Nomura Holdings Inc (NMR) FY2025 Earnings: Record Profits and Strategic Shifts Amid Volatility

Nomura Holdings Inc (NMR) delivered a mixed but largely positive fiscal year 2025 (FY2025) earnings report, balancing record-breaking annual performance with near-term challenges tied to market volatility. The Japanese financial giant reported a 21% surge in net revenue to ¥1.89 trillion and net income nearly doubling to ¥340.7 billion, marking a historic high. However, the final quarter (Q4) saw declines in key metrics, underscoring the risks of reliance on cyclical markets. Below is an in-depth analysis of the results, strategic moves, and risks investors should consider.

Full-Year Triumph: Strong Growth Across Segments

The year’s standout performance was driven by all three business segments—Wealth Management, Investment Management, and Wholesale—each exceeding key performance indicators (KPIs).

• Wealth Management saw net revenue grow 12% YoY to ¥451.5 billion, with income before taxes surging 39% to ¥170.8 billion, the highest in 11 years. This was fueled by net inflows of ¥1.37 trillion into recurring revenue assets (exceeding the ¥800 billion target) and cost discipline. Recurring revenue, such as fees from investment trusts and loans, rose 29% YoY, highlighting the segment’s shift toward stable income streams.
• Investment Management posted a 25% YoY revenue gain to ¥154.1 billion, with income before taxes jumping 49% to ¥89.6 billion—its highest since the division’s 2021 launch.
• Wholesale (banking and markets) saw income before taxes hit a 15-year high of ¥166.3 billion, up 82% YoY, driven by strong performance in equities and investment banking.

Quarterly Slump: Market Headwinds Take a Toll

Despite the annual success, Q4 results revealed vulnerabilities. Group net revenue fell 10% QoQ to ¥452.7 billion, while net income dropped 29% QoQ to ¥72 billion. The decline stemmed from:

1. Fixed Income Struggles: Wholesale’s fixed income division saw net revenue plunge 24% QoQ to ¥105.8 billion, as rising yen rates and subdued global liquidity hit trading volumes. CFO Takumi Kitamura noted Japan’s market focus and lack of commodities exposure contributed to underperformance compared to U.S. peers.
2. Wealth Management Softness: Q4 flow revenue (e.g., primary stock subscriptions) dropped 45%, reflecting investor caution in a declining stock market. Recurring revenue, however, remained robust.
3. Cost Pressures: Wholesale’s cost-to-income ratio rose to 84%, signaling inefficiencies.

Strategic Shifts: Diversification and Global Ambitions

Nomura is doubling down on fee-based revenue to reduce reliance on volatile markets. Key moves include:
- $1.8 Billion Acquisition of Macquarie’s Asset Management Units: This deal targets growth in U.S. and European public asset management, boosting recurring revenue and diversifying geographic exposure.
- Cost Optimization: Staff costs fell 9.7% YoY in Q4, aiding profitability. Management aims to further streamline operations, particularly in Wholesale.

CEO Kentaro Okuda emphasized a “stable revenue-driven” strategy, prioritizing asset management and workplace services (e.g., ESOP platforms), which grew 3.88 million units vs. a 3.66 million target.

Financial Health and Shareholder Returns

Nomura’s capital ratios remain strong:
- Tier One Capital Ratio: 16.2% (vs. 14.8% in FY2024).
- Common Equity Tier 1 (CET1): 14.5%, well above regulatory requirements.

The company also announced a ¥60 billion share buyback (up to 100 million shares) and a ¥57 annual dividend per share (49% payout ratio), signaling confidence in its financial stability.

Risks and Challenges Ahead

1. Market Volatility: Rising yen rates and geopolitical risks (e.g., U.S. tariffs) could prolong weakness in fixed income and flow-based businesses. April’s performance remained below Q4 levels, per Kitamura.
2. Cost Management: Wholesale’s 84% cost-to-income ratio must be addressed to sustain profitability.
3. GuruFocus Warnings: Three unspecified red flags—likely tied to debt, liquidity, or earnings consistency—warrant monitoring.

Conclusion: A Strong Foundation with Near-Term Hurdles

Nomura’s FY2025 results reflect a dual narrative: long-term strategic progress and short-term market sensitivity. The ¥340.7 billion net income record, KPI overachievement, and capital strength position it well for future growth. Strategic moves like the Macquarie acquisition and shift to fee-based revenue could solidify its global standing.

However, investors must weigh these positives against near-term risks. If fixed income and cost issues persist, they could dampen ROE growth, which rose to 10%—still below the 8–10% target range for FY2030.

For now, the ¥60 billion buyback and strong capital ratios suggest Nomura is a resilient play in Asian financials. But sustained outperformance will hinge on navigating macroeconomic headwinds and executing its cost/diversification agenda.

In short, Nomura’s FY2025 results are a cautious win: a record year sets the stage, but the path to sustained excellence remains uneven.