2Q FY2015 Earnings Announcement October 28, 2015 Daiwa Securities - PowerPoint PPT Presentation

2Q FY2015 Earnings Announcement October 28, 2015 Daiwa Securities Group Inc.

Table of Contents Consolidated Results 3 ～ 6  Summary 7 ～ 8  Breakdown of SG&A  Balance Sheet 9  Financial Management 10 11 ～ 18  Segment Information  DIR Group, Daiwa Next Bank and Overseas Operation 19 20 ～ 33 Reference 2

Consolidated Highlights （ 1H / FY2015 ） ■ Ordinary income increased YoY against the backdrop of strong result achieved in 1Q FY2015  Net operating revenues: Y278.2 bil (+10.1% YoY), Ordinary income: Y98.5bil (+17.4% YoY), Profit attributable to owners of parent company: Y69.1 bil (-3.2% YoY)  1H FY2015 annualized ROE was 11.1%, exceeding a numerical target of the Medium Term Management Plan (ROE:10% or more) ■ Both Retail and Wholesale Division contributed to the increase in net operating revenues and ordinary income  Ordinary income for the Retail Division was Y42.2 bil (+19.8% YoY) as the sales of stock investment trust and fund wrap were stable despite the market turmoil from August.  Ordinary income for the Wholesale Division was Y29.6bil (+24.6% YoY) owing to a number of large scale global transactions (IPO, PO and M&A) and bond products.  Achieved first place in IPO, Municipal bond and RMBS league tables for 1H FY2015. 3

Consolidated Summary （ 2Q / FY2015 ）  2Q FY2015 Net operating revenues: Y123.5 bil （ -20.1% QoQ ）  Net operating revenues decreased due to the market turmoil in the global financial market.  Global Investment Banking achieved growth in net operating revenues due to the increase in underwriting and M&A deals.  2Q FY2015 Ordinary income: Y35.4 bil （ -43.8 ％ QoQ ）  SG&A was Y91.2 bil, -4.5% QoQ as variable costs such as bonus decreased.  2Q FY2015 Profit attributable to owners of parent company: Y24.3 bil （ -45.7 ％ QoQ ）  Annualized ROE was 7.7% (-6.6 pt QoQ), BPS was Y732.15 (-Y12.15 QoQ)  Interim dividend was 17 yen, dividend payout ratio was 42.1% (FY2014 interim dividend was 14 yen, year-end dividend was 16 yen ) Profit attributable to owners of Net operating revenues Ordinary income parent company （ Y bil ） （ Y bil ） （ Y bil ） 154.6 160 80 80 140.2 139.3 122.4 130.1 123.5 63.1 120 60 60 51.0 49.5 44.8 44.2 39.7 38.5 38.5 37.0 80 40 35.4 34.3 40 24.3 20 40 20 0 0 0 1Q/14 2Q/14 3Q/14 4Q/14 1Q/15 2Q/15 1Q/14 2Q/14 3Q/14 4Q/14 1Q/15 2Q/15 1Q/14 2Q/14 3Q/14 4Q/14 1Q/15 2Q/15 4

Consolidated Financial Summary % Change % Change FY2015 FY2014 FY2015 (Y mil) FY2014 vs vs 1Q 2Q 1H 1H 1Q/15 1 Ｈ /14 191,389 659,396 158,126 -17.4% 304,357 349,515 14.8% Operating revenues 154,663 532,220 123,579 -20.1% 278,242 10.1% Net operating revenues 252,654 95,574 361,380 91,281 -4.5% 177,053 186,856 5.5% SG&A 63,113 184,578 Ordinary income 35,456 -43.8% 83,944 98,569 17.4% Profit (loss) attributable to 44,836 148,490 24,347 -45.7% 69,183 -3.2% 71,465 owners of parent 23,451,198 23,001,585 Total assets 23,183,711 21,664,680 23,183,711 1,362,124 1,434,680 1,346,356 1,346,356 Net assets 1,338,721 1,272,263 1,238,657 Shareholders' equity* 1,258,269 1,143,952 1,258,269 26.24 87.07 14.19 40.41 EPS (Y) 41.94 744.30 725.27 BPS (Y) 732.15 670.81 732.15 14.3% 12.8% 7.7% 11.1% ROE (Annualized) 12.9% * Shareholders’ equity = Owners’ equity + Accumulated other comprehensive income FY2015 Interim Dividend 17 yen 5

Consolidated P/L Summary FY2014 FY2015 % FY2014 FY2015 % (Y mil) Change Change FY2014 Net operating revenues : Y123.5 bil 2Q 3Q 4Q 1Q 2Q vs 1Q/15 1H 1H vs 1H/14 (-20.1% QoQ ） 659,396 Operating revenues 155,656 179,583 175,454 191,389 158,126 -17.4% 304,357 349,515 14.8%  Commission received was Y76.4 bil 291,115 70,954 76,029 75,445 80,041 139,641 Commision received 76,460 -4.5% 156,502 12.1% (-4.5%QoQ) 157,220 Net trading income 39,016 38,806 41,817 49,043 23,681 -51.7% 76,596 72,724 -5.1% ・ Due to decrease in the value of Net gain/loss on private equity stock trading and sales of stock 7,415 1,543 3,384 570 3,704 1,490 -59.8% 3,460 5,195 50.1% and other securities investment trusts, brokerage 125,934 commission* was Y18.4 bil (-12.4% 29,789 34,612 34,954 37,830 56,367 Financial revenue 35,335 -6.6% 73,166 29.8% QoQ), distribution commission* was 77,710 Other operating revenue 14,351 26,750 22,667 20,768 21,158 1.9% 28,292 41,927 48.2% Y9.4 bil (-15.9% QoQ) 80,070 ・ M&A commissions was Y2.9 bil Financial expenses 15,381 27,660 20,497 23,978 24,288 1.3% 31,912 48,267 51.2% (+93.8% QoQ) as cross-border M&A 47,105 10,110 11,674 15,640 12,746 19,790 Other operating expenses 10,258 -19.5% 23,005 16.2% deals successfully closed. 532,220 Net operating revenues 130,163 140,248 139,316 154,663 123,579 -20.1% 252,654 278,242 10.1% ・ Underwriting commission* was Y9.5 bil (+5.9% QoQ) as the number of 361,380 SG&A 88,889 91,408 92,918 95,574 91,281 -4.5% 177,053 186,856 5.5% IPO/PO deals increased. 41,274 48,840 46,398 59,088 75,600 170,839 Operating income/loss 32,297 -45.3% 91,386 20.9%  Net trading income was Y23.6 bil (-51.7% QoQ) as there was less 13,738 Non-operating income/loss 2,964 2,215 3,179 4,024 3,158 -21.5% 8,343 7,182 -13.9% contribution from client flows and 184,578 position management owing to Ordinary income/loss 44,239 51,056 49,578 63,113 35,456 -43.8% 83,944 98,569 17.4% market turmoil. -2,662 717 -3,666 264 2,813 740 Extraordinary income/loss 343 -87.8% 3,156 326.2% Ordinary income : Y35.4 bil 181,916 Income/loss before income taxes 44,956 47,389 49,842 65,926 35,799 -45.7% 84,684 101,725 20.1% （ -43.8% QoQ ） 27,444 Total income taxes 6,756 7,463 8,937 19,636 11,421 -41.8% 11,042 31,057 181.2% Net income ** : Y24.3 bil Profit (loss) attributable to （ -45.7% QoQ ） 148,490 37,085 38,502 38,522 44,836 71,465 24,347 -45.7% 69,183 -3.2% owners of parent * Composition of total commission received (See p.21) ** Net income: Profit attributable to owners of parent company 6

Consolidated Breakdown of SG&A % % FY2014 FY2015 FY2014 FY2015 Change Change （ Y mil ） FY2014 SG&A : Y91.2 bil vs vs 2Q 3Q 4Q 1Q 2Q 1H 1H 1Q/15 1H/14 （ -4.5% QoQ ） 177,053 186,856 88,889 91,408 92,918 95,574 91,281 -4.5% 5.5% 361,380 SG&A  Trading related expenses decreased to Y18.3 bil (-3.0% QoQ) due to decrease in equity Trading related 18,569 18,762 18,473 18,871 18,304 -3.0% 36,440 37,175 2.0% 73,676 expenses trading volume in Daiwa Securities and assets under management of Daiwa AM. Personnel 44,157 46,061 47,935 49,358 87,775 181,772 45,616 -7.6% 94,974 8.2% expenses  Personnel expenses fell to Y45.6 bil (-7.6% QoQ) mainly due to the Real estate reduction of bonus, which is linked 9,169 9,076 9,550 9,287 18,382 37,009 9,686 4.3% 18,974 3.2% expenses to ordinary income.  Real estate expenses increased to 6,104 6,485 6,521 6,501 12,437 25,444 Office cost 6,578 1.2% 13,079 5.2% Y9.6 bil (+4.3% QoQ) due to rise in rent on real estate and system related maintenance insurance Depreciation 6,140 6,141 5,772 5,953 5,921 -0.5% 12,170 11,874 -2.4% 24,084 cost.  Office cost was Y6.5 bil (+1.2% QoQ) and depreciation cost was Taxes and dues 1,738 1,808 1,556 2,895 2,148 -25.8% 3,622 5,044 39.3% 6,987 Y5.9 bil (-0.5% QoQ). Both remained almost flat compared to the previous quarter. Other 3,009 3,073 3,107 2,707 3,025 11.7% 6,225 5,733 -7.9% 12,405 7

Consolidated Cost Structure （ Y bil ） 100 95.5 87.2 88.1 88.8 91.4 92.9 FY2013 FY2014 FY2015 90.1 91.2 (Y bil) 86.9 2Q 3Q 4Q 1Q-4Q 1Q 2Q 3Q 4Q 1Q-4Q 1Q 2Q 1Q-2Q Variable costs Total SG&A 86.9 90.1 87.2 357.3 88.1 88.8 91.4 92.9 361.3 95.5 91.2 186.8 80 36.0 38.9 36.4 36.4 37.1 38.9 39.7 41.3 Variable costs 36.0 38.9 36.4 152.3 36.4 37.1 38.9 39.7 152.2 41.3 37.4 78.8 37.4 Trading related 18.4 19.1 17.7 74.3 17.8 18.5 18.7 18.4 73.6 18.8 18.3 37.1 expenses Advertising 60 2.6 2.4 1.9 8.2 1.7 1.7 2.0 2.0 7.5 1.7 1.9 3.6 expenses Bonus and others 12.5 14.4 13.6 57.1 12.8 13.1 14.6 15.5 56.0 16.9 13.5 30.4 2.0 2.2 2.0 8.3 2.2 2.1 2.3 2.2 9.0 2.3 4.6 Overtime, part-time 2.2 40 Fixed costs 50.9 51.1 50.8 205.0 51.7 51.7 52.4 53.1 209.1 54.2 53.7 108.0 Fixed costs Personnel 27.2 27.3 27.7 109.9 28.1 28.4 28.8 29.7 115.2 29.6 29.4 59.1 expenses 50.9 51.1 50.8 51.7 51.7 52.4 53.1 54.2 53.7 Real estate 8.8 9.1 9.2 36.2 9.2 9.1 9.0 9.5 37.0 9.2 9.6 18.9 expenses 20 Depreciation 6.8 6.5 6.1 26.5 6.0 6.1 6.1 5.7 24.0 5.9 5.9 11.8 6.1 5.9 5.7 23.6 6.0 5.8 6.1 6.2 24.2 6.1 12.4 Office expenses 6.2 Taxes and dues 1.4 1.6 1.4 6.6 1.8 1.7 1.8 1.5 6.9 2.8 2.1 5.0 0 2Q/13 3Q/13 4Q/13 1Q/14 2Q/14 3Q/14 4Q/14 1Q/15 2Q/15 ※ Bonus-linked social insurance premium at Daiwa securities which had been reported as fixed costs, is now included as variable costs, and figures have been retroactively adjusted. 8