Daiwa Securities Group Stock

Thank you very much for waiting, investors. We appreciate your participation today in the FY 2026 Second Quarter Financial Results Conference Call of Daiwa Securities Group Inc. despite your busy schedules. It is time, and we will begin the conference call.

Joining us today from Daiwa Securities Group Inc. is Executive Managing Director and CFO, Kotaro Yoshida. I am Kana Nakamura, Head of the IR office, and I will be moderating today's proceedings. Thank you for your attention. First, CFO, Yoshida, will explain the financial results for the second quarter of FY 2026. We will accept questions from participants after the explanation is concluded. Please note that today's conference has also been streamed by the Internet and is open to the general investors.

Now we will begin the explanation.

Hello, everyone. This is Yoshida from Daiwa Securities Group Inc. Thank you very much for taking time out of your busy schedules to join our telephone conference today. Today, I would like to review our second quarter financial results for FY 2026 announced earlier today, following the presentation deck available on our corporate website.

Please turn to Page 4. First, I will summarize our consolidated financial results. Percentage changes are compared to the first quarter, the previous quarter, FY 2026. Net operating revenues were JPY 223.9 billion, up 1.6%. Ordinary income was JPY 78.2 billion, down 11.2%. Profit attributable to owners of parent was JPY 51.4 billion, down 8.8% and annualized ROE stood at 11.3%.

During the second quarter, despite headwinds from market conditions, we steadily accumulated stable earnings underpinned by stock-based recurring revenue assets. Wealth Management division at Daiwa Securities fund wrap services and equity investment trust continue to see capital inflows, driving asset-based revenues to a record high of JPY 38.3 billion. Asset Management division, sustained fund inflows lifted AUM to a record high. However, ordinary income declined mainly due to lower capital gains in alternative asset management.

As for Global Markets, it solidly captured domestic and overseas client flows, though profit decreased due to lower revenues in overseas FICC. Global Investment Banking achieved profit growth driven by debt underwriting and domestic M&A. The interim dividend is set at a record high of JPY 39 per share, representing a dividend payout ratio of 50.3%.

Please turn to Page 8. Base profit, our KPI for stable earnings as set out in the medium-term management plan reached JPY 62.3 billion, up 41.9% year-on-year. Base profit remained on par with the previous quarter. On a cumulative basis for the first half, it totaled JPY 125.2 billion, reached over 80% of our medium-term management plan target of JPY 150 billion.

Please turn to Page 11. I will now explain our consolidated statement of income. Commissions received totaled JPY 137.7 billion, minus 4.0%. The breakdown of commissions received is detailed on Page 25. Brokerage commission was JPY 26.4 billion, down 24.4%. Underwriting and secondary offering commission was JPY 11.7 billion, down 31.2%. Distribution commission was JPY 7.7 billion, down 16.4%. M&A-related commissions, JPY 15.1 billion, up 20.5%.

Please turn to Page 12. SG&A expenses were JPY 152.9 billion, up 7.1%. This increase was primarily due to the consolidation of ORIX Bank, which resulted in higher trading-related expenses, personnel expenses, office costs and depreciation.

Please turn to Page 14. Total ordinary income from overseas operation was JPY 7.6 billion, down 44.6%. However, it reached JPY 20.4 billion for the first half, marking an all-time semiannual high. By region, Europe returned to profitability. Asia and Alcanna posted lower profits, reflecting declines in equity revenue and equity method investment income compared to the strong first quarter. Americas recorded lower profits due to the reduced revenue in FICC.

Next, I will review performance by segment. Please turn to Page 15. First, the Wealth Management division. Net operating revenues were JPY 99.2 billion, up 12.5%. Ordinary income was JPY 39.7 billion, up 6.6%. Capital inflows from clients continued on the back of progress in total asset consulting leading to an accumulation of asset balances, primarily in equity investment trusts and fund wrap services.

While floor-based revenues declined due declined due to the market volatility, asset-based revenues expanded steadily. By product equities, revenues declined by JPY 6.2 billion, reflecting a decrease in equity trading for both domestic and foreign equities compared to Q1. Fixed income captured investment demand amidst rising interest rates, maintaining solid revenue levels. Wrap-related revenues. Met client needs for stable management and portfolio diversification increased by JPY 1.6 billion to JPY 20.8 billion, setting a new all-time high.

Asset-based revenues set a record high of JPY 38.3 billion, driven by ongoing net inflows into equity investment trust and fund drops. The fixed cost coverage ratio of asset-based revenues in the Wealth Management division rose to 128.4%, and the total cost coverage ratio increased to 82.1%. Net asset inflows totaled JPY 312.6 billion. The individual segment maintained net inflows for the 11th consecutive quarters with new fund flows consistently originating from yen time deposits in addition to equity investment trusts and fund wrap services. Please refer to Pages 28 and 29 for detailed figures.

Please turn to Page 16. Besides present sales and distribution amount by product in the domestic wealth management division. Wrap Account Services, contract value was JPY 418.2 billion. The net increase was JPY 294.6 billion, both reaching record quarterly highs. Contract AUM climbed to an all-time high of JPY 6,946.9 billion. Equity Investment Trust sales volume was JPY 502.7 billion. with redemption remaining low. The net increase stood at a high level of JPY 165 billion. For RAP services and early equity investment trust reached JPY 459.6 billion, marking an all-time quarterly high.

Please turn to Page 17. This slide shows the result of Dionex bank. Net interest income, et cetera, came to JPY 13.4 billion, up 2%, and ordinary income was JPY 7.8 billion, up 8.5% was record highs. Deposit balances declined from the end of the previous quarter as growth in time deposits, driven by our promotional campaign was more than offset by increased transfers of funds into security investments and withdraws of maturity proceeds.

Please turn to Page 18. This slide shows the results of Oryx Bank, which we began consolidating this quarter. On a stand-alone basis, Orix Bank posted ordinary revenues of JPY 24.1 billion, up 8.5% and order income of JPY 8.3 billion, up 20.5%. Its contribution to the consolidated ordinary income of the Wealth Management division was JPY 6.7 billion after deducting amortization of goodwill. The loan balance was flat compared with the end of the previous quarter as an increase in investment property loans and other loans was offset by a decrease in corporate loans.

Please turn to Page 19. We I will now explain the Asset Management division. First Securities Asset Management. Net operating revenues were JPY 22.9 billion, up 7.9%. and ordinary income was JPY 12.8 billion, down 18.3%.

Well, revenues increased on the back of a higher AUM during the period. Profit declined due in part to valuation losses recorded on certain assets. The AUM in publicly offered investment trust at Daiwa Asset Management surpassed JPY 44 trillion, reaching a record high.

Please turn to Page 20. Next, Real Estate Asset Management. Net operating revenues were JPY 12 billion, down 9.7%. And and ordinary income was JPY 9.8 billion, down 0.3%. AUM reached a new record high, reflecting the steady accumulation of assets. Ordinary income was broadly in line with the previous quarter, supported by stable AUM linked revenues and gains on property sales at Daiwa Securities Reality and Summit.

Please turn to Page 21. Next, Alternative Asset Management. Net operating revenues were JPY 3 billion and 1 income was JPY 1.2 billion. Capital gains declined due to lower gains realized from investment exits. In addition, Daiwa Energy & Infrastructure recorded losses on renewable energy-related investments.

Please turn to Page 22. Finally, the Global Markets and Investment Banking division. First, Global Markets posted net operating revenues of JPY 45.7 billion, down 15.1%, and owner income was JPY 11.1 billion, down 38.6%. In equity, while trading value in stock market declined globally, we steadily captured institutional investor flows and the performance remained solid.

In equity derivatives, despite lower volatility, we captured plant demand and both the number and the value of new trades increased. In FICC, domestic business remains solid as we steadily captured client flows, mainly in Japanese bonds and derivatives, even amid rising interest rates. Overseas, however, grand flows decreased due to rising U.S. interest rates and challenging postal management.

Please turn to Page 23. Global Investment Banking posted net operating revenues of JPY 23.4 billion, up 3.4% and ordinary income of JPY 4 billion, up 22.7%. Higher revenues from debt underwriting and the domestic M&A contributed. This concludes my explanation of our financial results for the second quarter of fiscal year 2026.

Let me make some closing remarks. In the second quarter, the steady accumulation of stable asset-based income supported of our results, enabling us to secure an annualized ROE of 11.3%. With market partially collecting, meet uncertainty about the outlook, flow-related revenues declined. And ordinary income was JPY 78.2 billion, down 11.2% from the previous quarter.

At the same time, we believe this quarter demonstrated that our earnings foundation remains solid as reflected in our base income level, even as tailwinds from the external environment temporarily weakened. Asset inflows from clients continue at a high level. Net sales, that is net inflows of equity investment trust and WAP account services reached a record high for a quarter.

Although client activity declined due to factors such as collection in the team stocks and the rising interest rates, we view it as a significant achievement that our net inflows which are the most important factor in growing our customers' assets over the medium to long term reached a record high.

Turning to the current situation. In the third quarter, even as market conditions fluctuate, we think that client demand for medium- to long-term asset building and diversified investment remains strong. Since the start of October, would management has continued to perform well. Meanwhile, Global Markets has been affected by market conditions, and is slower than in the second quarter. But in the Global Investment Banking, we are still building our deal.

In addition, Bank became a wholly-owned subsidiary of DaranextBank on August 3 and has been consolidated since the second quarter. The addition of lending capabilities will diversify our driven sources and broaden the range of solutions we can offer to meet client needs. Going forward, with Wealth Management at the core of the group's growth, we will achieve profit growth by deepening and extending our relationships with our clients.

We will also work to further expand asset management AUM and to create business opportunities as primary and secondary markets become more active. We'd like to ask for your continued support. This concludes my presentation. Thank you so much.

We will now move on to the Q&A session. [Operator Instructions] We would like to introduce the first question, SMBC Nickel Securities. Morales go ahead with your question.

This is Muraki from SMBC Nikko. I have 2 questions. First relates to Wealth Management and the other 1 relates to global market. So Page 17 about the next back. So because of the transfer of funds to Daiwa Securities, the deposit has come down. And in the previous page, in Page 16, in the Daiwa Securities, the equity investment trust and as the net inflow was record high. So is there a shift -- is there an acceleration of shift from savings to investment. Is that how we should interpret that?

So if you can explain the reason for the fund move as well as how sustainable business. The next question relates to the Page 22 about global market. In the past 3 quarters, the profit has been at a high level, but it has been on the decline and has been slow October onwards. But for the month of July, August, September and October, how has the revenue trended in those months? If you can give us more color, that would be appreciated.

Thank you very much, Marco, for that question. The individual customers. And also for the corporate customers, for both of them. So this move away from savings to investment. It is definitely accelerating and this trend has strengthened. If you look at the number -- there are some ups and downs -- but in terms of the customer inflow for the second quarter, it was JPY 310 billion. So in comparison to Q1, there was a slight decline.

But if you look at on a half-on-half basis, for JPY 800 billion for this past half last year, second half was JPY 900 billion. And also that last year's first half was JPY 700 billion in the second half of 2024 was JPY 700 billion. So actually, we're trending at a high level between JPY 700 billion to JPY 800 billion. Also in terms of the asset under management has been steadily increasing.

So of course, there are some impacts related to market the value and so forth. But in various areas, we are seeing this move away from savings into investment. So where that is most contiguous is in the equity investment trust and fund wraps. So in terms of the net inflows or net increase, net sales, it was a record high. So of course, the market environment was not necessarily a tailwind, but of course, the customers are looking at asset formulation more on the mid- to long-term basis. So the needs have been very strong.

So recently, our take is the customers' needs. It's about -- it's not so much of which products are they going to purchase. It's more about how they intend to basically structure their own assets and how -- so I believe the interest of the customers have shifted, especially for those high net worth customers, we believe those needs are becoming more prominent.

So given this into consideration, we are promoting this total asset consulting and a result of the fund drops and the equity investment trust have been chosen by the customers. So as for the Daiwa Bank, the deposit balance has come down and as related to that. Again, the cross-sales to securities has been promoted.

So for the second quarter, the corporate bonds and also JGBs, there has been more outflow to the bonds and also transferred to fund wraps. We are seeing those movements. If you were to look at 12 months ago or a year ago, so the -- some of the time deposit, which we collected about a year ago during the campaign, substantial amount has actually reached maturity in second quarter. So about 70% was the Daiwa Securities in terms of how they were able to retain. But 30% of the customers or the flow, they actually -- it was an outflow to other financial institutions.

So there was an outflow to the securities or also to other banks. So if you look at 3 months only, it was a negative balance. But from the perspective of increasing the total asset under management of the customers, we believe the strong momentum is continuing. So we're not exactly seeing change in the trend.

So your question related to how sustainable this trend is -- so more of this total, the asset consulting will be continuously promoted. And also, we would like to enhance the quality of consulting to the customers and hopes of gaining trust from the customers, which will lead to long-term relationship. So we would like to make sure that, that sustainability is maintained.

Also related to the second part of your question, -- so for the months of July, August and September trend, as far as equity is concerned, as you may know, back in July, the AI semiconductor stocks, there was a bit of a correction in the market. And there was a recovery a little bit in August. And again, it was down again in September. So as far as Japanese equity is concerned, the Nikkei average has come down for those 3 months. However, topics went up. so there were rotations of different names.

So, in the month of July and August, the volatility has come up. However, there has been a portfolio rebalanced. We have seen those both from the institutional investors and the individual investors. So on a relative basis, it was at a high level. So in terms of the proportion of July, August and September, it's about 40%, 30% and 30% in terms of the breakdown.

And as far as the FICC is concerned, Q2 across the second quarter, that is -- so as far as the domestic bond business is concerned, the revenue has increased in comparison to Q1. So the interest rate -- now that interest rate is trading positive now that we're seeing an inflationary trend. So there's more needs to or bond and those products with yield. So there has been more flow towards those products.

So, there has been rebalancing needs of the institutional investors. And we've been able to successfully capture those. So that is why the revenue has increased on a Q-on-Q basis. September, the month of September. So, in terms of the capital of the market, the American FICC business, the U.S. The treasury, the interest rate has come up and also with the discounting and the credit spread there has been some challenges in terms of the positioning.

Also with the rise in interest rates, the U.S. residential loans has come down. Therefore, there is -- because of the decline in the funds flow, there has been some challenges in terms of the mortgage-related businesses. So FICC in domestic and overseas combined together, it's about 40%, 40% and 20% in terms of the breakdown. It's just a rough breakdown, but that's where we are.

So, in comparison to the average of Q2, the month of October, of course, it is just the starting point. So, I'm just sharing with you the current image. So, it is a slow start, let's just say, for the month of October. That is all.

So as far as the global market is concerned, then the month of October, the interest rate has come down. So it's not a simple explanation then. So with the interest rate going up, that is what sort of impact it has. So it's not that -- so -- and that is correct. So it is not a simple direction. We should look at the customer flow and also the positioning in anticipation of those customer flow. So there's not necessarily the correlation with the interest rate ups or nets. So the overall flow, potentially, of course, there is a possibility -- so various events in autumn, after they are completed, we are hoping that we will get back to more of a normal mode. Thank you very much.

Mr. Muraki, thank you so much for your questions. Next questions are from soon, BOB Securities.

First, marketable securities. -- profit and losses from sale of marketable securities. As you mentioned, you included alternative assets, energy and infrastructure devaluation losses, additional losses were included. And for that particular item, that is a positive impact in the segment for the whole alternative particularly. So there are losses and profit gains mixed together.

So, what is the size of the losses for each one? And also it looks like tax looks high compared with the adit. So did you have some losses in the scale of some billion. So what is the image of the scale of the losses? And also, what are the specific assets for which you incurred various in Europe, in particular, I thought you cleaned them up industrial. So what are the types of assets that could generate buttonless in the future.

My second question down in October and compared with September interest rates internationally have come down. So compared with September, markets recovered, Am I right?

Thank you so much for the questions. In terms of the alternative asset management gains and losses from sale of marketable securities both gains and losses -- old marketable securities, PI partners. There was a big one. And also the energy infrastructure for the renewable assets, to do the specific losses and amount is similar to the number that you have mentioned. So, it's not the amount that you may season.

For renewable energy in Japan and internationally in both markets, relatively speaking, as fixed tariff generating income to generate stable income. That's the business model. But recently, due to the Middle East situation and global inflation the procurement cost, procurement price is increasing. This although the tariff is fixed, however, cost is increasing.

So overall, this business model is facing the difficult situation at the moment. from the beginning of this fiscal year. So with that situation, we have revalued the vast assets are, which we do every year. In this process, sometimes we have the variation of losses or impairment -- that's why we have impact from those valuation processes. But as we have been saying from last year, we have assets in Europe. and assets in other regions, and there were multiple of assets.

To your second question, strongness in October, it seems that interest rates have come down. The season is not strong for fixed income and equity because of the interest rates, as I answered the first person question, depending on the direction of the interest rates it does not directly impact the trading position directly . as you mentioned correctly, in the equity business, U.S. stocks, retail investor trading from August to September, the trading declined in volume, but just coming back at the moment for the U.S. stocks.

So it's been only 1 month. So we are off to a relatively slow start, but I think we can catch up. I hope I answered your question.

I'd like to move on to the next question. Hasan from Nomura Securities.

This is Sasaki from Nomura Securities. So my first question relates to Orix bank that you have newly consolidated. So as of end of September. So looking at the explanatory materials -- so the loan-to-deposit ratio was over 100% as of end of September. So the funding for Orix Bank, what are your thoughts going forward? So is there any sort of funding? Well, are you looking aside from deposit? So will you be doing financing within the Daiwa Securities Group. So that is the first question.

Also, are you talking about this the move away from savings into investment. You've talked about that. So I'd like to know about the Dionex band to Daiwa Securities. If the funds were transferred, what sort of impact would it pose on the revenue. So let's just say, the banks -- so they would have 1% or so revenue vis-a-vis the deposit. But once that is transferred to Daiwa Securities. So let's just say if it's changing to corporate bonds.

On a short-term basis, I believe the revenue will not go up on a short-term basis. So when the Daiwa to Daiwa securities, if the funds are moved, what sort of impact would it pose on the revenue of the group as a whole?

Sasaki-san, thank you very much for that question. On the Orban on a stand-alone basis, the loan-to-deposit ratio exceeding 100%. So that has been the case prior to consolidating Orix bank. So because of that situation, they were facing some challenges in expanding their lending. Right now, -- so on a combined basis, with the Daiwa Next bank in terms of the loan-to-deposit ratio, it's in the 60% range, 60% range.

So, what is the becoming the subsidiary of Daiwa -- so what our Daiwa next bank in the BOJ current account, they're already starting to use up for the lending for OraBank. So by leveraging on that, we believe there's still room to raise or enhance the loan-to-deposit ratio.

Also the second part of your question from the next bank to the securities, if the funds are shifted, how would that impact the revenue. Of course, if it sounds as a deposit or held as the bonds or securities or investment trusts. There are different ways that revenues could be posted. So we cannot paint it was across the board the same. But we do not actually look at the profitability per product. Therefore, we should gather more funds to this particular product. That is not how we consider.

Really boson to what are the needs and demands of the customers. and given the risk and return tolerance and also given the current state of the asset, we propose the best products and portfolio. That's how we proceed. And that is also reflected in the incentives of the sales person as well. So it is not the revenue of the profitability that they are incentivized to sell more particular products.

Also in terms of the profitability or the revenue generation, it may depend on the interest rate and also the equity share price ups and downs. So rather than proposing a single product to the customer, we are proceeding with the total solution provision. So the spread or the margin that we can have for the deposit as opposed to individual JGB. Of course, deposit appears to be higher.

But in terms of the GP, it could be considered as an entry point to further securities investment. So again, we'd like to propose products that are best fitted for our customers.

Just 1 point I forgot to ask. So you've talked about Akasaka Prince. So JPY 300 billion. So I think there has been immediate coverage, so would you be the arranger. And so you would just be providing the finance? Or would you also be making investment with your own funds? So that's just a follow-up.

So, I cannot comment on the individual deals. But as of today, what has been disclosed. So this particular property equity token, STO, about JPY 300 billion -- JPY 300 billion, so we will underwrite the ST and Daiwa Securities has been selected for that. So the securities, the demand towards real estate continues to be high. So by using the security token and more about smaller size retail, the products the needs continues to be high.

And also the property has a very well known. So we believe this is significant in providing various investment opportunities to diversecute these customers. so there are some information that has not been disclosed. So we would like to reframe for making -- providing you with further information. Thank you very much.

Mr. Sasaki, thank you so much for your questions. Next question from JP Milligan Securities. Sara, please go ahead.

Sato from JPMorgan Securities. Two questions. One, regulated capital ratio. Could you please update me on the outlook of the regulated capital. From the past, as you explained, due to the consolidation of ORIX Bank the impact is about 5% down. And then you have a cumulation profits. And by issuing 81 bond, you'd like to recover the capital ratio to around 16%. That's the expansion that we have been providing to us.

But you have consolidated or expand and goodwill amortization amount has been fixed and AT1 bond is prepared to be issued soon. So what is your outlook for the capital ratio. What is the target level and the timing at which you think you can achieve that target? Would you please update me on that?

My second question. Extraordinary profit in this quarter. gains from sale of marketable securities were booked in Bob, this is Credito -- and in October onward, it appears that you've been selling your stakes as well. So the similar size of gains are expected in the next quarter orward. But -- would you please explain if there is any change to the business partnership with Korian and does it indicate any change of your stance to them? And would you please give me the update on your thinking behind that as well.

Thank you so much for your questions. To your first question, the capital ratio. In the presentation that we distributed today, this is capital ratio as of the end of June, 21.04% and the Basel III finalized impact and Alex consolidation impact, preseen capital ratio, including all of that, as you pointed out, quirky, at the end of September, capital ratio is probably down to around 14% or so. entering the maintenance of the financial soundness and need to invest for future growth we'd like to recover some buffer capital.

So I'd like to gradually recover our capital level. Therefore, at 11:30 today, we have announced AT1 bond on the announcement and the amount of the funding, it depends on the needs from investors, but it's going to be probably JPY 100 billion to JPY 120 billion in that range. And also with the AT1 bonds and also annual profits will help recover our capital ratio.

Our AT1 issuance will increase the capital ratio by about 1%, and annual profit is going to increase the capital ratio by about 1%. That's the rough image. And we have to think about the pipeline for future investments. So we'd like to continue to monitor the capital level. And also relating to retailers returns -- in principle, there's no change to our capital return policy. We'd like to look at soundness of financials, gross investment needs and also returning to investors. I would like to strike a good balance among the 3.

And extraordinary profit, in 2019, we have started to form alliance with credit on -- but there's no plan to change our stance to the partnership. And FintaTec, which is a crypto asset backed bonds. That's the business that we work with them. And also Daiwa connect securities, we work with them as well in the partnership to defer customers to each other. So this alliance with them is going to continue.

To the second part of the answer. So simply compared with condition cost from TSE, has increased. So you need to control your total exposure? Is that the reason why you sold a part of your stakes. Business partnership with Credit Saison is always under the review on a regular basis. At the beginning, we wanted to work with them in varieties of business areas in the Fintetech and connect -- our partnership generated good results to some extent.

But there were some other businesses that needed some review will be visiting in some other business areas. Therefore, from that perspective, we've been living strategically held equity stocks, and we are considering capital efficiency. So we decided to -- our stake in them, which is mutually discussed.

We'd like to move on to the next question. SBI Securities, Okasan san, please.

This is Otsuka from SBI Securities. Yes, we can hear you. I'd like to ask 1 question at a time. The first question relates to the Page 16. about the wrap service and also about the equity. So I have a question related to Page 16. In the past 12 months or so, especially, it's about the how the ups and downs of the equities?

How do you actually observe these especially the Nikkei average, I think it's easier to refer to those numbers. So once Nikkei average rise. So there is a decline in the net increase when the Nikkei average drops, then the net increase recovers. So when the Nikkei average goes up, then the customers sell when it comes down, the customers are purchasing. So how should I look at this? So if I'm wrong, please also correct me.

So this net inflow of WRAP account service and equity investment trusts. So that's on what you mentioned, definitely, we do perceive that. So in terms of the investment trust, there's been -- if the general -- the price goes up, of course, some of the customers would choose to sell. But of course, if the general, the price comes down, then there will be less customers selling, okay.

So on Slide 28, it doesn't really coincide with the inflows and outflows of funds because you have other products and also primary solicitation. So it doesn't match on a quarterly basis, that is great. It doesn't match because there are various ways in terms of net asset inflows. We have primary products, new products. so we have the stocks and also some of the movement of the corporate customers. So if you have 1 of those sort of a mouse movement, it may actually move against the general trend. So it doesn't necessarily coincide.

Understood. The second question relates to corporate bonds. -- at Page 16. So this is domestic bonds. So I think this in growth JGB as well. So the past 2 quarters. So it seems as if the general level has changed. So on the back side, the IB, as you can tell from Page 23, the debt underwriting, I believe this is SoftBank, so I think that is related to that in investment banking. So, I'd like to ask about the debt size pipeline, shall we say, or the corporate size needs towards corporate bonds. From the investment banking side, is that demand rising? That is the second question.

I think what you outlined is true. -- domestically for the straight bonds and also for the institutional bonds in terms of the issuance last year and the previous year, it was about JPY 20 trillion on a full year basis. By the first half already, we have issuance of 13 trillion, if not JPY 14 trillion because the interest rate is expected to rise. So, the issues are actually trying to issue at the earliest ways possible ahead of that. So, basically gross investment that cannot be accommodated through corporate lending. They are also issuing the bonds, not just in the domestic but also for the overseas market.

Now for the pipeline, it is progressing higher on a year-on-year basis. So actually, it is increasing in terms of the number of cases and also with a number of deals and also in terms of the amount. So there's definitely a strong demand for funding. And in terms of the individuals, also in terms of the sales amount. So of course, that is the backside of the coin to some extent. So recently, there has been rise in needs for the JV for individuals.

So, for wealth management, so we are providing those stable yield products as well. So if that's the case then, so this -- I'm looking at Page 23, say, debt underwriting. So in terms of the revenue from -- my -- so considering the pipeline, we expect to see a rise here then. Is that correct? That is correct. So it's higher the underwriting amount, the debt-related commission should rise as well.

Next question from UBS Securities. Niwa-san, please go ahead.

I have 2 questions. One, base income, which is Page 8. My second question is on your outlook for the shareholders' return in the second half of the year onward. -- your first -- to our first question, which is base income. Both factors from the market are quite large, but it's been increasing for a while. But the level of base income appears to be going to be hitting the seating, reaching the peak. What is the outlook of the trend line of the base income?

So if I put optimistic hat, then Wealth Management has been the driver for the steady increase of the base income. So I should not really be concerned that much. But what is the confidence level of the contention of the increase of the base income? That's my first question.

My second question, directly speaking, I'd like to ask you on the buyback. Sato-san, you explained about the size of AT bond. But assuming that bond, probably, I should are not expecting too much for the buyback from your company. Are you going to stick with balance with M&A investments and other needs with the shareholder buyback -- so would you please comment to the extent you can?

Thank you so much always for your questions. Base income -- management, securities, asset management or asset management. So this is the total of the ordinary income of those. But in Q2 Wealth Management division of Daiwa Securities. So we talked about investment trust net increase has been doing very strongly. However, looking at Q-on-Q, the stock brokerage and investment trust sales income has been down by more than 10% Q-on-Q.

And Securities Asset Management AUM has been growing very steadily. However, there's one-off devaluation loss associated with Daiwa asset management where they conduct investment advisory business, together with JP life. And this is sort of investment of seed money from the R&D type of perspective. So there was some impact on the fluctuation of that.

So for the base income, this is impacted by the market environment to some extent. So there's always lactation like this. If you look at the graph on Page 8, there's no steady increase always in every year, although the fundamental trend is the increasing trend. But if you look at the Q-on-Q breakdown, there are some fluctuations always. So asset inflow, net inflow and AUM. So, we've been trying to focus on those and also customers AUM, the increase base income.

And also in the second quarter, what's included in base income is the contribution of the profit from ORIX Group, which is newly consolidated after deducting the amortization of goodwill. So with that included, we'd like to focus on expanding base income in the future.

And to your second question, shareholders' returns in the second half -- looking at the capital ratio, which is around 14% at the end of September and considering the future pipeline for investments for growth? And also with regard to financial fundamentals, we have to consider the soundness of finals because credit rating agencies after the acquisition of our expand put some watch on us. So we'd like to balance among those factors to strengthen the fundamentals of financials. But in terms of the shareholders' return policy, there's no change to the basic policy. as we accumulate more profits.

And if we don't see any investment opportunities, we'd like to conduct the share buyback flexibly and there's no change to that. So that completes my answer.

So those are questions. [Operator Instructions] We are receiving questions now. seems to be no more questions. So with that, we would like to conclude the Q&A session. Thank you very much for staying with us until the very end. We ask for your continued support to Daiwa Securities Group.

Thank you very much for participating in telephone conference for the fiscal year 2026, the first quarter earnings announcement of Daiwa Securities Group despite your busy schedule. I would like to start the meeting.

From Daiwa Securities Group, we have Managing Executive Officer and CFO, Yoshida. I am the Head of IR, Nakamura. First, Yoshida will explain about the first quarter results of fiscal year 2026. We will receive your questions after the presentation. Today, this is streamed live on the Internet and general investors can view this start.

Hello. This is Yoshida from Daiwa Securities Group headquarter. Thank you very much for taking the time out of your busy schedule to join our conference call today. I will now explain the financial results for the first quarter of the fiscal year 2026, which we announced today based on the presentation materials posted on our website.

Please turn to Page 4. First, I will provide a summary of our consolidated financial results. The percentage changes in figures are compared to the fourth quarter of fiscal year 2025. In the first quarter of fiscal year 2026, we achieved profit growth across all divisions with ROE reaching 12.7%. Net operating revenue was JPY 220.3 billion, up 11.4%. Ordinary income was JPY 88 billion, up 31.4% and profit attributable to owners of the parent was JPY 56.4 billion, up 13.2%.

The Wealth Management division, in addition to this client activity, saw its portfolio-based proposals gain traction, resulting in record high asset-based revenue of JPY 35.8 billion. The trend of net assets -- asset inflows continues. Furthermore, not only asset-based revenue, but also flow-based revenue expanded.

In the Asset Management division, against the backdrop of continued net inflows and favorable market conditions, ordinary income at Securities Asset Management reached a record high of JPY 15.7 billion. In Global Markets, client flows expanded against the backdrop of a strong market environment and equity revenues increased significantly. Global Investment Banking saw an increase in earnings driven by contributions from several large-scale deals.

Please turn to Page 8. Base income, the KPI for stable earnings set forth in the midterm management plan reached JPY 62.8 billion, an increase of 83.8% compared to the same period last year. We are progressing at a pace that significantly exceeds the final year target of JPY 150 billion set in the medium-term management plan, and we are making steady progress in building an earnings base that is less susceptible to external conditions.

Please turn to Page 11. I will now explain the income statement. Commission received totaled JPY 143.4 billion, an increase of 9.3%. The breakdown of commission received can be found on Page 24. Brokerage commission was JPY 34.9 billion, up 9.4%. Underwriting and secondary offering commissions were JPY 17 billion, up 86.4%. Distribution commissions were JPY 9.2 billion, up 20%. And M&A-related commissions were JPY 12.5 billion, down 27.9%.

Please turn to Page 12. SG&A totaled JPY 142.8 billion, up 3.3%. Trading-related expenses increased due to higher commission payments. Personnel expenses rose due to wage increases and primarily in Japan, an increase in performance-based bonuses.

Please turn to Page 14. Total ordinary income from overseas operations reached JPY 13.1 billion, up 90%, setting a new record high. By region, in Europe, the M&A business was sluggish due to geopolitical risks. In Asia and Oceania, ordinary increased driven by equity revenue, reaching a record high level. In the Americas, ordinary income rose significantly due to an expansion in equity revenues.

Next, I will explain the results by segment. Please turn to Page 15. First, the Wealth Management division. Net operating revenue was JPY 88.2 billion, up 8.8%. Ordinary income was JPY 37.2 billion, up 12.4%. In addition to favorable market conditions, the widespread adoption of total asset consulting allowed us to capture a broad range of our clients' asset management needs and translate them into results.

Looking at results by product. Trading volume in equities expanded driven particularly by foreign stocks, revenue increased by JPY 900 million. In the Fixed Income segment as well, by capturing investment needs in amid rising interest rates, revenue increased by JPY 800 million.

Furthermore, the use of wrap account services continued to grow as a solution for inflation hedging and medium- to long-term asset management needs, resulting in a JPY 1.1 billion increase in wrap-related revenue, which reached a new all-time high.

Asset-based revenue also reached a record high of JPY 35.5 (sic) [ JPY 35.8 ] billion, driven by increases in trust agency fees and wrap-related revenues. The fixed cost coverage ratio based on asset-based revenue rose to 125.7%, while the total expense coverage ratio improved to 77.3%. Detailed data is provided on Page 28, so please refer to it later.

Please turn to Page 16. This page shows the status of product offerings and sales amounts for the domestic Wealth Management division. The wrap account service performed steadily with contract value reaching JPY 357.7 billion and a net increase of JPY 237.6 billion, bringing the total contracted AUM to a record high of JPY 6.765 trillion.

Next, please turn to Page 17. This is the status of Daiwa Next Bank. Net interest income was JPY 13 billion, up 16.2% and ordinary income was JPY 7.2 billion, up 15.8%. Deposit acquisition progressed through collaboration with Daiwa Securities and the deposit balance expanded to JPY 5.3 trillion. Daiwa Next Bank continues to steadily fulfill its gateway function for the shift from savings to investment. In addition, the increase in the policy rate widened the interest margin, resulting in higher revenues and income.

Please turn to Page 18, the Asset Management division. First, Securities Asset Management. Net operating revenues were JPY 21.2 billion, up 7.8% and ordinary income was JPY 15.7 billion, up 37.6%. AUM of publicly offered investment trust managed by Daiwa Asset Management surpassed JPY 43 trillion, a record high. Assets under investment advisory contracts, including those related to the alliance with Japan Post Insurance, continued to expand steadily, further strengthening the revenue base.

Please turn to Page 19 for Real Estate Asset Management. Net operating revenues were JPY 13.3 billion, up 47.2% and ordinary income was JPY 9.8 billion, up 0.2%. AUM in Real Estate Real Asset Management surpassed JPY 1.8 trillion, achieving the FY 2030 target ahead of schedule. Gains on property sales at Daiwa Securities Realty and income from managed REITs contributed to the increase in both revenues and income.

Please turn to Page 20 for Alternative Asset Management. Net operating revenues were JPY 6.3 billion and ordinary income was JPY 4.8 billion. Capital gains were recorded due to the exit from certain portfolio investments, among other factors.

On Page 21. Finally, I will explain the Global Markets and Investment Banking division. In Global Markets, net operating revenues were JPY 53.8 billion, up 4.9% and ordinary income was JPY 18.1 billion, up 2.3%. In equities, client order flows from both institutional investors and wealth management clients remained solid in both Japanese and foreign equities.

Despite elevated market volatility, we captured order flows effectively and combined with successful positioning of the -- position management secured a high level of revenues. In FICC, order flows in both domestic and foreign bonds declined from the previous quarter's high level but remained solid overall.

Turning to Page 22. Global Investment Banking recorded net operating revenues of JPY 22.6 billion, down 6.1% and ordinary income of JPY 3.2 billion, up 52.5%. This concludes my explanation of the financial results for the Q1 of FY 2026.

Just to add some comments. First quarter's revenue and income both reached historically high levels. That said, we do not view the results as simply the product of a favorable market environment. Against the backdrop of rising inflation and the growing asset building needs, we continue to see a strong structure shift of funds into the financial and capital market, including some needs to meet the respond to the corporate governance so that we believe our ability to steadily translate this shift to tangible outcomes, reflecting the group's steadfast effort and disciplined execution of these strategies.

The Total Asset Consulting in the Wealth Management division is not only a method of selling investment products, but rather to identify the customers' pain points and needs and broadening the range of solution across investment management, asset succession, real estate and corporate transactions. Continuing this effort has, as a result, led to growth in both balance-based revenues and flow revenues.

In the Asset Management division, the accumulated AUM has contributed to higher profitability, further demonstrating the strength of our stock-type business model. In Global Markets and Investment Banking as well, we have accurately captured structural changes such as progress in capital market reforms and shifting client needs and have stickly captured revenue opportunities.

This fiscal year, the final year of our midterm management plan is positioned as a year to further drive these achievements. This first quarter marks a good start towards that goal. Regarding the current market environment, uncertainty continues to linger. Even so the wealth management is tracking at roughly the same pace as the first quarter average. In the meantime, Global Markets is off to a start below the high first quarter average, though we continue to see solid client flows.

In addition, today, we completed the process of making ORIX Bank, our 100th subsidiary. We believe this represents an important step forward in advancing our growth strategy centered on wealth management. Going forward, we will continue to respond to our clients' diverse needs, contribute to the development of the financial and capital markets and pursue sustainable growth in corporate value. We thank you for your continued support.

That's all from myself. Now let us open for Q&A session.

[Operator Instructions] Let's go to the first question from SMBC Nikko Securities, Muraki-san.

I'm Muraki from SMBC Nikko Securities. I have 2 questions. First, on Page 21, the equity revenue, I would like to ask you a bit in more detail. In terms of position management, you said that you were good in doing that. So April, May, June and July, I think GM has slowed down. But up until July, what has been the earnings situation? And how has the earnings been improving? So that's my first question.

The second question is that besides the earnings report, the ORIX Bank in terms of acquisition, you said that you have completed the process. In the previous meets -- on the previous meeting, you had some updates that you can give us. So in terms of the capital adequacy ratio, that will have an impact of about 5%, so how about this? And from the second quarter onwards, you said that the contribution is coming in terms of profit after the goodwill amortization, how much would this contribution be?

And I think the next step will be the merger. So do you have any time line? What type of cost will entail? So until the merger, the 2 bank subsidiaries, how are we going to manage these subsidiaries? If you have any update about this issue, please, I would like to ask about that.

Thank you very much for your question. First, about the first quarter Global Markets equity revenue or earnings. April, May, June for the first quarter, if we look at the trend, -- so if it's over 10, April 3, May 3 and June, April, I think it's like equal of all the 3 months, but June was slightly better. To go into more detail, April -- from April, the Japanese stocks has been on the upward trend and the overseas foreign institutional investors have been coming in and then late by that domestic investor came.

For the U.S. stocks, it was good. For instance, from the retail investors from Japan, there has been a lot of orders coming for the U.S. stocks. The order flow for the Japanese stocks domestically and overseas has been at a very good state through this quarter. In July -- June was better, higher compared to April to May. July has been a slow start compared to that. But in terms of the order flow has been good. In terms of the position management, for the institutional investors, there has been a lot of inquiries of block trade has been coming up. We have been going through these order flows.

Number two, about ORIX Bank on the updates. After the announcement, within Daiwa Securities Group, in terms of what we have been setting up a project, and we have been going forward. But -- so there has been some gun jumping regulations. Direct negotiations or discussions with ORIX Bank actually have not been able to do much of that. In terms of the future synergies and how we're going to respond to this, compared to what we have announced in May, we have not a major update as to date.

First, in terms of profit. On the ORIX Bank on a stand-alone basis, the net income on the 5-year average is about JPY 20 billion. The goodwill amortization will happen and there will be some cost that has to be deducted. However, the interest rate has gone up, and we think that there is a possibility that we can expect some upside, but we can't talk much about these numbers. Maybe the cost of the integration and the earnings side will be offset against each other.

I think there's no major update I can give you against what we have said in May. Until the merger, your question about what's going to happen. Well, for in terms of merger, we would like to conduct this as early as possible. But of course, we have to conduct negotiations and adjustments with stakeholders. That's what we are right now. But in terms of the -- we have become 100% -- the Daiwa Next Bank has become 100% subsidiary. In terms of the Next Bank to ORIX Bank, there is some funds that can flow to that bank.

For this situation, I think this is a type of synergy that we can enjoy at the early timing. That has been my answer to your question.

In terms of the group headquarters, in terms of the capital adequacy ratio is going to go down, I think you talked about the option of issuing the AT1 bonds. How would that -- how do you think about that?

We have been continuing to consider this and we are planning. In terms of the schedule, it's not decided yet.

Next question is from Tsujino-san.

I have 3 questions. First is that this time, the alternative profit was big, the real estate and the PE, I guess. In the first quarter, there were some exits maybe. After the Q2, any plan for the exit or any profit growth? Any prospects that you can share with us? That's my first question.

And the second question is regarding FICC. It was slightly down compared to Q4 of last year. But after June, any flash report or any news that you can share with us? The third question is about, after the integration of ORIX Bank, are there going to be any big one-off cost that you think you're going to recognize? Well, you just mentioned that there's not going to be a significant impact. However, I'd like to know about that if there's going to be any big one-off impact.

Okay. Thank you for your questions. Question number one, regarding the alternative asset management. The current situation regarding the first quarter, the real estate and PE had some exit and that made a contribution factor to push up the profit. In the Q2 and Q4 last year, we have the energy-related asset in Europe, and that did not really recur for the current fiscal year. There were several exits from this alternative asset management that generated the profits for the first quarter.

A plan for the Q2,there are some plans of the exits, but there's nothing that I can share with you. That's a fair comment, I guess. And your second question about FICC. Well, the yen interest rate is also rising, so that from that point, a variety of investors, including retail investors, are showing interest, looking at the yen credit and other assets like that as well.

As you know, we do have network nationwide. And among some customers, especially recently because of the interest rate volatility level is going up and also the currency is quite volatile so that there are increasing needs of hedging, and that needs has started to surge since the end of last year. Hedging those currency and the derivative income has also made a contribution -- positive contribution.

After June, entering into the month of July, do we see any big change? Not a big one. But in this second quarter, August, or some corporate customers are probably going to the summer holidays, so that it may be a bit slow as a movement. The third question regarding the one-off big cost because of the integration of ORIX, we are not estimating any big one, big chunk to recognize. There will be, of course, some miscellaneous cost expenses that will be happening, but it's not going to be any big one-off cost.

Going to next question. We cannot confirm your audio. Can you hear us?

We seem not have been able to receive the audio. [Operator Instructions] Going to the next question from JPMorgan Securities, Sato-san.

This is Sato from JPMorgan Securities. One question from my side. So in terms of the Securities Asset Management in terms of earnings, the profitability is quite high. So I would like to ask about the -- how sustainable this is and why this is happening.

In terms of the Securities Asset Management, as you know, from the earnings that we get from AUM and in terms of the cost, it's more a lot of fixed cost. It means that against the increase of the earnings, the cost increase is limited. In terms of the profitability, not only this quarter, in the past 1 to 2 years, it has consistently been improving. Going forward, the Daiwa Asset Management, it is true that they have a following coming from the market cap situation. But in terms of the inflow of net cash, they have been able to maintain a net increase for a certain period of time.

It means that they have a very attractive products, and we want to increase -- continue to increase the AUM. In terms of Japan Post Insurance, we have the alliance, and we have the investment advisory contract balance is increasing. And from last fiscal year, we have the U.S. Global X, which has been an equity-based affiliated company from last year. They have very -- kind of ETF that is quite different. They have been able to improve the earnings of the asset management, and they have served to improve the earnings of this business. From wealth management for the securities AM in terms of the operating margin enhancement, we will continue to monitor this trend.

In terms of the fourth quarter, I think there has been an asset if you [ extract ] the cost, is that due to the equity method? Is this a kind of a disruptive factor that because in the fourth quarter, you saw a decline? What you are...

Yes, maybe that is part of the impact.

Next, UBS, Niwa-san.

It's Niwa. I have 2 questions about wealth management. The first question is about the performance of the wrap account. On a daily basis, I don't think the wrap account customers do not really be swayed by the daily move of the pricing. But when you compare to what is happening in the performance of today compared to the best timing, do you think there are some changes? Can you comment some details.

And also the inquiries from the customers or the advice from your own company, I'd like to know what kind of points that you are providing, meaning because I do think that the market is a bit in confusion. So when we look at the stock balance or the customers' balance, it's not that negative. That's my reading of what's happening today. So am I right? Or if I'm missing, please tell me.

And also on Page 29, I'd like to know the past fee. The balance fee itself is increasing, which is favorable. But at this timing, the flow I thought that it could grow much stronger. So when the environment is good, do you have any comments about your own appetite of how much you want to grow?

Thank you for your questions. First of all, about the fund wrap performance. Including our company, I think we have the common KPI from all peers in the market. The customers with the disposal of the unrealized gains in 2026, about 95% of the fund wrap customers, the account holders had the positive unrealized gain. The June end of this year, 99% of the customers or more than that have the surplus or the positive unrealized gain.

Because of the nature of the fund wrap products, people normally take -- hold it for a mid- to long-term basis, not short term. When we make some information for the customers, we always say that it will be probably wise and the purchase for the longer-term period, not for the short-term period because the average tenure is actually increasing. It's about the 11 years that the people are holding on average. The market is volatile. There's been ups and downs right now, but that is not only affecting the customers' flow.

Geopolitical risks has been happening, and there's been some drops in the stock market. But even at that time, we did not see a big cancellation or the realization gain or anything. We at the tariff time of the Trump administration or this Middle East crisis of this year, our consultants provided information to the rep account holders. But we did not see a panic among the rep account holders. Because of the nature of the products, I think the sales and marketing activities have been quite appropriate and making a good communication to the customers as far as we are concerned.

Also the fund wrap -- the fund for the fund wrap is normally the funds that customer has and then manage the asset for the long-term period. Regarding the core asset for the customers, we think our product is a good receiving end. When the real estate price is going up or the equity market is up, the customers sometimes wish to review their portfolio of the asset. For example, they want to get the disposal gain of the real estate or they want to just liquidate the company, then there will be some surplus of the fund, which often customer would select the fund wrap for diverting their amount for the investment.

The second question about the flow income. The stock business or the fund wrap business, it's actually the other side of the coin. But by having such a diverse portfolio, the asset replacement sometimes happens and the movement from the saving to investment or marketable securities. That kind of flow income should be expanding. When we think about the appetite, we are not thinking about to what extent. We are just looking at the accumulation of the balance and also getting the tangible outcome as a result of us steadily translating our initiatives.

But when it comes to the actual trading, we want to respond to the needs of the customers and then respond accordingly, not to go after the immediate gain or the short-term outcome. We're talking about the total asset consulting, and that should be applied to a variety of assets of the customers. The tenure of the fund wrap, the average tenure is about 12 years now.

[Operator Instructions] Thank you very much for your participation today. So I ask you for your continued support. We'll end this earnings call at this point. Thank you very much for your participation.

This is Kotaro Yoshida from Daiwa Securities Group Inc. Thank you very much for taking the time to participate in our conference call today.

I will now explain the financial results for the fourth quarter of FY 2025 announced today following the presentation materials available on our website. First, please turn to Page 4. I will begin with a summary of our consolidated financial results. Percentage changes are in comparison to the third quarter of FY 2025. In Q4 FY 2025, despite the continued highly volatile market environment, our profit base, primarily driven by asset-based revenues, functioned steadily, allowing us to maintain a high level of consolidated profit.

Net operating revenues were JPY 197.8 billion, up 1.7%. Ordinary income was JPY 67 billion, down 3.6% and profit attributable to owners of parent was JPY 49.8 billion, up 7.3%. Looking at the results by division in the Wealth Management division, as a result of our focus on total asset consulting, both the contract amount and net inflow for wrap account services reached record highs and net asset inflows also expanded. In Securities Asset Management and real estate asset management, assets under management grew steadily, continuing to expand our revenue base.

Global Markets accurately captured customer flows amid market fluctuations, resulting in increased revenues in both equity and FICC. In Global Investment Banking, domestic M&A remained strong. As a result of these factors, the annualized ROE was 11.5%. The year-end dividend is JPY 35 per share. Combined with the interim dividend of JPY 29, the annual dividend will reach a record high of JPY 64, resulting in a dividend payout ratio of 50.8%. Please turn to Page 8. This page shows base profit, our KPI for stable earnings as outlined in the medium-term management plan. FY 2025 base profit grew steadily to JPY 182.7 billion, up 32.9% year-on-year.

We have achieved a level that significantly exceeds the JPY 150 billion target set for the final year of the medium-term management plan, doing so in just the second year of the plan. Please turn to Page 11. I will now explain the statement of income. Commissions received was JPY 131.2 billion, up 2.0%. A breakdown of commission received is provided on Page 26. Brokerage commissions increased significantly to JPY 31.9 billion, driven by an increase in customer flow.

Please turn to Page 12. Selling, general and administrative expenses were JPY 138.3 billion, plus 4.1%. Personnel expenses increased due to an increase in performance-linked bonuses. Please turn to Page 14. This slide shows the annual trends in revenues and SG&A expenses. Whilst performance-linked costs and strategic expenses such as IT investments have increased in tandem with business expansion, the increase in fixed cost has been constrained, keeping overall costs at a well-controlled level.

Please turn to Page 15. Total ordinary income from overseas operations was JPY 6.9 billion, down 17.6% quarter-on-quarter. By region, Asia and Oceania saw an increase in profit, supported by equity-related revenues driven primarily by Asian equities. On the other hand, the Americas recorded a decrease in profit due to a decline in M&A revenues. Next, I will explain the financial results by segment.

Please turn to Page 16. First is the Wealth Management division. Net operating revenues were JPY 81 billion, plus 5.2% and ordinary income was JPY 33.1 billion, plus 12.1%. We believe that the results of our ongoing efforts in the asset management type business have manifested in our sales performance despite the persistent high volatility in the market environment. By product, equity saw a revenue increase of JPY 1.1 billion due to increased trading in Japanese equities.

Fixed income revenues also increased by JPY 500 million as we accurately captured investment needs. Sales of fund wrap increased significantly, driven by growing demand for long-term diversified investment and portfolio management. In addition to inflation hedging, wrap-related revenues reached a record high of JPY 18 billion. Asset-based revenues reached a new record high of JPY 33.4 billion, driven by increase in agency fees for investment trust and wrap-related revenues. The fixed cost coverage ratio based on asset-based revenue in the Wealth Management division was 120%, and the total cost coverage ratio was 76.5%.

Please turn to Page 17. This slide shows the status of sales and distribution amount by product within our domestic Wealth Management division. Our wrap account service reached a record high level with total contract AUM rising to JPY 6.4046 trillion. New contract amounted to JPY 386.2 billion, and net inflows came to JPY 276.2 billion, both marking all-time highs.

Our fund wrap also continues to grow strongly. Its characteristics have been well received by clients in both favorable market conditions and during periods of adjustment, resulting in a significant expansion in assets under contract. In addition, collaboration with external partners such as Japan Post Bank and Aozora Bank has been progressing steadily, contributing further to the growth in the new contracts.

Please turn to Page 18. This section outlines the progress of our wealth management business model. Cumulative balance-based revenues for fiscal 2025 increased to JPY 123.2 billion. Net inflow of assets also remained high, totaling JPY 1.6342 trillion. In line with our group's fundamental management policy of maximizing clients' asset value, we will continue to provide optimal portfolio proposals based on each client's total assets while working to build a revenue base, which is less susceptible to market fluctuations.

Please turn to Page 19. Here, we show the status of Daiwa Next Bank. NII, net interest income, totaled JPY 11.2 billion, up 11.2% and ordinary profit reached JPY 6.2 billion, up 30.2%. The increase in policy rates contributed to an expansion in net interest margins. The promotion of total asset consulting, together with initiatives such as competitive deposit interest rates, including a 1.2% 1-year time yen time deposit for retail customers proved effective and deposit balance surpassed JPY 5 trillion.

And now turning to Page 20. Let me explain the Asset Management segment, beginning with Securities Asset Management. Net operating revenues were JPY 19.7 billion, up 5.9%; and ordinary income was JPY 11.4 billion, up 11.6%. Daiwa Asset Management publicly offered securities investment trust AUM topped JPY 37 trillion, hitting record high.

And then moving on to Page 21 for real estate asset management. Net operating revenues were JPY [ 9.9 ] billion, down 10.6% and ordinary income was JPY 9.8 billion, down 5.6%. While revenues and profits declined on a quarterly basis, mainly due to the absence of property sales gains recorded in the previous quarter, real estate asset management is a business in which the profit grew in line with AUM.

AUM at Daiwa Real Estate Asset Management surpassed JPY 1.6 trillion, and we expect stable midterm growth in line with continued AUM accumulation. In addition, equity method investment gains from Samty Holdings contributed to maintaining a high level of profit.

On Page 22 is Alternative Asset Management. Net operating revenues were negative JPY 2.6 billion and ordinary income was negative JPY 4.8 billion. And the Renewable energy, we recorded provisions and impairments due to the revaluation of certain portfolio investments.

On Page 23, lastly, let me explain the Global Markets and Investment Banking division. First, Global Markets, net operating revenues were JPY 51.3 billion, up 13.4% and ordinary income was JPY 17.7 billion, up 48.6%. Both equities and FICC performed strongly, resulting in a significant increase in revenues and profits. In equities, trading flows in Japanese stocks increased substantially, particularly among overseas investors, leading to a 6.2% rise in revenues.

By offering a diverse range of execution methods, we successfully captured large-scale trading mandates contributing to revenue growth. In FICC, revenues increased 20%, driven by strong performance in JGBs and credits. We effectively captured customer order flows in both domestic and foreign bonds and the position management remained solid even in a highly volatile market environment.

And now turning to Page 24. In Global Investment Banking, net operating revenues were JPY 24.1 billion, down 7.4% and ordinary income was 2.1 billion, down 60.5%. But M&A advisory remained strong in Japan and the revenues increased in Europe within our overseas operations. That concludes the explanation of our financial results for the fourth quarter of fiscal 2025.

Fiscal 2025 on a full year basis experienced high volatility in stock price and interest rates, but the year itself was quite active overall. And the entire business portfolio had higher stability so that income was stable and the market response capability also improved. We were able to benefit from both of them. As a result, the second year of this midterm plan hit record high in terms of the profit and the ordinary income was hitting the highest in the last 20 years. Well, towards the end of the midterm plan, we think that we have a very good strong result.

Now we'd like to move on to the announcements that we have made about the subsidiary of the ORIX Bank, as we have explained on our website. I will explain the overview, objectives and financial impact in accordance with the materials published on our website.

Please turn to Page 2 of the document entitled regarding the acquisition of ORIX Bank as a subsidiary. This is a transaction summary. In this transaction, Daiwa Next Bank will make ORIX Bank a wholly owned subsidiary. We also plan a merger of the 2 banks in the future. The acquisition price is JPY 370 billion, and the final acquisition price will be determined after price adjustments stipulated in the share transfer agreement. The acquisition will be funded entirely by our own funds, strategically utilizing the capital buffer we have accumulated to date.

Next, the primary objective of this transaction is to continuously expand the stable revenues of the Daiwa Securities Group and improve ROE and EPS through the strengthening of the Wealth Management division. By integrating Daiwa Next Bank and ORIX Bank, which have different strengths, we aim to enhance our ability to provide solutions for our clients' challenges regarding both assets and liabilities, thereby significantly improving the corporate value of both banks.

Specifically, we will realize sustainable growth by combining the outstanding lending and trust capabilities cultivated by ORIX Bank with the deposit gathering capabilities backed by our group's solid customer base and sales network.

There are 3 pillars to this strategy. First, deepening the total asset consulting tailored to the life stages of each individual client. Second, establishing a sustainable growth model through a virtuous cycle of deposit and lending expansion. Third, maximizing synergy effects through functional integration by a future merger. I will explain each of these in turn.

Please turn to Page 3. The post-integration bank will have total assets of JPY 9 trillion and approximately JPY 400 billion in equity capital, evolving into a comprehensive bank, combining advanced lending and trust functions with strong deposit gathering capabilities. By offering competitive deposit rates backed by ORIX Bank's high investment capabilities, we aim to establish a sustainable growth model through a virtuous cycle of deposit and lending expansion.

Regarding the impact on consolidated financial results, there is a potential to improve net interest income as a synergy effect. In addition to the over JPY 1.5 trillion of drawable funds from Daiwa Next Bank's current account at the Bank of Japan, we aim to accumulate JPY 2 trillion in deposits over the next 5 years as a synergy effect, separate from the stand-alone deposit growth of both banks through the provision of competitive deposit rates.

We plan to invest a total of JPY 3.5 trillion in real estate investment loans and securities-backed loans to improve net interest income. Assuming we can secure a 1% interest rate margin improvement, our estimates indicate a potential improvement of JPY 35 billion in net interest income. In addition to these synergy effects, ORIX Bank's stand-alone performance will be consolidated into our financial results. The bank's average ordinary income over the past 5 years is approximately JPY 30 billion with a net income of approximately JPY 20 billion. On the other hand, we expect to incur amortization expenses for goodwill associated with the acquisition.

Next, regarding capital and regulatory aspects. We will maintain financial soundness while effectively utilizing our capital buffer. Whilst the implementation of this transaction will lower the consolidated total capital adequacy ratio by 5 percentage points, it will still exceed 14% on a fully loaded Phase III finalization basis, securing a certain level of capital buffer. However, to expand our capacity for future growth investment and shareholder returns, we will also consider issuing perpetual subordinated bonds. Please note that we are not considering equity financing.

Now moving on to Slide 4. Let me see the strength of Daiwa Next Bank. That is the strong deposit gathering capability. In the meanwhile, it has to challenge with the limited lending and the trust functions. Against that, the ORIX Bank has a strong lending and trust function. That's their strength, while the challenge is the deposit gathering capability. So while we are complementing or we are able to complement each other with the strength and the challenge, we think this is an ideal match between the 2.

And moving on to Slide 5. I may be repeating myself, but the objective of making them a subsidiary is to strengthen the wealth management division and also a great leap in terms of the stability of the income as a result of that. The stronger Wealth Management division is not coming from one point. It comes from some pillars, the deepening total asset consulting, virtual cycle of deposit and loan expansion and accelerating growth through collaboration with the Asset Management division. Those are going to be the 3 pillars to enhance the management division and the stability of the income.

And then moving on to Slide 6. We are trying to see the deeper total asset consulting capability for the clients. The assets and liabilities of our customers would change from life stage to life stage. That's the reason why not only the assets, but the liabilities all included. It's quite important to have the total asset consulting capability to optimize our capability of designing the balance sheet of the customers. By utilizing the ORIX strength, which is the lending and the trust, we are going to be providing the solutions for the pains of the customers depending upon their life stage.

And then moving on to the Slide 7. We're thinking about accelerating the growth spiral by leveraging the strength of the banks. we look at those banks alone, the balance is going to be accumulated. But as a result, in addition to the growth of each bank's deposit balance, we aim to expand the deposit by over JPY 2 trillion in the next 5 years as a synergy effect, the asset -- the loan asset of the ORIX is quite competitive. So based upon which we're going to offer the Daiwa Securities customers a competitive deposit interest so that we are able to get -- acquire the [ stucki ] deposit. And then eventually, that is going to increase the deposit balance. That is going to be a great spiral of the growth of the banks overall.

And then on Slide 8, this shows the changes of the balance sheet structure as a result of the integration of the 2. On the asset side, the lending and securities and on the liability side, the ordinary deposit and the time deposits are going to be all balancing so that the balance sheet is going to have a good risk diversification.

The explanation is over with that. The details is going to be explained by our CEO, Ogino, at the management strategy meeting, which is scheduled to be held next month. By responding flexibly to the variety of needs by the customers, we're going to be capturing the changes in the market environment. And as a leader of the financial and capital market, we are going to pursue sustainable growth. We sincerely appreciate your continued support, and thank you very much for your kind attention.

With that, we finish our explanation. Now let us move on to the Q&A session.

[Operator Instructions] I would like to introduce the first person, SMBC Nikko, Muraki-san.

This is Muraki from SMBC Nikko Securities. So I have a question related to ORIX Bank's acquisition. The first point relates to Slide 3. You talked about the synergy and how it supplements with one another. So deposit is JPY 2 trillion increase. That is the number you've mentioned already, so 1.05% to 2%, that is the time deposit level. So going forward, do you intend to actually increase this to a competitive level? That is the first question.

And also, you would have a loan increase by JPY 3.5 trillion. So you have the real estate loan and the secured loans. What is the breakdown in terms of the loan growth? So second part of the question relates to your capital strategy. So this is Slide 12 of the material. You have the image here. So this will be over 14%. The capital ratio will come down. But if you look at the future from the current level, the capital level intends to be built. So I don't know if it's 17% or 18%, it's hard to tell from this diagram.

So whilst you're increasing this level, what are some prospects of the share buybacks? What are some of the ideas we should have? In the past, the share buybacks they conducted even amongst the high level of capital. But now if the capital is going to be depressed, perhaps there will be less allocated or different allocation to the share buybacks. So please give us some idea.

Thank you very much for that question. The first part of the question, so what are the JPY 2 trillion of deposit as part of the synergy? So what is the outlook? So related to this point, we are confident that we can acquire. We believe there is a fair chance that we can achieve that number. So within this fiscal term -- so after the rate hike, so Daiwa Securities, there has been a 2% of provision in the year. So last year, in terms of the time deposit, so about JPY 650 billion increase in terms of the time deposit.

So if you can provide a competitive -- the deposit, right, given the fact that Daiwa Securities have a nationwide network and the high-level consulting capabilities and through our consultants, we should be able to acquire the deposit. So of course, there has been a shift away from savings to investment. But this is not just the deposit into equities. But also, we have been providing consulting to their entire asset, inclusive of deposit. So within that process, the larger the pie is, the better chance that we may have for the acquisition of deposits.

So JPY 2 trillion is feasible. That is our expectation. Also about the JPY 3.5 trillion of the loan, so real estate loans and also the securities, the back loans, the breakdown of that, we don't have the exact number as we speak. But already, what ORIX Bank is providing, that is an investment use in real estate loan, it is for the one mansion for the single-family hold in the metropolitan area.

So the number of banks have been on the decline. But in terms of the number of households, single households in the metropolitan area is expected to rise. Therefore, we do believe there is sufficient demand. In the past several decades, ORIX Bank has built this lending capability. So in relation to that, it is very possible that we can achieve that JPY 3.5 trillion of lending.

Also the second part of your question about the capital, the strategy. Please hold. So through this acquisition, so in terms of the consolidated total capital adequacy ratio will be out -- will be down by mid-5% or so. So right now, it's over 14%. So that is the level that we're expecting at this moment. So going forward, how the capital policy may change, and that is the intent of your question. But as of this moment, no change vis-a-vis our basic policy.

So the dividend -- the payout ratio is at 50% or higher. And also the floor for the annual dividend of JPY 40, we'd like to maintain that. So through this acquisition, there will be some level of decline in terms of the total capital adequacy ratio. However, we can ensure the financial soundness. And also by steadily building on the profit, we can continuously keep this financial soundness.

Also in order to ensure flexibility, AT1 bonds issuance is also under explanation. Of course, the actual amount is still under consideration. But again, we'd like to further have a solid capital base. Also in terms of share buybacks, the question was what are our plans going forward. Again, no change in terms of our general stance. So based on the assumption of financial soundness, in light of the different operating environment, gross investments will be considered. But of course, that is necessary for future shareholders' return. So we definitely like to prioritize on that.

So looking at the gross investment and the buyback, we need to strike the right balance and be agile and flexible. So this particular deal, this is an impact of the profitability of ORIX Bank. And also through the realization of the synergy, we can expect to enhance the capital generation within the group as a whole. So ultimately, this would actually lead to increase in the source for shareholders' return.

So going forward, the capital allocation, capital policy is a very important policy. So given the current operating environment, we'd like to make a comprehensive approach.

Related to the second part of my question. So at this particular timing, you didn't announce the share buybacks. So in terms of the perpetual subordinate bonds utilization, related to that point, so what is the potential amount AT1 bond issuance that is? What is the amount they have in mind? And once you announce that, in light of the credit rating, we expect you to conduct share buybacks at that timing.

Thank you for that question. So in terms of the AT1 bonds, the issuance, so it will be within the part of the consideration. But in terms of concrete details, we will consider those going forward. Also in terms of the credit rating, so we would like to definitely conduct meticulous communication with the credit rating companies. So we may also incorporate those ideas. So based on that, so whether there's a possibility of buybacks, again, we'd like to take a comprehensive approach in making that decision. So that has been my answer.

The next question is by Morgan Stanley, Sato-san.

This is JPMorgan, Sato speaking. Well, I have several questions about the bank. One, we simply this consolidation, you're going to make them a subsidiary. After that, how should we think about how you're going to be executing it? On the material, you're talking about the recurring income of about JPY 30 billion and the net profit of about JPY 20 billion. What kind of upside are you expecting from that baseline?

I think that, of course, depends on the analyst, but the depreciation or the amortization of the goodwill and also the sourcing cost, probably a part of that needs to be recognized as well. So when you explain that to the market participants, what kind of a level are you going to say to them on the annual contribution? What is going to be the level that you think you're going to be talking in that communication to the market?

The second question is about this -- by the acquisition of this ORIX Bank, you still have an external partners. Are there going to be any changes in the relationship with those partners? Like Aozora Bank, you are currently accounting for them under equity method. So your business alliance with them, is it going to be changing because of your acquisition?

There might be some changes in terms of like focal point that you are working together with those external partners. And also when it comes to the asset-backed ones, partly, you are working together with Credit Saison. What are you going to be thinking about those asset-backed securities?

Thank you very much for your questions. The first question about the bank. Well, as you say, the average of the ordinary income is about JPY 30 billion of the ORIX and the profit is about JPY 20 billion. At Daiwa Shoken Daiwa Securities Group, our capital average is about JPY 1.7 trillion, meaning that on a simple calculation, it has the positive impact of pushing up the ROE by 1.2%. The equity finance is not likely to happen. So that's the scenario that we are seeing at this point. But the amortization of the goodwill and assuming that AT1 is going to be issued, which we, of course, need to examine. But anyway, setting that aside, we think that is a basic simple calculation that we are currently having our basis.

And the second question, first of all, we do have the external partnership with Aozora Bank. And regarding that partnership, we assume there's no impact. Well, regarding the integration, it's for strengthening the wealth management business. The total asset consulting business for the retail business, the asset to support from the total asset consulting is going to be stronger.

And the trust functions in order to work in our wealth management business for the retail market, it's important to have the trust function. Well, organically within the company, we did not really have much capability to grow itself. And by having the external partners, we have provided some instruments. But from now on, we think we'll be able to do that in-house. That's going to be another one big pillar.

Well, regarding Aozora Bank, our partnership with Aozora Bank, there are some corporates that are listed and private. We have been providing the referral to the Aozora Bank and also the LBO financing, for example, have been provided and have been providing in the past so that the customer trade is quite different in Aozora Bank. So we think both can actually stand.

And also for the real estate-backed loans, well, Credit Saison is a part of the business that we've been engaged with. But Fintertech is jointly operating -- operated by Credit Saison. So they have the asset -- the real estate asset-backed loans. But of course, the market size is limited so that the capacity is not that big. And this time, thinking about the capability being much bigger. I think the issuance coming from the business is going to be having new opportunities for us to grow our pie itself. Does that answer my question?

What about the amortization of the goodwill. Any color on that scale?

The amortization amounts and the cost for the amortization we're going to be discussing in details more. So at this point of time, there's nothing that we can comment. So please be patient. During the time comes for the closing, we think we'll be able to come to that point.

So let us move on to the next question. BofA Securities, Tsujino-san, please.

The last point about the goodwill amortization, it could be as long as 20 years, but some say it could be 10 years. So you should have some sort of image in terms of the amortization. And also in terms of decision of the dividend, it would be -- so the net profit -- so would you be using the same sort of net profit regardless of the amortization. So 20 years or 10 years, I don't think that you have no image as to the amortization. If you can give us some color, that would be helpful. That is the first question.

Thank you very much for that question. So of course, we have some image or some ideas. So the duration that you've mentioned, it will be within the time frame that you've mentioned. But as of this moment, we're working together with the auditors. So we would like to refrain from giving you an exact answer. Also, as far as dividend is concerned, as you rightly mentioned, no change in terms of the dividend payout ratio. So 50% or higher of the earnings. So no change in terms of the dividend policy.

Also in terms of ORIX Bank, so they have the Tianjin report. So as of September end, so in terms of the J-GAAP, excuse me, J-GAAP earnings, JPY 7.4 billion, and ordinary income was JPY 10.6 billion. So it is actually quite lower in comparison to 5-year average. So in order to drive this, do we just work towards that JPY 8.6 trillion. I think that is the direction we should aim for. But right now, it's a midterm -- sorry, interim times 2.

Is that the image that we should have in mind for ORIX going forward? The interim number, double that number?

First of all, as of September 2025, the interim results for the company -- so within ORIX Bank, there were some rebalancing of the securities. So there were some loss from sales. So that is why the amount has ended to that one. So somewhat lower that is. That is our understanding. So in terms of the underlying capability, then it is closer to 5-year average then.

Okay. Understood. So the third point -- the third question I have, this is a question related to the results. So FICC has been very favorable. So Q3, there was a growth. In Q4, there was a further growth in FICC. So how sustainable is this? So for the March quarter, how has been the recent performance? And how is it trending now as we speak?

Thank you very much for that question. So in terms of FICC, amidst this very high level of volatility, we were able to capture the customer flow, and we've been able to turn those into profit. So that has been very positive. Also in terms of products, that's been all around. So we have JGBs and also, we have some domestic derivatives and so forth. So within this high level of volatility, we do have a high level of activities amongst the customers. So the customer flow, we were able to capture that through the communication with the customers.

We can anticipate the customer flow and conducted the positioning. So through this control, that has led to a positive impact of the earnings. So that has been the experience of this past quarter. So for FY 2025, in the first part of the year at the phase of rate increase, I think we have also mentioned there were some difficulties in conducting the position control. But we have addressed these issues, conducted communication with the customers and also develop customers and also address the diverse needs of the customers.

We've been able to have more strengths in the position management. But just because that we were able to do that. That doesn't mean we can sustain this without doing anything because, of course, the market is changing every day. So accordingly, we would like to enhance our capability to capture the customer flow. And also, we'd like to steadily strengthen the position management system.

Also for the fourth quarter, so for the March quarter, that is FICC, the revenue image that is, so January 3 and February is 2 and March is 5. So in terms of the month of April, so in comparison to the fourth quarter average, maybe it is somewhat subdued for the month of April. But again, the customer flow continues to be fairly active. So of course, the environment continues to be uncertain, but we would like to have a closer communication with the customers. And we are hoping that we can turn it to our better performance.

Next question is Nomura Securities, Sasaki-san.

This is Sasaki of Nomura Securities. One question about the earnings call results and one about ORIX. Well, I'd like to talk about the wealth management. The AUM in the first half was declined and the previous quarter was down, but the asset inflow was making an improvement. I would understand that, that is because of the drop in the U.S. equity price. For the retail investors, there was some sales for the realization sales. Am I right to understand that? If I'm not, then please correct me.

And the second question is about the acquisition of ORIX Bank. So-called -- are there any binding contracts for like a key man close that you are going to be able to retain the key men or the management people. I will also be able to get those words from the ORIX side. The ORIX side, the asset is very characteristic is because of the support getting from their parent company, which is ORIX. Is that also something that you have captured? Or do you think the business is going to be continuing based upon your strength as a stand-alone basis?

Well, thank you very much for your questions. First of all, about the asset inflow. On the earnings announcement material, Slide -- just a moment. For the fiscal 2025, we have had the inflow. So compared to the year before, the inflow amount was about the same as the 2024.

I'm sorry. The fourth quarter is my question. The fourth quarter inflow.

Okay, Q4 only. But regarding the AUM, on this quarter, the amount has declined. However, the U.S. stock was one reason. And also the fall in the stock price in domestic as well. So the asset inflow, the net inflow has increased has surpassed as a result. But the asset inflow itself, as I mentioned earlier, has been quite active and quite strong. Well, since 2007, the asset flow side has been really big.

Okay. And regarding the acquisition of M&A in the contract, do we have any key men close about the retention of the management people.

Well, regarding the close of the contract, I should not make any remarks. But after the merger or after the integration, the smooth integration is going to be, of course, the most important. And ORIX and ORIX Bank, both are, of course, making effort for the smooth and continual operation. So as a large direction, we, of course, have had the agreement to come to this agreement or decision so that we shall make an effort to deliver results.

So assuming that, for example, the real estate finance, the property sourcing is basically coming from partly support from ORIX. Am I correct? The support from the ORIX Group. Is it also coming?

I didn't really understand. Well, from the very beginning for the sourcing, the ORIX Bank has been acquired by using their own network. So the support from ORIX is, as far as we understand, is limited, if any.

I would like to move on to the next question. SBI Securities, Otsuka-san, please.

This is Otsuka from SBI Securities. Can you hear me?

Yes, we can hear you. Please go ahead.

So one question at a time. So related to the -- you've talked about the asset inflow related to the previous question. So in terms of the cash in the past 2 years, it has been the strongest. So if you can actually tell us the reasons behind that. This is Page 49, Slide 49 about the actual the cash that is.

Thank you very much for that is. So we have the bank deposits as cash and it may turn into investment trusts and fund wraps. So there are different objectives for that. But roughly speaking, Q4 fund wraps, in order to contract the fund wraps, there are a lot of cash paid in from other banks.

So we did see a lot in the past quarter. Also for Daiwa Next Bank deposit, so there were some cash paid in for Daiwa Next Bank's deposit. That was another reason. Also, there has been active transaction of the Japanese equities for the March quarter. So in order to buy the equities, a lot of people have actually cashed in.

On the other end, the share price actually peaked in the month of February, some may actually sold their holdings. So actually, they may have withdrawn the cash. So on a net basis, this is the number that we had.

Understood. So fund wraps then. So for additional and also new purchases, both have been strong then?

Yes, both.

Second question relates to ORIX Bank. So this is Slide 6 of the presentation material. So in terms of the clients' life stage, I'd like to understand this accurately. So with the acquisition of ORIX Bank, the question is, where would you like to focus? So according to Slide 6, so 60s, 70s, 80s, actually, the asset exceeds the liabilities. So those who are in excess of assets and those generation, ORIX excels in the best real estate investment loans. So do you intend to actually provide those to those elderly customers? Or are you actually focusing on more those in 30s and 40s where the liability is larger for assets? We will be focusing on extending credit to them.

So for those in 30s to 40s, so they will be the first house the purchases. So this is different from the investment real estate loans. So this may be an area ORIX Bank is not necessarily strong. So how do you intend to actually approach the different life stages of the clients?

Thank you very much for that question. So according to the Slide 6 on the bottom part about the image of asset and liability balance by generation. So generally speaking, by different age, so the younger, you would have more liabilities. So you may have the housing loans or investment loans. So basically, liabilities tends to be higher in comparison to assets. But once you exceed over the age of 60, net assets would start to increase.

So for Daiwa Securities, the main customers for Daiwa Securities are mainly those 60s or above. So as you can tell from this image, so asset on a net basis, it is larger. And so we have been providing different consultation for the management of their assets. So in other words, for those customers in the 40s and 50s, asset formulation type of proposals by NISA, that has been conducted.

But of course, the inherent needs of these generation is how they can actually extend and also repay the loans. And also for those who wish to actually invest in real estate, we didn't have the facility to actually provide credit towards that end for those in the 40s and 50s.

Now for ORIX Bank, the real estate, the bank loans, the main customer image is to share with you is in the metropolitan area. And so those in the 30s and 40s, family men working for listed companies, they account for a large proportion of ORIX Bank. So generally speaking, they do have high level of income. And of course, they have their own the housing. But at the same time, they are investing in the metropolitan one-room mansions, one-room condos. So that has been the main customers that ORIX Bank has been cultivating.

So going forward, what ORIX banks provide. So they have the apartment loans that is another part of the loan product offerings. So this is more towards high net worth individuals and also more of the more elderly customers. So we can actually provide these products to the Daiwa Securities customers for these apartment loans.

Also from what we have received, the securities from the Daiwa Securities customers, we can actually use them. The securities can be backed and use it as part of the business. But of course, we do have -- we are connecting that already. But because of the capital regulation and so forth, it has been somewhat restricted. So with the addition of the ORIX Bank, we could expect to see further accumulation of the loans with the securities backed loans.

I couldn't quite understand that point. So you mentioned those in 30s and 40s working for listed companies. And those who already have credit with ORIX Bank, you mentioned that. So already, they are customers of ORIX Bank. So whether ORIX Bank will become a subsidiary of Daiwa Securities, it doesn't really matter, doesn't it, because they are already customers. So is my understanding correct?

So if they're going to start the transaction with Daiwa Securities, that is positive. But taking this opportunity, it is not likely -- to be honest with you, I cannot actually imagine that they would all start doing business with Daiwa Securities. Actually, we do believe there could be a positive impact. So those who have the real estate loans from ORIX Bank, it is not so large in terms of number in comparison to Daiwa Securities customer base. So the impact could be limited.

But in terms of the real estate investment loans, the customer base or customer potential is much larger, not just confined to those who are customers of ORIX Bank. So we also intend to develop new customer base together with ORIX Bank, so we can further expand the customer base.

Understood. So perhaps at the IR meetings and also at the business strategy meeting, we'd like to continue the discussion.

Next is going to be the last questioner, UBS, Niwa-san.

This is Niwa of UBS. Can you hear me?

Yes.

Well, regarding the bank, I have 2 questions. One, I'd like to know the background of the acquisition. Which one has made the first comment and how long did it take? And also, you're talking about the margin of 1%, the interest margin of 1% as a guideline. How realistic that is going to be? According to your model, 1% of the interest margin seems to be easy to achieve. If that's the case, then that's going to be the image that we should consider as conservative? Or should we think about that a challenging target? That is the question about the bank.

The second part of the question is that the U.S. private asset is now going through some turmoil. Any impacts on your business? Or do you have any exposure? And also the response of the retail investors, are there anything that you can share with us?

Thank you very much for your questions. First of all, the background of this M&A. We, with the ORIX as a company for our group, well, they have been an important business client for a long time. Including the management, we have had very good relationships. And there is much complementarity between the 2 banks. The possibility of working together, we have sounded out to the ORIX Bank from our side.

In the last few years, because we entered into a world with positive interest rate, as I mentioned earlier, we have a high expectation of the complementary synergy to deliver. So since last fiscal year, we have made some serious proposals. So the 2 companies continued discussion. And as a result, we decided to work together as one company. That is the background.

And talking about the interest margin, Daiwa Next has the deposit to BOJ, of course, at 0.75%. But the weighted average of the bank is about 2.1% for the lending. So thinking about the better yield for our companies, that's going to be 1.36%. So if we're going to have the calculation on a test basis at 1%, that was the scenario that we wanted to provide with you.

And then moving on to the private credit, our exposure and the impact. First of all, our exposure is the one that we do have an origination, there's nothing. For the group as a whole, as an exposure, it's very limited and very much of the indirect exposure. So on a consolidation basis, there's no impact on our margin. And for the retail investors -- alternative asset -- for alternative assets -- as Daiwa Securities, the alternative investment is an option for less liquidity, but higher diversification so that the return profile can improve.

So alternative is a very important asset class for us. But liquidity is limited. So when our clients decide to buy, then we do have the higher compliance guideline to follow. When there is enough assets and also the exposure should be just one portion of the total asset, especially given the consideration of the low liquidity, those are the items that need to be fully explained and then understood by the customers. The credit -- the private credit trust investment is managed and then consigned to Blackstone. The minimum amount of the investment is USD 50,000. So the subject is the high net worth customers.

Though recently, we do see the mass media coverage. And that is causing some concern for the customers. So for all the customers who have those exposures, we are following up for all of them. For the Daiwa Asset and for ourselves, we have been very flexible and trying to provide the information that is user-friendly. So at present, we do see the situation where the cancellation request is mounting or anything. There are some number of people who are considering the cancellation, but it's not that high. So continuously, we will monitor the situation and then think about the follow-up to our customers.

Niwa-san, thank you very much for your questions. With that, we want to finish our Q&A session.

[indiscernible] speaking from Daiwa Securities Group. Well, thank you very much for joining today for investors and analysts who would like to have a continued communication. So thank you very much for your continued support. If you have any further questions, please send us to IR team. Thank you very much for your attention today. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]