Q2 2022 Nomura Holdings Inc Earnings Call
Good day, everyone and to work on Google does Nomura Holdings second quarter operating results for fiscal year <unk>.
<unk> 2022 conference call. Please.
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The question and answer session will be held after the presentation.
Please note that this telephone conference contains forward.
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 by four months or Asa expectations implied by those projections.
Such factors include economy, and market conditions political events and investor sentiment. The quiddity, obviously, a country market led out on the volatility of interest rates currency exchange rate security valuations competitive conditions.
And the size and timing of transactions.
One is that we would like to begin the conference.
Mr. Looney Kitamura, Chief Financial Officer. Please go ahead.
Good evening. This is takumi kitamura CFO of Nomura Holdings I'll now give you an overview of our financial results for the first half and second quarter of the fiscal year ending March 2022, using the document titled consolidated results of operations. Please turn to page two for an overview of the first half.
Net revenue declined 19% year on year to $672 1 billion yen income before income taxes was 97 billion down 63%, while net income declined to 75% to $51 7 billion yen.
There are two main reasons why earnings declined from the previous year.
First in the first quarter, we booked an additional loss of $65 4 billion yen as in May we completed unwinding, our positions related to transactions with a U S client in March this year.
This is included in wholesale in the business segment results shown on the bottom right. The second factor is in segment. Other we booked a provision for legal costs in the second quarter of 39 billion yen related to legacy transactions in the Americas from before the global financial crisis in 2007 to 2008 as they say.
Is still ongoing we cannot discuss the details of this both of these factors together resulted in a total impact of around 100 billion yen with that backdrop, let's now look at the business segment results retail income before income taxes remained roughly unchanged year on year at 36 billion yen brokerage commissions from the sale of stocks and investment trusts slowed but Rick.
<unk> revenue increased on growth in investment trusts and discretionary investments client assets.
Investment management posted strong growth with income before income taxes rising to $59 9 billion yen.
Assets under management continue to decline and business revenue increased while investment gain loss was particularly strong driven by the listing of an invested company wholesale results were impacted by the $65 4 billion yen additional loss I just mentioned wholesale booked a loss before income taxes of $3 4 billion yen.
Even excluding the $65 4 billion pre tax income declined by about 90 billion yen. This is mainly due to a slowdown in macro products such as rates and FX emerging which were particularly strong in the same period last year as the fixed income market rallied last year.
Investment banking posted a 60% increase in revenues on the back of strong performance in M&A and ECM.
Segment other posted a loss before income taxes of 800 million yen due to the 39 billion yen provision I mentioned.
That concludes the overview of our first half results.
Today, we announced a dividend of ATM per share for shareholders of record as of the end of September. We also launched a share buyback program to raise capital efficiency and ensure a flexible capital management policy and to deliver as stock based compensation.
The upper limit of total shares will be 80 million shares and the upper limit for a total value will be 50 billion yen. The program will run from November 16, 2021 to March 31st 2022, Please turn to page three for an overview of second quarter results firm wide in.
Before income taxes declined 76% quarter on quarter to $18 5 billion yen. This included a pre tax loss of $40 4 billion yen in segment other which includes the 39 billion yen provision for legal expenses.
Income before income taxes from our three core businesses was 57 billion yen up 60% from last quarter as wholesale performance improved due to the impact from transactions with our U S clients no longer present.
Second quarter net income was $3 2 billion yen and ROA was 0.5%. Unfortunately, the 39 billion yen provision in the Americas significantly impacted our bottom line in this quarter.
Now please turn to page six for an overview of results by business starting with retail.
Net revenue was $85 2 billion yen.
As market uncertainty persisted through July and into August brokerage commissions from sales of secondary stocks investment trusts and bonds declined.
However, recurring revenue and contributions from primary stocks, both increased resulting in revenues remaining roughly flat quarter on quarter income before income taxes was <unk> 17 billion a decline of 11% over last quarter when costs were unusually low.
Please turn to page seven for an update on key performance indicators.
We are taking a number of steps to grow our retail business over the medium to long term.
On the top right you can see investment trust net inflows of $78 1 billion yen and discretionary investment net inflows of $19 2 billion yen representing continued monthly net inflows since April. This ongoing buildup has helped lift recurring assets to a record high of $19 five trillion yen and we are on track to reach our <unk>.
March 2023, Kpis target of 21 trillion yen.
Recurring revenue derived from recurring assets was $27 2 billion yen accounting for over 30% of total retail revenues and 40% of expenses.
Consulting related revenues shown in the bottom left was $4 5 billion, representing an improvement from last quarter driven by the real estate related business and annuities. Please turn to page eight for investment management.
Net revenue declined to 46% quarter on quarter to $34 3 billion yen income before income taxes was 15 billion yen down 67% from last quarter. When you book the contribution of 24 billion yen from the listing of our Nomura capital Partners Investees company.
This quarter's results slowed as that uplift was not present this quarter and American century investments related gain loss declined.
That said our asset management business remains solid.
Business revenue grew 4% to $29 3 billion yen and as shown on the bottom left assets under management reached a record high of 67 eight trillion yen.
Assets under management were lifted by market factors and inflows as shown on page nine.
This quarter, we saw total inflows of luxury you again, comprising 270 billion gain from the investment trust business than the 770 billion gain from the investment advisory and international businesses.
Graph on the bottom left it gives a breakdown of the investment trust business. The dark red portion showing sort of the thing for those into core investment trust with 180 bps going into <unk> the regional banks in the bank channel alone in this.
Advisory business reported more than 400 billion yen of inflows in Japan and international even fluid stood at 350 billion yen in the international business shown on the top right the right assets.
<unk> increased $2 five trillion yen over the last year, one trillion yen of which is for a lean flows inflows were particularly seen in well performing fixed income funds.
In private market alternative assets under management continue to grow steadily reaching 690 billion yen.
Please turn to page 10 for wholesale.
Net revenue increased 30% to $172 7 billion yen and income before income taxes improved from last quarter to 25 billion yen the improvement becomes school.
Our quarter was impacted by the $65 4 billion yen.
Related to the transaction with a U S clients looking at net revenue by region on the bottom left the Americas improved from last quarter as the impact of the low so let's not present this quarter. Japan's revenues remained roughly unchanged as equities and investment banking offset the slowdown in fixed income Asia reported stronger revenues across all businesses.
EMEA revenues filled in fixed income driven by rates and securitized products. Please turn to page 11 for an overview by business line, starting with global markets.
Second quarter net revenue in global markets increased 41% Q on Q to $137 2 billion again equities revenue jumped seven three times from last quarter to $66 five beating on the end of the quarter, including the little sense, because Japan, India EJ revenues both increased.
Income revenues were $17 7 billion AEG in the Japan created the affiliate quota, but tobacco products, such as rates and FX emerging market declined 20% on lower client activity.
You will also find the regional highlights on the right of this page.
Turning now to page 12 for investment banking revenues to remain so for the fourth straight quarter to $35 4 billion yen Avon day had another good quarter and the sustainability related deal shown in green on the top right, whether that's cross border Dundee.
<unk> contributed to revenues.
The Japan ECM business had a strong quarter executing global deals such as a follow on offering by risk to Japan railway and supporting multiple solutions transactions internationally and then they were still in the Americas and EMEA.
Collaborations with Wolfe research in the Americas helped us win a number of ECM mandates.
Please turn to page 13 for an overview of non interest expenses.
<unk> cost increased 9% to 344 billion yen, notably other expenses shown on the second row from the bottom increased 60% Q on Q2 to $76 nine getting again, well the $9 3 billion in loans.
Those provision booked last year was not present this quarter, we booked a provision of 13 9 billion yen as I discussed earlier.
Compensation and benefits declined 5% to $129 2 billion yen due to lower bonus provisions in line with pay for performance.
Next our financial position on page 14.
As shown on the bottom of this there is no real change to our financial position and throw them in June with our September end of tier one capital ratio of 22% and set one to capital ratio of 17, 6%.
That concludes the discussion of our second quarter results.
This quarter. It's the results. Unfortunately included an impact to our bottom line by the provision booked for legacy transactions from before the global financial crisis.
The same time of course.
Businesses retail so recurring assets and recurring revenue hit a record high net inflows into investment trusts and the discretionary investments have continued into October.
Our strategically important contact centers, starting to gain traction with its remote consulting and services for our clients in their fifties and sixties, who are currently working age who are currently at work engage your hub face the big lifetime event of retirement investments non instrument to reported ongoing inflows from.
Regional banks the bank channel do you see business and investment advisory business lifting assets under management to a record high and achieving steady growth across the broader asset management business.
In wholesale where are we.
Fixed income business holds a competitive advantage in macro products, we faced a challenging market environment. October's saw also saw wholesale revenues and get off to a slow start primarily in rates, but the macro environment becomes clearer, we expect to see market participant activity pick up.
Investment banking is starting to deliver with revenues remaining elevated for four straight quarters. We recently appointed Jeffrey <unk>, the founder of Greentech capital of Global co head of investment banking.
Looking ahead in addition to our strength in secondary business, we will strengthen the advisory and the sustainability related businesses to further diversify our revenue mix and to deliver more consistent revenues.
Today, we also announced initiatives to enhance our risk management.
Following the incident in the U S. We conducted a comprehensive review of our risk management.
Based on this we have been implementing initiatives to enhance our risk management.
This consists of three main points.
The board level, we established a board risk committee, consisting mainly of outside directors.
On the execution side, we realigned our committees and created a group risk management Committee and the steering committee for in health mental risk management.
We aim to achieve sustainable growth, while working hard to enhance our risk management.
Thank you very much.
Thank you to all cases.
I'll give I'll sit in your lap.
Well look at that is sitting you at Daytona in your lets take that.
We have a question and answer session.
Now thank you.
Have a question please.
One.
Your line of cash and a question.
Past the hand that 10.
After the announcement.
With your name and company.
If you have a question please press <unk>.
<unk> Wang.
The first question.
Is from Mr. Murky SMB Nikko Securities <unk> San Please go ahead.
Yeah.
Hello. This is murky from SMB Nikko Securities two questions. Please first.
Regarding the legal reserve or a litigation provision of 39 billion yen last year first half 'twenty 4 billion yen second half several billions of yen of provisions I believe.
And it's been quite a while since the global financial crisis, but you have been booking these provisions consecutively what is your future outlook about booking further provisions.
I believe the risk.
Pretty much speaks out is that the way to think about it or.
As of August 16th.
You calculated as 68 billion yen of maximum probable loss, which exceeds the provisions amount.
And so I believe there are some expected losses in other issues. Other cases, so how do you view the future risk and from the outside.
I'm sure there are some contingencies, but.
How can we.
Estimate the expected future losses, such as this.
And my second question is.
Regarding your capital strategy at this time, you announced 50 billion yen of share buyback your total payout ratio of 144, 145%.
Why did you choose to exceed 100% payout.
Payout.
Did you change your definition of your profit or core.
Our income or do you feel theres some abundant capital.
And which allows you to make this payout. Thank you.
Thank you this is <unk>.
Your first point about the provision.
What I can say as of today is that <unk>.
Right now we have made the necessary provisions and in the future future possibilities.
Frankly I.
I don't think its appropriate to comment.
And this is an issue which took place quite a while ago, but yes, we do have to make provisions like this so it is disappointing for us, but we have made to the provisions that we need as of today.
And.
We do conduct business globally. So.
There is we cannot completely mitigate litigation risk outside of Japan.
On the other hand.
It is through conducting the appropriate business that we can reduce our future litigation risk.
And.
As announced we are enhancing our risk management.
And by conducting business appropriately.
We would like to reduce these cases as much as possible in the future.
Your second question about our capital policy.
As he pointed out the share buyback and dividends total payout ratio of about 140%.
In the previous results announcement I believe.
<unk>.
There was the U S client incident and.
You asked we are.
We were asked about whether the losses from the incident are being factored into the dividend towards the payout and yes, we said that we will consider it to a certain extent.
So we have made some adjustments to our income, which we use for the payout calculation.
And.
We are going to use some of the share buyback for the <unk> or the stock option. So on the surface. The total payout ratio is very high.
And yes, we have made some adjustments to the income that we use for the payout calculation and in terms of your question about whether we have excess capital.
At the moment said, 122% above 2000 and set 117.6%.
So.
So as of today, yes, we do have sufficient or somewhat excess capital.
And.
The <unk> <unk> impact as we have been explaining from the past.
That is the key issue.
And for <unk>.
The J FSA analysis made an announcement and.
From <unk>, we have submitted our opinions from the financial industry.
And I believe the discussions will kick off from here.
Yeah.
And based on the current balance sheet and the current position.
If we make some assumptions.
We said if our TB impacts it was three to four.
As I say it has gone up slightly from that level.
Meanwhile, in order to control the impact there are some mitigation plans and.
We will be conducting reviews of the businesses related so I believe we can control the impact to a certain extent.
So the outlook remains unclear, but as of today.
We do have some somewhat excess capital or room in our capital. Thank you.
Thank you. This is murky about your second about the second point.
And the announcement by the J FSA.
Market risk credit risk and CVA and they will see proposed revision for these items.
But the impact of three to four or exceeding three to four.
Is.
Mainly market risk is that the way to understand this yes camera. This is that's correct the market risk impact is.
The large portion and because of the.
Because there will be no correlation this market risk has the biggest impact to Nomura.
Understood. Thank you.
The next question is from Mr. Watanabe of Daiwa Securities.
Thank you. This is watanabe from Daiwa I have two questions first question is about global market.
Equity and FIC revenue.
And what's the competition of trading and client flows.
In the second quarter second question is about page 10 regarding cost of wholesale cost income ratio is 86%, which is above the 80% target. It appears that fixed cost is on the rise.
But.
In terms of run rate.
What's the run rate level in Q2, thank you.
Thank you very much for the question. This is Taylor firstly.
Yeah.
Equity fixed income.
Client revenue and trading revenue.
Great for fixed income.
Both fixed income and equity.
How should I put it roughly speaking, 90% to 10% client revenue, 90% and risk revenue trading revenue representing the remaining 10%.
Then to you.
Your second question.
Wholesale divisions cost.
Cost income ratio is 86%.
It looks high.
As you pointed out.
Okay.
Yes.
Partially.
We are applying cost control on the other hand in growth areas in other words private area also advisory area also.
Wealth management business in Asia AEG.
In those growth areas, we are making investment.
Okay.
So we are.
Spending, making other zones investment and cost is being incurred.
The secondary trading revenue is being normalized as a result, the cost up.
As high as a result, however.
As we promised.
Lung meeting in Vienna caused the reduction in wholesale has been completed.
Moving forward, we will focus on growing revenue.
Okay.
In this context.
Yes.
If we can achieve <unk> hundred 50 <unk> Yang.
And then.
We will be able to achieve that target of cost income ratio.
My follow up question is regarding equity.
Revenue what is your trend compared with.
U S peers and your revenue level, it seems weak, but what's the background is it the impact coming from the shrinkage shrinking scale.
Scale back of Prime brokerage business. Thank you very much for that question.
So youre impression seems to be that our equities week. This is camera, but that's not our immigration.
Yes.
Equity business.
<unk>, that's our understanding.
As you pointed out U S peers.
We released our good results.
There or.
Multiple ipos and also with the increase in stock prices.
Cash.
Trading.
Yes.
Contributed well to them.
Equity derivative is our main stay business and <unk>.
I do not believe equity derivative business looks weaker.
Relatively speaking.
So you touched up on the potential impact from prime brokerage, but that's not our view at all thank.
Thank you.
Thank you very much for your clear explanation.
Okay.
The next question.
Is from Mr. Juneau, Mitsubishi <unk> Morgan Stanley Securities <unk>, San Please go ahead.
Thank you this is Susan though first of all.
In Japan.
The.
September monthly.
Sales figures.
And the investment Trust September there was growth positive growth, but.
July August was weak and September.
There wasn't that much of a recovery.
So over a three year or compared with our peers.
You seem to have lost your past momentum compared to the past.
And what are your thoughts about this.
And.
You mentioned how in October.
The client assets, where AUM is growing.
But.
In terms of the sales.
And there is a rise because of the pricing price rise so.
What was the actual increase in sales in September.
And leading to today.
Could you explain the sales trend please.
And that's my first 0.2nd.
This 39.
39 billion yen of provision.
As of June end.
Sorry, not June and August.
Seven.
Middle August.
The 68 billion maximum loss, which was in the Q1 disclosure.
Which is a 20.
<unk> 20 billion yen also increase from March and.
And.
And this kind of information is disclosed in the U haul disclosure with financial disclosure and.
Does this reflect the $20 billion or so increase or.
Does this provision.
Is this something new which you really realize before this $20 billion and we have to wait until the quarterly disclosure to find out these.
These losses these numbers, but.
As the number of declining by about 40 billion yen as expected or not could you give me more color on that please.
Thank you this is <unk>.
Your first point.
How about the investment trust sales.
Oh.
Frankly, I don't think its appropriate to compare with our peers, but at Nomura.
We are promoting the gold based asset management and also portfolio management and we are also promoting mid to long term ownership of assets to contribute to our clients as we have been explaining several times from the past and in order to do this.
Instead of two.
Trading we are.
Shifting to our asset consulting business focusing on the fees recruiting fees. So.
The investment trust sales per quarter does not exactly match the trends in the market.
And this client focused business. We are now in the fifth year of focusing on this type of business. So.
This has become the norm at Nomura.
Yeah.
And last year in June or since last June.
The market recovered.
And our clients assets unrealized gains continue to rise.
Yes.
And.
In September.
There was an average of more than 20% or around 20%.
Growth in the unrealized gain.
Valuation gain.
And by the unrealized gain increasing our client satisfaction is improving.
And this gives an incentive for them to own their assets over the mid to long term.
On the other hand.
Because asset prices have risen.
Some clients choose to sell their assets.
Converted to cash.
And that kind of needs is declining at the moment.
And.
You talked about the 20% or so unrealized gain or valuation gains in the past when the unrealized gain increases.
There was the increase in the switching.
Suntrust in proportion to the ryzen, the unrealized gains but recently.
The correlation between the unrealized gain and the switching between investment trusts has disappeared. There is no correlation anymore. So right now the unrealized gain is rising but the rate of customers switching to other investment trusts has really fallen.
And investment Trust.
If the customers sell Investor Trust that also is booked as a sale, but we do not we are not pursuing that at the moment, we want our clients customers to be satisfied with the unrealized gain and put in more money into their accounts and if your point is that we need to do more works.
In this area then maybe that's not true but.
Yeah.
Just because the investment trust related.
Numbers are not as strong as our peers, yes that is true but this is just as I. Just explained there has been a change in the way we face our clients and this is the background for the investment trust figures.
And we are making use of the unrealized gains that are being generated and we want more customers to.
And they are our client assets to us for us to manage the second point.
About the provision.
In terms of the maximum probable loss.
Which we disclosed in Q1, the 68 billion yen, whether the provision was included in a 60 billion yen or not it was not included.
And we cannot go into detail about each individual situation case, but.
When there is a rational reason.
A reason to expect a loss and if the amount of the loss can be rationally and logically calculated in that case.
We calculate the maximum probable loss and we stated in the disclosure.
And this time.
So Jonathan you mentioned.
After we disclose the U haul disclosure.
Yeah.
There was progress made for this case.
Until today. So this number was not included in the probable maximum loss as of Q1 and that was booked as the provision.
And your other point about.
The next maximum probable loss, which we will announce it in November and whether the number will be included in that.
Well, we would like to ask you to wait for a little longer.
Thank you.
Understood. Thank you.
The next question is from Mr. Otsuka of Jpmorgan Securities. Please go ahead.
Thank you this is otsuka from Jpmorgan Securities.
So.
Could you.
My question to every question right after I ask a question.
So the first question.
Including the buyback in the first half.
I would like to ask you to ask you about the shareholder return so earlier.
Our net profit of $51 7 billion was off the used so some adjustment was made so.
The payout ratio or a total payout ratio.
It looks different.
<unk>.
Well, what the basis did you.
Didn't mean that doesn't make a decision on the.
This dividend so if we do the bulk carrier collection from ATM and then.
<unk> Yang in profit seems to be the threshold and based upon that AWS.
Determined.
Buyback speaking, it's a question that's difficult to answer but Mr. Scott you are thinking is not far off the mark.
Northcott speaking.
Ann.
Profit is.
Don.
Us.
I just have a sudden explained this is due to that U S incident and also the provision booked in the second quarter. So they suppressed profit.
And those two incidents.
Hit then that means the 17 points $51 7 billion is kind of inflated.
Because you are not excluding those two factors kitamura speaking it's difficult to.
Precisely say, which factors are not included but in the previous IR telephone conference.
Talked about this but that is also related to the in stent in the U S.
To a certain extent I said I think we will.
Consider that to some extent and we've done so thank you My second question Mr. Kitamura is that.
Regarding the initial profit in the second quarter.
You explained.
The underlying profit but.
For segment profit in the second quarter 57 billion yen.
Could you explain 57 getting only end of segment profit the intention of my question is that.
As you explained wholesale cost.
Seems high this time and retail divisions profitability seems slow.
So is it are they the.
Run rate level or is it temporary.
Temporarily elevated levels in the second quarter. Thank.
Thank you this is <unk> speaking.
Okay.
Okay.
How to think about seasonality is a difficult question, but.
My feeling is that second quarter tends to have weak numbers because second quarter.
Summer.
In this situation.
Yes.
Looking back at the second quarter.
Yeah.
Natural business macro products business.
Well, it's quite challenged in the second quarter.
In this situation.
25 billion.
Wholesale number which is not commendable from your perspective about <unk> 5 billion of bottom line profit was secured for wholesale that means.
Yes.
Done we've taken actions to secure that.
Natural product environment.
And that we are seeing today will not persist forever.
So as client activity has come back.
We are expecting the macro environment.
To recover as well so in that sense, we can have certain level of expectation.
Optimism toward wholesale.
As for our retail division.
In the first quarter expense was.
Low level.
Related to the technical factor of when the <unk>.
Personnel expense was booked and as a result in the second quarter.
Expense ratio looks higher.
But we are not taking over stretched approach we are placing clients at the center of what we are doing our business.
And we come to this number.
Ms <unk>.
Asked earlier.
July and August of summer vacation, and we had Olympic games.
Customer activities were quite slow still we could secure this bottom line profit so.
And again I would like to reiterate the point that we are not taking farfetched approach steel we could secure this bottom line profit that's how we look at this number.
Thank you and then going back to wholesale Mr. Kitamura.
Three months cost is 147 billion.
Of course, if revenue goes up then due to a pay for performance cost also increases, but this kind of chunk.
Run rate seen from outside.
We expect this level of run rate cost.
Yeah.
<unk> speaking.
As I mentioned.
Okay.
In areas, which we see us growth area, we are making advanced investment.
In that sense.
The level of cost that we are seeing now in wholesale that's one.
The level of benchmark.
Baseline level, but compared with the first quarter.
The environment was quite difficult in the second quarter and as a result, the cost income ratio is elevated but when top line growth due to a pay for performance expense will be increased as well, but cost income ratio will surely come down.
Thank you very much mistaken for your clear explanation.
The next question is from Mr. <unk> of Citigroup, Japan U S and please go ahead.
Thank you this is <unk> from Citi.
I would like to ask about the asset management business.
And the risk issue first of all on page eight.
The recurring type products have increased and the asset building type products is that.
True.
What is behind us and what is the condition for this trend to continue.
And then my second point is.
While considering your Boston profits.
When there is risk youre risks your profits tends to shrink quite dramatically in relation to the past issues and you say you will control your costs, but some.
Yeah.
Yeah.
I'm sure you will be growing your top line revenue.
How do you think about the risks you are taking versus the revenues.
And how will you proceed with your reforms.
What will the balance between risk and revenue. Thank you.
Yes. This is kitamura.
About the recurring.
Revenue in our recurring revenue assets.
Increasing.
Yes, we have been working on this and we are finally, we are now seeing the results of our efforts I believe and discretionary.
<unk>.
Or using that expertise of the CIO group and we are reviewing the scope of investments and we are also conducting more careful follow up to our customers leading to the increase in the discretionary investments.
And as Susan is on.
Asked about earlier.
The.
The fact that we are taking this goal based approach.
Is now being.
Absorbed and understood by our partners and they are taking a holistic approach against the total assets of our customers.
And we can control, we have been able to control the amount of selling of assets following volatility in the market. So I believe it's a result of each of these efforts.
And that is leading to the buildup of the recurring revenue assets.
So.
We are not doing anything special which means I believe this is sustainable.
And your second point.
This provision is related to the issue, which took place in a long while ago.
And.
And this is very disappointing and we.
We would like apologize to our shareholders stakeholders, but some.
Okay.
Yeah.
As I explained earlier.
This was this took place before the global financial crisis.
And.
Since the financial crisis, there has been the tightening of regulations and.
The whole industry has.
In house, it's risk management.
Including Nomura.
And at the moment.
For the trading business. The question is how much how to provide liquidity to clients that is the main objective and we monitor what's going on in the market and are taking risks cautiously.
And in Q2.
As we have been explaining from the past macro trading faced a very tough environment.
And the revenue versus risk weighted assets was seven 1%.
Which I believe was a reasonably a good result.
And personally.
I believe our revenue versus risk score revenue versus resources I'm always monitoring these kpis and I will continue to do this going forward.
So we will steadily improve our.
We only had said to improve our profitability while controlling risks.
Yeah.
And today as we announced in the press release.
We will further enhance our risk management.
And this is in order for Nomura to grow even further and help contribute to an enriched society, we will sophisticate, an enhanced our risk management and we believe it is crucial for <unk> to fulfill its mission.
So.
We will move forward with a very strong resolution on this risk management. Thank you.
Thank you for answering in such detail one follow up question.
For retail.
I understood your initiatives.
But in terms of your peers.
I know, it's quite hard to calculate the share but is your market share rising or falling.
If you could comment on that please yes. This is tomorrow.
Yeah.
<unk> R.
There seems to be some growth in investment trusts.
And that itself is.
It's a very good thing for the Japanese securities industry or for Japan as a whole.
The young generation are getting very interested in investing.
Yeah.
And.
In terms of whether our share is rising or not frankly, we don't have the statistics, but.
The net inflow in investment trusts, which is continuing for Nomura.
If we look at the age group of the customers.
It is increasing in a wide range of generations, but in terms of net inflow.
People in their fifties and sixties account for roughly half so they form the volume zone.
And we worked on the channel formation two years ago and.
I believe we've talked about this several times in this analyst conference, but we set up the contact center.
We believe this is a remote contact center and Belize.
The generations people in their <unk> and <unk> and as long as people are starting to finally see the results of their savings or people who are about to retire. These people are being approached by the contact centers and this approach is working.
Working very well.
And.
The money of these customers is flowing in.
These are active people and.
Active generation.
And people always say numerous clients are too old but to actually.
We are seeing an increase or decline in the the age group of the active customers of tomorrow and.
So in terms of the share of Nomura.
I don't think it has fallen that much.
I believe it is it should be recovering or I hope it's recovering.
But sorry, I cannot give you a very clear answer.
But we do feel that the.
Things are moving positively at the moment in the market.
Understood. Thank you very much.
The next question comes from.
Ms <unk> from Mitsubishi <unk> Morgan Stanley.
Thank you.
<unk> I have one more question.
Regarding overseas fixed income.
Sure.
Absolute amount EMEA is down in a significant manner.
Looking at the heat map I cannot clearly see it.
Yeah.
So as usual.
By region.
I would like to know the percentage by region and the reason why EMEA declined greatly what is the reason for that then.
Is it specific to the second quarter and it will not continue into the third quarter or do we see the same factors affecting negatively EMEA in the third quarter as well.
Okay.
Once I can obtain the breakdown then we can tell that the issue is EMEA.
Thank you for your question. This is Deborah regarding the.
Fixed income's regional breakdown.
Revenue.
Americas has the biggest portion more than 40% and AEG has about 30% and EMEA has a bit more than 10% and the Japan remaining 10% or so.
So that's the rough split.
As you say EMEA.
Just difficulty for one thing.
There was the seasonality factor.
Every year.
In summer time.
EMEA.
Government bond issuance slowed down at this time of year.
And.
<unk> is the central part of our business.
And that's what we are good at noon.
Newly issued bonds training trading in.
<unk>.
The volume of trading was small in that sense.
The seasonal factor also there was macro factor.
It's not limited to Europe, but it's a global factor.
The end of monetary easing.
Seems to be on the horizon.
So market is no searching for the new level of interest rate in this situation market participants.
Trying to identify where the interest rates will end up.
That seems to be the current situation.
These days.
Concerned about the prolonged inflation has been expressed on the other hand, so investment into not many investors are investing into long dated bonds.
In this situation due to seasonality primary and secondary trading.
Got it and the client activities were slow.
Some.
A little bit of avenues for.
Fluctuating interest rates and looking at the yield curve there.
Haven't been able to identify consistency.
So.
Honestly speaking the current environment, we will not persist.
The issuance market to a certain extent, we'll come back to the.
Normalized level.
And.
Yeah.
The.
Yes.
Spirit.
Data is all the data to yield spread will come back to a normal level. So the summertime situation will not continue for a long time, but that's our assumption.
Did that answer your question <unk> speaking.
So looking back at the past four quarters. The current level is about 50% of what it was before still.
The last four quarters.
Therefore, we will not go back up to the level of the previous four quarters given the current situation.
<unk> speaking.
Last year the level of last year.
We enjoy to the tailwind of the market.
So we are not expecting the rebound to the level of last year, but second quarter, especially.
Especially macro rates business, which is the core business for us it face the court.
The macro business faced challenging situations. So we are expecting the rates business to recover from here.
Speaking, thank you very much.
Okay.
Thank you. This is <unk>. Thank you very much for participating today.
So we were held back by our past issues and we had to make this provisions.
And this was very disappointing for us.
However.
We are starting to see the results of our efforts that we have been working on in the past we are gradually seeing the fruits of our efforts.
And you can we can see this in the expansion of the recurring revenue as well as the unrealized gains of our clients.
Okay.
And this is a result of our client consulting and asset management business, which is very client focused.
And we feel the results of this shift in our business and in wholesale.
In the macro business, where we have strengthen.
The environment was extremely tough.
But even so even in this environment, we were able to book 25 billion yen of bottom line.
And I believe this is a result of our past cost reduction efforts as well as Green Tech, which we acquired last April.
The synergies with Green Tech.
Starting to help.
The overseas M&A, especially in the U S from the second half of last year.
And as I mentioned earlier.
We appointed as global co head of investment banking.
The founder of Greentech, Jeff.
And.
Yeah.
Going forward, we will focus on the advisory business in the U S.
And the strength lies in sustainability so.
We will make sure to grow these businesses to grow the next driver of our earnings.
And that will help stabilize nomura's revenues and it will diversify our business as well.
We are also working on the enhancement of our risk management as explained.
And this is.
In order for Nomura to move forward and take the next step this is a critical.
Issue that we need to work on and.
By focusing on the implementation of this enhancement, we will make sure to continue to provide services to our clients.
And we look forward to your continued support thank you very much.
Thank you for taking your time and that concludes today's conference call. You may now disconnect your lines.
[music].