1Q FY2016Earnings Announcement
July 27, 2016Daiwa Securities Group Inc.
2
Table of Contents
Consolidated Results
Summary 3~6
Breakdown of SG&A 7~8
Balance Sheet 9
Financial Management 10
Overseas Operation 11
Segment Information 12~19
Reference 20~34
3
Consolidated
Highlights (1Q / FY2016)
■Both net operating revenues and ordinary income decreased YoY, but increased QoQ. Net operating revenues: Y114.0 bil (-26.3% YoY, +2.0% QoQ) Ordinary income: Y32.5 bil (-48.4% YoY, +13.7% QoQ) Profit attributable to owners of parent company: Y24.5 bil (-45.2% YoY, +15.3% QoQ) Both net operating revenues and ordinary income for 1Q FY2016 declined compared to the results
for 1Q FY2015, where the equity market experienced strong performance, but increased QoQdespite challenging market conditions including concerns about the global economic slowdown and appreciation of the yen.
■Overseas operation turned into the black. Ordinary income in overseas operation was Y1.3 bil (+595.1% YoY, returning to the black for the
first time in 4 quarters).
Ordinary income for Americas significantly increased due to a rise in FICC revenues, and Asia/Oceania improved due to continued operational efforts.
■S&P raised ratings on Daiwa Securities to “A”, Daiwa Securities Group Inc. to “A-”. S&P raised long-term counterparty credit ratings as we were designated as “D-SIBs” (Domestic
Systemically Important Banks) by FSA, based on our maintaining of financial soundness.
4
Net operating revenues Ordinary income Profit attributable to owners of parent company
1Q FY2016 Net operating revenues: Y114.0 bil (+2.0% QoQ)
Revenues for Retail Division recorded small increase as individual investors continued to be in risk-off mode, while revenues for Wholesale Division delivered strong profit, led by FICC trading in Global Markets.
Revenues for Asset Management Division increased due to the real estate asset management business, and gains from sale of existing investment contributed to increased revenues in Investment Division.
1Q FY2016 Ordinary income: Y32.5 bil (+13.7% QoQ)
SG&A decreased by -2.6% to Y86.0 bil as overseas personnel expenses declined due to the yen appreciation, resulting in the rise of ordinary income by 13.7% QoQ.
1Q FY2016 Profit attributable to owners of parent company: Y24.5 bil (+15.3% QoQ)
Annualized ROE was 8.2% (+1.3pt QoQ), BPS was Y694.52 (-Y26.34 QoQ)
(Y bil)
Consolidated
Summary (1Q / FY2016)
(Y bil) (Y bil)
122.4 130.1140.2
139.3154.6
123.5124.7 111.7 114.0
0
60
120
180
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
FY14 FY15 FY16
34.3 37.0 38.5 38.544.8
24.3 26.321.3 24.5
0
25
50
75
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
FY14 FY15 FY16
39.744.2
51.0 49.5
63.1
35.4 37.9
28.632.5
0
25
50
75
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
FY14 FY15 FY16
5
* Shareholders’ equity = Owners’ equity + Accumulated other comprehensive income
Consolidated
Financial Summary FY2015 FY2016 FY2015
4Q 1Q 1Q
Operating revenues 150,579 151,859 0.9% 191,389 -20.7% 653,711
Net operating revenues 111,772 114,049 2.0% 154,663 -26.3% 514,815
SG&A 88,329 86,029 -2.6% 95,574 -10.0% 364,517
Ordinary income 28,628 32,537 13.7% 63,113 -48.4% 165,148Profit (loss) attributable toowners of parent 21,311 24,571 15.3% 44,836 -45.2% 116,848
Total assets 20,420,818 21,419,907 23,451,198 20,420,818
Net assets 1,313,005 1,267,304 1,362,124 1,313,005
Shareholders' equity* 1,219,831 1,175,326 1,272,263 1,219,831
EPS (Y) 12.50 14.52 26.24 68.25
BPS (Y) 720.86 694.52 744.30 720.86
ROE (Annualized) 6.9% 8.2% 14.3% 9.5%
% Changevs
4Q/FY15FY2015
% Changevs
1Q/FY15(Y mil)
6
P/L Summary
Net operating revenues : Y114.0 bil(+2.0% QoQ)
Commission received was Y61.6 bil(-1.6% QoQ)
・Brokerage commission* fell to Y13.8 bil(-7.1% QoQ) as stock trading volume decreased.
・Underwriting commission* rose to Y5.3 bil (+36.5% QoQ) due to increase in equity/debt underwriting deals.
Net trading income was Y33.3 bil(+16.3% QoQ), led by FICC trading income based on client flow.
Net gain on private equity and other securities was Y4.8 bil (+390.2% QoQ) with an exit from existing investment.
Ordinary income : Y32.5 bil(+13.7% QoQ)
Net income ** : Y24.5 bil(+15.3% QoQ)
* Breakdown of total commission received (See p.21)** Net income: Profit attributable to owners of parent company
Consolidated
FY2016
1Q 2Q 3Q 4Q 1Q
Operating revenues 191,389 158,126 153,616 150,579 151,859 0.9% -20.7% 653,711
Commision received 80,041 76,460 69,215 62,701 61,693 -1.6% -22.9% 288,418
Net trading income 49,043 23,681 29,910 28,688 33,379 16.3% -31.9% 131,324
Net gain/loss on private equityand other securities
3,704 1,490 12,327 979 4,802 390.2% 29.6% 18,502
Financial revenue 37,830 35,335 33,587 42,697 35,726 -16.3% -5.6% 149,451
Other operating revenue 20,768 21,158 8,575 15,511 16,257 4.8% -21.7% 66,014
Financial expenses 23,978 24,288 19,551 21,710 26,633 22.7% 11.1% 89,530
Other operating expenses 12,746 10,258 9,264 17,095 11,177 -34.6% -12.3% 49,366
Net operating revenues 154,663 123,579 124,799 111,772 114,049 2.0% -26.3% 514,815
SG&A 95,574 91,281 89,331 88,329 86,029 -2.6% -10.0% 364,517
Operating income/loss 59,088 32,297 35,468 23,442 28,019 19.5% -52.6% 150,297
Non-operating income/loss 4,024 3,158 2,481 5,186 4,518 -12.9% 12.3% 14,851
Ordinary income/loss 63,113 35,456 37,950 28,628 32,537 13.7% -48.4% 165,148
Extraordinary income/loss 2,813 343 3,701 -2,093 1,021 - -63.7% 4,764
Income/loss before income taxes 65,926 35,799 41,651 26,535 33,559 26.5% -49.1% 169,912
Total income taxes 19,636 11,421 10,651 5,226 8,974 71.7% -54.3% 46,935
44,836 24,347 26,354 21,311 24,571 15.3% -45.2% 116,848Profit (loss) attributable toowners of parent
FY2015(Y mil)% Change
vs4Q/FY15
% Changevs
1Q/FY15
FY2015
7
Breakdown of SG&A
SG&A : Y86.0 bil(-2.6% QoQ)
Trading related expenses was Y16.3 bil(-5.6% QoQ) as advertising expenses decreased.
Personnel expenses was Y43.2 bil(-1.0% QoQ) and depreciation cost was Y5.8 bil (-0.4% QoQ), both remaining flat.
Real estate expenses was Y8.7 bil(-4.4% QoQ) due to decrease in the cost of equipment, maintenance insurance fee and management cost.
Office cost fell to Y6.2 bil (-6.8% QoQ) due to the decrease in system related outsourcing fees.
Tax and dues increased by +45.0% QoQas tax rate of pro forma standard taxation rose.
Consolidated
FY2016
1Q 2Q 3Q 4Q 1Q
SG&A 95,574 91,281 89,331 88,329 86,029 -2.6% -10.0% 364,517
Trading relatedexpenses
18,871 18,304 17,805 17,357 16,385 -5.6% -13.2% 72,339
Personnelexpenses
49,358 45,616 44,626 43,691 43,240 -1.0% -12.4% 183,292
Real estateexpenses
9,287 9,686 9,235 9,151 8,744 -4.4% -5.8% 37,360
Office cost 6,501 6,578 7,002 6,689 6,233 -6.8% -4.1% 26,771
Depreciation 5,953 5,921 6,038 5,920 5,897 -0.4% -0.9% 23,833
Taxes and dues 2,895 2,148 2,078 1,765 2,559 45.0% -11.6% 8,887
Other 2,707 3,025 2,545 3,753 2,968 -20.9% 9.6% 12,032
(Y mil) FY2015
%Change
vs4Q/FY15
%Change
vs1Q/FY15
FY2015
8
(Y bil)
Fixed costsVariable costs
Cost StructureConsolidated
FY2016
1Q 2Q 3Q 4Q 1Q-4Q 1Q 2Q 3Q 4Q 1Q-4Q 1Q
Total SG&A 88.1 88.8 91.4 92.9 361.3 95.5 91.2 89.3 88.3 364.5 86.0
36.4 37.1 38.9 39.7 152.2 41.3 37.4 35.8 35.9 150.5 34.1
17.8 18.5 18.7 18.4 73.6 18.8 18.3 17.8 17.3 72.3 16.3
Advertisingexpenses 1.7 1.7 2.0 2.0 7.5 1.7 1.9 2.0 2.4 8.1 1.9
12.8 13.1 14.6 15.5 56.0 16.9 13.5 12.7 12.3 55.5 12.2
Overtime, part-time 2.2 2.1 2.3 2.2 9.0 2.3 2.2 2.3 2.1 9.1 2.3
51.7 51.7 52.4 53.1 209.1 54.2 53.7 53.5 52.3 213.9 51.8
28.1 28.4 28.8 29.7 115.2 29.6 29.4 29.2 28.9 117.3 28.4
9.2 9.1 9.0 9.5 37.0 9.2 9.6 9.2 9.1 37.3 8.7
Depreciation 6.0 6.1 6.1 5.7 24.0 5.9 5.9 6.0 5.9 23.8 5.8
Office expenses 6.0 5.8 6.1 6.2 24.2 6.1 6.2 6.6 6.3 25.4 5.8
Taxes and dues 1.8 1.7 1.8 1.5 6.9 2.8 2.1 2.0 1.7 8.8 2.5
FY2014(Y bil)
FY2015
Fixed costs
Variable costs
Bonus and others
Trading related expenses
PersonnelexpensesReal estateexpenses
51.7 51.7 52.4 53.1 54.2 53.7 53.5 52.3 51.8
36.4 37.138.9 39.7
41.337.4 35.8 35.9 34.1
88.1 88.891.4
92.995.5
91.2 89.3 88.386.0
0
20
40
60
80
100
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
FY2014 FY2015 FY16
9
Balance Sheet
Total assets: Y21.4 tri
Net assets: Y1.2 tri
Shareholders’ equity**: Y1.1 tri
90.1% of total assets have high liquidity*.
* Cash and deposits + Short-term investment securities + Trading products + Loans secured by securities
Shareholders’ equity** decreased by Y44.5 bil from March 31, 2016 to Y1.1 tri.
** Shareholders’ equity = Owners’ equity + Accumulated other comprehensive income
※Figures in parentheses indicate changes from March 31, 2016
(Y bil)Consolidated Balance Sheet (June 30, 2016)
Consolidated
Current assets 20,877 (1,026) Current liabilities 17,863 (1,035) Cash and deposits 3,533 (199) Trading products 5,341 (40) Short-term investment securities 2,033 (-57) Trading securities and other 1,807 (-508) Trading products 9,146 (1,645) Stocks, convertible bonds 161 (29)Trading securities and other 5,170 (1,152) Bonds 1,621 (-543)
Stocks, Convertible bonds 251 (-134) CD/CP and others 24 (6)Bonds 4,297 (1,445) Derivatives 3,533 (548)Beneficiary certificates 92 (-59) Loans payable secured by securities 5,577 (-324)CD/CP and others 528 (-99) Deposits for banking business 2,887 (-41)
Derivatives 3,976 (492) Short-term loans payable 749 (-70) Operational investment securities 110 (-5) Commercial papers 101 (-35) (after allowance for possible investment losses) Current portion of bonds 209 (-22)
Daiwa PI Partners + Daiwa Securities SMBC PI 102 (-5)Daiwa Corporate Investment 8 (0)
Loans secured by securities 4,575 (-674) Non-current assets 542 (-27) Non-current liabilities 2,285 (9) Property, plant and equipment 123 (-1) Bonds payable 1,220 (15) Intangible assets 84 (0) Long-term loans payable 1,004 (0) Investments and other assets 334 (-25) Total liabilities 20,152 (1,044) Investment securities 298 (-26) Net assets 1,267 (-45)
Listed stocks 138 (-22) Owners' equity 1,137 (4)Unlisted stocks 16 (0) Accumulated other comprehensive income 37 (-49)Other 142 (-3) Non-controlling interests 84 (0)
Total Assets 21,419 (999) Total liabilities and net assets 21,419 (999)
10
Consolidated Leverage Ratio Consolidated Liquidity Coverage Ratio
Financial Management (Regulatory Capital & Regulatory Liquidity)
Consolidated Capital Adequacy Ratio
※ Figures are as at the end of each quarter.
【Regulatory Capital (Basel III)】
(As at March 31, 2016)
Consolidated Total Capital Ratio : 21.2%
Consolidated Tier1 Capital Ratio : 21.1%
Consolidated Common Equity Tier 1 Capital Ratio : 21.0%
Consolidated Leverage Ratio : 5.99%
【Regulatory Liquidity (Basel III)】
(End of month average April-June, 2016)
Consolidated Liquidity Coverage Ratio : 165.7%
Consolidated
1,112 1,159
1,238 1,211 1,192
1,169 1,196
1,126
1,055 1,085
1,133 1,136 1,134 1,122 1,147
1,113 22.5% 22.4% 22.3% 21.0% 21.3% 21.0%
21.8% 21.2%
21.3% 20.9% 20.4%19.7% 20.2% 20.1% 20.9% 21.0%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
FY2014 FY2015
Total Qualifying Capital (Y bil) Common Equity Tier 1 (Y bil)
Consolidated Total Capital Ratio Consolidated Common Equity Tier 1 Capital Ratio
1,910 2,025 2,120 2,034 2,230
1,609 1,323 1,273 1,302 1,345
118.6%
153.0%166.4% 156.2% 165.7%
1Q 2Q 3Q 4Q 1Q
FY2015 FY2016
High quality liquid assets (Y bil)Net cash outflows (Y bil)Consolidated liquidity coverage ratio
22,733 22,443 22,159
18,654
1,160 1,143 1,166 1,117
5.10% 5.09% 5.26% 5.99%
1Q 2Q 3Q 4Q
FY2015
Total exposures (Y bil)Tier 1 capital (Y bil)Consolidated levarage ratio
11
Overseas Operation
Overseas Operation Total : Y 1.3 bil
Overseas operation total turned into the black for the first time since 1Q FY2015.
Europe continued to post small deficit as equity revenues dropped. There was also small impact by Brexit.
Asia/Oceania improved its profitability mainly contributed by wealth management and M&A business.
Ordinary income for Americasfurther increased as revenues from the FICC business continued to grow.
Ordinary Income
FY20161Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
(Y bil)FY2014 FY2015
Consolidated
※ The figures includes overseas subsidiaries of Daiwa Asset Management which has become consolidated since 1Q FY2016.
‐4
‐2
0
2
4Europe
Asia / Oceania
Americas
Overseas operationTotal
FY2016
1Q 2Q 3Q 4Q 1Q
196 -692 -3,474 -714 1,366 - 595.1% -4,684
Europe -804 404 -2,175 -665 -667 - - -3,240
Asia / Oceania -353 -1,285 -1,749 -742 19 - - -4,130
Americas 1,354 188 450 693 2,014 190.5% 48.7% 2,686
%Change
vs1Q/FY15
FY2015(Y mi l )
FY2015
Overseas operationTotal
%Change
vs4Q/FY15
12
Segment Information
※Figures calculated based on managerial accounting of each Group companies.* Since Daiwa Office Investment Corporation changed from consolidated subsidiary to equity-method affiliated company, only equity in earnings of the company has been recorded in the
ordinary income of Asset Management Division since 2Q/FY2015..
FY20161Q 2Q 3Q 4Q 1Q
64,631 57,081 51,839 44,371 45,013 1.4% -30.4% 217,92257,174 38,468 38,663 43,709 43,427 -0.6% -24.0% 178,014
Global M arkets 47,546 28,670 30,670 35,809 36,028 0.6% -24.2% 142,695
Global Investment Banking 9,628 9,798 7,993 7,899 7,398 -6.3% -23.2% 35,318
15,488 12,074 11,925 11,040 11,623 5.3% -25.0% 50,5284,234 1,712 12,626 1,156 4,956 328.5% 17.0% 19,730
13,134 14,242 9,745 11,495 9,028 48,618154,663 123,579 124,799 111,772 114,049 2.0% -26.3% 514,815
FY20161Q 2Q 3Q 4Q 1Q
24,263 17,942 13,545 5,328 6,566 23.2% -72.9% 61,08024,027 5,588 6,430 12,832 14,899 16.1% -38.0% 48,878
Global M arkets 21,960 3,838 6,718 13,539 14,100 4.1% -35.8% 46,057
Global Investment Banking 2,066 1,749 -287 -707 798 - -61.4% 2,821
9,260 7,536 7,201 5,991 6,748 12.6% -27.1% 29,9903,671 1,168 11,978 579 4,624 698.3% 25.9% 17,3971,889 3,219 -1,205 3,897 -301 7,801
63,113 35,456 37,950 28,628 32,537 13.7% -48.4% 165,148Consolidated total
RetailWholesale
Asset Management*InvestmentsOther/Adjustments
Consolidated total
(Y mil) % Changevs
4Q/FY15
FY2015Ordinary income
% Changevs
1Q/FY15FY2015
Retail
Wholesale
Asset Management*
Investments
Other/Adjustments
(Y mil) % Changevs
4Q/FY15
Net operat ing revenuesFY2015 % Change
vs1Q/FY15
FY2015
13
Retail Division
While domestic stock trading volume declined QoQ, equity revenues slightly improved QoQ due to increased foreign stock trading volume, mainly for US stocks.
Fixed income revenues increased due to strong sales of domestic bonds by capturing investors’ needs amidst lower interest rate environment.
Distribution commission for investment trust rose due to an increase in sales of investment trusts. On the other hand, agency fees for investment trust decreased due to a decline in AUC.
Regarding other revenues, investment advisory and account management fees*, which include wrap account service related revenues, decreased, while insurance sales commission* increased.
Net operating revenues and ordinary income
Net operatingrevenues 45,013 1.4% -30.4% 217,922
Ordinary income 6,566 23.2% -72.9% 61,080
(Y mil)FY2016
1Q
% Changevs
4Q/FY15
% Changevs
1Q/FY15FY2015
0
25
50
75Equity
Fixed income
Distributioncommission forinvestment trustAgency fee forinvestment trust
Other (includeswrap-relatedrevenues)Ordinaryincome
FY2016
1Q 2Q 3Q 4Q 1Q
Equity 16.3 14.4 12.3 9.9 10.1
Fixed income 19.8 16.1 13.7 12.4 12.9Distribution commission forinvestment trust 11.0 9.2 8.1 5.4 5.8Agency fee for investmenttrust 9.7 9.0 8.5 7.6 7.3Other (includes w rap-relatedrevenues) 7.5 8.1 8.9 8.8 8.6
Net operating revenues 64.6 57.0 51.8 44.3 45.0
Ordinary income 24.2 17.9 13.5 5.3 6.5
(Y bil)FY2015
*See p.21
14
【Stock Investment Trusts】 Sales of investment trusts slightly increased QoQ. Funds investing
in Fin-tech related companies and REIT (domestic/international) were most popular as the proposals well captured changes in market environment.
<Popular investment trusts and sales amount in 1Q FY2016>Daiwa Global Fin-tech Related Fund Y50.1 bilDaiwa US REIT Fund Y48.0 bilDaiwa J-REIT Open Fund Y18.5 bil
【Domestic Bonds】
Owing to proposals that captured customer needs after the introduction of negative interest rate policy, sales of domestic bonds increased steadily to the second highest level since 1Q FY2013 when we sold large scale retail bond.
332.3
186.2
0
100
200
300
400
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
FY2012 FY2013 FY2014 FY2015 FY16
*Total contract amount of Daiwa fund wrap and Daiwa SMA**Insurance include pension insurance, life insurance and business insurance***Foreign bonds include yen-denominated bonds ****Stock investment trusts include switching transactions between funds
Sales and distribution amount by product
Retail Division Daiwa Securities
0
400
800
1,200
1,600
Equity
SMA + FundWrap*Insurance**
Domestic bonds
Foreign bonds***
Stock investmenttrusts****
FY20161Q 2Q 3Q 4Q 1Q
Equity 87.8 89.0 136.9 24.8 39.2
SMA + Fund Wrap* 231.8 180.7 125.9 61.5 62.9
Insurance** 23.5 20.8 30.8 27.9 29.6
Domestic bonds 74.5 83.0 103.8 125.2 186.2
Foreign bonds*** 379.6 312.5 306.5 244.9 229.2
Stock investment trusts*** 677.2 598.0 653.3 388.4 396.8
(Y bil)FY2014Sales of domestic bonds(Y bil)
15
Wholesale Division Global Markets
*FICC: Fixed Income, Currency and Commodities
Net operating revenues and ordinary income
【Equity】
Equity revenues decreased by -26.0% QoQ due to a fall in trading revenues reflecting muted client activity under difficult market conditions, including appreciation of the yen triggered by BOJ’s decision to maintain its monetary policy, receding expectation of interest rate hike by FRB, and risk-off sentiment on Brexit worries.
【FICC*】 FICC revenues rose by +16.1% QoQ driven by a rise in JGB/credit
related trading revenues, capturing declining interest rate environment from mid-May to June.
Net operatingrevenues 36,028 0.6% -24.2% 142,695
Ordinary income 14,100 4.1% -35.8% 46,057
(Y mil)FY2016
1Q
% Changevs
4Q/FY15
% Changevs
1Q/FY15FY2015
0
20
40
60
Equity
FICC*
Others
Ordinaryincome
FY20161Q 2Q 3Q 4Q 1Q
Equity 22.6 11.3 14.2 12.5 9.3
FICC* 23.9 16.5 15.7 22.4 26.0
Others 0.9 0.7 0.6 0.7 0.6
Net operating revenues 47.5 28.6 30.6 35.8 36.0
Ordinary income 21.9 3.8 6.7 13.5 14.1
(Y bil)FY2015
16
Wholesale Division Global Investment Banking
Net operating revenues and ordinary income
【Equity】
Though equity primary market shrunk, IPO of KOMEDA contributed to revenues.
<Selected lead managed deals> <Offering size>KOMEDA Holdings Co.,Ltd. IPO Y60.2 bilKenedix Retail REIT Corporation REIT PO Y17.3 bil
【Debt】 By capturing change in the market environment, lead managed
a number of deals such as the largest Samurai bond in 1Q FY2016 issued by Mexico.
<Selected lead managed deals> <Offering size>United Mexican States (3/5/10/20 yrs) Samurai bond Total Y135.0 bilJapan Finance Organization for Municipalities (5 yrs)
Benchmark dollar bond USD1.5 bilKyushu Electric Power Company Inc (6/20 yrs). SB Total Y40.0 bilMitsubishi Chemical Holdings Corporation (10/20 yrs) SB Total Y30.0 bil
【M&A】 Advised various cross-border M&A deals by collaborating with
alliance partner and DC Advisory. <Selected deals>
Capital and business alliance between Taisho Pharmaceutical Co., Ltd. and DHG Pharmaceutical (Vietnam)Acquisition of Zanotti S.p.A.(Italy) by DAIKIN INDUSTRIES, LTD.
Net operatingrevenues 7,398 -6.3% -23.2% 35,318
Ordinary income 798 - -61.4% 2,821
(Y mil)FY2016
1Q
% Changevs
4Q/FY15
% Changevs
1Q/FY15FY2015
‐2
0
2
4
6
8
10
12Equityunderwriting
Debtunderwriting
M&A / others
Ordinaryincome
FY20161Q 2Q 3Q 4Q 1Q
Equity underwriting 5.1 4.2 2.5 1.1 2.1
Debt underwriting 2.6 2.2 1.7 1.9 2.4
M&A / others 1.8 3.2 3.7 4.7 2.7
Net operating revenues 9.6 9.7 7.9 7.8 7.3
Ordinary income 2.0 1.7 -0.2 -0.7 0.7
(Y bil)FY2015
17
Asset Management Division
※‘Others’ includes Daiwa Fund Consulting, Daiwa Real Estate Asset Management and Mi-Casa Asset Management (since 1Q FY2016).※Equity in earnings of affiliates is included in non-operating revenues
Net operating revenues and ordinary income
【Daiwa Asset Management】 Ordinary income slightly increased despite a decline in
management fees due to decrease in AUM QoQ affected by strong yen and sluggish stock market.
Decided to redeem “Medium Term Treasury Fund” and “Free Financial Fund” at the end of Jun. 2016 after introduction of negative interest rates. “Daiwa MMF” will be redeemed at the end of Oct. 2016.
【Others】
Management fees of Daiwa Real Estate AM, the operator of 3 REITs, increased QoQ due to an increase in AUM and sales of existing properties associated with asset replacement.
The results of Mi-Casa Asset Management have been included as a consolidated subsidiary since 1Q FY2016.
0
4
8
12
16
Daiwa AM
Others
Ordinaryincome
FY20161Q 2Q 3Q 4Q 1Q
Daiwa AM 11.4 11.1 10.8 9.9 9.9
Others 4.0 0.9 1.0 1.0 1.6
Net operating revenues 15.4 12.0 11.9 11.0 11.6
Ordinary income 9.2 7.5 7.2 5.9 6.7
(Y bil)FY2014
Net operatingrevenues 11,623 5.3% -25.0% 50,528
Ordinary income 6,748 12.6% -27.1% 29,990
(Y mil)FY2016
1Q
% Changevs
4Q/FY15
% Changevs
1Q/FY15FY2015
18
FY20161Q 2Q 3Q 4Q 1Q
Stock investment trusts 2,751 2,471 2,654 2,481 2,230Investment advisory 2,686 2,440 2,719 2,249 2,096Total 5,438 4,911 5,373 4,730 4,327Investment trustShare
2.7% 2.7% 2.7% 2.7% 2.6%
(Y bil)FY2015
Daiwa Asset Management AUM (Investment Trusts)
Daiwa Real Estate Asset Management AUMDaiwa SB Investments AUM (Investment Trusts & Investment Advisory)
Asset Management Division Assets Under Management
Daiwa AM & Daiwa SB Net Asset Inflow (Stock Investment Trusts, excl. ETF)
FY20161Q (Y bil)FY2011 FY2012 FY2013 FY2014 FY2015
FY20161Q 2Q 3Q 4Q 1Q (Y bil)
FY2015
FY20161Q 2Q 3Q 4Q 1Q
Stock investment trusts 11,393 10,466 11,290 10,840 10,297Bond investment trusts 3,462 3,113 3,006 2,563 2,174Total 14,855 13,579 14,296 13,403 12,472Investment trustShare 14.7% 14.6% 14.6% 14.5% 14.5%
(Y bil)FY2015
0
5,000
10,000
15,000Stock investmenttrusts
Bond investmenttrusts
0
5,000
10,000Stock investmenttrusts
Investmentadvisory
※ AUMs are as at the end of each quarter
1,010
74
768
1,093
1,271
41
‐300
0
300
600
900
1,200
1,500
Daiwa SBInvestments
Daiwa AssetManagement
532 537
761 780 790
0
250
500
750
1,000Japan Rental HousingInvestments Inc.
Nippon HealthcareInvestment Corp.
Daiwa Residential PrivateInvestment Corp.
Daiwa Office InvestmentCorp.
19
FY20161Q 2Q 3Q 4Q 1Q
Private equity and PIPEs 42 46 43 49 49
Monetary claims 29 30 30 35 35
Real estate 20 20 20 20 20
Total 91 96 94 104 104
(Y bil)FY2015
Investment Division
Principal investment values
※ Principal investment values are the sum of Daiwa PI Partners and Daiwa Securities SMBCPI※ PIPEs: Private Investment in Public Equities※ All figures are as at the end of each quarter
Net operating revenues and ordinary income
0
50
100Private equityand PIPEs
Monetary claims
Real estate
Net operatingrevenues 4,956 328.5% 17.0% 19,730
Ordinary income 4,624 698.3% 25.9% 17,397
(Y mil)FY2016
1Q
% Changevs
4Q/FY15
% Changevs
1Q/FY15FY2015
0
3
6
9
12
15
Net operatingrevenues
Ordinaryincome
FY20161Q 2Q 3Q 4Q 1Q
Net operating revenues 4.2 1.7 12.6 1.1 4.9
Ordinary income 3.6 1.1 11.9 0.5 4.6
(Y bil)FY2015
Reference
21
Breakdown of commissionConsolidated
FY2016
1Q 2Q 3Q 4Q 1Q
80,041 76,460 69,215 62,701 61,693 -1.6% -22.9% 288,418
21,035 18,417 15,922 14,950 13,888 -7.1% -34.0% 70,325
9,031 9,560 6,031 3,930 5,366 36.5% -40.6% 28,553
11,226 9,439 8,237 5,839 6,320 8.2% -43.7% 34,743
38,748 39,043 39,023 37,980 36,119 -4.9% -6.8% 154,796
4,764 5,173 5,273 5,287 5,177 -2.1% 8.7% 20,497
658 915 1,577 1,573 1,696 7.8% 157.5% 4,724
1,503 2,914 3,354 3,658 2,533 -30.7% 68.5% 11,431
23,899 22,814 21,982 20,154 20,083 -0.3% -16.0% 88,850
7,922 7,225 6,836 7,307 6,628 -9.3% -16.3% 29,291
Total commission
% Changevs
4Q/FY15
M&A commission
FY2015(Y mil)FY2015 % Change
vs1Q/FY15
Management fee
Other
Brokerage commission
Underwriting commission
Distribution commission
Other commission
Investment advisory andaccount management fees
Insurance sales commission
22
<Reference>Financial accounting basis:Net gain/loss on trading + Net financial income
Equity & FICC Income: Consolidated Trading Gain/Loss
【Managerial accounting basis】
*FICC: Fixed Income, Currency and Commodities
Daiwa Securities/Overseas
Consolidated trading gain / loss(Managerial accounting basis)
Equity 2,063 -51.4% -80.5% 23,430Bond andforex 31,315 28.1% -18.5% 107,893Net financialincome 9,093 -56.7% -34.3% 59,921
Total 42,472 -14.5% -32.5% 191,245
(Y mil)FY2016
1Q
% Changevs
4Q/FY15
% Changevs
1Q/FY15FY2015
Equity 5.0 -28.6% -70.6% 38.0
FICC* 36.0 9.1% -12.2% 134.0
Total 41.0 2.5% -29.3% 172.0
(Y bil)FY2016
1Q
% Changevs
4Q/FY15
% Changevs
1Q/FY15FY2015
FY2016
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Equity 11 14 13 14 17 5 9 7 5
FICC* 30 32 33 37 41 32 28 33 36
Total 41 46 46 51 58 37 37 40 41
FY2015FY2014(Y bil)
0
10
20
30
40
50
60Equity
FICC*
23
Financial Summary ⅠDaiwa Securities
FY20161Q 2Q 3Q 4Q 1Q
112,934 88,119 86,225 81,878 81,872 0.0% -27.5% 369,158Commission received 53,512 49,384 45,103 39,290 40,345 2.7% -24.6% 187,290Brokerage commission 15,512 13,632 11,638 11,094 10,093 -9.0% -34.9% 51,877
Stock and others 14,631 12,606 10,905 10,225 9,453 -7.6% -35.4% 48,369Underwriting commission 7,308 7,385 5,878 3,599 5,301 47.3% -27.5% 24,171
Equity 4,423 4,643 3,466 1,504 2,229 48.1% -49.6% 14,038Bond and others 2,884 2,742 2,411 2,094 3,072 46.7% 6.5% 10,133
Distribution commission 10,812 9,105 7,916 5,605 6,137 9.5% -43.2% 33,440Investment trust 10,659 8,902 7,658 5,162 5,648 9.4% -47.0% 32,383
Other commissions 19,879 19,260 19,670 18,990 18,812 -0.9% -5.4% 77,800Agency fee and others 10,443 9,757 9,191 8,187 7,970 -2.6% -23.7% 37,580Inv estment adv isory andaccount management fees 4,764 5,173 5,273 5,287 5,177 -2.1% 8.7% 20,497Insurance sales commission 658 915 1,577 1,573 1,696 7.8% 157.5% 4,724M&A commission 905 646 1,020 1,067 1,185 11.0% 30.9% 3,640
Net trading income/loss 48,950 26,329 31,838 31,935 32,529 1.9% -33.5% 139,053Equity 12,230 331 7,614 2,585 1,683 -34.9% -86.2% 22,760Bond and forex 36,719 25,998 24,223 29,350 30,845 5.1% -16.0% 116,292
Financial revenues 10,471 12,405 9,284 10,653 8,997 -15.5% -14.1% 42,814Financial expenses 6,149 4,255 5,765 4,765 5,519 15.8% -10.3% 20,936
106,784 83,864 80,459 77,113 76,352 -1.0% -28.5% 348,221
FY2015
Operating revenues
Net operating revenues
(Y mil)% Change
vs4Q/FY15
FY2015 % Changevs
1Q/FY15
24
Financial Summary ⅡDaiwa Securities
FY20161Q 2Q 3Q 4Q 1Q
59,990 58,647 57,091 57,951 56,386 -2.7% -6.0% 233,680
Trading related expenses 9,695 10,331 10,364 10,655 9,307 -12.6% -4.0% 41,046
Personnel expenses 27,895 25,252 24,337 24,634 24,556 -0.3% -12.0% 102,120
Real estate expenses 5,950 6,191 5,938 6,063 5,847 -3.6% -1.7% 24,144
Office cost 10,947 11,382 10,931 10,565 10,667 1.0% -2.6% 43,827
Depreciation 3,501 3,524 3,741 3,793 3,880 2.3% 10.8% 14,560
Taxes and dues 1,158 877 894 607 1,174 93.3% 1.4% 3,537
Other 841 1,087 882 1,631 952 -41.6% 13.2% 4,442
47,405 25,605 23,138 20,123 20,580 2.3% -56.6% 116,272
31,814 18,191 15,659 15,194 13,934 -8.3% -56.2% 80,859
17.7% 9.8% 8.3% 7.9% 7.1% 10.9%
294.0% 318.5% 330.8% 337.8% 369.2% 337.8%Capital adequacy ratio
(Y mil)% Change
vs1Q/FY15
% Changevs
4Q/FY15
FY2015FY2015
SG&A
Ordinary income
Net income
ROE(Annualized)
25
Balance Sheet (June 30, 2016)
Balance SheetDaiwa Securities
※Figures in parentheses show changes from March 31, 2016
(Y bil)
Current assets 12,156 (1,736) Current liabilities 10,236 (1,675) Trading products 7,368 (1,988) Trading products 4,391 (281)
Trading securities and other 3,396 (1,505) Trading securities and other 870 (-254)Derivatives 3,971 (482) Derivatives 3,520 (535)
Margin transaction assets 181 (-14) Margin transaction liabilities 57 (5)Loans on margin transactions 161 (-13) Loans payables secured by securities 2,261 (7)
19 (0) Short-term loans payable 864 (-159) Loans secured by securities 2,452 (-339) Commercial Papers 101 (-35) Short-term guarantee deposits 362 (14) Current portion of bonds 91 (-4) Short-term loans receivable 254 (41) Non-current liabilities 1,226 (48)
Bonds payable 631 (11) Long-term loans payable 560 (37)
Non-current assets 103 (-1) Total liabilities 11,466 (1,723) Property, plant and equipment 3 (0) Net assets 793 (11) Intangible assets 53 (1) Shareholders' equity 787 (13)
Capital stock 100 -
Total assets 12,259 (1,735) Total liabilities and net assets 12,259 (1,735)
Cash collateral pledged for securitiesborrowing on margin transactions
26
Assets under Custody
※All figures are as at the end of each quarter.※ ETFs are recorded in ‘Equity’.
Daiwa Securities
0
10
20
30
40
50
60Equity
Domestic bonds
Foreign bonds
Stock investment trusts
Bond investment trusts
Foreign investmenttrusts
Others
FY20161Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Equity 28.4 29.5 30.6 32.5 34.2 31.0 33.0 30.1 28.8
Domestic bonds 8.1 7.6 7.5 7.3 7.3 7.3 7.1 6.8 6.7
Foreign bonds 5.1 5.1 5.1 4.9 4.8 4.7 4.8 5.0 4.7
Stock investment trusts 5.6 5.9 6.5 6.6 6.8 6.1 6.5 6.2 5.9
Bond investment trusts 1.6 1.6 1.6 1.6 1.7 1.6 1.5 1.3 1.0
Foreign investment trusts 0.2 0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.1
Others 1.2 1.2 1.1 1.2 1.3 1.2 1.3 1.2 1.2
Total 50.5 51.3 52.9 54.6 56.6 52.4 54.5 51.0 48.7
(Y tri) FY2015FY2014
27
Number of accounts and Equity tradingDaiwa Securities
* The accumulated number of opened accounts
FY20161Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
3,614 3,642 3,680 3,719 3,747 3,778 3,808 3,821 3,833
Accounts with balance (thousands) 2,839 2,857 2,877 2,910 2,926 2,948 2,961 2,973 2,973
Accounts holding equity (thousands) 1,357 1,356 1,347 1,342 1,336 1,343 1,367 1,381 1,402
Online trading accounts (thousands) 2,775 2,810 2,857 2,904 2,942 2,980 3,020 3,040 3,060
35 37 42 44 43 42 50 31 34
612 638 661 686 709 723 741 749 756
Contract assets under management (Y bil) 626 763 1,037 1,242 1,459 1,466 1,575 1,540 1,498
Number of customers (thousands) 45.1 55.9 71.8 87.2 100.3 110.7 116.5 118.4 120.0
Total number of contracts (thousands) 2,611 3,135 3,702 3,552 3,540 3,441 2,912 3,103 2,757
Online out of total (thousands) 2,334 2,799 3,260 3,153 3,130 3,094 2,571 2,775 2,442
Total trading value (Y bil) 2,550 3,128 3,745 3,539 3,877 3,560 2,850 2,561 2,341
Online out of total (Y bil) 2,057 2,534 2,939 2,790 3,027 2,871 2,241 2,063 1,826
Trading value (Y bil) 170 200 245 176 185 129 126 75 127
FY2015FY2014
Foreign equity trading value (Retail)
Cash Management Service accounts (thousands)
Wrap account service (end of quarter)
Contracts and trading value for individualinvestors at Daiwa Securities (Japanese Equity)
Newly opened accounts (thousands)
NISA accounts* (thousands)
28
Retail Division (Daiwa Securities) Net inflow of assets (individuals)Retail Division (Daiwa Securities) Net inflow of assets
Net Inflow of Assets
※ Net inflow of assets = net inflow of cash and securities
Daiwa Securities
FY2016
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Net inf low ofcash 160.3 97.2 74.1 112.4 -1.9 112.9 59.9 49.6 56.9
New inflow ofsecurities 15.5 53.7 118.7 75.3 75.2 -5.2 12.4 32.1 63.0
FY2014 FY2015(Y bil)
‐50
0
50
100
150
200
250
300Net inflow of cash
New inflow of securities
0
100
200
300
Corporation
Individual
FY2016
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Corporation 117.9 106.2 74.4 60.9 186.4 111.5 20.6 8.8 39.9
Individual 175.8 151.0 192.9 187.7 73.3 107.6 72.4 81.7 119.9
Total 293.8 257.2 267.4 248.7 259.7 219.2 93.1 90.6 159.9
(Y bil)FY2014 FY2015
29
0%
10%
20%
30%
0
150
300
450
600
750Sales amount (left)
Net increase ratio (right)
Retail Division (Daiwa Securities) Sales of stock investment trusts
0
400
800
1,200
1,600
2,000
0
60
120
180
240
300Contract amount (left)
Contract assets under management (right)
FY2016
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Contractamount
64.0 153.7 228.0 238.0 231.8 180.7 125.9 61.5 62.9
ContractAUM
626 763 1,037 1,242 1,459 1,466 1,575 1,540 1,498
(Y bil)FY2015FY2014
Stock Investment Trusts & Wrap Accounts
Wrap account contract and contract AUM
Daiwa Securities
purchase - (sell-off + redemption)
※Net increase ratio(%)= ×100purchase
※Includes switching transaction between funds.
FY2016
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Salesamount
472.9 533.6 611.7 618.5 677.2 598.0 653.3 388.4 396.8
(Y bil)FY2014 FY2015
30
League TableDaiwa Securities
Source: Daiwa Securities Apr 2016 – Jun 2016M&A: THOMSON REUTERS Apr 2016 – Jun 2016 “M&A advisory league table for any Japanese involvement announced (AD19)”
※ Primary and secondary equity, IPO, Straight bonds, Agency bonds, Municipal bonds and Samurai bonds are based on settlement dateJoint lead manager allotment of Primary and secondary equity, IPO, Straight bonds, Municipal bonds and Agency bonds is based on underwritten amountJoint lead manager allotment of Samurai bonds is divided up evenly among the managers
Primary andsecondary equity
offeringsIPO
Straight bonds(excl. family
bonds)Agency bonds Munic ipal bonds
Samurai bonds(excl. family
bonds)
M&A(Number of
deals)
Bank of AmericaMerrill Lynch
Daiwa Mizuho Mitsubishi UFJMS Daiwa Daiwa
45.6% 42.5% 23.3% 25.2% 20.5% 25.0%
Mizuho Mitsubishi UFJMS Mitsubish i UFJMS SMBC Nikko Nomura Mitsubishi UFJMS
20.3% 24.6% 20.3% 22.1% 19.4% 25.0%
Mitsubishi UFJMS SMBC Nikko Nomura Nomura Mizuho SMBC Nikko
10.5% 18.5% 20.1% 21.4% 16.6% 20.0%
Daiwa Mizuho Daiwa Daiwa SMBC Nikko Nomura
10.1% 9.0% 16.1% 16.2% 16.5% 18.1%
Nomura Nomura SMBC Nikko Mizuho Mitsubish i UFJMS Mizuho
8.3% 3.1% 15.4% 14.3% 13.4% 11.9%
1Q FY2016 League Table
1st MHFG
2nd Nomura
3rd Daiwa
SMFG
5thPlutus
Consulting
4th
31
Daiwa Asset Management
Financial Summary
FY20161Q 2Q 3Q 4Q 1Q
24,129 23,020 22,175 20,324 20,132 -0.9% -16.6% 89,650
23,899 22,814 21,982 20,154 19,950 -1.0% -16.5% 88,850
Stock investment trust 23,805 22,725 21,884 20,077 19,916 -0.8% -16.3% 88,493
Bond investment trust 94 88 98 76 34 -54.9% -63.4% 357
230 205 192 170 181 6.3% -21.2% 799
18,868 17,930 17,417 16,350 16,123 -1.4% -14.5% 70,567
12,643 11,856 11,335 10,330 10,159 -1.7% -19.6% 46,165
6,225 6,074 6,081 6,020 5,964 -0.9% -4.2% 24,402
5,260 5,089 4,758 3,974 4,008 0.9% -23.8% 19,082
5,404 5,296 4,799 3,970 4,056 2.2% -24.9% 19,471
Net income 3,599 3,799 3,099 2,764 2,693 -2.5% -25.2% 13,262
FY2015% Change
vs1Q/FY15
Ordinary income
Operating revenues
Management fee
Other operating revenues
SG&A
Commission paid
Other SG&A
Operating income
(Y mil)% Change
vs4Q/FY15
FY2015
32
Gross Profits / Ordinary Income Daiwa Next Bank Deposit balance & number of accounts
Daiwa Next Bank
Earnings and Deposit Balance
(Y bil) (thousands)
0
500
1,000
1,500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Ordinarydeposits
Timedeposits
Negotiablecertificate ofdeposits /Other
Number ofaccounts(thousands)
FY20161Q
Ordinary deposits 429 771 1,085 1,455 1,401 1,416
Time deposits 792 1,125 1,261 1,528 1,711 1,641
Negotiable certificateof deposits / Other
211 314 52 62 8 10
Deposit balance 1,432 2,210 2,399 3,047 3,121 3,069
Number of accounts(thousands)
486 719 901 1,018 1,133 1,155
FY2015(Y bil) FY2011 FY2012 FY2013 FY2014
※All figures are as at the end of the period.
FY16Total 1Q 2Q 3Q 4Q 1Q
Gross profits 3.9 10.5 12.3 20.7 17.3 6.1 5.4 2.6 3.0 2.6
Ordinaryincome -0.4 5.0 5.7 13.6 9.5 3.8 3.6 0.8 1.2 0.9
FY14FY2015
(Y bil) FY11 FY12 FY13
‐3
0
3
6
9
12
15
18
21
24 Gross Profits (YTD) Gross Profits (QTD)Ordinary income (YTD) Ordinary income (QTD)
33
Consolidated
Value at Risk
Confidence level:99% (one-side test)
Holding period:1 day
Adjusted for price correlation between product
Range and assumption of VaR
FY20161Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
VaR (Quarter end) 1.29 2.00 2.07 2.32 1.74 1.53 1.25 1.55 1.01
High 1.94 2.30 2.37 3.46 2.43 2.59 1.71 3.14 2.26Low 1.22 1.08 1.42 1.61 1.68 1.34 1.13 1.17 0.99
Average 1.50 1.48 1.95 1.93 2.04 1.65 1.47 1.67 1.53
By risk factors (Quarter end)Equity 0.45 0.49 0.43 0.70 0.56 0.83 0.39 0.28 0.27Interest 1.40 1.82 1.90 2.27 1.98 1.42 1.13 1.64 1.00
Currency 0.32 0.39 0.76 0.32 0.25 0.33 0.59 0.33 0.19Commodity - - - 0.02 0.00 0.00 0.00 0.00 0.00
(Y bil)FY2015FY2014
34
Consolidated
Number of Group Employees
Number of employees as at end of each quarter.
※ Total figures are the sum of consolidated group companies and Daiwa SB Investments.
※ Overseas figures are the sum of consolidated group companies under Daiwa International Holdings and Daiwa Securities. The figure also includes overseas subsidiaries of Daiwa Asset Management which have become consolidated companies since 1Q FY2016.
※ Figures include temporary staff.
FY2016
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
14,918 14,827 14,792 14,757 15,301 15,209 15,179 15,028 15,637
Overseas 1,650 1,656 1,627 1,636 1,617 1,611 1,603 1,566 1,592
Total
FY2015FY2014
Contact
Daiwa Securities Group Inc.Investor Relations
TEL: +81-3-5555-1300 FAX: +81-3-5555-0661E-mail: [email protected]: http://www.daiwa-grp.jp/ir/english/
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