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Presentation

Operator: Good day, everyone, and welcome to today’s Nomura Holdings Third Quarter Operating Results for Fiscal Year Ending March 2023 Conference Call. Please be reminded that today’s conference call is being recorded at the request of the hosting company. During the presentation, all the telephone lines are placed for listen-only mode. A question-and-answer session will be held after the presentation. Please note that this telephone conference contains certain 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 of the company to be materially different from the results, performance or other expectations implied by those projections.

Such factors include economic and market conditions, political events and investor sentiment, liquidity of secondary markets, level and the volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions. With that, we would like to begin the conference. Mr. Takumi Kitamura, Chief Financial Officer. Please go ahead.

Takumi Kitamura: Good evening. This is Takumi Kitamura, CFO of Nomura Holdings. I will now give you an overview of our financial results for the third quarter of the fiscal year ending March 2023, using the document titled Consolidated Results of Operations. Please turn to Page 2. Group wide net revenue for the quarter was JPY393.7 billion, up 24% from last quarter. As you can see on the right, income before income taxes increased 165% to JPY83.6 billion, underscoring a rebound in performance since bottoming out in the first quarter. Net income was JPY66.9 billion. EPS was JPY21.5 and ROE came in at 8.5%. The market was clouded by uncertainty in October as central banks in Europe and the U.S. shifted to monetary tightening and concerns grew over a recession.

This gradually eased as the pace of rate hikes slowed, and there was a pause in appreciation of the U.S. dollar, leading to higher risk appetite among investors and a rally in equity markets. December brought a surprise move from the BOJ in yields curve control. Investors rushed into the bank and insurance sectors while selling real estate and export related stocks. The yen appreciation and the bear market prompted investors to buy on the dips, and sales increased as expectations rose over a revival in Japanese equities. So on the whole, we saw an improvement in investor sentiment during the quarter. Amid this backdrop, three segment income before income taxes rose 43% to JPY44.7 billion, as shown on the bottom right, driven by a rebound in retail and investment management.

Income before income taxes from outside the three segments was JPY38.9 billion. In December, we sold a part of our stake in Nomura Research Institute and booked a realized gain of JPY28 billion, which is mostly included here. Before turning to results for each business, I will briefly touch on performance for the nine months to December. Please turn to Page 3. As I said, market uncertainty eased during the third quarter and investor risk appetite increase. But looking at the nine months compared to the same period the year before, market activity was generally sluggish across many product lines. Groupwide net revenue was roughly flat at JPY1,010.6 billion, supported by the precipitous drop in the yen. However, income before income taxes declined 28% to JPY126.8 billion, and net income slumped 24% to JPY85.4 billion.

EPS was JPY27.44 and annualized ROE was 3.8%. As you can see on the bottom right, three segment income before income taxes declined 45% to JPY94.4 billion. Retail reported a slowdown in flow revenues, mainly from stock and investment trusts, while investment gain loss in investment management worsened. Conversely, retail recurring revenue and investment management business revenue, which represents stable revenues were both higher compared to the previous year. In Wholesale, the investment banking revenues slowed as corporates postponed share issuances and performance in our equities business was muted. Fixed income booked stronger revenues driven by the macro business. We also reported an improvement in gain loss related to transactions with a U.S. client in 2021.

As a result, Wholesale income before income taxes increased 16% year-on-year. Let’s now take a look at each business, starting with Retail on Page 6. By the way, the percentages I refer to from now on are all quarter-on-quarter comparison. Net revenue in Retail increased 12% to JPY81 billion. Income before income taxes grew 142% to JPY13.3 billion. By strengthening our segment based approach and providing detailed consulting services tailored to each client’s needs and the changing market conditions, we were able to increase flow revenue by 22% driven by sales of stocks, investment trusts and foreign bonds. Recurring revenue was flat, but our recurring revenue cost coverage ratio remained at 50% as overall revenues increased, and we maintained expenses.

Please turn to Page 7 for a breakdown of sales by product. Total sales for the quarter increased 7% to JPY4.9 trillion. Sales of stocks became more active each month as the market rebounds improved investor sentiment and retail investors bought on the dip in December. U.S. growth stock funds and high yield funds topped sales of investment trusts on the back of expectations for growth at U.S. corporates and higher bond yields. Sales of insurance products also increased as we made successful proposals for solutions for retirement funds and estate planning needs. Please turn to Page 8 for an update on KPIs. Net inflows of recurring revenue assets shown on the top left, increased slightly to JPY7.6 billion as there was a large investment trust redemption by corporate clients.

Excluding corporate clients, net inflows were JPY190 billion, with contributions from discretionary investments, insurance and loans. As you can see on the upper right, recurring revenue assets stood at JPY18.1 trillion at the end of December, down due to market factors, although recurring revenue remained flat. Please turn to Page 9 for Investment Management. Net revenue increased 118% to JPY57 billion. As shown on the bottom left, business revenue, which represents stable revenues, increased by 5%. The Asset Management business remains solid and Nomura Babcock & Brown performance improved on the back of a recovery in the operating environment for aircraft leasing. Investment gain loss was JPY25.6 billion, a significant improvement compared to negative JPY3.7 billion last quarter.

American Century Investments gain loss made a substantial contribution and Nomura Capital Partners reported unrealized gains and recognized realized gains on the exit of some private equity investments. Expenses increased 15% to JPY23.7 billion due to share sales and the origination of aircraft leases. And these are transaction related costs, which won’t occur every quarter. Income before income taxes was JPY33.3 billion, the highest level in six quarters. Now turning on to Page 10. As shown on the top left, assets under management were JPY64.7 trillion at the end of December, down JPY100 billion due mainly to market factors. Net inflows on the bottom left show outflows of about JPY100 billion from the investment trust business due to JPY350 billion of outflows from ETFs. MRFs, where retail investors talk idle funds, reported inflows of JPY200 billion, and core investment trust also booked inflows of JPY44 billion.

The Investment Advisory business reported inflows of JPY57 billion on inflows into foreign stock funds in Japan. As shown on the bottom right, alternative assets under management declined due to yen appreciation, but inflows continued. Please turn to Page 11 for Wholesale. Net revenue declined 8% to JPY189.1 billion. As shown on the bottom left, Global Markets revenues slowed by 15% to JPY154.3 billion, mainly due to a slowdown in rates and ForEx emerging markets. Investment banking revenues increased 24% on a recovery in the Japan ECM business. Expenses were JPY190.9 billion, up 3% due to yen depreciation, severance related expenses, platform enhancements and professional fees. As a result, loss before income taxes was JPY1.9 billion. Please turn to Page 12 for an overview of business line performance, starting with Global Markets.

Net revenue declined 13% to JPY154.3 billion. Fixed income dropped to 25% to JPY86.7 billion. Macro products had a particularly slow quarter. Although rates revenues increased in EMEA for both the flow and structured businesses, agency mortgages in the Americas declined. ForEx emerging market in AEJ slowed from last quarter, which was the best in about six years. Spread Products revenues increased primarily in AEJ as China’s economy reopened, but securitized products slowed due to muted client activity. Equities revenues increased 9% to JPY67.5 billion. Execution services revenues increased in Japan and the Americas due to primary transactions and a rebound in market volumes. We also recognized JPY9.1 billion in revenues related to prior transactions with the U.S. clients.

Please turn to Page 13 for Investment Banking. Net revenue increased 24% to JPY38 — JPY34.8 billion. Advisory remained solid despite a slowdown in global fee pools as M&A completed transactions and equity private placement transactions in the Americas contributed to revenues. As you can see here, revenue from financing and solutions improved markedly due to factors, including a rebound in Japan ECM and strong performance in the Solutions business for equities, rates and ForEx on demand for hedging a mid-market volatility. Please turn to Page 14 for an overview of non-interest expenses. Groupwide non-interest expenses increased by JPY24 billion to JPY310.1 billion, of which about 30% is attributable to yen depreciation. Other factors include compensation and benefits being impacted by severance related expenses in Wholesale.

Other expenses increased by 32% due to a rise in professional fees related to transactions and because provision reversals related to progress in legacy transactions kept expenses down last quarter. Finally, please turn to 15, Page 15 for an update on our financial position. As shown on the table on the bottom left, Tier 1 capital was JPY3.2 trillion, down JPY36 billion from the end of September due to lower ForEx transaction value as the yen rose. Risk weighted assets rose by JPY770 billion from the end of September to JPY17.9 trillion. The waterfall graph on the bottom right shows credit risk declined by JPY460 billion, but market risk increased by JPY1.2 trillion due partly to a temporary increase in our position due to credit split widening and transaction origination.

As a result, our Tier 1 capital ratio at the end of December was 18.1%, and our CET1 capital ratio was 16%, both lower than at the end of September. That concludes the overview of our third quarter results. This quarter, we finally saw market-to-market valuations turned positive after dragging down our results from the past three quarters. This, combined with the realized gain from selling shares in an affiliate company substantially lifted groupwide earnings. In our core business, we started to see an improvement in sentiment among investors and corporates and retail and investment banking revenues rebounded, giving us an ROE of over 8% for the first time in four quarters. Retail performance in January got off to a slightly slow start compared to revenue levels in the third quarter, but we are starting to see a bullish stance towards Japan equities as expectations grow over the reopening of the economy.

Demand for a newly launched investment trust reopened Japan has been higher than expected. In Wholesale, fixed income, particularly macro products struggled in third quarter, but bottomed out in October and has been recovering. Overall, wholesale has gotten off to a good start in January. While maintaining this business momentum, we will manage cost stringently. As we said at our investment forum last year, we are working towards JPY20 billion in cost reductions in retail by end of March 2025. In Wholesale, we will see the impact of inflation globally, but we are reviewing our cost base in line with the current business environment, and we will continue to do so. This year, we expect inflation concerns and geopolitical risks to continue and we must remain vigilant.

We will manage risk prudently while providing liquidity and solutions for our clients. Thank you.

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Operator: We have a question and answer session now. The first question is from SMBC Nikko Securities, Muraki-san. Muraki-san, please go ahead.

Masao Muraki: Thank you. This is Muraki from SMBC Nikko. Regarding the wholesale, first, on Page 11, the cost ratio 101%. And then this — you say this includes some one-off factors, but how do you plan to bring this down to 80%? And the trend is revenue not growing so much, but meanwhile, expenses growing, increasing. So it’s a reverse leverage situation. And looking back in 2019 and also 2016 April, you conducted a big cost reduction, and you announced a big reduction. And as a result, you were able to maintain share and reduce our costs. So at the moment, you have been making some cautious comments about — or Morgan Stanley has making some cautious comments about reducing headcount, but they conducted a large-scale headcount reduction recently.

And last December, Nomura, you said that you are not considering a major head count. But in April, which is an important timing for you, I’m looking forward to customers magic once again at Nomura. So could you give us some more color on that? And I don’t think there are that many underperforming businesses, but compared to the past, it’s getting quite hard to effective cost reduction. So could you also comment on the change in the situation, please circumstances? Second question is also about Page 11, the KPIs. If we divide the risk — divide risk assets by net revenue, 5.9% of revenue divided by risk-weighted assets, you said trading was slow. But if you exclude the impact from trading, was the revenue over modified RWA slightly better? Thank you.

Takumi Kitamura: Yes. This is Kitamura. Thank you, Muraki-san. Your first question and second question, they are — they overlap to a certain extent. First of all, Wholesale and the cost income ratio of above 100%, which means we are loss making, very unfortunate. And we would at least like the bottom line profitable and that will be a high priority for us. And in terms of the restructuring, the U.S. players looked at the deal flow or the entertaining deal flow and market action. And two years ago, 2021, they hired a lot of people, which was almost like a hiring boom in anticipation of a pickup in market. So this was excessive expansion of their businesses. And then last year, the market environment changed abruptly. And they were forced to address the situation in several divisions.

And compared to that, Nomura has almost not increased any headcount until last year. So we are not — we were not forced to make major adjustments to our headcount. And the structural reform in 2019, as a result of that, we are now focused on our core products, and we have — we are maintaining the top-ranked share. So we have a strong franchise, and we have a strong business platform. And you can see in the current performance in January of global markets, there has been a strong recovery. So the impact of the interest rate hikes, it’s going to take a little longer for that to become clear. So we will — the clients will continue to wait and see attitude in the structured business and finance businesses. So the question is how long this is going to last.

And I think we can wait a little longer. So there will be some deferred demand — pent-up demand at which point, we will have the franchise to harvest that. So we want to maintain the franchise. Meanwhile, last year, the people in the investment banking business shrunk significantly. And in terms of measures suggest the decline in profitability, we did do a cost reduction, which was quite large for Nomura. And this time, the cost income ratio being very high, was frankly due to more of a revenue issue rather than a cost issue. And this time, in Q3, the business unfortunately booked the loss, but GM earnings, JPY150 billion, which is quite tough. And in terms of client revenue increased or improved on a quarter-on-quarter basis. So we were not able to monetize from the revenue opportunities as well as we should have.

October, with the dollar appreciation shifting towards dollar weakening and interest rate movement was quite choppy. And at that time, we were not able to secure revenues as well as we should have. And that was the major lesson that we learned from that period. And in Q3 — at the beginning of Q3, especially October, things were quite tough. And as the months went by, wholesale, especially Global Markets earnings have improved, and that trend is continuing in January as well. So in the mid to long term we do have the platform to capture the upside in the future. Agency mortgage business in this quarter was quite tough. And revenue on RWA, 5.9%. And if we exclude those factors, yeah, it was as bad as that. And I can’t give the exact number, but if we exclude the sluggish mortgage business, the revenue over RWA was reasonable.

Thank you.

Masao Muraki: Regarding the risk assets, this is Muraki again. On Page 15, you show how the risk assets has continued to increase. And you explained the reasons for this. But in terms of new risk taking, is that not that large or has that had an effect on this? And also, the FRB’s additional regulations are — last year, you have been reducing your risk assets in relation to the FRB’s actions. But has there been any positive effects from that?

Takumi Kitamura: This is Kitamura. For RWA, there was a slight increase. And in Q2, the increase in RWA was due to the currency levels. And this time, the JPY800 billion, JPY900 billion increase of RWA, and that was due to — and I’m sure you know better — you know this was due to a technical stress SVaR that’s what increased. And in the stress scenario, the positioning just happened to be that way. And so it’s not like we have taken additional risk, the SVaR (ph) increased regardless of that. So the effect of that is the main cause for the slight increase in RWA. So again, it’s not like we are taking some risk, which we haven’t taken on in the past. And in fact, from a business perspective, we were quite cautious in Q3. But the SVaR increase caused the rise in the overall RWA.

Masao Muraki: Understood. Thank you very much.

Operator: Thank you very much. Your next question will be by Watanabe-san of Daiwa Securities. Watanabe-san the floor is yours.

Kazuki Watanabe: Thank you. This is Watanabe of Daiwa Securities. I have two questions. First of all, third quarter flow and position and the percentage on FIG revenue and rates and exchange rates changed. And I think you were in an environment that was quite easy to monetize. But why did you struggle so much macro products and what are your prospects? Secondly, IM investment loss JPY25.6 billion. That was an improvement. Major components would be unrealized of AEC and various unrealized gains. But can you give us a breakdown and ACI-related losses? — volatility mitigation policy, I think you were taking some initiatives. This time, there was no impact from such policies.

Takumi Kitamura: Thank you for the questions. First of all, on fixed income, third quarter flow. Yes, trading and — this is Kitamura. On company-wide basis, fixed income, 9 versus one. 9 customers and risk or on position is one. That’s the ratio. And as I said, inventory or position management we were not so successful. And therefore, in terms of proportion, the client revenue outweighs our own position. And there has been stronger bias towards client revenue than ordinary times. Why did we struggle in macro products? December was quite active. And that’s our impression. October, the market reached a turning point. In October, we defended our positions without taking significant risk, and that’s probably one of the reasons why we struggled.

One of our core businesses is agency mortgage. And in the case of Nomura, macro or in the rates business, this is included in the rates business. Maybe the demarcation is different in our peers, but in our case, we include this in macro. And again, there was some activity slowdown and also the market environment was extremely tough. So we were not able to capture revenue opportunities in this area and fixed income, especially macro products was a big challenge for us. Having said so however, conversely speaking, we’re not so much concerned. Yes, there was a dip in October, but then after we have been able to cause recovery. So if we look at just the three months fixed income and rates were poor in terms of performance. But that’s only for those particular three months.

And more recently, we are seeing robust recovery, and we are confident about our position. IM investment loss breakdown, regarding quantitative disclosures from the previous session, we decided not to disclose, but ACI occupied major proportions and NCAP unrealized gains and realized gains have been included. ACI hedging portion is increasing as part of our risk mitigation policy, but we’re not taking full hedge. It’s not completely hedged. This is a partial hedge. And that is why the unrealized portion increased. And that’s part of the background. Yes, there has been impact from hedging, and there could have been upside if we hadn’t hedged. But due to partial hedging, unfortunately, our hedging position booked losses.

Kazuki Watanabe: Thank you very much. I have one follow-up question. FIG revenue. If you look at the monthly on October, November and December, can you give us the proportion?

Takumi Kitamura: October, November, December breakdown, this is Kitamura responding to that question. Fixed income, October 30%, slightly below 30%. November, about 30%. December, around mid-40s. So the performance has been improving month after month.

Kazuki Watanabe: Thank you very much for the detailed information.

Operator: The next question is from Mitsubishi UFJ Morgan Stanley Securities, Tsujino-san. Tsujino-san, please go ahead.

Natsumu Tsujino: Thank you. This time, for fixed income Japan, EMEA, U.S., could you explain the breakdown or the percentage? And I would like to have — make a follow-up question. So why don’t I stop there first?

Takumi Kitamura: Yes, this is Kitamura. For fixed income, Japan, 20% or mid-20% — 20% to 30%; EMEA, 30% to 40%; Americas, 10% to 20%. AEJ, a little bit less than 30%.

Natsumu Tsujino: Okay. Understood. So Japan is almost flat, easy to understand. EMEA was good and Americas went to less than half Q-on-Q big decline. And AEJ Q2 was too good. So there has been a decline. And you’ve been saying that October was the bottom and things are recovering, and you’re almost asking us to forget about October. Yes, in terms of risk taking, perhaps you were not taking the risks and the hedging works in an adverse manner perhaps. But this going forward, is that going to repeat itself? Is there a list chance of something like that happening? How can we have more comfort in believing that? And the mortgage business is still slow. And early January, there were a lot of loan applications, but overall, the mortgage business remains slow and is expected to continue to be slow.

And you talked about restructuring earlier and you said you don’t need to do the restructuring and the wages has gone — competition has gone up quite a bit Q-on-Q. Is it really okay, especially when we think about the FIG (ph) Americas, agency mortgage, could you cover those topics, please? That’s my first point. Second, again, FIG, your Americas FIG is, there are deals which are related to Asia and also Japan and you are getting a lot of orders related to the Asian region. And with short-term interest rates moving in that way in the U.S. in October, the yen depreciation shifted to yen appreciation. So that had an effect on the Japanese financial institutions and various companies changing their investment policy. Did that lead to a decline in your revenue opportunity and are things going to be slow for a while going forward.

Thank you.

Takumi Kitamura: This is Kitamura. Your first point. And for agency mortgage, I can’t go into details about each individual product. But for agency mortgage, October was tough, and that is true. And you can see that in all sorts of data, mortgage-backed securities issuance. There was a big decline. And so environment was quite tough as you know. However, I’d like you to recall how there’s been a big decline. So the market has — it’s almost frozen and almost no volume. And so in terms of market outlook, if there is more clarity in the market outlook and if the FRB’s monetary policy becomes more clear, then there could be some improvements in the businesses, which were weak last year. And one of those businesses is the agency mortgage business.

At Nomura, we have the top share in agency mortgage. And so we have the strong platform or base to capture the upside. And we’re not expecting a recovery overnight, but we are not expecting the current situation to continue forever either. So when things improve, we will make sure to capture that upside. And your second point, Americas and the relationship with Asia and Japan in some of the deals. If we look at the clients’ activities, yes, it is starting to change, especially recently with the BOJ’s policy actions and changing its monetary policy. So international investors, Japanese investors are focused more on the JGB market and client activity will remain high and strong for a while. So I’m just talking about expand at the moment, but there hasn’t been much action in this part of the market for quite a long time.

And the market share, our market share is quite high in this area. So the JGBs have started to move, and that’s quite significant. Meanwhile, in the U.S., the yield curve in the U.S. at the moment, it’s a negative yield in Brazil, but if that changes, there could be a shift from Japan to the U.S. partly because of the interest rates. So yes, we are expecting some movements. And Japanese investors are, as I said earlier, they are interested in JGBs at the moment, but the size of the market, the depth of market is much bigger in the U.S. So when things stabilize, then I think there will be a flow of money from Japan to the U.S. Thank you.

Natsumu Tsujino: Yes. Just one follow-up. Japan. For Q3, Japan FIG was basically flat. But in mid-December, there was some action in the business, but it didn’t leads to an increase in the FIG. So in Q4, how should we see Q4, please?

Takumi Kitamura: This is Kitamura. Thank you. I can’t really talk too much in detail about the January numbers, but the fixed income in January is strong. That’s all I can say.

Natsumu Tsujino: Understood. Thank you very much.

Operator: Let me introduce the next speaker, BOA Securities Sasaki-san. Please go ahead, Sasaki-san.

Futoshi Sasaki: Thank you. This is Sasaki of Bank of America. I have two questions. First of all, in the Tanshin summary, Page 13 segment profits. And at the bottom of segment income, you have the quarterly disclosure. And about the segment income, negative equity method investment numbers and realized gain was positive. And those numbers are approximately the same. In the press conference, you said there are two transactions. What is the accounting treatment applied here? That’s my first question.

Takumi Kitamura: Thank you for your question. This is Kitamura speaking. As you see, 20.7% versus approximately the same. So on a net basis, it’s JPY1.2 billion positive between unrealized and realized for policy holdings. On a regular basis, we monitor the significance or objective of policy holdings, and we’re trying to reduce our portfolio, and we’ve begun to do so since approximately 10 years ago. You know that against our Tier 1 capital, the level of our policy holding only accounts for 45%, which is significantly lower than other financial institutions and more recently, we have continued to sell off those hovering’s. And now I directly respond to your question, but in our Nomura’s segment information regarding shares that we have sold, the amount of difference between the investment we have done and the sales proceed is shown as realized gain.

So until the previous quarter, the accumulated amount, which had been booked as unrealized losses, that is reversed in one month. So that amount is therefore shown on two lines. And so what had been included in unrealized gain was realized and therefore, that had led to losses, unrealized losses. So that is how the accounting treatment works. And the same accounting treatment had been applied since the past, but there was a bit of a deformation because of the size of the amount.

Futoshi Sasaki: Thank you very much So there is a plus and minus in the policy holdings. Is that correct?

Takumi Kitamura: Yes, because we have sold those holdings, that’s how we book those numbers.

Futoshi Sasaki: Thank you very much. And the second question, ACM business has improved. I will deviate from the performance results, but YCC disclosure — do you think JGB is going to become very profitable there’s higher attention, but I think it’s only going to be security firms that will purchase. But do you think that environment will unfold so you can expect certain revenue or downgrading it can also be contemplated. But with rise of volatility, investment banking, can book revenues, is that too simplistic or to the extent possible, can you share with us your thinking?

Takumi Kitamura: This is Kitamura. Frankly speaking, I talked about physician management not being so successful. And immediately, having made that comment, I don’t want to reverse. But I don’t think the investor will certainly place weight on the reverse side. So it will not be a case where the position will continue to accumulate. So as we make coordination and adjustment in our position when there is client activity, of course, that would mean venue opportunity for ourselves. So if there is volatility, no doubt that would lead to revenue opportunity.

Futoshi Sasaki: Thank you. This is Sasaki again. But if you have a recollection, when there was — when negative interest rate kicked in or people stopped purchasing JGB that had led to a big difference or change in the JGB prices. You had experienced such events. Were you able to book significant revenues as a result of those events in the past?

Takumi Kitamura: I apologize, I don’t have the data at hand. This is Kitamura speaking. But in principle, when there is market shock, rate-related business would be improvement — significant improvement in performance. That’s a general comment. But sorry, I do not have data at hand, but intuitively, that’s how it is.

Futoshi Sasaki: Thank you very much. Thank you for those responses. That is the end of my question this time around.

Operator: The next question is from Citigroup Securities, Niwa-san. Niwa-san, please go ahead.

Koichi Niwa: Thank you. This is Niwa from Citi. Two things. First is about retail and revenues, retail revenue. And the other is about the investment trusts and the launches of new investment trusts. And for retail revenue, in this quarter, the flow was strong. So things are quite good and it gives us more comfort. But I was wondering how to think about that period. And in the — if we look at the past nine months, the level, revenue level seems to be improving. And — but compared to the past, it’s still not there yet. So — and when compared to your peers, these three months, the recovery in this three months was quite strong at Nomura. So my question is, is there a difference in the client base between you and your peers?

And was that how we should assess the improvement in retail revenues or were your operations too conservative? And are you now shifting more towards risk taking? And are you becoming more active in covering your clients’ customers or are you getting used to the new business structure following the reforms? So could you give us some more color about the revenue improvement and whether we can have more comfort in revenues continuing to improve. So yes, the sustainability of the flow revenue, please? My first point. Second is this is based on the media coverage, but in the Asset Management division, there was successes in some of the inceptions of new investment trusts. This is especially for Japan equities. And my question is these newly launched funds are more popular in the markets.

Is that right or are you focused more on your existing funds and is that lineup sufficient? My interest is when it comes to new fund assumptions or when you provide new products? I think they are becoming more popular among corporate clients as well as retail investors. So I was wondering what the market sentiment is for investment trust products, please.

Takumi Kitamura: Thank you. This is Kitamura. Nomura’s retail business outperforms our peers or at least it looks that way. And the reason for that is your first question, I believe. The customer base and also our proposals to customers were also — were both factors. And previously, or I forgot maybe it was the previous one before that, but we learned from our past experience that we were somewhat hesitant in proposing to customers about our products. And in terms of proposing one product, we should propose various products, and that will deepen our discussions with our customers. So that’s what we decided to improve on. And since then, we have become more proactive in introducing and proposing products. And that has — we have got — there’s been a big improvement in terms of the contacts and the number of proposals with customers, there’s been steady improvement and growth there.

But just because we make our proposal to customers, it’s up to them to decide whether to make the investment or not. So having a strong customer base is important. And on top of that, the way we promote our products, the way we behave has also changed, I think it’s multiple factors which led to this improvement in the revenues for retail. I’m not so sure about what our peers are — have been up to, and we are looking at their performance, but we don’t exactly know what was behind their performance, but I think it was thanks to us strengthening our proposals and the customer base. These were the factors behind the revenue improvement. And your second point about the reopening the large investment trust and we were able to stimulate the demand for investments, and we were able to cater to the needs of customers.

At the moment, in the Japanese stock market, retail investors are making net purchases. And on the January 6, we hosted the Japan equities event. We did a seminar to explain the investment environment of the Japan decrease. And more than 1,000 people attended this webinar. So there’s very strong interest in Japan equities more so than in the past. And over the past few years, there was more interest in global equities, mainly U.S. equities. But I think there’s this sentiment of heightened interest towards Japanese equities and people are coming back to Japan equities. And within the portfolios of customers, they had been underweight on Japan equities. And this time, that we have been proposing Japan equities to diversify their portfolios, and that has led to purchases.

So we’re not planning to launch these big funds continuously, but now it just happens to be the right time, and that’s why we launched this new fund. And there are numerous financial products out there in the market, and we were able to address and we will address the customer needs and the market environment and promote the product, and we’ll continue to strengthen our product proposals. Thank you.

Koichi Niwa: Thank you very much. Regarding the first point, may I make a follow-up, please. Over the three months, maybe there isn’t much clear trend. But on Page 7 of the presentation, bottom right, you get the hit products, it’s the U.S. growth stocks, high yield. And so these are somewhat contrarian, I think. But in terms of customer needs and customer characteristics, how do you see it at the moment? And yes, I understand how these products were popular among those customers. But when you look at the recent hit products, how do you analyze the appetite of investors.

Takumi Kitamura: Thank you. This is Kitamura. For U.S. equities, the reason why they were popular is, as you pointed out, Niwa-san, it was more of a contrarian approach, I think. And there was a big correction in U.S. equities. In meanwhile, there is strong expectations for growth in the U.S. So when investors want to build their assets over the mid to long term, they wanted to add a position to their U.S. equities, U.S. growth stocks as part of their portfolio, I think. And as for high yields, we have a very strong track record in this area. And we have been diversifying our investments about 700 , I think, is the diversification and has been maintaining very strong performance and the interest rate situation is changing. And the currency has stabilized quite a bit from the past. So interest rates remain high and some investors want to buy these types of products, I think.

Koichi Niwa: Understood. Thank you. Thank you for your thorough answer. Thank you very much.

Operator: There is no more questions. We would like to finish question-and-answer session. Now we would like to make the closing address by Nomura Holdings.

Takumi Kitamura: Yes. Thank you, everyone, for joining in Q3, if we look at the results, the Retail division, which had been struggling for the past three quarters and also investment management have seen some positive movements. And meanwhile, unfortunately, wholesale was loss making. And so the results for this three quarters were not that strong, which was disappointing. But recently, in January, the performance has been improving. And so we are going in the right direction. And we are not that — we don’t have a major concern about the situation. But a lot of people pointed out the cost level, which I, too, have a strong sense of urgency. And it’s not like we haven’t been controlling costs, but we will think about our cost strategies more strategically in the future.

So we know what we have to do, very clear, and the themes we have to work on are very clear. And if we look at just this quarter or on a quarterly basis, there have been some ups and downs. But — we don’t want to be true carried away by that and focus more on what we have to do in the mid to long term. So we look forward to your continued support and understanding. Thank you very much.

Operator: Thank you for taking your time, and that concludes today’s conference call. You may now disconnect your lines.