Nomura Holdings, Inc. (8604) Earnings Call Transcript & Summary

Good morning. This is Kentaro Okuda, CEO. Thank you very much for attending our Investor Day event despite your tight schedule. Firstly, I would like to extend my sincere condolences to those who passed away due to COVID-19. At the same time, I wish for the quick recovery of those who are under treatment. Since I was appointed as the next CEO in December last year, together with management team, we have had -- I have had a frank discussion regarding how Nomura Group should be and what is expected from clients, market and the society as well as what is the recent data of Nomura. As a conclusion, the management members are aligned that we need to transform ourselves into a new Nomura, which is not a mere extension of the existing business. As group CEO of Nomura, I would like to take Nomura to a completely new dimension that is very different from where we stand today. Firstly, let me explain the current status. Please go to Page 2. The impact of COVID-19 on the global economy far exceeds that witnessed back in 2008 when we had global financial crisis. In response to this, countries in order to avoid economic plunge has implemented economic measures far larger than the ones during the financial crisis. In March, market experienced great fluctuation. Stock price plunged and VIX index spiked. In the wake of that, trading volume increased greatly in the stock market. On the other hand, the government bonds, the safe assets were bought, and also the risk of accelerated in the corporate bond market and some emerging market countries. So there was a conspicuous trend of flight to quality. Page 4 shows the revenue of some products in Wholesale division. In the fourth quarter, macro products such as rates and FX and equity transactions greatly grew, and also the activities of market participants became active. In that situation, we played our role as a liquidity provider. In this environment, our priorities have greatly changed. Firstly, our urgent priority is to keep providing our functions as the intermediary and liquidity provider in the capital market. Today, globally, more than 70% of our employees are working from home. Firstly, our priority is to carry on our business as usual. Page 6 explains our response to COVID-19. As from March, many issuer clients have scrambled to secure liquidity on hand. In that situation, as you see in the center of this slide, we have supported bond issuance deals close to JPY 9 trillion. Needless to say, our financial robustness and liquidity have to be secured as an important priority. The market is greatly changing. And under the stressed, extremely stressed environment, our capital level is way above the required level, and we are securing sufficient liquidity. In response to such changes in environment, we have to modify our operational model. As you find in Page 8, our approach is to clients and have to be revisited by pursuing non-face-to-face model utilizing digital technology. And also, we should revisit branch office operations. As for the work style of employees, this is a great opportunity to revisit it. Through the work-from-home model, we've identified several challenges. Based upon such discoveries, we need to develop more advanced IT infrastructure. And we should secure the work -- we should establish a work environment that will secure the same level of productivity no matter where people work. That will give us a wider range of options of operational model. And of course, we will rethink the use of office spaces. Through the state of emergency, we've identified several challenges, which we will organize and sort out 1 by 1 so that we can establish a new operation model. Now let me take time to talk about our management vision. Our management vision is to realize sustainable growth through the resolution of social challenges. In order to achieve this vision, as I mentioned, it is necessary for us to take Nomura to a completely new dimension. Then how do we get to where we aim to be? As a strategy to realize that, we are focused on expansion of our scope of business from public to private. Please take a look at Page 10. The word private contains many meanings. Let me expand on that. Page 10 shows 3 accesses, products and services, clients and the delivery method. Firstly, products and services. We are expanding the scope from public to private. Conventionally, we've had strength in public market and financial products such as listed stock and investment trusts. Moving forward, we will be expanding our scope of business from public to private by working on private territories such as private equity, private debt, infrastructure and other project asset type alternative investment products. Next, regarding clients. For example, in our investment banking business, we have focused on the listed companies as issuer clients. In the future, we will also expand the scope of our business to cover nonlisted corporates such as start-ups. And also, we will approach an investor base, which we didn't have access before and also to existing investor clients. Not only providing products, we will be providing consulting and advisory services to capture additional needs from them and so that we can expand our business by expanding the scope of our services. The third access is delivery method. The key here is the use of digital technology. We are not just taking orders online. What we will be doing is not just delivering content and services in a uniform manner, but what we'll be doing is -- what we will be able to do is to deliver products and services customized to the needs of individual clients. In a way, this is a expansion from public to private. By combining these we will be able to provide private services and solutions customized for individual clients, both retail and corporate clients. Only for you is our message to our clients. This will enable us to have a truly differentiated competitive edge. Now let me explain more specifics about the strategy of expanding from public to private. Please go to the next page. Firstly, enhancement of alternative asset management. As I explained, based upon the 2 accesses, product services and clients, we are expanding from public to private along those 2 accesses. So far, as Nomura Group, the investment products that we have provided to clients, we are centering on traditional investment assets. So our approach to alternative assets was part of our solution for corporate clients. And all we did was providing part of our balance sheet. But in order to further meet the needs of clients, we are placing the private investment business as a integral part of our group's growth strategy, and while utilizing our balance sheet, we will be strengthening and expanding the services and products to provide to clients. Specifically, we will be working on the private equity and private debt that can leverage our existing strength. In addition to that, we will be focusing on project-type investments such as infrastructure, finance area where we have track record in the U.S. As we execute those strategy, we will be appointing executive officers, and we are putting together a specific strategy. The specific content of the strategy, once decided, will be shared with you. Next, delivery of highly -- higher added value through content consolidation. So this contains the 4 meanings of the expansion from public to private. Nomura Research is one of the most important management resources. Since the foundation, Nomura has focused -- placed importance on research and analysis, and the outcome or benefit of the initiatives have been proactively shared with the public. That was the area where we saw a significance. In addition, we have proactively made proposals to financial and capital markets as well as the society. That has greatly contributed to the branding of Nomura. In our group's growth strategy moving forward, contents to be generated by research will become even more tool more than ever. The specific measures includes the follows. Knowledge resource contents -- for the effective use of knowledge resource contents, we will be consolidating and reorganizing the research functions of the group. If necessary, we will consider establishing a new organization. The environment is constantly changing and challenging us, including the needs of the market and our clients. In order to meet such changes and also to take on new challenges, we are consolidating and reorganizing the research functions. The necessary human resources will be hired, both from an outside of the group. As I mentioned earlier, we are expanding and strengthening our focus on private area. The trust already research on the known-listed firms such as a start-up that do not come with public information will be perceived by clients that's highly value added. In addition, needs for ESG contents will grow even bigger. Also going beyond the framework of research, we will be expanding the scope of our business to include consulting businesses to help clients with their challenges. In addition, it's important or it's indispensable for us to commercialize new technology and develop new industry for the revitalization of economy. Contribution to social issues, including environmental issues, is part of our important mission. And not only providing information, we will be utilizing our organization to promote group businesses. And for that purpose, we will be embedding new functions. We will be maximizing the added value of analysts and researchers. In addition, we will be establishing a team in charge of developing delivery functions, utilizing digital technology. In addition to the quality of contents and the delivery of such contents and also the touch points with clients will determine our success. Our digital touch point with clients will determine our success. And also, I believe everyone understood the value of the time spent on the meeting with clients in person. Regarding this matter, we have a project team in place. The team is working out details. And once the details are worked out, I will share such details with you. The third access is the promotion of digital. Digitalization. On the left-hand side, you see how we would like to use digital technologies in our approach to clients, applications, online and other mobile tools are important, needless to say. But the high-touch business that involves our human resources, our source of our competitive edge. In that area, digital is inseparable. In order to provide more highly value-added services and solutions to clients, we are working on digitalization as a company-wide effort. Also, as I mentioned earlier, we will work on, as a priority, the establishment of a work environment that does not tie down employees to specific locations. Now please go to Page 14. So this management vision is being looked at from the 3 angles. The first angle starting from our core business. We are expanding the scope of our business from public to private. And by realizing the business growth, we aim to achieve ROE of 8% to 10% in the medium term. At the same time, while ensuring the robustness of finance, we will be balancing -- we will be keeping the balance between growth areas and shareholder return. The second point is the trust from society. And the third point is employee satisfaction. The last 2 points are related to ESG. By combining those 3 things, we believe we can generate synergy, and we will be able to grow in a sustainable manner through the resolution of social challenges. On Page 15, you will find a path to achieving our management vision. The road map is divided into 2 major phases. The first phase will be up to March 2023 or 3 years from now, during which we shall be focusing on what I had indicated at the outset. In other words, optimization of operations, expansion of existing businesses, and investment and development of new business domains. During the second phase, the investment done towards the future will begin to deliver results, and we shall be providing comprehensive services covering both public and private. Now let me touch upon the initiatives for the core business 3 segments. Please refer to Page 17. These are the main KPIs towards the term to end in March 2025. Each business line will be explained in the following pages. The KPI for each of those businesses indicated at the center part of this slide are targets that we have set forth in the midst of unknown factors, such as determining when the COVID-19 will be contained or the size of the impact. So I solicit your understanding that there is constantly the possibility that these targets will be revised in the months and years ahead. But at the same time, we have no intention whatsoever to largely change the initiative or the strategy. We will also continue with the cost reduction of JPY 140 billion, which we began earlier, as indicated on the left of Page 18. 70% had been achieved by the end of March this year. Centering around corporate, we will be taking the initiatives listed on the right to achieve the goal by March 2022. Now for each business line, let me begin with retail on Page 19. In order to provide the optimal service depending on each customer's attribute in retail. Last year, in August, we had gone through the review of channel formation. At the same time, we've continued to develop digital infrastructure. This term, we will focus on deepening the digital toolbox and data used in order to elevate the customer satisfaction and employee productivity so that we can prolong the relationship with as many customers as possible. On Page 20, we have drawn an image of use of digital information to contact customers. Based upon the data acquired through various means at the most appropriate timing for each customer, we shall be combining contact and noncontact channels. By offering the necessary services, we will be able to provide a more comfortable customer experience. Through these initiatives, we shall be able to upgrade the customer satisfaction. At the same time, partner sales activities will become more efficient so that highly sophisticated service based upon expertise will be able to be offered to higher number of customers. We began digital transformation last year. And through that, already, there are more contact points, not just face-to-face contact points. We're already following a hybrid model where telephones, emails, online conferencing system and online services are also combined. By further promoting digital use, we will be able to offer higher added value. At the same time, as indicated on Page 21. We will enrich the product and service lineup so that we shall be able to offer advice comprehensively to optimize the balance sheet of the customers. Further, by focusing on corporates and business owners, we will offer a variety of services, not just limited to asset management. We shall offer support for seeking growth in the core business as well as asset formation of their employees. By offering such diverse services, the relationship can be prolonged. And at the same time, Nomura will be able to diversify our revenue sources. We will also be focusing on establishment of advisory function that is more developed and evolved than the current level. Now on Page 22, we have indicated the newly established Chief Investment Office Group, the CIO Group. There will be a team that conducts management consulting, targeting institutional investors, the discretionary investment team targeting individual customers who will be using highly added value contents that I touched upon previously. They will be engaged in asset allocation based upon the risk preference and tolerance of each investor and will be defining the investment strategy or investment themes as a team-wide view of the CIO Group. And this shall lead to the introduction of a new billing structure by offering asset management services through this group. There are customers that will do their own decision-making based upon such advice. And for those customers, partners will be using the output of the CIO Group and will be offering more sophisticated information to the customers through the mechanism that we will be establishing. On to Page 23. Through such initiatives in Retail, by March 2023, we will be targeting pretax income of JPY 110 billion. The progress towards the target will be measured based upon the 4 KPIs that are in the red shaded boxes. Next, on asset management. Please proceed to Page 24. I think that the business and mindset of the group as a whole must become more close to asset management like concept. In that sense, the positioning of this group within the group is going to be extremely important. As shown on this page, the target for March 2023 is pretax income of JPY 50 billion, AUM of JPY 65 trillion. On to Page 25. So far, we have been offering mainly traditional asset management products, including Japanese and non-Japanese equity and bonds. In the months and years ahead, we will be defining ESG, multi assets and alternatives as growth domains. Through the expansion of product offering and product development, we will be able to promptly capture the requirements of diversifying customers. Further, in order to further expand the client franchise, we will be strengthening our approach to asset builders and retirees through the Nomura Securities channel and inject efforts to strengthen the channels such as DC pension plans and bank channel. We will also be focusing on overseas business and online services so that services can reach higher number of customers. At the same time, we will continue our efforts to boost productivity and operational efficiency to elevate the level of profitability. On Wholesale, please refer to Page 26. In April last year, we conducted an overhaul of the business portfolio of Wholesale. As a result of selection and concentration, pretax income of March 2020 recovered to a level close to what it used to be in March 2018. Further, managerial resources that had been rather dispersed and distributed had been reconcentrated into areas where we have strength in order to improve the resource efficiency. We will continue optimization of resource allocation promptly through reallocation depending on the market environment, diversify revenue sources to target $1.1 billion of pretax income by March 2023. To achieve that goal, the Wholesale business will concentrate on 3 KPIs, as indicated on Page 27. First, revenue over risk-weighted assets. During the past 3 years, this ratio was between 5% to 6.5%. We want to control the level of this ratio to around 6% as we proceed towards March 2023 along with the increase in volatility. Lately, resource consumption has also increased. On the other hand, we see activity in trading business. We will continue to optimize resource allocation to improve business efficiency. Secondly, from the perspective of operational efficiency, we will place more focus on expense ratio. We saw control direct expenses and conduct a thorough management of cost and investment return of large and small projects within the company to prevent overhead from inflating. And of the $1 billion cost reduction up to March 2022, we will be able to achieve the remaining $300 million. By so doing, we will control the expense ratio to 82% or lower. Third, diversification of revenue opportunities. To respond to the requirements of customers and the society, we must expand the service domain in execution business and strengthen sustainable investment. Through mobilization of group synergy and digital strength, we are aiming to achieve expansion of revenue by 15% in the coming 3 years. Next, key actions in each business. We are beginning to see some stability recently in the financial market, but nervousness still continues. At the moment, we are continuing with the reform of revenue structure based upon a long-range horizon. At the same time, by being mindful of the latest environment and the attributes of each business, we must react with agility. So in the short run, we will focus on execution services and secondary trading, which are in alignment with the present environment in order to increase the revenue through customer flow. Our execution model is highly evaluated in terms of sophisticated technology and data analysis. We're seeing increase in revenue in the volatile market that we see recently. We will further increase added value to elevate the level of our share. And further, in secondary trading, we will seek expansion of client franchise and try to manage the business at higher efficiency. There will be the need to review financing and capital policy in the area of origination. Such requirement will expand. By tapping on the total strength of our group, we want to capture those requirements. On the other hand, financing business that make use of the balance sheet will be also an area where we will constantly be mindful of the profitability against resource and be selective. There's been some delay in the time line in the area of M&A for some projects, but at the same time, we're seeing emerging needs to expand into new business areas and invest into new areas that take into consideration the socioeconomic structural change in such areas as ESGs. This is an area where our total strength can be kept upon. In order to support the growth strategy and enterprise value upgrade of our customers, we will try to respond to such requirement with speed. Now let me touch upon revenue opportunities through wholesale digital transformation on Page 29. In the sovereign bonds market making, we've begun to partially make use of AI. In addition to pricing and service environment, by making use of big data, we are making proposals with higher value added to customers. And by further improving the execution -- efficiency of our group, we will improve the profitability. And through our joint venture, we will officially begin custody service of digital assets for institutional investors. Already, the first contract with a certain customer has been signed. In addition to the business in the upstream primary market, by engaging in the ecosystem of digital assets, we will be able to better respond to the changing needs, and we'll be placing the building blocks for growth. Revenue contribution from such business area is still small, but by expanding digital-related business, we will be able to create new revenue opportunities. On to Page 30. ESG initiatives in Wholesale. Last month, in April, we completed the acquisition of U.S. M&A, Boutique Green Capital -- Greentech Capital. Greentech is the top runner in M&A advisory in sustainable technology and infrastructure. Through the acquisition of Greentech, we now have access to the specialized content and expertise of Greentech. Putting that together with Nomura's global network and solution, we shall be able to offer high value-added services and contribute to sustainable growth that is mindful of sustainability in the global environment. On the occasion of delivering the message to all our employees when I was appointed group CEO, I said we are aiming to reach a different place than where we are today in a different dimension than where we are in today. Without being bound with conventional thinking, we need to think future business. That's why I use the expression, different dimension. That expression could probably be replaced by the expression of disruptive growth. We don't have to stick to the concept of asset management or finances or even the border of finance. That's why it is necessary not to be bound by division or organizational borders. We must aim for group-wide performance and challenge. Without limiting your own coverage and task, please actively intervene to other areas. Because you're not the direct person assigned, you may be able to be in a better position of discovering business opportunities. The worst situation we must avoid is no play, no error. Nomura has a strong spirit of being the first ones to do something new. I think that's an instinct or DNA that we have. We do that regardless of whether that's evaluated highly or not. Management, including myself, will be proactively trying to pursue new completely innovative opportunities, and that would require a reform of the mindset to move us on to the next dimension. COVID-19 has instantaneously changed the normal life that we should be familiar with that we used to take granted for. Again, we were reminded that tomorrow is not just another today. When the dust is settled, will life be where it used to be before? There is no such guarantee. So we are expecting irreversible changes to occur in many aspects, such as the review of contact and noncontact balance, use of digital and working style. We will be responding properly to these changes. In group management, the keys for the future would be diversity. This element will gain in importance. I'm not seeing that as an additive we must show to the external world. Without diversity, it is going to be difficult to do something new or to go to a new dimension. Under the new management structure we introduced in April, we conducted transfer of executive offices that go beyond conventional borders. Half of the newly appointed 12 executives are those who came to Nomura after gaining experience in other organizations. I'm expecting to see new chemical reaction and synergy in various corners of the group. And as a result, we shall become a group that can respond to sophisticated needs of the customers and rapid change of the society. By mobilizing all resources, expertise, experience and human resources, which is our most important asset and confidence from the customers, I would like to walk with you to the next dimension. And I have strong belief that we can do that. Thank you for your kind attention.

This is Muraki from SMBC. I have 2 questions. This is Muraki. Firstly, this is a macro picture of question, but now in details, you have explained a wide-ranging part of the business, but your expansion from public to private. As you work on that expansion, now you have JPY 2.7 trillion of capital. How are you going to reallocate that capital? In your presentation, for example, Page 11, you explained the first pillar of the expansion from public to private. But your enhancement of alternative investment. You have Merchant Banking division, which is -- which you had in the past. And I believe you'll be reallocating more capital to Merchant Banking division. But to what extent towards 2025 are you intending to deploy capital? And also Page 17, you have 50% as total return ratio target. And over the next 5 years, as a stage -- there will be a stage for intensive investment. And also, there will be a stage for the recoupment of investment. So the investment will come on the front line, and I believe that return will be increased towards the back end. Is it the right image that I should hold? And also over the next 5 years, in what time line we will be utilizing the capital? That's my first question. My second question is related to Retail division. Can I continue with the second question? Or can I stop here?

Okuda speaking. Please continue with your second question.

Muraki speaking. Thank you. My second question is related to Page 22. In Retail division, now you mentioned the establishment of CIO Group. Now overseas, private bank business has this kind of department. But in your presentation, you touched upon the new billing structure, which you would like to work on. Now U.S. player, Morgan Stanley has a retail division where they use subscription-based model, which is advisory-based services. So 50% or more of asset has been shifted there. In your case, with SMA and wrap services, combined, you are not at that level yet, but over the next 5 years, in what kind of time frame will you be shifting to the new model? And how are you going to be shifting your asset toward that direction? Those are my 2 questions.

This is Kitamura speaking. Mr. Muraki, to your first question, let me touch upon that. Let me answer that question. Then Mr. Okuda will give additional comment. To your first question. In the area of private territory, our expansion of business and what is our plan of deployment of capital. If you go to Page 11, so this provision of our balance sheet and investment products are what we mean by our initiative. But the alternative strategy that we are considering. So provision to invest clients and a fee business expansion are the key parts of our initiatives. Of course, for alternative investment products, in order to show our commitment, to a certain degree, LP investment and seed money investment naturally will be involved. So in that sense, we will be utilizing capital to a certain extent. But in the sense of deployment of investment products, we are not utilizing the excessive or large, big-sized use of capital. And last year, as much in the banking division, we have set up the private equity business. JPY 100 billion or -- JPY 100 billion of investment limit was announced on that. And for now, we do not have any change to the plan. So Mr. Muraki, JPY 100 billion of limit. If you look at that number -- that limit. So JPY 2.7 trillion is the capital. So compared to that, I believe you can tell, it's only a fraction of the capital. And regarding the use of capital as well as time frame. The time frame compared with the public business that we are focused on now. The time line is going to be longer. So for the first couple or few years, if anything, we will be focused on investment. Then after that, the recruitment phase will come in the fourth or fifth year. In terms of the return, the return will happen along that time line.

This is Okuda speaking. So regarding CIO model and also your question regarding the Retail division, let me answer your question. What we are trying to establish at CIO Group, it's an organization that's independent of retail division. And as you pointed out, overseas PB has this kind of model oftentimes. And as of now, our thinking is as follows. We have, in addition to the discretionary services, we're targeting various types of assets. We -- the fee linked to the balance of assets, introduction of such model will align the interest of clients with our business direction. So how do we achieve that in the sense of system and organizational structure and also the level of fee? So those details are being discussed as of today, and the introduction of this model will be sometime next year. In any case, we would like to provide better services to clients and introduce more diversified billing commission structure. So as one of the key steps, we are considering the deployment of house model. And the time line of transition is as follows. We have level fee structure for the discretionary services. We have JPY 2.5 trillion of balance right now in that area. So as soon as possible, we would like to quadruple that to JPY 10 trillion, where we can provide highly value-added services. That's our target. But once we have more details, we would like to share those with you. Thank you.

Watanabe, I'm with Daiwa Securities. I have 2 questions. First of all, positioning of your group companies. To date, noncore business, small businesses were subject to strategies to carve them out. But today, you referred to your intention to bring Nomura to the next dimension without being bound by the border of finance NRI in Nomura Real Estate. Have you changed your view with regards to the positioning of those noncore subsidiaries and group companies? That's my first question. Secondly, the KPIs you use on your vision, EPI target was not shown this time around. So what was the reason you decided to eliminate this from KPI? And what's the assumption in terms of the market development as you have identify these KPIs?

This is Okuda speaking. And to respond to your first question on the positioning of the group companies, members of the management are discussing Nomura Securities and Nomura Holdings group companies and whether these companies alone can offer the diverse services that are required to our customers. And these companies alone may not be sufficient. So for example, IT or digital, how can we better use these features? That's one major challenge for us. So collaboration with NRI may be necessary or co-development of system or joint business development with NRI and other such companies will become important. Same applies for Nomura Real Estate. Especially in Retail, there are many employees that are obtaining the national qualification for real estate trading and evaluation. Although this wasn't stated in the presentation, wealth management is an important area. And I talked about the necessity to offer advice to the total balance sheet of the customers. And such balance sheet includes real estate as an important asset class, and we are seeing growth in this area and the partner is Nomura Real Estate. Nomura Real Estate is the biggest partner in such service. So in order to tap on the total strength of our group, NRI or Nomura Real Estate, are entities that are important partners that will play significant roles. On the other hand, I think another intention, you asked the question is the holdings of equity at Nomura Holdings, separate from the business intention. At the moment, we have no intention to sell-off the policy holdings or increase our stake. We will continue to monitor the situation. And on policy holdings, in general, we will continue our various discussions by taking in various factors, and that attitude remains unchanged. And on your second question, on EPS, it was missing in the presentation. So far, EPS was presented as one target. With the change of the top CEO, after my appointment, I thought about how we can achieve sustainable growth and upgrade the shareholder benefits and values. Conventionally, when the number of shares increased through various public offerings, that caused impact. And one target was reducing the number of shares issued. And that is why we had been presenting EPS conventionally. But we will focus on growth and increase of shareholder values. So we think that ROE better indicates those values. And on the market environment with COVID-19 impact, there is much dislocation in the market. So we have not made an assumption by focusing on any particular phenomena, such as certain country's recession. So we are conducting a debate within the conventional house view. And I hope that, that answered your question.

This is Ban. I have 2 questions. Regarding your outlook for risk asset in the new management target, what kind of increase in risk assets are you planning to see? That's my first question. The second question, well, Mr. Kitamura explained the other day at earnings release, but moving forward, the absolute levels of revenue and return will be important. But in addition, on a quarterly basis and annual basis, what is going to be the volatilities of revenue and profit? So due to COVID-19, the quarterly profit declined greatly. So Mr. Kitamura talked about the importance of keeping the balance of the loss-absorbing capability. But moving forward, what is the volatility of revenue and profit? How are you going to be separating such volatility? Can you touch upon that? So those are the 2 questions for me.

Kitamura speaking. Thank you very much for the questions. Firstly, the outlook for risk-weighted assets has not been changed much as of now. The efficiency of resource and the revenue opportunities will be observed. Then we will decide on the deployment of the assets. But for the existing businesses in the mid- to long-term, we will not be making much -- many changes. And earlier, regarding new businesses, as I answered to Mr. Muraki's question, we are not considering the use of huge resource in new businesses. And our Tier 1 ratio came down somewhat, but still, it's staying at a high level. So as for new businesses, part of our capital surplus will be used. And also the restructuring or reclassification from the existing business will generate enough capital for the new businesses. Did I answer your first question, Mr. Ban?

I have a follow-up question. In Wholesale, 15% is the revenue expansion goal. And regarding as ratio to risk asset, the ratio will not change much. Then for Wholesale, 10% increase in risk asset is what you assume?

Mr. Ban, this is Kitamura. You are talking about Page 27? So 15% increase in Page 27, this is an advisory fee and commission revenue, which we would like to grow by 15%, not the Wholesale's entire revenue, to be clear. And also, for fee business, such as advisory fee and execution service commissions, those business lines do not use much resource. So in the sense of capital efficiency, I believe these are good businesses. Regarding your second question about how we are going to view the profit volatility, is that -- was that your question?

Yes.

For example, in our fee business, the more commission grows bigger, the volatility of revenue will come down. And as mentioned earlier, the provision of alternative investment products will center on the expansion of fee business. So profit volatility, if anything, will be suppressed while we increase the stable revenue stream. On the other hand, trading business remains to be an important business for us, and also part of loan business or credit provision. Selectively, we will keep doing that. So by increasing the revenue stability in areas where secondary or loan businesses will be able to increase the loss-absorbing capacity.

Okuda speaking, let me add to that. In our management, so you touched upon the pain point, sort of, in our business. So Wholesale has worked on business model transformation since last year. So to answer your question, the business lines of different market cycles, we are seeing the establishment of new businesses with different market cycles by growing different business lines. We'll be able to generate revenue streams that do not depend on secondary trading. And I mentioned expansion from public to private. But in the area of private asset management business, that's business -- the business cycle of that is completely different from the trading. So by increasing those different revenue streams, we would like to increase the level of profit and reduce the volatility. And to keep a good balance, we would like to conduct various new initiatives.

Sasaki of Merrill Lynch speaking. I have 2 questions. First of all, on the new management vision, Page 10. You have a 3D diagram. I want to understand this accurately. Mr. Kitamura said that in private, the initiatives will remain more or less changed. The horizontal axis also describes the conventional challenge that you have been engaged in. But what's the message here? Are you trying to say that new trend will emerge or are you saying that this will be diligent continuation of the efforts that had already been underway? That's my first question. And secondly, on domestic Retail, CIO function to be concentrated into the group. What would be the new role of employees in Retail and the positioning? And you're thinking of a new advisory service to be offered by Retail. How can they -- those functions be compatible or is one to replace the other? What's the way to interpret?

This is Kitamura speaking. Maybe I wasn't explaining so clearly, so I gave you the impression that we won't change. When I said it won't change, I was only talking about private equity. Last year, we started up Merchant Banking, and JPY 100 billion is the limit of investment that we had set forth. And we, at the moment, have no intention to change that. That's the only thing I said. Alternatives, nonprivate equity debt or private debt or infrastructural project-like initiatives, the area is quite diverse, including those business opportunities. And we are currently dealing with the services in public. But including private placement, we want to respond to expanded opportunities. And that was the message that we had wanted to deliver through Mr. Okuda's presentation. You indicated that things won't change than what we're used to. So that's not the right interpretation.

Then let me change the way I ask the question. In the sphere of private, are you trying to do that globally or is that purely a domestic domain? If you're going global, it's a congested market, Macquarie veins. There are so many players already. Which edge will you be using to create your own opportunities to capture business chances in this already congested market?

This is Okuda speaking. In the private domain, we will start with the Japanese market at the outset. I'm not sure whether it's going to be the world with corona or after corona, but under such environment, I think people will begin to have questions with regards to asset investment. And conventionally, there have been emerging requirement for alternatives in the midst of low interest environment. But so far, we've not been able offer the right products and services for those requirements. So by establishing a new team, we want to capture such demand. And in order to further expand our Asset Management business, we will start from Japan. But in my presentation, I talked about infrastructure and project-like assets, and that would be an area where we will strengthen our business efforts. And we are seeing some expansion of those opportunities in the United States and by transferring such expertise from the U.S. to Japan. Although the asset may be existent in Japan, there are a few business opportunities where we may be able to such -- use such expertise we gained in the United States. So as you have pointed out, there are formidable competitors in the global market. But I think their growth opportunity is relatively high in Japan. So this is an area where we will be focusing going forward. If that responds to one of your questions, may I now give the microphone -- may I now respond to CIO?

Sorry, a follow-up question from Sasaki. In the private Japanese market, the number of unicorn is small and there are so many regulations still existent in the infrastructure area. So you are bound with various restraints. If you're going to focus on the domestic market, do you think there is enough scale of economy that you can offer profits to your customers?

This is Okuda speaking. I understand the intention of your question. But on the other hand, the points that we have indicated in the private domain are areas that are new to us. We don't have such sizable business. There are many uncertainties with regards to the future size and profitability. On the other hand, on private companies, just because a unicorn is big, that's not the only reason. In the business relationship we have with customers, there is high requirement. And private equity and private debt in comparison to non-Japanese market is still underdeveloped, and there is high level of potential for further growth. So I think it depends on how we can live up to the challenge on what size we can achieve, but we think there is quite a sizable opportunity, but it will depend on what kind of efforts we will be able to make. So we would love to have your feedback in this area as well.

And please go on to my next question.

Okuda speaking. On CIO model and the conventional retail organization and the role and assignments given to our employees, how will that change? I think that was the gist of your question. First, the CIO group in itself isn't going to be created with Retail. It's going to be started up as a separate and independent division, and will be the command tower to provide investment advice within the group. So the objective is not to offer a specific product. Rather, the objective is to offer a robust investment model. And by using that, existing partners will be able to offer advice to customers. So this initiative is compatible with the mission given to Retail. More specifically, the substance of the proposal can be made more specific that caters better to the customer needs. So we think that the new group will be compatible with Retail. And the people that we call as our partners will continue to contribute, so it would be the widening of the mission given to those partners.

This is Tsujino speaking. Firstly, Page 14, you showed 11% or more of CET1 ratio. But the numbers that you had -- I haven't checked the past numbers, and there have been some changes made to the target. And we have referred to the numbers. I suppose in the past level, a bit higher than that was set as the target by Nomura. So I have the impression that you have lowered your target here. So let me understand the background. And also due to the volatility risk-weighted asset increased. And even though it may be temporary, the capital ratio came down. So in the situation, did you lower your target? So regarding that, can you expand on that? And as you have mentioned earlier, this -- will this have an impact on the share buyback moving forward? That's my first question. And my second question is related to the alternative investment to be enhanced. But moving forward, risk-weighted asset will not be increased dramatically, it appears. But in the first part of the presentation, you mentioned that. So could you elaborate a bit more on to what extent you would like to enhance it? And infrastructure investment, you mentioned you have track record. And sorry, I do not have the knowledge on that area. But could you give me more specific examples there? My third question is related to the Retail. New initiatives have to be implemented, as you explained, and I do understand it. But as of now, there are things that will be enabled by digital technologies in accordance with your explanation. If so, in April and May, under such circumstances, what has been the contact with clients? And what about the trends of new clients? Are you receiving inquiries from new clients? And how are you taking inquiries from new clients? And also when it comes to new system, the launch will take longer than a year, according to your explanation. Then for transitioning to that model -- before the transition to that model is completed, so right now, what kind of initiatives or tactics are you working on?

This is Kitamura. Thank you very much, Miss Tsujino. I will answer your first question. So if you go to Page 7, you can find medium-term target of 11% or more. And whether we have lowered our target or not, we have not lowered our target, but the 11% or more, all along, has been the number that we have continuously shown. Recently, the reason why the ratio has trended at a higher level is the risk of positions, and also the fact that we were not using resources as much. As a result, the ratio tended to be higher recently. But our CET1 ratio target of 11% has not been changed at all. Also, the share buyback-related questions, what is our view towards share buyback. As we have indicated this time, our dividend payout ratio of 30% and a total return ratio of 50% have not been changed. And as of now, given the most recent stock price of ours, PBR is below 0.5x. Under this situation, share buyback will be positioned continuously as part of our important capital policy. So based upon this situation, we are looking to grow sustainably and enhance shareholder value. And at the same time, we would like to secure the financial robustness. By keeping a balance between those three, we would like to keep carrying on our business as we have done all along, and we will keep doing that. So in that sense, to answer your question, we are not being affected in what we are trying to do. That's my answer.

Okuda speaking. Regarding your second question, which is about alternative investment. To what extent are we going to be growing that business and also the infrastructure investment deals in the U.S.A., if there is any specific example that we can point to? In the area of private, what kind of resources we will be utilizing? I have touched upon that earlier, but we do not have concrete details as of now, I'm afraid. But to explain our thinking, at least, if anything, what we're trying to do in terms of business model is closer to Asset Management. So it's not like we are conducting intensive investments utilizing our balance sheet. And of course, CET money and also -- the CET money investment to a certain level of burden on balance sheet could happen. But as a business, we would like to face clients. And just like an Asset Management model, we would like to expand our business. And there was a question about why it belongs to Merchant Banking. But this business will be positioned somewhere in between Asset Management business and Merchant Banking business because that's where we would like to expand our business. And our infrastructure investments are specific examples. So since 2 years ago, we have set up an infrastructure team in New York, working on hydraulic power generation and wind power generation. In those areas, we are providing loans and financing to clients in such areas. The size of our business is not that big now, but it's growing stably. As I explained earlier, these businesses have different investment cycles. So in the sense of reducing -- shrinking the volatility of business, this is accretive because it has different investment cycles. Your third question was about digital and also the initiatives in Retail division. The last couple of months, we have shut down our branch offices. And how we are maintaining the touch points with clients, I would like to explain on our contacts with clients. We have been working on transformation of Retail division and we have made certain progress there. But in Retail branches, more than 90% of client touchpoints are through telephone and e-mail and also online conferencing system. By utilizing those tools, we are maintaining touchpoints with clients. So compared with our face-to-face meetings, the e-mail-based meetings will be easier to be conducted, you may think. But more than 90% right now, more than 90% of client touch points are through non-face-to-face contact. So moving forward, we would like to think about a hybrid model that's positioned somewhere between face-to-face and non-face-to-face.

Kitamura speaking. Tsujino, did we answer your question?

Tsujino speaking. So from the clients regarding the progress of the transformation, what was the feedback from clients? Was there a positive reaction? I wonder if there has been any positive reaction from clients.

Kitamura speaking. As I mentioned in our earnings release, due to COVID-19, the market has collapsed greatly. And our economic outlook -- well, economic outlook has received divided opinions, but the situation we face is pretty challenging. In this situation, our sales partners are contacting our clients, and they are talking about the market outlook as well as market outlook in -- with corona and post-corona scenarios, and our sales partners are communicating closely with our clients. So the conversations for sharing information is highly evaluated by our clients, I'm told. Then those telephone-based conversations, will they directly translate into transaction? We are setting that aside. At Nomura, we are supporting clients with their issues. Even if we are not meeting with them in person, we are being able to efficiently have conversations with them on the telephone, and we are receiving positive comments from them.

This is Otsuka of JPMorgan. I have 2 questions. First of all, I'm looking at Page 15. Again, I wish to confirm whether my understanding is correct. The new initiative from public to private will be focused on the latter half, March '25, and slightly by March '23. So my specific question, what's the KPI of March '23, an annualized commitment up to that target. As indicated on Page 17, pretax income target is indicated and Retail or Wholesale would be the keys. For example, in the case of Retail, Page 23. And Wholesale is in later pages. But what's the level of certainty for these numbers? You haven't changed the assumption for Retail on Page 23, the revenue will increase by JPY 60 billion, and the income will also increase at the same level on wholesale on Page 26, $300 million increase. And if the loan loss is absorbed, maybe that's doable. Can you give us an image on what you intend to achieve? That's my first question. And secondly, recently, according to press reports, SBI Securities or group would be better nomenclature. But the number of accounts has exceeded the number of accounts at Nomura Retail. You only disclosed active accounts. They disclosed the total amount -- number of accounts. So maybe it's not one-on-one comparison, but I think the message of the press is probably that Nomura isn't reaching out to all the potential customers. Then if you want to respond to such insufficiency, as indicated on Page 19, what specific approach will we be taking to customer clusters like young customers? Now putting aside CIO group, my take on the approach is not much changed. LINE Securities wasn't mentioned this time around, so what's the plan in such an area?

Kitamura speaking. Your first question is the certainty for the numbers we set forth for March '23. Otsuka, as you have indicated in that sense on Page 15, your interpretation is correct. For the new business, it will take some time until earnings and income is harvested. So the contribution will come towards the time frame of March '25. So for March '23, that would mostly be achieved through the expansion of the existing business. On Page 23, on Retail, the KPIs have been indicated for Retail consulting-related revenue and recurring revenue and active clients. All of these 3 indicators will increase by a certain percentage according to our target. And on the right-hand side, net inflows of cash and securities, we're assuming quite a significant growth. These KPIs have been set forth. And if they are achieved, then the pretax income that we have set for ourselves is reachable. Your question was the level of certainty. Now it's not going to be such an easy task. But at the same time, it's not an impossible task either. And that's how we define the KPIs on Wholesale business. Otsuka, as you have rightly said, it's not a long shot. The most recent number is JPY 0.8 billion PTI. So March '23 is doable with all the measures that we have announced so far. And the pretax income target is within reach.

This is Okuda speaking. On your second question, the net securities account numbers is growing. What we do about that and how we approach the young generation, Okuda will take up that question. Now sector-wide efforts have to be made. And for that case, they have been identified as a challenge from savings to investment, and the percentage of population who sell securities account has to be increased. We have to persuade and cater to a wider audience so that Japanese people can feel safe in investing in securities. So in that sense, I'm not saying this just as an excuse to cover up our insufficiency, but the increase in net security accounts is good for the sector as a whole. And approach to the younger generation is important. And at the same time, candidly speaking, Nomura may find some weakness in that area, so we will take approach. You said we didn't mention online securities. It's not that we intentionally carved that out. But after about 6 months, there's not much news that we can report to you. But on Page 19, we mentioned collaboration with other players. So in LINE Securities, the number of accounts is actually steadily increasing. So at some timing, I hope to report back to you the results of such efforts, which we tended to continue to inject. So not just the young generation, but asset builders and by also capturing new entrants into the market, new customers into the market, we want to cater to such requirements. And not just the younger generation, but our broad goal is to increase customers in general, so collaboration with regional financial institutions is an area that we have been making efforts, San-in Godo Bank and other regional banks have been the target of our collaboration. So by tapping on such collaboration with other entities, we are expanding the number of accounts and the profile of customers. And as I said at the outset, we shouldn't be satisfied just by a customer opening a new account. We have to aim for a long relationship with each customer and each account holder. And that would require the improvement of our service quality and the way we provide advice, customized to each of the needs of the customer. And that's a key in differentiating ourselves. And I hope I answered your question.

This is Nagasaka from Morgan Stanley, MUFG. I have one question. Regarding your human resources that drive your management division, the other day, there was a Financial Times article on Nomura. So in addition to the university graduate to be hired, you are enhancing online hiring as you secure and attract and retain talented human resources. As top management, what are you focusing on Mr. Okuda? That's my one question.

This is Okuda speaking. Thank you very much for your question. Regarding the recruitment of university graduates, we will go through the same process that we have in place, and we will be recruiting talented human resources. On the other hand, regarding the mid-career hires, more than ever, we will be placing focus on the mid-career hires. As I mentioned, in the group, we have 12 new newly appointed executive officers, 6 of them are mid-career hires. In the past with Nomura, there were very few mid-career hires who became an executive Officer, but we now have 6 newly appointed executive officers who are mid-career because they had a very good talent, and they were high performers. So our concept is Pay for Performance. So regardless of the carrier track, we will give opportunity. And in new businesses, such as Digital, we have -- we do not have sufficient resources -- human resources. So we will be -- we are open to hiring from outside the firm, and the performance will be rewarded. Otherwise, we won't be able to hire from outside firm. And in such areas as global markets or investment banking, the mid-career hires have advanced to the management level. So within Nomura, we would like to ensure a fair evaluation mechanism. So that's what I'm talking to HR department about, so that we can further improve the process and mechanism. Thank you, everyone, for attending Investor Day event despite your busy schedule. Also, we have received many questions. At this point in time, we are having discussions on many things, and we do not have answer on some questions. But by referring to your input, we would like to continue with our efforts. Now we are facing brought on by COVID-19, and we see changes out in the market and society. So tomorrow, it's not just another day. That's what I'm feeling strongly. In that sense, we will firmly work on our management division. But if there is change in the environment, we'll be flexible in responding to such changes. That's important thing that should be done by the management. In that sense, we will be closely communicating with analysts and investors in whatever direction that will be headed. So if there is anything, if you have any questions and inquiries, please contact our IR team or me. Thank you very much. That's all. [Statements in English on this transcript were spoken by an interpreter present on the live call.]