Full Year 2022 Nomura Holdings Inc Earnings Call
Good day, everyone and welcome to today's Nomura Holdings.
Fourth quarter and full year operating results for fiscal year ended March 2022 conference call.
Please be reminded that today's conference call is being recorded at the request of the hosting company.
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During the presentation all the telephone lines are placed cool listen only mode.
The question and answer session will be held.
The presentation.
Please note that this telephone conference contains certain.
All forward looking statements and other projected results, which involve known and unknown risks delays on certain days and other factors note under the company's control, which may cause actual results Buffalo months achievement over the company to be material.
Different from the results the fall months, we'll also expectations implied by those projections.
Such factors include the economy and market conditions political events and in this does sentiment.
All the secondary market model on the volatility of interest rates currency exchange rates. Thank you and keep alization competitive conditions and times number on timing of transactions.
What is that.
We would like to begin the conference.
Mr Cooney Kitamura.
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 full year and fourth quarter of the fiscal year ended March 2022, using the document titled consolidated results of operations. Please turn to page two first let's look at the full year period bottom left net revenue was one trillion.
$363 9 billion yen down 3% year on year income before income taxes declined 2% to become $226 6 billion yen. The chart on the bottom right gives a breakdown of income before income taxes. The third line from the bottom shows segment other improved from last year to $15 8 billion yen, while the three segment total.
<unk> declined 17% to $205 2 billion yen.
This was mainly due to retail and investment management.
Retail investor sentiment weakened due to further waves of the pandemic shifts in central Bank monetary policy and heightened geopolitical risks.
This led to a slowdown in flow revenue such as sales of stocks and investment trusts.
Investment management reported a worsening in investment gain loss due to market factors.
That said both divisions, both growth and stable revenue.
Retail continues to evolve its business away from the traditional securities business to an asset consulting business.
And during the full year, we saw ongoing inflows into investment trusts and discretionary investments lifting recurring revenue. We also reported an increase in consulting related revenue from insurance and M&A investment management books inflows across all four quarters and assets under management reached a record high in December .
As a result business revenue increase driven by management fees.
Okay.
Wholesale reported stronger results compared to the year before in particular investment banking had a good year in the international advisory business delivering its highest revenues in the past six years.
Net income for the full year was 143 billion yen down 7% year on year.
<unk> was 40 523 yen and ROE was five 1%.
We announced at year end dividend of <unk> <unk> per share for shareholders of record as of the end of March. This takes our annual dividend to <unk> 22 yen per share.
In addition, today, we also resolved to setup a share buyback program in order to enhance capital efficiency and ensure a flexible capital policy as well as to our shares for equity compensation.
The program has an upper limit of 50 million shares or 30 billion yen and runs from May 2017 until the end of March next year.
Please turn to page three for an overview of our fourth quarter results.
As shown on the top right income before income taxes was $49 5 billion yen down 38% quarter on quarter. While net income was 31 billion yen or 49% decline from last quarter EPS was 989 yen and annualized ROE was four 3%.
The bottom right shows three segment income before income taxes of $33 5 billion yen, 58% lower than the previous quarter.
Okay.
This decline was mainly due to the drop in the stock market on rising interest rates in the U S and heightened geopolitical risks, which impacted retail client activity and the fair value of investor companies in investment management.
Segment other income before income taxes was $14 9 billion yen, which includes the $42 8 billion yen gain on the sale of our stake in our affiliate Nomura Research Institute announced recently.
In addition in relation to the provision we booked in the second quarter for transactions in the Americas from before the global financial crisis.
We booked additional expenses of 23 billion yen in the fourth quarter.
This is in relation to claims by Securities Trust beneficiaries and others to purchase loans related to certain visit residential mortgage backed loans issued by our U S subsidiary from 2005 to 2007.
And we have negotiated proactively to put this issue behind us by resolving the over 10 year dispute to direct our management resources to growth areas.
With the additional expenses booked this quarter.
We have mostly completed the accounting treatment of this issue and have drawn a line under these legacy transactions.
Bookings the additional expense means that the maximum loss, which is the maximum loss reasonably possible exceeding provisions.
Declines from 106 billion yen in the third quarter to around 60 billion yen, depending on the exchange rate.
Our year end dividend of <unk> 14 yen gives the dividend payout ratio of 46%.
Which is significantly higher than our dividend policy of 30%.
Given the RMB is accounting treatment is nearly completed and we have closed our legacy transactions.
We have made some adjustments to shareholder returns.
Please turn to page six for an overview of each business.
Retail reported fourth quarter net revenue of $70 5 billion yen down 19% quarter on quarter income before income taxes declined to 71% to $5 2 billion in the bear market from the beginning of the year led some investors to buy on the dip, but investor sentiment worsens significantly.
As the market continued to drop.
The market drop in February on heightened geopolitical risks was particularly challenging and sales of stocks and investment trusts came to a halt resulting in the lowest levels of recurring revenue assets and recurring revenue over the past year. Please turn to page seven.
The market also impacted our main kpis in the fourth quarter, but on a full year basis, we saw results in our areas of focus.
The table on the top right shows investment Trust net inflows of 260 billion yen and discretionary investment net inflows of around 360 billion yen, both of which improved from last year and contributed to growth in recurring revenue assets.
Full year recurring revenue was $106 3 billion yen after 23% year on year, while the recurring revenue cost coverage ratio increased to 240% underscoring the progress we are making to build a more stable earnings base.
And by taking a holistic approach to client asset portfolios for our corporate owners and high net worth individuals. We are increasing the number of proposals, we make and consulting related revenue from insurance M&A and advisory services increased by 24%.
Please turn to page eight for investment management.
Fourth quarter net revenue was $10 1 billion a sequential decline of 75% business revenue remained solid at $31 1 billion yen assets under management declined slightly due to market factors impacting management fees, but some performance led to an increase in.
In performance fees.
Meanwhile, investment gain loss was negative $21 1 billion yen due mainly to a loss of $18 8 billion yen related to American century investments and an unrealized loss of 4 billion yen on investing companies of Nomura capital partners.
Please turn to page nine the grapevine.
That's on the top left shows investment advisory and international businesses outflows of 190 billion yen from foreign bonds and use it firms.
However, David representing the investment Trust business shows a close of around 370 billion yen as investors, but more etfs during the market adjustment the graph on the top right shows AUN in the bank channel, which has grown to nearly 2.2 trillion yen at the end of March.
Representing an increase of 620 billion yen over the past year.
In the fourth quarter, we saw inflows into banished firms, regardless this is favorable to market volatility and ESG funds.
Inflows for the full year came in at 540 billion yen.
On the bottom right shows Citigroup, Inc.
Dave assets under management of 840 billion yen, Please turn to page 10 for wholesale.
As shown on the top left net revenue was $194 9 billion down 4% quarter on quarter and income before income taxes declined 9% to 37 billion yen.
On the bottom left gives a breakdown of net revenue by region. The revenues in the Americas and EMEA declined on a slowdown in spread related products, Japan reported stronger revenues in equities and investment banking, while EMEA posted revenues growth in macro products, such as rates and FX <unk> and <unk>.
Thank you.
Please turn to page 11 for an overview by business line.
Global markets net revenue declined 3% quarter on quarter to $158 2 billion yen diversification across regions and products helped us deliver solid results amid market turbulence.
Fixed income net revenue was $80 1 billion down 9% client flows slowed on credit spread widening and concerns over geopolitical risks, resulting in and challenging quarter for credit compared to the strong previous quarter.
Slowdown in securitized products revenues.
Products, such as rates and Forex emerging we're able to tap in good client flows and market volatility.
Generate stronger revenues and for heat map on the top right shows EMEA reported higher revenues, while AEG and the Americas revenues declined.
Equity net revenue grew 3% to $78 1 billion yen as you can see on the top rate Americas reported higher revenues in cash equities, but derivatives revenues slowed giving an overall slight decline <unk>.
Our reported stronger revenues quarter on quarter, Please turn to page 12 for investment banking.
Fourth quarter net revenue remained strong.
$36 7 billion, a 6% decline from last quarter.
The market slump led to an increase in postponed ECM.
S deals, but the advisory business reported revenues above the particularly strong previous quarter.
Right gives a breakdown of revenues for Japan and international.
Net revenue for the year ended March 22 was $146 6 billion.
Record level since 2017 when comparisons are possible.
International revenues have doubled over the past two years driven largely by the global advisory business shown on the right.
The Americas and EMEA are particularly strong and we supported multiple transactions across the business reorganization cross border deals and sustainability transactions driven by Nomura Greentech. Please.
Please turn to page 13 for an overview of expenses.
Quarter non interest expenses were $291 3 billion, an increase of 8% over the last quarter. This was mainly due to other expenses shown at the bottom. This includes additional expenses of 23 billion yen related to the our MBS issue I mentioned earlier.
Station and benefits declined 10% to $125 6 billion yen due to the bonus adjustments for the year end and to reflect full year performance. Please turn to page 14 for an update on our financial position.
As shown in the table on the bottom left.
Tier one capital was $3 one trillion up 60 billion yen from the end of December due mainly to Forex translation adjustments because of the yen depreciation.
<unk> were $15 nine trillion yen as market risk increase on higher market volatility and credit spread widening and credit risks increased by $1. One trillion yen from the end of December .
As a result.
One capital ratio at the end of March was 19, 5% and set one capital ratio was 17, 1% that concludes the overview of our fourth quarter results.
To sum up.
The fourth quarter was dominated by market turbulence from U S interest rate hikes, and heightened geopolitical risks and our results were impacted by a slowdown in client activity in unrealized losses.
However, this quarter also marks an important turning point as I said at the start we made significant progress in dealing with legacy issues from over 10 years ago, and we are now well placed to shift management resources to growth areas.
Efforts to grow stable revenues and diversify our revenues meant we were able to deliver solid results in the fourth quarter, despite mortgage headwinds and additional costs related to winding up legacy issues.
Market uncertainty has remained into April and retail has got off to a slow start, but we expect flu revenues to rebound somewhat once the market recovers.
From this year in order to deliver services that go beyond the expectations of our clients. We have good executive officers in charge of the corporate owner high net worth and mass affluent segments to accelerate the evolution of business designed for each segment.
Further retail and additional company work together to speed up our digital client services.
Wholesale has reported a strong start this year in fixed income, particularly credit and Forex imaging.
<unk> and investment banking.
<unk> had a slow start we expect uncertainties, such as geopolitical risks and interest rate policy to remain for the near future and we will continue to manage risks stringently. Additionally, we will further diversify our revenue sources by expanding capital light businesses, we will provide an update of our strategy.
At our Investor day on May 17th Thank you.
Okay.
We have a question and answer session now.
If you have a question please press <unk> one.
If we want to cancel a question please press zero too.
After the announcement.
To your question with your name and company.
If you have a question please press <unk> one.
One.
The first question is from SNB <unk> Nikko Securities Mr. Murky.
Roxanne. Please go ahead.
Hello. This is murky from SMB Nikko Securities two questions. Please first.
Regarding the Russia, Ukraine, Ukraine situation, any direct or indirect impact from that.
And in Q4, the risk assets increased and the set one ratio.
Fell by about one percentage point.
The provisions for bad debt NPL.
<unk> has increased slightly.
So.
What impact has the situation had on risk assets and your P&L. Please.
That's my first question second question.
The share buyback that you announced.
And this time, it's one 5% of the number of shares and the period is slightly above over 10 months, so slightly long period.
Previously.
When you announced it in October it was two 5% of shares and the period was about four to five months.
So at this time.
Why did you set a long period for the share buyback program. Thank you.
Thank you Mark you sign this is <unk> your first question.
The Russia, Ukraine situation and the impact of that.
And I'd like to stress first that.
We.
Do not have offices in Russia and Ukraine.
And since a few years ago.
Western Europe Ncis businesses have been we have been shrinking those businesses so our direct exposure.
Direct impact is very limited.
There are there is some impact from the settlements of rubles, and we have to what's out for that.
But.
The impact is not that significant.
In terms of the indirect impact.
The servicing of these geopolitical risks does have a big impact on the markets.
Yes.
In the equities market suffered a sharp decline horizon volatility.
So yes, we have been indirectly impacted in that way.
And then in terms of RW <unk>.
There has been a slight increase.
First of all this was due to the rise in volatility and also the widening of credit spreads.
And the market risks increased.
And.
In terms of counterparty risk that also rose so the credit risk.
The increase as well Meanwhile, with the weakening of the yen.
There was a sharp weakening towards March end.
So our risk weighted assets.
It is dollar denominated so there was the impact of the weak yen as well.
And you mentioned about the provisions for bad debt or Npls and how it's increasing.
<unk>.
We don't think its increasing by that much.
And this is not related to the Russia, Ukraine situation at all.
So it can be assured of that.
And your second question.
How about the share buybacks and why is long.
Well, we have set a long period just to be on the safe side.
Until the end of the current fiscal periods.
And.
I think.
When we start buying the shares.
And with this current share price.
I think the program will be completed earlier than that.
And as you pointed out what Roxanne.
The previous program that we did share buybacks.
It was completed in a very short time. So I think the same will happen. This time and it will not take until March of next year.
And in terms of this fiscal periods or in the.
Yes in the current fiscal period ending March next year.
We are not limiting the possibility of doing further buybacks and as we have been saying in the past.
We will look at the situation of our profit share price regulations et cetera, and conduct share buybacks and flexible basis, depending on the situation. Thank you.
Thank you your regarding the first point this is mackie again.
The increase in risk assets.
And the future direction.
Is it going to come under control or is it going to decline over a short period of time in a short period of time or do you expect this current level to continue for a while.
This is <unk>.
The $15 nine trillion yen at the moment I believe.
We will look at the portfolio and we are controlling this level. So.
The it has not reached the limit for the risk weighted assets at all and.
This is kind of like a cruising speed in terms of the level of the risk weighted assets.
There is some impact from the currency. So it may look somewhat high but we.
We do not see the current level of <unk> as being high.
And.
With the weekend.
I think this level is going to continue for the time being.
We do not have to suddenly lower it from the current level.
Understood. Thank you very much.
With an addition of Daiwa Securities. Please go ahead.
Thank you. This is <unk> of Daiwa Securities I have two questions first of all on capital policy.
30 billion yen of buyback or the size of whats the backdrop and our issue.
9900 shares worth.
500 billion yen.
How do you.
And do you think that.
The same levels should be said year after year.
<unk> expense ratio, 86% U S customers.
If your revenues will go down what would be the actual fixed cost will it go down or do you think investment is needed. So you will be continuing to spin cost in the area of investment.
My two questions. Thank.
Thank you for your questions.
Sure.
In terms of a.
30 billion of share buyback had did we decide on that amount that was your first question.
We took into various factors comprehensively.
And set the level.
Also with another song.
At the previous telephone call you asked a similar question 50 billion was the previous level reset.
<unk>.
40 billion.
We finished the program at 40 billion less and the stock price nowhere so.
At this time, we decided on another buyback and or if you.
Okay.
It's not that we have to buy back in one cycle.
We needed to provide enough funding. So we made the decision this time are.
Our issue depending on the performance.
We have introduced paper for performance.
<unk> on the performance bonus.
We will be determined and.
The stock price will be determined so thousands of.
Sure. So we cannot automatically give you any number because of that situation part of the bonus.
It will be deferred and if you would be granted and the amount would be the equivalent number of shares.
So we can't predict a specific number that would be rather challenging.
So that is.
In response to your first question.
And on your second question.
Wholesale costs.
And if revenue goes down is the cost for wholesale going to come down.
If we look at the recent trend in expense ratio, 81% is the level for wholesale.
This is more or less the level that we had been planning and assuming.
As you know.
At the moment.
Growth areas that are capital light advisory is a priority area, where we are actively investing.
So.
There is cost before revenues begin to be generated.
So that kind of a lagging effect cannot be denied and interest management overseas.
In Asia. This is a result of slight business, but our Ann.
It could be recruited and corporate.
Staff has to be recruited as well but.
Revenue is going up but.
Costs is booked before revenues are generated and.
Sophistication of risk management.
This is an area, where we are in getting much efforts. So it may appear that we are booking expenses before revenues are generated but these investments will lead to future profit generation. So in terms of expense ratio.
There will be a decline further in the months and years ahead.
Thank you very much and thank you for the detailed response.
The next question is from Mitsubishi <unk> Morgan Stanley Securities Mr. <unk>.
Yes. Thank you this is seasonal.
First of all.
Fixed income.
If we look at it Q on Q basis.
It was quite stable in each geography EMEA recovered.
Because sleep slight decline.
Hey.
Credit was very good in Q3. So this time, though there was a decline but.
So going forward.
The Americas.
Interest rates are going up.
So January February March agency mortgage issuance.
Is falling.
Quite clearly and.
So for the current fiscal year.
Yeah.
We will face a tougher situation compared to the previous year and.
So you have to cover that with other businesses.
So could you share with us your outlook on that please.
Four.
EMEA slight improvement Q on Q.
But.
Do you think this is sustainable.
Or.
In Q4 was the increase in flow due to various factors.
So could you share with us your views on each region.
And my next question is.
The buyback.
And your previous answer I pretty much covered my question, but.
You said that you may and earlier than expected, but or you might continue it until March and previously you said 50 billion, but you will only be able to.
Close to 40 billion and that's why this time are you, saying 30 billion yen.
Earlier, so listening to you talk about the share buybacks.
It seems like.
You are going to make some revisions in the current fiscal year or.
Are you just keeping the period up to March and just because you are not able to complete early so.
This fiscal year.
There are some uncertainties in the market and is that why you are.
Is this the reason for your policy.
So could you also share your views on that please.
Thank you this is summer Oh, sorry, and one more.
There is no again my third question.
Ask you after the first two okay. This is tomorrow.
For fixed income and the outlook.
What was your first question.
And by region.
Initially.
The businesses that were strong where the macro businesses like rates FX.
But throughout last year.
It was more of a securitized products and credit.
So at least at a spread products, which did well.
And in the Americas.
Yes agency mortgage.
In the rising interest rates things out a bit tough.
But.
So the rates business, which is our main business.
Doing well thanks to the hedging needs for options I think it will do well and there will also be portfolio rebalancing needs. So the client activity pick up in client activity will drive the business and.
The rates business is our main business and we expect a recovery there going forward and for EMEA, our fixed income.
It was strong in this quarter because.
There is the rates business and also FX or the macro type businesses.
And so.
Our views are.
Somewhat similar between the U S and Europe .
Yes.
And.
For Asia AJ.
In Q4.
FX emerging was quite strong. These are also a macro type businesses.
Our fixed income business in Asia is.
Okay.
<unk> an emerging these other drivers and also the credit business.
And in Q4, FX and emerging did well credits was a bit slow.
Right.
Actually more recently.
The Asia credit business, which we are good at.
Is benefiting from the Chinese monetary easing.
And recovery is picking up.
So we are not that pessimistic about this in fact, we are more optimistic about Asia.
Yeah.
So that's the outlook for our fixed income business. Your second question.
How about the buyback.
And.
Well, thank you for trying to read between the lines and trying to get.
Read the tone of my comments, but actually there isn't that much deep meaning to it than maybe this $30 billion will be completed very quickly and if thats. The case, then we will consider the next round of buybacks.
So those are my answers to your first and second questions.
Yes. This is Jason.
Thank you.
The third question is.
About the provisions.
For litigation and the remaining maximum lawsuit 60 billion yen.
And.
For this time.
There was the increase in the maximum probable loss and there were two provisions that you made.
Yeah.
So that led to a lot of concern in the market.
But as of this moment.
The biggest concern for Nomura is behind you is that how we should look at this and the maximum estimates of loss.
There was a big rise in then it's fallen recently.
Yeah.
Our.
Are there any other issues.
Similar.
Sure.
Yes. This is tomorrow.
This is a litigation we cannot go into too much detail.
But.
There was a sudden servicing of the concern.
And.
That was in this fiscal year so.
That's why in Q2.
We made the provision.
And we also.
Increased the maximum potential loss from this issue.
And as you pointed out.
Yeah.
We have been we havent, causing a lot of concern both within and externally.
And the management is aware of that and so.
We wanted to act proactively.
And get it resolved within the fiscal year.
And as a result.
Q2, Q4, we made a total of 662 63 billion yen of provisions.
But this issue is pretty much behind us and.
And we have made most.
Most of the financial treatments that we have to do.
<unk>.
There are no major concerns that are outstanding.
And the remaining maximum loss of about 60 billion yen it has come down to 60.
This is quite a long standing.
And.
Uh huh.
Oh.
So we do not expect this sharp increase or rise and the concerns about this.
We are not expecting at least at this moment.
And for the concerns.
We have already made the necessary provisions so this.
We do not expect this maximum loss to actually lead to a sharp rise in the losses if that answers your question.
Yeah. Thank you very much.
Yeah.
From Jpmorgan Securities Otsuka San.
Please go ahead destroys yours.
This is.
JP Morgan and Securities I Hope you can hear me.
Yes. Thank you I can hear you can we go one by one one question. It's two one answer and first of all on IV chemo.
You refer to page 12, and on the right hand side advisory revenues increasing.
That was mentioned in your presentation.
For example.
Q4, 36 7 billion yen.
Revenue based upon that revenue.
Business.
D C and D C N.
And then a advisory if you split up that business what would be the share.
I understand that total revenue has doubled.
<unk>.
It would have been easier for us to imagine the degree of growth. If you had given us a breakdown. So that's my first question.
Thank you for that first question.
Yeah.
What would happen if we broke down the I b.
The revenue ECM DCM, M&A, yes, or just the breakdown between ECM and DCM.
You want the proportion or the share composition of earnings is that correct, yes accrued number it would do.
D C N.
And others.
Thank you for that question.
Q4 revenue half of Q4 revenue is advisory in day in and day.
And.
What about E C M.
This is a volatile area, depending on the existence of deals.
Around 15% I would guess would be the share and DCM around 10% and there are other areas like finance.
So in terms of share there.
Those proportions would probably be.
The breakdown.
Thank you then advisory or somewhat others would be included but 36 seven.
Half of that is 18 billion, so 18 billion from advisory.
So during the past year it grew from nine to 18 billion.
Is that the right way rich. Thank you for that question, Yes, that's right.
Then I proceed Sir my second question, if we carve out the investment banking revenue.
It has declined quarter on quarter, but.
Sure.
In Q4 in January March quarter.
There has been a drop.
And in terms of the breakdown ECM DCM business shrank, but.
Was that offset by strength in advisory is that the right image.
Yes, Youre very correct.
That was not.
Unique to our.
Our company, but if we look at the fee pool, our wallet for the industry as a whole it has slightly dropped but it's that drop isn't as steep and its ECM that experienced the biggest drop and in the market.
It certainly depends on the research Institute the 60%.
There has been a decline of the total amount of fee pool and that is reflected in our reduction as well.
Financing business long business.
It has also experienced a significant drop D C and hasn't really declined.
<unk>.
Significantly.
So as the <unk>.
Industry wide wallet shrinks.
We have a strong pipeline.
So we will be able to monetize.
And the fees from that pipeline. So in the Q4, we were able to report.
Solid numbers.
Thank you Dan.
Advisory briefly in comparison to your peers.
Haven't been defeated so in terms of share no. Louis share has gone up is that the right interpretation I would guess.
I have not really looked.
Our share in the detail, but with the whole wallet shrinking.
Have a solid advisory business so sure.
Should be increasing.
For both the Japanese business and international business is that true for both.
Suri.
Aye.
Not aware of that breakdown between Japan and international.
At the global level Advisory performance was quite robust at Nomura. Thank.
Thank you very much your points are well taken thank you.
The next question.
Bank of America Securities. Mr. Sasaki. Please go ahead.
Yes. This is <unk> from Bank of America Securities two questions. Please.
First about in Q4.
You booked the Nomura Research Institute.
Stock capital gain.
And.
This may be hard to link but.
For example, you have.
Litigation on one on one side and you have the cost. So what's this intended to cover those costs or is it completely separate how should we think about your decision to book this capital gain of NRI.
That's my first question.
Thank you. This is tomorrow, we do not connect to the two or link the two.
And.
So from the standpoint of making good use of the assets, we own that which led to the disposal.
Okay. This is Keith so.
NRI there was not much rationale to own shares and I think there are some other assets like that.
But.
Why did you choose NRI.
Instead of the others.
Tomorrow.
When we think about our balance sheet most of it is trading assets.
And.
Within trading assets.
We want to make good use of assets and we sell the.
Stocks, which do have liquidity, that's the first that comes to mind and Thats why we chose to sell in our eyes stock.
And.
Assets other than trading assets.
For example, deferred tax assets is something you cannot really sell land hard to sell.
So the subject or potential of the classes that we can sell are quite limited actually.
This is the psyche.
So the properties that you own.
Which you are not making for yourself and also the strategic holdings for which the relationships are.
Not that strong at the moment.
<unk>.
NRI.
Our market cap has doubled and so I still I'm not fully sure why you chose NRI compared to the other assets.
Are you going to continue selling the NRI stocks.
Okay.
This is tomorrow.
Yeah.
Well NRI is an important strategic partner to us no change to that at all and even if we sell some of our position.
I believe we still own 24, 6%.
Yes.
And NRI remains an important partner, we have no intention to break that at all and.
You mentioned that real estate.
We have been.
Selling the unnecessary real estate and we are pretty much done with that process and for strategic holdings.
We have been selling as much as possible.
And so I'm sure you're well aware of that.
Our strategic holdings.
Against tier one ratio.
Compared to other financial institutions, it's much it's much smaller for Nomura.
And most of that is.
The non listed or the private companies, which makes it hard to sell frankly, and that's one of the problems we're facing.
You.
Understood.
And my second question is you didn't explained this in the presentation, but in April .
You are starting the level fee.
And my question is.
Hi.
I understand the strategic rationale of I will ask you about it in the large meeting about level fee, but from the CFO perspective, what are the financial impacts of the level of fees introducing level fees.
And how much is the level fee progressing and what are the financial impacts.
CFO please.
This is <unk>. Thank you.
Yes from April we have started the full fledged introduction of level fees.
And the contract balance has already exceeded 100 billion yen and we are steadily building up the business.
And I guess, the 120 trillion yen or so of assets.
The assets, which are subject to a level fee is only a 100 billion yen. So frankly, there is no impact to our P&L yet.
And this level fee.
This type of asset balance base fee, we plan to grow to about 10 trillion yen and.
If that happens in the sales commissions will decline in the trading commissions will decline, but the level fee itself.
It is important for us to put ourselves on the same boat as our clients and improve customer satisfaction and get them to put new money to Nomura.
And this is something which we should be doing this kind of approach such as a level fee and.
Of course, we can only charge a fixed fee.
And it may look like it has a negative impact on our earnings or revenue, but actually.
The benefits of customers.
Entrusting us with more money will be enough to offset this negative impact.
I see understood.
And actually for this fiscal year throughout the year.
How much balance do you plan to go up to for the level three assets.
And.
I understand that this is a very important strategic change for you.
But a year from now.
I don't know how much you can growth but.
Do you have any views on that.
This is camera well.
We don't have a target.
The target for this fiscal year, we don't disclose it.
And there are no numbers that which we can't disclose and as I said earlier, we will spend several years growing to more than 10 Chilean yen.
Okay.
And.
Maybe on the Investor day on May 17th Siggi, Amazon might make some kind of a comment but at the moment.
We all we can say is we will grow it to a significant size in a few years. So that's our intention.
Understood. Thank you very much.
Nick's Jefferies Securities <unk> San please.
Please go ahead.
Thank you for this opportunity.
I have two questions.
And it's similar to what I know this sounds question.
I have a question on retail business in Japan and expenses.
As you mentioned.
There was decline in flow due to mortgage situation and on quarter on quarter basis.
The bottom line was slow and when top line goes down to secure pre tax income.
<unk> seems to be high for you to secure pre tax income.
So was there any investment that you had to make in this particular quarter in advance that had pushed up expenses.
If the market remains.
It is.
Do you think that the absolute level of cost in your retail business can be cut further in order for you to generate profits and retail policy, including level fee.
Require investment in advance.
To the extent possible can you explain to us points. That's my first question second question. This overlap.
What you have already explained cheap Yang.
Interest rates rising and other countries is that impacting your deal pipeline and if so how specifically Japanese businesses.
Are experiencing.
Great rise overseas and a cheaper yen and is that negatively impacting your pipeline.
Okay.
Okay.
There could be bumps.
Decline as well as increased needs and demand. So on net basis is your pipeline not being influence in totality.
My two questions. Thank you very much for those questions. Your first question was on retail cost.
By segment, we are defining approaches segment by segment and we are trying to.
Strengthen.
Corporate owner.
It with mass affluent segments.
<unk>.
In each of the segments, we are trying to define the most effective approach and trying to invest in necessary resources in one segment that may require human resources in another segment.
Intellectual property or there's still resources may be required.
No.
As we implement this segment by segment approach.
We will look at the segment by segment profitability, we haven't yet reached the stage of being able to share segment.
By segment profitability, but we are.
Doing that internally.
And we will follow the trend of expense rate against the profitability by segment are there unnecessary costs being expensed.
We would like to dive more.
More deeply.
This too is a key and this is an area where we need to promote more efforts when was it was at Investor day last year.
<unk> hundred billion or 10 billion yen per year of investment will be done, we announced and part of that.
Okay.
Is reflected in the expenses for this fiscal year.
Okay.
This is an investment in order to increase the number of contact points with our clients at any rate, we will do cost control Richard Lee.
And identify the truly necessary costs.
And from a fresh perspective, so stringent cost control will be.
Conducted.
Yang Liu.
And ink and rates rising in other countries that was your second question, how will that impact our business.
In hindsight.
Was it around 2015, a few years back it was 120 yen to the dollar yen weakened to that level and.
Mr Brown.
I think we are repeating the same kind of debate we had back then.
As you know Forex.
Would determine the timing of investment and impact the supply chain strategy as well as return on investment So of course, a fluctuation of currency. It is something that we monitor it very closely.
<unk> businesses are also watching very carefully the exchange rate, but on the other hand, when we think about the Japanese market.
Yes.
With limited growth opportunities there are businesses that are seeking growth opportunities overseas and that kind of attitude remains unchanged. So yes. The recent weakening of the yen has had impact, but if we take a mid to long term perspective.
Seeking their market overseas is a major direction that would be sustained and we do not expect any major change from that kind of strategy does not as you said the biggest.
Challenge in the business World is ESG and sustainability and Nomura does have goals, but sustainable finance is an area, where we will continue to support.
Yeah.
There will be new opportunities.
And of course, there could be a tentative dip in business opportunities, but this is an area, where we expect mid to long term growth.
Thank you very much for your response.
Yeah.
The next question is from Mr. Miura from Citigroup Securities.
<unk> from Citigroup. Please go ahead.
Apologies were checking the connection with the questioner I Miss in your ASO. Please wait a moment.
Okay. Mr. Miura from Citigroup Securities. Please go ahead.
Hello. This is <unk> from Citigroup can you hear me Okay, Yes, we can.
Oh apologies for that.
Just briefly your two questions.
In EMEA.
And retail revenues for.
For EMEA.
The losses seem to be continuing.
So could you share your view about the positioning of EMEA and what Youre going to do about it second retail revenues.
In the text you said that you expect an autonomous recovery, but.
To what extent do you think is the fundamental strength of your retail business.
The segment profit 5 billion it seems a bit week so.
Could you share your views on that as well please.
Yes to your first point.
Both EMEA and the revenues.
And with the normalization of the market last us EMEA, especially fixed income faced a very tough situation.
And this year.
I have asked answered several analyst questions, but we.
We expect this to normalize going forwards and macro products and other businesses will recover.
And Meanwhile.
There are some regulations on the compensation in Europe and.
We positioned this as the hub of our international business. So the costs in EMEA tends to stay high and we do acknowledge that so.
This drop in revenues if it does drop.
We have to there are some limitations to the cost flexibility.
And we need to implement the right measures.
And for aside from fixed income.
We've been talking about the advisory business.
And.
In March 'twenty, two EMEA advisory you did very well.
And in terms of new business, there is the infrastructure finance.
We're also working on that and.
Greentech and we will apply leverage to that.
And it's still mainly U S but.
There are the capabilities with screen Tech has and we will apply that to EMEA and E J.
And for sustainability, we will strengthen our sustainability related businesses in Europe as well.
And by diversifying our sources of revenue, we will improve the profitability of the EMEA region.
Your second question about retail.
Yes, as you point out.
P&L bottom line was a bit low and.
This was due to the unclear market outlook and the flow of business.
<unk> was a bit weak.
And that has impacted our earnings as well.
And.
In terms of our initiatives.
This is now penetrating to the working level and.
It is taking.
Some of the partners are somewhat hesitant.
Proposing the products that meets their needs.
The market environment and.
We will monitor the market environment and the portfolios of our customers and make flexible proposals and that is very client centric. So we will thoroughly send that message out within Nomura.
And in terms of this autonomous recovery in our business, but on top of that we also.
There are all these slogans like consulting advisory, which may sound like a.
We are not going to focus that much on the products proposals, but.
It is important to provide the right products on a timely in a timely manner and that is in the interest of the clients.
And we.
Not only just helping our clients resolve the issues, but we hope we will also help our clients find some issues, which they even they themselves had unrealized that's the importance of Nomura and.
We will make proposals to solve these issues.
Clients are themselves have not realized I think thats the.
Fundamental role of retail and.
We are the needs of our clients, including these latent needs are becoming very diverse. So we are taking this domain based approach and we are appointing directors in charge of each of these domains business categories, and we are coming up with planning and strategies business designed for each day.
With speed.
So in that sense.
I don't know if im answering your question, but.
Retail will rebound its business going forward.
Thank you.
Understood. Thank you very much.
It's time to finish and we'd like to conclude question answer session.
If you have more questions. Please ask our Nomura holdings.
The bottom Inc.
Indian we'd like to make closing addressed by Nomura Holdings.
Yes. Thank you very much everyone for participating and asking all of your questions.
March 'twenty two there were quite a lot of one off items, which went up and down making the results quite hard to understand perhaps.
But the initiatives that we have been working on are starting to bear fruit to a certain extent.
And I think the direction that we're heading is the right one.
And the issue is maybe the perhaps the speed at which we are progressing so we will make sure we will work on accelerating the initiatives, even further and so in that sense.
The legal issue.
<unk> took place more than a decade ago, we have been coping with it proactively and we have been able to put the negative legacy pretty much behind us. This means that this will free up our management resources, not just financial but also talent resources to more positive direction going forward.
And I think this is a very important turning point for Nomura.
Yeah.
And the number of group will continue its group wide efforts to move forward. So we look forward to your continued support and coverage. Thank you very much.
Thank you for taking your time.
That concludes today's conference call.
You may now disconnect your lines.
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