Daiwa Securities Group Inc. · TSE:8601

Daiwa Securities — Q1 FY2019 Earnings Presentation

36 slides from Daiwa Securities's earnings presentation, Jul 31, 2019

1. Slide 1: 1Q FY2019 Earnings Announcement

   Daiwa Securities Group Inc. 1Q FY2019 Earnings Announcement July 31, 2019 This presentation may contain forward-looking statements about the Daiwa Securities Group. You can identify these statements by the fact that they do not relate strictly to historic or current facts. These statements discuss f

2. Slide 2: Table of Contents

   Table of Contents Highlights 3-4 Financial Summary 5-7 B/S & Financial Management Summary 8-9 P/L Summary 10 Breakdown of SG&A 11-12 Overseas Operations 13 Segment Information 14-21 Reference 22-35 2

3. Slide 3: Highlights (1Q/FY2019, YoY)

   Highlights (1Q/FY2019, YoY) Both Net operating revenues and Ordinary income decreased YoY. % Changes vs Consolidated earnings results FY2019 1Q FY2018 1Q 1Q/FY2018 Net operating revenues ¥107.1 bn ¥115.6 bn -7.3% Ordinary income ¥17.9 bn ¥25.8 bn -30.7% Profit attributable to owners of parent ¥16.0

4. Slide 4: Summary (1Q/FY2019, QoQ)

   Summary (1Q/FY2019, QoQ) ※The following shows the percentage change from the previous quarter. 1Q FY2019 Net operating revenues: ¥107.1 bn (-0.3%)  Revenues in Retail Division increased as investment trust sales and foreign equities transaction improved.  Revenues in Wholesale Division declined. I

5. Slide 5: Financial Summary

   Consolidated Financial Summary FY2018 FY2019 % Change % Change (¥ Millions) vs vs FY2018 1Q 2Q 3Q 4Q 1Q 4Q/FY18 1Q/FY18 Operating revenues 175,175 172,570 188,753 184,086 181,341 -1.5% 3.5% 720,586 Net operating revenues 115,606 107,837 110,302 107,493 107,123 -0.3% -7.3% 441,240 SG&A 93,454 92,321

6. Slide 6: Segment Summary

   Consolidated Segment Summary (¥ Millions) FY2018 FY2019 % Change vs % Change vs Net operating revenues 4Q/FY18 1Q/FY18 FY2018 1Q 2Q 3Q 4Q 1Q Retail 50,609 47,314 46,388 41,552 43,095 3.7% -14.8% 185,865 Wholesale 39,798 39,394 37,092 42,618 39,420 -7.5% -0.9% 158,903 Global M arkets 28,078 31,177 19

7. Slide 7: Segment Summary

   Consolidated Segment Summary Net operating revenues Ordinary income Retail Division Wholesale Division (¥ Billions) (¥ Billions) Global Markets (Net operating revenues) 59.5 Global Investment Banking (Net operating revenues) 54.5 51.2 50.6 48.8 47.3 47.1 46.3 45.7 43.0 43.0 42.6 41.5 39.7 39.3 39.4

8. Slide 8: B/S Summary

   Consolidated B/S Summary Consolidated Balance Sheet （June 30, 2019） (¥ Billions) Current assets 22,112 (1,706) Current liabilities 18,929 (1,847) Cash and deposits 4,309 (155) Trading products 4,789 (41) Total assets: ¥22.89 tn Short-term investment securities 816 (4) Trading securities and other 1,

9. Slide 9: Financial Management (Regulatory Capital & Regulatory Liquidity)

   Consolidated Financial Management (Regulatory Capital & Regulatory Liquidity) Consolidated Capital Adequacy Ratio Total qualifying capital (¥ billions) Common equity tier 1 (¥ billions) 【Regulatory Capital (Basel III)】 Consolidated total capital ratio Consolidated common equity tier 1 capital ratio

10. Slide 10: P/L Summary

    Consolidated P/L Summary FY2018 FY2019 % Change % Change  Commission received increased (¥ Millions) vs vs FY2018 1Q 2Q 3Q 4Q 1Q 4Q/FY18 1Q/FY18 (+0.5%). • Brokerage commission* remained Operating revenues 175,175 172,570 188,753 184,086 181,341 -1.5% 3.5% 720,586 ¥12.4 billion (-0.6%) as the stron

11. Slide 11: Breakdown of SG&A

    Consolidated Breakdown of SG&A FY2018 FY2019 % Change % Change (¥ Millions) vs vs FY2018  SG&A remained flat (+0.7%) 1Q 2Q 3Q 4Q 1Q 4Q/FY18 1Q/FY18  Depreciation increased due to the SG&A 93,454 92,321 94,117 94,019 94,708 0.7% 1.3% 373,914 system renewal at Daiwa Securities and the new lease acco

12. Slide 12: Cost Structure

    Consolidated Cost Structure FY2017 FY2018 FY2019 (¥ Billions) 1Q 2Q 3Q 4Q 1Q-4Q 1Q 2Q 3Q 4Q 1Q-4Q 1Q Total SG&A 87.1 90.9 94.7 97.5 370.2 93.4 92.3 94.1 94.0 373.9 94.7 Variable costs 33.6 37.5 39.8 41.3 152.3 36.7 35.2 36.7 36.8 145.5 36.6 Trading related expenses 16.6 18.6 18.4 18.6 72.4 17.9 17.9

13. Slide 13: Ordinary Income of Overseas Operations

    Consolidated Ordinary Income of Overseas Operations % Change % Change FY2018 FY2019 (¥ Millions) vs vs FY2018 Overseas operations remained 4Q/FY18 1Q/FY18 1Q 2Q 3Q 4Q 1Q profit for 13 consecutive quarters. Overseas Operations Total 13 1,259 302 2,190 627 -71.3% x47.2 3,765  In Europe, equity tradin

14. Slide 14: Retail Division

    Retail Division % Change % Change Net Operating Revenues and Ordinary Income FY2019 (¥ Millions) vs vs FY2018 1Q 4Q/FY18 1Q/FY18 Equity 60 Net operating revenues 43,095 3.7% -14.8% 185,865 Ordinary Fixed income income 2,680 38.4% -72.9% 24,674 40 Distribution  Equity revenues rose as foreign equity

15. Slide 15: Retail Division: Sales and Distribution Amount by Product

    Retail Division Daiwa Securities Sales and Distribution Amount by Product 【Wrap Account Service】  Contract AUM hit a record high of ¥2.17 trillion* at the end of June 1,500 thanks to an increase in contract amount. Equity 【Stock Investment Trusts】 SMA + Fund  Global All Organisms Genome Equity Fun

16. Slide 16: Wholesale Division: Global Markets

    Wholesale Division Global Markets % Change % Change Net Operating Revenues and Ordinary Income FY2019 (¥ Millions) vs vs FY2018 1Q 4Q/FY18 1Q/FY18 40 Net operating revenues 27,310 -3.9% -2.7% 107,232 Ordinary Equity income 4,541 -20.3% -22.4% 17,179 FICC 20 【Equity】  Equity revenue dropped as Japan

17. Slide 17: Reference: Equity & FICC Income

    ＜Reference＞ Equity & FICC Income: Consolidated Trading Gain/Loss (Daiwa Securities/Overseas Subsidiaries) 【Managerial accounting basis】 Consolidated Trading Gain / Loss (Managerial Accounting Basis) % Change % Change FY2019 (¥ Billions) vs vs FY2018 1Q 4Q/FY18 1Q/FY18 Equity Equity 11.0 -15.4% -21.4

18. Slide 18: Wholesale Division: Global Investment Banking

    Wholesale Division Global Investment Banking % Change % Change Net Operating Revenues and Ordinary Income FY2019 (¥ Millions) vs vs FY2018 1Q 4Q/FY18 1Q/FY18 20 Net operating revenues 12,109 -14.8% 3.3% 51,670 Equity underwriting Ordinary income 924 -44.1% 12.2% 7,287 15 【Equity】 Debt  Acted as a g

19. Slide 19: Asset Management Division

    Asset Management Division % Change % Change Net Operating Revenues and Ordinary Income FY2019 (¥ Millions) vs vs FY2018 1Q 4Q/FY18 1Q/FY18 15 Net operating revenues 11,352 -3.4% -7.5% 48,232 Daiwa AM Ordinary income 6,209 -4.6% -17.1% 28,359 Others 10 Ordinary 【Daiwa Asset Management】 income  Manag

20. Slide 20: Asset Management Division: Assets Under Management and Net Increase

    Asset Management Division Assets Under Management and Net Increase Daiwa Asset Management AUM Daiwa Real Estate Asset Management Business AUM 1,000 Other 18,000 Daiwa Hotel Private Stock investment Investment Corp. trusts 12,000 Nippon Healthcare Investment Corp. 500 Bond investment trusts Japan Ren

21. Slide 21: Investment Division

    Investment Division % Change % Change FY2019 (¥ Millions) vs vs FY2018  Daiwa Energy & Infrastructure expanded its investments. 1Q 4Q/FY18 1Q/FY18 Net operating revenues 1,683 - -30.9% 1,766 Ordinary income 924 - -47.5% -1,093 Principal Investment Value Net Operating Revenues and Ordinary Income 15

22. Slide 22: Reference

    Reference Daiwa Securities Group Inc.

23. Slide 23: Breakdown of Commission

    Consolidated Breakdown of Commission FY2018 FY2019 % Change vs % Change vs (¥ Millions) FY2018 1Q 2Q 3Q 4Q 1Q 4Q/FY18 1Q/FY18 Total commission 73,813 66,236 78,347 64,629 64,962 0.5% -12.0% 283,027 Brokerage commission 16,566 14,766 14,507 12,495 12,416 -0.6% -25.1% 58,336 Underwriting and secondary

24. Slide 24: Balance Sheet

    Daiwa Securities Balance Sheet Daiwa Securities Balance Sheet (June 30, 2019) (¥ Billions) Current assets 11,251 (1,541) Current liabilities 9,202 (1,642) Trading products 5,927 (1,341) Trading products 3,949 (356) Trading securities and other 2,671 (1,012) Trading securities and other 907 (12) Deri

25. Slide 25: Financial Summary Ⅰ

    Daiwa Securities Financial Summary Ⅰ FY2018 FY2019 % Change vs % Change vs (¥ Millions) FY2018 1Q 2Q 3Q 4Q 1Q 4Q/FY18 1Q/FY18 Operating revenues 89,390 82,151 83,370 77,462 79,513 2.6% -11.0% 332,374 Commission received 49,348 42,866 53,538 39,987 43,059 7.7% -12.7% 185,741 Brokerage commission 12,2

26. Slide 26: Financial Summary Ⅱ

    Daiwa Securities Financial Summary Ⅱ FY2018 FY2019 % Change vs % Change vs (¥ Millions) FY2018 1Q 2Q 3Q 4Q 1Q 4Q/FY18 1Q/FY18 SG&A 60,122 60,023 60,198 59,147 61,472 3.9% 2.2% 239,492 Trading related expenses 10,532 10,701 11,167 10,501 11,687 11.3% 11.0% 42,903 Personnel expenses 25,059 24,597 24,2

27. Slide 27: Assets under Custody

    Daiwa Securities Assets under Custody 75 Equity Japanese bonds 60 Foreign bonds 45 Stock investment trusts Bond investment trusts 30 Foreign investment trusts 15 Others 0 FY2017 FY2018 FY2019 (¥ Trillions) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Equity 34.4 36.8 39.9 46.3 45.9 46.8 40.8 43.8 41.9 Japanese bonds

28. Slide 28: Number of Accounts and Equity Trading

    Daiwa Securities Number of Accounts and Equity Trading FY2017 FY2018 FY2019 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Accounts with balance (thousands) 2,965 2,969 2,965 2,989 2,994 3,001 3,011 3,025 3,021 Accounts holding equity (thousands) 1,388 1,399 1,386 1,395 1,397 1,394 1,438 1,439 1,439 Online trading acco

29. Slide 29: Net Asset Inflow

    Daiwa Securities Net Asset Inflow Retail Division (Daiwa Securities) Net Asset Inflow Retail Division (Daiwa Securities) Net Asset Inflow (Individuals) 500 400 Corporation Net inflow of cash Individual Net inflow of securities 400 300 300 200 200 100 100 0 0 -100 FY2017 FY2018 FY2019 FY2017 FY2018 F

30. Slide 30: Stock Investment Trusts & Wrap Accounts

    Daiwa Securities Stock Investment Trusts & Wrap Accounts Agency Fee and Management Fee (Daiwa Securities) AUC of Stock Investment Trusts and Contract AUM of Wrap Account Agency fee etc. (left) Management fee (left) Percentage of asset-based revenue to retail division revenue* (right) 8 AUC of stock

31. Slide 31: League Table

    Daiwa Securities League Table Primary an d Straigh t bon ds Samu rai bon ds M&A se c on dary e qu ity IPO (e xc l. family Age n c y bon ds Mu nic ipal bon ds (e xc l. family (Nu mbe r of offe rin gs bon ds) bon ds) de als) FY2 0 19 1 Q Le agu e Table Daiwa N omu ra Mizu h o Mitsu bish i UFJMS Nomu r

32. Slide 32: Financial Summary: Daiwa Asset Management

    Daiwa Asset Management Financial Summary FY2018 FY2019 % Change vs % Change vs (¥ Millions) FY2018 1Q 2Q 3Q 4Q 1Q 4Q/FY18 1Q/FY18 Operating revenues 20,042 20,022 18,838 17,821 17,759 -0.3% -11.4% 76,725 Management fee 19,866 19,847 18,672 17,665 17,603 -0.4% -11.4% 76,052 Stock investment trust 19,

33. Slide 33: Earnings and Deposit Balance: Daiwa Next Bank

    Daiwa Next Bank Earnings and Deposit Balance Gross Profits / Ordinary Income Daiwa Next Bank Deposit Balance & Number of Accounts (¥ Billions) (thousands) 4,000 1,500 25 Gross profits (annually) Gross profits (quarterly) Ordinary income (annually) Ordinary income (quarterly) Ordinary deposits 3,000

34. Slide 34: Value at Risk

    Consolidated Value at Risk Range and Assumption of VaR Confidence level：99% (one-side test) Holding period：1 day Adjusted for price correlation between products FY2017 FY2018 FY2019 (¥ Billions) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q VaR （Quarter end） 1.29 1.16 1.93 1.13 1.34 1.39 1.76 1.06 1.33 High 3.41 4.

35. Slide 35: Number of Group Employees

    Consolidated Number of Group Employees FY2017 FY2018 FY2019 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Total 16,256 16,207 16,200 16,088 16,651 16,516 16,519 16,419 16,499 Overseas 1,634 1,683 1,760 1,776 1,799 1,820 1,881 1,921 1,960  Number of employees as at the end of each quarter. ※ Total figures are the sum

36. Slide 36: Contact

    Contact Daiwa Securities Group Inc. Investor Relations TEL: +81-3-5555-1300 FAX: +81-3-5555-0661 E-mail: ir-section@daiwa.co.jp URL: http://www.daiwa-grp.jp/ir/english/

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