Nomura Holdings, Inc. (NMR) Income Statement

The negative NII in 2026Q4 appears to be an anomaly, likely driven by mark-to-market losses on derivatives or funding costs, but it highlights the firm's exposure to market movements. Over the past year, NII has been erratic, with quarters of positive growth (2025Q4: +4.4%) and sharp declines (2025Q2: -65.1%). This volatility suggests that Nomura's net interest income is not a stable earnings driver, and investors should focus on fee-based revenues for consistency.

The near-zero NIM reflects Nomura's business model, which is not deposit-funded like traditional banks, but rather relies on brokerage and trading activities. The efficiency ratio improvement is notable, dropping from 27.5% in 2024Q3 to 45.3% in 2026Q4, though the spike in 2026Q4 may be due to the negative NII. Excluding that quarter, the efficiency ratio has been in the mid-20s to low-30s, suggesting operational leverage is being achieved, but the sustainability is questionable given revenue volatility.

The high leverage ratio is typical for a global investment bank, but combined with negative free cash flow, it suggests that Nomura is relying on debt to fund operations and growth. This may constrain capital flexibility and amplify losses during market stress. The record net income of ¥73.9 billion in 2026Q4 is overshadowed by the balance sheet risk, and investors should monitor whether the firm can generate positive cash flow to reduce leverage.

The lack of provisions is unusual for a financial institution, especially one with global operations. It could suggest that Nomura's loan portfolio is minimal, or that management believes credit risk is immaterial. However, given the firm's exposure to market volatility, investors should question whether this reflects true credit quality or an aggressive stance. If credit conditions deteriorate, the absence of a provision buffer could lead to sudden earnings hits.

Fee income, primarily from retail brokerage and asset management, has grown from ¥359.9 billion in 2024Q3 to ¥462.2 billion in 2026Q1, a 28% increase. This growth suggests that Nomura's strategic pivot to a fee-based wealth management model is gaining traction. However, the reliance on transaction-based fees in wholesale trading introduces cyclicality, and the quality of fees should be assessed for recurrence. The increase in fee percentage from 33.2% to 41.6% indicates a positive mix shift.

The latest quarter (2026Q4) showed net income of ¥73.9 billion, up from ¥56.8 billion in 2024Q4, a 30% increase. This improvement is driven by higher fee income and cost controls. However, the lack of forward guidance in the latest report indicates management caution. The inflection point appears to be the transition from a transaction-heavy model to a recurring revenue model, which may lead to more stable earnings but also requires continued investment in technology and advisory capabilities.