Nomura Holdings, Inc. (NYSE:NMR) Q4 2024 Earnings Call Transcript

Nomura Holdings, Inc. (NYSE:NMR) Q4 2024 Earnings Call Transcript April 26, 2024

Nomura Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, everyone, and welcome to today’s Nomura Holdings Fourth Quarter and Full-Year Operating Results for Fiscal Year Ending March 2024 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. The 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 achievements 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 market 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 fourth quarter and full-year of the fiscal year ended March ’24. Please turn to Page 2. First, our full-year results. As you can see on the bottom left, group net revenue increased 17% year-on-year, ¥1,562 billion. Pretax income grew 83% to ¥273.9 billion. EPS was ¥52.69 and ROE for the year was 5.1%. The first half of the year kicked off with the failure of regional banks in the U.S. and issues around the U.S. debt ceiling. This, coupled with monetary tightening of central banks around the world and spiking oil prices led to continued uncertainty in fixed income markets. Equities markets were generally solid, but concerns around the higher rates for longer resulted in a correction centered on hi-tech stocks towards the end of the half year period.

As we moved into the second half of the year, inflation in the U.S. eased and we started to see an exit from the sharp rate hikes in the past two years. In 2024, the Fed hinted at three rate cuts leading to robust trading among market participants. In spite of some market jitters since mid-March, the business environment has generally been favorable. Interest in the Japanese market surged over the past year due to deflation ending, speculation of a shift on BOJ policy and structural reforms to boost profitability of Japanese companies. The Nikkei hit a record high and introduction of the new NISA scheme in 2024 looks to have finally prompted a full-fledged shift from savings to asset building. Against this backdrop, three segment income before income taxes increased 123% to ¥236.8 billion underpinned by gains across all business divisions.

Retail income before income taxes grew 3.7x to ¥122.7 billion, representing the highest level in eight years since fiscal year ’15-’16. Sales were higher across all products and services, thanks partly to the market rally, but also to the major realignment of our people in spring last year delivering results quicker than expected. Our shift to an asset management recurring business model is progressing smoothly. Stable recurring revenue has roughly doubled in the past eight years, while divisional costs have declined by nearly 10%, resulting in an increase in our recurring revenue cost coverage ratio from 28% to 55%. Investment Management has seen steady growth in its asset management business. Annual net inflows were ¥3.8 trillion, taking assets under management to ¥89 trillion.

Both numbers are trending above our fiscal year ’24-’25 KPI target. Business revenue, which represents stable revenues, increased 14% year-on-year. Investment gains doubled over the past year. As a result, pretax income increased 38% year-on-year to ¥60.2 billion. Wholesale income before income taxes increased 84% to ¥53.9 billion. Our international business faced challenges during the first half of the year, but momentum picked up in the second half. Global markets net revenue increased 8% year-on-year on improved performance in spread products, such as securitized products and credit as well as in equity products. Investment banking was up against a difficult environment as global fee pools remain depressed, having dropped by over 40% since the peak in fiscal ’21 and ’22.

That said, we leveraged our robust client base in Japan and our global franchise to support many transactions throughout the year. As a result, investment banking net revenue was at the highest level since the year ended March ’17, when comparisons are possible. Today, we also announced a dividend of ¥15 per share for shareholders on record as of the end of March. This translates to an annual dividend of ¥23 per share. Next, please turn to Page 3 for an overview of our fourth quarter results. All the percentage figures I mention from now on refer to quarter-on-quarter comparisons. Group net revenue increased 11% to ¥445.1 billion and pretax income grew 17% to ¥92.1 billion. Net income was up 12% to ¥56.8 billion. EPS was ¥18.02 and ROE 6.8%.

As you can see on the bottom right, three segment income before income taxes was ¥77.1 billion as retail revenue growth momentum continued since bottoming out in the April to June quarter of ’22 and the asset management business in Investment Management performed well. Please turn to Page 6 for an overview of results in each business, starting with Retail. Net revenue in Retail grew 6% to ¥108.8 billion and income before income taxes increased 21% to ¥38.8 billion. Stable recurring revenue reached a record high of ¥41.8 billion, partly driven by advisory fees booked every six months. Our recurring revenue cost coverage ratios for the quarter was 60%. Flow revenue reached ¥67 billion. We saw strong growth in sales of equities and investment trends, thanks to the successful realignment of our sales partners, combined with Japan stock market rally and uptick in investor sentiment on the back of introduction of the new NISA scheme.

Please turn to Page 7 for an outline of sales by product. Total sales jumped 33% to ¥6.2 trillion. Sales of equities surged 43% to ¥4.5 trillion and sales of secondary stocks grew strongly. Investment trust sales were up 26% to ¥760 billion. As shown on the bottom right, we booked inflows into publicly offered funds that invest in private equity and global equity funds. Please turn to Page 8 for an update on progress against KPI targets. Net inflows of recurring revenue assets were ¥103.5 billion, as shown on the top left. Although the corporate client section reported a slowdown in inflows as clients sold to lock in gains, net inflows, excluding this were ¥235.3 billion, demonstrating continued strong momentum. Recurring revenue assets reached a record high of ¥23 trillion as you can see here on the top right.

This led to an uplift in stable recurring revenues. Flow business line numbers shown on the bottom left stood at approximately ¥1.69 billion, which is above our KPI target for the year ending March ’25. In addition to the positive impact of realigning our sales partners, the market rally and introduction of new NISA scheme led to more investment opportunities and uptick in trading line clients. Our workplace business is trending well. We now provide around 3.63 million services. Next, please turn to Page 9 for Investment Management. Net revenue increased 12% to ¥43.6 billion, and income before income taxes grew 14% to ¥17.8 billion. As you can see on the bottom left, stable business revenue was ¥38 billion, the highest quarterly revenue since the division was established in April ’21.

The asset management business had a strong quarter, and Nomura Babcock & Brown continued the revenue growth with higher sales of aircraft leases. Investment gains was ¥5.6 billion, roughly unchanged from last quarter. Please turn to Page 10 for an update on the asset management business, which generates the division’s business revenues. The top left shows assets under management at the end of March at ¥89 trillion, marking the fifth straight quarter of record highs and trending well above our March 2025 KPI target of ¥75.8 trillion. On the bottom left, you see net inflows for the quarter of ¥1.1 trillion, of which the investment trust business booked ¥780 billion of inflows and the investment advisory and international businesses booked ¥350 billion of inflows.

Investment trust business booked ¥300 billion of inflows into Japan bond and stock ETFs and inflows of ¥260 billion into MRFs and other money market funds, underscoring a gradual buildup of individuals’ idle funds. Excluding ETFs and MRFs, we booked ¥230 billion of inflows, mostly into publicly offered funds that invest in private equity and global equity funds. The investment advisory and international businesses reported outflows from Japan equity funds amid the market rally, while internationally, we continued to book inflows into U.S. high-yield bond funds and India equity funds. On the bottom right, alternative assets under management grew steadily to ¥1.9 trillion, driven by private equity funds I just mentioned. Please turn to Page 11 for an update on our Wholesale business.

Wholesale net revenue grew 17% to ¥254.2 billion. The first half of the quarter started off with an optimistic mood among market participants over expectations of rate cuts. But towards the end of the quarter, inflation reemerged and there were growing concerns over geopolitical risks. Amid this, we were able to support our clients in both global markets and investment banking booked stronger revenues. As you can see on the bottom right, all regions posted higher revenues. Expenses rose 20% to ¥233.6 billion. In addition to higher variable costs in line with the performance, a number of special factors and the year-end factors also had an impact. Specifically, we booked a loss provision of around ¥14 billion arising from transaction failures with a broker counterparty, costs for equity compensation linked to our share price increase due to a rise in our share price.

And for year-end factors, cost for decommissioning, IT and other intangible fixed assets increased. These factors resulted in a total cost increase of just over ¥20 billion. As a result, Wholesale income before income taxes declined 10% to ¥20.6 billion. Our fourth quarter cost income ratio was 92%, but excluding the special factors and the year-end factors I just mentioned, it was between 80% and 85%, which shows we have been able to keep costs under control. Please turn to Page 12 for an update on each business line. Global markets revenue — net revenue increased 19% to ¥204.4 billion. Fixed income net revenue was up 18% at ¥122.6 billion driven by an uptick in market activity in EMEA and the Americas. By product, macro products delivered stronger revenue.

The rates business revenue increased in EMEA and the Americas. On the improved performance of agency mortgage and loan contributions from SSA bonds in spread products, securitized products revenue grew for the fifth straight quarter. Credit revenue slowed in Japan due to a drop in foreign bond investments due to the sharp Yen depreciation and the AEJ revenues were also down due to the muted performance in the China market. Equities net revenue increased 20% to ¥81.9 billion. Equity products had a good quarter with Japan revenues increasing strongly on contributions from sales of shareholdings in Euro-Yen CB transactions. EMEA and AEJ also posted higher revenues. Please turn to Page 13 for investment banking. Net revenue grew 10% to ¥49.8 billion, which is the best quarterly revenue performance since the year ended March 2017 when comparisons are possible.

All these international regions booked stronger revenues. Although Japan slowed from a particularly strong prior quarter, revenues remained elevated. Advisory also slowed from a strong previous quarter, but as you see on the top right, we collaborated globally, and were involved in many cross-border deals. Financing and solutions revenues were up as ALF performance improved and international solutions transactions and sales of shareholdings in Japan contributed to revenues. Please turn to Page 14 for an overview of noninterest expenses. Group-wide noninterest expenses increased 10% to ¥353 billion. Compensation and benefits edged up 4% to ¥177.1 billion. Although bonus provisions were down, the increase was due to the higher deferred compensation I mentioned earlier.

Other expenses totaled ¥57.9 billion. This includes higher business-related third-party fees and the ¥14 billion loss provision I mentioned. Please turn to Page 15 for an update on financial position. The table on the bottom left shows Tier 1 capital of ¥3.5 trillion and risk-weighted assets of ¥19 trillion, giving a Tier 1 capital ratio of 18.2% and a common equity Tier 1 ratio of 16.2%. As such, our financial position remains robust. That concludes the overview of our fourth quarter results. To conclude, over the past year, each business was able to deliver steady results as we tapped into our strength in our home market with structural changes as a tailwind and we leveraged revenue opportunities in our international business. In 2024, we have seen a full-fledged shift in individuals’ money from savings to asset building as Nikkei reached a record high, the new NISA scheme launched and inflation appeared.

In just three months, the amount of sales of NISA through us is nearly the same as last full-year. In February, there were days when our contact centers fielded over 50,000 inquiries. This shows the increasing incredibly large interest there is in investing now. From April, we have changed the name of our Retail division to Wealth Management to better reflect the reality of the business. Although the market is going through a correction in April, it is in times of uncertainty like this that information and advice takes on greater added value and the role we have to play becomes more important. By providing comprehensive asset management services while operating in the markets, we have been able to maintain revenues at the level of the strong fourth quarter.

In Wholesale, we have confirmed that our franchise can capture revenue upside as the markets recover. Revenues are growing in securitized products, equity products and risk-light businesses, such as investment banking and international wealth management. We have also made progress in diversifying our revenue mix. Fourth quarter revenues of approximately ¥250 billion was to some extent, inflated by Yen depreciation. But on a dollar basis, excluding currency translation, revenues have recovered to the level they were at two years ago when Central Bank’s started tightening. Business has been strong in April, driven by rates, credit and Americas equity products with revenues maintaining at fourth quarter level and the performance momentum continuing.

We continue to stringently manage our cost base. The ¥20 billion cost reduction target in Retail is likely to be fully completed by March 2025. And in Wholesale, we are implementing various cost reduction programs across front to back and have been able to mostly offset increased costs from strategic hiring and higher fixed cost due to inflation. We will continue to tightly control costs through structural reform initiatives. So that’s our fourth quarter and full-year performance.

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Q&A Session

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

Masao Muraki: SMBC Nikko Securities, Muraki. I have two questions. First, Europe, ¥14 billion loss due to counterparty failure of settlement. Can you elaborate on the situation? How did this situation emerge? Three years ago in the United States, due to credit to a certain client, loss was booked and you improved risk management. So in the context of counterparty failure, is that something that is impossible to avoid? That’s my first question. And second question, investment banking. This time, on Page 13, UKG, Applied Systems, since January, leverage loan markets resumed and leverage loan arrangement transactions were booked, which contributed to revenues. Since April, what has been the situation? Can we expect more of these transactions to come and continue?

And what about the revenues from proceeds of selling your holdings in Q3 Denso with sales to retail that contributed to group revenues? But are these mainly broad transactions in terms of contributions? Can we expect that proceeds from sales of your holdings will increase? What is the expected opportunities since April?

Takumi Kitamura: Thank you very much. To answer your first question first, in February of this year, U.K. subsidiary, Instinet Europe encountered this transaction. U.K. broker mandated us for sales of equity, but there was failure of settlement payment in our transactions with this broker. We have settled all of the transactions with this broker and all of the losses have been booked in Q4 emerging from this transaction, and we are currently studying how we can recover the losses — the credit. Overseas, there are some incidents of failure of settlement. And it’s not so rare that this kind of situation occurs ordinarily between brokers with whom we do various transactions. This could happen from time to time, and it’s not so extraordinary.

But failure by broker breaking the transaction through lack of performance of payment is a rare case. And it’s not a fact that we are responding to all of these incidents. But as far as this broker is concerned, we’ve booked all of the losses in the Q4. Muraki, you said the previous case, but the nature of this incident is completely different. And the broker is a broker registered to the authorities of the government, and so it was a very rare case. Responding to your second question, leverage finance. As a market, finally, we are beginning to see signs of revival. In March, many potential transactions popped up. Financial sponsors began to become more active. Most of these transactions were for refinancing purposes, which is the character of the deals, best effort-based deals.

So refinancing our proportion. So in terms of the deals, they were quite attractive. So is this going to become a big trend? And are we seeing many similar transactions in the pipeline? We wouldn’t go as far as to say there are many in the pipeline, but we are beginning to see signs of recovery. So we are beginning to have optimistic views and prospects. Regarding the sales of our policy holdings, we have high expectations. Corporate governance code has been made robust and each companies in Japan’s corporate sector are proceeding with selling their policy holdings, as you are well aware. Nomura’s strong franchise in Japan means that there is high likelihood that we will be engaging in such business opportunities. So in that sense, we have bright prospects for such business opportunities.

Thank you.

Masao Muraki: Thank you very much.

Operator: The next question comes from SBI Securities, Otsuka-san.

Wataru Otsuka: Thank you. I’m Otsuka from SBI Securities. I have two questions on two different things. First question, Page 11, Wholesale. Earlier, you explained about ¥14 billion of cost, but excluding that cost, 80% is cost-income ratio or 86% based on simple math. So for a couple of quarters, this cost-income ratio is relatively low or favorable in the fourth quarter. But I’d like you to elaborate on the factors. That’s my first question. So simply put, the revenue level was high. As a result, cost-income ratio came down. Is it what happened or product mix improved? What were the factors behind? That’s my first question. Thank you.

Takumi Kitamura: Thank you very much. Firstly, the ¥14 billion, which I mentioned and the deferred compensation impact actually existed. And for the officers, we are granting the deferred compensation. And it’s a deferral of compensation. So under accounting treatment, the recognition of expense is deferred. And as you are familiar, in the fourth quarter, our stock price increased. So the — in order to recognize the expense — so as we recognize the expense, due to stock price increase, the cost increased in a sizable scale. In addition, due to review of various systems, the IT systems and intangible assets were disposed off and that kind of costs are included. So when those costs are accumulated, combined together, it’s going to be a sizable number.

So that compared to 86%, which you mentioned, so the number would have been lower than that, so the lower part of the 80s, the cost-income ratio. And of course, revenue was good. So low level of cost-income ratio. The major factor is revenue because the cost-income ratio cannot be reduced just by cost savings. So indeed, it is a factor. The cost — revenue increase was a factor. But at the same time, we are taking company-wide efforts to reduce cost and wholesale is covered by the cost saving initiative. And as a result of cost control, excluding special factors, the cost–income ratio came down to a bit above 80%. Thank you for the first question.

Wataru Otsuka: My second question is about Page 27. Retail division stayed — so according to your explanation, the interest in investment has heightened. So could you elaborate on that remark? So firstly, for new accounts for January through March, what was the situation of the opening of new accounts, 19,000 accounts? So this level of new accounts, so what is the view of the management? So in the third quarter, it was 87,000. So the number of new accounts is up. So it’s a 14% increase. So, given the market environment, the growth could have been bigger in a way. So 99,000, is it considered as high from the management perspective?

Takumi Kitamura: Thank you very much. From new clients are coming to contact Nomura, and we are thankful. But we are not placing focus on the absolute numbers, even though new accounts are important, but we would like clients with potential to conduct transactions using us. So the opening of new accounts at the Retail division to be renamed Wealth Management from April, so to a certain extent, a certain size of customers are who we focus on. In this situation, 99,000 is the number. So for me, this is a satisfactory number.

Wataru Otsuka: Understood. And I’d like you to expand on the NISA scheme. So in January through March quarter, the NISA account opening based on the simple deduction — as a result of simple deduction, so from 1.78 to minus 1.75, then it’s 22,000. Is it the increase of new NISA scheme-based accounts increase? Yes, the buying starts in January. So some people have NISA account elsewhere. So the simple deduction calculation does not come to the new accounts opened under NISA scheme. But what my question is, so the simple deduction calculation, so 22,000 for the March quarter and the end of March, end of September, at the end of December, so it’s 59,000. So NISA started in January. But in December, the accounts — number of accounts seem to have increased. So the growth of accounts and the start of new NISA, what is the correlation between the two? I wanted to understand that relation. Thank you.

Takumi Kitamura: So you are asking about that delta, so from September to December and December to March. So the September to December delta seems larger, you mentioned. But of course, there are cases where clients opened up accounts. So for them to start buying in January, they are requested to open accounts before January. So the delta is bigger for September to December. Okay? So then — so from December to March, close to 1.8 million, so under new NISA. So you saw the buying activities that you described. Yes, so the new accounts opened this fiscal year. So it is not that they finished their activities in the fourth quarter, they will continue their buying activities. But what you mentioned is the main portion.

Wataru Otsuka: Okay, understood. Thank you very much.

Operator: The next question is by Watanabe-san of Daiwa Securities. Please go ahead.

Kazuki Watanabe: Daiwa Securities, Watanabe. I have two questions. First of all, Page 12, fixed income revenue. Mortgage-related products had led to this growth. But U.S. rates is not coming down. Do you think that income level can be sustained? And Q4 fixed income others, there was a spike. What is the backdrop? What are the reasons? Second question, ¥6.9 billion of noncontrolled equity losses, what’s the backdrop? And do you think that this could become a factor of volatility going forward?

Takumi Kitamura: Thank you very much. Let me take up your first question first. Securitized products, clearly, the market is coming back. For example, if you look at issuance in comparison to the previous quarter, there has been growth. So the market environment is improving. But is this true recovery? I think we need to monitor the situation more closely. For example, the market price recovery is one of the factors behind the improvement of performance. So we need to watch closely. But we will enter into a rate declining mode eventually. So we don’t think that the environment is unfavorable. In terms of inventory, we are constantly checking. And towards the end of March, there has been a slight increase. But partly because of market activity, we are seeing a rapid reduction of inventory.

So if our clients become active, I think we will be able to capture those opportunities promptly. The reason why others booked quite a large number, global markets, they are co-working with IB in client financing business. And the revenues from that business is included. And in GM, international wealth management booked for Asia, we are seeing steady expansion of this business. So from these businesses, we are seeing increase in others. And this is a technical point, but treasury function under my position, CFO, is constantly charging UF as internal interest rate. And it used to be relatively high. And towards the end of the quarter, treasury PM — part of the PM was reimbursed. That is included. And I hope I answered your first question. And your second question, noncontrolled equity.

We as a minority shareholder, why was this big? This is a technical issue. I’m not so confident that I’ll be able to persuade you. NAM is investing in a fund, variable VIE, and it’s a consolidated fund subject to consolidation. VIE is subject to consolidation. So 100% of income is booked and then the noncontrolled equity is deducted. And in the subject quarter, the profit of this fund was relatively high, and therefore, the gap was bigger than a normal quarter. It’s complicated, and some of the jargons might have been difficult to understand, but I hope you got my point. On your second point, mark-to-market, it’s mark-to-market and the fluctuation was big. Is that what you’re saying? Or there was contribution from your mainstream business, and that had led to this big number?

Well, to answer your question, the fund value — the fund performance improved. So as an outcome, the noncontrolling equity portion also rose.

Kazuki Watanabe: I understood very well. Thank you very much for the response.

Operator: [Operator Instructions] The next question is asked by Yaginuma-san from BofA Securities. Mr. Yaginuma, I cannot hear you.

Koichi Niwa: Hello?

Operator: Yes. Now, I can hear you. Sorry.

Koichi Niwa: This is Niwa from Citi. May I ask a question?

Takumi Kitamura: Yes, please go ahead.

Koichi Niwa: Regarding Wholesale and EMEA business, I have a question each. For my question regarding Wholesale is that the medium-term target is from 160 to 180. So fourth quarter result seems to go above that level. My interest is, is it a one-off in nature? Or is it sustainable? But for you to be able to aim higher, what needs to happen? So is the profit sustainable? And what is your view on the upside? That’s my first question. My second question is about EMEA. Excluding the loan provision, still situation seems challenging. You are going to retain global franchise. But once again, could you comment on the positioning of the EMEA business? Thank you.

Takumi Kitamura: Thank you very much for that question. In the fourth quarter, as you mentioned, Niwa-san, as top line was robust, the biggest factor was — well, for a quite a while macro-related businesses, especially rates that were challenged, but they came back. The business came back. As a result, revenue recovered. In addition, the last couple of years, we have placed focus on equity product and securitized products and credit, and they have constantly grown. So in that sense, this momentum is expected to continue. Also, IWM, International Wealth Business is — it’s growing steadily. So revenue contribution is expected there. The last couple — or last few years, over the last two years or so, so including the first half of this year, the situation has been challenging, as you know.

And this time, in the fourth quarter, the numbers in U.S. dollar basis, so it’s slightly above the fourth quarter number two years ago. So finally, through the — after going through that tough situation, we have come back to where we stand now. But as we look at our peers’ situation, the wholesale revenue level, our level does not seem inferior compared to our peers. So the capability of generating revenue is held by us. However, since breakeven point is relatively high, so when revenue comes down, then we lose bottom line profit, that’s the situation. So cost control is continued. And as mentioned, product line is being enriched and we are focusing on the recovery of rates business. And through such measures, we can expect continuity or sustainability of the performance.

And regarding EMEA, as you mentioned ¥18.8 billion of negative number, so minus ¥14 billion, then the number is negative. So our — so it’s a hub of our global business. So certain size of footprint will be retained in EMEA. And all along, in EMEA, we had limited revenue drivers. So we were overly dependent on rates business. And for a while, the rates business was not so spectacular. That was the reason for that stagnation. And the rates bond team now has the new leader who has got on board, and the team is being rebuilt. So we are starting to see the benefit and effect in the fourth quarter. So we have expectations for that part of the business. And we have depended on rates business, but we need to take countermeasures through that situation.

So we would like to increase revenue drivers, especially in Americas. Equity business is successful. So it is not that we are taking excessive risk but such businesses are what we are considering for expansion and also securitized products. In a globally consistent manner, we could conduct business. And from Americas, securitized products business in Europe could be monitored and overseen, and we are taking measures for that. So top line revenue drivers are going to be increased moving forward. So that the numbers will look better than the most recent numbers. That’s all. Thanks.

Koichi Niwa: Thank you very much. Regarding Wholesale risk asset control, could you elaborate on that? So 7.9% is the profitability. So value at risk is not used much. Then you have sufficient capital, then more capital could be allocated to go after more revenue from my view as an amateur, but from the viewpoint of accumulating revenue, what is your view on the usage of the risk assets? Could you give some more colors?

Takumi Kitamura: So thank you very much for your comment. So return or profitability on resource needs to be monitored all the time. And in the material, what we’ve shown is return on risk-weighted assets. Other than that, there are various resources such as leverage exposure and unsecured funding. And also, there are such resources though not necessarily regulated, so we are looking at various resources as we think about resource allocation. So if in the short term, if we find business opportunities, then temporarily, some funding will be allocated. So most important thing is to manage resources with discipline.

Koichi Niwa: Thank you very much for your explanation.

Takumi Kitamura: So that question was asked by Niwa-san from Citigroup Securities.

Operator: [Operator Instructions]. The next question is by SMBC Nikko Securities, Muraki-san. Please go ahead.

Masao Muraki: If possible, I have one additional question, I wish to ask. Today, BOJ Governor’s press conference was done, and he said that the rates will be hiked up to neutral level, money market fund. At what rate will there be revival? And then if it’s revived, you can expect significant amounts of funds. But as a trigger of cross-selling in wealth management, what are the hopes?

Takumi Kitamura: Thank you for the question. At the moment, money market fund, we don’t have that at the moment, frankly speaking. On this point, unless rates come higher, it would be difficult. But then at what level, frankly speaking, it’s very difficult to respond. I don’t know. Is it money fund or Nomura Trust Bank, which is a separate subsidiary? We are studying the possibility of accepting deposits. So in terms of idle funds, will they go to MMF or deposits for tentative parking of idle funds? If rates come higher, we are hopeful that idle funds begin to move around. Then within Nomura Group, for example, they could be used to purchase variable products or sell those products to purchase something else, there could be more flexibility and more action. So there are such hopes. I’m not sure whether I’ve been able to respond to your question, but that’s where we are.

Masao Muraki: Thank you very much for your response.

Operator: [Operator Instructions] As there is no more question, we would like to finish question-and-answer session. Now we would like to make the closing address by Nomura Holdings.

Takumi Kitamura: Thank you very much for your participation today. So regarding the performance, what we have done over the last several years, our efforts seem to have gradually delivered results, especially in Retail division. Revenue grew greatly, and the cost control has been effective. So compared to last year, cost is — has increased only by 5% and bottom line profit increased by 3.7x. So we see the result. As for Wholesale, which has been challenged in macro business, but we see recovery and the product lines that have underpinned the Wholesale have become solid. So — and the revenue is becoming more diversified. So moving forward, of course, market environments and especially geopolitical risks have to be monitored closely.

But if anything, our view is optimistic. Here at Nomura Group, in December 25, next year, we are celebrating our centennial anniversary. And as we do so, the founding principle and corporate philosophy will be cherished. So that — and we — in this situation, we created a purpose, we aspire to create a better world by harnessing the power of financial markets, that is the newly created purpose of Nomura. So compared to our peers, our purpose is longer, but it’s a specific purpose. And to achieve this, we will focus on our areas of competitiveness, pursue our — this time, we’ve been talking about situation by business, but we have — the collaboration across the business divisions will be the key for us. So we’d like to pursue added value by — through collaboration, and we’d like to proactively invest in growth areas and control costs stringently in order to raise our corporate value and achieve sustainable growth.

Thank you very much for your continued support. Thank you very much once again for your participation.

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