Daiwa Securities Group Inc. 3Q FY2018 Earnings Announcement January 29, 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 future expectations, identify strategies, contain projections of results of operations or of financial condition or state other “forward-looking” information. These statements are based on currently available information and represent the beliefs of the management of the Daiwa Securities Group. These statements are subject to numerous risks and uncert ainties that could cause the Daiwa Securities Group’s actual results, performance, achievements or financial condition to differ materially from those described or implied in the forward-looking statements. The Daiwa Securities Group undertakes no obligation to publicly update any forward-looking statements after the date of this presentation. These potential risks and uncertainties include, but are not limited to: competition within the financial services industries in Japan and overseas, our ability to adjust our business focus and to maintain profitable strategic alliances, volatile and sudden movements in the international securities markets, foreign exchange and global economic situations affecting the Daiwa Securities Group.
Table of Contents 3-4 Highlights 5-7 Financial Summary 8-9 B/S & Financial Management Summary 10 P/L Summary 11-12 Breakdown of SG&A 13 Overseas Operations 14-21 Segment Information 22-35 Reference 2 2
Highlights (1Q-3Q/FY2018) Both Net operating revenues and Ordinary income decreased YoY. % Changes vs % Changes vs Consolidated earnings results FY2018 1Q-3Q FY2018 3Q 1Q-3Q/FY2017 2Q/FY2018 Net operating revenues ¥333.7 bn -10.9% ¥110.3 bn +2.3% Ordinary income ¥65.4 bn -41.6% ¥19.4 bn -3.3% Profit attributable to owners of parent ¥50.4 bn -31.9% ¥14.1 bn -20.5% 【 Retail Division 】 Net asset inflow from April to December exceeded ¥1 trillion (¥1.05 trillion) and hit a record high in the past 10 years from the ripple effects of SoftBank IPO, the largest IPO deal in Japan, and Mercari IPO which Daiwa Securities lead managed. Contract AUM of wrap account service steadily rose from the end of March 2018. Investment advisory and account management fees also increased. 【 Wholesale Division 】 Retained 1 st place on primary and secondary equity offerings league table and 2 nd place on IPO league table. Underwriting and secondary offerings commissions significantly increased by managing several lead • managed deals such as Renesas Electronics global PO, Softbank and Mercari global IPO. A number of M&A deals increased utilizing our global network. M&A related commission also rose. Managed multiple cross-border deals including acquisition of French subsidiary of the US leading • pharmaceutical company by Taisho Pharmaceutical Co., Ltd.. 3
Summary (3Q/FY2018) ※ The following shows the percentage change from the previous quarter. 3Q FY2018 Net operating revenues: ¥110.3 bn (+2.3%) Revenues in Retail Division decreased as stock investment trust sales and trading value of foreign equities dropped during correction phase toward the end of the year. On the other hand, SoftBank global IPO brought an increase in net inflow of assets and newly opened accounts. For Wholesale Division, revenues in Global Investment Banking reached a record high on quarterly basis since 2010 due to an increase in underwriting offering commissions and M&A related commission even though revenues from both equities and FICC in Global Markets decreased. 3Q FY2018 Ordinary income: ¥19.4 bn (-3.3%) SG&A rose to ¥94.1 billion (+1.9%) as advertising and promotion expenses related to sales promotion and earnings-linked bonuses in overseas increased. 3Q FY2018 Profit attributable to owners of parent: ¥14.1 bn (-20.5%) Annualized ROE: 4.5%, BPS: ¥782.06 Profit Attributable to Net Operating Revenues Ordinary Income Owners of Parent (¥ Billions) (¥ Billions) (¥ Billions) 180 60 60 130.9134.9 130.8 43.8 43.2 43.4 121.9 121.6 115.6 107.8 110.3 120 40 40 108.5 36.5 35.4 34.3 31.9 26.6 25.8 25.1 22.6 22.3 19.3 20.1 19.4 18.5 17.7 60 20 20 14.1 0 0 0 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2016 FY2017 FY2018 FY2016 FY2017 FY2018 FY2016 FY2017 FY2018 4
Consolidated Financial Summary % Change % Change % Change FY2017 FY2018 FY2017 FY2018 (¥ Millions) vs vs FY2017 vs 3Q 4Q 1Q 2Q 3Q 1Q-3Q 1Q-3Q 1Q-3Q/FY17 2Q/FY18 3Q/FY17 Operating revenues 190,875 185,461 175,175 172,570 188,753 9.4% -1.1% 527,140 536,499 1.8% 712,601 Net operating revenues 134,997 130,886 115,606 107,837 110,302 2.3% -18.3% 374,464 333,746 -10.9% 505,350 SG&A 94,725 97,520 93,454 92,321 94,117 1.9% -0.6% 272,771 279,894 2.6% 370,292 Ordinary income 43,216 43,477 25,860 20,154 19,479 -3.3% -54.9% 112,199 65,495 -41.6% 155,676 Profit (loss) attributable to 22,697 36,581 18,534 17,751 14,117 -20.5% -37.8% 73,998 50,404 -31.9% 110,579 owners of parent Total assets 21,925,865 21,135,041 20,853,852 20,963,519 21,429,204 21,925,865 21,429,204 21,135,041 Net assets 1,375,632 1,370,520 1,371,244 1,300,984 1,247,475 1,375,632 1,247,475 1,370,520 Shareholders' equity* 1,278,643 1,273,133 1,274,457 1,289,355 1,235,676 1,278,643 1,235,676 1,273,133 EPS (¥) 13.73 22.53 11.45 10.99 8.89 44.49 31.36 66.88 BPS (¥) 780.71 786.56 787.29 801.84 782.06 780.71 782.06 786.56 ROE (Annualized) 7.1% 11.5% 5.8% 5.5% 4.5% 7.8% 5.4% 8.8% * Shareholders’ equity = Owners’ equity + Accumulated other comprehensive income 5
Consolidated Segment Summary (¥ Millions) % Change % Change % Change FY2017 FY2018 FY2017 FY2018 Net operating revenues vs vs FY2017 vs 3Q 4Q 1Q 2Q 3Q 1Q-3Q 1Q-3Q 2Q/FY18 3Q/FY17 1Q-3Q/FY17 Retail 59,570 54,573 50,609 47,314 46,388 -2.0% -22.1% 159,673 144,313 -9.6% 214,247 Wholesale 45,726 47,135 39,798 39,394 37,092 -5.8% -18.9% 124,057 116,284 -6.3% 171,192 Global M arkets 32,633 33,616 28,078 31,177 19,564 -37.2% -40.0% 90,080 78,821 -12.5% 123,697 13,092 13,518 11,719 8,216 33,976 47,495 Global Investment Banking 17,527 113.3% 33.9% 37,462 10.3% Asset Management 12,650 12,587 12,268 12,092 12,125 0.3% -4.2% 36,802 36,486 -0.9% 49,390 Investments 6,326 5,359 2,435 -1,861 1,511 - -76.1% 22,042 2,086 -90.5% 27,401 Other/Adjustments 10,722 11,230 10,494 10,897 13,184 - - 31,887 34,577 - 43,118 Consolidated total 134,997 130,886 115,606 107,837 110,302 2.3% -18.3% 374,464 333,746 -10.9% 505,350 % Change % Change % Change FY2017 FY2018 FY2017 FY2018 Ordinary income vs vs vs FY2017 3Q 4Q 1Q 2Q 3Q 1Q-3Q 1Q-3Q 2Q/FY18 3Q/FY17 1Q-3Q/FY17 Retail 18,002 12,312 9,894 6,723 6,119 -9.0% -66.0% 39,019 22,737 -41.7% 51,331 Wholesale 12,789 13,252 6,996 7,445 3,466 -53.4% -72.9% 32,120 17,907 -44.2% 45,373 Global M arkets 9,817 11,228 5,849 8,786 -3,151 - - 23,059 11,484 -50.2% 34,288 2,794 1,760 823 -1,492 8,349 10,109 Global Investment Banking 6,302 - 125.5% 5,633 -32.5% Asset Management 7,489 7,292 7,488 7,391 6,969 -5.7% -6.9% 21,827 21,850 0.1% 29,119 Investments 5,529 4,377 1,760 -2,377 633 - -88.5% 20,121 15 -99.9% 24,499 Other/Adjustments -594 6,243 -278 972 2,290 - - -890 2,983 - 5,353 Consolidated total 43,216 43,477 25,860 20,154 19,479 -3.3% -54.9% 112,199 65,495 -41.6% 155,676 ※ Figures calculated based on managerial accounting of each Group companies. Equity in earnings of affiliates is included in each respective segment. 6
Consolidated Segment Summary Net operating revenues Ordinary income Retail Division Wholesale Division (¥ Billions) (¥ Billions) Global Markets (Net operating revenues) Global Investment Banking (Net operating revenues) 59.5 54.5 51.2 50.6 49.6 49.6 48.8 47.1 47.1 46.4 47.3 45.7 46.3 43.0 39.7 39.3 37.0 35.2 GM 18.0 16.9 16.9 13.2 12.8 12.7 12.3 10.6 10.3 9.5 9.8 8.7 7.4 6.9 6.7 6.1 6.4 3.4 GIB 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2016 FY2017 FY2018 FY2016 FY2017 FY2018 Asset Management Division Investment Division (¥ Billions) (¥ Billions) 13.9 12.6 12.5 12.2 12.0 12.1 12.0 12.1 11.5 11.7 13.1 6.3 5.3 2.5 2.4 2.4 7.4 7.4 7.3 1.8 1.5 7.2 7.2 7.1 6.9 6.5 6.6 5.5 4.3 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 1.8 1.4 0.6 1.5 1.7 -2.3 -1.8 FY2016 FY2017 FY2018 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2016 FY2017 FY2018 7
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