Nomura Holdings (NMR) Q2 2026: Wealth and Investment Management Net Inflows Drive 40% Net Income Growth
Nomura delivered a resilient Q2, as recurring revenue streams in wealth and investment management set new records and propelled net income up 40% excluding one-off gains. The wholesale segment extended its profitability streak, with global markets and investment banking both showing robust momentum. Management’s focus on portfolio diversification and risk discipline signals a more stable earnings base, but cost pressure and capital allocation constraints remain key watchpoints for investors as the firm balances growth, risk, and shareholder returns.
Summary
- Recurring Revenue Foundation: Wealth and investment management net inflows hit all-time highs, solidifying stable revenue growth.
- Wholesale Diversification: Global markets and investment banking delivered broad-based gains, offsetting macro softness.
- Capital Allocation Discipline: CET1 ratio compression and cost uptick highlight the need for careful balance between risk, growth, and returns.
Performance Analysis
Nomura’s Q2 revenue and profit mix reflected a clear shift toward stability, with recurring revenue from wealth management and investment management both reaching record levels. Wealth management’s net revenue rose 10% quarter-on-quarter, buoyed by a 14th consecutive quarter of net inflows and a pre-tax margin of 39%—the highest in a decade. Investment management net revenue surged 20%, with assets under management climbing to 101.2 trillion yen, driven by 10 straight quarters of net inflows and new highs in asset management fees.
Wholesale delivered another robust quarter, with net revenue up 7% and income before income taxes up 27%. Equities revenue hit a record high, supported by strong client activity in Japan and Asia ex-Japan (AEJ), as well as continued strength in derivatives and U.S. execution services. Investment banking revenue climbed 15%, with Japan advisory and international deals both contributing. However, group-wide expenses rose 4%, primarily due to higher performance-linked bonuses and retirement costs, as well as one-time costs related to acquisitions and phishing compensation.
- Wealth and Investment Management Stability: Recurring revenue assets and net inflows set new records, underpinning earnings consistency.
- Wholesale Margin Expansion: Cost-income ratio improved to 81%, with stringent cost controls and higher revenues in equities and investment banking.
- Expense Pressure Emerges: Compensation, benefits, and one-off costs increased, highlighting the challenge of containing overhead as revenue grows.
Return on equity (ROE) remained above the 2030 target for the sixth consecutive quarter, but capital ratios compressed slightly due to risk-weighted asset growth and the Macaulay acquisition. The dividend payout ratio was maintained at 40.3% for the period, with total payout commitments reaffirmed.
Executive Commentary
"Steady growth in recurring assets in both wealth management and investment management has resulted in strong growth in stable revenues... Banking has been steadily increasing its recurring business, including loans outstanding and trust balance, thereby expanding its foundation for growth."
Hiroyuki Moriuchi, Chief Financial Officer
"For six quarters in a row, we have attained a quantitative target for 2030 announced last year of consistently achieving ROE of 8 to 10% or more... This has added further to the stability of our company-wide performance."
Hiroyuki Moriuchi, Chief Financial Officer
Strategic Positioning
1. Recurring Revenue Engine in Wealth and Investment Management
Nomura’s 14th and 10th consecutive quarters of net inflows in wealth and investment management, respectively, reflect a deliberate push toward fee-based, stable income. The company’s focus on expanding recurring revenue assets—such as investment trusts and discretionary investments—has led to record levels in both divisions, reducing earnings volatility and anchoring long-term growth. The workplace services client base has also grown past 4 million, supporting future cross-sell opportunities.
2. Wholesale Portfolio Diversification and Self-Funding Discipline
The wholesale segment’s growth is increasingly broad-based, with record equity revenues and strong investment banking deal flow across multiple geographies and products. This diversification, coupled with a “self-funding” model—where growth is supported by the division’s own profit generation rather than group capital infusions—has made the business more resilient to market cycles. Management flagged the importance of balancing risk, especially in structured credit and private credit exposures, and emphasized selective deal-making to avoid concentration risk.
3. Capital and Risk Management Amid Growth Initiatives
Capital allocation is under pressure, with the CET1 ratio dipping to 12.9% and expected to fall further post-Macaulay acquisition. Management reiterated its commitment to a 40%+ dividend payout and a 50%+ total payout, but acknowledged the tension between shareholder returns, investment in growth, and maintaining financial discipline. The Q&A revealed a cautious stance on buybacks, with future actions contingent on capital headroom, risk opportunities, and inorganic growth prospects.
Key Considerations
This quarter’s results highlight Nomura’s strategic pivot toward recurring revenue, operational discipline, and risk-aware growth, but also expose areas that require ongoing attention as the firm navigates a complex market environment.
Key Considerations:
- Recurring Revenue Momentum: Sustained net inflows in core fee-based businesses provide a buffer against market volatility and cyclical downturns.
- Wholesale Risk and Reward: Broad-based strength in global markets and investment banking must be balanced with careful risk management, especially in structured and private credit.
- Expense Management Challenges: Rising compensation, retirement, and acquisition-related costs could erode margin gains if not tightly controlled.
- Capital Adequacy Constraints: CET1 ratio compression post-acquisition and ongoing risk-weighted asset growth may limit flexibility for buybacks or aggressive expansion.
Risks
Nomura faces several material risks: Capital ratio compression from acquisitions and RWA growth could constrain risk-taking and shareholder returns. Expense inflation, including variable compensation and one-off costs, may pressure margins. Credit and market risk concentration in wholesale, particularly in structured and private credit, requires ongoing vigilance. Additionally, operational and cybersecurity risks (as highlighted by phishing-related losses) remain a persistent threat to client trust and profitability.
Forward Outlook
For Q3, Nomura signaled:
- Wealth and investment management net revenue in October tracking above Q2 levels, with continued strong inflows.
- Wholesale revenue in October “about the same level” as Q2, with normalization expected in some equity and fixed income segments.
For full-year 2026, management maintained its commitment to:
- Dividend payout ratio of 40% or more, total payout ratio of 50% or more.
Management emphasized ongoing portfolio diversification, risk discipline, and the goal of maintaining ROE above 8% across cycles.
- Selective risk-taking in wholesale, especially in structured credit, to avoid concentration.
- Continued investment in recurring revenue platforms and operational efficiency.
Takeaways
Nomura’s Q2 results underscore a business model transition toward stability and diversification, but also reveal the operational and capital tradeoffs of that shift.
- Stable Revenue Backbone: Record net inflows and recurring revenue in wealth and investment management are anchoring predictable earnings, reducing reliance on volatile trading and deal-making.
- Wholesale Growth Balanced by Risk Controls: Broad-based momentum in global markets and investment banking is offset by a disciplined approach to risk, especially in credit and structured products.
- Capital and Cost Watch: Investors should monitor capital adequacy post-acquisition and whether cost inflation is contained as the firm scales recurring revenue streams.
Conclusion
Nomura’s Q2 performance demonstrates the effectiveness of its recurring revenue strategy and diversified wholesale growth engine, but also highlights the challenge of balancing cost, risk, and capital allocation. The firm’s ability to sustain high ROE and deliver on payout commitments will hinge on disciplined execution as it navigates macro volatility and evolving market opportunities.
Industry Read-Through
Nomura’s results offer several insights for the broader securities and asset management industry: The pivot to recurring revenue and fee-based business models is proving essential for earnings stability in volatile markets. Diversification across geographies and products—especially in wholesale and investment banking—can cushion against regional or product-specific downturns. However, cost discipline and capital management remain critical as firms pursue growth and defend shareholder returns. Operational resilience, especially in cybersecurity, is increasingly a differentiator as digital threats rise. Competitors should note the importance of balancing growth initiatives with rigorous risk and capital controls in this evolving landscape.