Nomura Holdings, Inc. (NYSE:NMR) Q2 2025 Earnings Call Transcript

Nomura Holdings, Inc. (NYSE:NMR) Q2 2025 Earnings Call Transcript November 1, 2024

Operator: Good day, everyone and welcome to today’s Nomura Holdings Second Quarter Operating Results for Fiscal Year ending March 2025 Conference Call. Please be reminded that today’s conference call is being recorded at the request of the hosting company. Should you have any objections, you may disconnect at this point in time. During the presentation all the telephone lines are placed for listen-only mode. 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 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. Let me give an overview of our financial results of second quarter of the fiscal year ending March 2025 using the document. Please turn to Page 2. Group-wide net revenue increased 6% quarter-on-quarter to JPY483.3 billion. Income before income taxes grew 29% to JPY133 billion. Net income was JPY98.4 billion, representing a 43% increase over last quarters. We had a very strong quarter. Income before income taxes and net income were both at their highest level since the quarter ended June 2020. All three international regions were profitable and some international entities made use of tax loss carried forwards, lowering our effective tax rate to 27%.

EPS was JPY32.26 and annualized ROE was 11.6%, which is at the upper limit of our 2030 quantitative target of ROE of 8% to 10% or more. Three segment income before income taxes shown on the bottom right was JPY122.5 billion, marking the sixth straight quarter of gains. We were able to deliver operating leverage as all divisions booked higher revenues and we maintained our control of costs. In wholesale our cost-to-income ratio improved to 83% and income before income taxes doubled. Before going into each business in detail, let’s first take a brief look at the results of first half of the fiscal year. Please turn to Page 3. The bottom left shows net revenue of JPY937.8 billion, 31% higher than the first half of the previous year. Income before income taxes grew 129% to JPY235.9 billion, while net income increased by 186% to JPY167.3 billion.

EPS was JPY54.58 and ROE was 10.1%. The bottom right gives a breakdown of income before income taxes. All divisions reported strong gains with three segment income before income taxes totaling JPY209.1 billion. This represents more than 70% of March 2025 KGI target of JPY288 billion announced at our Investor Day in May last year. In wealth management, asset management type business gained further ground to record a 30% increase in recurring revenue while investment management’s asset management business continues to gain traction with business revenue at a record high since the division was established. Both divisions continue to build up stable revenues where we generate revenues based on the level of client assets. In wholesale, all business lines fixed income, equities and investment banking and all regions reported stronger revenues compared to the same period last year underscoring progress in diversifying our revenue sources.

As revenues grew 30%, we controlled costs to deliver income before income taxes 6.4 times higher than the previous year. Based on this performance, today we announced a JPY23 dividend per share for shareholders of record, as of the end of September, giving a dividend payout ratio of 40.6%. Now let’s take a look at the second quarter performance by segment. Please turn to Page 6. The percentages I refer to here are all quarter-on-quarter comparisons. Wealth management net revenue increased 2% to JPY116.7 billion and income before income taxes grew 7% to JPY45.3 billion. Income before income taxes was the highest in nine years since the quarter ended June 2015. During this quarter, we witnessed a sharp market adjustment in early August, followed by volatile market conditions.

However, our sales partners advised and followed up closely with the clients based on their portfolios and market data, allowing clients to remain relatively calm. As we had already been advising clients with a view to medium-to-long-term investing and diversification, our clients’ unrealized gains have increased. And we were able to achieve strong net inflows of recurring revenue assets amid this adjustment phase. As a result recurring revenue increased 10% to a record high, of ¥50.3 billion. While bonus provisions were up in line with top line performance we continue to control non-personnel expenses giving a recurring revenue cost coverage ratio of 70% beating our March 2031 target, long ahead of schedule. Please turn to page 7, for an update on total sales by product.

Total sales declined ¥900 billion to ¥5.9 trillion, but this is because last quarter included a tender offer of over ¥1 trillion. Excluding that, sales of stock increased from last quarter. We executed multiple primary transactions and took orders from clients taking advantage of the market volatility from August to buy on the dip, resulting in sales of over ¥4 trillion. Sales of investment trusts and discretionary investments slowed from the strong prior quarter, but remained robust compared to Q4 of the last fiscal year. Sales of insurance products increased on demand for retirement funds and estate planning, while sales of products and services easy to transact based on proposals and advice from sales partners remained solid. Page 8 shows, KPIs, mostly trending above the fiscal year’s targets.

The top left shows net inflows of recurring revenue assets of ¥438.3 billion, representing a further gain from the robust prior quarter. As a result net inflows of recurring revenue assets for the six-month period were ¥826.2 billion, outstripping our annual target of ¥800 billion. As of the end of September, recurring revenue assets were ¥23.4 trillion, a decline from last quarter due to market factors but quarterly average remained roughly unchanged. Recurring revenue was at a record high, due to changes to our product mix and the fact that some half yearly fees are received in Q2. The number of workplace services provided shown on the bottom right was 3.79 million, which is also ahead of our KPI target of 3.66 million. Please turn to page 9, for investment management.

Net revenue was up 18% at ¥56.1 billion, while net income before income taxes grew 38% to ¥31.9 billion. As you can see in the bottom left, stable business revenue was ¥39.4 billion, marking a record high for quarterly revenue since the division was established. The asset management business remained strong, while assets under management at the end of September dipped from last quarter. The quarterly average was roughly unchanged. We reported ongoing inflows into products where investment management expertise is required such as, active fund management and private assets giving us a better product mix and higher investment management fees. Investment gain/loss was up 95% at ¥16.7 billion driven by a significant increase in American Century Investment-related valuation gain loss.

Please turn to page 10 for an update of the asset management business, which generates business revenue. As you see on the top left assets under management at the end of September stood at ¥88.8 trillion, down from last quarter, due to market factors but the quarterly average was roughly the same. The bottom left shows another quarter of net inflows of ¥1.1 trillion, ¥650 billion of which was into investment trust business and ¥470 billion into the investment advisory and international business. In the investment trust business MRFs reported over ¥440 billion of outflows hinting at a prominent shift of funds to new investments. Excluding ETFs and MRFs investment trust booked inflows of ¥570 billion into private assets, balanced funds and global equities across diverse distribution channels including Nomura Securities, Regional Financial Institutions and other securities brokers.

ETFs booked inflows of ¥520 billion, mostly into Japan equities. In the investment advisory and international businesses the international business made a strong contribution driven by inflows into US high-yield bond funds. Next please turn to page 11, for an overview of wholesale performance. Net revenue increased 8% to ¥263.4 billion. As shown on the bottom left, global markets revenues grew 6% while investment banking revenues were up 14%. At the same time, wholesale expenses declined 3%, although, bonus provisions increased in line with top line performance. Severance-related expenses included in last quarter were no longer present and this combined with yen appreciation to lower costs. As a result income before income taxes significantly increased by 114% to ¥45.3 billion and our cost-to-income ratio improved to 83%.

Please turn to page 12, for an update on each business line. Global markets net revenue increased 6% to ¥221.1 billion. This quarter saw a spike in volatility on the back of uncertainty over the US economy, a sell-off in tech stocks and geopolitical risks. Amid this environment, we were able to provide liquidity to the market and monetize robust client flows. Fixed income net revenue increased 2% to JPY127.8 billion. Macro products had a good quarter with rates booking stronger revenues from an uptick in client activity in Japan and Americas and FXCM performance improving in AEJ. In spread products, credit slowed in Japan from a strong prior quarter and securitized products revenues declined primarily in Americas. Equities net revenue was JPY93.2 billion, up 14% over Q1.

Financing and derivatives had a strong quarter in Japan and AEJ while equity products revenues grew substantially. Please turn to page 13 for investment banking. Net revenue increased 14% to JPY42.3 billion. In Japan, we supported several corporate actions aimed at boosting corporate value, resulting in record high revenues since the fiscal year ended March, 2017 when comparisons are possible. By product advisory revenues grew internationally driven by EMEA’s involvement in high-profile transactions such as the acquisition of Britvic by Carlsberg’s UK subsidiary. Although, Japan slowed from the strong performance last quarter, we supported multiple tender offers and management buyouts. Revenues in financing and solutions were up markedly. ECM revenues doubled on the back of offerings to sell cross-shareholdings while DCM executed many large insurances including SoftBank Corp’s bond type class shares, Sekisui House subordinated bonds and INFRONEER Holdings green bond-type class shares a first in Japan.

Please turn to page 14 for non-interest expenses. Group-wide expenses were roughly flat at JPY350.3 billion. Compensation and benefits were unchanged at JPY184.7 billion, although bonus compensations increased in line with performance. As mentioned severance related expenses declined from last quarter. Commissions and floor brokerage increased due to high trading volumes, but other expenses declined 6% on lower professional fees. Please turn to page 15 for an update on our financial position. The table on the bottom left shows Tier 1 capital of JPY3.4 trillion, a decrease of approximately JPY150 billion from the end of June. In addition risk-weighted assets declined by JPY900 billion to JPY19.2 trillion, resulting in a Tier 1 capital ratio of 17.6% and the common equity Tier 1 ratio of 15.7% both roughly the same as last quarter.

That concludes our overview of our Q2 results. To sum up, despite the market volatility this quarter, we achieved annualized ROE of 11.6%, the second quarter of results to consistently achieve 2030 quantitative target of ROE of 8% to 10% or more. ROE of 11.6% is the highest since the quarter ended December 2020. At that time wholesale accounted for 60% of three segment income before income taxes, but now earnings are well-balanced across three divisions giving us a higher quality ROE. Recurring revenue in wealth management and business revenue in investment management, both of which are sources of stable revenues have increased by nearly 80% since the 2020 December end quarter lifting our repeat business baseline ROE. We have also diversified our revenue mix in wholesale by growing our equity products and securitized products businesses into second and third pillars to complement our macro products business.

In October, both wealth management and wholesale slowed down from the strong Q2 as clients increasingly sat on the sidelines given various political events. That said wealth management revenues are still trending at a high level, contributing to baseline ROE while wholesale revenue diversification continues. As demonstrated in second quarter, we will continue to control costs and take on appropriate risk in line with market conditions as we aim to boost our bottom line. Thank you very much for your continuous support.

Q&A Session

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

Masao Muraki: SMBC Nikko Securities. This is Muraki speaking. I have two questions. First of all page 11. This time as you had explained, in Japan a large ECM deal was gained and performance was strong in Asia. And that applies not just to, wholesale but to wealth management as well. Are these performances sustainable? ECM, when I read the press releases, volatility impacted in and after August, so therein after it hasn’t been so strong despite the strength in July. But regarding Asia, stimulus package in China made a contribution. And in comparison to recent quarters, profits in Asia seem to be stronger. What is your forecast for the months and years ahead? That’s my first question. My second question is on capital policy. Regarding share buyback, what kind of debate had taken place to reach the conclusion not to buy back shares?

And as you write in your report, CET1 ratio target maximum, regarding the study of setting the maximum where are you in terms of your discussions? Thank you.

Takumi Kitamura: Thank you very much. On your first question of ECMs in Japan and whether such performance is sustainable, there are many in the pipeline including large deals and euro-yen CD with rate increase. These are some of the areas we are injecting efforts into. In this area competition is becoming intense but in the selection of lead managers, we’re doing our pitch so that we’re not impacted by competition. And in terms of pipeline, there are several potential deals and we wish to realize those potential deals in the pipeline. Another issue is selling of policy holdings and we think that the level of sales will remain high. Nomura will continue to support the capital policies of our clients. So that’s my response regarding sustainability of ECM deals.

Now on to Asia. If we look at the past track record, FX reemerging and credit, they have been the core of our business. More recently, in addition, we have begun to see strength in equity, equity derivative business. And another area is IWM, International Wealth Management. So with the addition of these businesses, we’re seeing higher diversification of revenue sources. In the quarter that has just ended, FX emerging made a comeback, which was an area where we had been struggling and the equity team is becoming stronger. Muraki-san, as you have rightly pointed out, Chinese equity, Hong Kong equity boosted but was there a tailwind? I wouldn’t deny. But I think more had to do with diversification of revenue sources and widening coverage in terms of products.

And those factors delivered results. And on your second question, buyback. Basel 3 will kick in March next year. FITB impact will have to be evaluated as the impact has become more visible. On the other hand, there are other things on our mind. So we’re not denying share buyback as an option. But as we think about many elements, this time we decided not to. But on the other hand, 50% or higher total payout ratio, this has been the external commitment that we have made. So as we proceed into the second half, we will continue to consider such options. And CET1 ratio maximum ceiling Basel 3 impact is being objectively assessed. Frankly speaking, Basel 2.5 versus Basel 3, the behavior is different. In the case of Basel 3, we would like to monitor more closely.

Not to say that we will be on the sidelines for a year or two but for the time being we would like to observe the situation to think about what range would be appropriate for our firm. So next fiscal year — at early timing in next fiscal year we are hopeful that we would be able to set the ceiling. In terms of the buffer — not the buffer but Tier I or SET I range, we will be studying that and to what extent do we do or not do buyback those are some of the items that we will continue to consider. Thank you.

Masao Muraki: Thank you very much. I’m not sure whether I’m supposed to ask but you said you’re thinking about many other things as well. Is that something to do with the regulatory authorities? Or are you thinking about investments?

Takumi Kitamura: Wholesale performance is significantly improving. So, in the short run we may allocate capital to such areas. And we’ve been talking about inorganic opportunities and we are continuing to pursue such opportunities.

Masao Muraki: Thank you very much. Your responses were very clear.

Operator: The next question comes from Watanabe-san from Daiwa Securities.

Kazuki Watanabe: Hello. I am Watanabe from Daiwa. I have two questions. First, regarding fixed income business of GM, major U.S. players 2% decline year-on-year, but in your case plus 32% in your case, compared to U.S. peers what was the factors of outperformance of FIC revenue for you? And the second question is related to Wealth Management. In the July-September quarter, what was the monthly revenue trend? Could you comment on that? And also what was the impact of the plunge of market in August? And how did you address that situation in August? Thank you.

Takumi Kitamura: Thank you very much. First, regarding fixed income on a year-on-year basis, we grew greatly, but that’s from the start of a low level last year. So, last year’s level cannot really be something that we can compare this year against. But as mentioned revenue diversification has progressed and that is a major point. Securitized products and others have increased in its level. And in Q2 in the area of FX and emerging, volatility went up but we could monetize in those businesses. Also in macro, our rates products which struggled last year, have gradually seen recovery of clients’ activities and especially, in Americas, client flow increased and that’s something that we could monetize. As a result on a year-on-year basis, we could achieve a significant improvement and we outperformed our peers and we could gain market share.

Regarding your second question, monthly revenue in July was the highest and August and September due to market factors monthly revenues were lower. And in July, we had multiple equity primary deals. So that contributed to our strong performance. And in August, as you know, in the early part of August, there was a plunge in the market. And when stock prices were low, some investors bought but there was a slowness in the market. So, we spent sufficient time explaining situation to clients. So, the situation in August is something that we could accept. And then in September, the market was not very clear in terms of the direction. At the Tokyo Stock Exchange and other exchanges the transaction volumes shrunk in market. So, July was the strongest followed by weaker months.

Thank you.

Kazuki Watanabe: Thank you very much for your answer. Regarding October onward for Wealth Management, what is the level of October compared to the July, August, and September?

Takumi Kitamura: So, we have just come out from October. I said there is slowness, but it’s not really slow. Overall, transaction volume has come down. So, we are affected by that. But as an operating environment, the environment is not so weak. So, the decline is not so big.

Kazuki Watanabe: Thank you very much for your answer.

Operator: Now, we move to next question. As we couldn’t confirm your affiliation, please state your company name and your name after hearing the unmuted announcement. Now, unmuted.

Natsumu Tsujino: BoA Tsujino speaking. I have two questions. First, you’ve been talking about equity and fixed income and the high performance in Q2. But since the beginning of October, assuming there has been change where have those changes occurred? Second question, ACI volatility has this time around delivered positive results, but you’re hedging and yet you are able to lock in significant gains. How is this being achieved? Is it discount rate of interest rates? And to what extent, did that contribute? It’s really difficult to understand why this large gain. Then in Q3, will it turn the other way around? Will there be a reversal? So interest rate the and the AUN increasing. So the positive factor of rate will come back in Q3. So is this JPY17 billion JPY18 billion, can you give us a breakdown of factors and how they contributed?

Takumi Kitamura: Thank you, Tsujino-san. Let me try to respond. The slight slowness in October was caused mainly by macro factors, equity and securitized products. Equity and securitized products are doing well, but since the beginning of October, forex emerging and rates there has been slight sluggishness in these areas. Rates trend is uncertain and dollar rate has become rather uncertain. So these are factors that we can’t avoid. And on this point next week, there will be the presidential election in the United States. And it is considered that it will take four or five days for the counts to be announced. And that’s taken into consideration by the investors, and they’re on the sidelines taking a wait-and-see attitude. But dry powder is piling up.

So in the second half, we think that there will be a comeback of activities in the market. And on ACI, I am not able to comment on the details. But the factor for markup. One, AUM has increased, partly driven by market factors, but their business is strong and AUM is increasing with investments increasing. Their business is strong. That has led to increased AUM. That part is difficult to hedge. So of course, that remains a gap. And rate decline, is one of the major contributors to the markup. It’s not why we do 100% hedge, on a fully hedged basis. So in the end this was positive. When rates go up, of course, it would go to the reverse direction. But as I said, it is partly hedged. So it depends on the degree to what extent will that deliver results.

Thank you.

Q – Natsumu Tsujino: This time in these numbers, is it half-half? What’s the breakdown? What’s the contribution of AUM increase? Is that the majority? Or do you think that the rate impact was bigger than AUM? Or is it difficult to answer?

Takumi Kitamura: Stock prices are going up. So AUM has increased, partly driven by stock price increase. And the business expansion also was a contributor. So, each factor had made impact. I cannot make a clear comment regarding the breakdown, but both factors were both significant contributors. Thank you very much.

Operator: Now we move to next question. As we couldn’t confirm your affiliation, please state your company name and your name after hearing unmuted announcement. Now unmuted.

Unidentified Analyst: I’m Ari [ph] from JPMorgan Securities. Can you hear me?

Operator: Yes.

Unidentified Analyst: Thank you. I have two questions. First question regarding wholesale’s cost/income ratio improvement. So 83% was achieved this time. Regarding top line the revenue diversification has advanced as you mentioned. So regarding cost reduction severance-related costs came down, but operational efficiency improvement and what is the progress of the core cost reduction? My second question is also related to cost of wealth management. So, non-personnel cost was reduced according to the explanation in the slide. But what is the content? And what more room for saving is there for wealth management’s cost? So those are my two questions.

Takumi Kitamura : Thank you very much for your questions. Firstly, regarding cost/income ratio of wholesale is it sufficient? No, we are not satisfied yet, but 83% was achieved this time. So as the direction, it is a positive direction. All along, we’ve had SRC-driven cost-saving initiatives, SRC initiatives, and out of SRC initiatives JPY 50 billion cost saving measures have been implemented already. So the effects of savings are now materializing. But at a large picture operating model change or IT architecture transformation such areas are where we have specific measures that are waiting to be implemented. So we would like to do more from here. So, overseas, there’s an inflationary environment. So various upward cost pressure is mounting.

But by suppressing such costs we would like to tightly control cost. Regarding wealth management, cost control compared to wholesale wealth management cost saving has been going ahead of wholesale. As we looked at all systems and various types of costs, we have eliminated what is not necessary. So JPY 20 billion of cost saving was identified and we have implemented measures to achieve that. And we are seeing the effect of that, but the review of wealth management cost was based mostly on the removal of unnecessary cost. But we are now in the next stage where we are revisiting the entire picture. For example, an operational front-to-back process review is conducted. For example, how much cost is being incurred in which department? So, from wealth sales partners to operating centers, we are looking at every detail in our efforts to change operational structure and such initiative has started.

So, we’re expecting the result to come out from such initiatives down the road.

Unidentified Analyst: Thank you very much for your answer. Thank you very much. I clearly understood.

Operator: Now we move to the next question. As we couldn’t confirm your affiliation please state your company name and your name after hearing unmuted announcement. Now unmuted.

Wataru Otsuka : It’s SBI Securities, my name is Otsuka. I hope you can hear me.

Operator: Yes, we can hear you.

Wataru Otsuka: Thank you very much. There’s an overlap with the question asked before myself. But wholesale cost ratio in your explanation Kitamura-san you said that there could be the issue of ForEx and revenue, but can we understand that this is sustainable? There was a sudden improvement between Q1 and Q2 so what would be the standard level?

Takumi Kitamura: Thank you very much. 83% cost ratio expense ratio in comparison to last year, it’s much more comfortable. We are controlling costs and this time around revenue increased which was a major factor. As I explained in the previous question-and-answer dialogue const control will be continued. Separate from the level of revenue we will steadfastly continue to implement cost control initiatives. If we can maintain this level of revenue naturally, the cost ratio is achievable. And there’s further room for reduction.

Wataru Otsuka: Thank you very much. Second question page 26. For six to three inflows of cash and securities they’re quite strong. 1649 for Q2. Can you explain the background factors for the strong inflows of cash and securities? I asked a similar question in your results announcement for Q1 but I repeat the same question.

Takumi Kitamura: Thank you. What’s the backdrop of money coming in? The business turnaround has made contributions to our performance. New customers acquisition of new clients is proceeding well. And when we look inside the impact from existing customers seems to be bigger. As a result of segmentation, per sales partner the number of customers has become more focused. So our partners can offer more so and comprehensive service to each and every customer. And in the end the satisfaction from our customers has improved. And our sales partners have been able to foster stronger trust with their customers. And these customers are customers with large asset holdings to begin with. So with the improvement of satisfaction and trust, they may choose to offer Nomura more money and workplace business.

With IB and with wealth management, they have a common KPI as they engage in business activities. As you know IB has a very robust franchise which will be leveraged to offer these solutions to our corporate clients. Human resources investment is an area where many of our customers have become keenly interested. So it’s become easier to offer our proposals and solutions. Of course, there are differences company by company and we are providing a customized approach depending on the requirements of our corporate clients. And also, alliance is expanding. So new introduction and sales is going on well.

Wataru Otsuka: Thank you very much. I have a follow-up question. Next page 27. Accounts with balance equity holding accounts. In this quarter 360,000 accounts with balance and 280,000 equity holdings accounts sudden increase. What was the reason behind?

Takumi Kitamura: LINE Securities were taken over by Nomura Securities. That’s why.

Wataru Otsuka: Thank you very much.

Operator: The next question is from Ban-san [ph] from Bloomberg Intellegence. Please go ahead.

Unidentified Analyst: Thank you very much. Regarding recurring revenue asset, I have three questions. First, revenue divided by asset. So when we calculate the ratio compared to the previous quarter the ratio has come up. And even when I calculate the average maybe that’s due to the change in the mix, but there was an explanation previously provided that the marginal return on asset does not go up. But was there the change in the mix that contributed to the improvement in the ratio? And secondly, seasonality-driven improvement recurring revenue, what kind of recurring revenue is seasonally driven? Would such recurring revenue seasonally driven go up in Q3 or Q4 as well as Q2? And then thirdly recurring revenue is steadily increasing.

But what is going to be the pace or speed? Is there going to be a major driver that will accelerate the speed of expansion? For example in the second half, there will be large IPOs. And when you have deal flows would it accelerate? And when workplace business becomes more active would it accelerate the recurring revenue? So what kind of changes do you expect will serve as the drivers that will accelerate the recurring revenue? Thank you.

Takumi Kitamura: Thank you very much for your question. Firstly, in terms of product mix significant change is not expected, as I believe, I explained, but it is not that, there is no impact. For example, private asset type or alternative type assets when they flow in then margin or return will go up. So the product mix had some effect. And regarding seasonal factors, so the semiannual fee that we receive in September and in March, we receive a semiannual fee in fourth quarter and second quarter, there is a tendency of boost from the semiannual fee, because of the timing of receiving such fees. And from here, how do we further increase the revenue? We have advisory services which we would like to strengthen further. Rather than pursuing transactions, we would like to closely manage clients’ portfolios and provide advice.

So when customer satisfaction or trust on us grows then we expect them to shift more assets to Nomura. In the past transactions with Nomura Securities, centered on flow or equities transactions, but I believe, there is a gradual shift. But by increasing the level of our services, we could expect customers to shift their portfolio more to Nomura. That is going to be the biggest driver.

Unidentified Analyst: Thank you very much. I understood.

Operator: The next question is by Citigroup Securities Niwa-san.

Koichi Niwa: This is Niwa of Citi are you receiving my voice?

Operator: Yes, we can hear you.

Koichi Niwa: Thank you very much. I have a couple of questions. First M&A. Another question wealth management segment. So one question each. First M&A targets. To date, at large meetings you talked about the asset management area being the target of M&A. Is that the right understanding? And if possible, what’s the missing piece for Nomura? The reason, I ask this question is recently in alternatives, there have been some attractive deals. And recently, large financial institutions asset management M&A appetite has risen quite significantly. And yet, I think, there are too many players. Do you still want to go in? So that’s my first question. Secondly, in wealth management new acquisition new customers. My question will overlap with Otsuka-san’s question.

But in the previous quarter you talked about private wealth management high net worth and you’re doing well in terms of acquisition of new customers through reference. And when we just take a look at the acquisition of new customers the number seems to have gone down. Is this a one-off trend? Or do you think that you’ve gained enough new customers so that there will be a slowdown? Or do you still have more room for increase in number of customers?

Takumi Kitamura: Thank you very much. First of all, on the target of M&A, asset management is that, a target area? Yes, it continues to be our target area. What’s our missing piece? NAM is the biggest asset management company in Japan. In terms of foreign equity management, we are proud to have a certain track record but the focus is limited. That taken into consideration, I think, it’s right to say that, the rest is the missing piece. And of course, we’re interested in alternatives, but valuation-wise, we are watching at the expensive price. So where is the market, what’s the opportunity, and how much room do we have in terms of our capital? We will continue to monitor the situation. On the acquisition of new customers, it’s not that we’re trying to build up the number of customers.

Our priority is rather than seeking maximization of the number of customers we want quality customers. We want to attract quality customers. We want to offer services to quality customers. As I already mentioned per partner the number of customers one partner covers has been reduced. So that means that the time each partner spends per customer is longer. So more services are being provided to customers and there’s higher satisfaction so much so that we want our customers to refer us to friends and families. And the partners have more time. So when I talk with partners I think there is more of a mood to try to cultivate new customers. So in first half the opening of new accounts has risen quite significantly. You said that there’s lack of visibility and that’s something that we need to think about.

But we will continue to expand the coverage of our customers.

Koichi Niwa: Thank you very much. Sorry, I haven’t done enough homework, but on M&A opportunity. You are the biggest company in the sector. But in terms of customers, I don’t understand where the customers are, in terms of new customers who still don’t have a transaction with Nomura. Do you think that the customer number can grow double, triple of where it lies today?

Takumi Kitamura: Thank you very much. It’s also partly due to the segmentation of our customers. But to a certain extent, yes, we have customer coverage. But what about the potential? I think there still is huge potential. Maybe a customer has opened an account but not deposited much money. And there are inactive customers. So this customer has an open account and we want to attract the customers to do more transactions with Nomura. And new emerging customers who are about to become the next-generation high net worth we want to reach out more to such customers too. For example, one area we are focusing on is workplace. I think this could become a gigantic market. And Niwa-san you have observed overseas markets so you know well the characteristics of such segments.

And there is enormous potential in such a market. So we will continue our approach to the workplace business and reach out to those customers. We’ve been able to reach out to customers, but there still remains areas where we haven’t yet been able to reach out.

Koichi Niwa: Thank you very much. That was a clear answer. Thank you.

Operator: It’s time to finish. We’d like to conclude the question-and-answer session. If you have some more questions please ask our Nomura Holdings IR department. In the end, we would like to make closing address by Nomura Holdings.

Takumi Kitamura: Thank you very much. So the Q2 result was pretty strong. As we analyze our performance from various perspectives and for example in wealth management PTI margin over the last year we have seen a great progress. Looking back on the past year there has been a tailwind of market and we do understand that. But more than that our own measures took effect and resulted in numbers. For wholesale has been struggling for a while but we are starting to see a bright sign in wholesale even though we are not satisfied with where we are. 11.6% of ROE you would wonder whether it is sustainable or not. So we would like to deliver such a level of number in a stable manner. So for that we would like to diversify revenue and generate high-quality revenue while at the same time controlling cost and risk. So we would like to do our best to deliver the good performance and thank you for your continued support. Thank you.

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