Deferred compensation awards

12 Months Ended

Mar. 31, 2021

Deferred Compensation Awards [Abstract]

14. Deferred compensation awards:

Nomura issues deferred compensation awards to senior management and employees, which are linked to the price of the Company’s common stock, in order to retain and motivate key staff.

These stock-based compensation awards comprise Restricted Stock Unit (“RSU”) awards, Plan A and Plan B Stock Acquisition Right (“SAR”) awards, Notional Stock Unit (“NSU”) awards, and Collared Notional Stock Unit (“CSU”) awards. SAR Plan A awards are awards of stock options while RSU awards, SAR Plan B awards, NSU awards and CSU awards are analogous to awards of restricted common stock. The Company also issues other deferred compensation awards, namely Notional Indexed Unit (“NIU”) awards which are linked to a world stock index quoted by Morgan Stanley Capital International.

Certain deferred compensation awards include “Full Career Retirement” (“FCR”) provisions which permit recipients of the awards to continue to vest in the awards upon voluntary termination of employment if certain criteria based on corporate title and length of service within Nomura are met. The requisite service period for these awards ends on the earlier of the contractual vesting date and the date that the recipients become eligible for or claim FCR.

Unless indicated below, deferred compensation awards are generally reduced, forfeited or clawed back in the event of termination of employment, material restatements of financial statements, material conduct issues, material damage to Nomura’s business or reputation, material downturns in the performance of the Nomura group and/or a material failure of risk management.

RSU awards

The Company introduced RSU awards in the fiscal year ended March 31, 2018, and granted the first RSU awards in May 2018. For each RSU award, one common stock of the Company is delivered. The awards generally have a graded vesting period over

three

years with an extending vesting period of up to

seven

years for certain senior management and employees in order to meet local regulatory requirements based on the role they perform within Nomura.

The grant date fair value per award is determined using the price of the Company’s common stock.

The following table presents activity relating to RSU awards for the year ended March 31, 2021.


	Outstanding (number of Nomura shares)			Weighted-average grant date fair value per share			Weighted-average remaining life until expiry (years)
Outstanding as of March 31, 2020		63,339,600			¥	447		1.0
Granted		78,054,800				418
Forfeited		(1,695,510	)			431
Delivered		(24,411,160	)			447

Outstanding as of March 31, 2021		115,287,730			¥	427		1.0

The weighted-average grant date fair value per award for the year ended March 31, 2020 and 2021 was ¥365 and ¥418, respectively.

The total intrinsic value of RSU awards vested during the year ended March 31, 2021 was ¥10,327 million. The total of 9,000,347 shares was delivered during the year ended March 31, 2021 and its intrinsic value was ¥10,360 million. The aggregate intrinsic value of RSU awards outstanding as of March 31, 2021 was ¥67,028 million.

As of March 31, 2021, total unrecognized compensation cost relating to RSU awards was ¥8,192 million which is expected to be recognized over a weighted average period of 1.8 years.

SAR Plan A awards

The Company issues SAR Plan A awards linked to the price of the Company’s common stock pursuant to several stock option plans. These awards vest and are exercisable into the Company’s common stock approximately two years after grant date and expire approximately seven years after grant date. The exercise price is generally not less than the fair value of the Company’s common stock on grant date. These awards are subject to the above reduction and forfeiture provisions but are not subject to claw back.

The grant date fair value of SAR Plan A awards is estimated using a Black-Scholes option-pricing model and using the following assumptions:

•

Expected volatilities based on historical volatility of the Company’s common stock;

•

Expected dividend yield based on the current dividend rate at the time of grant;

•

Expected lives of the awards determined based on historical experience; and

•

Expected risk-free interest rate based on Japanese Yen swap rate with a maturity equal to the expected lives of the options.

The weighted-average grant date fair value of SAR Plan A awards granted during the years ended March 31, 2019 was ¥79 per share. There was no

AR Plan A award granted during the year ended March 31, 2020 and 2021. The weighted-average assumptions used in each of these years were as follows.


	Year ended March 31
	2019			2020			2021
Expected volatility		33.30	%		—	%		—	%
Expected dividends yield		3.67	%		—	%		—	%
Expected lives (in years)		4.5			—			—
Risk-free interest rate		0.10	%		—	%		—	%

The following table presents activity relating to SAR Plan A awards for the year ended March 31, 2021.


	Outstanding (number of Nomura shares)			Weighted-average exercise price			Weighted-average remaining life until expiry (years)
Outstanding as of March 31, 2020		15,452,900			¥	704		3.1
Granted		—				—
Exercised		(350,600	)			586
Forfeited		(28,600	)			653
Expired		(2,675,200	)			821

Outstanding as of March 31, 2021		12,398,500			¥	682		2.6

Exercisable as of March 31, 2021		12,398,500			¥	682		2.6

The total intrinsic value of SAR Plan A awards exercised during the years ended March 31, 2019, 2020 and 2021 was ¥241 million, ¥139 million and ¥29 million, respectively.

The aggregate intrinsic value of SAR Plan A awards outstanding and exercisable as of March 31, 2021 was both ¥19 million, respectively.

As of March 31, 2021, total unrecognized compensation cost relating to SAR Plan A awards was ¥nil

. The total fair value of SAR Plan A awards which vested during the years ended March 31, 2019, 2020 and 2021 was

nil

, respectively.

SAR Plan B awards

The Company issues SAR Plan B awards linked to the price of the Company’s common stock pursuant to several stock unit plans. These awards vest and are exercisable into the Company’s common stock, have an exercise price of ¥1 per share and graded vesting generally over three years with certain longer vesting or holding periods where required under local regulations.

The grant date fair value of SAR Plan B awards is determined using the price of the Company’s common stock.

The following table presents activity relating to SAR Plan B awards for the year ended March 31, 2021. No new SAR Plan B awards have been granted since April 1, 2018.


	Outstanding (number of Nomura shares)			Weighted-average grant date fair value per share			Weighted-average remaining life until expiry (years)
Outstanding as of March 31, 2020		22,338,900			¥	517		3.4
Granted		—				—
Exercised		(8,966,200	)			532
Forfeited		(95,500	)			474
Expired		(310,100	)			457

Outstanding as of March 31, 2021		12,967,100			¥	509		2.7

Exercisable as of March 31, 2021		11,073,000			¥	514		2.1

The total intrinsic value of SAR Plan B awards exercised during the years ended March 31, 2019, 2020 and 2021 was ¥8,896 million, ¥7,640 million and ¥4,878 million, respectively.

The aggregate intrinsic value of SAR Plan B awards outstanding and exercisable as of March 31, 2021 was ¥7,526 million and ¥6,427 million, respectively.

As of March 31, 2021, total unrecognized compensation cost relating to SAR Plan B awards was ¥7 million which is expected to be recognized over a weighted average period of 1.3 years. The total fair value of SAR Plan B awards which vested during the years ended March 31, 2019, 2020 and 2021 was ¥10,757 million, ¥4,309 million and ¥1,784 million, respectively.

Total compensation expense recognized within

Non-interest

expenses—Compensation and benefits

in the consolidated statements of income relating to RSU, SAR Plan A, and SAR Plan B awards for the years ended March 31, 2019, 2020 and 2021 was ¥21,814 million, ¥12,694 million and ¥28,251 million, respectively.

Cash received from the exercise of SAR Plan A and SAR Plan B awards during the year ended March 31, 2021 was ¥214 million and the tax benefit realized from exercise of these awards was ¥438 million.

Total related tax benefits recognized in the consolidated statements of income relating to RSU, SAR Plan A and SAR Plan B awards for the years ended March 31, 2019, 2020 and 202

were ¥90 million, ¥13 million and ¥

nil

million, respectively. The dilutive effect of outstanding deferred compensation plans is included in the weighted average number of shares outstanding used in diluted EPS computations. See Note 12

“Earnings per share”

for further information.

NSU and CSU awards

NSU and CSU awards are cash-settled awards linked to the price of the Company’s common stock. NSU awards replicate the key features of SAR Plan B awards described above but are settled in cash rather than exercisable into the Company’s common stock. CSU awards are similar to NSU awards but exposure to movements in the price of the Company’s common stock is subject to a cap and floor. Both types of award have graded vesting periods generally over

three years

with certain longer vesting periods where required by local regulations.

The fair value of NSU and CSU awards are determined using the price of the Company’s common stock.

The following table presents activity related to NSU and CSU awards for the year ended March 31, 2021. No new CSU awards have been granted since

April 1, 2018.


	NSUs							CSUs
	Outstanding (number of units)			Stock price				Outstanding (number of units)			Stock price
Outstanding as of March 31, 2020		21,098,829			¥	445			2,801,656			¥	611
Granted		16,527,516				435	(1)		—				—
Vested		(17,470,375	)			482	(2)		(934,256	)			617	(2)
Forfeited		(204,008	)						—

Outstanding as of March 31, 2021		19,951,962			¥	539	(3)		1,867,400			¥	636	(3)

(1)	Weighted-average price of the Company’s common stock used to determine number of awards granted.

(2)	Weighted-average price of the Company’s common stock used to determine the final cash settlement amount of the awards.

(3)	The price of the Company’s common stock used to remeasure the fair value of the remaining outstanding unvested awards as of March 31, 2021.

Total compensation expense recognized within

Non-interest

expenses—Compensation and benefits

in the consolidated statements of income relating to NSU and CSU awards for the years ended March 31, 2019, 2020 and 2021 was ¥5,077 million, ¥4,639 million and ¥8,043

million, respectively.

Total unrecognized compensation cost relating to NSU awards, based on the fair value of these awards as of March 31, 2021, was ¥645 million, which is expected to be recognized through the consolidated statements of income over a remaining weighted-average period of 1.1 years. The total fair value of NSU awards which vested during the years ended March 31, 2019, 2020 and 2021 was ¥11,481 million, ¥9,980 million and ¥8,426 million, respectively.

Total unrecognized compensation cost relating to CSU awards, based on the fair value of these awards as of March 31, 2021, was ¥59 million, which is expected to be recognized through the consolidated statements of income over a remaining weighted-average period of 1.6 years. The total fair value of CSU awards which vested during the years ended March 31, 2019, 2020 and 2021 was ¥6,282 million, ¥3,445 million and ¥576 million, respectively.

NIU awards

In addition to the stock-based compensation awards described above, Nomura also grants NIU awards to senior management and employees. NIU awards are cash-settled awards linked to a world stock index quoted by Morgan Stanley Capital International, with graded vesting periods generally over three years with certain longer vesting periods where required by local regulations.

The fair value of NIU awards is determined using the price of the index.

The following table presents activity relating to NIU awards for the year ended March 31, 2021. No new NIU awards have been granted since

April 1, 2018.


	Outstanding (number of units)			Index price (1)
Outstanding as of March 31, 2020		839,954			$	5,339
Granted		—				—
Vested		(265,887	)			5,814	(2)
Forfeited		—

Outstanding as of March 31, 2021		574,067			$	8,400	(3)

(1)	The price of each unit is determined using 1/1000th of the index price.

(2)	Weighted-average index price used to determine the final cash settlement amount of the awards.

(3)	Index price used to remeasure the total fair value of the remaining outstanding unvested awards as of March 31, 2021.

Total compensation expense recognized within

Non-interest

expenses—Compensation and benefits

in the consolidated statements of income relating to NIU awards for the year ended March 31, 2019, 2020 and 2021 was ¥1,731 million, ¥237 million and ¥235 million, respectively.

Total unrecognized compensation cost relating to NIU awards, based on the fair value of these awards as of March 31, 2021, was ¥50 million which is expected to be recognized through the consolidated statements of income over a remaining weighted-average period of 1.7 years. The total fair value of NIU awards which vested during the years ended March 31, 2019, 2020 and 2021 was ¥5,091 million, ¥2,795 million and ¥164 million, respectively.

Total tax benefits recognized in the consolidated statements of income for compensation expense relating to NSU, CSU and NIU awards for the years ended March 31, 2019, 2020 and 2021 were ¥220 million, ¥168 million and ¥205 million, respectively.

Subsequent events

On May 17, 2021, the Company passed a resolution to grant RSU awards to certain senior management and employees. Total of 64,439,400 RSU awards have been granted which generally have a graded vesting period from

one

three

years with an extending vesting period of up to

seven

years for certain senior management and employees in order to meet local regulatory requirements based on the role they perform within Nomura.

In June 202

, Nomura also granted NSU awards to senior management and employees in countries where RSU awards are less favorably treated from tax or other perspectives. These NSU awards have a total grant date fair value of ¥5 billion and vesting periods of up to seven years.