Q1 2023 Nomura Holdings Inc Earnings Call
Good day, everyone and they're working.
Nomura Holdings first quarter operating results for fiscal year, ending March Tucson jumped 23 conference call.
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Please note that this telephone conference contains forward.
Forward looking statements and other projected results, which involve known and unknown risks delays uncertainties and other factors not under the company's control, which may cause actual results performance or achievement over the company to be materially.
Different from the results by four months or Asa expectations implied by those projections.
Such factors include economy, and market conditions political events and investor sentiments, the gravity of secondary market level and volatility of interest rates currency exchange rate security valuations competitive conditions.
On slide number on 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 <unk> CFO of Nomura Holdings I will now give you an overview of our financial results for the first quarter of the fiscal year ending March 2023, using the document titled consolidated results of operations. Please turn to page two.
<unk> quarter as U S interest rate hikes, and fears of a recession dragged on the market negatively impacting market activity and mark to market valuations all of our Securities Holdings.
As you can see on the top right income before income taxes slumped, 76% to $11 7 billion yen and net income dropped to 95% to $1 7 billion yen earnings per share was <unk> 5 billion and annualized ROE was 0.2%.
Three segment income before income taxes shown on the bottom right slowed 45% to $18 5 billion yen.
Market headwinds led to a widening of negative investment revenue in investment management compared to last quarter and a slowdown in wholesale due to weaker transaction volumes and the postponement of deals in equities and investment banking.
Despite this revenues in our three core businesses remained relatively resilient.
Retail gain traction and its shift to expanding client assets over the medium to long term reporting net inflows into recurring revenue assets, particularly discretionary investments level fees legal fee assets and loans recurring revenue in stop quarter on quarter, Despite the market headwinds.
Investment management had another solid quarter and its funds management business. The investment trust business booked ongoing inflows through a diverse range of channels and alternative assets under management part of our push into private markets top to one trillion yen.
Wholesale fixed income had a good quarter with macro products reporting significantly higher revenues as we monetize the spike in interest rates and FX volatility and an uptick in client activity.
Investment banking reported continued high levels of revenue and advisory businesses, although down from the particularly strong recent two quarters.
Outside of our three segments, we booked a loss before income taxes of $6 7 billion yen as I said the impact of fair valuations led to a worsening of losses on investment securities and losses related to economic hedging transactions.
Please turn to page five for an overview of our results in each business.
Retail net revenue was $71 4 billion up 1% quarter on quarter, while income before income taxes declined 5% to $4 9 billion yen.
From this quarter, we have given a breakdown of revenues at the bottom left.
<unk> revenues from transactions remained sluggish as $39 1 billion yen as clients continue to sit on the sidelines given the current market uncertainty.
Meanwhile, recurring revenue, which is based on fees from client assets remained resilient amid market headwinds.
Sure.
Please turn to page six for total sales by product.
This quarter, we changed the scope of how we calculate total sales.
Lee, we only content sales in the retail channel, which serves corporates and their owners as well as individual clients via our nationwide branch office network from this quarter onwards, we are including the Japan wealth management group net and call and intermediary. This should give you a more complete and consistent view of total sales across retail.
It'll sales this quarter declined 4% quarter on quarter to $4 seven trillion yen.
Sales of stocks shown here by the Red Bar graph declined 15% as primary offerings came almost to a complete stop and Japan secondary stock sales were slow in April and May.
Products other than stocks increased compared to last quarter.
Investment Trust sales grew 24% with the top selling funds being global and U S stocks and Japan's first publicly offered investment trust that invests in U S. Unlisted REIT, which is a part of our push into private markets.
Please turn to page seven which gives you an update of our new Kpis set in May this year.
As shown on the top left net inflows into recurring revenue assets was $132 8 billion yen. This represents a strong rebound from last quarter with funds flowing into discretionary investments level fee assets, which were fully launched in April and loans as.
As a result recurring revenue remained solid as you can see here on the top right.
For services for salaried employees, an area, we are stepping up our efforts as part of our approach to the next generation of investors. We saw an increase in aesop contracts with the total surpassing $3 4 million at the end of June . Please turn to page eight for an overview of investment management net revenue declined to 20.
5% to seven 6 billion yen, while loss before income taxes was $11 7 billion yen.
The revenue breakdown or the bottom left shows investment revenue of negative $23 1 billion yen, which had a substantial impact on the divisions performance.
Was mainly due to a loss related to American century investments of $18 5 billion yen and an unrealized loss of $4 7 billion yen on Nomura capital partners portfolio companies.
However.
Business revenue, which represents stable earnings was $30 7 billion in management fees remained solid despite slowing slightly from last quarter, which saw a concentration of calculations for success fees.
Please turn to page nine.
<unk> that's under management at the end of June was 65, six trillion yen down $2 three trillion in getting from the end of March primarily due to mark to talk to us in terms of flow of funds investment advisory business reported net outflows of 930 billion yen, but the investment trust business booked net inflows of 480 <unk>.
So again only inflows into Etfs and defined contribution funds.
In our focus areas private market alternative assets under management grew to one point to one trillion yen.
Please turn to page 10 for wholesale.
Net revenue increased 2% to 119 9 billion yen.
Last quarter included 15.
5 billion yen from the reversal of losses arising from transactions with a U S client revenues grew quarter on quarter. Thanks to strong performance in fixed income and do it as the yen depreciation.
<unk> expenses also increased due to yen depreciation and income before income taxes declined to 32% to $25 three.
<unk> video again, please turn to page 11 for an overview of results by business slowing global markets net revenue grew 11% to 175, 3% going in fixed income was particularly strong with revenues, increasing 41% to $112 6 billion yen from this quarter.
We have included a graph showing revenue by main products this quarter in macro products, such as rates and FX cm lodestone and spread product revenues increase that's created more than offset a slowdown in securitized products.
Equities revenues decreased 20% to $62 6 billion yen Americas' equity derivatives, one of our core businesses reported stronger revenues, but Japan that AEG revenues slowed on lower trading volumes and the muted client activity. Please turn to page 12 for investment banking.
Net revenue was $23 7 billion yen down 30% quarter on quarter finance related revenues from businesses, such as ECM and sluggish.
Sluggish global transactions slowed advisory revenues also slowed compared to the particularly so in the past two quarters, but remained relatively resilient with revenues of over 10 billion yen for the seventh consecutive quarter.
Advisory revenues remained around the same level as last quarter globally, we supported multiple international cross border and a sustainability transactions.
Please turn to page 13 for an overview of non interest expenses for them verticals declined 1% to 287 3 billion yen, while overall cost increased due to yen depreciation and other expenses declined significantly.
<unk> included additional cost of 23, BDO again related to the RMB.
Please turn to page 14 for an update of our financial position at the table on the bottom left shows steel on the capital of $3. Two trillion an increase of over 90 million again compared to the end of much. This increase this increase is mainly due to an increase in FX translation adjustments due to yen depreciation.
Risk weighted assets increased by one trading again from the end of March 2000, 16.8 treating in the waterfall graph on the bottom right shows bucket of risk increased by 0.9 trillion yen due to higher market volatility and credit spread widening.
<unk> also increased by about 70 billion yen.
The yen depreciation is a factor dragging up the risk weighted assets.
<unk> ratio at the end of June was 18 pulling to 9% and the common equity tier one ratio was 16, 7% both down compared to the end of March.
That concludes my overview of our first quarter results.
To sum up this quarter they'll look at any rate hikes to portfolio markdowns and muted client activity and some businesses, but as I said earlier underlying revenues from our three core businesses remained resilient and we saw results from the strategies, we are taking in each business.
This market uncertainty has continued into July and royalty revenue for those revenues have not yet truly recovered yet yen depreciation has prompted investors to re look at their portfolios for instance, investors with foreign bonds in their portfolios are increasing.
July sales of Toyota Motor credit corporations flooring bonds boats at a monthly record.
Oh asset planning consulting and goal based approach is gaining traction and we are seeing ongoing the net inflows into recurring revenue assets in wholesale equities and investment banking remains slow, but fixed income has been strong as we monetize opportunities in rates in Japan, and EMEA and FX.
AEG.
We expect market uncertainty around inflation and interest rates to continue for the time being.
As such we will continue to focus closely on managing risks, while supplying liquidity and providing our clients with the right solutions.
Yes.
Thank you very much for your continued support.
If we have a question please press general one.
We have a question and answer session now.
If you have a question please press <unk> one.
If you want to cancel a question please press zero too.
After the announcement.
Your question with your name and company.
If you have a question please press general one.
Yes.
The first question is from <unk> Nikko Securities <unk> San.
Roxanne. Please go ahead.
Yes.
Okay.
Thank you. This is murky from SMB cynical two questions. Please first.
Regarding the U S.
Your earnings in the U S.
On page 21.
Thanks.
So the loss of $21 6 billion yen in the Americas.
Which ACI is.
It makes up the majority of the remaining remainder is about 3 billion yen and in your presentation and wholesale you said.
Core earnings in the Americas was strong and it wasn't weak, but please explain why your bottom line is weak.
And my second question is <unk>.
Including this loss evaluation loss, but if you exclude these noncash valuation losses, what is the underlying business trend.
You seem to be implying that it is strong and robust but based on that.
Yes.
What are your thoughts about your dividends.
And you are making progress and counsel.
In acquiring <unk>.
Goldman shares and the share buyback, but.
How do you view your profit level in Q1 should we look at the net income or should we exclude the valuation losses in these one off items.
Thank you. This is camera. Thank you Roxanne regarding your first question about the earnings in the Americas.
And as you pointed out.
Okay.
Last year or in the previous quarter.
There was the litigation expenses related to legacy assets legacy transactions, which declined but in Q1 of this year.
We have booked a certain amount.
<unk> this is pushing down the bottom line in the Americas.
And for CVA and DVA. These are very technical issues, but.
There was impact from that as well.
<unk>.
Personnel expenses that we booked in Q1, sorry in Q4, there was a rebound of that so there are some very technical issues. So that is what is weakening the.
Earnings or the profits in the Americas.
And if we exclude these factors the performance in the Americas.
It.
Has remained pretty much unchanged from Q4 of last year.
And wholesale revenues in the Americas, we disclosed and.
There was about a 10% improvement and if we exclude the currency impact it was pretty much flat.
Your second question.
First in Q1, there were market factors. So you made a slow start but.
We our focus is to make sure to generate earnings in Q2 onwards, which will serve as the source of the dividends and we do have a quite a strong pipeline.
Okay.
So our focus is to realize these opportunities in the pipeline.
Okay.
And in terms of our shareholder return policy at the moment, there hasnt been much change from the past.
We haven't really finally made a final decision about what to do but in the previous quarter.
There was the impact of litigation regarding.
Regarding the legacy transaction, which was a very irregular issue and this had a big impact on our profit during that period. So we did consider that to a certain extent as you are aware.
At this time.
The situation is a bit different from last year.
But there are market factors and we will consider whether to consider the market factors and other accounting issues when we decide on the dividend.
But in any case the source of our dividend is the earnings and profits throughout this period. So we will focus on generating the profit. Thank you.
Yes.
Sure.
Okay.
Thank you this is murky.
Regarding the first point.
If you look at your peers like the USPS.
They are looking about 200 million U S.
Of.
Losses related to the record keeping issues or using their personal devices for business purposes and.
What about you.
Okay.
Has nomura fully provide made the provisions for this and do we not have to worry about this issue in Q2 onwards, and regarding the weakening of the yen I think that is affecting your earnings but in a local currency basis.
Yes.
What is the cost inflation, including the personnel expenses internationally and compared to three months ago has there been not much change.
Please explain if there are any changes please.
Okay.
Yes. Thank you.
Using the unapproved electronic devices to communicate with clients and also the storage of data.
There is an investigation going on by the U S authorities.
And <unk>.
Nomura in Q1 booked a certain amount and we made provisions of a certain amount.
And the investigation is still ongoing.
So that is all I can comment on at the moment.
And regarding the weakening of the yen and its impacts.
Okay.
Yes.
Yes.
Okay.
Well as I said in the previous earnings announcements the.
The compensation and benefits is on the rise but.
Did have visibility about that but on a Q on Q basis, the comps and benefits hasnt.
Change that much excluding the impact of the currency.
And wholesale so there hasn't been much impact.
Yes, I hope that answers your question.
Yes understood. Thank you very much.
The next question comes from.
Mitsubishi <unk> Morgan Stanley , Iran. Olson your line is on peace.
Sure.
This is gino.
Yes understand.
Thank you my first question.
Global markets did pretty well in this quarter.
Yeah.
For equities GM struggled but for fixed income.
Okay.
In the market.
Right.
Sure.
Americas, EMEA and Japan flow through.
Robust so what is the outlook for the remainder of this year of course, we cannot be optimistic but.
If anything.
Okay.
This kind of turbulent situation might continue that may make it difficult for you to navigate to the market, but once you navigate this market than you may be able to generate certain flows and you will prepare the Florida.
And I wouldn't say comfortable but.
Could I have expectation towards the <unk>.
The result, and regarding the equities.
For the April to June quarter.
In light of it what's the timing for the adjustment but.
To July in the USA, the equity seem to be hitting the bottom and we cannot foresee is going to happen. After that is it could be the EMEA.
Bucket really but in this situation.
Jason maybe changing in July and is it your perception that would you give me some color.
That's the first question. My second question is regarding the compensation and benefits increased on a Q on Q basis, you said the majority of that came from the FX.
Is it really the case I wonder so in the fourth quarter personnel expense as of end of fourth quarter.
So you heard the bonus pool.
And the <unk>.
It might have looked.
Similar in comparison.
Thank you for your questions. So let me start with your second question.
Realize that FX exchange rate for the applies to wholesale business.
In the first quarter for example, Japan retail business.
University graduates, who newly joined the firm so first quarter it tends to have higher than other.
Personnel expense in the first quarter and also there is the accounting treatment for the deferred does it so far.
First quarter personnel expense tends to be high because of such factors, but excluding those factors. The remaining factor is FX.
In the fourth quarter.
Rather than the question the words about what is traditional for the fourth quarter I do hope that you understand the results of the first quarter based upon the background that I mentioned regarding your first question on the fixed income.
I believe you've given us the positive evaluation, but for us globally significant was that Japan.
<unk> business is recovering.
Hum.
Left positively Jay JV yield has gone up and the volatility went up.
Long time actually in a sense.
<unk>.
It has been about a range bound.
So.
There have been a mixed views about the market and in Dutch Jason, but I think it went up and as Japan seems to have bounced back up and it seems to have had a positive impact on fixed income.
So.
Nomura.
So a significant was AEG in the Japan created business, which made a positive contribution.
In the sense of regional mix.
Regional mix is somewhat different from USPS.
AJ created.
You could take a look at our credit spreads, but in China credit spread is tightening.
So this kind of opportunities.
For Chubb shared will so that I believe led to the outperformance of fixed income.
So you rightly pointed out just to the North zone.
The environment is quite itself in such difficulties our business.
Controlled basin of control of the risks and to generate revenue.
So in.
Highly volatile market.
That could continue then.
And then we could have expectation toward the.
Robust top line of our business if the volatility continues and the regarding <unk>.
Yes.
Overall.
Transaction volume is on the decline.
As you pointed out it may be the case.
Trading volume declined maybe hitting the bottom, but client client flows seems to be.
Getting smaller.
If all at risk in the emerging market countries and the geopolitical risks maybe.
<unk> the sentiment of customers, who then becoming muted India activities, So I'm not sure.
Optimistic we can be but.
Continuously believes that there is certain amount of opportunities to generate revenue. So.
I do hope that we can have certain expectations.
So in terms of our earnings equity derivatives, which is our core business.
Equity did agree with David <unk>.
We saw weakness in Japan, and Asia, but we do have the expectation for the recovery in those regions. Thank you.
Thank you very much <unk>, so regarding acreage is not specific to Japan.
Comment applies to other regions as well when you say, it's shrinking that's correct.
Thank you very much stabilized around for your answer.
The next question is from Watanabe San of Daiwa Securities.
Please go ahead.
Yes.
Thank you. This is watanabe from Daiwa two questions. Please.
Is about page 10 of the materials.
<unk> expense ratio was 87% in Q1.
Which is higher compared to the 80% target cost income ratio and you have implied that the weak yen works on both the denominator and numerator. So please explain why the cost burden is getting heavier and please explain your future outlook.
Second question.
Page five.
Retail level fees.
As of June and exceed the 200 billion yen.
This means its building up by 100 billion yen per quarter.
Including discretionary investments your target 10 trillion yen in several years.
Which seems a bit slow compared to target. So how do you view the building up and get this into the level of fees. Please.
Thank you.
Yes. This is <unk> first wholesales cost income ratio.
And as you pointed out the target is 80%.
And we have exceeded or.
The acceptance of our highest higher than that and.
Since in the past, we have been saying that we will make the necessary investments, especially.
And <unk> International wealth management.
And M&A.
Which are investments for the future.
Sure.
So there is no change to our staff there and in this quarter.
The yen weakened and that impacted both revenue and expenses.
Inflated both revenues and expenses so the expense ratio it seems a bit high compared to revenue.
And going forward.
Okay.
We will continue to focus on our growth areas and invest in these areas, but for investment banking.
We are not investing that much at the moment.
And frankly.
The market had been inflating.
Had been on an inflationary trend, but recently that seems to be coming down.
No.
Okay.
Hopefully it will become easier for us to hire employees and investment banking.
And.
The.
Cost income ratio our expense ratio, we want to continue lowering and.
In terms of the absolute amount of course.
It's something we need to control and also improve our top line. These are crucial to control the cost income ratio.
And in terms of the absolute level of cost we will use digital technologies to make operations more efficient and we've already been doing it but we will continue.
Our efforts in that area and.
Right.
Some of the nice to have items.
We will be we will not be investing as planned on the nice to have items. Meanwhile, we will continue to invest in areas, where we said to grow our top line and.
And make sure to control our expenses at the 80% cost income ratio and make efforts to achieve that target and.
And the other thing is.
We would like to make our cost more variable than fixed. So the question is how to shift from the fixed cost to variable cost.
And we are working on that as we speak.
Your second question.
Okay.
About the level of fees.
In retail and how we view the progress.
Okay.
The level fee is something that we set so that we can work together with our customers towards the long term goal and we want to support our customers and kind of thinking about the overall portfolio and working on following up with the customers. So the.
The point is to improve the satisfaction of our customers.
And.
If we try to build up and increase the amount of level it doesn't lead to good results.
Our focus should be on keeping our customers satisfied and as a result, the level fee should grow and we hope that customers will choose the loyalty as a result of being satisfied with Nomura Securities and this should lead to introduction of new assets and new businesses that is the whole point of introducing the level fee. So.
We are not trying to simply shift existing assets into level fee assets, that's not what we intend to do.
Our objective is to satisfy our customers and as a result, we can.
A little piece.
Liberty assets to buildup.
And at the moment.
Yeah.
Uh huh.
The customers or investors, who are choosing the level fee structure are giving us very positive feedback.
And.
Our employees or our partners are also giving us positive feedback about the introduction of level fees.
The feedback from our customers is that it's.
It is not linked to fees. So they can trust the proposals even if the sales person or the partner is saying the same thing it's more reliable because it is not linked to fees and because the proposal are not linked to fees.
It's <unk>.
<unk> for the investors to make investment decisions and Thats the kind of positive feedback we are getting.
Yes.
And yes, we do want to grow this level fee and the level of fee business.
And.
The goal is to get customers to put in new money rather than shift their assets from existing assets. Thank you.
Thank you very much.
To check about the first point you say you wanted to shipyard expenses. The variable does that mean more pay for performance in your expenses or do you want to are you talking about the it system costs and real estate expenses, which you are currently paying a fixed cost what do you mean by shifting to variable costs, yes. Thanks for the follow up.
Our performance is something we are already working on and yes, we will work on a more thoroughly and.
Our it systems and.
Those are.
Typical fixed cost.
These are things, which we do not necessarily have to have within Nomura. So we are assessing what do we need to hold onto and what we would like to use external resources for and shift to variable expenses.
Yeah.
Understood. Thank you very much.
Okay.
The next question comes from sounds like Sterno from Bofa Securities. Mr. Sasaki. Please.
Thank you and thank you from Bank of America.
Two questions first question is about American century's valuation loss.
When currently expect destination to improve and also.
Is that the reason why you have booked to the valuation of those.
Erika and century.
Underlying new business deteriorating.
With interest rates increasing.
You conduct the discount.
For the present value.
You come to that decision.
Could you elaborate on the reason why you came to booking the valuation of those American century investments that that's my first question.
Second question is.
For the first quarter, you said the profit level.
Not high.
Right.
The roofing.
Yeah.
We're looking at.
First quarter two level, even when we add the bulk of the extraordinary items still the profit level seems low so.
Do you have a clear trajectory bulk to the level of profit where you used to be those are my two questions. Thank you.
For your question first regarding ACI us, even though every quarter.
Sure.
Based upon the performance of ACI and based upon market and economic indexes, we conduct a fair market value evaluation.
For the April to June quarter.
Primarily in the USA global equity market correction and also insurance rates increased and relatively speaking.
A quite sizable valuation loss was booked.
Then aci's evaluation on the dose is it particularly significant.
Is <unk>.
Numbers, so significant for us I do not think that is the case.
Yes.
Looking at the market and looking at the performance of.
Asset managers looking out their equity stock prices I do believe ACI is.
Trending in parallel with our market in that sense. Our evaluation is reasonable so I would say that ACI is in line with the other.
I'll say advantage us positioned on the other hand regarding the valuation of those booked for two consecutive quarters worth 18 bidding them.
So volatility.
Associated with ACI.
Perceived by management is a huge challenge to be worked through so as needed. We have we are considering.
Considering the mitigating measures that we could implement.
Also.
The evaluation of the first quarter result, overall profit level seems low.
That's your comment.
Yeah.
We are not saying that we are satisfied with the results when we look at the back or the factors.
<unk>.
We have more work to do in making improvement to profitability, but us Nomura.
Okay.
In order to raise Roe.
Major factor is retail division in the first quarter five <unk> pretax income was disclosed and the <unk>.
Improvement of the retail divisions.
<unk> profit is a challenge and therefore, our top line.
Answering various questions being asked about.
On top of top line, we have to revisit the cost structure.
Regarding the cost structure.
Together with Mr. Sugiyama head of retail division.
Hi.
Co sponsoring a project to revisit the cost structure.
So in the retail division.
The.
Segment based approach is going to be enhanced.
For each segment.
We're going to make.
The improved vis vis deals numbers, and we are going to be more tactical and speedy in implementing measures for each segment.
<unk> retail business, we have the resource allocations and we are going to look at the details and we would like to implement the measures to make improvement and when those initiatives up and running I do believe that a relief for the firm as a whole will improve.
Also.
B deals.
Effectively frozen and that's significant especially in ECM.
The frozen market is.
Quite significant then when can we expect.
Improved mental destination from what it was in the first quarter I cannot foresee that specific timing, but.
I should say that we have been accumulating deals in our pipeline. So sometime in the future when the market comes back and recoveries than I do hope that we can.
<unk> that opportunity so I do not we do not expect the market condition to stay.
I'll stay here forever so.
So when these businesses come back because we do believe that we will be able to exceed the capital cost that concludes my answer. Thank you.
Understood.
Regarding the first point regarding Aci's <unk>.
<unk> fair value.
Is it possible forward value to be lowered if the stock price of ACI is in line with other companies then.
Is there any method of adjusting the fair value.
Okay.
As you said, we could actually we could conduct hedging.
To mitigate the volatility from the ACI is fair.
Fair value.
I see.
Thank you very much for the explanation.
The next question is from Citigroup Securities <unk> San.
Okay.
Thank you this is <unk>.
Regarding retail.
And <unk>.
<unk> please.
For Japan retail.
Sure.
Okay.
There's somewhat overlaps with the previous points, but from the outside.
In terms of the progress of Kpis that seems to be good but.
There seems to be a big gap it was the case.
And the reason is the flow revenues being weak.
And could you explain the reason for this and is this due to market factors and.
You're building up of our recurring revenue businesses.
<unk> is going well and going forward if the market factors Subsides, then you should be able to generate about 30, or 27 5 billion yen per quarter as you used to generate or as you mentioned earlier.
In order to achieve case, yes.
Do you is there room to conduct a thorough review of the cost structure. Please.
My second question.
For Sichuan ratio.
At the moment and 16, 7%.
And.
Three months ago.
And thank you for explaining could you explain in detail the changes from three months ago and after Basel Finalization.
Is it going to be above 11%.
And your peers like U S peers.
Our suspending their share buybacks.
But what about Nomura.
Are you considering the flow side of the shareholder return. So is there going to be much impact to your shareholder return from San Juan. Please. Thank you.
Thank you for your question this is camera.
We are not focusing on the cost and when we review our cost structure.
It is necessary in any case.
And.
Yes.
As you pointed out we do want to continue growing the flow revenue.
And.
We want to provide our services to a wider range of customers and we think product marketing is very important and we are sharing the understanding within the division. The key is to provide the right products.
To our customers and that's very important.
And in the corporate owners segment and the mass affluent segment the high net worth segment.
For each segment, we have appointed directors in charge and for April onwards, we would like to propose these products and we will make more proposals to these customers and clients.
Okay.
And this momentum is continuing in July onwards.
Okay.
And proposing the right products is important and of course, it's up to the customer to decide whether they want to buy that product or not but.
Well you have to make sure to propose the right product to our customers.
And our salespeople, who our partners are fully aware of this.
And when the market comes back the flow revenues should pick up again.
Okay.
And we are.
To improve fee level, one in the flow revenues, but we have not given up on the full revenue and.
This is the biggest strength of Nomura.
Okay.
And our focus is to provide the right products at the right timing.
Recommend it to our customers so that we can grow the business.
Yes.
And with the recent weakening of the yen.
And the rise in interest rates in the U S.
Yeah.
A lot of investors are focusing more on portfolio management.
And in July TMC.
Sales amount has reached 150 billion yen, which was a record high on a monthly basis.
So there are all sorts of opportunities and we'd like to capture them to grow our flow revenue.
Okay.
Yeah.
And another important point is the contact with our customers.
In the past we were relying on human resources.
<unk> also focused on face to face.
<unk>, but.
But from April this year, we have set up the digital company in.
Or are we have.
We are the retail division as co working with a digital company.
Digitalization efforts and alliances with others is another area of focus recently, we have.
<unk> I'll answer this year.
These two have been doing very well in terms of performance.
So we will make use of these alliances as well to expand the touch points with our clients and investors.
Yeah.
Your second question.
About the <unk> capital ratio.
And the reason for the decline.
Well, if you look at the numerator and the denominator.
You can see the risk weighted assets increase and that was the main factor for us at one <unk>.
And.
One reason was the weakening of the yen.
And also there were market factors.
<unk> the higher volatility.
That was another factor.
And the period that we looked at was a bit different.
And that led to higher <unk>.
So it was a buildup or accumulation of all the different factors, which led to the one trillion yen also increase in risk weighted assets.
Yes.
And after the call.
What happens after the introduction of <unk> TB well at the moment.
As we have been showing from the past.
This 3% to 4% level.
Impact from <unk>, TV or the Finalization of Basel.
It hasnt really changed that much.
So.
We will continue to implement measures such as easing the implementation of the internal model.
And mitigate the effects.
To answer your question.
Okay.
Yes. Thank you.
If you have a question please press <unk> one.
Okay.
Next question comes from Mr.
Jefferies Mr. Don Please.
Thank you.
I have just one question.
Good.
I guess I'll ask about this but.
For three segments.
PBT is affected by those have value. According to your explanation, but for that other than the three segments.
You bet.
Billy Thank you as appropriate.
Quarterly Roe and EPS.
It turned out to be quite volatile and earlier you mentioned the hedge operations for ACI, but.
For other fair value valuations.
Yeah.
Regarding the other.
Fair value valuation valuations that could impact your business is it possible for you to conduct hedging operations.
You reduce such does.
<unk> valuation apportioned so you can mitigate the volatility.
And stabilize.
Is there any plan that you are considering anything that you can share with me at this point. Thank you.
Thank you very much for your question.
In areas other than business fair value valuation that's had the impact came from the strategically held.
Securities, let's compare to our peers.
<unk> in investment Securities is quite small a lot smaller.
For the investment Securities that we are conducting a mark to market valuation. So there is <unk> impact.
Yeah.
So.
Uh huh.
Yeah.
Okay.
Yes.
Sure.
Approach is not to use <unk> and directly reflect that on capital, but we would like to reduce the absolute amount of the.
Strategically held the shares.
Through a sell off.
Another thing regarding economic hedging.
Yeah.
This is kind of like the tracking error of accounting.
And I'm not sure to what they tend to have explained it's about the bonds that we issued before 2013.
In order to hedge risks.
We have conducted hedge transactions with external counterparties.
But.
Bonds to be issued before 2018, Anthony powerful valuation there not being a mark to market on the other hand, the hedging positions.
Conducting the mark to market valuation so the.
There is a misalignment there.
So economically we are conducting hedging, but counting attempts there is mitch mismatch.
So.
And that's what the economic hedging item is about for this.
At time before 2018, but after 2018 for the bonds. We have started applying fair value valuation. So therefore that community or fluctuation. We believe has been mitigated.
And full bonds issued before 2018.
When they come to maturity.
Then.
Yeah.
Hedging transactions that the.
I needed for addressing the <unk>.
TCT will be.
The <unk>.
<unk> so over time, the economic hedging.
Economic hedging impact on our performance, we will become more manageable.
Understood. Thank you very much for your explanation.
It's time to finish and we like to talk Lee question answer session.
If you have some more questions. Please ask our Nomura Holdings IR Department.
And we'd like to make closing addressed by Nomura Holdings.
Thank you everyone for joining at a late time in Tokyo and.
In terms of the bottom line, we are not happy with the numbers, but.
There are some initiatives that we are working on and we are starting to see the results of those efforts.
And the number of proposals that we make to clients.
And these are <unk>, which leads to Kpis and we are monitoring these numbers, whether it be retail or investment banking.
And the number of proposals is steadily increasing.
So we are planting the seeds for the future and we're making good progress there.
And for fixed income.
We were able to outperform our peers.
Thanks.
Which led to a lot of confidence for us.
<unk>.
We believe we are heading in the right direction.
And there are some things for which we can which we can improve on and we are fully aware of that.
So we will make sure to implement those improvements with speed and so.
Contribute to the bottom line.
And we look forward to your continued support.
Thank you very much for joining today.
Thank you for taking your time and that concludes today's conference call.
You may now disconnect your lines.
Okay.
Okay.
Sure.
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