Full Year 2021 Nomura Holdings Inc Earnings Call
With coal.
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 of the company to be materially different from the results performance or other expectations implied by those projections.
Such factors include economy, and market conditions political events and investor sentiment, the quiddity of secondary market level and volatility of interest rates currency exchange rate security evaluations 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.
Give you an overview of our financial results for the fiscal year ended March 2021, Please turn to page two first.
The results as you can see on the bottom left net revenue was 1.4 trillion $1 9 billion up 9% year on year in income before income taxes was 230 points it won't be the only and a decline of 7% compared to last year.
Income before income taxes at studio segment. The other three segment income before income taxes, which represents our core business increased by 35% to 239 billion yen, although wholesale declined year on year due to the U S retail and note that the money has been to both delivered strong performance.
Income was $153 1 billion down 29%, while EPS was 48.63 yen and utterly was five 7%.
Our dividend for shareholders over record as of the end of March was 15 yen per share, resulting in an annual dividend of 35 P. M.
Before I go into more details I would like to first say a few words about the possible loss arising from business activities announced on March 2009.
Please turn to page three.
On March 26.
An event occurred at U S subsidiaries, including Nomura Global financial products, Inc. Whereby we were subject to a potential significant loss due to prime brokerage transactions with a U S client.
The loss based on market prices at the time was estimated at $2 billion.
We take this matter very seriously and have taken a number of steps to address it first we took a disciplined approach to exit our positions taking into account both marketing Buxton minimizing losses as a result as of April 22, we have no exited over 90%.
7% of our positions. We have also confirmed the Fox over the event and checked for similar risk and existing and transactions in our prime brokerage and other financing related to the businesses. We have confirmed that there are currently no other similar transactions.
Yeah.
This event was a very specific individual case.
In order to ensure appropriate risk management of such cases in the future. We will engage third party experts to conduct a thorough review of our risk management framework in wholesale and risk management, while also enhancing our global risk controls.
Our results for the full year and fourth quarter ended March 2021 announced today include.
Impact of $2 $3 billion or $245 7 billion yen, reflecting the widening winding down those positions as much and then additional ammonia due to changes.
In due to changes in market prices also paper of 2013 talks to our consolidated financial results from April 1st is estimated as a loss of <unk> 62 billion, which will be booked in the fiscal year ending in March 2022. This event had a major impact on our <unk> show results for the full year, and particularly fourth quarter ended March 'twenty.
21, however, excluding this event our core business of retail asset management, then the wholesale global business all delivered strong results.
I would also emphasize that our financial health remains robust, including our capital metrics and liquidity.
Please turn to page four this slide outlines the changes in income loss before income taxes from 19 to 22 FY 'twenty 'twenty two on the left hand side shows FY 1920 income before income taxes of $248 3 billion yen without segment breakdowns shown.
On the far left.
Despite headwinds from the pandemic retail reported robust sales of stocks and investment Trust us favorable market conditions led to improved investor sentiment and the diversification of client approaches we have taken since the year before last worked well.
Cost reductions also helped improve the bottom line net revenue increased by 10% while cost declined by 4%, resulting in a $42 9 billion yen gain in income before income taxes.
So the main instrument American century investments related to the gain or loss improved markedly and income before income taxes increased by $45 5 billion yen net inflows of one nine trillion yen over the year lifted the assets under management to a record high of $64 seven trillion yen, resulting in the high.
Income before income taxes since the year ended March 2002 months of 2002 when comparisons are possible wholesale has shown us the light blue bar graph in the middle reported a decline in income before income taxes of 227 9 billion again, let me explain this in more detail.
So as I said earlier the <unk>.
They are rising from transactions with either U S clients were $245 7 billion yen.
This $204 2 billion gain is booked as a trading loss deduct it from equities net revenue. The remaining 41 six video needs bookstores, our loan loss provision and expenses.
Excluding the U S laws wholesale reported an increase of $217 80 billion income before income taxes.
On the next page in fixed income net revenue increased by 31% driven by strong performance in rates credit and securitized products well investment banking net revenues shown on the right grew 35% as we supported multiple air Monday in the ECM transactions equity children declined 41% due to the <unk>.
Loss arising from transactions with a U S client, excluding without we continue to see strong momentum in the fourth quarter.
We are also being able to keep our cost base down by completing our $1 billion cost reduction program one year ahead of schedule.
Please turn to page four.
Segment other shown to the right of wholesale reported a decline in income before income taxes of $110 9 billion in the main reasons for this are shown in the second from the top we booked an impairment charge of $47 7 billion yen on our stake in affiliate Nomura real estate holding.
<unk>.
This is because the market value of the company is lower than that for our consolidated book value and we determined that the decline in value is not a one off occurrence.
Naturally this is just an accounting treatment and there is no impact on their business the relationship with our company.
The other factors.
As shown on the slide.
Please turn to page six for an overview of our fourth quarter results.
This quarter saw the impact from the loss arising from the transactions with a U S client and as shown on the top right.
Well I did also before income the income loss.
Before income taxes was 166 point once bidding in a net loss of $155 4 billion yen in EPS was negative $50 78 to me on the graph on the bottom right shows a significant loss in wholesale due to the loss in the U S. Excluding this event our business have remained solid in retail and as at the money.
Men posting strong net revenue in line with the previous quarter, while wholesale saw robust performance in investment banking. Please turn to page nine for an overview of performance in each division starting with retail.
Fourth quarter net revenue was $96 8 billion yen stronger sales of Japanese secondary stocks and higher recurring revenue offset a slowdown in primary transactions and the net revenue remained roughly unchanged.
From the previous quarter income before income taxes remained solid although declined.
Declined 8% to $26 1 billion yen.
As shown on the bottom of the page total sales grew 7% quarter on quarter sales of stocks increased 9%, while bond sales were up 14% driven by sales of U S dollar and Australian dollar denominated bonds.
Okay.
Please turn to page 10 that graph on the top left shows that recurring revenue assets, such as the investment trusts and discretionary investment trusts.
The 18.2 trailing again driven by the market rally and net inflows into the investment trust contributing to a higher recurring revenue.
Consulting related revenue was $4 4 million again, improving from last quarter contributions from annuities and other products.
Growth in the number of active clients with sluggish compared to the previous fiscal year or in the number of clients re entering the market increase that's that might get punched.
I think you can see in the top right net inflows of cash and securities was over 300 billion yen, which combined with market factors lifted retail client assets to record high of $126 six drilling again.
Please turn to page 11 for asset management.
Net revenue was $36 6 billion yen and income before income taxes was $21 4 billion again. This represents the second highest level after last quarter. Since the year ended March 2002, the comparisons are possible.
The top left shows that American century investments related gain or loss remained high at $10 4 billion yen and net revenue, excluding ACI increased 9% on the back of growth in assets under management.
Okay.
Please turn to page 12, the graph on the top left shows outflows of 765 billion yen in the investment advisory and the international business is showing great due to the impact from outflows by public pension funds in Japan.
The investment Trust business shown in Red continues to book inflows into Etfs.
And finding mrf's increased as an investor in smartphones after looking gains from sales.
<unk> contribution funds et cetera, also reported container that inflows total inflows into the investment trust business for 393 billion again.
The bottom right shows assets under management and publicly offer at ESG funds in Japan recently, there has been growing interest in Japan in social and environmental issues by enhancing our product offering to meet demand to invest in companies that contribute to resolve their needs problems assets under management and ESG funds increased to 640.
3 billion yen as of the end of March representing growth of more than double over the past year.
Please turn to page 13 for wholesale.
As shown on the top left net revenue was negative 800 million again and at Boston was 165.9 billion yen.
I said at the start of my presentation of the loss related to the transactions for the U S client in fact that America's equities net revenue and wholesale expenses.
Net revenue by region is shown on the bottom left shows that the Americas were down significantly due to this impact well, Japan E tables slowed mainly due to the fixed income EMEA reported stronger than that revenue in both fixed income and equities.
Please turn to page 14 for an overview of each business line.
Global markets net revenue was negative $36 8 billion yen fixed income declined 14% to $84 3 billion again.
As the heat map on the right shows in the Americas securitized products had a good quarter on an uptick in client flows and E mail revenues were driven by European government bonds.
Asia reported strong revenues and credit and FX and compared to the strong previous quarter, and Japan, but softer revenues in rates and credit.
Equities net revenue was negative $121 1 billion yen.
At the heat map, the Americas reported stronger revenues in cash equities, but the loss mentioned earlier significantly impacted revenues.
And our revenues increased on contributions from cash equities and in E. G. The arrow is pointing up for cash and derivatives, both of which had a good quarter Japan.
Japan posted stronger revenues in derivatives, but revenues declined due to weaker block trades and primary flows.
Please turn to page 15 for investment banking.
Net revenue was 36.1 billion again, representing another strong quarter, our global M&A business had a particularly good quarter driven by Japan in America, that's why.
Contributions from announced deals that closed.
Internationally, we supported multiple sustainability related transactions Andy.
And the Americas ECM franchise was involved in multiple deals underpinned by our alliance with Wolfe research and the optics market environment.
Please turn to page 16 for non interest expenses.
Firm wide expenses for the quarter and were at $336 1 billion again, an increase of 24% compared to the third quarter, notably other expenses increased by 97 billion again to 140 billion again due to the loan loss provision I mentioned and the impairment charge on our stake in Nomura Real estate holdings.
<unk>.
Compensation and benefits declined by 30% as we contained bonus provisions in line with pay for performance.
Our financial position is shown on page 17.
At the end of March our balance sheet was $42 five Julian again declining by two point Montpelier again from the end of December due to a decline in repo transactions and trading assets.
The table on the bottom left shows we have tier one capital of approximately $2 eight trillion again, a decline of over 110 billion from the end of December. This is mainly because of the deterioration in performance during the period and dividend payments royalty amount of FX translation adjustments increased due to the lower again.
Risk weighted assets were 16 trailing again, an increase of one point Montreal Young man from the end of December due to an increase in market risk falling or rising U S interest rates and higher volatility in the equities and FX markets. That's why that's how your credit risk as a result, our tier one ratio at the end of March was 17, 7% and our common.
Equity tier one ratio was 15, 7%.
The Red line graph on the bottom right shows level three assets as a percentage of tier one capital increasing to 20% at the end of March from 17% at the end of December due mainly to a decline in tier one capital.
That concludes today's overview of our fourth quarter results.
To conclude the management takes very seriously the concerns caused over this significant authorizing from transactions with a U S client, we will implement the measures I discussed the benefit the firm in the future.
Yeah.
Looking back on the full year.
All our core business is reported stronger net revenue.
We also made solid progress towards achieving our fiscal 'twenty 'twenty two 'twenty three K G I can't be I targets.
Retail client assets and assets under management and asset management, both hitting record highs.
The pandemic prompted a shift to remote working and we still have a heightened focus on diversifying our work and boosting efficiencies.
Telling us to reach our 140 billion cost reduction target announced in 2019, one year out of schedule.
Retail and wholesale performance slowed slightly in early April.
But momentum has returned in the second half of the month.
The business environment in 2021 is looking good.
And at the low interest rate environment. We believe there will be continued demand to managed funds and as the economy normalizes in fiscal and monetary policy accelerates.
Global growth funds should continue flowing into the equity market.
Yeah.
You are now in a Q&A session, Chris zero wanted to join the queue to ask a question.
Zero two to cancel your request at any time during this session.
We have a question and answer session now.
Thank you have a question please press <unk>.
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Your line is <unk>.
Question. Please.
Please Sarah Tan.
After the announcement starting a question with your name and company name.
If you have a question please press <unk>.
One.
The first question comes from.
<unk> Nikko Mr Recchi.
Ricky definitely as yours.
Hello. This is murky from <unk> I have two questions. The first question is about page three.
Regarding the loss that comes from that transaction without specific client. So $2 9 billion is the loss amount than in terms of the gross exposure.
About 10 billion.
So then.
In food line.
In U S and EMEA.
<unk> equity business is not being conducted but why is run.
Clients using this size of this exercise of balance sheet. So.
So my question is on the right hand side.
The C me there.
Transactions, we had similar issues do not exist and you confirmed it but when you say similar issue whats kind of issue do you mean and also already multiple preventive.
Measures have already been implemented, but what do you mean by preventive measures.
My second question.
Regarding Americas <unk>.
Excluding this.
Incident.
In page 25 on a quarterly basis 40 billion yen or so of profit is generated so.
Including the fourth quarter.
Compared with past the level of profit is fairly high.
But given the normalization of market conditions in the new fiscal year in our flu, yes basis.
The profit contribution from the USA, how do you view the profit contribution from Americas. Thank you those are my two questions.
Thank you very much. This is kitamura. Thank you for your question Mr. Murky.
So.
After the incident that happened in the USA.
For prime brokerage transactions that we have conducted a flu overview.
Overhaul of prime brokerage transactions in the sense from the viewpoint of exposure and margin in the notional.
And from multi pass multi faceted perspective, so we have given the review and.
Yes.
So.
And we confirm that there was no other transactions that was the same in nature with the transaction that happened with this particular client so as I said in the earnings release. This transaction was unique and individual transaction.
US preventive measures.
Partially.
Margin.
Request has been made and also risk framework enhancement.
He is one of the auctions that we are working on now.
Also.
Secondly.
The profit contribution from Americas, how do we view the profit contribution from the USA going forward.
Including the USA the importance of our international business, including USA for Nomura is significant.
No.
In our strategy.
Do not have any major change in terms of direction.
So you know all of that at all.
We have told you this about.
We are focused on products, where we have strength as we execute the business so for it.
Those carefully selected the businesses in terms of the people we are ranking making it into a top five and we were able to establish those businesses.
A few years so in that sense no market. The franchise that we have established will be through the leverage so that we can generate further revenue and appropriate and as you pointed out Mr. Mackey.
For March 2021 through out the year of course, I shouldn't be talking about what if but excluding what happened there.
<unk> performance would have been very robust, but as he mentioned 40 billion or so of quarterly profit and more than 102 billion profit for the year.
Is achieved.
It would have been achieved of course, there is a market tailwind, but with the products, where we have strength.
Talking about not just the one product multiple such growth product in that sense, our revenue is being stabilized.
Same time, we have reduced cost and reduced the breakeven point.
So no we have more sustainability in terms of our ability to secure profit.
And.
The how do we view the recent market environment.
At one point sometime in the fourth quarter interest rates went up somewhat so clients activities slow down.
On the other hand.
<unk> mortgage was very active.
But recently the U S treasuries yield HUS steepened and know that supportive for us.
For a firm like US who are who is the.
Market mediator flat yield curve makes it difficult for us to generate revenue, but in situations where yield curve is steeper than I do believe that we have opportunities to generate revenue.
Thank you.
Thank you very much Mr. Kitamura regarding my second question.
So this is an individual point, but the notional limit you mentioned within that limit.
In the U S businesses have been conducted.
Is that the right understanding.
The notional limit.
Extra sized in the first place.
So the dynamic emerging controller says Tim.
Is in place at some firms whether or not that other offense.
In your case.
In real time.
The control margin.
Including Iga system.
Would you say that your mechanism is on par with the level of quality of the industry's top the top players or do you need additional investment on that front.
Thank you Mr. Recchi, whether there is limits or not of course naturally we do have them at about four individual transaction I'm not disclosing the details.
Then.
What about the dynamic of margin, which Mr. Merrick said I believe you referred to variation margin.
But naturally.
Yeah.
For us.
The amount of collateral that we have.
Whether they'll tell volunteers balance is sufficient to adult is being watched on a daily basis and Enel Chile.
We request additional collateral as needed so we have industry standard mechanism.
On the other hand.
Based upon the changes in environment could.
Could we have from being more.
Quick we could've been quicker action, taking about the we are still in the process of validation so I cannot conclude.
Here, but we do I believe we do have the <unk>.
Conventional system standardized system. Thank you.
Thank you very much for your answer.
Next we have.
Go ahead from Jpmorgan. Please start.
Thank you. This is Phil Scott from JP Morgan. Thank you for taking my question.
Please answer after each question. The first question is about provision.
40 billion yen or more provision.
I would like to understand the thinking behind us on page three this fiscal year.
I think.
Yeah.
590 million dollar loss Ah was estimated in the first quarter to offset for that was there a provisioning.
That is my first question. Thank you for your question. This is the first question.
All of you are aware of.
<unk> brokerage service.
Can be categorized roughly into two types first is cash prime brokerage and.
The second type is.
There it is.
Base synthetic prime brokerage.
And this time.
Allowance or was that booked.
Our foreign cash prime brokerage.
Related activities, that's forecast prime brokerage as many of you may know is a lending with a collateral of securities and regarding this lending based on the Recoverability judgment.
Loan loss provision was booked.
Yeah.
And.
In relation to that in this fiscal year. After the start of this fiscal year.
517 million $1 million of loss was booked and the question was whether it is going to be offset the answer is evil not be offset.
Related question.
No.
It was originally an allowance due to the transactions with certain U S clients or have you reviewed or whether there are similar transactions and as a result of the risk review have you booked additional allow us know the former is the case.
I see the former is the case now turning to the second question.
This is also related to page three.
This might sound somewhat strange, but we have numbers from the earnings release.
And on the Investor Day on May 12 based on these actions.
Okay.
Strategy regarding for example, prime brokerage business, how that will be developed and implemented and Doug Doug as I mentioned earlier.
Those are there are those that are being validated and reviewed and you may not be able to discuss these are fully but.
I would like.
To understand that there will be more information explosion.
Disclosure on May 12.
Although there'll be more detailed information on May 12.
Thanks for your question. There are some reviews that have been completed and there are ongoing reviews and our reviews to be started.
But lessons we can learn from these reviews.
Is that just from the event this time around.
Although of course be reflected in the business strategy management strategy going forward and regarding the management strategy, Oh Gosh I mentioned on Investor Day on May 12.
I'd like to.
Provide presentations on the strategy.
Thank you very much.
But then I look forward to hearing more detailed information on the Investor day.
Yeah.
Next question is from Mr. Watanabe of Daiwa Securities. Mr. Watanabe. Please go ahead.
This is watanabe from Daiwa I have two questions first question is about.
The profit contribution from prime brokerage business.
Cruising.
Yes.
Out of the U S equity revenue, what was the percentage or ratio proportion of private.
Brokerage business.
And in your in your answer to <unk> question, you said that there wasn't a similar transactions, but in terms of the way clients and apply leverage and as you revisit risk management the frame.
Risk management framework are you.
Sure.
Revenue from brokerage business will not come down and second question is regarding the shareholder return no you are conducting.
Dividend payout, so could you explain and elaborate more on the thinking behind that decision on the sale of the retail.
So regarding of the prime brokerage revenue contribution.
As a percentage to the total U S. A.
Equity revenue sorry.
Cannot.
Not I cannot disclose the details regarding the enhancement of the risk management framework.
To what extent would the revenue from prime brokerage coming down.
Yeah.
Since I cannot comment on the denominator itself, it's difficult to comment on that but.
In our U S equity business.
Just a couple of years, we have seen robust situation.
So that's in the equity derivative area. So.
That's different from the prime brokerage area that had issued a sign and regarding your second question about.
The dividend I believe firstly.
This time.
Unfortunately.
Due to the incident that happened for the net profit.
Came down to 153.1 being OEM, but retail division and asset management Division as mentioned did very well also wholesale division aside from certain business lines did well very very did very well so as I've said all alone.
The fundamental revenue, making power of businesses has gone up Sydney at the same time, we have sufficient capital. So in the form of in the four months of dividend to me would like to conduct shareholder return that is the background and what you read.
On the amount of dividend payout.
So in that sense.
This shows our confidence towards the continued sustainability of our performance.
Regarding the buyback can we.
[noise] contemplate it hard.
That possibility about do we had a loss of 260 billion yen and that on the online to capital so dividend alone.
That's about 70% of payout ratio. So this time, we would like.
Just on payout dividend us shareholder return policy and looking other situations.
And we will consider.
The opportunities of conducting buyback sometime in the future. Thank you very much for your answer.
Question regarding the first question. So this loss was.
Unique and individual in nature, but in terms of risk management framework. So how what is the background behind to which you are overhauling their risk management framework. Thank you. This is kitamura.
So for us.
Yeah.
So several people have said it but this transaction that I believe was idiosyncratic but.
Just because it's idiosyncratic it doesn't mean that the weekend.
Just be.
B V NAND about that but we.
We are intending to strengthen our risk management framework.
Thank you Miss that camera then in that sense, there won't be much impact coming from that camera is speaking that's.
And dependent on the outcome of their review so as a result of the review will be determining what's kind of in house I mean, we will be implementing but what's happened I believe it was quite unique.
So it's not that our risk management framework was defective.
So the impact on revenue.
Will depend on what kind of risk management framework, we will put in place about the impact it will be it will not be that big. Thank you for your onsite mix like Nomura.
Yeah.
Next from Mitsubishi <unk> Morgan Stanley, we have Ms <unk> <unk>.
For taking my question. The first question. This may be somewhat related to the earlier question about the answer was not very clear. So once again I would like to ask this question regarding equity revenue and the U S portion of that.
This is a more than $20 billion to $30 billion.
Up to the.
Third quarter last year on a quarterly basis. It started to rise in the first quarter and it was around $50 billion around in the second and the third quarter and in the fourth quarter. It is now in the office, but without argue most if not for our kickoff I believe it would have been over 40 billion.
And therefore in the second quarter third quarter level from that level and it seems that there is a decline of about 10 billion.
Yeah.
Given that situation.
This.
Number for the.
Quarter.
Coming from a certain specific client.
Are there increasing transactions significantly.
Cause of Uh huh.
The only market conditions, if that was the case and then going forward.
It may be about 41 billion.
Should that be the appropriate estimate for that future revenue.
And what is your view on this.
That is my first question.
And the second question is.
Thick this time in Japan.
The arrow is pointing down vertically downward in Japan, and it seems that it's far less than half the previous level.
Okay.
But was there a special circumstances.
Resulting in this and to estimate our first quarter and beyond how should we understand this so.
Those are my questions. Thank you for your questions.
I have received a.
A couple of questions.
Yeah.
Regarding this specific customer involved in this incident.
After January this year.
Okay.
The transaction size flip as increased.
Partly because of a surge in share prices.
Transactions I live has increased.
But sitting as I've said is about the second and third quarters.
And what date, whether there were huge transactions are with that customer in the second day of the third quarter. The answer would be no. The answer is no.
And then lie in the fourth quarter.
It appears that there is some deceleration.
Overall, the centering around the United States and in various other countries.
Interest rate is rising and there is also tightening in China and between Asia, and the United States, There's a flow of funds and equity linked bonds I believe ive transactions of these semi slowed down and flow derivatives.
It was a somewhat difficult to make profit in that area.
But Q2 in the fourth quarter.
There was a decline as you correctly pointed out but.
But on a full year basis U S equity was performing strongly.
And derivatives.
Alright, driving the equity revenue and that sector remains unchanged.
Now as far the recent trend.
Yeah.
In the fourth quarter equity derivative Sandia America, I suppose so but in April it seems that.
There is a recovery in pace and that is what I would like to additionally mention.
Now I believe the second question was about fixed income and the weakness in Japan, and why the weakness in Japan.
Overall I believe this is due to the ear in fact, there is repack bond instructor at products were somewhat slow.
Furthermore.
Emerging.
Bond.
Because of a reversal in dollar trend credits.
<unk> did not perform as strongly.
Overall, there wasn't that much movement inflow interest flow rates and this was also slow.
And.
I believe that those are the factors why.
Japan in the fourth quarter of us.
So myself and going forward, we have started our new fiscal year.
And regarding the fundamental outlook.
Relatively speaking.
I believe we can say that our fundamentals are favorable.
And there are monies are that.
I need to be invested we believe that there is ample money that is trying to find the return or investment opportunities. So Andy news fiscal year in the first quarter, we expect that there will be some movements of such money.
And therefore, we expect some recovery in comparison to the fourth quarter.
Thank you for those answers.
The next question comes from it sounds like some from Bofa Securities Mr. Sasaki.
Yeah.
Thank you. This is <unk> from bank of America I have two questions.
So first regarding.
The USA.
So.
This was the individual unique idiosyncratic transaction as you said, but the management of holding company was aware of this transaction that I believe but is my understanding correct. So that's my first question then.
And then Nomura real estate holdings impairment that.
You have taken in the fourth quarter.
So this is a basic question but.
No not really date holding share so at least it so is it the impairment of the at least at Nomura Holdings shares and looking at our stock price and have much right Javier decided to impair so I do not understand the reason.
So could you explain to the extent possible. Thank you.
This is camera Mr. Sasaki I didn't really understand your first question.
So in H ice management, including myself did you say the non instrument of hei.
Was aware of that transaction in the USA and can you be more specific.
So are you being specific in terms of the timing.
Well it goes back.
Sometime but so.
E N BS in the USA, how two channels and the management of that time.
Putting in place a system that allows them to.
Understand and monitor that.
So the management my understanding is that are you explained earlier that the management has a system to monitor the aspirational book than I thought that the management to us.
Familiar aware over what's going on there with that transaction that's the background.
This is Laura.
We have a massive size of trading off that then do we have a huge number of clients.
So NHI management level.
We're the we have the names of individual customers and their positions.
Not limited to these clients about the we do not follow the details of individual clients transactions about the window issues surfaced.
Of course.
But at Nomura holdings level us the holding company, we have been involved in the decision, making and the second question regarding the Nomura Real estate holdings.
So this is a about the at least it shares.
So why have you decided on impairment.
So that's your question.
So in general from the end of January through February the Nomura real is.
Its holdings stock price was up but.
Our consolidated book value of your investment.
Has it been above the market price for.
Throat protracted period of time, so that's the major reason the last year since the COVID-19 shock.
This companies.
P. B R has been below one time.
Continuously but the performance is good so.
Book value on our book has been on the rise basically so compared with our book value on the balance sheet this company's market value.
Unfortunately.
It has been.
At a lower level for a certain period over time, that's why in March we had to book the impairment.
Yeah.
Mr Nomura.
No.
So regarding the first part of your answer.
<unk> son asked about this.
And huge amount of position I believe was held and that can be estimated.
Based upon the size and trading accounts.
Worth 15 trillion yen any from their Salon training again worth of order then.
I don't think that of course did you say that you cannot understand everything about if it's if it as high as the ones that you Couldnt say that are you.
We're not aware.
Domino speaking for example in a swap transaction.
This transaction, but the notional amount is a very massive but on our balance sheet. What plays on our balance sheet is the win or a loss of derivative transactions and our positions. So one trillion out of 15 trillion.
Not really a valid point.
I see.
Okay understand.
Regarding Nomura real estate holdings for a certain period overtime that you mentioned looking at the stock price.
End of March last year so.
Price declined and after that.
Stagnated for awhile.
But the last 12 months or so the stock price or the market value has been below the book value is that what youre, saying or.
You saw the shrinking possibility of recovery and you made some decision judgment and took the impairment what was the case.
Stefan I was speaking for a certain period of time.
The market value has been below our book value. So that's the major reason.
So the former scenario that you mentioned is.
What's happened Okay understand my second number I. Thank you very much.
Okay.
Let me have.
Is there anywhere from Citigroup.
Okay.
Yeah.
And thank you for taking my question. This is <unk> from Citi you cannot hear me, yes, I can hear you. Thank.
Thank you I have.
Two questions first is about investment banking and the second is about dividend first regarding the investment bank.
What is the level of future pipeline in comparison to the past what is the.
Our level of growth and.
Regions deals.
Volume per deal.
Is there any characteristic of a potential deals in the pipeline.
Lithium efforts in comparison to the past he thought there are improvements.
Improvements are a result that is what I would like to know and if possible. If you could separate between M&A and ECM and the second question is regarding dividend and this is also related to question by about 10 of us on but simply put.
I nearly 35, Yang and second half 15 yen how does this calculated.
Thank you for your questions, but first a M and a pipeline or IV pipeline that was my first question. That's for our outlook going forward. We believe generally speaking our outlook is favorable.
In the second half of the year.
All of the fiscal year that just ended towards the second half of the year. There was also a growing momentum for increase in revenue from M&A and we believe that this momentum is continuing and there are I understand.
Large number of inquiries about possible deals.
Our business portfolio review is underway by many companies non financial companies given the current environment I think companies are pressed to do that and there are many companies that are contemplating possible divestiture.
I understand and although the future is uncertain during the pandemic. Our companies are affected and that there are also some M&A to save companies that are struggling and on the other hand Japanese companies are searching for growth opportunities in market and going outside of Japan and there are also such deals.
As I am informed.
In ECM.
And during the pandemic.
Companies are consolidating their financial standing and there's going need to do so.
And this is related to earlier question, but M&A finance.
Part of them and they find us.
Financing.
He's exist.
And regarding governance in Japan as well.
We are coming closer to global standard.
And our strategic cross shareholding.
It's unwound and there is a need to sell such shares.
I believe that we also have reasonably strong pipeline for E C M.
Now turning to your question regarding dividend 15, Yang for the second half of the year. How this was calculated.
Yeah.
Right.
Had it not been for this incident, then I shouldn't that discuss what if I'm fully aware of that but had it not been for the incidents.
And excluding that our our fundamental earnings capability remains strong remains strong and.
[noise] stable dividend.
Level continuing from the first half of the year was also taken into account.
And therefore.
From these are general point of view, we have decided on 15 yen.
Dividends for the second half of the year.
I have a follow up question.
Your company does not issue guidance about regarding the dividend for the second half of the year.
And he is also used the word confidence is this going to be a message for this new fiscal year. For example annual dividend of three D and if it does.
Divided calculated back using the payout ratio of 30% and then K G. I of 100 yen there'll be over performed and is that the right way of understanding this new fiscal year, but at least for the term ending in March 2021 had not been for the incident.
I believe that that level of number would have been achieved overall, we believe that our earnings capabilities are strengthened.
And in that respect we have confidence we have we are confident but unfortunately.
We are starting from the negative 62 billion yen in the beginning of this fiscal year and we have to start from this negative level.
Two.
Yeah.
Generate profit.
Yeah.
The structural reforms, we're underway to alleviate market impact, but we cannot be completely free from market.
And so I believe we were enjoying some tailwind from market environment in 2020.
I hope this addresses your question.
Thank you for your answer.
The next question is us.
<unk> from Jefferies. Mr Ban.
Thank you.
Sure.
Of.
My questions have some overlaps with the question was asked about the first question is regarding U S operations.
So U S subsidiary.
Stock has been named pad somewhat so the reason is that changes in your forecast for the revenues down the road, but for this specific.
Counterparty.
Instant is viewed as a individual idiosyncratic case and you.
Have you changed your revenue forecast for the USA moving forward. That's my first question and the second question is regarding Nomura real estate holdings.
No you've booked impairment and but there's no change to the business relations.
But moving forward.
So us business partners within Nomura group.
Is there any change that may not be changed as of now, but moving forward would it be possible for you to revisit revise the working relation with Nomura.
<unk> holdings in the future. Thank you for your question. This is Nomura.
Regarding the first question Nomura Holdings America.
Us entity.
And of that firm.
The.
It's not that the revenue forecast has been changed so I'm checking the press release about there's no mention of that and then the incident that happened in the USA.
Yeah.
Because of that there was a lot of that happened at the subsidiary of H H H H.
Net value asset the value of the holdings came with Atlas. So we booked the impairment. So it is not it does not mean that we changed the revenue forecast so as I explained our.
Our U S operations revenue, making capability has been improved so this write down is.
Attributable to one off loss.
And.
Regarding Nomura real estate impairment.
This is accounting treatment.
So between ourselves and Nomura real estate holdings.
And there was no impact on the relation between the two firms for example.
Public to private is our strategy.
In the retail division.
Our collaboration with Nomura realize data is being implemented and retail division has expanded its real estate related businesses and also in various areas.
We are looking to expand private area businesses and in that context, we would like to explore further opportunities of collaboration with Nomura real estate and we are in the process over discussion. So the impairment that was booked it's just for accounting purposes.
Yeah.
Thank you very much to me, it's like Nomura.
Thank you very much.
It's now time to end.
Today's session, we would like to end the Q&A session. If you have further questions.
Please send your question to I R. A department of Nomura great.
And in fact, I'm Gonna CFO. Please.
Yeah.
Regarding the loss from the U S business, and we had to incur a very large loss.
And the management takes this theory seriously.
In the third quarter and up to the middle of the fourth quarter lever showing a very strong performance and therefore I also found this quite regrettable, but we've like to learn lessons from this.
And would like to.
Use that in our future business and for our benefit.
Our Madison My vision announced last year of achieving sustainable growth by helping resolve social issues remains unchanged.
In addition to the public markets.
Mentioned earlier.
In addition to the public markets, where we are strong we will expand our service and private markets and aim to take the offering to the next level.
We will give an update on each of our business at our Investor Day next month.
Okay.
Well, thank you very much.
Okay.
Yeah.
Thank you for taking your time and that concludes today's conference call. You may now disconnect your lines.
[noise].