Nomura Holdings, Inc. Sponsored ADR Stock

Good day, everyone, and welcome to today's Nomura Holdings First Quarter Operating Results for Fiscal Year ended March 2027 Conference Call.

Please be reminded that today's conference call is being recorded at the request of the hosting company. [Operator Instructions].

Please note that this telephone conference contains certain forward-looking statements and other projected results which involve known and unknown risks, delays, uncertainties and other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these projections. Such factors include economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions.

With that, we'd like to begin the conference. Mr. Hiroyuki Moriuchi, Chief Financial Officer, please go ahead.

This is Moriuchi , CFO, speaking. I would like to start right away to report the results from Q1 year ending March 2027. In this quarter, all divisions achieved higher revenue and income before income taxes than in the previous quarter and ROE reached 15.4%. We believe the result of the structural reforms implemented over the past few years are now steadily being reflected in our performance and that we are making good progress further 2030 management vision. I would like to highlight 3 key points. First, growth in our recurring revenue business contributed to the steady strengthening of our stable revenue base. Second, our international businesses saw sharp growth, particularly in our priority areas. Income before income taxes in our 3 overseas regions reached a record high since disclosure began in fiscal year 2008, '09 adding greater depth to profits. Third, we launched deposit sweep service to strengthen our banking business, and we are still laying the groundwork for future growth. Through these initiatives, we feel confident that heading towards 2030, the stability of our earnings base has steadily improved and our ability to generate profit has also been enhanced. We now look at first quarter results for each division.

Please turn to Page 7. All percentage discussed from now on are based on quarter-on-quarter comparison. On the top left, you can see the Wealth Management net revenue increased 9% to JPY 145.4 billion, while income before income taxes increased 16% to JPY 71.1 billion. Thus, revenue and income increased for the fifth consecutive quarter as asset management business transformed the division's revenue structure.

On the bottom left, you can see the recurring revenue rose to an all-time high of JPY 59.2 billion. Net inflows of recurring revenue assets also remained strong, reaching an all-time high of JPY 539.6 billion. Flow revenue was strong, too. Accurate perceptions of client activity as major equity markets hit all-time highs ensured growth in high-quality flow that in turn translated into growth in recurring revenue assets and thereby supported revenue growth. Solid cost controls also enabled the division to generate a high ratio of pretax profit margin of 49%. The recurring revenue cost coverage ratio came in at 76%, representing steady progress towards the target in our 2030 vision.

Please turn to Page 8, where you can see an update on total sales by product. Total sales fell versus the previous quarter to JPY 8.5 trillion, but sales predicated on long-term diversified investment growth, thereby ensuring high-quality inflows that will translate into recurring revenue. By product, stocks registered a decline of 36%, owing to the absence of major tender offers, but remained high in absolute terms. Bonds registered a rise of 14% as rising yen interest rates ensured solid demand for Japanese bonds.

Investment trusts and discretionary investments, which constitute recurring revenue assets registered substantial growth of 22% and 38%, respectively, supported by services tailored to client requirements and the sort of product lineup that only Nomura can offer. Insurance also registered substantial growth of 36% on strong demand for pension and estate planning. Next, I would like to look at KPIs on Page 9. On the top left, you can see the recurring revenue assets saw a net inflow of JPY 539.6 billion, which represents the 17 consecutive quarters of net inflows. As a result, as shown on the top right, recurring revenue assets totaled JPY 31.7 trillion at the end of June, representing an all-time high.

Recurring revenue also registered an all-time high despite the absence of half yearly investment advisory fees. As shown on the bottom right, workplace client assets, which we have established as a new KPI, saw steady growth to JPY 10 trillion at the end of June on consistently high inflows from ESOPs. Next, let's take a look at investment management. Please turn to Page 10. On the top left, you can see that net revenue rose 14% to JPY 98.3 billion and that income before income taxes rose 148% to JPY 45 billion. In both cases, this was the best performance since the division was established in April 2021.

On the bottom left, you can see that business revenue was solid at JPY 86.2 billion. Asset management fees registered an all-time high owing to growth in assets under management. Furthermore, there were steady inflows of funds into newly established emerging market equity funds actively managed by Nomura Asset Management International and collaboration between Japanese and overseas offices with respect to acquired operations also generated rapid results and made a larger contribution to revenue. Investment gain and loss gain or loss also benefited from much better performance at American Century Investments.

Expenses also fell on the disappearance of impairments and onetime acquisition-related costs posted in the previous quarter. Let's now turn to Page 11 and examine our asset management business, which is the key source of business revenue for the division. The graph on the upper left shows the asset management show that asset management -- assets under management reached an all-time high of JPY 156.4 trillion at the end of June, supported by favorable market conditions. As shown at the bottom left, net outflows amounted to JPY 1.33 trillion. Net inflows into investment excluding ETFs and MRFs totaled around JPY 500 billion, owing to actively managed Japanese equity trusts and newly established actively managed emerging market equity funds, but net outflows from ETFs totaled around JPY 940 billion, mainly from Japanese equity ETFs amid rising equity markets. Domestic investment advisory and international businesses saw net inflows in Japan mainly into actively managed Japanese equity investment trusts and private assets, but net outflows overseas, including sustained outflows from mutual funds in line with U.S. market trends as well as outflows from U.S. high-yield bonds. As shown at the bottom right, alternative AUM rose to a new high owing to net inflows.

Next, Wholesale Division, Page 12, please.

On the top left, you can see that wholesale net revenue rose 20% to JPY 369.1 billion, while income before income taxes rose 116% to JPY 93.3 billion. In both cases, this was the best performance since the division was established in April 2010. Global Markets net revenue rose 26%, driven by equities. Investment Banking net revenue fell versus the strong previous quarter, but registered an all-time high for the first quarter of the fiscal year. The revenue to modified risk-weighted asset ratio rose to 9.3% on flexible allocation of resources in response to market conditions and steady efforts to tap revenue opportunities under the self-funding framework.

Please turn to Page 13 for an update on each business line. Net revenue in the global markets rose 26% to JPY 318.7 billion. Please look at the middle section on the right. Fixed income revenue rose 11% to JPY 139.2 billion. In macro products rates, revenue rose in EMEA on client activity, while FX emerging markets revenues rose substantially in AEJ on increased client flows. In spread products, credit revenue rose substantially in Japan and AEJ on increased client activity triggered by tighter spreads, while securitized products revenue came in flat. International Wealth Management revenue also grew steadily on expansion of client base, thereby helping to ensure more diverse sources of revenue for global markets. Equities revenue registered strong growth, rising 41% to JPY 179.4 billion, owing to the strategic global rollout of businesses that have already been established in certain regions as well as favorable market conditions.

Equity products saw strong revenue growth across all regions as increased client flows drove growth in derivatives. Elsewhere, accurate perceptions of client activity enabled AEJ to drive growth in Execution Services. Let's turn to Page 14 for Investment Banking. As you can see on the top left, Investment Banking net revenue fell 9% to JPY 50.4 billion, but it hit an all-time high for the first quarter of the fiscal year, exceeding JPY 50 billion for the first time since fiscal year 2016, '17, the earliest period for which data is available.

Byproducts advisory revenue fell versus the strong prior quarter, but benefited from growth investments and portfolio realignment in Japan and from multiple deals outside of Japan, including renewable energy-related deals that are an area of particular focus. In financing and solutions, et cetera, ECM remained at the top of the league table in Japan with contributions from multiple major deals. The business also responded to diverse needs, including the issuance of bond type class shares. Elsewhere, DCM was widely involved in bond issuance by a broad range of Japanese and overseas issuers, while solutions businesses also continued to perform solidly.

Next, Banking division. Please turn to Page 15. As shown on the top left, net revenue was up 5% to JPY 15.2 billion and income before income taxes was up 19% to JPY 3.6 billion. Starting from this quarter, we disclosed net revenue broken down into banking revenue and trust and agent service revenue. As you see in the middle of the right, banking revenue rose 19% to JPY 4.1 billion. The balance of deposits and number of accounts grew steadily, owing to the marketing of deposit sweep service launched on April 27 and collaboration with wealth management.

Also, revenue from lending operations grew on a steady increase in loans outstanding and valuation gains on securities holdings also contributed to revenue growth. Trust and agent service revenue was JPY 11.2 billion. Revenue trended solidly by a growth in investment trust balances backed by the launch of new investment trust and market factors. Next, we turn to KPIs on Page 16. On the top left, loans outstanding were JPY 1,247 billion. Loans outstanding grew centered on Nomura web loans, reflecting a growing recognition of securities-backed loans and an increase in the value of collateral accompanying the market rise as shown at the bottom of the slide. The investment trust balance and assets under administration have been growing steadily on the acquisition of mandates for newly established investment trust and as fund inflows have continued on the back of marketing strategy enhancements.

Next, expenses. Page 17, please. Group-wide expenses were JPY 475.2 billion, an increase of about 1% or JPY 5.7 billion from the previous quarter. Performance-linked bonus provisions and other compensation and benefits rose, but at the same time, other expenses were held down, leading to the capture of benefits from operating leverage.

Next, financial position. Page 18, please. As shown in the table on the bottom left, at the end of June, common equity Tier 1 capital ratio was 12.9%, up 0.1 percentage points from 12.8% at the end of March. That completes our overview of the first quarter results. In closing, in May this year, we raised our numerical target range for ROE to 10% to 12% or more by 2030 and our target for income before income taxes in 2030 to at least JPY 750 billion. ROE of 15.4% in the first quarter was the highest since the April to June quarter of 2020 when wholesale with relatively volatile earnings was making a major contribution to profits amid quantitative easing measures being taken around the world in response to COVID-19 pandemic.

In recent years, the net revenue structure has been changing as the exposure to any one particular division has declined and the generation of profits has become more balanced across divisions. Stable revenues have expanded roughly 60% from a year earlier, indicating steady reinforcement of income before income taxes level. In wholesale, revenue sources are becoming more diversified, driven by growth in equity products and securitized products as well as the expansion of the international wealth management business, although performance may fluctuate to some extent in response to market conditions, we believe the quality of our profits has been steadily improving because of restructuring efforts made to date.

Let me comment briefly on the situation since July. Market environment has been characterized by continued uncertainty amid the renewed heightening of geopolitical risk and the equity market have been -- have seen corrections and increased volatility. Despite these circumstances, net revenue in Wealth Management has been roughly on par with the first quarter. Fund inflows to products and services predicated on long-term diversified investments remain firm. In wholesale, net revenue has slowed somewhat of late.

This is partly in reaction to strong net revenue in the first quarter, mainly in equities, but also owing to seasonal factors specific to the summer. Nevertheless, the pipeline for the division as a whole remains favorable. We think market volatility is likely to increase in the second half of the year with midterm elections to be held in the U.S. and in view of monetary policy trends in key nations, we plan to monetize opportunities while engaging in appropriate risk taking and maintaining strict discipline in terms of cost controls. Thank you for your continued support. We have a question and answer session now.[Operator Instructions]

I'm Watanabe from Daiwa Securities. I have 2 questions. First, about wholesale revenue. In July, you've explained that it slowed down somewhat. In comparison to Q1, I believe there are seasonality factors. But on year-on-year basis, with revenue in July an increase, revenue sources are diversified. And what is your outlook on wholesale revenue?

The second is on capital policy based on payout ratio of 40% with Q1 revenue DPS of close to JPY 20 securities. Is that the right understanding? As income increases with the capital accumulation, ROE will be under downward pressure. Will there be adjustment of capital, including buyback? These are 2 questions.

Thank you, Watanabe-san, for your questions.

About wholesale revenue, it slowed down a little in July. Every year, because of seasonality in July and in August, according to the past trends, in almost all years, we see some slowdown in summer. Having said so, in terms of year-on-year, how does it compare? Currently, it is more or less flat. So that is my response to your first question.

And regarding the second question on shareholder return policy, to be honest, it is only at the end of Q1 and payout ratio perhaps may be too premature to be discussed. Growth investment and enhancement of shareholder return will have to be balanced. In view of that balance, we would like to take this into further consideration. I hope this answers your questions.

Regarding the first question, equity especially was strong in Q1. Is this momentum -- will this momentum be sustained in Q2 and beyond?

Thank you for that question. As you rightly pointed out, in the first quarter, equities were very strong, including bulge brackets peers also enjoyed multiple favorable conditions that were unique according to these peers. On our part, because of the activities of the market over short term to long term, perhaps there may be a small normalization. In any event, it continues to be the case that equities remain strong. So even though there may be small normalization in comparison to the past level, there may be an upward correction of the baseline.

The next question comes from SMBC Nikko Securities, Mr. Muraki. -- please.

I'm Muraki from SMBC Nikko. I have 2 questions. First question is about revenue. This time, Page 13, I'm looking at the graph on Page 13, and the performance was driven by equity product revenue. So compared to a year ago, it's about double JPY 120 billion. So in what way was the revenue generated driven?

I'd like to deepen my understanding, if possible, derivatives, structured products and prime finance. So I'd like to know the breakdown. That's my first question. My second question is regarding resource usage. I ask this question every time, but Page 20, overall balance sheet shows that securities-backed lending and trading assets combined, it's about JPY 4 trillion and JPY 0.7 trillion when I look at the pure loan, so balance sheet has grown bigger.

In terms of U.S. peers from hedge fund clients, so there is a very strong need for financing. So they have increased resources, but they cannot keep up with the increasing demand from clients. In your case, leverage ratio came down, but it's 0.6%. So compared to regulation, there is still headroom in your case. In this situation, resource management and risk management, what is your approach to them?

Thank you, Mr. Muraki for your question. Regarding your first question, equities, equity products breakdown. So what was the driver for the revenue growth? The detailed breakdown cannot be disclosed, but roughly speaking, finance-related business such as corporate derivative or prime business and trading type business such as flow trading and cash business and structured trade. So finance and trading represent 50% each of revenue growth in terms of contribution to revenue growth.

It just so happens that in the past, we started with cash and gradually centering on the U.S.A., we have expanded product lineup. And geographically, looking at the success in the U.S.A., in Asia, we have strengthened our business. Market theme was captured and monetized into revenue in Asia as well. As for lineup of products, in addition to derivatives, financing execution services, and we have expanded product lineup. So that's been our situation. The second question, our balance sheet has grown bigger, but our financial resources, especially leverage exposure. And when it comes to risk management, what is our approach?

I believe that was your question. Regarding the balance sheet growing bigger, the reason for that is simply put. Equity business contribution is big as a factor. Equity business has been quite active and that led to increase in balance sheet. And as for management of financial resources, as you pointed out, leverage exposure still has some headroom. Regarding leverage exposure, unlike CET1 , by issuing AT1, leverage exposure can be expanded if we try to do so. But as you know, Muraki-san, regarding wholesale division, we have self-funding framework within which we have certain guideline about financial resources. And within the guideline, we are -- we would like wholesale to grow business.

The intent here is our financial resources precious. So within certain limit or framework, within wholesale, we would like wholesale to control resource, so the resource can be focused on the high-margin projects deals so that the revenue to RWA ratio can be increased. That is our aspiration. And group-wide business portfolio within the group-wide portfolio, we do not want the concentration into wholesale. So we want to avoid concentration risk.

So in wholesale, -- sometimes we are flexible in providing wholesale -- in providing resources to wholesale. But basically, we are aiming to drive growth within the framework set within wholesale.

That's how we manage portfolio and risk management risk. And that's going to be our continued approach. So it's not just wholesale that conducts business that use resources. For example, in terms of IM inorganic opportunities, they will use RWA and Nomura Trust and Banking division. So these businesses will use more leverage exposure moving forward.

So financial resource control will become increasingly important. I hope that answers your questions.

Regarding your first point, so you say the derivatives business did well, but derivatives in the 50% of equity business, so it belongs to flow trading. And now derivatives represent a significant portion of the latter part, 50%.

So regarding the breakdown, there is some mixture. So we would like to check the specific details and then have you keep you updated at some point in the future.

This is Tsujino from BofA.

I have 3 questions. First, regarding compensation and benefits. Since last year, there were some special factors, onetime factors that led to increase in compensation and benefits. And from this fiscal year onwards, I believe you've discussed that you expect a decline in compensation and benefits. Going forward, how will it trend in Q2 because of changes in bonus, et cetera, will there be a temporary increase in compensation and benefits, which will come down subsequently? That is my first question.

And the second question is about global markets from July onwards. In comparison to Q1, it is a bit slow. Wholesale, it is almost flat. But global markets, when we focus only on global markets, FIC in Q1 has increased substantially year-on-year. FIC is relatively flat. When we look at the market, FIC sudden decline is not likely.

So FIC versus equity, if FIC slows down in summer and if it is lower than Q1. But unless equity suffers from very sharp decline on a year-on-year basis, I don't think there will be a leveling off or plateauing. So could you add color to FIC and equity separately? And another question is about IM profit, excluding investment gain and loss. And then about JPY 20 billion is increased Q-on-Q. And the forestry asset is JPY 12.1 billion decrease.

Acquisition cost, JPY 5.5 billion decline. And so that should lead to improvement. But to begin with, in Q4, Nomura Babcock was extremely strong. And because of such factors, the performance was not so bad, which means that Nomura Babcock this time, how normalized was it? How much normalization was there in Nomura Babcock?

Could you discuss these developments?

Tsujino, thank you for your questions. About increase in compensation and benefits, onetime factors occurred last year, as you rightly pointed out. And as we also provided information on this, there were several onetime factors, one of which is deferred compensation-related factor. And this is a replacement of cash compensation. So this was onetime factor last year. And gradually, this cost will be leveled off. That is, I believe, how we explained in the third quarter presentation.

Actually, as a matter of fact, what we call DCA deferred compensation regarding that cost, assuming that earnings remains the same, then DCA declines, but earnings are improving, rising. So deferred compensation included compensation and benefits are also increasing because of the industry -- the nature of the industry, there is some fixed level of compensation and benefits. But in line with the performance, there is also additional compensation and benefits linked to performance. So to an extent, there is some increase linked to performance. And performance has been very strong. So rather than likely decline, at this pace, we anticipate some increase.

Having said so, in Q1, there are so many onetime factors for compensation and benefits, but there is a stock compensation that will be vested in short term, and that was booked in Q1. And because of that, there was a onetime effect.

Regarding the second question about the recent July equity fixed income breakdown. Year-on-year, it is about the same. And that led to your estimate that equity may have fallen. Right now, regarding equities due to market corrections, in comparison to the previous quarter, it is coming down. However, it is still at a high level is maintained for equities.

As for fixed income, there are investors on the sidelines trying to see the monetary policy of Western countries. And because of market volatility, it is leading to more volatile revenue. As for credit and securitized products in the previous quarter from the very high level in the previous quarter, and since there are deals that affect the performance, the number of deals may affect the performance, and that may have had some effect.

And I believe you've had a question related to IM as your third question, factors that led to increase in revenue. In terms of Q-on-Q performance, Babcock had some seasonal factors, and there was a slight decline. Babcock products typically have a stronger performance in Q3, Q4. In Q1, there was a slight decline. As for contingency fees, there were some strong results, including Vietnam, Taiwan and AUM increased.

Seed investments, this is similar to proprietary investment. And this seed investment also had a good performance. In the meantime, there are some offsetting factors, but I hope this addresses your question.

About seed investment, do you mean there was a mark-to-market?

Yes, that is correct.

Next person asking the question is Sato-san from JPMorgan Securities.

I am Sato from JPMorgan Securities. I have 2 questions. First question is about wholesale division's revenue, especially revenue to RWA ratio. 9.3% was the result of Q1. So on a quarterly basis, it's the highest level. And the other day, 2030 compared to 2030 target, the Q1 result was quite high in terms of the ratio. And you've explained the equities business did quite well. But regarding the risk asset mix, -- could you add some color to the risk asset mix?

When I do calculation backward, adjusted risk assets have not increased much. Actually, it may have decreased somewhat. So I'd like to understand if there is any change to the mix? The second question, in the second half of year, you are scheduled to relocate the headquarters. And what is your latest outlook on the relocation cost this time,

Well, headquarter, new headquarter-related equipment cost increase was mentioned. And by September, the investment into the retained floor space, about JPY 150 billion or so. And accounting-wise, it might be an amortization or depreciation. If there is such cost, then what is going to be the total cost associated with relocation?

Sato-san, thank you for your questions. First, regarding your first question, revenue to RWA ratio, the level has gone up, but RWA level remains unchanged. So what is the mix? So that was your first question. I understand. Regarding the mix, equity products and SPPC was securitized products. And IWM, International Wealth Management resources have been increased. In the area of equities, the resource allocation has been increased.

And how we should think about the current situation? Towards 2030, we have macro business centering on rates and equity business and spread business, credit and SPPC. The rough breakdown will be kept -- and in the medium to long term, we would like to grow all of them in a balanced manner. But particularly, we would like to grow equity business more in the medium to long term. So in the medium, long term, our portfolio mix target, the target is not going to change much.

On the other hand, when it comes to short term, market -- depending on the themes or situation of markets, the demand for certain products sometimes greatly increase. This time, equities market has been quite active. So financial resources have been reallocated from other businesses to equities business.

This is a sign that wholesale self-funding worked. So where there is opportunities for revenue generation, headquarters have urged wholesale to make a revenue by shifting resources and they are living up to the headquarters' expectations. And U.S. peers included in equities business, demand is bigger than the capacity of balance sheet of each firm.

So in this kind of situation, the level of profitability remaining with the firms, I believe, has trended up somewhat. That's my answer to your first question.

Regarding your second question about headquarters cost.

In the most recent quarter, there was some cost incurred, but headquarter relocation itself will be proceeded with gradually. So the associated costs will be incurred gradually. So this fiscal year and next we expect certain volume of cost. However, impact on this year's performance is considered to be relatively small, while I would like to refrain from speaking about specific number, but at the right timing, we would like to explain the relevant cost.

So you can give me qualitative remark, but Otemachi properties and other properties, now you are paying rent. Then after you've completed relocation and you've exited the existing buildings, then you've returned the floor, then on a net basis, cost is going to stay flat.

Thank you for the follow-up question. Well, regarding headquarters, the expense will switch from rent expense to depreciation after relocation. But in the medium to long term, the headquarter-related cost will stay flat or annual cost, I believe, will end up being a bit lower, though I do not have a specific number here. So when it's -- when we are ready to disclose, we'd like to follow up with this.

I'm Otsuka from SBI. I hope you can hear me.

Yes, we can hear you loud and clear.

Page 25. I have 2 questions, and I would like to have a response after the first question. I'm looking at Page 25. As for revenue in international operations, you have 3 regions. And this quarter, JPY 39.8 billion from Americas. In comparison to the past, for example, in fiscal 2020, this level was achieved. But Asia and Oceania, JPY 47.2 billion. This is a huge amount that was not seen before. What are the factors?

And how sustainable is this level of income? As for EMEA or Europe, market was performing well, but losses continue to be incurred. Competitors, Paribas and Deutsche in Markets ID division, they are reporting profits. Of course, the businesses are different between Nomura and them. But in Europe, despite a favorable market environment, losses are incurred. Could you comment on these?

Thank you for your question, Mr. Otsuka. As for international operations, the U.S. is at a high level, but this was a level similar to what was achieved in the past year. As for Asia, Oceania, this high level of income is quite unusual, and you would like to understand the background. This fiscal year, as we have been discussing, equity contributed hugely to increase in revenue. In addition, FX and emerging also enjoyed a very large increase in revenue. Credit flow credit was also relatively strong.

In addition to these, what is different from the past is IWM, International Wealth Management. Since around 4 to 5 years ago, we began to revitalize the business. And initially, there was a J-curve, and we had to restructure several franchises. But since around 2 years ago, we began to see blossoming of these efforts. And in this fiscal year, not only in terms of revenue, but in terms of income, IWM is making a huge contribution. In relation to this, although there is some fluctuation, but in comparison to other products from GM, we expect a more stable growth continuously.

As for EMEA, you've mentioned other competitors and why the sustained loss-making situation, we would like to strengthen business. We are making efforts to grow business. As for the magnitude of losses on a 2- to 3-year range, it is being reduced. This fiscal year, rates are showing relatively strong growth in fixed income and equity, both have enjoyed increase in revenue. On the other hand, -- in particular, we are focusing on growing equities and the regional diversification and regional expansion are being pursued.

We are making progress gradually. But when it comes to EMEA, especially in our international operations, as booking center booking hub, we are using EMEA transfer pricing. Of course, we are assigning appropriate pricing. But as a legal entity, there are some costs that need to be incurred. In that respect, amongst 3 international regions, EMEA is a special region. It is a profit center as well as a cost center or functioning similar to corporate center.

And therefore, in comparison to other regions, there is some added burden for EMEA. As for wholesale self-funding framework, based on that framework, there is some dynamic reallocation of financial resources. In this time, in wholesale, as we have repeatedly mentioned, U.S. equity and Asian equities are capturing very good opportunities in large number. And therefore, there was an intentional shift of resources to that area. And that also is resulting in these numbers.

So does that mean that seen from outside, these are losses? Is it a profit center? It appears only as a cost center. But seen from the management, you believe that this is something you have to persevere.

If we stop EMEA, we cannot do business in other international regions. That is what is meant by booking center. For wholesale overall, I believe it would be more accurate to look at the entire picture of wholesale. It may be difficult to take such a view. But globally, in managing our business, we are looking at global products for wholesale rather than looking at region by region. So we hope you will be able to see wholesale business in that perspective.

The second question is on Page 29 about cash and securities. Rather inflows of cash and securities, it was very large at JPY 8 trillion. There was an outflow in the previous quarter. In comparison to previous quarter, there were fluctuations. To the extent possible, could you discuss what the reasons behind are and what inflows, outflows there were?

Thank you for your question. It may be difficult to discern here, but a large negative this time is because there were several major corporate actions. And as a result, there was a large amount of funding that was paid out. So this was a unique situation. If we look only at retail, inflows of cash and securities, it is a positive of more than JPY 400 billion. Therefore, it is not as if this is indicating a major trend. I believe it would be better to understand that there was some special factor or unique factor.

If you have any numbers you can discuss regarding retail, it may be completely equal, but in wealth management, what kind of funding inflow, what kind of product inflow did you see on Page 8? There were various descriptions of strong performance of equities. So if you could add color to that, please.

Thank you for that question. Generally speaking, as for the trends in retail, as you rightly mentioned, total sales on Page 8, I believe that shows the trend very clearly.

I see. Then investment trusts were sold in discretionary investment was also doing well because of cash in?

Yes, that is correct.

Next question comes from Niwa-san from UBS Securities.

Can you hear me?

Yes. Niwa-san, please go ahead.

I have 2 questions. Regarding Page 19, Wealth Management and ROE of the total company. First, Page 19, Wealth Management's recent situation inflow has been strong according to your explanation, but the market environment is uncertain. So in this situation, how should I put it? What is the key points of advice? In other words, about what are your customers concerned about? Even if the current uncertain environment continues, could we expect the stable revenue to continue? So could I have some more colors regarding some episodes that you can share with us regarding the dialogues you have had with clients?

The second question, 15% or more of ROE achieved in first quarter. My question is, was there areas where you could have done better in terms of revenue? ROE exceeded target, and it's very good. But if hypothetically, if you could have done this and that, then do you believe you could have delivered more revenue?

For example, wholesale allocation, if you had given more resources beyond the self-funding to global markets. So what would have been the result second quarter onward. But could you have delivered bigger revenue had you allocated more resources to certain businesses? So also, I'd like to know about the sustainability of revenue.

Thank you very much, Niwa-san. Regarding your first question, the market is now uncertain, but what are the key points to look at to understand business. So that's how I understood your question. In that sense, as you pointed out, our wealth management business has recurring revenue and flow revenue. In terms of flow revenue, flow revenue is influenced by market sentiment. So we would like to stay close to our clients and conduct consulting-based services, and that's what we've been doing.

And regarding recurring revenue, which is relatively stable in Wealth Management, we are working to grow recurring revenue. So we have recurring revenue, and that's supported by the net increase in recurring assets and also recurring revenue cost coverage ratio. So those are the key points to pay attention to.

Regarding your second question, ROE of more than 15%, especially in the area of wholesale regarding resource allocation, were there areas where we could have done better. As you say, if we had infinite amount of resources, then we could have received more demand from clients. We could have captured more demands from customers because demands are quite strong. So in that sense, well, we had to be selective in choosing which deal to do.

And that placed a burden on our business divisions. But still concentration risk for group as a whole and concentration risk on certain products within wholesale has been controlled. so that in the medium, long term, we can grow in a sustainable manner. So for that, the approach we took was unavoidable. That's our understanding. I hope I answered your question.

Regarding the second point, I'd like to ask a follow-up question. It's another hypothetical question. But if without what you have described, then what would have been the ROE level. So what would have been the highest level of ROE you could have achieved hypothetically?

But it's a very difficult question to answer.

So with consent understanding from shareholders, we hold excess capital. So in addition to regulatory capital, so we have internal target of 11%, and we have a buffer above that. Regarding capital usage, sometimes we allocate capital to wholesale beyond self-funding. But when actually there is a need for capital, can we recoup the capital?

So the flexibility of resource is what we have to pay attention to because once resource is given to business division, the capital is not returned easily. If it's used for client business, there is certain duration given that for future opportunities, then we will have to retain certain buffer.

So if we had captured all opportunities, then we would have achieved ROE above 15.4%, but that might have undermined the future growth opportunities. So it's a hypothetical question, but it is a difficult question to answer.

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

Closing message from Nomura Holdings.

Thank you very much for your participation. In this quarter, there were market themes, market opportunities that is certainly the case. And in order to capture these opportunities, we are engaged in business portfolio restructuring and structural reform in the past 2, 3 years. These were translated into actual good performance. Towards good 2030, we were able to make a good start immediately after a revision of our target. Summer is a slow season typically, Q2 and beyond, we would like to make sure that we continue to achieve strong performance, and we appreciate your continuous support. And thank you very much once again for your patience.

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

This is Kentaro Okuda, Group CEO. Thank you very much for taking time out of your busy schedules to join our Investor Day today.

Let me begin with the most important point. We are significantly raising our numerical targets for 2030, ROE to 10% to 12% or more and income before income taxes to over JPY 750 billion by 2030. Following my presentation, the heads of our 4 divisions will each present their strategies. So in my part, I would like to explain the progress we have made in transforming our business model, the upward revision of our numerical targets for 2030 and our growth strategy and organizational foundation aimed at achieving those targets.

First, I'd like to review the progress we have made so far in transforming our business model. In the previous fiscal year, net revenue totaled JPY 2,167.7 billion. Income before income taxes was JPY 539.8 billion, and net income was JPY 362.1 billion. This represented both higher revenues and higher profits. Net income reached a record high for the second consecutive year. Income before income taxes and ROE are progressing faster than the targets we initially set when formulating our management vision for 2030. Each KPI is also progressing at a pace above the initial assumptions made when we developed that vision.

In Wealth Management, the asset management-based business model has continued to expand. In Investment Management, our global asset management platform has been strengthened. In Wholesale, our profit-generating capacity and earnings stability have improved significantly. And in banking, although it's still in the early stages, it is steadily emerging as the next pillar of our growth.

While we have benefited from certain favorable market conditions, our performance has not been dependent on them. Rather, it's the result of our transformation translating into tangible outcomes. The stability of our earnings and our ability to generate profits has improved dramatically.

In the current fiscal year as well, during April and May, Wealth Management and Wholesale have been trending above the levels of the previous quarter. Nomura is a company that steadily executes its strategy enhances the value it provides to clients and turns those efforts into results. At the outset, there were voices asking whether we could really deliver. But by not fearing change and by transforming ourselves, we have, in fact, raised our earnings power. The business model transformation we are seeing today and the results it is producing demonstrate exactly that.

That said, we are by no means satisfied. The moment we become satisfied growth stops. That's why we must always aim higher and continuous driving. I'm convinced that Nomura has the ability to achieve the goals that it sets. As I mentioned, we are raising our targets to ROE of 10% to 12% or more and income before income taxes of over JPY 750 billion by 2030. The JPY 750 billion figure is 1.5x our previous target and approximately 3x our actual results for the fiscal year ended March 2024, before we announced the 2030 management vision. We held extensive discussions internally before arriving at this decision.

In order to clearly communicate to investors at this point, in time, our growth potential and our commitment to achieving it, we have set these targets with strong determination. The new ROE target range of 10% to 12% or more reflects our intention to firmly establish ROE above 10%, even in challenging environments and aim even higher when conditions are favorable. We recognize that improving capital efficiency and delivering profit growth while aiming for 12% or more will not be easy. However, we will seek to achieve these targets by expanding revenues in each division, increasing synergies across divisions and continuing group-wide structural reforms, including in Corporate. At the same time, we will continue reviewing our business portfolio and replacing assets with a focus on profitability and capital efficiency.

On that basis, we will further strengthen cost discipline and enhance our profit-generating capacity. To balance growth investments and shareholder returns, we will maintain disciplined resource allocation and further strengthen our governance and risk management. Among the KGIs and KPIs shown on the slide for each division, I'd like to highlight Three points in particular. First, in Wealth Management. We are aiming for a recurring revenue cost coverage ratio of over 100%. Through this, we will further enhance the client-focused services we have built over time and expand the positive cycle of growth.

Second, in Investment Management. We are targeting assets under management of approximately JPY 180 trillion. This would allow us to join the $1 trillion club, a benchmark for globally competitive asset managers and it will further strengthen our revenue base. Third, in Wholesale, we are aiming for revenue to modify RWA ratio of 7% or more, a cost-to-income ratio below 80% and divisional pre-tax ROE of 10% or more. Banking was only established last year, so we have not made major revisions to its KPIs. However, it is steadily taking shape as a platform connected to Wealth Management. Through initiatives such as Deposit Sweep Services, it is developing into the next pillar of growth by expanding the value we provide to clients. It should be noted that the targets we are revising upward today do not incorporate any major inorganic growth. We believe these targets are achievable through the growth of our existing divisions and existing businesses alone.

On top of that, we will also pursue nonlinear growth by making use of accumulated capital. We believe that steadily building organic growth while maintaining discipline around capital efficiency and financial soundness and delivering growth beyond expectations is what will earn the trust of our stakeholders. To achieve this, we are moving forward with several important initiatives and changes to our management structure. Since becoming CEO, I have emphasized the expansion and strengthening of private markets in addition to public and have worked to reinforce a stable revenue base centered on our Asset Management business.

As a result, as of the end of the previous fiscal year, combined client assets in Wealth Management and Investment Management exceeded JPY 300 trillion, through stronger collaboration across divisions and regions as well as strategic partnerships with external partners, I believe the value of our platform has reached an unprecedented level. The client base of Wealth Management, the product capabilities of Investment Management in private markets, the global franchise of wholesale and the loan business of banking have begun to operate in concert, strengthening the revenue base of the entire group. We will embed and further enhance this collaboration as a mechanism that supports the group's revenue base.

To achieve our upwardly revised numerical targets we have reviewed our management structure. Of the 4 division heads, 3 have changed. We have also changed the heads of 2 companies and appointed a new President of Nomura Asset Management from outside the group. This is a clear message that we are not simply continuing along the same path as before but are moving toward further evolution. And I have made these personnel decisions with a strong desire to create major change. This is the leadership structure we need in order to execute each division's growth strategy more quickly and with greater expertise. We have organized the initiatives for sustainably achieving ROE of 10% to 12% or more into 3 areas: revenue growth, expense optimization and capital allocation.

Let me start with our revenue growth initiatives. Through last year's acquisition of a U.S. asset manager, Nomura Asset Management, which has long had an overwhelmingly strong foundation in Japan, has entered a new phase of establishing itself as a global brand. What we gained through this acquisition is a platform that integrates distribution, products and Investment Management in the fast-growing U.S. market. By further strengthening distribution in the U.S. market, and expanding new business opportunities such as active ETFs, we will quickly establish the structure needed to grow AuM. The Nomura Emerging Open Fund launched on the 21st of last month and managed by Nomura Asset Management International achieved inflows of approximately JPY 150 billion.

In addition, we will expand our product lineup with collaboration through the Macquarie Group, the former parent company. We have also started selling an APAC-focused infrastructure fund structured by Macquarie in Japan, making this a concrete example of collaboration across divisions. At the same time, by leveraging the distribution channels of Nomura Asset Management International to cross-sell existing products, including those from Japan, we will connect these efforts to new medium- to long-term growth opportunities. In addition to making Nomura Asset Management, a global brand, we will further strengthen our global asset management franchise by building a one-stop platform for alternative investments, expanding in real assets such as aircraft leasing and real estate funds and continuing to enhance the deployment of talent overseas.

In Wholesale, we have strengthened our client franchise, diversified our products and increased the stability of a regular base, all with the aim of steadily improving divisional ROE. Over the past 3 years, we have improved the cost-to-income ratio from to 83%. In the previous fiscal year, our revenue to modified RWA ratio exceeded 7%, demonstrating stronger earning power. As a result, in the previous fiscal year, wholesale recorded its highest profit since the division was established in April 2010.

Going forward, we will further review areas with low profitability and concentrate management resources in areas with higher profitability, thereby continuing the transformation toward a business structure capable of generating sustainable earnings. Through integrated operations from front to back, the use of technology and top-down reviews of our cost structure, we will capture global growth opportunities while maintaining a strong focus on capital efficiency and cost discipline. In Wealth Management, we have seen transforming -- we have been transforming our business model through a shift to an asset management-based business model, the introduction of a segment-based approach, the strengthening of workplace business to capture emerging wealth and comprehensive business partnerships with regional financial institutions.

Banking functions are directly linked to strategic key words for the group, such as affluent clients, workplace, corporates and wealth succession. In banking, on April 27, we launched a Deposit Sweep Service that automatically transfers funds between securities accounts, at Nomura Securities and deposit accounts at the Nomura Trust and Banking. We have also expanded the range of assets eligible as collateral for our loan services, strengthening our service platform to respond to a broader range of client needs to realize true Wealth Management as a group, we believe it is essential to strengthen banking functions and provide more comprehensive asset management services from the client's perspective.

By enabling clients to use banking functions such as deposits, loans and trust services, we can steadily build net interest income as a stable source of revenue. At the same time, sweep deposits have different characteristics from everyday transaction accounts. We will, therefore, carefully manage ALM and liquidity while enhancing the value we provide to clients and expanding our revenue base. Nomura has been transforming itself into a company that builds services based on client needs. Going forward, we will take this a step further by offering our IT infrastructure and expertise as service functions, thereby enhancing our value as a platform. This will allow us to deliver services to customer segments we have thus far not been able to sufficiently reach, supporting the expansion of the asset management market while also contributing to growth in our client assets.

We now have comprehensive business partnerships with regional financial institutions that share our vision and all of these partnerships are producing results above the initial plan. Our initiatives with regional financial institutions also help us identify areas where we can enhance the value provided to clients and are contributing to the accumulation of important expertise for advancing our platform strategy. We are also working to expand new channels for providing financial services by leveraging our strong corporate network in Investment Banking. We expect to be able to talk soon about new alliance partners that go beyond existing industry and business category boundaries.

In addition to cost increase from inflation, we are facing structural upward pressure on expenses from areas such as cybersecurity, infrastructure enhancement and other investments. Even in this environment, we will implement prudent top-down cost control in order to achieve our ROE target on a stable basis. The initiatives led by the Structural Reform Committee or SRC, are not merely temporary cost-cutting measures. They are group-wide efforts to achieve efficiency gains and improve productivity through structural reforms of our organization and infrastructure while realizing disciplined cost management. Through SRC 1.0, we achieved approximately JPY 75 billion in cost structure improvements going forward through SRC 2.0 will fundamentally review the operating model of corporate functions and our IT architecture and aim to achieve additional cost efficiency gains of around USD 500 million.

At the same time, we will continue reviewing our business portfolio, concentrating management resources in highly profitable areas and aiming for further improvement in the cost-to-income ratio. Our objective is not to cut expenses indiscriminately. We will make the necessary investments for the future while generating funds that can be directed towards growth. That is why we will pursue cost control together with growth investments, including inorganic opportunities. Our AI and data strategy is designed to leverage our client base and proprietary data to provide personalized services. We will use it as a foundation for improving service quality and profitability. Our use of AI should not stop at having AI support people. We need to evolve into an organization where AI is embedded in the way we work. In other words, we aim to become an organization where AI can work effectively.

Over the past 2 years, we have achieved a certain degree of improvement in earnings stability. Going forward, we intend to further accelerate growth. Capital exists, not to be hoarded but to be deployed to create value. By building capital through profit generation and by rotating assets, we will secure the resources to fund growth and make investments aimed at realizing nonlinear growth. Through a disciplined capital strategy, we will balance growth investment and shareholder returns while aiming to improve ROE and maximize corporate value.

In April this year, Nomura Group established the Well Growing Institute with the aim of contributing to a cycle of human endeavoring and thriving for people both inside and outside the company, starting from the comprehensive strength we possess as a financial services group. This initiative will further enhance the value we provide to society while also strengthening Nomura Group's organizational foundation. We regard people as our greatest asset with well-being, inclusion and human resources management strategy as our core pillars, we will promote the growth of each employee and enhance our organizational capabilities. We see investment in people, not as cost, but as a form of growth investment that supports future earning power by enhancing client value, strengthening our advisory capabilities and improving execution capabilities.

The Nomura brand is widely recognized. However, there remains further room to deepen understanding and raise appreciation of Nomura Group's strength and the value we provide. Brand strategy is not simply about increasing awareness. It is an important management resource that supports both client acquisition and talent recruitment. By integrating our brand strategy across the group, we will strengthen our position as a company chosen by both clients and outstanding talent, which will translate into enhanced corporate value.

Last fiscal year, as part of our efforts to enhance governance, we transitioned into a structure in which all members of the Nomination Committee and Compensation Committee are outside directors. Since this transition, both committees have been operating more actively and effectively. At the same time, we will continue to evaluate the effectiveness of the Board of Directors and strengthen its supervisory functions, thereby improving the quality of management. In particular, the objective perspectives and professional insights provided by outside directors are extremely important as we prepare for the next phase of change. We aspire to create a better world by harnessing the power of financial markets. That is our purpose.

I believe the starting point towards the achievement of this purpose is to deliver value to clients through our core businesses. Through the markets we serve, we circulate capital and expertise to support the challenges of companies and individuals. By accumulating these efforts, we help make society more prosperous. That is the essence of our work. The moment, we become complacent growth stops. That is why we will always continue to aim towards new heights. We are raising our numerical targets for 2030 to ROE of 10% to 12% or more. And income before income taxes of over JPY 750 billion. We will raise our targets, change our structure, refine our strategy allocate capital appropriately and leverage AI and our brand to accelerate growth. We intend to continue playing a leading role in promoting Japan as a leading asset management center. Please look forward to Nomura's next stage of challenge. Thank you very much.

Next, we will have Mr. Tobari, Head of Wealth Management, present.

This is Akihito Tobari, Head of Wealth Management. I will explain the progress of our strategy towards 2030 and our outlook going forward. First, I will review the transformation we have undertaken to date. In 2012, Wealth Management began transforming its business model toward asset management-based business model. And since then, we have clarified client segments and build service delivery structures optimized for each client group. As a result, the recurring revenue cost coverage ratio has risen from 22% to 72%, and our revenue base has shifted to a more stable structure.

Over the past 2 years, in particular, these results have become clearly visible. Our current income before income taxes has exceeded JPY 200 billion, the highest since the division was established in the fiscal year ended March 2002. All of our major KPIs are progressing above plan. Notably, net inflows of recurring revenue assets have reached the mid JPY 1 trillion range for 2 consecutive years, and recurring revenue assets reached JPY 27.9 trillion at the end of March 2026. These results are not due to one-off market factors, but are the outcome of steadily executing our strategy. For high net worth clients, we reorganized our structure 3 years ago and significantly increased the number of face-to-face sales partners.

Since then, we have improved productivity and clarified target segments, so sales partners can sustain high performance and expanded our product and solution offerings. As a result, our Asset Management-based business has grown substantially, and we have expanded our client base through new client acquisition. Regarding our workplace business, and services that combine digital and human elements, we have built the foundation of a reproducible business model. In the Workplace business, in particular, we have established client acquisition channels, leveraging our unique strengths, highly manager ratios and shares in ESOP among listed companies. substantially increasing the number of workplace services provided and the number of accounts. The results for our high net worth clients are also clearly reflected in the numbers.

In the core face-to-face businesses, Private Wealth Management and Wealth Management. Sales partners delivering high added value are driving revenue growth at a pace that exceeds spontaneous trading. Net inflows of recurring revenue assets increases have also grown on both fronts, inflows from new clients and accumulation from existing clients, and they are expanding with quality. So what growth potential remains here? Well, I believe there's still significant room. In Japan, with inflation rising, demand for asset building and asset management has clearly increased. Policy support has advanced the shift from savings to investments, and the share of securities in household financial assets is on an upward trend. Along with the accumulation of investable assets and the buoyant equity market, the overall household financial asset base continues to expand.

Given this trend, we expect the high net worth individuals market to continue expanding. More importantly, this is not limited to high net worth individuals. These needs are also showing up in emerging Wealth and asset building segments, and we expect the market to expand. To capture this market growth reliably, we will provide services tailored to the needs and circumstances of each client segment and expand assets under custody. In light of our strategic progress and the changing environment, we have revised our 2030 targets. We have upwardly revised recurring revenue assets to JPY 41 trillion and the recurring revenue cost coverage ratio to over 100%. We have also introduced a new target for workplace assets under custody targeting expansion to over JPY 15 trillion in the fiscal year ending March 2031.

Given the results we've achieved so far and the projected market expansion, we consider these targets fully achievable. So how will we achieve these targets. Going forward, we will focus on 3 core strategies: first, enhancing the value we deliver. By deepening collaboration with banking and offering more comprehensive solutions that integrate assets and liabilities, we will elevate our Wealth Management services. we will expand our service line up from a client needs perspective and continue to raise the level of our greatest source of added value, which is our people.

Second, establishing new models to expand our client base. We will further strengthen the Workplace business, which we have steadily built up through our model and expand our platform business. Third, building infrastructure using AI and technology. Leveraging AI and technology, we will create the infrastructure that supports improved value delivery and client base expansion. By advancing these strategies, we will enhance value delivery, broaden our client base and maintain sustainable growth.

Delivering numerous comprehensive Asset Management services to more clients while contributing to the realization of a more affluent society and helping to fulfill the Nomura Group's purpose. I will now explain each strategy in more detail. First, improving value delivery, focusing on the collaboration with banking. Currently, Japan is experiencing inflation and rising interest rates. In this environment, demand is increasing for integrated asset and liability solutions that include not only asset management but also deposits, borrowing and liquidity management. We have already been proposing solutions with the balance sheet in mind, but deeper collaboration with banking will enable more comprehensive asset management that includes deposits and loans. As a result, we will be able to offer a wider variety of higher-value products and services tailored to client attributes and needs.

Looking at U.S. precedents, advanced services that combine Wealth Management and banking functions raise client satisfaction, which in turn increases assets entrusted to the firm and grows both interest income and fee-based revenue. We believe this represents a significant revenue opportunity for us as well. Next, expanding our service lineup from a client-centric perspective. Our strength lies in our ability to shape and deliver the necessary services for diverse needs that arise from our extensive client base by leveraging internal and external resources. When sales partner identify client needs, our well-staffed product and solution organization develops optimal services in coordination with the group and delivers them.

This accumulation has led to the expansion of our Nomura-style service lineup. For example, to meet the increasingly sophisticated investment needs of ultra-high net worth and high net worth clients, we offer investment opportunities in private assets to diversified client portfolios. For clients seeking stable returns, we provide new investment opportunities such as listed corporate bond type preferred shares. We will continue to lead the market by expanding our service lineup and raising the value we deliver.

Next, raising partner capability. Sales partners ultimately deliver services to clients and improving talent quality is key to enhancing value delivery. Therefore, we are building systems to continuously produce high-quality sales partners. Specifically, we hold regular dialogue sessions so the entire organization moves in the same direction embedding our vision. We are also establishing systematic talent development programs and strengthening the management layer that supports them. One example of systematic talent development is our program for the first 36 months after joining the firm. Nomura has a culture of instructors training young employees. Leveraging the knowledge accumulated through this practice, the program is structured so that employees systematically acquire numerous know-how according to common steps.

We will continue to strengthen training by level to further improve the quality of talent development. For the management layer, we have clarified roles and established a consistent personnel management system. We also ensure managers have enough time to engage adequately with their subordinates. Recently, through organizational restructuring, we have created a structure that enables managers to properly focus on business development, talent development and appropriate operational management. Next, expanding new client bases. First, the sustained expansion of the emerging wealth client base through the workplace channel. As previously explained, we have been building a B2B2C business model to acquire emerging wealth clients who could become future high net worth clients.

By the end of last fiscal year, we had developed the organizational setup and operational foundation to continuously acquire clients and deliver services. From here, the challenge is how to increase the assets entrusted to us by raising service levels and being helpful at various stages of our clients' lives. For working edge clients, we will expand usage by improving the UI/UX of our digital services and innovating how services are delivered, so clients begin asset building earlier. For the Retirement segment, we will develop sales partners to provide higher-value asset management services. In addition, through collaboration with banking, we will expand our product lineup tailored to workplace clients. Through these initiatives, we will grow workplace assets under custody to over JPY 15 trillion.

Next, expanding the client base through platform business. As CEO Okuda explained, the platform business allows us to serve clients we could not reach on our own. This not only widens our growth opportunities but also contributes to realizing Japan's goal of becoming a leading asset management center. We are already seeing significant results in our business with regional financial institutions, and we will continue to expand these efforts. Now I will discuss the third strategy, building infrastructure through AI and technology. The core of our digital usage platform is the asset management app, NOMURA. We have developed asset management functions and partner integration features, and we have prioritized security in development, including passkey registration.

As a result, active users have grown significantly and monthly active users reached 1.17 million at the end of March 2026. Going forward, we will continue to improve convenience through UI/UX enhancements and incorporate Nomura specific added value to deliver services more widely to clients with high digital needs, including high net worth clients. Regarding AI use. We will train AI on Nomura's long accumulated high net worth client data as well as Nomura's proprietary insights such as partner behavior and proposal data. This AI will support efficiency and improve reproducibility of high-quality proposals by creating and summarizing client profiles and meeting records and organizing information for the next proposal.

We are also building the infrastructure that underpins the client experience. In addition to developing the data platform that supports AI use, we will introduce AI operators in contact centers at client touch points. In the future, AI trained on Nomura's insights will work in tandem with sales partners to further enhance proposal quality and the client experience for each client, delivering Nomura's unique added value. Finally, I will explain our approach to costs and investments. Since 2018, we have pursued continuous cost reductions centered on compressing the fixed cost base transforming our P&L into a structure with stronger discipline.

Going forward, we will continue to control expenses within asset range by consolidating and standardizing operations digitizing and optimizing IT costs to review our cost structure. At the same time, the capacity freed by structural reforms will be firmly allocated to growth investments. Investment in AI, technology and people are particularly important themes that will determine future competitiveness. We will act nimbly to make the necessary investments. That concludes my presentation of our medium- to long-term strategy towards 2030. Building on the foundation we have established by enhancing value delivery, expanding our client base and leveraging AI and technology, we will reliably achieve our 2030 targets. Thank you for your attention today.

The next presentation will be made by Mr. Sugiyama, Head of Banking. Please go ahead.

This is Sugiyama speaking. And as of April, I have taken on the role of Head of the Banking division. Today, I will explain the environments around in the Banking division and our approach to business expansion over the mid- to long term. First, I would like to review the fiscal year ended March 2026. The Banking division was established in 2025 under the strategic policy to strengthen banking as the fourth pillar of the Nomura Group's efforts to realize our 2030 management vision. In our first year, while top line revenue steadily expanded, expenses increased as we continued strategic investments aimed towards medium- to long-term business growth, resulting in a decline in PTI.

However, this was due to upfront investments to capture future growth opportunities and the earnings base itself has been steadily strengthened. We monitor revenue in 2 broad categories: banking revenue and trust and agency service revenue. Banking revenue has been accelerating, driven not only by the increase in loan balances, but also by improving spreads in a new era of the world with interest rates in Japan. We believe the Banking business will serve as an especially important driver of future business expansion. Trust and Agency service revenue has also been growing steadily, supported by the expansion of trust assets, which is one of our KPIs.

Looking back at individual initiatives in our loan business, we expanded the range of asset eligibles, we expanded the range of assets eligible for collateral to better meet the needs of a broader range of clients. In addition, by revising our advertising strategy, we succeeded in stimulating client demands. As a result, spontaneous uptake of web loans by our customers accelerated and balances increased by 25% from the end of the previous fiscal year. We have thus been able to turn our clients' needs into business opportunities. In our trust business, assets grew certainly against a backdrop of favorable market conditions. In particular, capital inflows continued into private assets where we have a competitive advantage, contributing to the expansion of trust assets.

In addition, capital inflows into tri-party repo, one of our trust services for financial institutions continued supporting stable business growth. We also made significant progress in strengthening our business infrastructure. By completing the renewal of our core banking system, we eliminated the previous cap of 1 million managed accounts and established a foundation that enables us to provide banking services broadly to Nomura Group clients. Through this initiative, we are also strengthening the linkage of client information with the Wealth Management division and advancing efforts to build a framework that enables us to provide more consistent services in coordination with Nomura Securities.

I will explain our strategic investments in more detail later. But as far as the banking division is concerned, strengthening our infrastructure is essential to dramatically expand our business, and we view the completion of this critical first step as a meaningful achievement. Next, I would like to explain the social significance of the business we are developing in banking. In Japan, under the policy plan for promoting Japan as a leading asset management center, investment in securities is expanding. In addition, with the return of inflation and interest rates for the first time in 30 years, the characteristics of cash and deposits, which account for roughly half of Japanese household financial assets are undergoing significant change. As a result, there is a growing need to further enhance asset management for each individual in order to help them realize the future they aspire to.

Against this backdrop, the Nomura Group will leverage our comprehensive strength across the group to deepen our engagement with our clients to serve all aspects of our of their balance sheet and provide more advanced comprehensive Wealth Management services by demonstrating the desirable model for comprehensive Wealth Management services, we aim to contribute to the policy plan for promoting Japan as a leading asset management center. And in turn, to the establishment of a virtuous cycle between growth and distribution, helping to realize a more prosperous society.

In this context, what's important is the Nomura Group's vision of Wealth Management. What is Wealth Management. At Nomura, we believe that Wealth Management is a service that supports the management not only of financial assets, but also of the broader assets that clients value such as their families, companies and communities. It is a service that helps address the concerns client space in managing their assets. In particular, the concerns of clients with large asset bases often become more complex and highly individualized and resolving them requires deeply customized services tailored to each client's specific circumstances. Many financial institutions take a product and service supplier-centric approach in which they first prepare a broad lineup of generic services and then provide them to clients who need them.

While this can be effective for offering services broadly to a large number of customers, it does not necessarily lead to service delivery that aligns with the needs of each individual client. As a result, the value of the client experience remains limited, and there are also constraints on business expansion per client. By contrast, what Nomura Group pursues is client-centric solution creating wealth management. if our existing products and services cannot fully address a client's needs or concerns, we develop new ones and strengthen the lineup itself. This mindset is a source of our competitiveness.

Rather than covering a high number of clients, but through little engagement per client, our approach is to serve each client deeply, which leads to higher client experience value and maximization of LTV. In fact, in response to growing demands for more sophisticated portfolio management, we launched BREIT as Japan's first publicly offered private investment trust. Also to meet demand from clients who wish to raise funds without selling well-performing U.S. equities or investment trust, we added for an equities and investment trust to the list of eligible collateral for Web Loans. In this way, we have expanded our product service lineup. Expanding products and service lineup in response to client needs not only improve satisfaction among existing clients, but attracts new clients with similar needs, further accelerating overall business growth.

To accurately meet such diverse and complex needs, sales partners who can precisely identify client needs and the capability to develop products that meet such needs are both indispensable, having both is a major strength of Nomura's Wealth Management business and the banking division is responsible for the product development side of that equation. So where is the room for future growth? First, there is significant potential to expand our client base. Our Wealth Management division already has 1 of the largest client bases in Japan, but we currently provide banking services to only about 600,000 accounts, which is roughly 10% of securities accounts with balances.

At some other firms, banking services are provided to about 50% to 60% of securities accounts. So we recognize that there is still substantial room for development within the Nomura Group. We also see substantial room to expand the breadth of services. As asset accumulation progresses, an increasingly important need is emerging. Many clients are saying, "I want to continue managing the assets I have built up without selling them while also raising funds, borrowing against securities collateral was not necessarily a common behavior in the past, but in response to changes in the environment, it is steadily gaining traction. In particular, Web Loan which is used by a broad range of clients has grown by approximately 3x over the past 4 years.

In addition, when it comes to expanding the loan business, the breadth of assets eligible for collateral expanded based on client needs, has become a major strength. Few competitors offer loans that allow investment trust foreign equities to be placed as collateral and a growing number of plants are transferring assets from other firms wanting to do so. Backed by the Wealth Management client assets, we are among the largest in the industry, and we see substantial room for further acceleration of growth. There is also significant potential in the trust and agency business. Our core trust asset administration business is a classic recurring business in which revenue expands in line with the growth of client assets. Investment trusts themselves are increasing in importance within the broader train to promote Japan as a leading asset management center and the market is growing rapidly.

Looking ahead, we expect continued medium- to long-term growth and our strength lies in our ability to handle highly individualized project, including private assets, which are difficult for other firms to support, in fact, the publicly offered private the motor was the first in the industry to create leveraging the group's integrated capabilities, we hold a very high share in trust asset administration. In addition to overall market growth, we believe that our ability to provide the right services that address client circumstances will be a source of future growth.

By making these growth opportunities visible, we will develop the banking division into an organization that contributes to stable earnings growth for the group by 2030. Our quantitative target is income before income taxes of JPY 50 billion, and we will strengthen our commitment to achieving the following KPIs as well. Loan balances of JPY 2.8 trillion, NTB investment trust balance of JPY 70 trillion and NPL assets under administration of around are particularly important element in achieving this is strengthening collaboration with the Wealth Management division.

The Wealth Management division has a robust organizational structure built around client needs and is able to capture those needs with great precision. We at the banking division, will capture those needs in intensify communication and develop products that exactly solve client pain points. For example, we see significant room for development in loans for high net worth clients with large real estate holdings in their portfolios or products linked to workplace-based services for clients originating from workplace channels.

I would now like to discuss Deposit Sweep an important initiative for realizing division I have just described. Deposit Sweep is a service that automatically transfers awaiting securities transactions from MRF into ordinary bank deposits. This is a service that builds a point of contact between Wealth Management division clients and Nomura Trust & Banking through the product clients are most familiar with deposits by offering this broadly to wealth management division clients, we believe we can dramatically accelerate growth in both account numbers and deposit balances. Through this initiative, we will achieve exponential expansion in account numbers and broaden our deposit acquisition channels, which, in the first instance, increased deposit balances to JPY 4 trillion, approximately 2.4x the current level, securing as a platform for future growth.

As the balance sheet expands, opportunities for new product development will also increase contributing to improved service levels lowering funding costs and higher interest income. To realize this vision, we will continue to strengthen collaboration with the Wealth Management division and expand our client base. Finally, I would like to touch on strategic investments. The growth strategy I have outlined cannot be executed without upfront investment. To date, Nomura Trust & Banking have been focusing on building infrastructure, mainly for corporate services. This -- to scale the business over the mid- to long term, we must create systems that can withstand dramatic business expansion for that reason.

In addition to the core banking system renewal and deposits implementation I mentioned earlier, we are making strategic investments such as building IT infrastructure that can support the sustainable growth of business that will expand significantly in the future. On top of the foundation we are building, we will layer products and services that deliver more advanced Asset Management, thereby attracting clients who need such services and further expanding our client base forming this virtuous cycle is the scenario for the banking division's sustainable growth.

That concludes my explanation. The Banking division's role goes beyond simply providing banking functions. It is an important part of realizing more advanced and comprehensive wealth management services for clients by leveraging the full strength of the Nomura Group. Going forward as well, we will continue to evolve our products and services based on client needs and firmly contribute to the group's growth and enhancement of corporate value. Thank you.

Next, Mr. Koike, Head of the Investment Management division.

This is Hiroyasu Koike, and I assume the position of Head of the Investment Management division in April. I would like to explain the Investment Management division's initiatives toward the fiscal year ending March 2031. First, let me begin with a review of our performance. In the fiscal year ended March 2026, our division posted income before income taxes of JPY 88.3 billion and assets under management of JPY 136.9 trillion, supported by favorable market conditions and policy tailwinds, Nomura Asset Management, which is at the core of our public business drove the division's earnings. Its assets under management reached approximately JPY 111 trillion, marking a record high.

In addition to public markets, the firm is also advancing strategic initiatives in private markets and the handling of private products and the gatekeeping business carried out in collaboration with external asset managers are both continuing to grow steadily. In addition, our major asset management companies, including Nomura Capital Partners and Nomura Babcock and Brown also delivered strong results. The new divisional management structure, including our U.S. and European businesses acquired from the Macquarie Group will operate globally as a one team to pursue further growth.

At Nomura Asset Management, President Okoshi has been appointed, and Nomura Asset Management International will be led by Shawn Lytle as CEO. Chris Willcox, Executive Vice President of Nomura Holdings will continue to serve as Chairman and support divisional management, drawing on his extensive experience in the United States. With this upgraded division now managing approximately JPY 140 trillion in assets under management and employing approximately 2,380 people. We will manage the business firmly and aim to involve into a global asset management platform.

Now let me explain the Investment Management division's new targets for the fiscal year ending March 2031. Thanks to the strong performance of Nomura Asset Management and the acquisition of Macquarie Group's U.S. and European businesses, the path toward achieving our previous targets has become clear. We are, therefore, revising our targets for the fiscal year ending March 2031, upward. Assets under management from JPY 150 trillion to JPY 180 trillion, and income before income taxes from approximately JPY 100 billion to approximately JPY 150 billion. We will achieve this through 3 key pillars: accelerating the growth of Nomura Asset Management, the core company of our division, steadily promoting our private business and strengthening the business of NAM International.

Let me now explain these 3 strategies. First, Nomura Asset Management. Nomura Asset Management provides a comprehensive range of investment strategies, including active and passive strategies. In recent years, we have focused on strengthening our active investment capabilities and improving performance. Nomura Asset Management has been working to deliver strategy and investment performance at a global standard not only in Japan equities but also in global active equities. In particular, we have remained committed to in-house investment management and this has enabled us to win mandates for in-house global equity management from major domestic clients, including public pension funds. We also offer core strategies and publicly offered investment trusts.

Going forward, through collaboration with Nomura Asset Management International, for example, overseas assignments aimed at developing investment talent and sharing research platforms, we will further enhance our global active management capabilities. Over the past several years, we have been shifting our business toward active strategies and private markets. At the same time, we've also been driving management reforms to improve profitability. As part of this effort, we have been strategically narrowing down our publicly offered investment trust lineup.

Among the investment trusts launched in the past, some funds have seen a significant decline in assets under management. However, regardless of size, even small-scale funds require us to maintain high-quality investment operations. To improve management efficiency, we will continue to streamline our product lineup and by concentrating resources including talent on selected strategic businesses and products, we will continue our management reforms to enhance both investment quality and operational efficiency.

Over the past several years, we have been focusing on the private business as one of our growth strategies. Three years ago, we had a team of 25 people, and we're managing a JPY 1.8 trillion institutional investor gatekeeping business. Today, that business has expanded to JPY 3.4 trillion with 60 people, including our business for high net worth clients in Japan. However, private business still accounts for only around 3% of total AUM.

Many of our competitors in Europe and the U.S. have business to more than 10% of AUM. And over the long term, we will work towards reaching that level as well.

As an interim milestone by March 2031, we aim to expand the share of our private business to around 5% to 6%. To achieve this growth, we will further expand our gatekeeping business while also strengthening our in-house investment capabilities and pursuing other growth initiatives.

This slide introduces one example of the private business we are currently working on. At Nomura Asset Management through Nomura Alternative Connect or NAC, we are strengthening our platform that connects investors with leading private and alternative asset managers around the world. More than 70 private and alternative asset managers from around the world are registered on NAC, providing more than 100 strategies as well as information related to private markets. Through this platform and NAC's website, investors can access a wide variety of content, including diverse strategies around the world, enhanced risk management capabilities rich product lineup, educational content and updates on global private markets trends, not only institutional investors but also financial institutions that distribute private market products can access the platform and obtain a variety of useful information. For private asset managers registered on NAC, the platform also provides opportunities to reach investors in Japan, expand their distribution networks and enhance their brand recognition.

By connecting investors and asset managers and working together with Nomura Asset Management, we aim to support the growth of the private and alternative markets. We will also leverage NAC as a high value-added platform to diversify and expand our business.

The companies within the division engaged in private investment businesses are also steadily delivering results. At Nomura Babcock & Brown, which is involved in aircraft leasing, transaction volume reached a record high last fiscal year. And starting this fiscal year, we have also begun introducing aircraft funds to institutional investors.

As for new initiatives, as part of our collaboration with the Macquarie Group, we have launched a co-branded fund. In addition, through our investment in the German ship-owning company Navigo, we are entering the ship and shipping business.

In U.S. private credit, Nomura Capital Management, which manages assets in-house has delivered strong investment results. And going forward, we will begin considering full-scale cross-selling opportunities, including in Japan.

Last December, Nomura Group acquired a U.S. asset management company from Macquarie and established Nomura Asset Management International. We have gained a platform in the world's largest asset management market, one that provides us with investment capabilities, a client base and a launching point for our global expansion.

In addition to further strengthening our business in Japan, we will reinforce our business foundation in the U.S. market and steadily develop our global growth strategy. Furthermore, by integrating the operations of Nomura Asset Management's overseas business with Nomura Asset Management International, we will also enhance our presence in the European and Asian markets. By executing these medium- to long-term growth strategies, we aim to build a global asset management platform.

Let me explain the key points for the growth of Nomura Asset Management International. In the United States, the world's largest market, the shift from traditional investment trusts and mutual funds to active ETFs continues. In addition, demand from individual investors for private investments is also increasing. Nomura Asset Management International has a strong presence in the U.S. However, looking at its product strategy, mutual funds account for about 90% of the lineup, while businesses driving market growth, such as active ETFs and private investments remain limited at around 10%.

Although we have strong distribution channels in the U.S., marketing investment has been limited over the past several years. And as a result, there is a need to strengthen our distribution framework again. Accordingly, going forward, we will focus on the following two priorities: expanding our product lineup to match market needs and rebuilding a robust distribution platform by leveraging our strong channels.

I will now discuss one of these key points, expanding our product lineup. The areas we will focus on are active ETFs and private credit. For active ETFs, while taking market needs into account, we will accelerate the launch of ETFs centered on strategies with a proven track record and competitive edge, such as high-yield bond strategies managed by NCRAM. We currently have 9 ETFs, and we aim to expand that number to around 30 by 2030. ETF assets are expected to grow from the current level of roughly JPY 150 billion to around JPY 4 trillion. For private credit, we will accelerate our efforts primarily through NCM, Nomura Capital Management, which has built a strong track record through in-house investment management.

The second point is rebuilding our distribution structure. To strengthen coverage of our existing major distribution channels, we have begun rebuilding our structure, including new hires. Specifically, there are clear gaps in coverage in key asset management regions in the U.S., such as the West Coast and Northeast. And by allocating sufficient personnel, we will steadily capture business opportunities. We will also further strengthen collaboration across the Nomura Group. As a first step in April, we launched the Nomura Emerging Open as a publicly offered investment trust in Japan using an investment strategy from Nomura Asset Management International. Its current AUM exceeds JPY 150 billion.

In addition, by advancing integrated operations with Nomura Asset Management's overseas offices, we will expand global cross-selling. These priority initiatives will require upfront investment, but we will reinforce our business foundation and aim to expand earnings in the future. Going forward, we will work to build a global asset management platform and aim to evolve into a growth engine for the group. To achieve this, talent development is absolutely essential.

As part of our global collaboration, we will continue to send approximately 10 people per year overseas, including investment professionals. By developing a large pool of talent with experience and insights in the highly competitive U.S. asset management market, we aim to become a truly unique global asset management company unparalleled in Japan. We are confident that the people we develop in this way will play an important role, not only in our asset management business, but also as a future source of competitiveness for Nomura Group as a whole. I firmly believe that this business integration with Nomura Asset Management International represents a major step forward in value creation, not only from the perspective of global growth and asset management, but also from the perspective of human capital management.

This concludes my presentation on our initiatives for investment management toward the fiscal year ending March 2031. Thank you for your attention.

Last but not least, presentation by Mr. Willcox, Head of Wholesale. Please go ahead.

Hello, everyone. It's great to be back here in Tokyo to address you today, and I'm excited to take you through our strategic plan. Three years ago, at this forum, I laid out a new strategy and direction for the Wholesale division. At that time, our ROE was languishing below 3%, and our international business was struggling to break even. I therefore, identified 3 immediate and critical priorities for the business. Stability by lowering our cost income ratio and improving our risk discipline, growth by building our critical mass in the core products and lastly, diversification of our business portfolio.

My message today is that this strategic plan is working. Wholesale revenues and pretax income are now at all-time highs and our international platform has decisively turned the corner on profitability. However, this is more than just a turnaround story. Not only is our plan working, but wholesale is now operating as a central driver of high-quality earnings for the firm. And I'll demonstrate that there is still opportunity for further growth and further bottom line accretion. As such, I'm pleased to announce that we are raising our 2030 targets in support of the group's overall ROE ambitions.

So let's get started. The strategy I announced back in 2023 could justifiably be labeled as boring. But I'm told by my Japanese colleagues that boring doesn't translate well. So let me clarify carefully considered and focused on steady and sustainable growth. There were no moonshot plans, no silver bullets to improve results. It was a back-to-basic strategy rooted in the idea that we needed to refocus on our core strengths manage our operations efficiently and achieve a stable diversified product mix focused on clients. Admittedly, yes, a cautious strategy but one that can produce very exciting results.

Wholesale pretax income is up approximately 7x since the fiscal year '22/'23. And we are well ahead of plan on each of our KPIs. Revenue over RWA stands at 7.4% versus our original target of around 6%. Our cost income ratio has dropped to 83% against our target of getting to 80%. And our ROE is now around 10% at the top end of our original 8% to 10% range. Our strategic dashboard provides further evidence of success. Revenue volatility has sharply decreased, and the growth has been broadly distributed with a notable step-up in capital-light fee-based businesses. Our diversification into international Wealth Management has been an extraordinary story of organic growth with AUM exceeding $40 billion. Importantly, it is not a single year of strong performance. It's a culmination of consistent delivery against our original strategic framework.

Fiscal year '25/'26 was a record year for wholesale on virtually every measure. Revenues and profitability reached all-time high since the establishment of the division in April 2010, and both Global Markets and Investment Banking delivered their record revenues. Today, wholesale revenues are 50% higher than they were in '22, '23 when we embarked on this plan. Of course, we should not discount the strong supportive market conditions that have aided our growth trajectory. But we should also not underestimate the investments and the strategic focus of our teams that have helped define this outcome.

And finally, growth has been broad-based. Every major product contributed to this journey, and all this was achieved with financial resources that have been pretty much flat to historical levels on a like-for-like Basel II and a half basis. Our revenue has been built on 2 engines, a leading Japan franchise and a growing international platform. The Japanese market backdrop in recent years has offered one of the most attractive structural opportunities with central bank policies, corporate restructuring and governance reforms creating multiyear tailwinds. As the top-ranked broker dealer, we are best positioned to capture it.

Japan wholesale revenues are up approximately 60% versus '22/'23, reaching their highest level since '16, '17. Clients trust us repeatedly. We are #1 in Japan equity products, M&A, ECM and credit. We were recognized as Bank of the Year in Japan in 2025. And as the Top Research, Trading and Execution Firm. Internationally, the story is one of continued momentum. We've successfully demonstrated that a focused model can win and win profitably. International wholesale revenues up approximately 45% since '22/'23, and profitability is also an all-time high in that time frame. And our -- the recognition and rewards speak for themselves. We've built top-tier positions in our target segments. Top 3 in AEJ EM Credit, #2 in U.S. Listed Equity Options, #4 in U.S. RMBS and #6 in Global Cash Equities. We were named RMBS Bank of the Year in the U.S. for the fourth consecutive year and won CMBS Deal of the Year for 2026. We were also recognized as Credit & Interest Rate Derivatives House of the Year in Europe and in Asia. This repeated recognition reaffirms that the strategy is succeeding.

Three years ago, I said that our franchise was operating as less than the sum of its parts, despite its many strengths. Frankly, we managed ourselves as 4 distinct regions, leading to duplication, inconsistency and limited cross-border flow. We, therefore, chose to deliberately reorganize our businesses around a cohesive global structure. And today, as a result, we see greater coordination, a unified client approach and enhanced efficiency in our operating model. We have globalized all of our major products and functions. In equities, we have successfully leveraged our leading Japan and Americas franchise into EMEA and Asia. EMEA equities revenue has approximately doubled since then, and AEJ is up over 60%.

Next, we have enhanced regional and product collaboration. A good example is private markets distribution into Japan, successfully responding to strong investor demand. And finally, we've significantly enhanced our cross collaboration. The number of GM cross referrals has doubled and IB cross-border M&A deals up around 45% over 3 years. Our client franchise client franchise is absolutely at the core of our wholesale business and of this plan. Our improved performance is almost perfectly correlated with growth in our client revenues. This drives not only the quantity, but also the quality of our overall results. We've made two deliberate choices in our client strategy. First, a focus on productivity, investing in talent, globalizing our sales organizations and promoting cross-sell. As a result, international GM sales productivity has more than doubled since '22/'23, and an international investment banking MD productivity has increased by 40%.

Second thing is targeting high-growth client segments. In Global Markets, real money client revenues are up 65% and in IB sponsors revenues are up 80%. This story of consistent performance is a natural segue into our future growth plan. Given our momentum, I'm very confident to upgrade our 2030 targets in line with our firm-wide ambition announced earlier by Okuda-san. We have increased our revenue over RWA target to 7% plus from 6%. We will reduce our cost income ratio to less than 80%, and we expect to deliver a pretax return on equity above 10%. These are meaningfully more ambitious goals. And critically, these targets are designed to deliver through the cycle and not just at the peak.

So let's talk about how we get there. The first lever is a pivot towards higher ROE areas. By fiscal year '30/'31, we expect more than 80% of our businesses to generate ROEs above 8%. Revenue expansion in capital-efficient businesses and prudent resource deployment will be the key drivers of this effort. So on the right, you see our growth objectives. By fiscal year '30/'31, we expect fee-based businesses, including international wealth management, global advisory, ECM, DCM and execution services to grow by 30% to 35%. And Structured and financing businesses will increase by 35% to 40%. And our flow and trading businesses are expected to grow by 25% to 30%. This is not about deprioritizing any one business. It's about targeting a balanced business mix, which is optimally positioned to benefit across market cycles.

The second lever is operating leverage. Three years ago, we were a subscale platform with an ROE of approximately 3% and a pretax margin of approximately 5%. Today, we have scale across a balanced business mix with ROE of around 10% and margins of around 17%. This demonstrates that for every dollar of investment, we are generating higher revenues than before.

Scale, begets scale. By 2030, we will target growth by ensuring a more diversified business mix. What you see on this chart is not necessarily an end-state ambition but is a through the cycle target. This will drive both resource allocation and investments across our businesses and this broader, more balanced base will unlock through the cycle ROE of 10% plus by fiscal year '30/'31. We've targeted our strategies to grow our businesses through 2030.

In Equities, we expect 20% to 30% revenue growth through expansion in Japan and in the U.S., investments in EMEA and AEJ and build-outs in Prime and Solutions. In macro products, we target 30% to 40% growth in flow rates, Derivatives and Solutions and FX, yes. In Spread Products, we expect 30% to 40% growth in financing structuring and expanding into new verticals such as commercial real estate and some mere credit. And then in International Wealth Management, we are targeting an AUM of over $60 billion.

Turning to banking. In Global Advisory, we target 50% plus growth, while in Financing & Solutions, more than 30% growth will come from broader product reach and deeper cross-sell initiatives. We will anchor these growth plans across 4 key initiatives.

First, the client franchise. In GM, we will increase high-value flows in real money insurance sponsors and corporate segments. In IB, we will increase penetration in subsectors by strengthening differentiated content.

Second, our targeted growth initiatives. We will expand into new areas like U.S. commercial real estate, prime and solutions. We will strengthen our international IB capabilities with a particular focus on the U.S.

And third, platform enhancements, where we will continue to strengthen front office risk and accelerate AI adoption.

And finally, we will build on our recent partnership success with Park Square Capital in Prismic and identify new opportunities, particularly in securitized products and private credit and equities.

Cost discipline remains critical to our operating strategy. Our track record is self-evident. Our cost increase of 2% year-over-year was significantly lower than that of our U.S. and European peers. And as you can see, despite the scale of growth delivered, our fixed cost inflation has been materially contained. This is another example of operating leverage and helped reduce our cost income ratio by 13 percentage points.

Looking ahead, we plan to accelerate nonpersonnel savings, including trade-related expenses and vendor contracts, improving efficiency in our front office technology and leveraging generative AI in our core operations.

And finally, comprehensively review our front-to-back processes and make targeted investments for cost optimization. Together, we think these actions will provide a clear path to drive our cost-to-income ratio below 80% on a sustained through-the-cycle basis.

Lastly, the third lever to strengthen our ROE is resource efficiency. Our focus is twofold. First, we will maintain a balanced distribution of resources across our macro products, spread products, equities and International Wealth Management businesses. While the proportion may change all businesses will see increased resource allocation over time generated through self-funding. Second, in addition to generating capital via self-funding, we will continue to actively pursue RWA optimization to create further capacity for growth.

So to conclude, we have delivered a genuine turnaround over the past 3 years. Wholesale revenues and pretax income are at record highs, and our KPIs are either ahead of or at the top end of our original targets. On the back of this progress, we are confident to raise our 2030 ambitions. Our building blocks are unchanged, stability through scaling high accretion businesses and maintaining robust risk and cost discipline, growth through deeper client penetration and expanded product access and diversification through accelerated international wealth management expansion and enhanced cross-sell. This is a wholesale platform with momentum, but discipline and with a clear path to deliver sustainable returns through the cycle.

Thank you for your time and attention today.

Thank you very much. We will now take your questions. Those of you joining via the phone, the operator will explain how to ask questions. And you can also ask questions via the chat function on the website. There's a message function at the bottom of the screen, so please use that.

This is Muraki from SMBC Nikko Securities. Regarding the ROE target, yes, 2 questions. First, about the ROE. In the first presentation on Page 3, you show the KPIs. Until now, Okuda-san, you were saying the ROE target for Nomura was through the cycle. So even if you achieve a target for a certain year, you won't raise it. But this time, you have raised the bottom from 8% to 10%. And what discussions did you have internally? What is your resolution that led to this conclusion of raising the ROE target? And if you look at the bottom right, the wholesale ROE target of 10% plus. Are you happy with this level from a holdings company perspective?

I don't know what to compare this with, but maybe JPMorgan, 18%; Morgan Stanley, 17%. And that's the wholesale division ROEs. And in terms of cost-to-income ratio, JPMorgan, 49%; and GS, 57%. And so I wonder how the Board and the senior management sees this difference? Maybe your targets are maybe too conservative or maybe you lack scale or resolution? Yes, please explain the reason for the difference.

And my second point is Page 8. The strategy -- strategic talent allocation for growth, at this time, you have made big changes to the management team. And for wealth management and IM banking, which are doing well, you made such a big change despite the business is doing well. So why was that?

And in terms of next-generation talent development, how will you use the positions of these division heads and subsidiary heads? This may be hard for you to say with so many employees listening in, but to the extent possible, please.

Thank you. This is Okuda. Muraki-san, thank you for your question. Your first question about the change of the targets and how we think about it, what we discussed internally. Yes, and we have a strong resolution behind this change. And we don't recklessly change our targets just because we achieved them in a single year. And the same thinking applies to this change that we made this time. And in terms of the time line, last year at the CEO forum, there were comments about how we had already achieved targets. So why not change the target. And I said we were discussing at the time. And today, we said we will announce the new targets in the Investor Day, if possible. And during that time, we had intensive discussions internally.

And in terms of what we discussed, we thought about the future business lines of Nomura and where we should invest in and how we want to achieve growth. So it was a reconfirmation process. And in those discussions, we especially focused on the resource allocation. And we had the heads of each division, including the weekends and spend a lot of time discussing that. And although you didn't ask your question, we talked about the balance between investments and returns and where the best mix is. We also discussed, including the outside directors and this may go somewhat aside, but we have many international outside directors. So we talked about increasing dividends and also share buybacks. And why 40%, 10%? That was another topic.

So we went back to the basics in our discussions. And in those discussions, we came up with an increase from 8% to 10% and 10% to 12% plus. One factor behind that was now the Nomura has really been changing as a group, and we are achieving strong performance. And for example, in the Japan capital markets, there's a lot of attention worldwide. And within that, the Wealth Management business and the IM, Investment Management business, which is mainly Nomura Asset Management and the Asset Management business, have started to generate very stable revenues.

And for Wealth Management, the -- we are saying 100% recurring revenue coverage ratio. And if we can achieve that, we will be building up stable revenues, and we have much more visibility on our earnings going forward. So that was one factor.

And for banking, we talked about the number around JPY 50 billion today. But in the past, it used to be very small, but we think, especially with the deposit sweep service, and by rethinking about the business line, as Sugiyama-san said, if we include all those strategies, then IM and Banking can reach about JPY 200 billion of PTI, which is a target, which means for Wealth Management. The reason why money is coming into Japan is probably because of Asset Management Center of the government, but performance is very strong and corporate governance is being improved in Japan. So there are these big underlying trends in the Japan market. And so we think this is not just a cyclical cycle. It's a more long-term trend, structural change in Japan. And so we became more confident that we can generate stable earnings. And those were the factors behind the review.

And going forward, you may ask this follow-up question. So just to answer in advance AI and digital. We will invest in those platforms. So we discussed what the best mix is. And for wholesale, as Chris Willcox explained, equities is doing very well, and there's demand for more resources. So we will consider the best balance of investments and SRC 2.0, it's about cost control, effective cost control. We also discussed that and came up with a number of 10% to 12% plus. And even in a downside scenario, we would like to stably achieve the 10% ROE level. And we are -- we have a certain confidence. And as we manage Nomura, we feel that the group is really changing. So we want to deliver results. Thereby, we wanted a more accurate target and discuss with the markets about our KGIs/KPIs.

And in the past 6 months of discussions, we talked about market cap, ROE, share price, not just where the share price should be, but also -- we think the market doesn't fully understand Nomura's changes. So we think there's more effort that we as top management can make. And we have set up the IR team several years ago, and we have strengthened that. And we also talked about the brand today, but we want people to understand that Nomura's Group is changing, and we will keep communicating that message to investors and our stakeholders and get them to understand this change. And that will be our brand strategy, which we have started.

So it's a result of these overall initiatives. It's not just about earnings but also about cost control, and we want to communicate to the market that we are changing and yes, we are doing a lot of global peer analysis with commercial banks and also broker-based investment banks similar to us and the likes of GS, Morgan Stanley, which are bank holding companies, which have a wide-ranging business. And we are assessing what differences there are and communicating the changes to the market and keep reforming the group and go upward. That is our resolution behind this announcement.

In terms of your question about the talent allocation, Wealth Management, IM, Banking are doing well. And yes, we made some changes to the senior positions. And this is our philosophy, but what I always say to our colleagues is when and doubt choose the bigger change. And I myself have been following that philosophy over the past few years.

And in terms of these new changes, like Sugiyama-san, Head of NTV and the Banking division, and for the Nomura Wealth Management business, we thought about what true Wealth Management is. And Sugiyama-san had been thinking about that. And there's the securities-related business and the bank-related business, and we thought of how we can combine that within the compliance rules to provide to clients. And we felt that was very important. And we also have International Wealth Management. And in that business, we are able to combine securities or broker business with banking. But in Japan, that isn't the case. And our client segments, we have the ultra-high net worth to the asset building segment. It's very wide ranging. So we discussed where the client needs are for each segment and what services we should provide to those segments and we've been discussing that and focused on that for the past few years.

And Tobari-san, the new Head of Wealth Management, if you look at his career so far, he was branch manager of Kyoto, which is a very traditional business. So he has that experience of wealth management. But after that, he was in charge of digital, and he also worked on the workplace business, which we are focused on, which are businesses that weren't really headed by our senior management, and those businesses are growing now. So by appointing Tobari-san to the Head of Wealth Management, the aim is to combine the traditional wealth management as well as the future growth areas, including workplace and also customer digital services and the stuff we're working over the weekends to cover clients and working together with clients when they move big amounts of money. And he has been in charge of building that business. So it's good to have someone like Tobari-san who understands both sides of the business to further grow this business. That's why we appointed him to the Head of Wealth Management.

And in terms of the next-generation development and how we think about the positions of the division heads and region heads, and thank you very much for asking precisely what I wanted to talk about. It's not something I can't explain to employees actually. And for example, we have pointed Koike-san as Head of Investment Management, who used to be the Head of Nomura Asset Management. This is someone in the past, people who are senior positions at Nomura Securities tended to become head of subsidiaries and they retire. But now that is not the case. We are very much more strategic and at the moment, I'm talking from the Head of Holdings position, but we have made very strategic appointments to the heads of divisions.

So we want young people to experience the leading positions. And then joined the senior management of Holdings. So since I took over, that has been the new policy. And so Koike-san, who was Head of Nomura Asset Management, now becoming division head is great. And same with Sugiyama-san. I don't think he feels he has been kicked out of the group. We are strategically strengthening the banking division right now. And when he -- yes, eventually, he may come back to Holdings, which is great.

So those of you listening in on our employees, please feel comfortable with moving sideways. And also for example, corporate functions, we have some new types of appointments that we are making, and finance people are moving to a pro. We don't really mention this, but these are changes in our HR appointments over the past few years. So we are taking a group-wide approach in developing our talent. And when we set up Holdings, about 80% was Nomura securities. Now it's the U.S., which is making the most money in wholesale, so a big change. And we are changing the way we manage the group. And that is what led to these recent senior appointments. And this shows my message to the group and outside.

I hope that answers your question.

And regarding the ROE target?

Yes, I understood your strong resolution behind it, and it was the discussions, thank you.

This is Watanabe of Daiwa Securities. ROE target lower bound -- positioning of the lower bound. What if the forecast would be lower than the lower bound, 10%. Will you reconsider buyback? And you also talked about the mix between investment and shareholder return. What's the reason you did not change the policy of shareholder return this time around?

Second big question. On AI, you mentioned across group efforts. Wholesale, IT investment is less than other peers. What's your competitive advantage? Wealth Management AI agents capability is rising. Where are the value added of sales partners?

Watanabe-san, thank you for your question. This is Okuda speaking. Let me respond to your questions.

So what about the commitment you mentioned, even when market environment isn't favorable we want to deliver at least 10% ROE. That is our determination as we revise upward the numerical target for ROE. Your question is what if the environment is unfavorable so much so that ROE will be below 10%. Will there be coordination made?

First of all, regarding buyback, we also think about investment opportunities. ROE hurdle rate capital cost. If there are opportunities that outperform that, we use surplus capital to investment and accumulate capital and increase ROE. If we don't find many investment opportunities, we may become more active in providing shareholder return. Now that timing hasn't arrived yet, so there could be debate. But if we don't find investment opportunities and the environment isn't desirable in order to achieve the target, we could be flexible in our capital policy that could be included in our horizon.

Secondly, you mentioned AI. The investment amount in comparison to the U.S. large peers is less. So what's the advantage that Nomura has. Now in terms of the amount of money invested, you're right. However, the use of AI is a key. And this is unlimited to financial institutions, but each company has its own way of use. In our case, efficiency, yes, there has been good use cases. And in other companies, there have been good use cases for efficiency purposes. So even if we don't invest as much as the U.S. peers does, we can catch up in terms of efficiency, but how can AI be positively influencing the top line. And this is a point that all companies are struggling regardless of the amount of investment. When I participate in international conferences and meet with top management of banks and financial institutions, this is the big question.

Yes, AI does contribute to cost efficiency and efficiency, but ROE remains low. And there are differences between Japan and Europe, but the United States can do job cutting. But there are countries with more stringent labor restrictions, which disables us to job cut, so cost is difficult to reduce. And what do we do with that? There is debate amongst the senior management. So although the scale may be small as use case, we want to seek a way of use of AI to maximize top line. So even if the investment amount may be smaller, I think we have room for a competitive advantage against our peers. And wealth management would be the best match and IM would also be the best match. So we will concentrate in those divisions as we make investments.

And your other question was AI agent emerging, how do we deliver added value from sales partners? In the Nomura business model, we think this is a positive tailwind. We are introducing digital and apps and where do we deploy people? There -- we deploy people to where funds transfer and also business succession or asset succession -- safe asset succession and the superiority or advantage of human beings in such areas remain unchanged. Population is declined.

What do we do about recruitment? What's the best size of headcount? And how much can we train them by using AI I think we will be able to create time for training or contact between people, which will in turn translate into improved productivity. And we did personnel shift Workplace CDS digital using teams are improving productivity led by Tobari-san. By leveraging these teams, a group-wide profitability efficiency will be improved and training them by people can be improved. So I believe that the value-added crew offered by sales partner will further increase. Thank you.

This is Sato from JPMorgan Securities. One question regarding the resource allocation. And in the first presentation, Page 17, you explained the capital strategy and resource allocation. And you also talked about the shareholder return, and you discussed a lot about the right balance with investments. So I think compared to other Japan financial institutions, you are now entering a phase of focusing more on future growth investments rather than prioritizing shareholder returns. I guess you discussed that possibility. So did you discuss that? So the total payout ratio of 50%, are you not necessarily going to commit to that in certain scenarios. Was that a point of discussion, please?

And the Wholesale division will continue its self-funding policy, I believe. But other than wholesale, and although this may not be factored into your plan, are there any areas of interest where you could potentially invest in. So what is your image of the scale? For example, last year, $1.8 billion you spent on buying the asset management business. But could there be larger inorganic opportunities are you envisaging that in your plans? So what is your investment appetite, please?

This is Okuda. Thank you, Sato-san, for your question. First, regarding the resource allocation and shareholder return and what we discussed. Yes, we did discuss how we are in the investment phase right now. And in terms of where to allocate our resources, yes, that was a topic of much discussion, including new and existing areas. And the markets are strong. So some divisions are asking for more allocation. So yes, we had very intense discussions about that.

But in terms of the total payout ratio of 50% or higher, I do not plan to lower that. We didn't think so from the start. And we have always been using this as a benchmark. And we didn't discuss changing this, but we did discuss a lot about the topic. And the outside directors, especially the international members, they understand what the western financial institutions are doing and what their appetites are. So one way to do this was to lower shareholder return and invest more, but I didn't think at all about changing that. And in Wholesale, we are making them self-fund themselves. And again, there could be various views there, but nothing -- I'm not thinking of changing that policy either. And in terms of how to manage balance the growth as well as stable earnings. Well, that's where we plan to invest in businesses that generate stable earnings. And last year, we bought the asset management company in the U.S., which is an example of that.

In terms of future acquisitions, which was also a part of your question, for asset management, especially in the U.S., there are some positives. And we are aiming for JPY 180 trillion, the $1 trillion club. So if there are good opportunities in doing so, we may consider.

And in the earlier question, we talked about ROE, market cap and how we looked into all these factors. And the question is how to build a scalable business going forward. And we have no plans to make stand-alone investments, which do not connect to the larger group. And for example, Banking, IM, those are areas where you have been strengthening and the Japan Wealth Management business, too. We will use digital technologies. So I think there's more that we can do there. And those are the areas where we have targets and the $1.8 billion last year, your question about whether we could see bigger opportunities, bigger deals. Well, it's not like we have the number in mind, like $5 billion, $3 billion. But maybe, for example, in Japan, if there are opportunities to invest, we could consider them. But at this moment, we have not factored in such investments into the plan. So sorry that I don't have a good answer for you. But my answer would be if there are good opportunities, we may consider the opportunity.

And just a follow-up. On Page 17, the low profitability businesses and how you plan to review the low-margin businesses, please? I guess there are various ways to do this. Maybe you could lower the ratio of low ROE business. And you have stated that policy. But do you have any issues that are outstanding, whether it be divisions or entities in terms of low profitability. Are there any areas where you feel you need to monitor certain categories that you feel you need to monitor better?

Thank you for the follow-up question. This is Moriuchi. At the moment, there are no specific entities or business categories that we have in mind and we won't be able to answer anyway. But towards 2030, we will consider the financial resources and growth opportunities. And we will continue to discuss our priorities. And for some of the low profitability and low priority businesses, if any, we will take bold action regarding those businesses. That will be our stance going forward. I hope that answers the question.

Thank you. We are running out of time. So let's make next one the last question, please.

I have one question. ROE, in March '26, 10%, there was proceeds from sales of assets you will be revising that to 10% to 12%. So this is a target range. But pretax profit will be increasing to 1.5 fold. So your assumption, this range of 10% to 12%. What kind of environment are you assuming? And you've been talking about investment requirements? The denominator, what are you thinking about the denominator? Profits will be increasing according to your plan and the required capital. How is the required capital going to increase?

Tsujino-san, thank you very much. This is CFO Moriuchi responding to your question. Regarding the increase, Mr. Okuda says more than 50% total payout ratio and the necessary -- regarding the necessary capital, we are assuming the necessary capital to achieve that will increase. So that's the first point. And then regarding the business environment as we did a review of the 2030 Vision, we conducted a debate on variables and how variables will evolve. But as we have shown in ranges, rather than coming up with just one scenario in terms of business environment in certain cycles, what kind of movement will occur in interest rate and stock prices. But even with those changes in mind, we will achieve 10% to 12%. That's our determination as we announced this range. And JPY 750 billion pretax income, how do we position this? If you do the calculation, you will find out that this is towards the upper half of the range. So JPY 750 billion is our solid target. And even if the basin isn't favorable, we would at least achieve 10% ROE. So that's our target. I hope I answered your question.

Regarding details of total payout ratio of 50% or higher, capital will increase. I don't think we should be expecting a sudden and significant buyback. But Nomura's buyback. So including the buyback of shareholder return, are you saying 50%? Or are you excluding that when you say 50% or higher total payout ratio as you decide the amount of share buyback?

Thank you, Tsujino-san. Including buyback, total payout ratio of 50% or higher RSU, for that purpose, as you say, in buyback, that would be achieved partly through buyback. So that included this total payout ratio. But when we say 50% or higher total payback ratio excluding RSU. So on net basis, 50% or higher total payout ratio is what we aim to achieve.

Regarding the portion of RSU, last fiscal year, Q3, I think we mentioned this at that timing. But in the deferred reward or compensation. Cash compensation is somewhat partly included. So the number of shares to be bought back is going to be declining according to our assumptions based upon that RSU.

With that, we'd like to end the Q&A session. And we will continue to take your questions at the IR Department of Nomura Holdings. Mr. Okuda will make the closing remarks.

Well, thank you, everyone, for joining despite your busy schedules and joining the Investor Day of Nomura. And we've got several questions, but I myself as the top management of Nomura feel the change undergoing at Nomura, and we feel these are positive changes and the structural reforms, thanks to everyone's efforts are now starting to bear fruit. And I really feel that as Head of Nomura. That's why we raised our targets at this time.

And going forward, we will continue evolving the group so that we can be of help to our clients as we grow. And we have re -- I think we were able to show that resolution thus this Investor Day today. And I'm sure there may be many more questions and some parts may be hard to understand perhaps, so we will make sure to address those questions. And the senior management sees this not just as an aspiration. We have been fulfilling our targets in the past and we would like to do so again and achieve results. So we look forward to your continued support and advice on our activities. Thank you very much, and thank you for joining today.

With that, we would like to conclude the Investor Day. Thank you, everyone, for joining.

Good day, everyone, and welcome to today's Nomura Holdings Fourth Quarter and Full Year Operating Results for Fiscal Year Ended March 2026 Conference Call. Please be reminded that today's conference call is being recorded at the request of the hosting company. Should you have any objections, you may disconnect at this point in time. [Operator Instructions]

Please note that this telephone conference contains certain forward-looking statements and other projected results, which involve known and unknown risks, delays, uncertainties and other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these projections. Such factors include economic and market conditions, political events and investor sentiment, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions.

With that, we'd like to begin the conference. Mr. Hiroyuki Moriuchi, Chief Financial Officer. Please go ahead.

This is Moriuchi, CFO. Thank you for joining us. I will now give you an overview of our financial results for the fourth quarter and full year for the fiscal year ended March 2026. Please turn to Page 2.

First of all, our full year results. As you can see on the bottom left, group net revenue increased 15% year-on-year to [ JPY 2.1677 trillion ], while income before income taxes grew 14% to JPY 539.8 billion, and net income increased 6% to JPY 362.1 billion, setting a record high for the second consecutive year. We achieved full year ROE of 10.1%, on target for the second year in a row since we set our ROE target range of 8% to 10% or more by 2030.

[ Four ] segment income before income taxes reached an all-time high of JPY 506.9 billion. Wealth Management and Wholesale drove company-wide earnings while both divisions achieving their highest income since their respective establishments. Wealth Management achieved growth of 23% in income before income taxes as the recurring revenue-based business model gained further momentum and major KPIs also saw substantial growth. Investment Management saw its asset under management rise by more than 50% over the year to around JPY 137 trillion, with a substantial increase in the stable business revenue base.

Meanwhile, Wholesale saw revenue growth across all regions and both Global Markets and Investment Banking achieved record high revenue, resulting in income growth of 21%. As for Banking, it has -- it has steadily expanded its business base since the division was established, and is making solid progress toward implementing deposit sweep. In view of our strong performance the period ended March '26, we expect to pay an ordinary dividend of JPY 24 per share. This brings the annual dividend to JPY 51 per share for a dividend payout ratio of 41%.

Next, let me give you an overview of the fourth quarter results. Please turn to Page 3. All the percentages I mention from here on are quarter-on-quarter comparisons. First of all, group net revenue rose 5% to JPY 577.2 billion, income before income taxes fell 20% to JPY 107.7 billion, and net income was down 19% at JPY 73.9 billion. Earnings per share came to JPY 24.34 and ROE was 8%. While 4 segment net revenue rose, income fell due to factors including a decrease in the amount of profit recognized from affiliates in the Other segment as well as an impairment loss at an investee company in Investment Management.

Next, please turn to Page 7, and I will present an overview of each business in the fourth quarter. As you can see in the top left, in Wealth Management, net revenue was more or less flat versus the previous quarter at JPY 133.1 billion, while income before income taxes exceeded the strong previous quarter, rising 5% to JPY 61.2 billion. The recurring revenue cost coverage ratio reached 72%, and the division achieved a high level of profitability, with the margin on income before income taxes remaining above 40%, which is higher than the industry average.

As shown on the bottom left, recurring revenue reached an all-time high of JPY 56.8 billion. Net inflows of recurring revenue assets remained at a high level, exceeding JPY 400 billion once again this quarter. Flow revenue was down slightly, but -- at JPY 76.4 billion remain high in absolute terms, second only to the level of the previous quarter, as we were able to effectively support customers need amid volatile market conditions.

Next, I will give you an update on total sales by product. Please turn to Page 8. Total sales rose 75% quarter-on-quarter to around JPY 11.7 trillion. This was largely due to major tender offers totaling JPY 4 trillion. But even excluding this factor, total sales remained at a high level. By product, excluding the tender offers, sales of Japanese stocks remain high, thanks to a contribution from primary deals. Sales of bonds fell by 5%, while demand for foreign products was solid, sales of Japanese bonds fell slightly in the absence of primary deals. Sales of investment trust and discretionary investments, which constitute recurring revenue assets, saw some fluctuations but remain at a high level as of [ full flung ] savings to investments continued. In insurance, meanwhile, sales of foreign currency-denominated products declined on weaker yen.

Next, we take a look at KPIs on Page 9. Net inflow of recurring revenue, as is shown on the top left, were JPY 422.8 billion, the 16th straight quarter for inflows to exceed outflows. Recurring revenue assets at the end of March, shown on the top right, were down, owing to market factors, but recurring revenue came to JPY 56.8 billion, a record high even when factoring out the receipt of half yearly investment advisory fees. As shown on the bottom left, number of flow business clients rose by around 200,000 from the previous quarter, reaching 1.74 million. Business was -- has been growing against a backdrop of high market volatility, primarily in face-to-face channels.

Next is investment management. Please turn to Page 10. As seen on the top left, net revenue increased 42% to JPY 86.2 billion and income before income taxes was more or less flat at JPY 18.1 billion. Business revenue, which is a stable type of revenue, was at an all-time high, owing to growth in the existing business and the expansion of international business through acquisitions.

At the same time, expenses related to acquired businesses and losses on impairment of our equity stake in an investee company were recognized. As -- an explanation of the breakdown of net revenues can be found on the bottom right. Solid asset management business and the aircraft business, Nomura Babcock & Brown both contributed to the increase in business revenue, while investment gains related to American Century Investments rose quarter-on-quarter.

Moving on to Page 11, we look at our asset management businesses, the backbone of business revenue. The graph on the upper left shows that assets under management at an all-time high of JPY 136.9 trillion at the end of March.

Shifting our focus on the bottom left, we see there were net outflows of JPY 279 billion. In the domestic investment trust business, which had inflows of JPY 816 billion, funds went mostly in the Japanese equity products in the ETF category and into balance funds, Japan equity active funds and private asset related products in the investment trust category.

In the domestic investment advisory international business, outflows came to about JPY 1 trillion, mainly from business targeted for acquisition. In line with the industry trends in the U.S., we expect funds to continue flowing from active type mutual funds for now, but we aim to grow assets under management by boosting total sales and bringing net flows of new -- close to neutral as soon as possible, with enhancements to making capabilities and expansion of active ETF SMA business opportunities. Alternative assets under management on the bottom right grew to a record high JPY 3.6 trillion, an increase of about JPY 300 billion from the end of December, of which fund inflows account for more than half.

Next, wholesale. Please refer to Page 12. On the top left, you can see that wholesale net revenue fell 2% to JPY 308.1 billion and income before income taxes declined 31% to JPY 43.2 billion. Looking at the breakdown on the bottom left, global markets net revenue slid 2% and investment banking net revenue fell 3%. Discussion by business line can be found on Page 13.

Global markets net revenue was down 2% at JPY 252.5 billion. Please find the middle section on the right. Fixed income revenue declined 8% to JPY 125.3 billion. In macro products, rates revenue was weak in the Americas with weak volatility rising but rose in Japan. FX emerging revenue offset some of the weakness in rates revenue as client flows were accurately captured.

In spread products, securitized products revenue remained high, mainly in the Americas, and fell quarter-on-quarter in AEJ. Credit revenue was unchanged despite widening spreads. Equities revenue was up 6% to JPY 127.2 billion. Equity Products revenue reached a record high as revenue rose sharply in Japan and AEJ on strong financing and derivative performance. Execution Services revenue rose in all regions, benefiting from a pickup in client activity.

Please go to Page 14 next. As shown on the bottom left, Investment Banking net revenue came to JPY 55.6 billion, down 3%, but still at the high level. By product, in advisory revenue, growth momentum continued based on involvement in many M&A deals, chiefly in Japan. The range of deals was varied and included domestic realignment, privatization and cross-border deals. In Financing & Solutions, et cetera, ECM revenue rose, partly on contributions from large-scale CV and PEO deals. Solutions business continued to perform well as it tapped demand for unwinding of [ cross-sell ] holdings.

Let's continue to banking on Page 15. On the top left, banking net revenue was up 6% at JPY 14.5 billion and the income before income taxes was down 27% at JPY 3.0 billion. Loans outstanding accumulated [indiscernible] due to -- during the quarter as recognition of loan products on offer grew. The investment trust balance grew, thanks to both market factors and the establishment of new trust. Income fell as expenses rose, including spending on IT and a part of the standardization of business processes and recognition of taxes and the public charges. We would like you to view this as an upfront investment aimed for future business expansion.

Next, expenses on Page 16. Group-wide expenses were JPY 469.5 billion, a quarter-on-quarter increase of about 13% or JPY 53 billion. Extraordinary factors that boosted expenses include impairment losses associated with our equity stake in investee company, compensation and benefits accompanying changes to remuneration regulation and effects from changes to the method of the presentation of financial statements. When these factors exclude it, we think it's evident that the cost structure in place is appropriate for the revenue growth. We aim to balance revenue growth and cost controls while making steady investment in growth.

Next, Page 17 for financial position. As you can see in the bottom left, the common equity Tier 1 ratio stood at 12.9% at the end of March, down 0.1 points from 13.0% at the end of December. This concludes our overview of our fourth quarter results.

In closing, we announced reaching -- lastly, please allow me to briefly talk about the situation related to private credit. First, our group's exposure is properly diversified and managed, breaking down our exposure. In wholesale business, lender financing for private credit funds comes to about $800 million and direct lending to SMEs comes to about $1.2 billion. While in investment management, investment holdings related to private credit come to about $400 million. Lender financing is backed by a diversified corporate credit portfolio and the credit fund counterparties are, by and large, supported by long-term capital provided by institutional investors and the like. Direct lending is diversified across more than 40 companies, and investment management investments are also suitably diversified and have been performing stably.

In closing, we announced reaching for sustainable growth, our vision for business in 2030 in May 2024, and set us numerical targets: the consistent attainment of ROE of 8% to 10% or more, and income before income taxes of more than JPY 500 billion, with the targets attained now in the span of 2 years. Great strides have been made to build the franchise required to realize sustained growth of the Nomura Group.

I would like to briefly touch upon the situation as of now in April. In Wealth Management, net revenue is largely at the same level as in the fourth quarter. Uncertainty remains in the market due to geopolitical risk, but the flow of funds into products and services, assuming the long-term diversification of investments remains firm and the client sentiment has been recovering.

In wholesale, net revenue has been trending much higher than in the fourth quarter, with equity markets rebounding sharply from the end of March and arising to new all-time highs. Client activity has picked up and the equity products revenue has been strong. The rate has also been steadily monetizing client flows amid moderate market volatility. We aim to monetize business opportunities while keeping mindful of appropriate risk levels and cost controls. Your continued support is appreciated. Thank you.

[Operator Instructions] The first question is from SMBC Nikko Securities, Muraki-san.

SMBC Nikko, Muraki. I have 2 questions. First, international asset management company control. On Page 10, on the footnote, 4 years ago, investment had been made, forest related asset management investment was done and JPY 12 billion of losses have been booked this time a row. Can you explain the backdrop? And on Page 11, Macquarie Asset Management. Regarding the cancellation of the agreement, there is a comment. But against the plan, how is the actual performance? That's my first question.

Second question is with regards to capital. Page 17. The short question is, in the next quarter, what would be the CET1 ratio? This is the new fiscal year. So I think this is a quarter where you can quite easily leverage your balance sheet. In equity derivatives, you are taking significant credit risk and private credit, U.S. division portfolio has been increasing in the past few years, which is using your balance sheet. So what's your idea regarding the use of balance sheet? And how will that impact your CET1 ratio?

Muraki-san, thank you very much. Then let me take the first question. First, international asset management related question. You touched upon 2 points. The forestry asset management company, we made an investment 4 years ago. And what about the loss and the history that had led to this loss? Back then, when we made the investment. ESG -- global ESG trend was on the rise globally and in the United States. And we expected that this will become a major trend. And we were also advocating public to private, and we were trying to expand our private asset business. So those have been the objectives based upon which we made a decision to make an investment into this company.

On the other hand, after the investment was made, as is well known to all of you, the ESG environment had significantly changed mainly in the United States. So that had triggered some difficulties in fundraising. This company itself, AUM is top 5 in forestry. So the health doesn't change. But in comparison to the plan we had drawn back when we made the investment, the growth has decelerated. So we had to book that based upon accounting standards, and that is why we've decided to book for impairment this time around. Carbon offset requirements from operating companies, there are funds that will be introduced, and those initiatives are under study. So we are hoping to further accelerate this business in the coming months and years. So that's the backdrop. Now this company is booking profits at the moment. However, the growth of profit is slower than we had expected.

And International Asset Management, your second point, net outflow, I touched upon that in the initial presentation. Against the plan, what is the current situation? That was your question?

Net outflow itself.

From the acquisition, U.S. traditional asset management company, it was the industry trend. So that had been factored into the valuation in making investments. And based upon that, what about the performance? In principle, onetime of investment -- or excluding onetime off costs, the original revenue and expense and EBITDA expected.

In the CEO Forum in December, we made a presentation, the peer earning power a quarter, so one quarter worth has been booked. On the other hand, as we mentioned on that occasion, towards integration, onetime of expenses have been booked, and amortization of intangibles have also been booked. So more or less -- we are more or less in line with the original expectations. But in the mid- to long run, this net outflow will be minimized and we have to achieve net inflow. So back when we hosted the CEO Forum active ETF transition, and we will also be making J-curve investments in order to expand the business.

On your second question, CET1 ratio for the next quarter, wholesale equity and SPPC balance sheet, use of the balance sheet. Those are the points that you touched upon regarding wholesale. As you know, self-funding -- based upon self-funding within the order of additional capital, balance sheet is used, RWA leverage exposure is used within that framework. So based upon the earning power, they are hoping to grow business in that quarter. But additional capital within self-funding -- additional capital is within self-funding. So CET1 ratio impact through business expansion is not that significant.

And then within that, what would be the positioning of equity PC and credit business? In the mid- to long run, we want to have a balanced portfolio, and that policy remains unchanged. Of course, we want to grow equity. But regarding SPPC, we will be looking at certain opportunities. And we will not deviate from that policy, and quantitative control will be in place as we try to manage our portfolio. I hope I answered your question.

In Q1, top line performance was good. CET1 ratio will not decline so significantly and ROE will improve. Is that the right interpretation?

CET1 ratio will not decline due to this factor. We don't think so. As you rightly pointed out, we are also hopeful that this will lead to improve our rate.

Next question comes from BofA Securities. Tsujino-san.

Regarding personnel expense on a Q-on-Q basis, it's up by more than JPY 6 billion. But in the U.K. regulatory change, there was a regulatory change and from the third quarter, there has been a change made to the deferred compensation. So what's the impact coming from them? That's my question. And also -- then in the first quarter, what is going to be the impact coming from them? Could you explain?

Another question relates to global markets. In April compared to the fourth quarter, wholesale outperformed compared to the fourth quarter. In other words, I believe that's due to -- thanks to global markets performance. And Japan equity was mentioned. And it may be the case for overseas as well. But could you speak more about geographical split equity or [ fix ] in something like that?

Thank you, Tsujino-san, for your questions. Regarding personnel expense. In the fourth quarter, as you pointed out -- In the third quarter, we made the announcement but deferred compensation change, so that had the impact. And as a result, in the fourth quarter, we booked a relevant impact. Compared to the third quarter, the impact amount is smaller. However, it's about the same as in the third quarter. In the third and fourth quarters, deferred compensation-related expense is booked. But in the third quarter, I explained it, but there is a timing gap -- timing the difference in terms of bookings. So for the fourth quarter, in terms of the amount, it's smaller. And this year, the impact is going to get closer to 0.

As for the compensation regulation, relaxation in the U.K., I am skipping details, but it's one-off in nature. So it's similar to the difference by a slide in the booking timing. That's my answer regarding personnel costs.

Regarding April, when wholesale performance improved compared to the fourth quarter, the main factors are as follows: in wholesale, mainly rates, equity products drove the outperformance. And in the fourth quarter, rates, especially from the middle of March based upon the turmoil in the Middle East, the risk has to be controlled. So it's not just about the end of year factors, but due to risk control, revenue slowed down. And in April, we saw the significant improvement. Equity product is continuously performing well.

As for nations -- please give me a moment. As for the geography, geographical split, all regions compared to the fourth quarter, we see outperformance. But regions other than the U.S. are particularly outperforming. The U.S. is performing well, but compared to other regions, growth rate is relatively lower. I hope I answered your question.

I have not captured everything but U.S. was doing well as of the end of fiscal year -- previous fiscal year, if I am not mistaken, the U.S. business was strong, on the other hand, compared to the U.S. in the first quarter, growth is limited...

Tsujino-san, sorry, I did not explain clearly, but bottom right on Page 12, you can find revenue by geography. And Americas, in the fourth quarter, revenue has come down relatively significantly in Americas compared to other regions. That's partially due to seasonality and also due to the impact from the Middle East. Since the middle of March, we had to control business. So especially macro business in Americas was particularly impacted, and the timing didn't work well, especially the last one week of the month and those that happened. And then the situation got relaxed. And then there has been a less tension after April, and we saw recovery.

The next question is Daiwa Securities, Watanabe-san.

Daiwa Securities, Watanabe. I have 2 questions. First, private credit. $2.4 billion, you explained. You also said diversification is in place software by sector. Can you give us some more detailed breakdown? And retail, private related products, what is the redemption call? And what is your policy of sales going forward?

And secondly, capital policy. You didn't announce any new buyback program, RSU 40 billion -- it would be JPY 20 billion about buyback. 50% total return -- total payout ratio to shareholders, is that the right interpretation?

Watanabe-san, thank you very much. First of all, private credit sector diversification. So what is the picture? Overall, health care, business service, software and computer service, consumer, engineering and construction, these are the sectors included. Mostly, health care and business service occupy quite a large proportion. Software, not necessarily high in terms of percentage. And on top of that, there is regional diversification in place as well.

And regarding the second half of your first question, retail customers, private credit, what about the redemption? And regarding sales policies, as client sentiment, there is some conservativeness. But at the moment, we are not seeing any cause for cancellation or requests. Originally -- or to begin with, when we sell to retail customers, we tell them that it's based upon the assumption of mid- to long-term investment. And when we obtain their understanding, we sell those products to them for the first time. So I think those communications have been effective, so much so that there hasn't been any significant run.

And buyback and total payout ratio, first half, second half put together, full year RSU included 58%. Excluding RSU, it's beyond 50%. So I hope that answers your question.

Regarding buyback announcement timing. 4Q -- if there's an announcement in 4Q, that would be fiscal year '25?

The JPY 60 billion buyback program we announced in Q3 -- in Q4, we assumed the Q4 profit and we defined the amount based upon our assumption.

The next question comes from JPMorgan Securities, Sato-san.

I am Sato from JPMorgan Securities. I have 2 questions. First question is about wholesale and wealth management expense outlook. In wholesale, performance was strong, and there was an adjustment made to the bonus, I believe. And as you explained, and there were onetime factors. So 83% of our cost/income ratio for the year and the next following year onward. If top line is at the same level, then what kind of level can we expect?

And on the other hand, for wealth, in the fourth quarter, the performance was solid. The quarterly expense came down. So in this strong performance, I believe you are doing the payout to employees. And even in light of that, if this is the level you are achieving then, when recurring asset growth are bigger, then can we expect more leverage? So could you explain your outlook for expense for those 2 divisions?

Secondly, in the third quarter, related to Laser Digital, loss was booked at that time. Risk control and net exposure reduction were explained. But in the fourth quarter period, what was the market situation -- based upon the market situation in the fourth quarter and based on the result of the third quarter, and what is the update on the effects achieved as a result of the current measure you have taken?

Thank you for your question. First, outlook for -- the outlook for expense. First, wholesale. In the fourth quarter on a Q-on-Q basis, plus JPY 13 billion. Out of this increase, 30% is due to the compensation regulatory change and also end of the year performance-linked bonus adjustment. And then the last part is the increase in the professional fee and payment for services received. So the expense rate increased, but fixed cost to was suppressed.

So this fiscal year, in a sense of the review of expense, in the fourth quarter, wholesale, they had a few onetime items and also fees paid or professional fees. For example, SPPC pipeline, so cost was incurred before the deal as we hired lawyers, and the revenue recognition got delayed. So compared to the fourth quarter, we expect the expense level to come down.

As for wealth management, we booked high level of margin. And can we expect the same level this year? As for this year, advanced investment in AI, also corporate cost increased due to inflation are expected. But continuously in Japan, for wealth management, we are going to tightly control costs. So even though there are timings when cost increases due to advanced investment, but it depends on revenues, but we expect we will be able to deliver a certain level of margin.

And finally, regarding Laser. In the third quarter, we troubled you and we got you worried with loss related to Laser. But as you said, we have controlled risk volume and we have taken a more conservative stance. And in the fourth quarter, when we look at the market, bitcoin and crypto market decline was the same level as in the third quarter. In terms of profit and loss, impact on consolidated results was limited. I hope I answered your question.

Regarding the latter part of your answer, the situation in the crypto market and the impact on your profitability. Simply put, you've reduced the exposure. So the benefit you received is as a result of reduced exposure and hedging or different ways of conducting market making. In other words, what I'm getting at is, previously, you said you are not intending to downsize the business. So the exposure level, I think, will increase in the future. Even with that you have a structure in place to prevent impact on profit?

Regarding trading in the market making, the absolute amount of risk has been reduced. And of course, there are venture capital investments and asset management seed capital with our own fund. So for those areas, in nontrading areas, we have long positions. So when we have progress in asset management business and from seed capital, we will see that transfer to equity capital by investors, LP investment.

The next question, SBI Securities, Otsuka-san.

Otsuka of SBI Securities. Is my voice coming through?

Yes.

Could I do one question and one answer? The first question is just for confirmation purposes, but wholesale, quarter-on-quarter basis, profits declined. What's the reason? Can you recap that revenue? As you had explained Global Markets fixed income, Q4 seasonality factor and Iran have been quite significant. And expenses expertise fee and performance, pay for performance. And so due to the revenue and expenses, 30% decline in profit. That's quite significant, but it wasn't a surprise to you. So that's my first question.

Thank you very much. And you've made the situation very clear. So if we divide between revenue and cost, as far as revenue is concerned, seasonality, due to the end of the fiscal year, risk position was controlled. And on top of that, due to the Middle East situation, in the mid- to late March period, there was exacerbation quite rapidly. So we had to control defensive position, and that's the big factor for the reduction of revenue.

And on the cost side, I slightly touched upon this in my presentation. But due to the review of the compensation regulation and also being the end of the fiscal year, part of it is timing gap, and there has been a onetime of increase. The remainder is increase of fees payable to experts and for transactions. But regarding this factor, the original understanding regarding SPPC, we were to add one product to the lineup. So the initial investment, that was within our control. But professional fees, we paid it earlier than booking the revenue. So this was a relatively high cost increase, higher than we had expected. That's my personal view. I hope I answered your first question.

Sorry. One follow-up question. Expense ratio is slightly high. So there was a timing gap. But 83% for full year, is that a normalized basis ratio?

Q4, 86%. Obviously, it's quite significantly higher. And regarding expense ratio, rather than expense side, the impact from revenue is quite heavy. But at any rate, 86% is slightly higher than normal. Thank you.

Second question. At the end, you mentioned ROE, 10% full year basis and 8% to 10% or higher and stably performing such ROE. You've achieved that goal. On the other hand, if we look at banks and other Japanese financial institutions or more so regarding overseas financial institutions, 8% to 10% ROE isn't that high. So plus. Don't you have an intention to elevate your goal? Isn't that discussed at the Board of Directors meeting? Can you touch upon such aspects?

Thank you very much. Otsuka-san, your point is very true. Of course, in comparison to mega banks, Japanese financial institutions and peers overseas, from the perspective of being in the investment business, 8% to 10% plus level is just a midpoint. It's not the ultimate goal.

Regarding this matter, in the deliberations for the budget, there is intensive discussion on this matter. So if there are any points that we need to review, in late May, we will have the Investors Day, so we may touch upon that aspect. Thank you. That concludes my response.

So your answer is you're discussing that point heavily, right?

Yes, exactly.

The next question comes from UBS Securities, Niwa-san.

I am Niwa. Can you hear me?

Yes.

Regarding wholesale cost and private asset initiatives of Nomura, I have a question about them. First, regarding wholesale cost. This year and next year, on a run rate basis, what's the percentage? Amid -- I do understand you have a medium-term goal. But given the environment, where there is a strong cost increased pressure, what is your outlook?

My second question is about long term than the earnings results. But in Americas, what's the future outlook of private asset market in the U.S.A.? And on that basis, what is Nomura's strategy? So if it's in the initial phase, then there will be the room for expansion. And in the call today, listening to the tone of your explanation, it appears you remain positive. But looking at your peers, they are switching gears. So if you could give me some perspective on this, that's appreciated.

Thank you very much. Regarding your first question on wholesale cost control and cost income ratio target, what is the rate of progress and what is our outlook for this year? And the cost pressure may be high, as you said. But as you said, the group-wide cost control has an important theme of how to manage inflation. So certain parts of this are unavoidable, but rather than absorbing -- taking them 100%, the theme is to look at where we can reduce cost in other areas. For example, through location strategy, offshore can be more effectively used. So we are considering approaches, including structural approaches. Also, that we can suppress cost increase to a certain level.

And regarding cost/income ratio, we would like to grow revenue at the rate that beats inflation. That's an important factor. And for business, this is more important. So in wholesale, ROI against the additional capital needs to be increased to increase ROE. That's our intention.

Secondly, regarding our outlook for private credit, we need to separate my answer for midterm and long term. Regarding private credit market itself, our view is positive. In the medium to long term, market has the potential to grow. On the other hand, both the bracket and our peers has pointed out repeatedly that in the short-term, credit cycle needs to be monitored closely and the risks must be controlled tightly. We do acknowledge the need to do so. So earlier, I answered to a previously asked question that in PBC we have reached pipeline with attractive opportunities, but our stance is to take selective approach.

And medium- to long-term portfolio, well, in wholesale as a whole, we would like to control so that no single product stands out too much. So that kind of control will be needed, and we have an agreement in our approach with wholesale. That's all.

Just one more thing for me. So mainly, impact on you in terms of division, the impact is happening mainly in wholesale? Not really in investment management, but wholesale is mainly impacted in terms of product line?

So as for the existing P&L, especially risk side, wholesale portion is the biggest. So your understanding is fine. But as we think about medium- to long-term growth, asset management is the area. As we have said since 2020, we are closely looking at the market opportunities. And not just private credit, but we look to grow private business. And as part of the total, private credit will grow. And wealth management, based on the principle of suitability, based upon the needs of our clients, we would like to steadily accumulate assets. And going back to the previous point, in the short term, we need to control risk for wholesale, that's as you pointed out.

We'd like to conclude question-and-answer session. If you have some more questions, please ask our Nomura Holdings IR department. In the end, we'd like to make closing address by Nomura Holdings.

Once again, thank you for joining us. As I have said a few times, for 2 successive years, on a full year basis, we've renewed the net profit and ROE, yes, there were some voices saying that this may not be enough, but we exceeded 10%. And we were able to achieve the goal towards the 2030 vision 2 years upfront. Recurring asset, increased banking division establishment, Macquarie Asset Management acquisition, these investments were done in order to make a robust platform for future growth. That was what we've done in the past 12 months. So I think we will begin to monetize out of those initiatives. And therefore, we call upon you to provide your continued support.

That was Moriuchi, CFO. Thank you.

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

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

Good day, everyone, and welcome to today's Nomura Holdings Third Quarter Operating Results for Fiscal Year ending March 2026 Conference Call.

Please be reminded that today's conference call is being recorded at the request of the hosting company. Should you have any objections, you may disconnect at this point in time. [Operator Instructions].

Please note that this telephone conference contains certain forward-looking statements, and other projected results, which involve known and unknown risks, delays, uncertainties, and other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these projections. Such factors include economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions.

With that, we'd like to begin the conference. Mr. Hiroyuki Moriuchi, Chief Financial Officer. Please go ahead.

This is Moriuchi, CFO. Thank you for joining us. I will now give you an overview of our financial results for the third quarter of the fiscal year ending March 2026. Please turn to Page 2.

Return on equity was 10.3%, reaching the quantitative target for 2030 of 8% to 10% or more for the seventh consecutive quarter. Group-wide net revenue came in at JPY 551.8 billion, up 7% over the last quarter. Income before income taxes fell 1% to JPY 135.2 billion, while net income fell 1% to JPY 91.6 billion. EPS for the quarter were JPY 30.19.

The 4 main divisions performed solidly, but the segment -- other incurred losses because of the downturn in market conditions for the digital asset-related businesses. For all 4 divisions in total, pretax income rose 8% to JPY 142.9 billion. This is the highest level in 18.5 years since the first quarter of the fiscal year ended March 2008.

Wealth Management achieved growth of around 30% versus the previous quarter, which was itself a strong quarter. Investment Management saw business revenue rise to an all-time high since the establishment of the division, thanks to the consolidation of the public asset management business of the Macquarie Group, which we acquired in December 1, 2025, but profits fell because of weaker investment gains and onetime expenses associated with this acquisition.

In wholesale, both Equities and Investment Banking performed solidly generating record revenues. Banking also generated solid revenues from lending activities as well as trust and agent services. In view of our strong momentum, we resolved to set up a share buyback program in order to enhance shareholder return and capital efficiency. The program will run from February 17 to September 30 of this year with an upper limit of 100 million shares and JPY 60 billion in amount.

Before we go into details for each business, let us first take a look at earnings in the first 9 months of the fiscal year. Please turn to Page 3. As shown on the bottom left, income before income taxes rose 15% year-on-year to JPY 432.1 billion, net income rose 7% to JPY 288.2 billion. Earnings per share came in at JPY 94.67, and return on equity came in at 10.8%.

Please see the bottom right for breakdown of income before income taxes. Pretax income at 4 main divisions rose 10% to JPY 381.3 billion. On a 9-month basis, income before income taxes is running slightly ahead of the target of over JPY 500 billion in our 2030 management vision.

Looking at individual divisions, Wealth Management continue to generate stock strong profits and year-on-year recurring revenue cost coverage ratio rose sharply, improving revenue stability. Profits fell in Investment Management because of onetime expenses associated with the Macquarie acquisition, but existing operations continued to generate organic growth, thereby steadily broadening the division's business foundations with a view to future growth. Moreover, at all wholesale businesses -- business lines, they performed well, thereby actively driving group-wide earnings.

Banking saw costs rise ahead of the introduction of the new deposit sweep service in the next fiscal year, but loans outstanding and investment trust balances rose smoothly. We will take a look at the third quarter results.

Please turn to Page 7. All percentages discussed from now on are based on a quarter-on-quarter comparison. On the top left, you can see that Wealth Management net revenue increased 14% to JPY 132.5 billion, while income before income taxes of JPY 58.5 billion represents a growth of 29% versus the previous quarter, which was itself a strong quarter. The margin of over 40% on income before income taxes was not only high in absolute terms, but was ahead of the street, too.

On the bottom left, you can see that recurring revenue rose to an all-time high of JPY 52.7 billion. The first and third quarters tend to be flat quarters for recurring revenue because investment advisory fees are only booked in the second and fourth quarters, but this was completely offset this quarter, thanks to net inflows of recurring revenue assets in excess of JPY 500 billion.

Floor revenue also increased sharply to JPY 79.8 billion. Accurate assessment of market movements and client needs, along with supply of new products, helped to ensure strong revenue. Recurring revenue cost coverage ratio also rose 1 percentage point to 71% amid ongoing cost control initiatives.

Please turn to Page 8, where you can see an update on total sales by product. Total sales rose around JPY 300 billion to JPY 6.6 trillion, thanks to growth across a wide range of products. Equities registered growth of 4%, thanks to increased secondary trading during market correction phases as well as major primary deals. Bonds registered a decline of 25%, yen-denominated bond sales came in flat as rising interest rates boosted yields and ensured solid demand, but foreign bond sales were hit by the disappearance of primary deals booked in the previous quarter.

Investment Trusts and Discretionary Investments, which make up recurring revenue assets saw steady growth in sales and insurance sales remained strong. This demonstrates that the shift from savings to investment has now firmly taken root.

Next, we take a look at the KPIs on Page 9. On the top left, you can see that recurring revenue assets saw a net inflow of JPY 503.9 billion, although there were some liquidity needs prompted by record highs in major markets, we secured the largest net increase on record. Our efforts to expand the recurring business are steadily producing results, strengthening our confidence. Meanwhile, as shown on the top right, recurring revenue assets totaled JPY 28.1 trillion at the end of December, which also presents an all-time high. As shown on the bottom left, the number of flow business clients rose by around 270,000 to 1.53 million. Volume market conditions led to an upturn in client activity and primary deals such as the SBI Shinsei Bank IPO, also encouraged trading activity.

Next, let's take a look at Investment Management on Page 10. On the top left, you can see that net revenue came in flat at JPY 60.9 billion, and the income before income taxes fell 42% to JPY 17.9 billion, mainly because of onetime expenses associated with the Macquarie acquisition, together with weaker gain associated with American Century Investments, which came under investment gains and losses.

On the bottom left, you could see that business revenue, which constitutes stable revenue rose to an all-time high of JPY 57.8 billion, benefiting from revenue from the acquisition that we completed in December last year as well as from solid performance in asset management business in Japan. However, Investment gains fell because of smaller gains related to American Century Investments and the disappearance of gains in the sales of portfolio companies at Nomura Capital Partners. Although profits for the division fell because of weaker investment gain and onetime expenses associated with the acquisition. The impact was offset in consolidated accounts via the reversal of the valuation allowance for deferred taxes, -- deferred tax assets.

Let's now turn to Page 11 and examine our Asset Management business, which is a key source of business revenue for the division. The graph on the upper left shows that assets under management reached an all-time high of JPY 134.7 trillion at the end of December as shown on the bottom left, net inflows amounted to JPY 115 billion, representing the 11th consecutive quarter of net inflows.

Net inflows to domestic investment trust business totaled JPY 71 billion. Although there were outflows from ETFs for profit taking amid rising equity markets and from Japanese equity investment trusts due to early redemptions, they were offset by inflows into newly established Japanese equity active funds, private assets and balanced funds. Net inflows into domestic investment advisory and International businesses totaled JPY 44 billion, with the outflows from U.S. high-yield bonds and the business we acquired, but influenced mainly into yen-denominated bonds in Japan.

As shown at the bottom right, alternative assets under management rose to a new high of JPY 3.3 trillion. This represents growth of about JPY 400 billion versus the end of September, more than half of which stems from net inflows.

Next, let's take a look at wholesale on Page 12. On the top left, you can see that wholesale net revenue rose 12% to JPY 313.9 billion, while income before income taxes rose 17% to JPY 62.3 billion. The breakdown on the bottom left shows that global market net revenue rose 9%, while Investment Banking net revenue rose 31%.

Please turn to Page 13 for an update on each business line. Page 13, please. Net revenue in the Global Markets business rose 9% to JPY 256.8 billion. Please look at the middle section on the right. Fixed income revenue rose 12% to JPY 136.9 billion. In macro products, rates, revenue growth in Japan and the Americas increased flows, while FX emerging revenues rose in EMEA and also recovered in ASIA from the previous quarter. In Spread products, credit revenues fell in AEJ of investors adopted a cautious approach, but securitized products revenues remained high in the Americas, in particular. Equities revenue rose 5% to a new high of JPY 119.9 billion. Equity Products revenue rose sharply in the Americas on strong performance in derivatives, and execution services revenues rose sharply in Japan, particularly thanks to primary deals.

Turn to Page 14, please. As you can see on the bottom left, Investment Banking net revenue rose 31% to JPY 57.1 billion. This represents the strongest performance for the period since the fiscal year ended March 2017, the earliest period for which we can make meaningful comparisons by product in advisory momentum remained strong in Japan with multiple transactions involving moves to take companies private and cross-border deals, and international businesses made the contribution with multiple deals, including deals in closely watched sectors, mainly in EMEA and AEJ. Revenue rose sharply in financing and solutions. Major IPOs and public offerings made strong contributions to growth in ECM, especially in Japan. Elsewhere, solutions revenue and DCM revenue in Japan also remained strong.

Now let's look at banking. Please turn to Page 15. As seen on the top right, in banking, net revenue came to JPY 13.7 billion, up 7% from the previous quarter. Income before income taxes rose 31% to JPY 4.2 billion. Income from lending business and trust agent business held firm as the division established in April 2025 increased the outstanding balances that we have set as KPIs, while benefits of marketing and advertising strategies slowly started to emerge. Preparations for the deposit sweep service scheduled for introduction in the next fiscal year are progressing as planned.

Next, Page 16, for expenses. Group-wide expenses came to JPY 416.5 billion, a 10% or JPY 37.7 billion increase from previous quarter. As shown on the right, the drivers of the increase include an FX impact of JPY 9 billion as well as JPY 13 billion in one-off costs, such as onetime expenses associated with the acquisition and the temporary costs arising from partial changes to the deferred compensation plan. Other major factors include operating expenses related to the acquired business provisions for performance-linked bonus and commissions and the floor brokerage fees. These are primary strategic investments aimed at strengthening our future earnings base or variable costs that move in line with revenue.

Moving forward, we will continue to execute strict cost control and work to secure our profitability.

Last, Page 17 for financial position. In the table on the bottom left, we can see that Tier 1 capital at the end of December came to JPY 3.6 trillion, up JPY 60 billion since the end of September, while risk-weighted assets came to JPY 24 trillion, up by JPY 700 billion. The common equity Tier 1 ratio at the end of December came to 12.8%. Our common equity Tier 1 ratio finished the quarter down 13% at the end of September, but this is mainly attributable to the negative effect of 0.5% as a calculation method for regulatory capital ratio changed with the completion of the acquisition of the business from Macquarie Group. This concludes our overview of third quarter results.

In closing, in the Q3, strong performance continued across all 4 segments, as stable revenue grew and repeat client flows were monetized against backdrop of U.S. Japanese equities rising to new heights, while absorbing one-off costs associated with acquisition, ROE for the Q3 came to 10.3% and ROE based on performance in the 9 months through the end of Q3, came to 10.8%.

Let me touch upon the situation in January. In Wealth Management, net revenue thus far in January is about even with the level in the third quarter. Client sentiment has been favorable despite some selling pressures in the market, and we think household financial assets are steadily shifting into investment in response to concerns about the inflation and heightened long-term diversified investment need. In wholesale, due to seasonal factors, Q4 tends to be somewhat slower than the previous quarter, even though GM, or Global Market, is striking broadly in line with the prior quarter. Meanwhile, Investment banking has gotten off to a slower -- slightly slow start, but overall, the pipeline is solid, and we are not concerned.

In Q3, the impact on earnings from fraudulent transactions stemming from phishing and scams was negligible based on recent conditions, we think the impact on earnings will continue to be very minimal. Also, there are 2 items that needs additional explanation regarding Laser and Investment Management division. First, starting with Laser. Let me explain the losses in the segment Other.

In this past quarter, we recorded losses in part of our business in EMEA owing to digital asset market movements and the effect of currency hedges. Specifically, earnings at Laser Digital, the unit that runs digital asset business were negatively impacted by market movements observed in October and November of last year. Laser became profitable 2 years after its establishment and its performance was solid in Q2, but the units suffered a temporary negative impact in the third quarter. Earnings in the crypto asset business are volatile by nature, and we are well aware of management of the business over medium to long term, has to take that volatility into account. At the same time, to limit short-term earnings fluctuations, we have further tightened control over positions and risk exposure. Moving forward, we will continue to capture growth in crypto markets while strengthening our services and customer base.

Next, regarding Investment Management division's performance, let me add -- let me explain the existing platform and acquired business separately. First, excluding the impact of the acquisition of existing platform's AUM expanded from JPY 101 trillion as of end of September to JPY 110 trillion at the end of December, supported by net inflows and the business revenue reached a record high. I will explain next the acquired business after consolidating December results. We newly recorded approximately JPY 25 trillion in assets under management, business revenue for the period was JPY 7 billion, and operating expenses were JPY 5 billion, in addition, one-off acquisition-related costs and amortization of intangible assets were recorded, bringing total expenses, including operating costs to roughly JPY 11 billion. These one-off acquisition costs reduced the division's pretax profit, but the impact on consolidated net profit after tax was offset by releasing valuation allowances against deferred tax assets associated with the acquisition.

As we explained at the investor event in December, we expect total future expenses of $100 million or so for transfer and integration-related costs and other items. These costs will be incurred over the next 2 years, but the majority is expected to be recognized over the 1-year period starting from the fourth quarter, we are now going over the details of what we expect to spend on growth investments and plan to present this information at the Investor Day event in May because the acquisition was only just been completed, have commented in some detail here about the contribution of the acquired business, but as acquired the business, becomes more fully integrated into operational commentary on business performance, we will treat the division as a unified whole while maintaining the disclosure transparency once we are through the initial investment phase of the J-curve, our long-term aim is to grow profits by maximizing synergies between our existing and the newly acquired business.

The company celebrated its centennial on December 25 last year. Going forward, we aim to continue striving for growth with the help of our stakeholders and other stakeholders. We are grateful for your continued support. Thank you.

[Operator Instructions] The first question is by SMBC Nikko's Muraki-san.

Muraki of SMBC Nikko. I have 2 questions. Page 24, JPY 10.6 billion Red Inc. in Europe. Laser Digital, you said that there was a fluctuation of the market between September and November. So JPY 10 billion of losses. At that stage, there was quite a sizable position. What was the status in terms of position management? One year ago, quite a sizable profits had been recorded, but at that stage, what was the state of position management and in order to control volatility, you said that you are taking measures, but what's your forecast regarding the volatility of performance going forward? That's my first question.

Second question, Wealth Management, Page 7. There was net increase in investment trust, but amount outstanding, net inflow was quite strong. What's the backdrop? There was not any outflow. Is this sustainable? And margin is more than 40% -- 44%, AI-related investment was cited, but what would be the level of margin?

Muraki-san, thank you for those questions. The first question -- the first point of question one, Laser's activity, were there any long positions taken? As you know, regarding Laser's activities, institutional investor market making and crypto assets, fund management and Nomura seed investment, venture investment. These are the diverse activities that Laser is engaged in as we offer services to customers. As you pointed out, there had been some long positions, and based upon that situation, going to the second point of your first question, how will we control volatility of performance going forward? This is a new industry of digital assets, and there are growth prospects, and we are currently in the stage of fostering businesses. And we -- our position is unchanged. We will -- we have long-term commitments.

And in terms of risk management framework, we already had a robust risk management framework. On the other hand, in the short term, as you have rightly pointed out, how should I put it? There are times when sizable revenues are recorded, but last year, in November and December, there was some market disruption. So there is upside as well as downside, quite significant upside as well as significant downside. So in the short term, already, in order to control volatility, we are reducing the volume of risk in the positions we take. So this kind of precise position management will be continued in order to control upside and downside volatility, and in the long run, we wish to expand this business. So that concludes my response to your first question.

Second question, net inflow of investment trust is sizable. Is this sustainable? Now having said so, there is market impact. There is impact from customers' preference. And I would like to, therefore, refrain commenting on whether we think that this trend will continue.

On the other hand, 44% is a high margin, and can we further seek higher margin on this matter? Partially there are impacts coming from the market. So it's difficult to make any comments on that dimension. We are impacted by cyclical factors. Market structural change is taking place. And our policies are well aligned to market structural change. The Japanese market, retail investors are making a major shift from savings into investment. This is a sustainable trend, and we are taking measures that are well aligned to that trend.

So in comparison to historical trends, we think that the margin level will be high, we will be able to maintain higher margin level. On the other hand, on the cost control side, we are continuing our efforts. But selectively, we are using AI, investing into AI, in order to improve the services we provide to our customers, so that will continue. So that concludes my response to your 2 questions.

My second question, Morgan Stanley and Merrill Lynch margins are 30%. They've targeted 30% and the actual is slightly over the target, but why does Nomura such advantage? Is it because the asset size is -- would they have larger asset size? What's your advantage?

Thank you for the question. I was consulting with our people in IR. There are country-to-country differences in terms of market structure, making it difficult to do an apple-to-apple comparison. Nomura's Wealth Management 100% sales are in-house. And because of that, partly because of that, it's easier to control cost. And the revenue market structure, I will have to once again check the market structure to respond regarding revenue. So I will conclude here.

The next question is asked by Watanabe-san of the Daiwa Securities.

I'm Watanabe from Daiwa. I have 2 questions. First question is about Wealth Management's pricing strategy, other face-to-face securities, overseas equities, and other products they are raising commissions. Do you have a discussion internally about raising pricing? Second question is about the timing and scale of buyback. Why Q3? Why not Q4? What's the background of the JPY 60 billion in size?

Thank you for your questions. For your first question on Wealth Management's commission rate, whether our peers are raising commission and what is our situation? That's your question. It's related to Wealth Management strategy. So I would like to refrain from answering that question. For us, we are focusing on value provision to customers. So we are considering what is the best solutions for customers. And we would like to continue our deliberation.

Regarding your second question about the timing of buyback, why Q3? And also you asked about the value or amount. Regarding the timing, for one thing, Macquarie U.S. Asset Management transaction closing was the 1st of December. And by booking the business, CET1 ratio impact was not clear, but it was clarified and finalized. So our investment capacity was clarified. So in the market, there is expectation for buyback. So with that taken into consideration, we wanted to live up to expectations of investors and decided on buyback.

Regarding the size of buyback as mentioned repeatedly, for us, investment strategy and future opportunities and also, at the same time, the importance of shareholder return are all considered. And based upon the balance, we came to the decision on the size.

Regarding the second answer, CET1 ratio. That's above the target range this time. And on that basis, you came to JPY 60 billion. So if FY 2025, so based upon the total return ratio target. So this completes your actions to meet the target for FY 2025?

So whether we are at or above 50% in total return ratio that cannot be decided until we see the fourth quarter results. Based upon the fourth quarter results, we will check whether there is shortfall or not. If there is shortfall, then we will consider measures to take at that point in time, but when deciding on the amount, it is possible to add to what we have announced.

The next question will be by JPMorgan Securities, Sato-san.

JPMorgan Securities, Sato. I have 2 questions. First, Global Markets, post-January performance. You touched upon that subject Q3. You said that the trend of Q3 has been maintained since the beginning of the month. Domestic rates, recently, there had been some fiscal concerns that had led to spike in interest rates, which means there was lack of buyers. So some people cited that there was dysfunctioning of the market. And under such circumstances, how should we view your domestic rates business?

Secondly, just to confirm the numbers, Macquarie acquisition, 1-month worth revenue expenses, revenues and expenses will be booked, but normal rate contribution, JPY 7 billion revenue, JPY 5 billion cost, so JPY 1 billion per month times 12. Is that the right assumption? So can you confirm whether those numbers are correct?

Thank you for the question. Then on the first question, the performance is solid in January as was the case of Q3, but what about domestic rates? As you have pointed out, there has been some increase in volatility in the market, super-long bond rates are going up. And therefore, some of the clients are taking a wait-and-see attitude and that is partly reflected in our Japan rates business, which has seen some slowdown.

On the other hand, for global markets, in general, we are doing quite well because our business has diversified. In Japan, it's not rates alone. We're doing equity, credit. We're in diverse business areas and our GM business overseas, especially U.S., the business has grown to become quite sizable. So this slowdown has been absorbed, and we are recording sound performance in January.

On the second question of Macquarie acquisition, no, in peacetime, 7 minus 5, to minus goodwill, 1 times 12. That's the broad image, but this 1 month is quite difficult because in revenue, seed capital -- we have seed capital to foster the business, and there is fluctuation. For the annual -- in annualized term, the position is neutral, but when we look at a snapshot of 1 month, there could be some fluctuation. So it could become bigger. So I think that's the way to look at it.

The next question comes from Tsujino-san of BofA Securities.

So this time, personnel cost increased and deferred compensation accounting method was changed and that impact is included, and moving forward in Q4 and after Q4 as well, what is going to be the impact in and after Q4? And also, what is the actual amount, absolute amount in impact? And considering that this time, revenue due to weak yen and personnel costs due to weak yen, both seem to have increased. But the way personnel costs increased, what was the reality of how personnel costs increased. That is my first question. And the impact from next fiscal year.

Next question, second question is about Laser Digital. You said you have reduced position, but moving forward, this business is what you would like to grow. And of course, you have traditional securities business, which is growing, but when the size increases, then you have no choice about to increase positions and then hedge is impossible for crypto assets. Then how should we think about the positioning. In the long term, how do you deal with the volatility that needs to be considered. So what is your thinking?

Thank you for your questions, Tsujino-san. Regarding your first question on deferred compensation, accounting method change, what is the actual impact? And what is the impact expected in the fourth quarter and the next year? In the third quarter, actual impact amount is about JPY 8 billion. In the fourth quarter, about the same amount is expected as impact. And next year onward, JPY 15 billion or JPY 16 billion are expected impact. But next year -- well, that's this year. So next year, 40% or 50% of that is what we expect for next year. And year after next, the impact will be negligible.

It's difficult for me to explain here the accounting treatment involving the slide in timing of cost recognition. Deferred compensation systems have varying treatments. So the cost is front-loaded and spending after 12 months, the level normalizes, that's how we should think about it.

Regarding your second question about the reduction of Laser positions. In the medium and long term, with the business growing, the position will grow bigger, and the volatility will stay elevated. That's the point, which you pointed out, I believe. And regarding your point, strategy included, we need to have a thorough discussion in any ways. We would like to grow this business in the medium to long term, but there are several activities by holding inventories we do market making and trading for customers, then the unit risk exposure will be reduced.

On the other hand, as mentioned, digital asset or crypto asset-related businesses, in addition to market making for institutional investors include other businesses such as crypto asset, management business or venture ecosystem supporting business, also combine custody-related businesses, there are such other businesses. So while ensuring diversity, we would like to grow the ecosystem. That is our direction. So just like you, Tsujino-san, we have the same sense of risk. So while understanding those points, we would like to conduct this business.

Regarding lending, are you conducting lending right now? And there is no extra risk there, if you are conducting lending business like crypto asset lending.

Regarding lending business, we do have lending business as part of product lineup, but activity is very small.

The next question is for UBS Securities, Niwa-san.

This is Niwa. I hope you can hear my voice.

Yes, we can hear you.

Wholesale resource efficiency and private assets. First, revenue and risk-weighted asset ratio Page 12, 7.7%, quite high. And how does the management evaluate this level? And you've been talking about improving efficiency. So is there room for further increase division ROE. Do you think that this could be raised further? That's the point of my question.

And secondly, I will deviate, but in Nikkei newspaper, Mr. Okuda was responding to an interview regarding private assets, and he was talking about selling Japanese products in other countries. So if you want to invite assets or investments into Japanese private asset, what is your estimate of the size of the business in terms of AUM or revenue? Or in order to engage in such business, does Nomura need to be equipped with a new function. So those are my questions.

Then on your first question regarding resource efficiency of resource, Page 12, 7.8%, revenue modified RWA, we think that this is so and so acceptable global markets, Hong Kong, Singapore, IWM is engaged in wealth management business. Resource is not so much needed and taking that growth, all of the activities taken together, this is the level. So for example, if the question is whether the resource efficiency is going up in a certain business, not so. This is a result of the business mix. So that's my first point.

And next, this number, is it possible to further increase this number? If we overfocus on that, the statutory capital RWA revenue or profitability in order to increase that, we may end up taking too high substantive risk in light of the economic capital. So it's good that this number goes up, but rather than just focusing on this indicator, we would look at various indicators comprehensively for risk management. And if in the end, this number goes further up, then that's positive. We have the self-funding program. The resource maybe somewhat tight for the business, and they are incentivized to focus on efficiency of resources. So even if there is a potential project, they have to judge whether resource can be used efficiently in light of the revenue that could be gained from that project. So I think that kind of incentive has also delivered some results. So this 7.8% is quite reasonable and appreciated, but we're not just chasing this number.

Second question, Japanese private asset in order to invite money into Japan for development of Japanese infrastructure, what kind of mechanism, or what's our estimate of the size of the resource? Regarding those points, it might be a bit premature to share the design we have in mind. And I think we need to engage in more internal discussions. At one point in time, we will probably have more factors that we can speak to you, and then we will explain our strategy. I hope that this would do for today.

[Operator Instructions] As there is no more question, we'd like to conclude question-and-answer session. Now, we'd like to make closing address by Nomura Holdings.

Thank you very much. I am Moriuchi. Thank you very much for spending your precious time. As mentioned, there are one-off items and the technical accounting-related items, which are difficult to grasp. And they are ending up in increase in revenue and decrease in profit in any ways for divisions delivered a strong performance and we are positively looking at the performance. So medium, long term, we are focused on growing the revenue power of those four divisions.

As for Laser Digital, we believe the business is promising in the medium, long term. So we would like to grow the business while suppressing short-term volatility by controlling the risk volume. In any case, thank you very much for your precious time that you spent with us. That is all for me. Thank you.

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

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

Good day, everyone, and welcome to today's Nomura Holdings Second Quarter Operating Results for Fiscal Year Ending March 2026 Conference Call. Please be reminded that today's conference call is being recorded at the request of the hosting company. Should you have any objections, you may disconnect at this point in time. [Operator Instructions]

Please note that this telephone conference contains certain forward-looking statements and other projected results, which involve known and unknown risks, delays, uncertainties and other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these projections. Such factors include economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions.

With that, we'd like to begin the conference. Mr. Hiroyuki Moriuchi, Chief Financial Officer. Please go ahead.

Thank you very much. This is Moriuchi, CFO. I will now give you an overview of our financial results for the second quarter of the fiscal year ending March 2026.

Please turn to Page 2. Group-wide net revenue came in at JPY 515.5 billion, down 2% from last quarter. Income before income taxes fell 15% to JPY 136.6 billion, while net income was JPY 92.1 billion, down 12%. Excluding gains from the sale of real estate recorded in the previous quarter, net revenue was up 10% and net income was up 40%, reflecting steady growth. Earnings per share for the quarter were JPY 30.49 and return on equity was 10.6%, reaching the quantitative target for 2030 of 8% to 10% or more for the sixth consecutive quarter.

In addition, income before income taxes in the 3 international regions rose 63% to JPY 44.9 billion, marking the ninth consecutive quarter of profitability. For all 4 divisions in total, income before income taxes rose 25% to JPY 132.6 billion. In Wealth Management, the balance of recurring revenue assets and recurring revenue saw a net inflow for the 14th consecutive quarter, reaching an all-time high. And in Investment Management, assets under management also reached an all-time high on a 10th consecutive quarter of net inflows. Revenues and profits rose in both divisions.

In Wholesale, the overall trend of growth in both revenue and profits strengthened further with net revenue in Equities reaching a record high in Global Markets and momentum remains strong in Investment Banking, too. The Banking division established in April also performed well.

Before we go into details for each business, let us first take a look at the performance in the first half of the fiscal year. Please turn to Page 3. As shown on the bottom left, income before income taxes rose 26% year-on-year to JPY 296.9 billion. Net income rose 18% to JPY 196.6 billion, and earnings per share came in at JPY 64.53. Return on equity rose to 11.3% as medium- to long-term initiatives steadily bore fruit. In addition, group revenue rose by 11% and profits benefited from cost controls and operating leverage with a cost coverage ratio of 71%.

Please see the bottom right for a breakdown of income before income taxes. Income before income taxes at the 4 main divisions rose 11% to JPY 238.4 billion. Growth in recurring business revenue in Wealth Management and Investment Management helped to stabilize overall performance and Wholesale continued its self-sustained growth based on the principle of self-funding, enabling income before income taxes to rise substantially, thereby driving overall performance. Banking got off to a good start and has made progress with preparations for the introduction of a deposit sweep service next fiscal year. In view of this performance, for the period ended September 2025, we expect to pay a dividend of JPY 27 per share. This works out at a dividend payout ratio of 40.3%.

Please turn to Page 4. This time, we have added this slide to our presentation. We calculate stable revenues as the sum of recurring revenue at Wealth Management, business revenue at Investment Management and revenue at Banking. Steady growth in recurring assets in both Wealth Management and Investment Management, shown on the left, has resulted in strong growth in stable revenues, as shown in the graph on the right. And Banking has been steadily increasing its recurring business, including loans outstanding and trust balance, thereby expanding its foundation for growth.

Now we will look at the second quarter results for each division. Please turn to Page 7. All percentages discussed from now on are based on a quarter-on-quarter comparison. Wealth Management net revenue increased 10% to JPY 116.5 billion, and income before income taxes grew 17% to JPY 45.5 billion. Income before income taxes was the highest in about 10 years since the quarter ended June 2015.

Recurring revenue and the balance of recurring revenue assets both reached record highs as recurring revenue assets saw a net inflow for the 14th consecutive quarter. As major equity markets rose to fresh highs during the quarter, client activity increased and flow revenue registered strong growth. Meanwhile, the pretax profit margin reached a high level of 39%, buoyed by ongoing cost controls. The recurring revenue cost coverage ratio for the last 4 quarters came to 70%, leading additional stability to the division's performance.

Please turn to Page 8, where you can see an update on total sales by product. Total sales declined around JPY 300 billion to JPY 6.4 trillion, but this was owing to a tender offer in excess of JPY 1 trillion during the previous quarter. As for recurring revenue assets, sales of investment trusts and discretionary investments grew steadily, supported by continued strong demand for long-term investment diversification. Regarding insurance, sales have continued at a high level, reflecting the relatively high U.S. interest rate environment.

Next, let's take a look at the KPIs on Page 9. On the top left, you can see that recurring revenue assets saw a net inflow of JPY 289.5 billion. As major markets reached new highs, net inflows remained at a high level despite increased selling pressure from portfolio adjustments as our efforts to expand the recurring business proved successful, taking us to the next stage. Meanwhile, as shown on the top right, recurring revenue assets totaled JPY 26.2 trillion at the end of September and recurring revenue exceeded JPY 50 billion for the first time in our quarterly results, owing to a contribution from investment fees, which are collected on a half-yearly basis in the second quarter. As shown on the bottom right, the number of workplace services rose steadily to exceed 4 million.

Next, let's take a look at Investment Management. Please turn to Page 10. Net revenue came to JPY 60.8 billion, up 20%. Income before income taxes amounted to JPY 30.7 billion, up 43%. Stable business revenue has been growing steadily. In addition to favorable market factors, 10 straight quarters of net inflows resulted in assets under management topping JPY 100 trillion and asset management fees reaching a new high. Investment gain loss came to JPY 16.8 billion, rising sharply by 69%. This reflects not only a large increase in investment gain loss related to American Century Investments, but also profits recorded at private equity investment firm, Nomura Capital Partners on the sale of shares held in Orion Breweries, which publicly listed.

Let's now turn to Page 11 and examine our asset management business, which is the key source of business revenue for the division. The graph on the upper left shows that assets under management reached JPY 101.2 trillion at the end of September. As shown on the bottom left, net inflows amounted to JPY 498 billion. Net inflows to the investment trust business totaled around JPY 525 billion and net outflows from the investment advisory and international businesses were around JPY 26 billion. Net inflows in the investment trust business were achieved despite share price increases on the major markets, triggering profit-taking sales, pushing up funds kept in reserve in MRFs. But even excluding MRFs, funds flowed into Japan equity ETFs, private assets and balanced funds.

The investment advisory and international businesses saw net outflows owing to reshuffling of investments by Japanese investors and outflows from Asian equities, which outweighed inflows to U.S. high-yield bonds and UCITS investment funds. As shown in the graph at the bottom right, alternative assets under management rose to a new high of JPY 2.9 trillion. This performance is the result of solid net inflows and not solely owing to market factors.

Next, Wholesale Division. Please go to Page 12. Net revenue came to JPY 279.2 billion, up 7% as shown at the bottom left of the slide. Global Markets net revenue was up 6% and Investment Banking net revenue was up 15%. Meanwhile, stringent cost management resulted in division expenses only rising 3%. As a result, cost-income ratio improved to 81% and income before income taxes rose 27% to JPY 53.1 billion.

Please turn to Page 13 for an update on each business line. Net revenue in Global Markets business rose 6% to JPY 235.7 billion. Fixed income revenue was JPY 121.9 billion, in line with the previous quarter. Let's look at the product breakdown. In macro products, rates revenues were down quarter-on-quarter in EMEA. FX/EM revenues in AEJ were also down. In spread products, credit revenue growth in Japan and AEJ was attained by capturing client flows and securitized products revenue growth was supported in the Americas by the prevailing direction of the interest rate environment. As a result, higher revenue from spread products offset lower revenues from macro products.

Equities revenue rose 16% to a new high of JPY 113.8 billion. In equity products, revenues grew on higher client activity in Japan and AEJ, supporting a strong performance in the derivative business and the Americas business remained favorable. Execution services sustained strong revenue from the previous quarter.

Please turn to Page 14. Investment Banking net revenue rose 15% to JPY 43.5 billion. Corporate action in Japan remained consistently strong and the international business also contributed to revenue growth. By product, in advisory, momentum remained strong in Japan with multiple transactions involving financial sponsors and moves to take companies private. And international business also made a contribution with M&A deals related to renewable energy and digital infrastructure, primarily in EMEA. Advisory continued to rank top in the Japan-related M&A league table for January through September and ranked 15th in the global M&A league table, demonstrating its global presence. In financing and solutions, revenue rose in DCM on continued solid performance in Japan and multiple international transactions, primarily in EMEA as well as ALF deals, particularly in the Americas.

Now let's look at Banking. Please turn to Page 15. In Banking, net revenue came to JPY 12.9 billion, flat from the previous quarter. Income before income taxes fell 12% to JPY 3.2 billion. KPIs such as loans outstanding and investment trust balance remained at a high level and revenue from lending business and trust agent business held firm. Meanwhile, higher costs pushed down profit as an upgrade to the core banking system completed at Nomura Trust and Banking in May 2025 resulted in the associated depreciation being fully booked this quarter. Preparations for the deposit sweep service scheduled for introduction in FY 2026, '27 are progressing as planned.

Now I will explain noninterest expenses. Please turn to Page 16. Group-wide expenses came to JPY 378.8 billion, a 4% increase from the previous quarter. Compensation and benefits totaled JPY 195.1 billion, rising 5%, reflecting an increase in performance-linked bonus provisions. Commissions and floor brokerage fees came to JPY 47.2 billion, up 5%. The increase was driven by a heavier volume of transactions. Other expenses came to JPY 52.8 billion, which includes JPY 3.1 billion related to acquisition and integration of the U.S. asset management business of Macquarie Group as well as the expense of paying compensation for losses arising from fraudulent trades in clients' accounts due to phishing scams. I will comment in more detail on how the phishing scams affected our profits this past quarter at the end of today's presentation.

Lastly, we take a look at the financial position, Page 17. In the table on the bottom left, you can see that Tier 1 capital at the end of September came to approximately JPY 3.6 trillion, up roughly JPY 170 billion since the end of June, while risk-weighted assets came to JPY 23.5 trillion, up roughly JPY 660 billion. The common equity Tier 1 ratio at the end of September accordingly came to 12.9%. This is within our target range of 11% to 14%. Our common equity Tier 1 ratio finished the quarter down from the 13.2% marked at the end of June, but this decrease reflected the accumulation of positions commensurate with revenue opportunities as well as the increase in the value of risk-weighted assets due to market factors.

As we explained 3 months ago, the calculation method for regulatory capital ratios will change once the acquisition of Macquarie Group's U.S. asset management business has been completed, and we currently expect this to depress the CET1 ratio by about 0.7 percentage points. This concludes our overview of second quarter results.

We would like to provide more detail on the issue of fraudulent trading in client assets resulting from phishing scams. In response to instances of fraudulent trading, we have raised the security level in stages and the number and scale of damages have come down greatly from April peak. At this point, we have been in direct contact with nearly all clients that have been affected by the attacks, and we are working through the process of paying a compensation to them. There are times during the second quarter when the related damages increased again, but at present, the situation has settled down, owing to various steps undertaken to address the issue.

In the second quarter, the negative impact on the profit came to JPY 4.8 billion. Although the number of damages fell sharply, fluctuation in share prices led to high costs in some cases to restore our clients' assets to their original condition. In this regard, we are working to avoid market volatility risk to the greatest extent possible. On October 18, we introduced a passkey authentication system that is recognized as an effective means of thwarting phishing attempts, and we are strengthening measures to eliminate such damages. Looking ahead, we expect that the impact of phishing scams will be much smaller than it has been up through the second quarter, judging from the current state of damages.

Our swift action to implement high-quality security countermeasures does more than just limit the damages suffered by our clients. It enhances the security and convenience of the financial services we provide. Our plan is to be proactive in assembling effective account security measures in our role as an industry leader and thereby reinforce our brand as the most trusted partner for our clients.

I would like to close with some final remarks. During the quarter just finished, stock indices in Japan and other major economies rose steeply amid lessened uncertainty over the trajectory of U.S. interest rates and widespread interest in AI-related stocks and other high stocks -- high-tech stocks. Those conditions helped us record another quarter of strong earnings as we expanded our stable source of revenue and successfully monetized robust client flows. EPS in the second quarter came to JPY 30.49 and ROE came to 10.6%. For 6 quarters in a row, we have attained a quantitative target for 2030 announced last year of consistently achieving ROE of 8% to 10% or more. In addition, ROE for the first half of the fiscal year was 11.3%.

As mentioned at the beginning of this presentation, we have seen solid growth in our key sources of stable revenue, including revenue -- recurring revenue in Wealth Management, business revenue in Investment Management and net revenue in Banking. This has added further to the stability of our company-wide performance. Wholesale as well as steadily achieving independently sustainable growth under the self-funding approach. Revenues and profits in the division have both been increasing in the continuation of last year's trend and overseas business, which has long presented a challenge, has gained ground in making a steady profit contribution.

Let me briefly touch on the situation in October. In Wealth Management, net revenue thus far in October is well above the levels observed in the second quarter. We have seen continuous medium- to long-term growth in investment trust and discretionary investment and other such products and services premised on the idea of long-term diversified investment, and this trend has continued in October. The flow from savings to investment has become well established, and we have tangible sense that the client base for investment in marketable securities have broadened steadily. We intend to continue playing our part to transform Japan into an asset management powerhouse by building relationship of trust with our clients and providing them with asset management services tailored to their needs.

In Wholesale GM business, equity products have continued performing well. In Investment Banking, we expect the current high frequency of corporate actions to continue. In October thus far, the net revenue in Wholesale continues to be solid. Going forward, we aim to raise our profit baseline by taking on risks appropriate to market conditions, and we ask for your continued support.

[Operator Instructions] The first question, Bank of America Securities, Tsujino-san.

This is Tsujino. Two questions. First is regarding the personnel expenses. And as explained, in Q1, you had the U.K. and according to the accounting rules, every year, the expenses tends to be high. So you started at a low level. And this time, compared to Q1, the yen has weakened slightly, so the costs are a bit higher. But even so, if you look at it on a Q-on-Q basis, the personnel or compensation and benefits has increased too much, I think. Considering the wholesale revenue and even compared to that, I think comp and benefits has increased too much is my impression. So could you add more color on that, please, is my first point.

My other point is, and this was the case in the past, too, but the CET1 ratio is within target range. And after Macquarie acquisition, it will go down a little bit. And it was 12.5% or so, which -- and you said you were not exactly fully comfortable with that. So now the market is strong and the position tends to increase. So for this year, regarding the buybacks this year, is there going to be any change compared to the past? So could you -- maybe you can't disclose that, but any color on that, too, please?

Tsujino-san, this is Moriuchi. Regarding your first question about comp and benefits, yes, the points you raised are all correct. And yes, let me add some color to that. Within the compensation and benefits, there's the bonus increase linked to our earnings. That is a big factor. And on top of that, there was some retirement bonus increase in Wholesale, for example. And that does tend to happen as part of our business. And in this quarter, the retirement payments was a little larger than usual. So that's my answer to your first question.

And for the second question, regarding the CET1 ratio target, 12.9% is going to go down to 12.8%, but how we think about the buybacks this year? Well, as for buybacks and for shareholder return in general, we have committed to the market of 40% dividend or above and total payout ratio of 50% or above. And we plan to stick to that as we consider shareholder return. And we had the Macquarie closing and the CET1 ratio is going to decline further from here. And within Wholesale at the moment, we are seeing some high-quality deals and opportunities, and those are increasing.

So from an investment perspective and financial discipline perspective and shareholder return, we will keep those 3 factors in mind, and it's quite hard to balance those 3. But we will make sure to stick to our commitments. Thank you. I hope that answers your question.

The next person asking the question is SMBC Nikko Securities, Mr. Muraki.

I'm Muraki from SMBC Nikko. I have 2 questions. First question is about markets department revenue. Now in macro, revenue seems weak and credit and equity derivatives -- sorry, securitized products and equity derivatives seem strong. But the way revenue is generated in Page 17, the credit risk RWA increase has followed -- or is continuing? And where are you taking the risk and what kind of revenue is being generated? And recently, you said there are quality deals, but what kind of risk taking is expected in the third quarter? So could you explain? That's my first question, market revenue and risk taking.

And my second question is as follows. The First Brands failure, so such incident from such instance, did you have some impact or any lesson that you have taken? And regarding private credit, oftentimes, there are many inquiries we receive about private credit. But looking at your balance sheet, trading book loan is JPY 1.9 trillion. And other than that, excluding Nomura Trust and Banking, loan is about JPY 1.2 trillion. In Americas, securitized -- securitization department or private credit-related business, what is the size of the business in this overall number? Could you give me some sense?

Thank you very much for your questions. For your first question regarding credit risk, where we are taking and how we are taking credit risks. In the first quarter and second quarter, as you say, SPPC and equity derivatives were very strong. Also, usually in credit trading business, our credit trading business contributed to revenue solidly. And what is the outlook for the third quarter, as you said, related to SPPC. There are interesting deals in the pipeline.

On the other hand, your -- it's related to your second question, but in our credit business, including First Brands, whether we see abnormality in credit market, we receive such questions often. Regarding SPPC, internally, we have been having various discussions and high profitability deals lined up. On the other hand, in our balance sheet, concentration risk on SPPC is something we have to be mindful of. So more than ever before, we have to be selective in deciding which deal to do. So in our total portfolio, SPPC portion is not going to be grown rapidly from where it is now.

Regarding your second question about First Brands related impact as well as lessons we have learned and also the scale or magnitude. Firstly, regarding this specific case or impact on our business or P&L was very small from this specific case. To a certain extent, we had some exposure, but it's negligible in size. Also, this name in question did not cause direct cost. And is there a broader implication related to this? As you say, regarding firm-wide stress testing, periodically and nonperiodically, we conduct a stress test to see the changing pattern of tail risk. Indeed, looking at our existing portfolio, whether the risk has grown bigger a lot or not, the risk is not growing rapidly because in SPPC business, private credit business portion in size is very small. So the SPPC business has mortgage structured lending and infrastructure business. So those represent a big portion.

So regarding private credit, private credit-related business is right now in the sense of the balance sheet of our P&L, the impact from that is not big, even though I cannot give you a specific number. That's all.

If possible, I am deviating from the earnings result, but I'd like to ask you about your perspective. So related to First Brands -- so risks related to First Brands, which you mentioned, what kind of risks are you paying attention to? For example, simply, but is it simple credit risk or nonbank intermediary-related risks or double collaterals were involved in some companies' transactions, but is there a risk of fraudulent transactions that you may be involved in? So specifically, what kind of risks are you being attentive to?

It's not that because this incident happened, but regarding individual cases, credit, we need to perform due diligence closely to look at the creditworthiness of each case. And regarding the fraudulent case or scam, by -- all we can do is to conduct a thorough due diligence to screen for the fraudulent trading. Regarding the nonbank intermediaries, unlike commercial banks, we are a firm that's focused on the trading. So what we take is inventory as a counterparty. So how should I put it?

Nonbank credit risks themselves are not taken greatly by us. The risk which I mentioned is in the sense that regarding individual transactions, we pay close attention to credit. And for example, for the specific individual cases, when we receive sizable deal to conduct, we are not a major firm. Our balance sheet size is limited. So to what extent do we allocate balance sheet to one transaction. So what is the level of concentration risk. So those are the items or matters that we closely evaluate as we make a decision, and that's what we will have to keep doing.

The next question is from Mr. Watanabe of Daiwa Securities.

This is Watanabe from Daiwa Securities. Two questions, please. First is regarding the October revenue environment. And in wholesale equity and IB is strong, which I understand. But for FIG, what are the trends you see in FIG? And compared to Q2, if you look at the Wholesale division revenue, is it above or higher or lower, please?

Number two is the tax burden, Page 5. If we look at it year-on-year, the pretax income is increasing, but the net profit is down. And international pretax income size is larger, but the tax rate is going up. Why is that, please? Two questions.

Watanabe-san, this is Moriuchi. Regarding your first question, the fixed income trends. First, for Japan, fixed income is quite strong. In the first half, for the ultra-long-term domain, it was quite difficult, including position taking. But even in that domain, we are seeing a normalization. And the market is very active and the revenues are catching up in accordance with that is my impression for fixed income in Japan.

As for international, I think we're seeing a similar trend, similar to first half. And from here on, depending on the rate environment going forward, there could be upside. And as part of the overall portfolio, when fixed income improves, that starts -- that tends to normalize the other businesses. But as we bundle the overall business, we are seeing an increase in stable revenues and that level is gradually improving is my impression. That's my first answer.

Your second question regarding the tax burden or the tax cost going up slightly. Sorry, it's hard to go into the details. There's a lot of technical issues here. So what I can say now, well, I won't go into the technical details.

Just to check on the first point, in October, Wholesale division revenue compared to Q2, is it above? Is it higher?

Well, overall, it is strong, but I would say it's about the same level. It's still only been 3 or 4 weeks. So we'll see where things go. It's still a bit early to say. But just for the first 3 weeks, I would say it's about the same level.

The next question comes from JPMorgan Securities, Sato-san.

I am Sato from JPMorgan Securities. I have 2 questions. First question, sorry for dwelling on this, but Wholesale, Equities or especially equity product business. So the revenue has reached the record high level. But firstly, in the short term, in the first quarter, Americas derivative did well, if I recall. But this time, looking at the material, Japan, AEJ had a significant increase in revenue. Anyways, derivative seems to be the strong area. But if it is fine with you over the several quarters in each region, what has been the trend of movement of each business line over the last several quarters? And such trend, is it sustainable over the next several quarters in the future? Can you give me some sense?

My second question is about risk asset. The target range is set at 11% to 14%. And in this situation, now after the closing of Macquarie acquisition, it will come to around 12%, but the CET1 ratio, CET, if it's JPY 3 trillion, if core equity, then if it's 11%, then it's going to be JPY 27 trillion. Then for the time being, is that going to be the allowable ceiling of risks you can take? Can I have that sense? So I'd like to ask you to elaborate on the capacity of risk taking.

Sato-san, thank you for your questions. Firstly, your first question, equities, what was the equities performance in each region? And what is the extent of sustainability moving forward? This time for the U.S., I might not have -- the material might not have mentioned it. But in the first quarter, the Americas has been the driver of revenue and the strength continues in Americas, though that's not specifically mentioned. On the other hand, for Asia and Japan, compared to the first quarter on a Q-on-Q basis. Now second quarter results came in stronger. Overall, equities in AEJ, Japan and U.S.A. the performance was very strong. And to what extent for how long can we retain this strength?

If equities continues to be this strong, then sometime down the road, there will be a point of normalization. That's what we are discussing internally. But as you are aware, not only in Japan, but in U.S.A. and Asia, we have geographical diversification. And within equities, we have various products and the last several years, we have worked to diversify and broaden the product range within equities. So in that sense, we are more tolerant or resistant against downside risk. In any case, equities have become stronger. So moving forward, we expect certain normalization, but in such situation, resource could be -- resource -- fixed income resource, which we had intentionally reduced could go up for macro and other fixed income. So I encourage you to take a look at the entirety of the portfolio.

And regarding your second question, target range from 11% to 14%. After Macquarie closing, the ratio is around 12%. So what is the future capacity of risk taking, that's what you asked about. So it is a good point you made. But firstly, regarding Wholesale, so stringently, they are sticking to the self-funding concept as they grow their business. So self-sustaining growth is being driven. So in the third and fourth quarters, if Wholesale continues to perform strongly, then based upon the revenue and profit generated by Wholesale and based upon the capital accumulated -- to be accumulated, RWA headroom or capacity will be increased.

On the other hand, for areas other than Wholesale, we have the question of whether we find a need for capital in the near-term future. But if there are opportunities for M&A or inorganic growth, then in a step change manner, resource may be grown. But in any case, it's going to be immediately after Macquarie transaction. So when it comes to finance, we would like to stay on the safe side, and we would like to be conservative to a certain extent, and we want to take a look at the balance. I hope I answered your question.

The next question is from Morgan Stanley MUFG Securities, Nagasaka-san.

This is Nagasaka. Two questions. On Slide 14, Investment Banking. In the second half and next year, how do you think about the pipeline towards the future? In Q2, Japan was strong. International also recovered. And according to your explanation, corporate actions will remain strong. So what about advisory, finance solutions? Could you add some comments by product, please, is my first point.

My second question is regarding the ROE. In Q2, 10.6% ROE on a full year basis, and there were some one-off items, but even so, 10.6%. So what is the base ROE which you can achieve? I think -- I guess the base ROE has gone up quite a bit. And your target 2030 target of 8% to 10% plus, what is the -- and I guess your expected profit level to achieve that is going up. So are you going to reconsider the target profit level at this stage? Any thoughts on the upside, downside, as CFO, please?

Thank you for your questions. This is Moriuchi. Regarding your first question about the pipeline by product. First of all, for advisory, in Japan, there are some cross-border opportunities and large opportunities and quite a lot of opportunities are building up in the pipeline. And for international, it depends on the region, but we have announced many deals. And also in the second half, there are some deals which we haven't announced, which is building up as well. And for advisory, the pipeline is building up quite nicely. Meanwhile for ECM, the fee pool is normalizing and shrinking somewhat.

And there are some normalizations of the cross-shareholdings opportunities. But even for the reduction of cross-shareholdings, that seems to be picking up slightly. And in the second half, usually, it's the second half that corporate actions tend to be concentrated versus first half in this product. So we'll make sure to pitch and win these opportunities. And for DCM, the business remains strong. And for the second half, as rates are expected to go up, but we are expecting a certain level of deal flow. Advisory, very strong. DCM is -- we expect a similar level to continue. For ECM, compared to a typical year, it's a bit weak, but we expect some recovery would be the summary.

Your second question regarding ROE. And in Q1, Q2, and based on the results, we are already booking more than 10% ROE. So are we not going to raise the level is your question. And yes, as you pointed out, if we look at the current earnings, our base earnings power is gradually improving. This is a result of portfolio reforms as well as the operational reforms at each business division, and those are leading to results. So in terms of ROE, we get a lot of inquiries about whether we are going to reconsider and revise it. And we are discussing a little bit internally, but the point here is that which part of the cycle we are in right now, that's something we need to be mindful of.

And regardless of the economic cycle, we want the products in Wholesale to offset each other so that we can maintain the overall revenue level. That's the kind of portfolio we are aiming for. But if we are going to enter a slowdown, is something we need to consider. And even in that case, we want to maintain at least the 8%, which is the lower end of the range of 8% to 10%. And we are currently building up the earnings capability, and that's what we should be focusing on at the moment. I hope that answers your question.

[Operator Instructions] As there is no more question, we'd like to conclude question-and-answer session. Now we'd like to make closing address by Nomura Holdings.

Thank you. This is Moriuchi again. Thank you very much for attending the call despite your tight schedule. So we were able to show you the good results. And we still have third quarter and the fourth quarter remaining, so we will stay focused so that we can deliver results so that we can do so, the management members will keep making efforts. Thank you very much for your continued support. Thank you.

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

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