Daiwa Securities Group Inc. (8601) Earnings Call Transcript & Summary

Thank you so much for joining us for the management strategy presentation meeting for Daiwa Securities Group Inc. My name is Nakata, President and CEO. Today, I am mainly going to explain about our Medium-Term Management Plan "Passion for the Best" 2023, which started in April this year. Please turn to Page 4. Let me begin with a recap of what we have achieved in the previous Medium-Term Management Plan. In the previous midterm plan period, it turned out that the market has rallied quite strongly. But I summarize that these 3 years or the 3 years when we had very significant volatility of the business environment, in particular, in the last fiscal year, due to the pandemic of COVID-19, we have seen the crossroad -- big crossroad for our business model. In the last Medium-Term Management Plan period, we have 3 KPIs: customer-oriented KPI, performance KPI and the financial KPI. The most critical KPI, which was customer-oriented KPI, for that, we have introduced Daiwa version of NPS to improve the customer satisfaction quite significantly. We have taken time and have thoroughly worked on the mindset reform of the salespeople and trying to create a corporate culture. NPS score for 2020 has been on the increasing trend very steadily, even excluding the tailwind from the strong market. We have thoroughly worked on the client-first mindset. As a result, I think we have been able to generate very good profit so far. Assets under custody reached JPY 75.3 trillion, which we could not reach our target of JPY 80 trillion, but asset inflow was JPY 9.1 trillion, which was higher than our assumption. Financial KPI, which is consolidated total capital ratio, has been kept at very strong levels. With regards to the performance KPI, we could not achieve our target, but we have been able to promote our business, which is fit for the business environment that has changed significantly due to COVID-19. We have achieved very good results from cost reductions, and we have hit the bottom in the Q1 of the last fiscal year. After hitting the bottom in Q1 last year, we have been able to recover on a full year basis. We were able to achieve increases both in terms of the net sales and profit year-on-year. We have been able to lay out stepping stones, many stepping stones for the future growth. I'm going to go to the details later on, but we have been able to establish the sales structure and the system to establish the wealth management business model. And we have identified focus areas under hybrid strategy, and we have made a good progress on cost reductions. Please go to Page 5. Based upon the group's business environment, we have identified issues and opportunities. We have been working on income structure reforms and responding to customer needs and responding to the regulatory and competitive environment changes. In addition, we have seen the new changes brought about by the pandemic. And SDGs and ESGs have been added as actions. And these actions will be summarized into 5 focus areas, which are: 100 years of life, innovation, green & social, diversity & inclusion, and foundation of sustainable management. Please turn to Page 6. We categorized those 3 focus areas that I have mentioned earlier as the focus areas for our vision for 2030, and the initial 3 years are going to be very important under our new Medium-Term Management Plan "Passion for the Best" 2023 to realize our vision. Please turn to Page 7. This shows the slogan and the basic policy for the new Medium-Term Management Plan. Quality No. 1 and hybrid strategy, these basic strategies will continue, and we are going to reinforce those strategies furthermore. In addition, the importance of the promotion of DX is increasing. Therefore, we have added the third pillar, which is the best mix of digital and real. These 3 policies will be the basic policies, and we'd like to be near our customers under the slogan of the best partner for co-creating the future, be with you. That's going to be the slogan for the new midterm plan. And we are going to work on sustainability initiatives, such as SDGs and ESG, and we are going to further reinforce the corporate strategy as a supporting base for those strategies. Please go to Page 8. This shows the financial targets. We have finance and the nonfinancial KPIs, with attention to the enhancement of the corporate value in a sustainable manner. In terms of the financial KPI, in terms of the performance KPI, we have ROE of 10% or more and ordinary income of JPY 200 billion or more. Of course, these KPIs are impacted heavily by the market environment. But through the transformation of the business model and through the expansion of our business model through our hybrid strategy, we'd like to solidify and establish the income base that is not easily affected by the market. With regards to the wealth management business model and hybrid strategy, we have added new KPIs: asset-based revenue ratio, 50% or more in the Retail Division; and hybrid-related ordinary income of JPY 50 billion or more; and hybrid-related income ratio, 25% or more. In terms of the nonfinancial KPIs, we are going to work on the digital IT development, human resource development and female engagement, and we have added those human resource-related KPIs, which are indispensable to establish the sustainable management base. Please turn to Page 9. This page shows the ordinary income target for 2023, which is JPY 200 billion broken down by segment. In the Retail Division, we aim at achieving more than JPY 40 billion. On a quarterly basis, this assumption is roughly JPY 10 billion each in each quarter. But by expanding the asset-based revenue, we think our revenue quality will be more stable. The fourth quarter of 2020 was already JPY 11.3 billion that we achieved. So considering that, this target is very conservative. I think there's a significant room for us to achieve more. In the Wholesale Division, specifically with the Global Markets, we are going to reinforce foreign equities business and the business for the middle corporations. With regards to the Global Investment Banking, we are going to further strengthen IPO business and M&A business to expand our profit opportunities. In addition, well, suppose the expansion of the group revenue is the hybrid business, please look at the left-hand side. This shows the breakdown of the revenue growth. If you looked at the green portion, this shows the impact from the profit growth coming from Real Estate Asset Management and Daiwa Energy & Infrastructure as well as Daiwa Next Bank. With regards to the real estate management, we are going to expand AUM. With regards to the Daiwa Energy & Infrastructure, we are going to obtain the capital gain through the external capital inflow through funds and expansion of AUM such that we are going to steadily increase the revenue. As you can see on this page, we are not going to rely on certain divisions. But rather, across the board, we are going to increase our revenue overall and achieve high level of ROE. Please turn to Page 10. The revenue coming from the hybrid business has been increasing steadily. In 2020, we have achieved JPY 25 billion, which shows an increase of JPY 10 billion from JPY 15 billion that we achieved in 2018. For 2023, we are planning to achieve more than JPY 50 billion coming from hybrid business. Hybrid income ratio of the total consolidated ordinary income was 21% in 2020, but we are assuming that to increase to 25%, roughly speaking, in 2023. Please turn to Page 11. Through the income structure reform that we have been working on since May 2019, by 2020, we have realized cost reductions roughly of about JPY 18 billion. In the future, by the end of 2023, we are aiming at additional cost reduction of about JPY 12 billion. On the other hand, we are actively investing in IT technologies. aiming at enhancing the convenience of customers and the improvement of our business processes. So IT-related expense is on the increasing trend. In the last Medium-Term Management Plan, we have established the office infrastructure of the next generation aiming at location-free. But in the new Medium-Term Management Plan, we are going to further promote digitalization, centralizing around the front office systems. Those investments will definitely contribute positively to the top line growth as well as future cost reductions. So we plan to continue those investments activity. With regards to the DX promotion, we are -- we have made very good progress on the paperless operation for the contracts and the vouchers and documents, and we don't need to do those administrative works in the branches anymore. So we are consolidating the middle and the back-office functions of the branches. Up until now, of the total 1,600 personnel in the middle and the back office of the branches, we have shifted about 800 people to the front office or group companies. With regards to the human resource shift aiming at the front business reinforcement, based upon the income structure reform, we are planning to shift total 1,100 people from the middle and the back office of the branches, but we have already completed 80% of that target by April this year. More than half of the people to be shifted will be shifted to the front business, so this will contribute positively to the income expansion. And if I look at the total group, then we can control and reduce the number of hiring of temp staffs and people from outside, so this will lead to the cost reduction. Please turn to Page 13. This page shows the progress that each business line has made and future actions, starting with the Retail Division. Before explaining our strategy, let me explain the revenue trend of the Retail business in the United States and the structural change in the Retail business in the United States. If you looked at the left on the slide, you show the trend of the composition of revenues of the Retail division of the Morgan Stanley in the United States and the Charles Schwab Wealth Management division over the past 10 years. If you look at the revenue trend of Morgan Stanley, it increased by 2x over 10 years, reaching $17.7 billion. Their net income has increased by 10x, reaching $3.7 billion. Our company has been continuing to reinforce wealth management business. As a result, asset-based revenue represents about 80% recently. If you look at the right-hand side on the slide, this shows a trend of the revenue of Charles Schwab where you have the strong image of them being an online security company. In fact, the driver for the growth of the revenue has been the face-to-face offline asset management business. The revenue of the Charles Schwab has increased by 2.5x over the past 10 years, reaching $10.6 billion. Net income increased by 5x, reaching $3.7 billion. But if you look at the brokerage fee, it has declined from 24% 10 years ago to 6% in 2019. On the other hand, their net interest income has been increasing because of the expansion of the revenue coming from the offline wealth management and the bank business. According to the founder, Mr. Charles Schwab, as the reason why he focused on expanding the offline service, he mentioned that probably investors who can make their own judgments and are well-versed in the investment represent only 5% of the market. The remaining 95% of the investors need various helps at various levels. That's the place where financial consultants can play along. Also, he mentioned as a reason why he focused on expanding the wealth management business, he mentioned, our customers have increased their assets with Charles Schwab. But after building the assets, there are no services that we were able to offer to them. So those customers who have finished building the assets leave Charles Schwab. So he wanted to stop that trend. That's why he started to expand the wealth management business. In Japan, this trend from the savings to asset building will be the mainstream trend. So regardless, online and offline, there is a significant room for us to increase the securities business. Furthermore, in Japan, majority of the financial assets is held by elderly wealthy people, so they have longevity risk. So there are heightening needs towards securing funds after their retirement. We feel strong needs available in Japan to our solution business, such as asset-building business, inheritance, business succession, real estate transaction. So there's a significant potential. We have the strength in this area where we have the strong face-to-face consulting capabilities. Please go to Page 14. In the last Medium-Term Management Plan, 3 years ago, we have launched Daiwa version of NPS in all branches. Through those initiatives, we have established the business model to pursue customers' best interest and mindset of salespeople. In this period, we have been able to establish good system where we can monitor the quality of customer services and our mindset of customers first. In the new midterm plan period, we are going to accelerate the business model evolvement to pursue the best interest and the best profit for customers so that the company can achieve growth sustainably in the future. The specific initiatives to achieve that are explained in more details on the next page onward. But roughly speaking, there are 4 big themes. First, expand the customer base through utilization of DX and our sales office strategy. Number two, expand asset-based revenues and the stock-based assets, such as investment trusts, fund wrap and foreign currency-denominated deposit. Number three, expand customer assets and transactions from total investment approach, through the comprehensive asset management consultant and by providing high level of solutions. Number four, expand customer contracts through external connections. Please go to Page 15. Transforming to the wealth management business model cannot be achieved for a short period of time. The model transformation takes development and the designing of the goal-based approach tools, and we have to develop products and services and the related systems towards the asset-based revenue. And we have to develop people, and those initiatives consume time. But they are indispensable. Furthermore, we pursue the best interest of the customers. So we have to have this strong spirit of salespeople. Otherwise, we cannot realize a true wealth management business model. I was appointed as President in April 2017. Back then, the company was working on the business transformation to customer first by introducing NPS and changed from the bottom-up sales approach by abolishing the sales target by product. Back in 2019, we have abolished revenue target, and we have decided to measure our progress based upon the proposals and products in accordance with the needs of our customers. I feel good about the results that we have achieved so far by executing these long-term strategies. Please turn to Page 16. To provide the optimum solutions for customers, utilization of the wealth management planning tool will be very powerful. There's this analysis tool called WealthBench made by MSCI, which is heavily used by strong private banks and overseas institutional investors. And we have customized this tool for Japan. And we are the only company and the first company introducing this tool for the first time for the retail investors in Japan. And using this tool, investors can see the investment return efficiently or efficiency of the investment of the total financial assets, including assets that they have with other companies. So this is very convincing, and this service has been highly evaluated by our customers. By promoting this asset planning tool, the portfolio type of investment will be penetrated among customers. So I think this will accelerate the shift towards wealth management business model. After launching this tool in August last year, in total, by the end of March 2021, we have analyzed about JPY 10 trillion assets, and as much as JPY 180 billion asset inflow happened, which 60% came from corporate clients. In 2020, the number of customers captured through corporate client referrals increased by as much as 40% from 2019. Please turn to Page 17. With regards to the initiative in the solutions business, about half of the assets of high net worth individuals is in real estate and family stocks. So we are going to reinforce the total asset approach, providing solutions in those areas. We have asset consultants. We have inheritance consultants. So we are going to utilize those in-house consultants, providing high level of solutions in areas of business succession, real estate and inheritance-related needs, utilizing resources inside and outside of the company that cannot be copied by other companies. The solution-related business revenue was JPY 5.5 billion in the last fiscal year. We are targeting at doubling that or more by 2023. As a topic, in April, we have established Daiwa Securities Realty because there are heightening needs towards real estate investments among retail individuals. So for the retail customers, we are going to start selling the new real estate-related investment products. Please turn to Page 18. The consulting through the total asset approach has contributed positively to the increase of the NPS score. Daiwa version of NPS was introduced in all branches in 2018, and we have nurtured the new corporate culture, and this contributed to the sustainable increase or improvement of NPS. And we have established the good system where we increased our sales quality, listening to the voices of our customers, and the improvement of our products and services and sales branches and sales offices worked as one by repeating the PDCA cycle. After the introduction of NPS system, the score has been increasing. According to the survey that we conducted on customers and a series of operations in this area have been working, increasing the NPS score from around January 2020. If you look at the right-hand side at the top, you see the strong correlation between the business result and NPS score. When 10% of the customers becomes from critics to passives or from passives to promoters over that total over 3 years, there's positive impact on the dividend increase from around JPY 9 billion to JPY 18 billion according to the analysis. So in the new Medium-Term Management Plan, we are going to position the NPS as the important monitoring KPI. Furthermore, if you look at numbers, you see that we've been making steady improvement of our business centered on customers first. If you look at the right-hand side at the top, the average holding period of the investment trust has become longer to around 3.7 years. And if you look at the frequency of the transaction, looking at the balance of foreign equities and transaction total amount, the frequency has declined to about 1 per year or less. And the ratio of the referrals from the existing customers of the total new account openings has increased to about 45%. Please turn to Page 19. We are going to continue the policy of expanding sales offices and improve the efficiency of the existing branches. We are going to increase the number of sales offices to about 75 in the future. Although it's not written here, the number of people belonging to sales offices represent about 8.5% of all branches as of the end of March, but they represent 17% of the total of the new customer acquisitions, which means they contribute positively to the expansion of the customer base of the company. We are also expecting the benefits from cost reductions through the improvement of the efficiency of branches. By the end of 2020, on the cumulative basis, we reduced by about JPY 1.8 billion. In the future, by transferring the location of the branches from the first floor to the second or higher floors and consolidating middle and back-office functions of the branches, by the end of 2023, we expect cost reduction to increase to about JPY 5 billion. We are going to restructure mass marketing system, and we are going to target at customers with whom we don't have any salesperson. We are going to provide them with the necessary information of services at the necessary timing and improve the efficiency of our sales and marketing activities and activate the transactions from those customers. Specifically speaking, thoroughly, we are going to do the targeting -- targeted marketing to those customers. We are going to identify the needs by approaching to them via mail. In particular, we are going to identify solution needs and customers who have consultation needs for their investment, and we have the contact center responding to those needs. We are going to have web-based interviews as well. Through the digital tool, we are going to reinforce our approaches to them, and we are going to best utilize our contact center in each branch, and we are going to work with the real channel. And by exercising mass marketing, we are planning to expand the customer base and efficiency of the improvement. We have officers and employees of listed companies as our customers through the officer shareholders associations and employee shareholding associations. So we are going to introduce the web-based integrated management service where they can manage their investments centrally on the web, on the smartphone for their restricted stocks and stock options starting from this year. Please turn to Page 20. Through the business model transformation to the wealth management business model, we are expanding our asset-based revenues such as investment trust, wrap account service, foreign currency-denominated deposits. The ratio of the balance-based revenue is currently 37%, but we are aiming at increasing that ratio to 50% by the fourth quarter of 2023. As an assumption, we are assuming the asset balance increase by the end of 2023 such as asset-based fee plan balance, JPY 1.5 trillion; wrap account service balance, JPY 3.4 trillion; foreign currency-denominated deposit balance, JPY 1 trillion. Furthermore, in 2022 onwards, we are planning to introduce the new AUM-based fee model. This model is a model where we receive fees for the services that we provide. By providing the portfolio, the investors can invest in a diversified way in various asset classes, such as equities and bonds, and we give advice in asset management from which we receive fees. Since the advice that we do, based upon the investment strategy, requires the high quality of the advice, we are planning to establish a new function, which is going to be responsible for making and defining investment strategies. Please turn to Page 21. One of the pillars of expanding the asset-based revenue is the asset-based fee plan. As of the end of April, the balance has steadily increased to JPY 215.1 billion. When we analyzed the users of this asset-based fee plan, about 57% of the total of the customers are comprised of people who are the corporate managers and corporate clients; 41%, people who did not have investment trust with our securities before; 79% are people who purchased asset-based fee plan using financial sources other than by selling existing investment trust with Daiwa Securities, meaning we've been able to capture the new customers. We receive fees depending upon the holding period. Therefore, it's important for us to take good care of our customers by providing information even after the purchase. And this is a plan where they can feel the good value for money for the first time by doing the transaction because there's no upfront fee, which is the fee structure that they cannot find in any other security firms. So far, feedback has been very positive, especially they don't have any upfront fee at the purchase, but they pay AUM-based fee later, and this structure has been well received. And our customers who have relatively high transaction frequency of equities and investment trust, we received very high evaluation because they don't have to pay additional fees. They can do the rebalance flexibly, depending upon the market situation. Over the short 6 months after the launch of this service, the balance has increased to about JPY 200 billion. This is about the pace of JPY 400 billion on the annual basis. So we think the balance target of JPY 1.5 trillion in the new Medium-Term Management Plan is highly achievable. On the average, if we can increase the balance to JPY 1.5 trillion, AUM-based fee will be about JPY 12 billion per year. By introducing this asset-based fee plan where the minimum investment is JPY 10 million, we can expand the solution valuations, and the amount of the solution has been increasing, and the number of solutions has been increasing. As a result, sales amount has been increasing, in addition to traditional investment trust where we charge the traditional fees. In addition, we are thoroughly making sure that we select names of investment trust selectively to fit customers' needs. The ratio of the top 10 names of the total sales amount has been declining -- decreasing. Please turn to Page 22. This page shows our partnership with external companies and open architecture strategy. We'd like to partner with external companies who have strong customer base and unique know-hows and knowledge. We'd like to generate an increased profit and share the profit and revenue. We think this is a strategy that fits the trend now. We have the collaboration with Japan Post Group and the JP Bank, and we are planning to start discretionary investment services at the beginning of 2022. And with regards to the alliance with Shinkin Central Bank, we are planning to support for financial product brokerage services for multiple number of Shinkin banks, and we are currently planning to provide various services and products. And we have the capital alliance -- capital partnership with Credit Saison who has many card members. And this alliance or partnership is for long term, not 3 to 5 years, but this alliance is for 20 -- 10 years and 20 years down the road. With regards to the initiative with Credit Saison, we have the joint venture company called Fintertech, and we have started digital asset-backed loans last year. And in April this year, we have been preparing to launch real estate-backed loans where we provide loans for customers and the people who purchase real estate for the investment purpose. We are planning to actively pursue opportunities with alliance with companies who have strong customer base. Please go to Page 23, Wholesale Division, starting with Global Markets. On the back of the strong stock market and supported by QE in the whole world, last year, net operating revenues and ordinary income achieved record-high levels. The characteristics of the global market of the company are that 70% to 80% of the revenue is coming from the domestic market. And the customer flow-based revenue, that's the main revenue source. Our policy is not to do the business that uses the balance sheet, the hedged balance sheet. Value at risk of the total group on a consolidated basis is limited to JPY 1.2 billion. On the right-hand side, we are showing the Retail Division support function to expand the foreign equities stock balance, which is the focus area. In Japan, of the total individual financial assets, the percentage of the foreign currency-denominated assets were -- was only 2.7% as of the end of December last year. There's a significant room for the increase of the international diversification. So we'd like to provide customers with diversified investment opportunities. By the end of 2030, of the total equity AUM in the Retail Division, we would like to increase the ratio of foreign equities AUM to 10%. The focus area of FICC, we would like to focus on businesses for the middle corporations derivatives because there's a significant room for growth. We are going to develop people who know about the market in this area very well to expand the transactions in this area. Please go to Page 24, Global Investment Banking. If you look at the league table for PO and IPO, we've been protecting the second position. In the last previous management plan, we had a target to achieve #3 or above. Steadily, we've been overachieving this target. In particular, with regards to IPOs, we are seeing good results coming from the initiatives that we've been taking from the past. We have the strong IPO platform where we can stably and structurally maintain high competitive advantage. Looking at the pipeline at the moment, we've been doing very well, and we'd like to expand and accumulate more mandates down the road. Please go to Page 25. The top line from the M&A has been increasing steadily. In 2020, amid the COVID-19, we achieved JPY 26.7 billion. In comparison against competitors, the revenue in M&A was about 40% a few years ago. But last year, it increased to 71% last year. 3 years ago -- since 3 years ago, we've been focusing on the mid-cap deals, and we've been acquiring a mid-cap M&A house to solidify the base. Looking at the fee table of the M&A business globally, JPY 3.5 trillion. Out of that, more than 50% is comprised of mid-cap deals, and players are many and competition is very intensified. So we don't need to compete in this large-cap field. So in the area of the mid-cap, we'd like to be the top in the world, so we've been increasing the team. We have invested 50% in the company called Green Giraffe, where they have the top-class position in the renewable energy area and advisory banking globally. Including them, we have about 500 people in Japan and abroad. Among advisory companies in the mid-cap area, we are the only company who has this strong global network. Therefore, in this area, we have the strong competitive advantage. So we are planning to expand the revenue in this area. Please go to Page 26. Next, Asset Management Division. From this fiscal year, Asset Management Division is going to have 2 separate disclosures: Securities AM and the Real Estate AM. In the process of heightening needs towards individuals' asset building, the needs are diversified more than before. So in the securities asset management, it's important for us to expand the AUM assets by providing services and products that are highly value-added to pursue investors' interests. In the future, as a big trend in the industry, there's cost consciousness. So the existence and the presence of ETF will be even higher than before. In Japan, ETF is mainly linked to the stock market. But what's growing in the United States is a theme-based ETF, so we have this mission to provide unique products in this area. So we established Global X Japan in September 2019. Recently, we have listed ETF which is related to ESG, which is a theme-based investment such as governance theme or clean tech theme. So continuously, we'd like to continue to provide services that much investors need. Please go to Page 27. It's been 10 years or more than 10 years since we entered into the real asset management business. The balance AUM has grown to JPY 1.2 trillion, and ordinary income of 2020 has been the record-high level, which was JPY 16.8 billion. And we have consolidated Daiwa Office Investment Corp. recently. Starting from this fiscal year, we are going to account for 100% of their income in our consolidated ordinary income. In the future, towards the expansion of the dividend stably, we are planning to increase AUM. In the Medium-Term Management Plan period, we are aiming at achieving AUM of JPY 1.5 trillion and ordinary income of JPY 26 billion. We have the asset management company called Daiwa Real Estate Asset Management. 2/3 of the employees working in this company are real estate professionals. So we have the strong and high level of know-hows and network relating to property sourcing and the tenant leasing. And we have the strength as an independent company in this space. We have strong sourcing capabilities based on all-round marketing, and we'd like to combine that with warehousing functions. As a result, in the medium to long term, we'd like to expand AUM and income stably. Please go to Page 28. In 2012, we have started investments in assets such as solar panel power generation, and we've been recruiting people in this area actively from outside. 2/3 of the employees working in the Daiwa Energy & Infrastructure come originally from trading house, municipalities, government, energy-related corporations. They are the professional people in this area. We have the accumulated know-hows to the investment experience for a long time. So we have accumulated know-hows and network in terms of the renewable energy and infrastructure investments. In addition, our business strength is the fact that we can utilize the sales network of Daiwa Securities. In the future, we are going to expand investments in solar power generation and infrastructure assets where we can expect stable income gain, and we are going to invite outside capital. Our AUM target in the medium to long term is JPY 300 billion. Yield from investment differs in each project. But on the average of the total assets in this area, we aim at and assume IRR of 5% or more and ROE 10% or higher. This business is linked to the AUM, and revenue is expected depending upon the AUM size. So are working on the expansion of the banks while managing risks stringently, and we would like to invite capital from outside via fund. We'd like to obtain capital gain, and we are proceeding with the capital recycling model. Daiwa Energy & Infrastructure target for ordinary profit for 2023 is JPY 15 billion. In addition to the profit growth, in accordance with the assets under management growth, we have the investment in Aquila Capital, which is a European investment management company, and we expect profit contribution from this company in the renewable energy area. Please go to Page 29. This shows the ordinary income trend of our international business. We have the competitive advantage, so we'd like to be selective in businesses where we have the competitive advantage, risk management and cost reductions. As a result, we've been profitable for 5 consecutive years. And we achieved a record-high ordinary income in 2020, which was JPY 21.8 billion. We have the wealth management business in Singapore using M&A network, and we made a very good progress in various business lines. And regions and business lines supplemented each other cross-functionally. And we have succeeded in stabilizing the revenue globally, and we have been increasing our response to changing environment. The presence of the international business in the whole group has been increasing. In 2020, both of the revenue and profit, they represent about 20% now of the whole group. In 2023, we would like to increase the income level further more, and we position the Americas as the growth pillar in the future. And our U.S. equities business is our strength. We have analysts, and we are trying to expand analyst coverage in U.S. equities. In the Retail Division, we are going to expect more contribution from foreign currency equities balance and contribution from FICC, in particular, MBS business. Next, let me go over the financial and the capital strategy. Please go to Page 31. This slide shows our financial and capital strategy. On the back of the strong financial base, we are going to work on the efficient capital management, growth investment contributing to the enhancement of corporate value and active shareholders' return. With regard to the shareholders' return, we are going to reflect the consolidated business results. We plan to pay out dividend payout ratio of 50% or more every half. That's our policy. On the other hand, to increase ROE sustainably, it's important for us to invest in growth areas. So we are going to optimize the business portfolio by paying attention to the capital efficiency, and we are going to work on risk management strategies by sophisticating our risk management capabilities. Please go to Page 32. This shows the situation and the status of the shareholders' return. Half year dividend, JPY 25 per share is the record high level on the half basis. And annual basis dividend, JPY 36 per share is the record high level as well. The total shareholders' payout ratio has no specific criteria or policy. But with regard to the share buyback, we'd like to comprehensively judge, depending upon the degradation, business result and the pipeline for future growth investments and the soundness of the financial indicators. There's no change to this policy. In the last fiscal year, we needed to see the situation due to the COVID-19, the potential impact on the business. But looking back, we now judge that we have very strong capability, responding to the changes of the environment. So we decided to just set the program of the buyback totaling about JPY 30 billion. This share buyback program is positioned as additional shareholders' return for 2020. Please turn to Page 33. As indicated on the left-hand side of the slide, we have made many investments for growth for the future while minimizing the risks and by selectively choosing investment programs. On the right-hand side, we are showing the hybrid ordinary income trend, assuming we execute investments planned in the current Medium-Term Management Plan, including the ones that we have already made. In the previous Medium-Term Management Plan, we have made about JPY 100 billion per year investments for growth. The time horizon when we can recoup the profit from the investment, the first, depending upon the investment. But in the future, we expect the profits to increase, thanks to the J-curve effect. The investment amount in the new Medium-Term Management Plan is assumed to be JPY 50 billion per year. We invest mainly in areas such as energy and infrastructure, real estate asset management where we can assume stable income. Please go to Page 36. Let me explain initiatives in the sustainability area. We have 2030 vision, and the 2030 is the time horizon for SDGs. So towards 2030, this shows what we'd like to become and principle of act for managers and employees of Daiwa Securities Group. When we made this Vision 2030, we have taken about 1 year. We have repeatedly discussed across the board in various group companies, not only in Japan, but we have talked with young people, people and employees and managers from abroad, including external directors. And we have collected various opinions from many people. We have digital technologies innovation that we are working on responding to COVID-19. The business environment is changing very rapidly. Therefore, we have considered and debated what we should do to become the company that is needed by the society and customers and created this vision for the future. We have this keyword from the savings to SDGs as an institution in the financial industry, and we are going to work on realization of SDGs by capital recycling scheme. Amid the COVID-19 environment, the social issues in the whole world are becoming more serious. The meaning of the SDG 17 goals and 169 targets has become much more important than before. Please go to Page 38. Let me talk about human resource, which supports the sustainable business management. Our HR strategy of the group is very advanced in the industry. But we are going to further evolve the people development of our employees and career development, development of professionals and promotion of motivation and engagement of our employees and a productivity improvement. In the future, digitalization will accelerate. So we need digital IT people and professionals who have even higher level of skills. So in addition to developing people internally, we have set the number of digital IT professionals as nonfinancial KPI. We have to have high level of IT skills as a matter of course, but we need professionals who have professional knowledge in the business. So we need those people in the front office, and it's important for us to utilize data smoothly in each business area. We are going to create the environment where each -- every one of the employee can demonstrate their skills by challenging their businesses and maximizing their values. With COVID-19, the world is changing dramatically, although we cannot see the end of the pandemic yet at this point. But now is the time when we have the strong stock market and business environment improvement. Now is the time when we have to transform ourselves broadly while maintaining the high level of income. Our strategy is a strategy with the balance between what we need to do in the short term and what we need to address in the long term with a view towards the future. In other words, the strategy that we should take is a strategy where we secure the customer-based flow income, steadily accumulate stock-based income assets, actively expand hybrid business so that we can create even stronger income business model that is not impacted easily by the market. We have laid out many stepping stones so far, and those actions that we have been taking are generating steady results so far. I am convinced more than before that we are heading into the right direction. We are going to do our best as a whole group, as one team, so that we can show you the new Daiwa Securities Group that is stepped up to the next level. This completes my explanation. Thank you so much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]