Q3 2021 Nomura Holdings Inc Earnings Call
Yeah.
Good day, everyone on the welcome to today's Nomura Holdings third quarter operating results for fiscal year, ending March 2021 conference call. Please be reminded that.
Today's conference call is being recorded at the request of the hosting company.
Should you have any objections you may disconnect at this point in time.
During the presentation all the telephone lines are placed for listen only mode.
The question and answer session will be held after the presentation. Please note that this telephone conference contains certain forward looking statements and other projected result, which involve known and unknown risks delays uncertainties and.
Other factors not under the company's control, which may cause actual results performance or achievement over the company to be materially different from the results performance or other expectations implied by those projections.
Such factors include economists and market conditions political events, and investor sentiments liquidity of secondary market level and volatility of interest rates currency exchange rates.
Alrighty valuations competitive conditions and size number and timing of transactions with that we would like to begin the conference. Mr. Clooney Kitamura Chief Financial Officer. Please go ahead.
Good evening. This is Doug <unk> CFO of Nomura Holdings.
I'll give you an overview of our financial results for the third quarter of the fiscal year ending March 2021, using the document titled consolidated results of operations. Please turn to page two net revenue for the nine months to December was once really on 231 day debating again, representing a year on year increase of 17%.
Income before income taxes increased 45% to $396 8 billion yen net income grew 23% to $308 5 billion again. This is a record set of results from the year ended March 22002, when comparisons are possible.
<unk> per share for the nine months period were $98 three and annualized ROE was 15, 1%.
Our core business three segment income before income taxes increased 132% year on year to $349 3 billion yen, notably wholesale income before income taxes grew 188% to 232 billion yen.
Please turn to page three for an overview of the three key points for the year to date period first the performance of our international business that they improve significantly delivering a record level of income before income tax. It since the end date of March 2003, when comparisons are possible, thereby graph on the left shows the income.
Before income taxes by region for amyloid income income firm wide income before income taxes for the nine months was $396 8 billion yen an increase of over 120 billion yen compared to 273 busy going in for the same period.
Yeah before that's all I have over this growth was international business and in particular, the Americas. That's shown here in Doug right total income before income taxes from Vasu International regions grew at two eight times. The 167 2 billion yen, representing an increase of over 100, beating on yen as a result of our international business accounted for 42%.
So firm wide income before income taxes.
The point is that all divisions delivered revenue growth during the nine months period, and we were able to stream.
Three we control of course also in Novato provides three Sigma net revenue and climbed 27% year on year to one three to 162, three beginning again, while expenses increased only by 4%.
140 billion yen cost reduction program, we embarked on two years ago. It was over 90% complete at the end of December.
We expect to complete this by the end of much linear ahead of schedule. These.
These efforts have helped us lower our cost base.
As a result, three segment income before income taxes increased 132% year on year.
Wholesale maintained momentum throughout the three quarters delivering income before income taxes of 230 billion yen.
To be sure our performance was supported by favorable market conditions, including higher volatility and an increase in client flows on the bulk of my career events as well as our global rally in equity markets. However, the third point I would emphasize is that our business franchise has developed in each region.
Based on our core products and we were able to monetize these favorable conditions page four is outside we used at our investor presentation.
And in December which shows the market share for our core products, we have grown our market share and retain top five positions in key products such as the U S and European government bonds AJ created U S securitization business in the U S equity raise adoptions in investment banking, we ranked number 11 in global M&A League table.
And number four in the global sovereign Supranational and agency bonds League.
Table.
Okay.
The global franchise helped lift our calendar year 2020 global markets net revenue by 38%.
Compared to the previous year.
Our growth has been on par with our U S peers, who offer food lineup of services our growth regions.
We feel that we have gained traction having are taking the right strategic path to realign our business portfolio in April 2019 focus resources on clients' businesses with top five market share and enhance our franchise.
Next let's take a look at third quarter performance. Please turn to page five as shown on the top right for them right.
Income before income taxes increased 57% to 130 to $1 3 billion, while net income grew 45% to $98 4 billion yen.
All of our three core business segments posted strong performers. This quarter three segment income before income taxes was $127 5 billion yen the highest <unk> 13 in the half year since the first quarter of the year ended March 2008 inch.
International income before income taxes was 50, $59 5 billion yen, representing a solid performance for the third straight quarter and are contributing to our lower firm wide effective tax rate third quarter annualized ROE was 14, 2% and EPS was <unk> 31 to 116.
Please turn to page eight for an overview of results for each business.
First retail.
Third quarter net revenue increased 6% quarter on quarter to $98 2 billion, while expenses remained roughly unchanged from the previous quarter. As a result income before income taxes grew 24% to $28 three.
3 billion coming in at the highest level in three years in.
In summary, 2019, we realigned our coverage areas into corporate and owners high net worth and mass affluent to provide more effective proposals in the best way possible.
Despite restrictions on sales activities, Amit the pandemic, we have been able to meet the diverse needs of our clients by making the best use of face to face meetings and non face to face interactions now total sales shown on the lower half of the slide were $3 3 million or over one.
Trading in a month on average sales over stocks shown in Red were particularly strong in our sales of Japanese secondary stocks increased although investment trust sales slowed 7% quarter on quarter, we booked inflows in U S stock funds and ESG related funds.
Sales of bonds insurance and discretionary investments all grew compared to the previous quarter. Please turn to page nine for an update on Kpis.
Recurring revenue assets shown on top left increased to nearly 18 treating and lifted by market gains the consulting related to business shown here on the lower left consists of many transactions that require extensive face to face interactions. So is the most susceptible to restrictions on sales.
Activities. However, we were able to increase revenues from insurance and they mandate by taking the paperwork for insurance sale that was done in person completely on line and enhancing our support for Monday by Smes.
The number of active clients shown on the right is trending above last year. So we have seen the results from further developing our approaches by coverage area.
Please turn to page 10 for asset management.
Third quarter net revenue increased 39% quarter on quarter to $37 3 billion yen and income before income taxes gained 96% to $22 3 billion in American century investments related the Gainesville was significant this quarter at $13 2 billion yen visa.
Ah represents the strongest net revenue and income before income tax rate since the year ended March 2002, when the comparisons are possible reported net inflows into investment trusts, the investment advisory business and international business, which.
Helped by a favorable market tailwind booths at assets under management to a record 61 to a trading in our airports the expanded assets under management paid off as our revenue excluding ACI remained roughly flat quarter on quarter. Despite the changes to our product mix and the impact from a revision to Etfs.
Please turn to page 11 test the flow of funds shown on the left side about 590 billion yen of inflows into the investment Trust business reported inflows of approximately 200 billion yen and mris influence, where approximately 500 billion yen from funds likely derived from profit taking on the back of this.
Stock market rally in the investment advisory and international businesses, We reported net inflows of.
680 billion and inflows in Japan, Indian bonds, Japan stocks and alternatives and internationally into UCITS funds.
Of the 61.2 trillion yen and assets under management and asset management $17. Three trillion sits outside the investment trust business that is 46% or eight trillion yen is in the international business as shown on the bottom right outside Japan, we are focused on leveraging the group's network to expand our distribution channels.
You can see here in the nine months to December we booked inflows of around 600 billion yen. The international business is a growth area for asset management.
Please turn to page 12 for an overview of wholesale results.
Net revenue remained high in line with last quarter at $223 1 billion, while expenses declined by 6% as a result income before income taxes increased 17% to $76 9 billion yen.
When the pandemic first started to take hold we have been able to respond much better to investors in ishares and we have seen a rebound in high touch businesses, such as financing and then Monday ethics.
Fixed income revenues normalized third quarter equities and investment banking revenue expansion, highlighting a more balanced revenue mix within wholesale.
Well fixed income accounted for 62% of wholesale revenues in the first quarter third quarter revenues were 44% fixed income, 40% equities and 16% investment banking.
Looking at net revenue by region shown on the lower left the Americas slowed from what was a record quarter last quarter, but remained strong.
GE reported its best revenue quarter in six years on strong performance in Forex and imaging and Japan revenues grew driven by equities and investment banking. This has resulted in a more regionally diverse revenue mix. Please turn to page 13 for an overview by business line.
Global markets maintained momentum from the strong previous quarter with net revenue of $187 5 billion a record since the air and get much Oh, two when comparisons are possible.
Fixed income net revenue declined 6% quarter on quarter to $98 1 billion well softer revenues in rates is the main reason for the decline Americas agency mortgages revenues remained robust.
E J Forex imaging had a strong quarter and Americas, and EMEA securitized products booked higher revenues.
Revenue in equities grew 2% to $89 4 billion as you can see in the heat map on the top right.
Because arrow is pointing diagonally down for equities, but David had a strong quarter in Japan and E. J reported stronger revenues in both cash and derivatives on the back of solid client flows. Please turn to page 14 for investment banking.
Third quarter revenues saw strong contributions from.
Industrial realignment and the business reorganization in Japan, and cross border and then a trends actions, Japan related E. C and also had a strong quarter.
That's not banking net revenue was the strongest in nine years since the October to December quarter in 2011, and net revenue increased 27% quarter on quarter to $35 6 billion yen.
Hindsight shows major deals announced or executed during the third quarter, the red boxes represent cross border transactions and the green shaded boxes are sustainability related transactions last.
Last year, we successfully supported the needs of a diverse range of issues such as fundraising needs amid the pandemic strategic realignment and business <unk> driven by corporate governance considerations and number of transactions. The Nomura Greentech is involved in also trended up on the back of growing.
Interesting social issues, such as climate change please.
Please turn to page 15 for non interest expenses.
Firm wide expenses decreased 5% to 270.8 billion yen.
Although firm wide revenues increased by 9% compensation and benefits were kept at roughly the same level as last quarter commissions and floor brokerage is declined by 5% on lower trading volumes in the Americas occupancy and related depreciation declined by 5% as last quarter included costs related to it.
It hasn't moved to Toyota office other expenses declined by 23% due to a drop in expenses related to legacy transactions and other transaction related expenses page 16 gives you an overview of our financial position our balance sheet at the end of December was $44 six trillion up one nine trillion.
At the end of September due to refunds in trading assets as shown on the bottom left bottom left our tier one capital ratio at the end of December was 19, 9% and I said, one capital ratio was 17, 7% both up compared to the end of September tier one capital, which is the numerator in the calculation increased by approximately.
98 billion due to a buildup of income fall risk assets. The denominator inched up only slightly from the end of September as a decline in market risk offset an increase in credit risk that concludes today's overview of our third quarter results.
To sum up this quarter, we saw the results of our business platform realignment, which started two years ago, and we were able to monetize favorable market conditions and business opportunities.
We delivered results in terms of earnings with a three segment income before income taxes, reaching a record high since the global financial crisis and annualized <unk> of over 14%.
Yeah.
Wholesale maintained the strong momentum of the first half and we further diversified our revenue drivers.
The realignment of our coverage areas in retail has led to a virtuous cycle and performance has trended up since bottoming in the July to September quarter in 2019.
Inflows contributed to record high assets under management in asset management, we continue to stringently control costs.
We were able to reduce cost.
While each business division reported revenue growth.
We are well positioned to deliver sustainable earnings globally.
In January wholesale maintain third quarter momentum with a good start to rates credit and Forex imaging in fixed income cash and derivatives in equities and advisory and solutions in investment banking.
Following the realignment in retail our efforts to enhance the expertise of sales partners in each coverage area is succeeding.
And we are meeting the needs of various clients despite the pandemic.
<unk> revenues are relatively stable and we are maintaining third quarter revenue levels.
As the number of coronavirus cases rises again globally.
We must remain vigilant.
We will leverage the whole firm to ensure business continuity as a financial institution in the capital markets, while putting the health and safety of our clients communities and people as our highest priority.
Yeah.
Yeah.
Thank you I will now take questions.
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Thank you for waiting the first question comes from Mr. Araki from Mitsubishi Nikko Securities. Mr. <unk>. Please go ahead.
Hello. This is America from CNBC I have two questions first.
In the USA the composition of profit in the USA and those Odessa and it'd be the deal of this profit level page three shows that this year.
Growth in appropriate to us mainly driven by the USA on the nine month period.
Excluding ACI valuation gain U S. Wholesale gain is about 100 billion yen, but fixed income equity and what is the competition among without three also so.
Some businesses that are in top three so you focus on those businesses and you explained today, what's the success factor on the other hand page 33 shows that.
Over a two year period.
Headcount has been reduced by about 10% or more so the performance has significantly improved I suppose so how do you view that sounds like that'd be they deal with this current situation. The second question is a simple question page 28.
Regarding retail.
Flow of funds in retail business in the third quarter U S negative.
So on the nine months period.
Not a significant inflow.
However by age bracket.
So those above below 60 years old it's inflow about those above 60 in Asia.
<unk> is outflow.
<unk> do that disclosure.
Before but what is the situation for the most recent quarter. Thank you.
Thank you very much this is kitamura.
Firstly regarding the wholesale.
In the USA and what is the competition over the profit in the USA I'm afraid to tell you that.
<unk> contribution by business is not being disclosed however, basically G. M represents a significant proportion of that.
Also.
We then G M fixed income equity what is the contribution from those businesses with N. G M no depending on market conditions the situation changes.
For example in the first quarter.
Fixed income naturally lots of big in size and in the third quarter.
The acreage is actually outsized fixed income.
In that sense, we are well balanced in the mixed in the mix for IV.
The impact of COVID-19 was felt in the early part of that period, however, gradually towards the third quarter, that's duration gradually improved.
Especially.
In April last year, we purchased Nomura Green Tech that's.
That focus is on sustainable energy.
It's a famous boutique so Nomura Green Tech.
Conducted sustainability related to deals and we have accumulated such deals.
And in August we made an announcement on the tie up with of research in the USA. So that is in.
From the viewpoint of enhancement of IV business that tie up is starting to generate a positive benefit so Wolfe research sales.
Members.
Are providing quality data feed about which are highly appreciated by issuers.
So.
Regarding the sustainability that you inquired about in IV, we have a pipeline of deals being accumulated and also fixed income and equity.
[noise] businesses.
Alright, well balanced so in that sense the profits in the USA I believe.
Sustainability.
The high market share means that even if the market collapses.
We will be left with a certain level of P&L. So that is the answer to your first question.
And my answer to your second question is.
All along as I've told you.
The trend hasn't changed much.
So those below the age of 60, basically we see inflows net inflows and of those above the age of 70, we see that trend of outflows.
So that structure has remained unchanged.
Unfortunately in this quarter.
195 billion yen of negative inflow net inflow of cash and securities was suffered.
In the most recent quarter.
The situation was I wouldn't say severe but market was good that's good thing for us but.
Many clients.
Unrealized gain especially in investment trusts products.
People have they have unrealized gain so for no other timing when they can expect unrealized gain they I believe so to their positions to secure their profit.
So whether it is.
Equities and investment trust the cell setting of pressure it was strong.
Funds stayed in MRO, but although fund flew flowed out however, looking at the inflow number and purchasing a number.
Are those numbers that are trading at quite high levels. So continuously.
Of course, we have to stay focused on providing good services not by receiving inflow from clients. Our intention is to keep growing for the M.
I am.
I understand Mr. <unk> I. Thank you very much for your answer.
The next question is by MS <unk>, Mitsubishi U S J Morgan.
Sandy Securities. Please go ahead Sir.
You very much for giving me this opportunity.
First question relates to.
The future of the global markets.
<unk>.
If the situation should worsen what would be the cause this time around in the United States right.
Shrank.
And that was the general trend in the sector.
On the other hand mortgage issuance.
Continues to be robust.
And on Q on Q, there has been a growth so.
Hi.
Understanding is that there was stability in that business area and credit spread.
Has become quite tight.
So.
In the weeks and months ahead, what would happen to the fake desk, where profitability had turned to negative if that situation is going to further worsen what would be the trigger.
And what about the mortgage which did well if we see negative.
In mortgage.
It would be long term rates going up or issuance going up but although rates have gone up at slower than a year ago, it's slower than two years ago.
So.
Can you elaborate on your concept.
In these areas and my second question is with or you guys to your policy.
Of dividend.
30%, each half year, and total return ratio of 50% as your benchmark and.
You.
Do share buyback.
So.
<unk> got the capital policy remains unchanged I wanted to confirm that point. Thank you those are my two questions.
This is kitamura speaking.
You very much for your questions. Your first question is what would happen to fixed income profitability going ahead, and if the profitability would worsen what would be the trigger.
If our be pre mature tapering.
The likelihood is not so high at this juncture.
But if that should happen there could be a sudden rise in long term rates.
So that could be one risk factor and should that happen.
Credit and securitized products and spread products would be heavily impacted.
As I have been saying it.
From some time ago, we have shrunk down our position and to a certain extent, we think that the situation in those businesses would be manageable.
There could be some.
Volatility in the rates business.
Due to those triggers but.
Two.
Our business at such impact from such trigger it would be rather limited.
I talked about this before but.
For us the biggest challenge is low volatility and low activity that would be the biggest challenge for Nomura.
In Q3 talking about the rates business the volatility remained at relatively low level.
And activity was not so high either and therefore.
U S rates business.
Saw some slowness, but since the beginning of this year.
Clients also began to become more active and when we observe the January market.
Such challenges have not realized in the most recent days.
Yeah.
We're not overly optimistic.
How about the times ahead, but on the other hand, there are a few expectations.
First vaccination.
Leading to.
Corona under control and roadmap towards economic growth and fiscal expenditure and monetary policy of various governments.
Making headlines leading to various speculations but.
Rebalancing activity is of investors due to such trend may occur.
And then on the investment side.
And structure.
Capital inflow.
Should be caused but the rates are extremely low so.
We continue to expect strong demand for yield.
I'll, let appoint SSA sector.
There could be issuance demand in the response to the pandemic.
And we have seen recently.
Sure it's related to sustainability in Japan and in other countries in this area.
We have a quite competitive positioning.
So.
In that context.
Those three factors are.
What are we are expecting for in terms of the upside going onto your second question.
We aren't making profits, but are we going to change the big benchmark for a total return ratio that's how I interpreted your question our commitment.
Is 30% dividend payout ratio and 50% total return ratio.
And we have no intention to change that commitment. Thank you.
Thank you very much so.
That means that you will do a share buyback right. They just keep them at a speaking again, we have committed to total return ratio of 50% or higher so.
By combining the dividend and share buyback, we will live up to our commitment. Thank you very much.
The next question comes from Mr. Watanabe from Daiwa Securities. Please go ahead.
Thank you. This is about that nobody from Daiwa Securities I have two questions first question is about investment banking.
The revenue of investment banking in third quarter was probably too high ECM DCM M&A what is the competition.
Investment banking revenue in the third quarter, and therefore I b.
Deals backlog.
Do we see an increase or decrease in terms of that trend.
And tax effect in the USA performance is improving next year are you is there a possibility that you'll be booking.
DTA next year in the USA.
Thank you.
Thank you very much this is nomura regarding.
Competition of IV, that's Buffalo that performed well in the third quarter I'm, sorry to tell you that the breakdown itself is not being disclosed.
But.
In the IR, a puck page 23.
So in the form of a commission.
You, Ken referred to a number so equity fixed income.
And then Monday, we have that disclosure based on that the categorization and E. M. M. D grew rapidly.
I believe you'll be able to.
I guess that and regarding the pipeline.
So.
For Monday, we have an increasing trend for the domestic.
And Monday pipeline.
Nomura has very strong relations with corporate managers so.
With the economic environment changing drastically I believe we are being able to make timely and quality proposals.
And for E C M.
That situation is not bad.
No the.
Enhancement of our financial position.
To through the Fundraisings.
Fund raising and also the sale of our folks too.
It generates cash and also the acquisition for future growth. So those corporate demand for funds and also improvement of capital efficiency through unwinding of cross held shares so they're a very wide range of the mountains and so this current.
And I believe will continue and as for D. C M.
Earlier.
So as you know some.
It's about the visit.
But social bonds and a sustained bill sustainability linked bond and green bonds issuance has very strong demand.
So so.
So in each of their business volumes.
Certain size of pipeline.
Is what we have and regarding your second question in the USA that tax level.
<unk> in the USA, where we are going to have both DTA deferred tax asset.
If there is any possibility for us to post DTA next year. The last two years the profits in the U S. A has been solid.
Unfortunately.
All of our deferred tax asset.
Comes with a valuation allowance so DDA has been zero.
Due to valuation allowance as we've explained to you.
From time to time and from here with XI in the home.
Eli Auditor and we are going to have a discussion. So we will decide on the possibility of recovery and based upon the accounting rule, we will be conducting the accounting treatment and as needed to we will post a DTA.
But I cannot say what are we going to oppose the date or not it really depends on how we're going to evaluate the.
A possibility or likelihood of recovery. Thank you very much mistaken him around for your clear answer.
The next question will be by Mr. Otsuka of Jpmorgan Securities. Please go ahead.
This is otsuka of Jpmorgan Securities I have two.
Question, one is numeric and second is the stock price of Nomura.
Of all.
Sorry, I've asked this question before but.
The profit level that you have just reported.
He described it as a record high historical high and that describes it all but other than fixed income that the market gave you a tailwind.
But.
How would you evaluate your people do you think that they did well or do you think that they could have done better in a positive market trend and also you touched upon this in your presentation, but.
The cost level.
Of course.
Cost reduction plan is well underway and is being achieved but in Q3.
The trend of cost versus.
Revenue was rather diversion so.
The ratio may change due to bonus allowance. That's my first question and secondly, I'm going to deviate from the results announcement, but Mr. Kitamura as you.
Well said.
If we look at the historical trend to a profit of Q3 was quite.
Wonderful.
But.
Capital market capitalization or P. B your stock price isn't catching up with the high performance in terms of profits. So how is that being taken by the top management. That's my second question.
This is Keith <unk> speaking, thank you very much first of all.
Our self assessment of Q3, I think it was a good quarter.
Q1 was a good quarter as well but.
We might have attach too much weight on fixed income, but in Q3 for each business line wholesale are equity I, b and asset management retail.
The revenue and profits were well balanced and we were able to record a quite robust bottom line.
Is this the limit was this as far as we could have gone.
Not really we will continue the initiatives that we have embarked upon and by realizing and continuing these initiatives. We think that there is further room for expansion.
Yeah.
On cost control.
You said diversions between revenue accounted for versus expenses.
And that's a quite a good point, but.
Yeah.
Cost.
Reduction.
Yeah.
After implementation there are some cases, where a time lag.
It is caused.
Until it is accounted for.
They'd say initiative that began in the first half and then.
That appears in statutory accounting later.
So in the end.
Due to such a process you may.
Find that in appearance at a glance, there's diversions between revenue and expenses and also.
Provisioning.
Well, we provide for more allowance because of the profit level quarter by quarter.
We provide for appropriate level of bonus allowance.
Each quarter.
Taking into consideration the profit level, that's my answer and as I said we.
We are proceeding well in terms of cost reduction.
And.
They are achievements that derived from what we had originally planned.
And there are cost reductions that we had achieved at which had not been factored into the plan.
As a result of the pandemic. So we will be able to achieve the goal one year ahead.
On the other hand, there are items that had been in the plan originally.
That are still under implementation.
And the results of cost reduction will only come out in the coming fiscal year, but at any rate I T and theres still transformation investment towards the future, we'll continue to be necessary. So.
Cost control and appropriate investment for growth, we will have to be well balanced.
In order to continue to monitor.
Company wide cost that is my response, thank you.
Oh, sorry, and stock price that was another question.
Well, our O E 15%.
P B R 0.6.
Frankly speaking.
Cheap.
But.
At the press conference this afternoon.
Everybody was talking about sustainability there were many questions on sustainability.
The current stock price.
Reflect.
Such concern I'm guessing that that's partly because we havent been able to.
Truly resolve such concerns and as I have talked about we are conducting the review of business portfolio to concentrate on selected areas, where we have competitive strengths and we are working.
Working on cost reduction.
And achieving results from those initiatives, but that has led to a much stronger business platform in comparison to the past so by taking this opportunity we are communicating those facts to the investors into the market, which I think is very important.
In the context of where our stock price and we are also very strong in the public sphere.
And by leveraging our strength into a public sphere, we will also.
Aggressively embark up on initiatives in the private sphere and by taking such.
Measures, we are hoping that the image of Nomura in the market will change. So what was your take I would like to ask you. What your impression was after the results announcement. This time around but we would believe most appreciative. If you could write in your reports your commentary on our stock price that concludes.
And my response.
Fine. Thank you very much sorry, I have a follow up question on the first point.
Quarter on quarter or year on year.
In retail.
Nine months, 9% increase but.
Ex France minus 12% as indicated on page eight. So this is difference between revenue growth apheresis expenditure so you're.
Your employees contributed 39%.
Perfect. Good so you have to incentivize the hard work.
So, including the provisioning for bonus.
Expenses.
Dropped by 4% same applies for our wholesale 20% increase.
And revenue total in nine months.
But expense only grew by 2%.
Does that mean that you are provisioning for a bonus and intent incentivising, but you are still able to reduce other cost items. This is Keith I'm Gonna speaking that's exactly the case in terms of personnel expenditure, we do the provisioning based upon others performance.
N T.
C area non personnel.
Expenses is the area where.
Cost has been cut.
So.
Your interpretation is correct, we are provisioning for personnel cost for the total cost.
Thank you very much.
The next question is from Mr. Sasaki of Bank of America. Please go ahead.
Thank you. This is just like you from bank of America I have two questions firstly.
So.
These days in the USA some names have quite high Volatilities wherever you look at transactions.
So you have high market share in option transactions is there a positive impact of a negative impact for you.
And the second question is.
Under the budget and the administration.
Rich.
Came to the office and you I believe have a clearer outlook about what is your view towards by the administration in the sense of its impact on your business or do you see it nothing to do with your business between buying elements resonated with business. Thank you for your question. This is Nomura regarding your first question.
Regarding the specific names.
Names.
We refrain from commenting on specific names. However, we are a liquidity provider and we are playing a role.
As a liquidity provider in the market infrastructure. So the market moves have been quite robust and violent and really werent completely immune to the market movement. However, the impact was not very drastic to the extent.
Got it.
Affects us greatly.
So that wasn't the magnitude. So secondly, the impact of by then administration on our business.
So U S economy, and the U S. China relations I'm not sure what it's going to go what is going to happen from here and regulations on financial institutions. That's something that we are paying close attention to all the other hand.
The New administration is upholding a couple of agenda, including infrastructure and investment in the area of environment. So those themes are what we are paying attention to so under the new administration.
Significant upgrading to the U S infrastructure can be expected.
So.
Recently, we have grown in such areas as infrastructure sinus.
Also.
As mentioned earlier Nomura Green Tech.
This is is a boutique house that focuses on sustainability related business and we have that entity within the group so for such entity. The current distribution presents a great big business opportunities.
So in addition to local businesses in the USA.
Japan and Asian investors in the area of ESG and sustainability investment we receive a quite a strong interest and inquiries from those investors in Japan and Asia. So to these investors.
Oh sure.
We can we can we could leverage our business in the USA and we could connect or the assets either USA with investors in Japan and Asia in that sense. I believe there are a lot of opportunities. So that we can pursue that so what is going to come out from the current situation is what do we will keep paying.
Close attention to.
Thank you. Thank you very much.
One more thing so regarding your comment I have a follow up question.
No. The performance is quite solid and your balance sheet is very strong and you have lots of business opportunities and our stock price. It's considered undervalued, but why are you refraining from or why are you hesitant to conduct a share buyback. What is the reason why you are being hesitant to.
Buy back shares.
This is Nomura, we are not intending to be hesitant about share buyback.
Yes.
So we have two more months to the end of this fiscal year.
Our sense is to maximize the performance.
And as <unk> explained many times.
Total return ratio below 50% of or more is what we're going to keep focusing on this year. Thank you very much Mr. <unk> for your answer.
Thank you very much no operator is checking if there is anyone else who wants to ask a question. So.
Just a moment please thank you.
The operator is it once again and checking the roster of the attendance whether they have a question does it basically.
Questions. Please press zero one.
Yeah.
Thank you very much.
We have with us in the U S out of Citigroup, Japan. Please go ahead.
This is in the U S speaking.
Are you getting my voice this.
This is kitamura, yes, I hear you well. Thank you. This is anyway, there's just one question.
March 2025 from the management vision perspective.
Yeah.
How would you assess Q1 to Q3 or Q3 in particular.
I'd appreciate if you could assess from three perspectives first of all as base profit on page five if I look at page five.
Wondered 20 billion would be.
The baseline.
Profit.
But in the 2025 vision.
I think so.
70 billion.
Was the normalized level so.
Do you think that the baseline has gone up and our O E. 15%, if we think from such perspective.
<unk>.
Will you read our K B I tool is it 2025, and what would be your focus in the review of such can't be I. That's my second 0.3rd point.
Indeed management vision, the expansion of profit source or contribution from new business areas.
We think those are some of your.
Aspirations, but in Q2 or Q3.
Are you getting more confidence.
Confidence that you'll be successful towards those goals.
My interest is whether we can expect a higher level of profits from those new areas. So that is my question. Thank you.
Thank you this is Keith I'm Gonna speaking and thank you for your question.
Last year in April.
We announced the 2025 vision.
That was when we were right at the midst of the pandemic.
So we at least announced are.
Tended to have a program or the vision that we have compiled then and we also commented that we will revise the vision.
So it becomes necessary.
And if we look at Q3, there has been tailwind from the market, but at the same time the level of profits has been elevated so we will discussed amongst our top management and as far as the review of the midterm management plan is concerned yes, there is a possibility.
That would be within the scope of management discussion.
And also.
New business areas.
That was part of your question.
And.
Frankly speaking.
We are still focused on the traditional business area.
I'm not sure whether traditionally used the right word, but how much of the profit is sourced.
So from the conventional business areas on the other hand, as an extension of the conventional business.
Sustainable related business, which is very close to the conventional business is gaining momentum.
And.
In this area, we think that we can expect a further expansion.
So I would not categorize this as a completely fair.
Fresh Green area, but we think that this is an area where we can expect further profit contribution and also profit and additional data or some of the.
Domains, where we have not yet been able to monetize the <unk>.
<unk> Ts yet.
So.
The other day, we made an announcement on.
Private shares unlisted private shares and investment.
Entities.
So through these initiatives, we will be seeking further upside.
And in the digital domain.
I'm not sure whether you recall, our comment Theres still asset custodian business called Eden <unk>.
Yes.
Our group company.
And.
There's a strong interest in the market.
So we will strengthen our initiatives in such areas I'm not sure whether I have been able to respond to your question Mr. NEVA, but.
This could be a new business area, where we have a quite high hopes. Thank you very much.
Thank you very much. This is <unk> speaking I have a follow up question.
Yeah.
In the discussion of review I've met their business plan, if you want to elevate the level of our O E would you change the benchmark of total return ratio or <unk>.
I think your target of capital ratio is 11% is there a room for review in other words.
Yeah Ken.
<unk> to increase your payout ratio can't you so is that going to be subject to review this.
This is kitamura speaking of total return ratio of 50% that benchmark included we will be looking at our business portfolio and the right level of capital.
And the discussion not necessarily directly linked to the major plan, we will be discussing does matters so set 111%.
That is our target and yes. There is the possibility that we may review that Theres also a possibility that we won't touch on that so we will think about various vantage points.
Thank you very much Mr. Kitamura each for your comprehensive response.
Our next question comes from.
Yes.
So as you know with Mitsubishi <unk> Morgan Stanley. Please go ahead.
Thank you.
One question this is gino.
So yeah.
You just talked about expenses, but on a quarterly basis.
For the personnel expense and the real estate occupancy related cost and others antibodies that change on the Q on Q basis, and also by segment and retail domains domestic retail and asset management and wholesale antibodies the level of expense.
Looking at the change in expense.
Caught my attention is other expense.
So wholesale expenses down but.
That may have something to do with other expenses so.
Then to organize information than decline in expense other expenses what is the biggest component there in other expense and what's kind of impact is it having on each segment of business. Thank you very much.
Thank you. This is a camera speaking that's a quite technical question. So I'm not sure if I was able to follow but.
Regarding other expense.
Related to that transaction.
Conducted in the past, that's a fuzzy way of describing it but.
<unk> expense is.
It has come down in this quarter related to the past transactions. So this expense in terms of segment.
It's not.
It is not allocated to any particular business line or segment.
Yeah.
So it is an old speaking.
So if I try to.
Take a deep dive then I cannot finish about.
So of course, it down by more than $10 billion, but for the headquarter is a corporate it's more than 10 billion and in the third quarter.
Related to the past transactions I think available it's expensive, though as the books ready ready to expense the let's call. It in the past about the I Wonder if there is a significant decline on a Q on Q basis. So is there any additional information that you can give me.
So on a Q on Q basis the knot.
Expense provision of expense is it is it possible for such expense to come down significantly on that go into your basis. This is Kevin Brian. Thank you very much for paying very close attention to our numbers in the third quarter. So Unfortunately, we have on 10 billion or so of expenses related to that transaction conductor.
In the past about it's down compared with the level in the second quarter. So I mean, that's like on the quarter the.
Relevant expense was higher than the third quarter and also.
Professional fee to some experts and also other S G and a and there are miscellaneous expenses included in the other expense line that is why it's called other lines and we see.
Slight decreases in different miscellaneous cost lines I don't know if that satisfies you Buck seasonal speaking under that I think I have a bit of sense. Thank you.
Thank you very much.
No its almost time to finish the call. So we're going to take the last question. The next question comes from Mr. <unk> from Jefferies.
Hello.
Yes, I hear you Mr. Ben Thank you very much at ease of Jefferies.
Gone overboard the time, so a very contagious to questions, including the presentation.
It may be premature but next.
Fiscal year, you will continue to increase topline but.
At the end of this fiscal year.
Head count also.
Is expected to decline but.
Well as you try to maximize top line will head count begin to go up again after bottoming out or in view of the <unk> and then make.
Are you going to control continue to control head count cost you tried to continue to increase top line revenues and that's my first point secondly in the previous quarter results announcement.
Hello, increasing by 20 or 30% was mentioned.
And you did well this quarter and you were able to harvest enjoy a great harvest.
So from the sustainability perspective.
Can we expect an increase of sustainability related business by 20% to 30% in the next fiscal year as well.
Do you think that this space will be maintained I'd. Appreciate if you could comment on that point. Thank you.
This is kitamura speaking.
To deal with your first question first.
Top line is increasing while total head count is declining.
For us human resources is a very important asset.
It's an important capital.
But.
The role of human capital is changing.
Things that can only be done by human beings.
Are declining.
So with control to head count.
To a certain extent it would be possible to.
Grow the topline.
Of course, they're all business areas with that our human capital intensive.
And in such areas.
We will be recruiting people, but our firm wide basis.
We do not believe that.
I think more than.
Quantity the issue on key is quality.
And another point business flow.
How would the business flow trend as we think about the next accounting year.
Since the beginning of this year.
We have seen activation of client flow at high levels and as I said.
There are a few key factors as we try to.
Think about next year's market.
So we are not necessarily optimistic but.
Or there are expectations, what do you think that.
Decent level of client flow will continue.
We have a diverse clientele.
And each client.
Faces.
<unk> challenges.
So to a certain extent I think we will continue to be in demand by the clients.
That concludes my client I hope I answered. Your question, yes. Thank you very much that was quite an abstract question, but thank you for your response Mr. Kitamura.
This is <unk>. Thank you everyone for attending the call. So for the performance in the third quarter I believe based upon their business platform reconstruction and the cost saving initiatives.
We have worked on and we believe those initiatives materialized in terms of the benefit as a result in the third quarter in that sense. We look at it positively for three quarters in a row, we were able to deliver the performance that we did.
And.
Regarding our business.
In the sense of sustainability of our business.
We have the hope that we will start to see some positive change and as a result.
Hopefully the market's view taught us will change for the better.
So all along we have been strong in the area of public so we're moving forward.
So under the theme of public to private.
Which is the new growth strategy, so I got to I B cell Okuda, we will steadfastly work on this.
Initiatives. So the two we can secure bottomline profit.
So I ask for your continued support.
Do you very much for your time today.
Thank you for taking your time and that concludes today's conference call.
May now disconnect your lines. Thank you.
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