions is closely interrelated as a result of credit, trading, clearing or other relationships among the institutions. As a result, concern about the creditworthiness of or a default by, a certain financial institution could lead to significant liquidity problems or losses in, or defaults by, other financial institutions. This may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges, with which we interact on a daily basis. Actual defaults, increases in perceived default risk and other similar events could arise in the future and could have an adverse effect on the financial markets and on us. Our funding operations may be adversely affected if major financial institutions, Japanese or otherwise, fail or experience severe liquidity or solvency problems.

(2) There can be no assurance as to the accuracy of the information about our credit risk, or the sufficiency of the collateral we use in managing it

We regularly review our credit exposure to specific clients or counterparties and to specific countries and regions that we believe may present credit concerns. Default risk, however, may arise from events or circumstances that we do not detect, such as account-rigging and fraud. We may also fail to receive full information with respect to the risks of a counterparty, or to accurately manage and assess such information internally. For example, our credit risk assessments with respect to the client whose default led to the U.S. Prime Brokerage Event did not reflect the full extent of the client’s relevant trading activity. In addition, in cases where we have extended credit against collateral, we may fall into a deficiency in value in the collateral if sudden declines in market values reduce the value of our collateral, as was the case with loans extended to the prime brokerage client leading in part to the U.S. Prime Brokerage Event. See Item 4 “Company Information—4. Status of Corporate Governance and Other—(1) Status of Corporate Governance—Risk Management Enhancement Program” for further information on the nature of this event.

(3) Our clients and counterparties may be unable to perform their obligations to us as a result of political or economic conditions

Country, regional and political risks are components of credit risk, as well as market risk. Political or economic pressures in a country or region, including those arising from local market disruptions or currency crises, may adversely affect the ability of clients or counterparties located in that country or region to obtain credit or foreign exchange, and therefore to perform their obligations owed to us.

7. We are exposed to model risk, i.e., risk of financial loss, incorrect decision making, or damage to the firm’s credibility arising from model errors or incorrect or inappropriate model application

Models are widely used by Nomura for various purposes including valuation of low liquidity derivative transactions or estimation of credit worthiness of obligors. However, models are never perfect, and their use subjects Nomura to model risk. Model errors or incorrect or inappropriate model applications could lead to incorrect decision making, financial losses or damage to the firm’s credibility. Model risk cannot be eliminated, but it can be managed. Nomura has a well-established Model Risk Management Framework, including robust model development, implementation, and use, and sound model validation process and governance to manage and mitigate model risk.

8. We are a holding company and depend on payments from our subsidiaries

We are a holding company and heavily depend on dividends, distributions and other payments from our subsidiaries to make payments on our obligations. Regulatory and other legal restrictions, such as those under the Companies Act, may limit our ability to transfer funds freely, either to or from our subsidiaries. In particular, many of our subsidiaries, including our broker-dealer subsidiaries, are subject to laws and regulations, including regulatory capital requirements, that authorize regulatory bodies to block or reduce the flow of funds to the parent holding company, or that prohibit such transfers altogether in certain circumstances. For example, Nomura Securities Co., Ltd. (“NSC”), Nomura Securities International, Inc., Nomura International plc and Nomura International (Hong Kong) Limited, our main broker-dealer subsidiaries, are subject to regulatory capital requirements and changes in such regulatory capital requirements and the required level could limit the transfer of funds to us. While we monitor and manage the transfer of funds among Nomura Group on the basis of the relevant laws and regulations on a daily basis, these laws and regulations may hinder our ability to access funds needed to make payments on our obligations.

 

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9. We may not be able to realize gains we expect, and may even suffer losses, on our investments in equity securities and non-trading debt securities

We hold substantial investments in equity securities including private equity investments and non-trading debt securities. Under U.S. GAAP, depending on market conditions, we may recognize significant unrealized gains or losses on our investments in equity securities and debt securities, which could have an adverse impact on our financial condition and results of operations. For example, in the fiscal year ended March 31, 2020, we recognized a loss of ¥16.4 billion related to our investment in American Century Investments and ¥16.6 billion on our investments in equity securities resulting from market declines arising from the COVID-19 pandemic. Moreover, while we may decide to dispose of these equity securities and debt securities, depending on the market conditions, we may not be able to dispose of these equity securities and debt securities when we would like to do so, as quickly as we may wish or at the desired price.

10. We may face an outflow of clients’ assets due to losses of cash reserve funds or debt securities we offer

Cash reserve funds, such as money market funds and money reserve funds are categorized as low risk financial products. As a result of a sudden rise in interest rates, such cash reserve funds may fall below par value due to losses resulting from price decreases of debt securities in the portfolio, defaults of debt securities in the portfolio or charges of negative interest. If we determine that a stable return cannot be achieved from the investment performance of cash reserve funds, we may accelerate the redemption of, or impose a deposit limit on, such cash reserve funds.

In addition, debt securities that we offer may default or experience delays in the payment of interest and/or principal.

These events above may result in the loss of client confidence and lead to an outflow of client assets from our custody or preclude us from increasing such client assets.

● Risks Relating to Our Financial Position

11. We may have to recognize impairment losses with regard to the amount of goodwill, tangible and intangible assets recognized on our consolidated balance sheets

We have purchased all or a part of the equity interests in, or operations from, certain other companies in order to pursue our business expansion, and expect to continue to do so when and as we deem appropriate. We account for certain of those and similar purchases and acquisitions as a business combination under U.S. GAAP by allocating our acquisition costs to the assets acquired and liabilities assumed and recognizing the remaining amount as goodwill. On April 1, 2020, Nomura acquired 100% of Greentech and goodwill of ¥12,480 million is reported on our consolidated balance sheet. We also possess tangible and intangible assets other than those stated above.

We may have to recognize impairment losses, as well as other losses associated with subsequent transactions, with regard to the amount of goodwill, tangible and intangible assets and, recognized on our consolidated group balance sheet which may adversely affect our financial condition and results of operations. For example, during the year ended March 31, 2019, we recognized an impairment loss on goodwill in our Wholesale segment attributable to previous overseas acquisitions of ¥81,372 million.

12. Liquidity risk could impair our ability to fund operations and jeopardize our financial condition

Liquidity, or having ready access to cash, is essential to our business. We define liquidity risk as the risk of loss arising from difficulty in securing the necessary funding or from a significantly higher cost of funding than normal levels due to deterioration of our creditworthiness or deterioration in market conditions. In addition to maintaining a readily available cash position, we seek to secure ample liquidity through repurchase agreements and securities lending transactions, long-term borrowings and the issuance of long-term debt securities, diversification of our short-term funding sources such as commercial paper, and by holding a portfolio of highly liquid assets. We bear the risk that we may lose liquidity under certain circumstances, including the following:

(1) We may be unable to access unsecured or secured funding

We continuously access unsecured funding from issuance of securities in the short-term credit markets and debt capital markets as well as bank borrowings to finance our day-to-day operations, including refinancing. We also enter into repurchase agreements and securities lending transactions to raise secured funding for our trading businesses. An inability to access unsecured or secured funding or funding at significantly higher cost than normal levels could have a substantial negative effect on our liquidity. For example, lenders could refuse to extend the credit necessary for us to conduct our business based on their assessment of our long-term or short-term financial prospects if:

 

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We incur large trading losses,

 

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•

The level of our business activity decreases due to a market downturn,

 

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Regulatory authorities take significant action against us, or

 

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Our credit rating is downgraded.

In addition to the above, our ability to borrow in the debt capital markets could also be adversely impacted by factors that are not specific to us, such as increases in market interest rates, reductions in banks’ lending capacity, a severe disruption of the financial and credit markets, negative views about the general prospects for the investment banking, brokerage or financial services industries, or negative market perceptions of Japan’s financial soundness.

(2) We may be unable to sell assets

If we are unable to raise funds or if our liquidity declines significantly, we will need to liquidate assets or take other actions in order to meet our maturing liabilities. In volatile or uncertain market environments, overall market liquidity may decline. In a time of reduced market liquidity, we may be unable to sell some of our assets, or we may have to sell at depressed prices, which could adversely affect our results of operations and financial condition. Our ability to sell assets may also be adversely impacted by other market participants seeking to sell similar assets into the market at the same time.

(3) Lowering of our credit ratings could impact our funding

Our funding depends significantly on our credit ratings. Rating agencies may reduce or withdraw their ratings or place us on “credit watch” with negative implications. For example, following the U.S. Prime Brokerage Event, in March 2021, Fitch Ratings, Inc. placed our credit ratings on negative watch and Moody’s Investors Service, Inc. changed the outlook on our credit ratings to negative, which may lead either agency to downgrade our credit ratings in the future. See Item 4 “Company Information—4. Status of Corporate Governance and Other—(1) Status of Corporate Governance—Risk Management Enhancement Program” for further information on the nature of this event. Future downgrades could increase our funding costs and limit our funding. This, in turn, could adversely affect our result of operations and our financial condition. In addition, other factors which are not specific to us may impact our funding, such as negative market perceptions of Japan’s financial soundness.

13. Equity investments in affiliates and other investees accounted for under the equity method in our consolidated financial statements may decline significantly over a period of time and result in us incurring impairment losses

We have affiliates and investees accounted for under the equity method in our consolidated financial statements and whose shares are publicly traded. If there is a decline in the market price, of the shares we hold in such affiliates over a period of time, and we determine that the decline is other-than-temporary, then we recognize an impairment loss for the applicable fiscal period which may have an adverse effect on our financial condition and results of operations. For example, we recognized an impairment loss of ¥47,661 million against its investment in Nomura Real Estate Holdings, Inc. during the year ended March 31, 2021.

● Risks Relating to Legal, Compliance and Other Operational Issues

14. Operational risk could adversely affect our business

Operational risk is the risk of financial loss or non-financial impact arising from inadequate or failed internal processes and systems, from a lack of appropriate personnel, from human errors, or from external events, and includes compliance, legal, IT and cyber security, fraud, third party, and other non-financial risks. We always face the potential of operational risk, and if materializes, it could adversely affect our business.

Issues related to operational risk may also include the risks listed in items 15 to 20 below.

15. Misconduct or fraud by an employee, director or officer, or any third party, could occur, and our reputation in the market and our relationships with clients could be harmed

We always face the risk that our employees, directors or officers, or any third party, could engage in misconduct that may adversely affect our business. Misconduct by an employee, director or officer includes conduct such as entering into transactions in excess of authorized limits, acceptance of risks that exceed our limits, or concealment of unauthorized or unsuccessful activities. The misconduct could also involve the improper use or disclosure of non-public information relating to us or our clients, such as insider trading, improper transmission of such information and the recommendation of trades based on such information, as well as other crimes, which could result in regulatory sanctions, legal liability and serious reputational or financial damage to us.

 

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For example, on March 5, 2019, a researcher at Nomura Research Institute, Ltd. (“NRI”), our equity-method affiliate, revealed information that there was a high possibility that the standard for designating the top market of the Tokyo Stock Exchange (the “TSE”) would fall to ¥25 billion, which had been under review at the TSE, to a chief strategist (the “NSC Strategist”) in the research division of NSC. The researcher at NRI was a member of the Advisory Group to Review the TSE Equity Market Structure and received this information in such capacity. On the same day and the next day, the NSC Strategist communicated the information to certain people including members of Japanese stock sales team of NSC and Nomura International (Hong Kong) Limited, some of whom provided the information to their institutional investor clients. Although the provision of the information did not represent a violation of law, they were inappropriate conducts and impaired the implicit trust placed in us and our employees by other market participants. Following a special internal investigation conducted by external experts, on May 24, 2019, we announced a remediation plan and the reduction of compensation of certain of our executives and those of NSC. On May 28, 2019, the FSA issued a business improvement order to us and to NSC, requiring us to clarify responsibility for this incident, develop and submit a detailed improvement plan, and report periodically on the implementation and effectiveness of measures for improvement, and on August 28, 2019, a fine of ¥10 million was imposed by Tokyo Stock Exchange, Inc. as a penalty.

Third parties may also engage in fraudulent activities, including devising a fraudulent scheme to induce our investment, loans, guarantee or any other form of financial commitment, both direct and indirect. Because of the broad range of businesses that we engage in and the large number of third parties with whom we deal in our day-to-day business operations, such fraud or any other misconduct may be difficult to prevent or detect, and our future reputation and financial condition could be adversely affected, which could result in serious reputational or financial damage to us in the future.

We have taken measures in line with the improvement plan to detect and prevent such fraudulent or misconduct by our employees, directors or officers, or any third party in the future, including the establishment and implementation of the “Nomura Group Code of Conduct” including ensuring its thorough dissemination throughout the group and ensuring thorough compliance with its terms, and through compliance training or any other programs, as well as an enhanced internal reporting system. However, the measures we have implemented or additional measures that may be implemented in the future may not be effective in preventing or managing the risk of misconduct or fraud in all cases, and we may not always be able to detect or deter misconduct or fraud by an employee, director, officers, or third parties. If any administrative or judicial sanction is issued against us as a result of such fraudulent or misconduct, we may lose business opportunities, and our future revenue and results of operations may be materially and adversely affected, even after the sanction is lifted, if and to the extent that our clients, especially public institutions, decide not to engage us for their financial transactions.

16. A failure to identify and appropriately address conflicts of interest could adversely affect our business

We are a global financial institution that provides a wide range of products and services to a diverse group of clients, including individuals, corporations, other financial institutions and governmental institutions. As such, we face potential conflicts of interest in the ordinary course of our business. Conflicts of interests can arise when our services to a particular client conflict or compete, or are perceived to conflict or compete, with our own interests. In addition, where non-public information is not appropriately restricted or shared within the firm, conflicts of interest can also arise where a transaction within the Nomura Group and or a transaction with another client conflict or compete, or is perceived to conflict or compete, with a transaction with a particular client. While we have extensive internal procedures and controls designed to identify and address conflicts of interest on the basis of the Nomura Group Conflicts of Interest Management Policy, a failure, or a perceived failure, to identify, disclose and appropriately address such conflicts could adversely affect our reputation, the willingness of current or potential clients to do business with us and our revenues and results of operations. In addition, conflicts of interest could give rise to regulatory actions or litigation.

17. Our business is subject to substantial legal, regulatory and reputational risks

Substantial legal liability or a significant regulatory action against us could have a material adverse effect on our business, financial condition or results of operations, or cause reputational harm to us. Also, material changes in regulations applicable to us or to the markets in which we operate could adversely affect our business. See Note 19. “Commitments, contingencies and guarantees” in our consolidated financial statements included in this annual report for further information regarding the significant investigations, lawsuits and other legal proceedings that we are currently facing.

We face significant legal risks in our businesses. These risks include liability under securities or other laws in connection with securities underwriting and offering transactions, liability arising from the purchase or sale of any securities or other financial products, disputes over the terms and conditions of complex trading arrangements or the validity of contracts for our transactions, disputes with our business alliance partners and legal claims concerning our other businesses. When we face the substantial legal liability, we seek advice from experts and third-parties, develop appropriate policies, and address the cases accordingly. However, depending on the disputes, our reputation, financial condition and results of operations could be adversely affected.

 

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(1) Legal liability may occur due to events such as market downturn and could adversely affect our business, financial condition and results of operations

During a prolonged market downturn or upon the occurrence of an event that adversely affects the market, we would expect claims against us to increase. We may also face significant litigation. The cost of defending such litigation may be substantial and our involvement in litigation may damage our reputation. For example, during the fiscal year ended March 2022, approximately ¥62.0 billion related to legacy transactions in the U.S. from before the global financial crisis (2007 – 2008) was recognized including legal expenses as well as certain transactions intended to mitigate future losses. In addition, even legal transactions might be subject to adverse public reaction according to the particular details of such transactions. These risks may be difficult to assess or quantify and their existence and magnitude may remain unknown for substantial periods of time.

(2) Extensive regulation of our businesses limits our activities and may subject us to significant penalties and losses

The financial services industry is subject to extensive regulation. We are subject to increasing regulation by governmental and self-regulatory organizations in Japan and in virtually all other jurisdictions in which we operate, and such governmental and regulatory scrutiny may increase as our operations expand or as laws change. In addition, while regulatory complexities increase, possibilities of extra-territorial application of a regulation in one jurisdiction to business activities outside of such jurisdiction may also increase. These regulations are broadly designed to ensure the stability of financial systems and the integrity of the financial markets and financial institutions, and to protect clients and other third parties who deal with us, and often limit our activities and/or affect our profitability, through net capital, client protection and market conduct requirements. In addition, on top of traditional finance-related legislation, the scope of laws and regulations applying to, and/or impacting on, our operations may become wider depending on the situation of the wider international political and economic environment or policy approaches taken by governmental authorities in respect of regulatory application or law enforcement. In particular, the number of investigations and proceedings against the financial services industry by governmental and self-regulatory organizations has increased substantially and the consequences of such investigations and proceedings have become more severe in recent years, and we are subject to face the risk of such investigations and proceedings. For example, the U.S. Department of Justice (the “DOJ”) conducted an investigation regarding residential mortgage-backed securities securitized by some of our U.S. subsidiaries prior to 2009. On October 15, 2018, the U.S. subsidiaries settled the investigation with the DOJ and agreed to pay $480 million. Although we take measures such as timely monitoring and establishing internal governance procedures in order to comply with law and regulations we may not always be able to prevent such violations, and we could be fined, prohibited from engaging in some of our business activities, ordered to improve our internal governance procedures or be subject to revocation of our license to conduct business. Our reputation could also suffer from the adverse publicity that any administrative or judicial sanction against us may create, which may negatively affect our business opportunities and ability to secure human resources. As a result of any such sanction, we may lose business opportunities for a period of time, even after the sanction is lifted, if and to the extent that our clients, especially public institutions, decide not to engage us for their financial transactions. In addition, certain market participants may refrain from investing in or entering into transactions with us if we engage in business activities in regions subject to international sanctions, even if our activities do not constitute violations of sanctions laws and regulations..

(3) Tightening of regulations applicable to the financial system and financial industry could adversely affect our business, financial condition and results of operations

If regulations that apply to our businesses are introduced, modified or removed, we could be adversely affected directly or through resulting changes in market conditions. The impact of such developments could make it economically unreasonable for us to continue to conduct all or certain of our businesses, or could cause us to incur significant costs to adjust to such changes.

New regulations or revisions to existing regulations relating to accounting standards, regulatory capital adequacy ratios, liquidity ratios and leverage ratios applicable to us could also have a material adverse effect on our business, financial condition and results of operations. Such new regulations or revisions to existing regulations include the so-called Basel III package formulated by the Basel Committee on Banking Supervision (“Basel Committee”) and the finalized Basel III reforms published in December 2017. Furthermore, in October 2012, the Basel Committee developed and published a set of principles on the assessment methodology and higher loss absorbency requirements for domestic systemically important banks (“D-SIBs”), and, in December 2015, the FSA identified us as a D-SIB and imposed a surcharge of 0.5% on our required capital ratio after March 2016 with 3-year transitional arrangement. In addition, FSB published the final standard requiring global systemically important banks (“G-SIBs”) to maintain a certain level of total loss-absorbing capacity (“TLAC”) upon their failure in November 2015. Under the FSA’s policy implementing the TLAC framework in Japan as updated in April 2018, the TLAC requirements in Japan apply not only to Japanese G-SIBs but also to Japanese D-SIBs that are deemed (i) of particular need for a cross-border resolution arrangement and (ii) of particular systemic significance to Japanese financial system if they fail. Based on the revised policy, in March 2019, the FSA published the notices and guidelines of TLAC regulations in Japan. According to these notices and guidelines, Nomura is subject to the TLAC requirements in Japan from March 31, 2021 although Nomura is not identified as a G-SIB as of the date of this annual report. These changes in regulations may increase our funding costs or require us to liquidate financial instruments and other assets, raise additional capital or otherwise restrict our business activities in a manner that could adversely affect our operating or financing activities or the interests of our shareholders.

 

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(4) Deferred tax assets may be impacted due to a change in business condition or in laws and regulations, resulting in an adverse effect on our operating results and financial condition

We recognize deferred tax assets in our consolidated balance sheets as a possible benefit of tax relief in the future. If we experience or forecast future operating losses, if tax laws or enacted tax rates in the relevant tax jurisdictions in which we operate change, or if there is a change in accounting standards in the future, we may reduce the deferred tax assets recognized in our consolidated balance sheets. As a result, it could adversely affect our financial condition and results of operations. See Note 14 “Income taxes” in our consolidated financial statements included in this annual report for further information regarding the deferred tax assets that we currently recognize.

(5) Defects in our anti-money laundering and counter-terrorism financing measures could have serious consequences such as, administrative penalties or punitive fines

In recent years, financial crimes have become more sophisticated, complex, and diverse. As the world faces growing threats of war, terrorism, and cyberattacks, it is highly important to counter the financing of crimes and terrorism. Financial institutions around the world are expected to take strong measures to combat money laundering and terrorist financing. Despite our efforts to improve our anti-money laundering and counter-terrorism financing measures, which we have implemented consistently across Nomura Group in accordance with the Recommendations provided by the Financial Action Task Force (FATF) and the FSA’s “Guidelines on Anti-Money Laundering and Terrorist Financing”, there remains a risk that such measures will not be fully effective in preventing or detecting all violations in a timely manner. As a consequence, we could be subject to administrative penalties or punitive fines. See ““—Risks Relating to Our Financial Position—17.Our business is subject to substantial legal, regulatory and reputational risks—(2) Extensive regulation of our businesses limits our activities and may subject us to significant penalties and losses” for further information regarding regulatory actions and other legal proceedings as well as consequences thereof.

18. Unauthorized disclosure or misuse of personal information held by us may adversely affect our business

We keep and manage personal information obtained from clients in connection with our business. In recent years, there have been many reported cases of personal information and records in the possession of corporations and institutions being improperly accessed disclosed or misused.

Although we exercise care to protect the confidentiality of personal information and have in place policies and procedures designed to safeguard such information and ensure that it is used in compliance with applicable laws, rules and regulations, were any unauthorized disclosure or misuse of personal information to occur, our business could be adversely affected. For example, we could be subject to government actions such as administrative actions or penalties in case there is any violation of applicable personal data protection laws, rules and regulations or be subject to complaints and lawsuits for damages from clients if they are adversely affected due to the unauthorized disclosure or misuse of their personal information (including leakage of such information by an external service provider). In addition, we could incur additional expenses associated with changing our security systems, either voluntarily or in response to administrative guidance or other regulatory initiatives. Moreover, restrictions on our ability to use personal information collected from clients may adversely affect our existing businesses or to develop new ones. Furthermore, any damage to our reputation caused by such unauthorized disclosure or misuse could lead to a decline in new clients and/or a loss of existing clients, as well as to increased costs and expenses incurred for public relations campaigns designed to prevent or mitigate damage to our corporate or brand image or reputation.

19. System failure, the information leakage and the cost of maintaining sufficient cybersecurity could adversely affect our business, financial condition and results of operations

Our businesses rely on secure processing, storage, transmission and reception of personal, confidential and proprietary information on our systems. We have been in the past and may again become the target of attempted unauthorized access, computer viruses or malware, and other cyberattacks designed to access and obtain information on our systems or to disrupt and cause other damage to our services. For example, in June 2018, one of our foreign subsidiaries experienced a spear phishing incident that resulted in the unauthorized access to the firm’s desktop network, requiring us to immediately launch an internal investigation to assess and remediate the incident, notify the appropriate authorities of its occurrence and communicate with clients and other individuals whose data may have been impacted. In response to the COVID-19 pandemic, many of our employees now work remotely using networking or other technologies, and these technologies have become even more critical to our business. The implementation of remote work arrangements may also increase the possibility that we will be subject to cyberattacks and other information security breaches. Although these threats may originate from human error or technological failure, they may also originate from the malice or fraud of internal parties, such as employees, or third parties, including foreign non-state actors and extremist parties. Additionally, we could also be adversely impacted if any of the third-party vendors, exchanges, clearing houses or other financial institutions to whom we are interconnected are subject to cyberattacks or other informational security breaches. Such events could cause interruptions to our systems, reputational damage, client dissatisfaction, legal liability, enforcement actions or additional costs, any and all of which could adversely affect our financial condition and operations.

 

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While we continue to devote significant resources to monitor and update our systems and implement information security measures to protect our systems, there can be no assurance that any controls and procedures we have in place will be sufficient to protect us from future security breaches. As cyber threats are continually evolving, our controls and procedures may become inadequate and we may be required to devote additional resources to modify or enhance our systems in the future.

20. Our business may be adversely affected if we are unable to hire, retain and develop qualified personnel

Nomura believe that our people are our greatest asset and we implement various talent management initiatives in a comprehensive manner. Any failure to hire, retain, and develop qualified personnel may materially and adversely affect our business, financial condition and results of operations. There is significant competition for such personnel, based on factors such as compensation, the working environment, training and benefits available to employees and our reputation as an employer. Spending on our human resource initiatives may harm our profitability. Moreover, developing our human resources and instilling in them a uniform corporate culture is a continuous, intensive process, and we may not be successful in doing so.

 

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4. Operating, Financial and Cash Flow Analyses by Management

(1) Operating Results.

Please refer to Item 1 “Information on the Company and Its Subsidiaries and Affiliates—1. Selected Financial Data” and Item 5 “Financial Information–Consolidates Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Equity, Consolidated Statements of Cash Flows” for Operating Results below. The following information also contains certain forward-looking statements that involve risks, uncertainties and assumptions. Nomura’s actual financial results may differ materially from the forward-looking statements contained herein

Executive Summary

[Overall results of business]

We recognized net revenue of ¥1,335.6 billion during the year ended March 31, 2023, a decrease of 2.1% from the previous fiscal year. Non-interest expenses increased by 4.3% to ¥1,186.1 billion, income before income taxes was ¥149.5 billion, and net income attributable to the shareholders of NHI was ¥92.8 billion. Return on equity was 3.1%. Earnings per Share(1) for the year ended March 31, 2023 was ¥29.74, a decrease from ¥45.23 for the year ended March 31, 2022. We have decided to pay a dividend of ¥12 per share to shareholders of record as of March 31, 2023. As a result, the total annual dividend will be ¥17 per share for the year ended March 31, 2023.

(Note):

1.	Diluted net income attributable to NHI shareholders per share.

[Management’s assessment of events that had a particular impact on the results of the year]

The fiscal year ended March 2023 was dominated by market uncertainties due to heightened geopolitical risks, inflation and central bank monetary policy tightening. Amid this environment, we focused on developing new areas of business, bolstering our existing businesses and better positioning ourselves to meet the individual needs of our clients.

In the Retail Division, the flow revenue etc. (consisting of revenue from transactions such as brokerage revenue, consulting-related revenue and interest income, etc. other than from loans) decreased mainly in the first half amid market uncertainty. On the other hand, Retail continued to provide clients with detailed consulting services to adapt to the changing environment and our efforts to increase client assets gained traction. As a result, recurring revenue (which we define as revenue from client assets and ongoing revenue such as investment trusts, discretionary investments, insurance, loans, level fee assets, etc.) grew year on year by 2 % due to consecutive net inflows of recurring revenue assets. Our recurring revenue cost coverage ratio (the ratio of recurring revenue to non-interest expenses) increased from 49 percent to 51 percent.

In the Investment Management Division, Business revenue remained roughly unchanged year on year as improved performance in Nomura Babcock & Brown’s aircraft leasing business offset a decline in performance fees. The division also booked continued inflows into core investment trusts and alternative assets. On the other hand, divisional performance slowed from the previous year due to lower gain/loss related to investment.

In the Wholesale Division, Macro Products underpinned stronger Fixed Income revenues for the full year. Equities revenues increased as losses related to the U.S. Prime Brokerage Event were no longer present. In Investment Banking, Advisory revenues remained solid on contributions from equity private placement deals, in a challenging environment with a significant decline in global fee pools, mainly in ECM and M&A. On the other hand, Wholesale performance was impacted by higher fixed costs due to yen depreciation and inflation.

[Capital policy and shareholder returns]

We plan to maintain appropriate capital ratios and aim for sustainable growth through optimal capital allocation. As preparatory steps to achieve our management vision, while controlling cost levels, we are investing for growth to realize our management strategy of expanding the scope of our business from public into private markets, in order to balance investment and shareholder returns, and maximize shareholder value by improving productivity and expanding revenue sources.

We strive to pay dividends using a consolidated payout ratio of 30 % of each semi-annual consolidated earnings as a key indicator. Additionally, we aim for a total payout ratio, which includes dividends and share buybacks, of at least 50 %. The total amount of shareholder returns for each fiscal year is determined by comprehensively taking into account trends in the regulatory environment in Japan and overseas, including the strengthening of Basel regulations, as well as the consolidated results of our business divisions. Also, we have changed our dividend policy to strive to pay dividends using a consolidated payout ratio of at least 40 percent of each semi-annual consolidated earnings as a key indicator from the fiscal year ending March 31, 2024.

 

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For further details of our dividend policy, refer to Item 4. “Company Information—3.Dividend Policy.”

[Summary by Segment]

In our Retail Division, net revenue for the year ended March 31, 2023 decreased by 8.5% from the previous fiscal year to ¥300.2 billion. Non-interest expenses decreased by 0.8% to ¥266.7 billion. As a result, income before income taxes decreased by 43.5% to ¥33.5 billion. Based on the basic concept of “Enriching clients by responding to their asset concerns”, our Retail Division has been working on shifting to asset consulting business in close cooperation with each client with the aim of becoming “the most trusted partner”. Flow revenue etc. was weak during the fiscal year, as the market environment remained uncertain and sales of stocks and investment trusts remained at a low level. However, our initiatives to expand our recurring revenue assets are making progress by seeking to offer consulting services on the entire asset bases of our clients. In addition, we are aiming to build a sustainable client base and expand our business over the medium to long term by achieving contact points through workplace financial services, and we have been able to successfully increase the number of clients we provide services to, including the working generation. Going forward, we will strengthen our initiatives in each channel, and in addition to asset management, we will strive to enhance our products and services to provide solutions for a variety of client issues, such as real estate and inheritance.

In our Investment Management Division, net revenue for the year ended March 31, 2023 decreased by 13.1% from the previous fiscal year to ¥128.6 billion. Non-interest expenses increased by 11.2% to ¥85.1 billion. As a result, income before income taxes decreased by 39.2% to ¥43.5 billion. The Investment Management Division has been engaged in the broad asset management business while expanding its product lineup and improving its services to meet the diversifying investment needs of clients. Although the balance of assets under management decreased slightly overall, business revenues remained at the same level as the previous year, due in part to an improvement in the revenues from aircraft leasing company Nomura Babcock & Brown. On the other hand, investment profit decreased from the previous fiscal year due to a decrease in gains related to American Century Investments and gains on valuation and sales of investee companies of Nomura Capital Partners. During the fiscal year under review, as part of our expansion into offering private investments, we established Nomura Real Asset Investment Co., Ltd., which invests in real estate and infrastructure, in a joint venture with Nomura Real Estate Holdings, Inc. We also acquired shares in New Forests Pty Limited, one of the world’s leading forestry asset management companies. In addition, we established Nomura Private Capital LLC to launch a private asset management business in the United States.

In our Wholesale Division, net revenue for the year ended March 31, 2023 increased by 9.9% from the previous fiscal year to ¥772.4 billion. Non-interest expenses increased by 18.2% to ¥743.0 billion. As a result, income before income taxes decreased by 60.6% to ¥29.4 billion. In Global Markets, we continued to reinforce our core strengths across regions, enhanced risk control and governance and focused on providing uninterrupted service and liquidity to our clients, as they rebalanced and hedged their portfolio in the highly volatile and uncertain markets which experienced a ‘paradigm shift’. We delivered resilient performance, deepened engagement with clients across flow as well as structured financing and solutions business. In Investment Banking, client activity was lower than the previous fiscal year due to increased caution among clients in light of geopolitical risks and uncertainty in the market environment surrounding monetary policy. As a result, earnings declined for the full year due to a decline in M&A, and particularly in Equity Capital Markets and ALF. However, the business continued to engage closely with clients and enhanced Equity Private Placements and Private Financing opportunities along with Solutions business to effectively help clients in hedging and managing risk.

 

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Progress on Key Performance Indicators (KPIs)

[Management Indicators]

Return on Equity

One component of Nomura’s management vision is “achieving sustainable growth by solving social issues” and we have set Return on Equity (ROE) as one of our most important indicators towards the fiscal year ending March 31, 2025. After the introduction of the Corporate Governance Code in Japan, the importance of management having an awareness of capital costs has increased among Japanese companies. In addition, under the framework of global financial regulations, more effective use of capital is required. As a result, we believe that the optimal allocation of management resources will become even more important for our company in the future. Accordingly, beginning in the year ended March 31, 2021, we adopted ROE as a key management indicator, which management uses to track the progress of our sustainable business transformation, along with the revision of “Fundamental Management Policy” based on the approval at the Board of Directors meeting held in May 2020.

ROE is defined and calculated as net income attributable to NHI shareholders divided by total NHI shareholders’ equity. We believe that disclosure of ROE is useful to investors in that it helps them to assess business conditions and our effective use of capital to enhance corporate value.

We have set a target ROE of 8-10% for the fiscal year ending March 31, 2025, reflecting the cost of capital demanded by our company. However, ROE may be of limited use in that it does not necessarily reflect financial soundness. In order to avoid the excessive pursuit of capital efficiency with the aim of improving ROE at the expense of financial soundness, we attach importance to the creation of corporate value, giving due consideration to financial soundness, and thereby improving ROE. ROE for the year ended March 31, 2023 decreased to 3.1% from 5.1% for the prior fiscal year.

Common equity Tier1 capital ratio

There are multiple global financial regulations that we must comply with, including capital regulations established by Basel Committee on Banking Supervision as interpreted and implemented by the FSA which have a direct impact on the way we conduct business. For this reason, we have set a target of maintaining a common equity Tier 1 capital ratio of at least 11%, so that we will take into consideration the financial soundness including certain buffer against severe market stress. Our common equity Tier 1 capital ratio decreased to 16.32% as of March 31, 2023 from 17.22% as of March 31, 2022. For further details, on the key capital requirements we must follow, see Item 2 “Operating and Financial Review—4. Operating, Financial and Cash Flow Analyses by Management—(5) Liquidity and Capital Resources—Consolidated Regulatory Capital Requirements”.

 

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[Indicators by Business Segment]

In addition to the Group KPIs, our management also uses certain divisional specific KPIs to monitor and assess performance of the divisions.

Retail

We have adopted the following key indicators in the Retail Division to quantify the outcomes of our efforts and monitor our business: Recurring revenue assets; Net inflows of recurring revenue assets; Flow business clients; and Services for salaried employees; so that our management will be able to monitor the progress of our businesses and target sustainable and further business growth. We believe that disclosure of those indicators is useful to investors in that it helps them to assess the progress of the division’s client-facing activities as well as digest and understand our growth potential.

 

		Year ended March 31 (Trillions of Japanese Yen)
		2021				2022				% Change from previous year				2023				% Change from previous year
Recurring revenue assets		¥	18.2			¥	19.6				7.7	%		¥	18.7				(4.6	)%
		Year ended March 31 (Billions of Japanese Yen)
		2021				2022				% Change from previous year				2023				% Change from previous year
Net inflows of recurring revenue assets		¥	(191.3	)		¥	477.2				—	%		¥	333.7				(30.1	)%
		Year ended March 31 (Thousands)
		2021				2022				% Change from previous year				2023				% Change from previous year
Flow business clients			1,534				1,505				(1.9	)%			1,446				(3.9	)%
Services for salaried employees			3,242				3,357				3.5	%			3,489				3.9	%

Recurring Revenue Assets

Recurring revenue assets are defined by adding related loans to the total amount of assets, such as investment trusts and discretionary investments, for which management fees and other recurring fees are charged. The amount of loans totaled approximately ¥721.9 billion within Loans receivable in the consolidated balance sheets as of March 31, 2023. Total recurring revenue assets as of March 31, 2023 were ¥18.7 trillion, and has dropped from March 31, 2022 due to market factors.

Net Inflows of Recurring Revenue Assets

Net inflows of recurring revenue assets are defined and calculated by subtracting the amount of sell-offs and outflows from the amount of purchase and inflows of recurring revenue assets, and is an index used to measure the expansion of recurring revenue assets excluding changes in market value. The total net inflows of recurring revenue assets for the fiscal year ended March 31, 2023 was ¥333.7 billion, and we have achieved a net increase in recurring revenue assets, mainly in services such as investment trusts, discretionary investment.

Flow Business Clients

The number of flow business clients is defined as the total number of clients to whom we provide flow business, businesses that generate flow revenues, and is a measure of the growth in the client base that is critical to realizing the growth in flow revenue, etc. The number of flow business clients as of March 31, 2023 was approximately 1,446 thousand, which is lower than that of March 31, 2022, and the growth of client base is a continuous challenge.

Services for Salaried Employees

Services for salaried employees are defined as the sum of the number of workplace financial services provided, such as the number of members of the employee stock ownership, accounts derived from the employee stock ownership (excluding current members) and corporate DC pension plan subscribers, and is an index used to measure the expansion of the client base through workplace financial businesses. As of March 31, 2023, the number of workplace services provided stood at 3,489 thousand. We have achieved expansion at levels exceeding our targets, mainly in terms of the increase in number of members of the employee stock ownership, and have expanded our client base which will lead to sustainable growth.

 

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Investment Management Division

We have set the balance of assets under management as a key performance indicator for the Investment Management Division. The businesses in the Investment Management Division generally earn management or similar fees based on the amount of assets under management, meaning that revenue trends for these businesses tend to follow trends in the amount of assets under management, and our management considers this measure to be effective in monitoring the progress of these businesses. We also believe that it is an important indicator of how well investment products are received by investors. Beginning in the fiscal year ending March 31, 2022, we have also set net inflows as a key performance indicator in the Investment Management Division. We believe that net inflows is an effective measure in monitoring the progress of the division’s asset management businesses, excluding market factors from fluctuations in the balance of assets under management. It is an important indicator for ascertaining the effectiveness of the division’s measures to expand assets under management and thereby achieve its profit expansion target.

 

		Year ended March 31 (Trillions of Japanese Yen)
		2021				2022				% Change from previous year				2023				% Change from previous year
The balance of assets under management		¥	64.7			¥	67.9				4.9	%		¥	67.3				(0.9	)%
		Year ended March 31 (Billions of Japanese Yen)
		2022								2023								% Change from previous year
Net inflow			¥2,066								¥(760)								—	%

The balance of assets under management includes the net balance (after deducting duplications) of assets under management (gross) of Nomura Asset Management Co., Ltd., Nomura Corporate Research and Asset Management Inc. and Wealth Square., Ltd., as well as third-party investments in funds managed by Nomura SPARX Investment, Inc., Nomura Mezzanine Partners., Ltd., Nomura Capital Partners Co., Ltd. and Nomura Research & Advisory Co., Ltd. Net inflows are calculated by subtracting cash outflows from cash inflows. For these purposes, cash outflows do not include outflows from distributions.

During the fiscal year ended March 31, 2023, the balance of assets under management slightly decreased due to net outflows and market factors, etc. In the investment trust business, although ETFs experienced outflows of funds, the balance of publicly offered investment trusts increased, driven by inflows into Japanese equity funds, balanced funds, and defined contribution pension products. On the other hand, the investment advisory business had marked net outflows, due to a significant outflow of funds from Japanese pension institutions as well as from investors taking a risk averse stance in response to global monetary tightening.

Wholesale

We have adopted a cost-to-income ratio and a revenue to modified RWA ratio as additional key performance indicators in our Wholesale Division. We believe that disclosure of these indicators would be useful for investors to assess progress in terms of cost and resource efficiency. Additionally, we use these indicators to evaluate our business based on progress on cost savings initiatives and return on resources.

 

		Year ended March 31
		2021				2022				% Change from previous year				2023				% Change from previous year
Cost-to-income ratio			91	%			89	%			(2	)%			96	%			7	%
Revenue/modified RWA			6.4	%			7.0	%			0.6	%			6.5	%			(0.5	)%

Cost-to-income ratio

The cost-to-income ratio for the Wholesale Division is calculated by dividing non-interest expenses for the division for a given reporting period by net revenue generated by the division for the same period, calculated consistently, in each case, with our segment presentation for the division. It is monitored at a divisional level to track operating margins for the business. The ratio increased during the year ended March 31, 2023 compared to the previous fiscal year as Wholesale costs rose faster than overall revenues. Cost growth was underpinned by yen depreciation and inflation while the revenue increase was driven by strength in Fixed Income and absence of losses related to the U.S. Prime Brokerage event in Equities. This revenue increase was partially offset by a decline in Investment Banking revenue in line with overall market slowdown. The ratio decreased during the year ended March 31, 2022 compared to the previous fiscal year primarily due to less impact from the U.S. Prime Brokerage Event on revenue and cost during the year. However, there was some effect on costs due to hiring in line with strategic initiatives and market-driven base salary adjustments.

 

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Revenue to modified Risk Weighted Asset (RWA) ratio

The revenue to modified RWA ratio for the Wholesale division is calculated by dividing net revenue generated by our Wholesale Division for a given reporting period (in the case of net revenue for the Wholesale Division for periods shorter than a full fiscal year, on an annualized basis) by the average balance of modified RWA used by the Wholesale Division for the same period. The Revenue to modified RWA ratio is monitored to track our revenue earning capacity against risk resources deployed. Modified RWA is the total of (i) average daily risk-weighted assets as calculated and presented under Basel regulations as interpreted and implemented by the FSA and (ii) an adjustment equal to the regulatory adjustment to common equity tier1 (CET1) capital calculated and presented under Basel regulations as interpreted and implemented by the FSA divided by our internal minimum capital ratio target of 12.5%. (daily average for the accounting period), which we use to estimate the amount of deductions to RWA generated by the division. The revenue to modified RWA as we calculate and present it may differ from similarly titled measures presented by our competitors due to the approach and methodologies used for calculation. Our credit risk-weighted assets and operational risk equivalent assets are calculated by using the foundation Internal Ratings-Based Approach and the Standardized Approach, respectively, with the approval of the FSA. Furthermore, Market risk equivalent assets are calculated by using the Internal Models Approach for market risk. The conversion of Wholesale RWA to modified RWA is based on adjustments reflecting our internal minimum capital ratio target. Moreover, the usefulness of this ratio may be limited in that the adjustment applied to RWA, which is intended to capture the appropriate amount of RWA to attribute to our businesses (as opposed to RWA as calculated for regulatory capital purposes), is an estimate incorporating our internal risk tolerance; however, this adjustment may not appropriately reflect the actual regulatory capital impact of the charged assets that are used by our business. Revenue to modified RWA decreased for the year ended March 31, 2023 compared to the previous fiscal year, with increase in RWA mainly from yen depreciation more than offsetting the impact of increase in overall revenues. The ratio increased for the year ended March 31, 2022 compared to the previous fiscal year primarily because of less impact from the U.S. Prime Brokerage Event on revenue as well as increased Investment Banking revenue.

 

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Results of Operations

Overview

The following table provides selected consolidated statements of income information for the years ended March 31, 2021, 2022 and 2023.

 

		Millions of yen, except percentages
		Year ended March 31
		2021				2022				% Change from previous year				2023				% Change from previous year
Non-interest revenues:
Commissions		¥	376,897			¥	332,344				(11.8	)%		¥	279,857				(15.8	)%
Fees from investment banking			108,681				149,603				37.7				113,208				(24.3	)
Asset management and portfolio service fees			230,047				269,985				17.4				271,684				0.6
Net gain on trading			310,040				368,799				19.0				563,269				52.7
Gain on private equity and debt investments			12,734				30,768				141.6				14,504				(52.9	)
Gain (loss) on investments in equity securities			14,053				5,446				(61.2	)			(1,426	)			—
Other			208,317				152,832				(26.6	)			130,940				(14.3	)
Total Non-interest revenues			1,260,769				1,309,777				3.9				1,372,036				4.8
Net interest revenue			141,103				54,113				(61.7	)			(36,459	)			—
Net revenue			1,401,872				1,363,890				(2.7	)			1,335,577				(2.1	)
Non-interest expenses			1,171,201				1,137,267				(2.9	)			1,186,103				4.3
Income before income taxes			230,671				226,623				(1.8	)			149,474				(34.0	)
Income tax expense			70,274				80,090				14.0				57,798				(27.8	)
Net income		¥	160,397			¥	146,533				(8.6	)%		¥	91,676				(37.4	)%
Less: Net income (loss) attributable to noncontrolling interests			7,281				3,537				(51.4	)			(1,110	)			—
Net income attributable to NHI shareholders		¥	153,116			¥	142,996				(6.6	)%		¥	92,786				(35.1	)%
Return on equity			5.7	%			5.1	%							3.1	%

Net revenue decreased from the year ended March 31, 2022 to the year ended March 31, 2023. This decrease was primarily driven by Commissions from our Retail Division and Net interest revenue. The decrease in Commissions was primarily due to a decrease in commissions received from brokerage for equity and equity-related products and distribution of investment trusts. Fees from investment banking decreased during the year ended March 31, 2023 primarily due to a decrease in revenue from underwriting and sales commission. Asset management and portfolio service fees increased slightly but remained generally flat during the year ended March 31, 2023. Net gain on trading increased during the year ended March 31, 2023, primarily due to losses related to the U.S. Prime Brokerage Event disappeared. Net gain on trading also included total losses of ¥3.4 billion attributable to changes in Nomura’s own creditworthiness with respect to derivative liabilities primarily due to a tightening of Nomura’s credit spread. Gain (loss) on investments in equity securities decreased during the year ended March 31, 2023, primarily due to a result of market correction during the year ended March 31, 2023. Gain (loss) on investments in equity securities includes both realized and unrealized gains and losses on investments in equity securities held for operating purposes which are our investments in unaffiliated companies, which we hold on a long-term basis in order to promote existing and potential business relationships. Other decreased during the year ended March 31, 2023, primarily due to less gain from sale of affiliated companies.

Net revenue decreased from the year ended March 31, 2021 to the year ended March 31, 2022. This decrease is primarily driven by Commissions earned by Retail Division. Commissions decreased from the year ended March 31, 2021 to the year ended March 31, 2022 primarily due to a decrease in commissions received from the brokerage commissions from equity and equity-related products and the distribution of investment trusts. Fees from investment banking increased from the year ended March 31, 2021 to the year ended March 31, 2022 primarily due to an increase in revenue from advisory services. Asset management and portfolio service fees increased from the year ended March 31, 2021 to the year ended March 31, 2022 mainly due to increases in recurring revenue in Retail Division and in revenue from high level of asset under management in Investment Management Division. Net gain on trading increased from the year ended March 31, 2021 to the year ended March 31, 2022, primarily due to the U.S. Prime Brokerage Event subsided. Net gain on trading also included total gains of ¥8.2 billion attributable to changes in Nomura’s own creditworthiness with respect to derivative liabilities primarily due to a widening of Nomura’s credit spread. Gain (loss) on investments in equity securities decreased from the year ended March 31, 2021 to the year ended March 31, 2022, primarily due to a result of market appreciation during the year ended March 31, 2021, not repeated in March 31, 2022. Gain (loss) on investments in equity securities includes both realized and unrealized gains and losses on investments in equity securities held for operating purposes which are our investments in unaffiliated companies, which we hold on a long-term basis in order to promote existing and potential business relationships. Other decreased from the year ended March 31, 2021 to the year ended March 31, 2022, primarily due to American Century Investments related gain/loss.

 

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Net revenue increased from the year ended March 31, 2020 to the year ended March 31, 2021 despite recognizing significant losses in connection with the U.S. Prime Brokerage Event in our Wholesale Division. This increase is primarily driven by Commissions earned by Retail Division. Commissions increased from the year ended March 31, 2020 to the year ended March 31, 2021 primarily due to an increase in commissions received from the distribution of investment trusts and brokerage commissions received from equity and equity related products. Fees from investment banking increased from the year ended March 31, 2020 to the year ended March 31, 2021 primarily due to an increase in revenue from M&A advisory services and our solution services associated with fund raising. Asset management and portfolio service fees decreased from the year ended March 31, 2020 to the year ended March 31, 2021 mainly due to decreases in fee ratios. Net gain on trading decreased from the year ended March 31, 2020 to the year ended March 31, 2021, primarily due to the U.S. Prime Brokerage Event. Net gain on trading also included total losses of ¥13.4 billion attributable to changes in Nomura’s own creditworthiness with respect to derivative liabilities primarily due to a tightening of Nomura’s credit spreads which were temporarily widened at the end of March 2020 due to the COVID-19 pandemic. Gain (loss) on investments in equity securities increased from the year ended March 31, 2020 to the year ended March 31, 2021, primarily due to a result of market appreciation during the year ended March 31, 2021. Gain (loss) on investments in equity securities includes both realized and unrealized gains and losses on investments in equity securities held for operating purposes which are our investments in unaffiliated companies, which we hold on a long-term basis in order to promote existing and potential business relationships. Other increased from the year ended March 31, 2020 to the year ended March 31, 2021, primarily due to recognizing a non-recurring gain of ¥71.1 billion resulting from the rights conversion related to the Tokyo Nihonbashi district redevelopment project.

Net interest revenue fluctuates by the balance and structure of total assets and liabilities, which includes trading assets and financing and lending transactions, and term structure and volatility of interest rates. Net interest revenue is an integral component of trading activity. In assessing the profitability of our overall business and of our Global Markets business in particular, we view Net interest revenue and Non-interest revenues in aggregate. For the year ended March 31, 2023, interest revenue, including a dividend from our investment in American Century Investments increased by 292%, and interest expense increased by 400% from the year ended March 31, 2022. As a result, Net interest revenue for the year ended March 31, 2023 decreased from the year ended March 31, 2022. For the year ended March 31, 2022, interest revenue, including a dividend from our investment in American Century Investments decreased by 20%, and interest expense increased by 7% from the year ended March 31, 2021. As a result, Net interest revenue for the year ended March 31, 2022 decreased from the year ended March 31, 2021.

Non-interest expenses for the year ended March 31, 2023 increased from the year ended March 31, 2022, primarily due to increase in Compensation and benefits even though the credit losses related to the U.S. Prime Brokerage Event disappeared compared to previous fiscal year.

Non-interest expenses for the year ended March 31, 2022 decreased from the year ended March 31, 2021, primarily due to the credit losses related to the U.S. Prime Brokerage Event subsiding compared to previous fiscal year and the absence of an impairment loss of ¥47.7 billion on our equity method investments in Nomura Real Estate Holdings.

We are subject to various taxes in Japan and with effect from April 1, 2022 we have applied the Group Tax Sharing system. The Group Tax Sharing system is only available for a national tax. Our domestic effective statutory tax rate was approximately 31% for the fiscal year ended March 31, 2021, 2022 and 2023, respectively. Our foreign subsidiaries are subject to the income taxes of the jurisdictions in which they operate, which are generally lower than those in Japan. The Company’s effective statutory tax rate in any one year is therefore dependent on our geographic mix of profits and losses and also on the specific tax treatment applicable in each jurisdiction.

Income tax expense for the year ended March 31, 2023, represented an effective tax rate of 38.7%. The significant factors causing the difference between the effective tax rate of 38.7% and the effective statutory tax rate of 31% was the changes in deferred tax valuation allowances which increased the effective tax rate by 11.3%, partially offset by the non-taxable income which decreased the effective tax rate by 4.7%.

Income tax expense for the year ended March 31, 2022, represented an effective tax rate of 35.3%. The significant factors causing the difference between the effective tax rate of 35.3% and the effective statutory tax rate of 31% was the changes in deferred tax valuation allowances which increased the effective tax rate by 18.0%, partially offset by the effect of changes in foreign tax laws which decreased the effective tax rate by 14.4%.

Income tax expense for the year ended March 31, 2021, represented an effective tax rate of 30.5%. The significant factors causing the difference between the effective tax rate of 30.5% and the effective statutory tax rate of 31% was the effect of the tax benefit recognized on the outside basis differences for investment in subsidiaries and affiliates which decreased the effective tax rate by 8.7%, partially offset by changes in deferred tax valuation allowances which increased the effective tax rate by 8.7%.

 

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Results by Business Segment

We established our Investment Management Division to replace our former Asset Management Division and the Merchant Banking Division on April 1, 2021. Accordingly, our operating management and management reporting are prepared based on our Retail, Investment Management and Wholesale Divisions. We have disclosed business segment information in accordance with this structure.

Net gain (loss) related to economic hedging transactions, a part of realized gain (loss) on investments in equity securities held for operating purposes, our share of equity in the earnings of affiliates, corporate items and other financial adjustments are included as “Other” operating results outside of business segments in our segment information. A part of unrealized gain (loss) on certain investments in equity securities held for operating purposes is classified as a reconciling item outside of our segment information. The following segment information should be read in conjunction with Note 20 “Segment and geographic information” in our consolidated financial statements included in this annual report. The reconciliation of our segment results of operations and consolidated financial statements is provided in Note 20 “Segment and geographic information” in our consolidated financial statements included in this annual report.

Retail

Operating Results of Retail

 

		Millions of yen
		Year ended March 31
		2021				2022				% Change from previous year				2023				% Change from previous year
Non-interest revenue		¥	366,271			¥	324,642				(11.4	)%		¥	297,496				(8.4	)%
Net interest revenue			2,538				3,343				31.7				2,695				(19.4	)
Net revenue			368,809				327,985				(11.1	)			300,191				(8.5	)
Non-interest expenses			276,480				268,745				(2.8	)			266,695				(0.8	)
Income before income taxes		¥	92,329			¥	59,240				(35.8	)%		¥	33,496				(43.5	)%

Net revenue decreased from the year ended March 31, 2022 to the year ended March 31, 2023 primarily due to a decrease in commissions earned from brokerage commissions and the distribution of investment trusts.

Net revenue decreased from the year ended March 31, 2021 to the year ended March 31, 2022 primarily due to a decrease in commissions earned from brokerage commissions and the distribution of investment trusts.

Non-interest expenses decreased from the year ended March 31, 2022 to the year ended March 31, 2023 primarily due to a decrease in bonus expense driven by a decrease in revenue.

Non-interest expenses decreased from the year ended March 31, 2021 to the year ended March 31, 2022 primarily due to a decrease in bonus expense driven by a decrease in revenue.

 

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The following table shows the breakdown of Retail non-interest revenues for the year ended March 31, 2022 and 2023.

 

										Millions of yen
										Year ended March 31
										2022				2023				% Change from previous year
Commissions										¥	138,525			¥	112,455				(18.8	)%
Brokerage commissions											67,419				50,901				(24.5	)
Commissions for distribution of investment trusts											43,537				30,183				(30.7	)
Other commissions											27,569				31,371				13.8
Net gain on trading											43,981				44,171				0.4
Fees from investment banking											19,003				16,184				(14.8	)
Asset management fees											109,300				108,085				(1.1	)
Others											13,833				16,601				20.0
Non-interest revenues										¥	324,642			¥	297,496				(8.4	)%
Commissions decreased from the year ended March 31, 2022 to the year ended March 31, 2023, primarily due to decrease in brokerage commissions received from equity and equity-related products and in commissions for distribution of investment trusts. Net gain on trading slightly increased from the year ended March 31, 2022 to the year ended March 31, 2023, but remained mainly unchanged.   Retail Client Assets   The following table presents amounts and details regarding the composition of Retail client assets as of March 31, 2022 and 2023. Retail client assets consist of clients’ assets under management and assets relating to variable annuity insurance products.
		Trillions of yen
		Year ended March 31, 2022
		Balance at beginning of  year				Gross inflows				Gross outflows				Market appreciation / (depreciation)				Balance at end of  year
Equities		¥	82.3			¥	19.5			¥	(19.8	)		¥	(4.5	)		¥	77.5
Debt securities			18.1				15.5				(13.3	)			(2.6	)			17.7
Equity investment trusts			10.2				2.4				(2.1	)			0.3				10.8
Debt investment trusts			8.0				0.3				(0.6	)			(0.2	)			7.5
Overseas mutual funds			1.1				0.2				0.0				0.0				1.3
Others			6.9				1.1				(0.5	)			(0.2	)			7.3
Total		¥	126.6			¥	39.0			¥	(36.3	)		¥	(7.2	)		¥	122.1
		Trillions of yen
		Year ended March 31, 2023
		Balance at beginning of  year				Gross inflows				Gross outflows				Market appreciation / (depreciation)				Balance at end of  year
Equities		¥	77.5			¥	21.4			¥	(18.6	)		¥	(2.3	)		¥	78.0
Debt securities			17.7				15.5				(22.9	)			8.2				18.5
Equity investment trusts			10.8				2.8				(2.6	)			(0.8	)			10.2
Debt investment trusts			7.5				0.1				(0.7	)			(0.1	)			6.8
Overseas mutual funds			1.3				0.1				(0.1	)			(0.1	)			1.2
Others			7.3				1.0				(0.5	)			(0.3	)			7.5
Total		¥	122.1			¥	40.9			¥	(45.4	)		¥	4.6			¥	122.2

Retail client assets increased from March 31, 2022 to March 31, 2023. The balances of our clients’ equity and equity-related products increased ¥0.5 trillion from March 31, 2022 to ¥78.0 trillion as of March 31, 2023, mainly due to increase of inflows during the year. The balances of our clients’ investment trusts decreased by ¥1.4 trillion from ¥19.6 trillion as of March 31, 2022 to ¥18.2 trillion as of March 31, 2023.

Retail client assets decreased from March 31, 2021 to March 31, 2022. The balances of our clients’ equity and equity-related products decreased from March 31, 2021 to ¥77.5 trillion as of March 31, 2022, mainly due to market depreciation during the year. The balances of our clients’ investment trusts increased by ¥0.3 trillion from ¥19.3 trillion as of March 31, 2021 to ¥19.6 trillion as of March 31, 2022.

 

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Investment Management

Operating Results of Investment Management

 

		Millions of yen
		Year ended March 31
		2021				2022				% Change from previous year				2023				% Change from previous year
Non-interest revenue		¥	153,523			¥	129,848				(15.4	)%		¥	120,096				(7.5	)%
Net interest revenue			9,627				18,145				88.5				8,463				(53.4	)
Net revenue			163,150				147,993				(9.3	)			128,559				(13.1	)
Non-interest expenses			72,142				76,478				6.0				85,064				11.2
Income before income taxes		¥	91,008			¥	71,515				(21.4	)%		¥	43,495				(39.2	)%

Net revenue decreased from the year ended March 31, 2022 to the year ended March 31, 2023, primarily due to decrease in unrealized gains recognized in respect of our investment in American Century Investments.

Net revenue decreased from the year ended March 31, 2021 to the year ended March 31, 2022, primarily due to decrease in unrealized gains recognized in respect of our investment in American Century Investments.

Non-interest expenses increased from the year ended March 31, 2022 to the year ended March 31, 2023, primarily due to increases in non-personnel expenses driven by change in foreign exchange rates and inflation.

Non-interest expenses increased from the year ended March 31, 2021 to the year ended March 31, 2022, primarily due to an increases in personnel expenses driven by an increase in business revenue.

The breakdown of net revenue for Investment Management is as follows.

 

		Millions of yen
		Year ended March 31
		2021				2022				% Change from previous year				2023				% Change from previous year
Business revenue(1)		¥	111,946			¥	119,920				7.1	%		¥	120,664				0.6	%
Investment gain/ loss(2)			51,204				28,073				(45.2	)			7,895				(71.9	)
Net revenue		¥	163,150			¥	147,993				(9.3	)%		¥	128,559				(13.1	)%

Note: Prior period amounts have been reclassified to conform to the current year presentation.

 

(1)

Consists of division revenue, other than investment gain/loss, including revenue generated by our asset management business (excluding gains and losses related to our investment in American Century Investments), revenues generated by Nomura Babcock & Brown Co., Ltd.’s aircraft leasing-related businesses and management fee revenues generated from our private equity and other investment businesses

 

(2)	Consists of division revenue attributable to investments (including fair value fluctuations, funding cost and dividends), including gains and losses related to our investment in American Century Investments, our investments held in our private equity and other investment businesses.

 

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The following table presents assets under management of each principal Nomura entity within our Investment Management Division as of March 31, 2022 and 2023.

 

		Billions of yen
		Year ended March 31, 2022
		Balance at beginning of year				Gross inflows				Gross outflows				Market appreciation / (depreciation)				Balance at end of year
Nomura Asset Management Co., Ltd .		¥	66,158			¥	26,883			¥	(25,549	)		¥	2,100			¥	69,592
Nomura Corporate Research and Asset Management Inc. etc			3,300				944				(690	)			313				3,867
Combined total			69,458				27,827				(26,239	)			2,413				73,459
Shared across group companies			(4,792	)			(1,462	)			1,163				(455	)			(5,546	)
Total		¥	64,666			¥	26,365			¥	(25,076	)		¥	1,958			¥	67,913
		Billions of yen
		Year ended March 31, 2023
		Balance at beginning of year				Gross inflows				Gross outflows				Market appreciation / (depreciation)				Balance at end of year
Nomura Asset Management Co., Ltd .		¥	69,592			¥	23,168			¥	(24,762	)		¥	1,094			¥	69,092
Nomura Corporate Research and Asset Management Inc. etc			3,867				1,040				(1,074	)			35				3,868
Combined total			73,459				24,208				(25,836	)			1,129				72,960
Shared across group companies			(5,546	)			(1,409	)			1,382				(115	)			(5,688	)
Total		¥	67,913			¥	22,799			¥	(24,454	)		¥	1,014			¥	67,272

Asset under management was largely unchanged the year ended March 31, 2022 to the year ended March 31, 2023.

The following table presents NAM’s market share, in terms of net asset value, of the Japanese publicly offered investment trusts market as of March 31, 2021, 2022 and 2023.

 

		March 31
		2021				2022				2023
Total of publicly offered investment trusts			28	%			27	%			27	%
Equity investment trusts			26	%			25	%			25	%
Debt investment trusts			44	%			44	%			44	%

(Source) Nomura’s own calculation based on data published by the Investment Trusts Association, Japan.

Investment trust assets included in assets under management by NAM were ¥48.0 trillion as of March 31, 2023 and were largely unchanged the year ended March 31, 2022 to the year ended March 31, 2023.

Investment trust assets included in assets under management by NAM were ¥47.9 trillion as of March 31, 2022, a ¥1.3 trillion, 3% increased from March 31, 2021. This increase was due to net inflows of ¥1.0 trillion and market appreciation of ¥0.3 trillion. The balances of certain investment trusts, including TOPIX Exchange Traded Fund increased.

 

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Wholesale

Operating Results of Wholesale

The operating results of our Wholesale Division comprise the combined results of our Global Markets and Investment Banking businesses. Our Global Markets business comprises our Fixed Income and Equities businesses.

 

		Millions of yen
		Year ended March 31
		2021				2022				% Change from previous year				2023				% Change from previous year
Non-interest revenue		¥	524,019			¥	617,227				17.8	%		¥	809,681				31.2	%
Net interest revenue			167,337				85,828				(48.7	)			(37,301	)			—
Net revenue			691,356				703,055				1.7				772,380				9.9
Non-interest expenses			627,051				628,563				0.2				743,011				18.2
Income before income taxes		¥	64,305			¥	74,492				15.8	%		¥	29,369				(60.6	)%

Net revenue increased from the year ended March 31, 2022 to the year ended March 31, 2023. Fixed Income revenues in Global Markets increased due to a strong performance in macro products. Equities revenues in Global Markets increased primarily due to disappearance of the losses related to the U.S. Prime Brokerage Event recognized during the previous year. Investment Banking revenues decreased primarily due to decreases in commissions from underwriting and sales during the year ended March 31, 2023.

Net revenue increased from the year ended March 31, 2021 to the year ended March 31, 2022. Fixed Income revenues in Global Markets decreased due to a slowdown of strong performance in macro products in the year ended March 31, 2021. Equities revenues in Global Markets decreased primarily due to losses related to the U.S. Prime Brokerage Event. Investment Banking revenues increased primarily due to increases in advisory business deals during the year ended March 31, 2022.

Non-interest expenses increased from the year ended March 31, 2022 to the year ended March 31, 2023, primarily due to the impact of a weaker yen on the translation of non-yen denominated oversea expenses and an increase in compensation expenses compared to previous year.

Non-interest expenses slightly increased from the year ended March 31, 2021 to the year ended March 31, 2022, primarily due to increases in yen-denominated expenses at overseas driven by the weaker yen, partially offset with credit losses related to the U.S. Prime Brokerage Event subsiding compared to the year ended March 31, 2021.

The following table presents a breakdown of net revenue for Wholesale for the year ended March 31, 2021, 2022 and 2023.

 

		Millions of yen
		Year ended March 31
		2021				2022				% Change from previous year				2023				% Change from previous year
Wholesale net revenue:
Global Markets net revenue		¥	575,533			¥	556,417				(3.3	)%		¥	656,298				18.0	%
Investment Banking net revenue			115,823				146,638				26.6				116,082				(20.8	)
Net revenue		¥	691,356			¥	703,055				1.7	%		¥	772,380				9.9	%

Global Markets

We have a proven track record in sales and trading of debt securities, equity securities, and foreign exchange, as well as derivative products referencing these financial instruments to domestic and overseas institutional investors. In response to the increasingly diverse and complex needs of our clients, we continue to enhance our trading and product origination capabilities to offer superior products not only to domestic and overseas institutional investors, but also to our Retail and Investment Management Divisions. This cross-divisional approach also extends to Investment Banking, where close collaboration leads to high value-adding solutions for our clients. These ties enable us to identify the types of product of interest for investors and develop and deliver products that meet their needs. We continue to develop extensive ties with institutional investors in Japan and international markets, as well as wealthy investors, public-sector agencies, and regional financial institutions in Japan, and government agencies, financial institutions, and corporations around the world.

 

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