Daiwa Securities : Presentation for 2Q FY2023

Daiwa Securities Group Inc.

2Q FY2023 Earnings Announcement

October 31, 2023

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 uncertainties 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

Highlights	3-4
Financial Summary	5-7
B/S & Financial Management Summary	8-9
P/L Summary	10
Breakdown of SG&A	11-12
Overseas Operations	13
Segment Information	14-21
Reference	22-35

2

Highlights (2Q/FY2023, YoY)

Net operating revenues and ordinary income increased YoY, ordinary income was 2.3x (highest level in 8 years).

Consolidated earnings results

Net operating revenues Ordinary income Profit attributable to owners of parent

FY2023 1H

¥278.4 bn

¥76.9 bn

¥53.5 bn

FY2022 1H

¥217.0 bn

¥32.9 bn

¥31.4 bn

• Changes vs 1H/FY2022

+28.3%

+133.5%

+70.1%

• Retail Division's ordinary income doubled to ¥25.5 bn, due to the steady progress of shifting to wealth management business model.
• • 2Q's asset based revenues of Retail Division of Daiwa Securities expanded to ¥22.8bn (¥91.2bn in annualized basis). Total cost coverage ratio was 62.6%.
  • Both contract amount (¥409.4 bn) and net inflow (¥258.2 bn) of wrap account service* was the highest since FY2015 1H. Contract AUM was record high (¥3.5 tn).
• Wholesale Division secured ordinary income of ¥23.8 bn due to the recovery in both primary and secondary markets.
• • Global Markets saw revenue increase in both equity and FICC due to the increase in customer activities.
  • Global Investment Banking revenue increased due to contributions from underwriting equity deals and debt deals, as well as expansion in M&A related revenues.

Continue high level of shareholder returns (Interim dividend: 19 yen, Set up of share repurchase program)

• FY2023 interim dividend: 19 yen (highest for interim dividend), dividend pay-out ratio: 51.5%
• Total number of share to be repurchased: up to 35.0 mil shares. Total amount to be paid for
  repurchase: up to ¥35.0 bn (2.43% of total shares outstanding, excluding treasury stock).

* Includes Wholesale Division

3

Summary (2Q/FY2023, QoQ)

Ordinary Income was ¥40.8 bn, +13.1% QoQ .

Consolidated earnings results		FY2023 2Q
Net operating revenues		¥144.3 bn
Ordinary income		¥40.8 bn
Profit attributable to owners of parent		¥29.7 bn

• Changes vs 1Q/FY2023

+7.6%

+13.1%

+25.6%

• Retail Division secured ordinary income of ¥12.0 bn. Wrap account service's contract amount
  (¥237.3bn) and net inflow (¥162.1bn) increased rapidly. Asset based revenues were record high.
• Wholesale Division's revenue and income increased. M&A related revenues increase in Global Investment Banking was the main driver.
• Annualized ROE: 8.0%

					Net Operating Revenues										Ordinary Income
(¥ Billions)															144.3	(¥ Billions)
150			134.3										134.0	60
129.2						121.4	125.7
					111.7 106.1 110.9
100														40			40.5													40.8
																			36.9									30.8	36.0
																							23.3	18.0			23.1
50																				20							14.8
0		2Q		3Q		4Q		1Q		2Q		3Q		4Q		1Q		2Q	0		2Q		3Q		4Q		1Q		2Q		3Q		4Q		1Q		2Q
													FY2021					FY2022				FY2023
		FY2021				FY2022				FY2023

Profit Attributable to

Owners of Parent

(¥ Billions) 60

40
26.6	26.6											23.7	29.7
									19.5
20					17.9			15.2	17.1
						11.8
0		2Q		3Q		4Q		1Q		2Q		3Q		4Q		1Q		2Q
			FY2021				FY2022				FY2023

4

Consolidated

Financial Summary

		FY2022		FY2023	% Change	% Change	FY2022	FY2023	% Change
(¥ Millions)						vs	vs			vs				FY2022
2Q	3Q	4Q	1Q	2Q	1H	1H
	1Q/FY23	2Q/FY22	1H/FY22
Operating revenues	192,552	233,036	293,860	266,259	303,827	14.1%	57.8%	339,193	570,087	68.1%				866,090
Net operating revenues	110,933	121,433	125,737	134,110	144,321	7.6%	30.1%	217,055	278,432	28.3%				464,226
SG&A	98,942	99,913	101,822	103,377	106,492	3.0%	7.6%	196,216	209,870	7.0%				397,952
Ordinary income	14,855	23,170	30,818	36,096	40,835	13.1%	174.9%	32,941	76,932	133.5%				86,930
Profit (loss) attributable to	19,576	15,295	17,124	23,712	29,793	25.6%	52.2%	31,455	53,505	70.1%				63,875
owners of parent
Total assets	31,461,475	28,115,421	26,413,248	31,501,328	33,424,666			31,461,475	33,424,666					26,413,248
Net assets	1,697,428	1,657,832	1,675,489	1,736,856	1,773,266			1,697,428	1,773,266					1,675,489
Shareholders' equity*	1,428,464	1,388,380	1,407,840	1,468,713	1,504,956			1,428,464	1,504,956					1,407,840
EPS (¥)	13.24	10.52	11.79	16.32	20.60			21.24	36.91					43.53
BPS (¥)	971.62	955.66	968.93	1,010.78	1,046.95			971.62	1,046.95					968.93
ROE (Annualized)	5.5%	4.3%	4.9%	6.6%	8.0%			4.5%	7.3%					4.6%

* Shareholders' equity = Owners' equity + Accumulated other comprehensive income

FY2023 Interim Dividend

19 yen

5

Consolidated

Segment Summary

(¥ Millions)

Net operating revenues				FY2022										FY2023										% Change	% Change	FY2022		FY2023		% Change								FY2022
																									vs	vs						vs
		2Q	3Q					4Q					1Q		2Q											1H		1H
																					1Q/FY23	2Q/FY22				1H/FY22
Retail		41,187	42,203	40,550	49,845	49,387	-0.9%	19.9%		81,581	99,232	21.6%						164,336
Wholesale		38,853	42,727	43,344	51,627	54,990	6.5%	41.5%		74,819	106,617	42.5%					160,891
Global Markets															36,921		0.2%	46.0%			73,770	48.2%
	25,280	27,923	25,155	36,848			49,772			102,850
Global Investment Banking		13,573	14,804	18,188		14,778	18,069			22.3%	33.1%		25,047	32,847	31.1%			58,041
Asset Management		16,943	17,276	17,569	17,309	18,031		4.2%	6.4%		35,549	35,341	-0.6%					70,394
Securities Asset Management		10,715	10,514		10,346	10,862	11,653		7.3%	8.8%		22,021	22,515	2.2%			42,882
Real Estate Asset Management		6,227	6,762			7,222	6,447	6,377					-1.1%	2.4%		13,527	12,825	-5.2%			27,512
Investments		1,918	3,791	7,046			1,838	4,534					146.6%	136.4%		5,607	6,373	13.7%					16,446
Other/Adjustments		12,029	15,434	17,226				13,489	17,377					-	-		19,496	30,867	-					52,157
Consolidated total		110,933	121,433	125,737				134,110	144,321					7.6%	30.1%		217,055	278,432	28.3%			464,226
Ordinary income			FY2022										FY2023										% Change	% Change	FY2022		FY2023		% Change						FY2022
																								vs	vs					vs
	2Q	3Q					4Q					1Q		2Q										1H		1H
																					1Q/FY23	2Q/FY22			1H/FY22
Retail		6,151	7,164	6,272		13,542		12,024		-11.2%	95.5%		12,449	25,567	105.4%						25,886
Wholesale		-549	2,435	3,608				11,041		12,766						15.6%	-		-3,221	23,807	-						2,822
Global Markets		-1,481	227	196		9,783		9,157		-6.4%	-		-3,554	18,941	-			-3,130
Global Investment Banking		733	1,924	3,235				886		3,206							261.6%	336.9%		-421	4,092	-			4,738
Asset Management																11,551							28.0%	7.1%			20,574	-6.3%
	10,785	10,569		11,998		9,022				21,958			44,526
Securities Asset Management		4,594	4,195		3,978		4,403		5,196		18.0%	13.1%		9,903	9,599	-3.1%			18,076
Real Estate Asset Management		6,191	6,374		8,020		4,619		6,355			37.6%	2.6%		12,055	10,975	-9.0%			26,450
Investments		788	1,233	6,563		2,975		4,702		58.0%	496.3%		5,271	7,677		45.6%					13,068
Other/Adjustments		-2,320	1,768	2,375					-486		-209										-	-		-3,517		-695		-					626
Consolidated total			14,855	23,170	30,818					36,096		40,835										13.1%	174.9%		32,941		76,932		133.5%					86,930

*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

(¥ Billions)

(¥ Billions)

Wholesale Division

Global Investment Banking (Net operating revenues)

Global Markets (Net operating revenues)

49.6

49.7

49.8

49.3

42.0 40.3 41.1 42.2 40.5

12.3	12.7	6.7			7.1		13.5	12.0
		6.2	6.1	6.2
2Q	3Q	4Q	1Q	2Q	3Q	4Q	1Q	2Q
	FY2021			FY2022		FY2023

Asset Management Division

(¥ Billions)

Real Estate AM (Net operating revenues)

Securities AM (Net operating revenues)

17.6	18.2	17.7	18.6	16.9	17.2	17.5	17.3	18.0
12.7	11.2	11.2	11.1	10.7	10.5	11.9	9.0	11.5
2Q	3Q	4Q	1Q	2Q	3Q	4Q	1Q	2Q
	FY2021			FY2022		FY2023

50.6	53.4						51.6	54.9
	44.9
				42.7	43.3
				38.8
GIB			35.9
GM	16.5
12.6						11.0	12.7
	10.4
			-2.6	-0.5	2.4	3.6
2Q	3Q	4Q	1Q	2Q	3Q	4Q	1Q	2Q
	FY2021			FY2022		FY2023

Investment Division

(¥ Billions)

		4.1	3.6		3.7	7.0		4.5
1.0	3.1	1.9	6.5	1.8
	4.1	4.4		4.7
	1.7		1.2		2.9
-0.4			0.7
2Q	3Q	4Q	1Q	2Q	3Q	4Q	1Q	2Q
	FY2021			FY2022		FY2023

7

Consolidated

B/S Summary

Consolidated Balance Sheet （September 30, 2023）

(¥ Billions)

Current assets	31,846	(6,973)
	Cash and deposits	4,403	(536)
	Short-term investment securities	1,273	(141)
	Trading products	10,711	(3,085)
		Trading securities and other	7,678	(2,253)
		Stocks, Convertible bonds	214	(-34)
		Bonds	5,429	(979)
		Beneficiary certificates	38	(-14)
		Other	1,995	(1,323)
		Derivatives transactions	3,032	(831)
	Operational investment securities	127	(0)
	(after allowance for possible investment losses)
	Loans secured by securities	10,720	(2,378)
Non-current assets	1,578	(38)
	Property, plant and equipment	923	(6)
	Intangible assets	128	(3)
	Investments and other assets	526	(28)
		Listed stocks	126	(12)
		Unlisted stocks		21	(-4)
		Affliated company stocks, etc.			182	(11)
		Other		195	(8)

Current liabilities	28,338	(6,756)
	Trading products	6,344	(902)
		Trading securities and other	3,552	(100)
		Stocks, Convertible bonds	158	(53)
		Bonds	3,299	(1)
		Other	94	(45)
		Derivatives transactions	2,792	(801)
	Loans payable secured by securities	12,097	(4,167)
	Deposits for banking business	4,441	(508)
	Short-term loans payable	1,351	(59)
	Current portion of bonds	251	(-233)
Long-term liabilities	3,309	(156)
	Bonds payable	1,148	(-155)
	Long-term loans payable	2,016	(309)
Total liabilities	31,651	(6,913)
Net assets	1,773	(97)
	Owners' equity	1,313	(21)
	Accumulated other comprehensive income	191	(75)
	Non-controlling interests	260	(1)

Total assets:	¥33.42 tn
Net assets:	¥1.77 tn
Shareholders' equity**:	¥1.50 tn

• 81.1% of total assets have high liquidity*.
• • Cash and deposits + Short-term investment securities + Trading products + Loans secured by securities
• Shareholders' equity** increased by ¥97.1 bn from March 31, 2023.
• • Shareholders' equity = Owners' equity + Accumulated other comprehensive income

Total Assets

33,424

(7,011)

Total liabilities and net assets

33,424

(7,011)

*Figures in parentheses indicate changes from March 31, 2023

8

Consolidated

Financial Management (Regulatory Capital & Regulatory Liquidity)

Consolidated Capital Adequacy Ratio

【Regulatory Capital (Basel III)】

Total qualifying capital (¥ billions)

Consolidated total capital ratio

1,327	1,314	1,337	1,360
1,152	1,148	1,166	1,189
21.17%	20.18%	19.67%	19.77%
18.38%	17.63%	17.15%	17.29%

Common equity tier 1 (¥ billions)

Consolidated common equity tier 1 capital ratio

1,437	1,444	1,449	1,439	1,495
1,305
1,246	1,258	1,250	1,240
20.43%	20.66%	21.28%	21.13%	21.57%
17.72%	17.99%	18.36%	18.22%	18.83%

(As at June 30, 2023)

• Consolidated Total Capital Ratio : 21.57%
• Consolidated Tier 1 Capital Ratio : 21.52%
• Consolidated Common Equity Tier 1

Capital Ratio :	18.83%
 Consolidated Leverage Ratio :	5.72%

• Figures are as at the end of each quarter.

1Q	2Q		3Q	4Q	1Q	2Q		3Q	4Q	1Q
		FY2021				FY2022		FY2023

Consolidated Leverage RatioConsolidated Liquidity Coverage Ratio

【Regulatory Liquidity (Basel III)】 (Daily average Jul. - Sep. 2023)

 Consolidated Liquidity Coverage Ratio : 130.7%

9

Consolidated

P/L Summary

※The following shows the percentage change from the previous quarter.

	(¥ Millions)		FY2022		FY2023	% Change % Change FY2022 FY2023	% Change					FY2022
						vs	vs			vs
				2Q	3Q	4Q	1Q	2Q	1Q/FY23	2Q/FY22	1H	1H	1H/FY22
Operating revenues
	192,552	233,036	293,860	266,259	303,827	14.1%	57.8%	339,193	570,087	68.1%				866,090
	Commission received		70,506	69,588	72,890	82,381	86,124	4.5%	22.2%	137,511	168,506	22.5%				279,991
	Net trading income							24,186	18.1%	31.2%		44,667	31.2%
			18,441	22,324	13,891	20,480	34,036				70,253
	Net gain (loss) on private equity			-1,523	1,735	937	186	3,272	17x	-	1,020	3,458	238.9%				3,692
	Financial revenue			66,607	110,885	120,218	134,340	154,436	15.0%	131.9%	101,444	288,777	184.7%				332,548
	Other operating revenue							35,807	24.0%	-7.0%		64,676	-0.8%
			38,519	28,502	85,922	28,869	65,179				179,604
Financial expenses		52,486	91,027	101,427	113,701	130,846	15.1%	149.3%	76,043	244,548	221.6%				268,498
Other operating expenses		29,132	20,574	66,696	18,447	28,659	55.4%	-1.6%	46,094	47,106	2.2%				133,365
Net operating revenues		110,933	121,433	125,737	134,110	144,321	7.6%	30.1%	217,055	278,432	28.3%				464,226
SG&A		98,942	99,913	101,822	103,377	106,492	3.0%	7.6%	196,216	209,870	7.0%				397,952
Operating income		11,990	21,519	23,915	30,733	37,828	23.1%	215.5%	20,838	68,561	229.0%				66,273
	Non-operating income		2,864	1,650	6,903	5,363	3,007	-43.9%	5.0%	12,102	8,370	-30.8%				20,657
Ordinary income/loss		14,855	23,170	30,818	36,096	40,835	13.1%	174.9%	32,941	76,932	133.5%				86,930
	Extraordinary income/loss	9,499	693	-2,452	747	1,865	149.5%	-80.4%	11,594	2,613	-77.5%			9,835
Income before income taxes		24,355	23,864	28,365	36,844	42,701	15.9%	75.3%	44,536	79,545	78.6%				96,766
	Total income taxes			2,609	6,330	8,617	10,886	10,694	-1.8%	309.8%	8,134	21,581	165.3%				23,082
Profit (loss) attributable to owners of parent			19,576	15,295	17,124	23,712	29,793	25.6%	52.2%	31,455	53,505	70.1%				63,875

• Commission received increased (+4.5%).
• • Brokerage commission* was ¥21.9 bn (+0.9%).
  • Underwriting and secondary offering commissions* were ¥9.2 bn (-19.1%).
  • Distribution commission* was ¥3.7 bn (-3.6%).
  • M&A related commission* was ¥10.9 bn (+37.7%).
  • • Breakdown of total commission received (See p.23)
• Net gain on private equity was ¥3.2 bn (17x).
• • Revenues from private equity investments increased.

10