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

Good morning, everyone. This is Kentaro Okuda, Group CEO. On behalf of Nomura, I sincerely appreciate your participation in the Nomura Investment Forum 2021. At the Investor Day this May, I talked about our strategy of expanding our scope of business from public to private. And this is the slide that we used at the time. What we are aiming for is not only the growth along each axis of products and services, clients and delivery method, we are aiming to integrate all 3 of these in order to provide service solutions customized just for each and every client. This is the private strategy in the true sense of the word. For example, the investment management division, which we newly set up this April. This is the platform for providing opportunities to invest in alternative assets such as private equity on top of the traditional asset classes such as listed equities and fixed income. And initiatives related to sustainability, which will become an ever more important theme, is actually highly compatible with the private strategy. For many companies, coping with ESG and sustainability will be a fight for survival. And each client is facing a different situation and our response must also be private and different for each client. It's crucial to work hand-in-hand with clients and think about the challenges they face, supporting their sustainability initiatives while building a business model that generates revenue for Nomura. And Nomura Greentech is at the forefront of this strategy. Since announcing this private strategy last year, I can feel it steadily taking root in the group. New initiatives and new challenges, which I have been mentioning on numerous occasions, can now be seen in various areas of our business. I would like this to become the norm in our group. We will steadily move forward initiatives with speed in order to enhance Nomura's corporate value. And today, I will mainly update you on the progress made over the past 6 months as well as some of our current initiatives. This slide tracks our performance on a 6-month basis. Considering the impact from the loss this March, the first half of this year is higher than 2 years ago. There was a slowdown in the first half compared to 2 years ago -- it was higher than 2 years ago, but it was behind last year when the market was active. And it was not bad even when compared with the pretax income target for fiscal year March 2023. Moving into the second half, in October, the Wholesale division made a somewhat slow start. But in November, client activity picked up. And revenue for October to November has been stronger than Q2. The retail division is also maintaining the revenue momentum from Q2. Looking back on the first half of this year, I feel we made steady progress in stabilizing and diversifying our revenue, which is our goal in the mid- to long term. For example, in asset management in the broad sense of the word, where we generate fees based on the balance of assets, the balance has reached a record high, thanks to the inflow, leading to expanding stable revenue. Risk-light businesses are growing globally, including M&A advisory and the financing by issuers or what we referred to here as origination. Providing solutions to asset managers and institutional investors based on their funding needs and the structured business are less susceptible to market fluctuations and performance is relatively stable. Total revenue from these businesses have reached almost half of the 3 segment revenue in the first half. And going forward, we will continue to grow these businesses to further stabilize our revenue structure. From here on, I will explain our initiatives so far as well as the progress we have made based on the 5 perspectives shown on this slide. In the Investment Management division that was newly set up this April, we will reinforce and expand traditional investment products as well as provide opportunities to invest in the private domain, such as through alternative assets. In the public domain, the assets under management, which is the main KPI for the division grew JPY 12.1 trillion in the past year to reach JPY 67.8 trillion. Out of this, JPY 2.4 trillion was an inflow of funds. The main contributors were ETFs as well as the growth in balance outside of Japan, as shown at the bottom right; the inflow from the bank channel continues to grow as well, as you can see at the bottom left. We are also working on initiatives in the private domain. This January, we announced our strategic alliance with SPARX Group in setting up a listed investment corporation that invests in private companies as well as setting up an investment management company. In August, we completed the registration process for the investment management business, and we set up Japan Growth Capital Investment Corporation in October. And just last week, we made the first investment in Astroscale Holdings, which is engaged in removing space debris. Going forward, the Investment Corporation will seek to list in the TSE venture funds market after a period of making private investments. We will provide the investee companies with support in IPO and IR activities as well as providing them advice on funding and M&A. With the low interest environment continuing, the appetite of institutional investors for alternative assets is rising year-by-year. In order to address these needs, we are working with external asset managers to provide opportunities to invest in private equity, infrastructure and real estate. The track record reached close to JPY 700 billion at the end of September, growing almost 60% in the past year. We are seeking to further expand investment opportunities in alternative assets. And we are in discussion with Nomura Real Estate about potentially collaborating in real assets. Our business in the public domain is also growing nicely. For example, Wealth Square, which offers regional financial institutions discretionary investment services for fund wrap as well as IT system services has steadily built up its balance since starting operations in 2016. From next year, it will become possible to make proposals to regional financial institutions with which Nomura Securities has brokerage contracts for financial products. And we are looking forward to further broadening the client base to whom we can offer asset management solutions. Outside of Japan, we've also seen an inflow of funds in products with strong performance, such as high-yield strategies and global dynamic bond strategies and have steadily built up balance. We will seek to further expand stable revenue through collaborations with regional financial institutions as well as strengthening our overseas business using the group's network. As for domestic retail customers, we are in progress in the shift to the asset consulting business model. The recovery in the market led to an increase in customers' unrealized gains, but customers now tend to hold on to their investments over the long term. In the past, there was a lot of both inflows and outflows for investment trusts and discretionary investments. But since this April, there has been continuous net inflow. And this momentum is accelerating since October. As a result, recurring revenue, which is the fee generated from asset balance, has grown to more than 30% of the division's revenue, helping to stabilize our earnings. We provide optimal asset consulting for the customer from a mid- to long-term perspective and support our customers in growing their assets. And we seek to grow our fee revenue by building up the balance of customer assets. In order to accelerate this trend, we are planning to make a full-fledged introduction of the level fee from April 2022. We have begun trials in several branches and offices this fiscal year, and the feedback from customers as well as our partners has been good so far. Approaching the next generation, our customers of the future is also important. Data shows that in Japan, there's a significant rise in net savings when people reach their 50s and a large number of people have no investment experience. We have established a sales and coverage structure that can closely support people of this generation with their needs and the issues they face. We are also actively using our contact centers to offer remote consulting. As you can see, our initiatives through services for company employees is also making good progress. There is, of course, a limit to the range and number of customers that we can reach on our own. This is why since last September, we have begun collaborating with San-In Godo Bank from last September and with Awa Bank since this April. It's only been a year since this comprehensive alliance began, but we are making good progress in new account openings and the buildup of assets. And client assets has been growing steadily, as you can see here. As announced the other day, LINE Securities surpassed 1 million accounts in just 2 years and 2 months since starting its service. This is the fastest growth among online securities firms, and it clearly shows the strength of being a platformer. As of today, there are approximately 8 million accounts with balance including employee stock ownership programs and DC, for which the Nomura Group directly provide services to, and we can approach a total of around 9 million accounts when including the indirect coverage through LINE Securities. Moving on to the wholesale business. We realigned our business portfolio in 2019 and have been focusing our management resources in areas where we are competitive. Compared to the past, there has been steady growth in revenue in the origination business, such as primary and advisory as well as in solutions. The gray section shows the secondary trading of equities and fixed income. This is the business that is most susceptible to the market environment. Due to the revenue volatility, first half revenue seems to have fallen from last year when we achieved record revenue. But we are maintaining a robust business platform so that when the market is strong, we can generate revenue based on client flow. For example, in U.S. rates agencies underwriting, our share is 11.1% and we are ranked the first; in European government bond trading volume, our share stands at 9.1% and we are ranked the second. We've been able to maintain high level of presence. By maintaining and expanding such franchise, we will be providing sufficient liquidity. One of the drivers that have contributed to the elevation of revenue through the diversification of wholesale revenues is the overseas investment banking, mainly in the Americas. The Americas M&A advisory and ECM has expanded, and the acquisitions and strategic alliances strategy has begun to function well. In the first half, the M&A advisory revenues hit a record high. Looking at the regional breakup, the Americas contributed to close to 40%, the biggest region in terms of contribution, much of which was driven by Nomura Greentech. Most recently, the founder of Greentech, Jeff, was appointed the Global Co-Head of Investment Banking. I'm sure that his experience and expertise of starting up Greentech from scratch will surely contribute to the expansion and growth of our global investment banking business. Through our lines with Wolfe Research, we've already gained 40-plus ECM deals. In the area of trading, we are feeling the positive impact through reference of customers by Wolfe. The actual results have been greater than we had expected. As we endeavor to further expand business, the keys are sustainability and digital. These are the 2 major themes. And Greentech has a high level of expertise and track record in these areas. By becoming Nomura Greentech we will now be able to offer solutions in a seamless manner, including finance to global client franchise of Nomura. In that sense, Nomura Greentech is unique unlike large investment banks or boutiques. And by expanding the team further, we will engage an increase of revenues from the advisory business. And M&A is not our ultimate goal. We will further diversify the business to deal with fundraising, ForEx rate hedging solutions to further upgrade the level of revenues. We launched the Americas Infra Power Finance (sic) [ Americas Structure Finance ] in 2017. Already in North America, we've been engaged in private debt deals to invest in many infra projects in North America. And we have delivered track record in progressive projects like regional energy systems. By utilizing such expertise gained overseas, we are offering opportunities for Japanese financial institutions to invest in North American infrastructure projects and for U.S. corporates to invest in Japanese infra projects. Asia is the only region among the 3 overseas regions where Nomura Group is engaged in all of the 3 businesses of Wholesale, Asset management and high net worth. Sales of structured notes to institutional investors and private banks is doing well recently, and the revenues from Asian credit has grown to more than double in comparison to -- prior to the business portfolio review. In emerging markets like India, where many unicorns have been generated, our presence in such areas as IPO is expanding. In the asset management business, the Asian AUM has grown to more than quadruple in the past decade. In the high net worth business, after redesigning our Asia, Middle East operations last year, by using the same platform as the 1 for institutional investors, service quality has improved. Although it has been said that Asia is a difficult region to monetize business opportunities, Nomura has continued to book profits in this area. In considering the high net worth business in Asia, China is a significant market. Two years ago, Nomura Orient International began operations. The fourth branch is planned to be opened in a city with a large population of high net worth and account openings is outpacing the annual plan. In the AEJ and the Middle East net -- high net worth business, partly through collaboration with IB, number of customers is increasing and AUM in the past year has grown to 1.5 fold. After recording losses from the transactions with a U.S. client in March, we've been studying various measures to further enhance risk management. Further, between late May and mid-August, by engaging outside experts, comprehensive review of the risk management framework was conducted in order to come up with countermeasures to further enhance risk management. We've concluded to take the following 3 measures in terms of structure and organization. First of all, the establishment of a board-level Risk Committee, mainly through the participation of outside directors. This will be chaired by Ms. Laura Unger, former Acting Chair of the SEC. 5 out of the 6 members are outside directors and the remaining 1 is a nonexecutive internal director. Thus, high level of independence from the executive side has been secured. Second, on the executive side, we decided to establish the Group Risk Management Committee to further enhance governance. And third, the establishment of the Steering Committee for enhancement of risk management. The latter 2 committees will be chaired by myself. And I will be driving the efforts through these groups. In order for us to establish a sustainable business platform and continued growth, enhancement of risk management is essential. Yes, we've experienced a large blow from the losses incurred by the U.S. client, causing much concern amongst our stakeholders. Now through the new risk governance structure, we are determined to establish a robust franchise. Now on approaches in the digital area. In the digital asset business, focusing on investments and alliances, we are engaged in origination in the upstream to custody in the downstream. We are aiming to offer seamless products and services throughout the value chain with high added value. For example, we took stake in Crypto Garage, a subsidiary of Digital Garage in October. By using the custody infrastructure of Komainu, we are providing -- we are promoting business development of digital asset custody service for corporate clients. At the same time, we are further enriching the content, such as digital corporate bonds using security tokens and asset-backed securities. For us, digital asset business is indispensable. We will be establishing a structure to respond to the diverse and changing needs of our clients and customers and create new revenue streams. Lastly, let me touch upon our own efforts to promote sustainability. Our management vision is to achieve sustainability -- sustainable growth by helping resolve social issues. Of course, there are myriads of different types of social issues. But amongst them, 1 of the most important themes is carbon neutrality and decarbonization as part of the efforts to tackle climate change. In September, we announced our support to the Paris Agreement and our accession to the Net Zero banking alliance. Our goal is to achieve net zero emissions in our operations by 2030 and to achieve the net zero GHG emissions in our investment and lending portfolio by 2050. Nomura Asset Management also joined the net zero asset managers' initiative as a responsible asset manager. At the same time, in order to contribute to the realization of a sustainable global environment, we will offer support through our core business. In order to support the flow of risk money towards a sustainable society in the next 5 years, we shall be offering $125 billion of sustainable finance. I touched upon Nomura Greentech, but centering around the Nomura Greentech, we will further strengthen support in advisory business, develop products that enable investors to contribute to the ESG and SDGs, and to offer such products to as many customers as possible. That is part of our mission. In order to achieve the targets that we have set forth expeditiously, we are engaged in accelerating the pace of implementation of the strategy to expand from public to private. What I have touched upon in this presentation are only part of the whole range of measures underway. We will work on them and on projects that are being studied or in progress to deliver results to achieve the targets that we have shared with you to elevate our corporate value. At the outset, I said that I'm actually feeling the penetration of the strategy to expand from public to private. And in fact, we are receiving more new proposals from our employees. I truly feel the change occurring. It's part of the job of the management, including myself, to support the enthusiasm on the part of our employees to make them motivated to live up to difficult challenges. The diverse businesses that we are engaged in, in our group is only possible when we are granted trust from all stakeholders, including our customers. The elevation of our corporate value and the sustainable growth of the society at large are completely aligned on the same pathway. We will continue our efforts to realize sustainable growth. Thank you for your kind attention.

The first question to Mr. Okuda. You have quite a lot of experience in the field of M&A. Going forward, when you think about the inorganic strategy for the Nomura Group, what are the priority areas for M&A or Wealth Management? Boutique -- alternative boutique investment firm, alternative assets? Could you let us hear your thoughts on that, please?

Yes. Thank you. This is Okuda. Thank you for your question. Since I was appointed CEO, we have made quite a large strategic change to our business. In the past, we chose to keep the business as organic as possible or in-house as possible. But as I explained in my presentation, in Japan, we are partnering with San-In Godo Bank as well as Awa bank and seeking to expand our business. And outside of Japan, we have Nomura Greentech, which we acquired and focusing on sustainability, ESG, SDGs, advisory business. We are strengthening the advisory business. And M&A or inorganic growth, if there are any opportunities, yes, we would like to pursue those opportunities -- and this is in line with the intention of the questioner. And in terms of which areas we will focus on, we are thinking of mainly 3 areas. First is investment management outside of Japan or asset management, especially alternative assets, alternative asset managers and hiring the people who are capable of making that kind of investment. This is a very high priority for us. The second area, the wealth management business, which we rebuilt in Asia. It's quite hard to specify the target, but we are making -- taking steady steps forward based on the performance. So if there are any opportunities, we would be interested. And in relation to M&A, not just M&A advisory, but we would like to use Nomura Greentech and apply the SDGs perspective, and we are setting up the team at the moment. So again, if there are opportunities, we would like to seriously consider the opportunities. So in that sense, I mentioned the keyword asset-light. We would like to pursue inorganic growth in areas where we do not have to use our balance sheet. Those are the high priority areas. Thank you.

Next question. This is on sustainability. You said that you will be supporting the flow of risk money to achieve sustainable society. And in the next 5 years, your target is $125 billion of sustainable finance -- advisory, green products, various business opportunities lie in this area. To what extent do you expect the revenue contribution from these businesses?

This is Okuda speaking, and thank you for the question. $125 billion of sustainability finance. I touched upon that in my presentation. That's our plan, but we have not been able to draw a clear image in terms of the number or level of revenues. But in investment banking platform, sustainability or ESG specialized teams or sector group will be established. And we think that the share of contribution from this area will be quite large. And in secondary, sustainability bond or equity is increasing in business opportunities. So the percentage of contribution to total revenues will increase. But for the moment, we have not yet come up with any specific figures in terms of percentage. So I cannot comment any further. Sorry for that.

The next question is from outside of Japan. In terms of your International Wealth Management business and as you expand the business, what are the top priorities and commitments? And as for the future growth strategy, could you please explain your future growth strategy for Wealth Management outside of Japan?

Thank you. This is Okuda. Thank you for your question. Until now, especially for Wealth Management in Asia, we have been focusing on that business for quite a long time. And frankly, we have not achieved as much growth as we intended. And over the past year, we have discussed about how to grow this business going forward. And we will shift the platform to global markets, which covers institutional investors. We also plan -- we will change the leadership and rebuild the business. And also for the IT system, Wealth Management is a platform business. So we will provide the products from global markets to institutional investors, and we will also establish a stronger platform, and we are in the process of reinforcing the business. And we have Ravi -- very good leadership in place at the moment, Ravi. And we are making progress in the hiring. And the wealth management team, the existing wealth management team, has strong relationships with clients. So we are achieving a synergy effect. And as I explained in the presentation, in China, we have the Nomura Orient Securities business, NOI. And when we have the synergies with NOI in China, then we will have a platform which can generate stable revenues. And in terms of priorities, until now, I think what Nomura lacked was the products, which was mainly Japan equities. But today, we have the strong collaboration with Global Markets, and we are able to offer a wide range of products, so we would like to expand the investor base and also offer new services, a more wide range of services to existing clients, and that would be the priority for this business. I hope that answers your question.

Going on to the next question. On risk management of your global business, overseas, you are hiring from outside, and you announced the review of the risk management structure in October. What's changed on the ground? How do you think the risk culture and risk policy ought to change going forward? That's the question.

Thank you very much for the question. This is Okuda responding. I explained in the presentation that we are engaged in whole of the group effort to further enhance risk management. In the United States, we booked huge losses. So by tapping on the knowledge of experts from outside -- what are the challenges in comparison to our peers, and we are taking measures to overcome those challenges. We are also hiring and further importance of across-the-board collaboration beyond business areas is something that we need to strengthen. Myself, serving as the commander at the top, we are trying to enhance risk culture and the theory of risk management and the philosophy of risk management, which will be much more sophisticated than before. So risk management will be significantly strengthened. And this is not just about our global markets, but for our Japanese operations as well. And this is not a short-term project. This is going to be a sustained long-term project. So as I explained, this will be supervised by our outside directors as well by engaging them. This will be a continued effort and all of group effort. I solicit your kind understanding.

The next question is regarding retail. In your expansion of the stock assets or recurring revenue assets and recurring revenue, the impact on your earnings is still limited. And as -- going forward, to what extent do you plan to grow the recurring revenue? And when will the growth in recurring revenue overtake the decline in the brokerage revenue?

Thank you. This is Okuda. To give you some numbers. As of the end of September, the stock assets, 15.9 -- JPY 19.5 trillion and our target is JPY 20 trillion. So we are making good progress. We are close to the JPY 20 trillion. And the first half recurring revenue covers 39% of the division's cost. So it is making a big contribution to stabilizing our earnings structure. And the target of JPY 21 trillion. This will be supported by the level fee, which we will make a full-fledged introduction from next April. And as the level fee growth -- the concept of level fee grows in the market and the coverage of asset expenses, then the recurring revenues will grow further. And at the moment, 39% is the coverage of the costs. And it's quite hard to clearly say how far we will raise that, but we will have the contribution from level fee, and we will monitor the progress and take the next opportunity to update you on the numbers. Thank you.

The next question is by an international investor. And the question is on Wealth Management. China is growing. But other than China, do you plan to enhance your high net worth business in other countries and which are the core markets? Further, this is a business area where competition is becoming quite intense. Can you also comment on the competitive landscape?

Thank you for the question. This is Okuda speaking. The question was on Wealth Management. And as the questioner indicated, we are prioritizing on Asia. And at the same time, the Middle East is another target market we deem as core. Yes, you're right, competition is quite harsh. On the other hand, amongst the peers, there are those who have been relatively successful as well as those who are beginning to experience difficulties. And amongst the universe of such peers, we are midsized and therefore, we are trying to increase our shares and compete well against our peers. And the key is network strengthening and differentiation through product supply. Thank you.

Thank you, Okuda-san. Any other questions? This is a good opportunity. So please make use of it and ask questions, should you have any. The next question. In further strengthening your advisory business, the Americas is a very competitive market. As you expand your business, what are the strengths of Nomura in this area? And what are your chances of winning?

Thank you for your question. M&A advisory and also, you mentioned the Americas, so let me address that in some detail. For the overall M&A business, cross-border deals have been on the rise recently. So it helps to have strong teams, which are based in each local market, and that helps to win global mandates. At the moment, in the Nomura Group, we have very strong market share in Japan for many years. And in EMEA and Asia, we are very strong. Whereas in the Americas, we have been building the business from scratch. So we have been trying to hire and strengthen the team. And last year, we had the acquisition of Nomura Greentech. So now we have made a strategic shift towards sustainability-related advisory businesses. And at the moment, the advisory fees from the U.S. account for about 40%. And depending on the timing, it is larger than the fees we generate in Japan. So that's the size of the business today. And in terms of Nomura's strengths and also our competition with our peers. For example, it's very difficult for Nomura to cover all clients in the U.S. and also it's hard to strengthen our advisory business to companies which need lending services. So we have been selective in the sectors we work with. And also, we have been thinking from the perspective of sustainability and ESG. And due to COVID, it's quite hard for the Greentech team in the U.S. to come and visit the Japanese clients. But in Japan and Asia, we have been introducing the sustainability-related technologies. And also the demand for technology are very strong in Asia, and there's been a big rise in the number of deals. So that's how we plan to differentiate in the U.S. And when we hire more people, you may worry about the costs and expenses. And we will make sure to control the hiring activities while keeping an eye on our performance and keeping a tight grip on the cost control. But this is a focus area and we will also be shifting some of the resources we have in other areas, focus on the advisory and the asset-light businesses. So we will continue to expand this business going forward.

Next question. 2019, Mirai, competitive company or future competition company, was established. Can you do a self-assessment of DX in your group? And do you think that a major change in the area of digital transformation can be expected in the near future?

Thank you very much for the question. The future innovation corporation -- the future innovation company, we are making great efforts. And let me highlight a few major countermeasures. Especially for the Japan market in the retail business, with technological change, and improvement of technology, these are areas where we are focusing and injecting efforts. Customers are switching to a new phase, and we are trying to offer higher level of convenience. Of course, we've not been able to improve to perfection, but I think improvement has progressed significantly. In the future innovation company, a few apps have been developed, like [ 1stop. ] So new services have been launched. So how do we monetize on these opportunities? That will be the next stage of challenge. But this is one progress and LINE Securities is a part of our operations through the future innovation company. I touched upon this in my presentation, and we've hit the 1 million mark in the number of accounts. On the other hand, if we look at the comprehensive efforts in digital in our group, and this applies to our global markets, but human resources enhancement in IT is being pursued. In wholesale, by appointing a CIO in the United States, we are trying to strengthen digital transformation in wholesale business. And in the area of IT, we have been gaining human resources from outside as well. So it's not just DX, but total improvement and major change is being pursued. And we are injecting human resources. We are conducting nonpersonnel investments as well. Thank you

Thank you, Okuda-san. The next question -- On Page 12, you have the secondary trading, origination and the solution business breakdown. For the Wholesale business, what's the revenue mix that you are seeking in the mid- to long term? Could you share with us any color or image that you may have?

Yes. Thank you. This is Okuda. Yes, as you point out, we are currently focused on not increasing the secondary trading, but to expand the business which we do not use the balance sheet -- or the asset-light business. That's where we plan to expand. And we have the solutions, originations and secondary trading. These have different characteristics, and it's important to strike the right balance between these businesses so that we can build a company that is resilient to market fluctuations and build a strong business portfolio. And this will lead to a sustainable business structure for Nomura. And when the market is strong, the secondary trading is the driver and generates 2/3 of the wholesale revenue at times in the past. But when the timing is right, that's what happens. But what we are aiming for is to lower our dependence on the trading business and grow the nonsecondary businesses. And there are also sort of cycles in the capital markets. And we would like to capture the revenue opportunities and build a strong business portfolio that allows that. And we don't have a percentage mix in mind. But at the moment, we do not plan to increase the use of the balance sheet for the secondary business, but we will continue it and generate steady revenues. And also, we would like to generate revenues from the other businesses. And apologies for not giving you the numbers that you wanted, but that's the way we think about this revenue mix.

Thank you very much. Again, a question on Wealth Management. In the Wealth Management business as well, digitalization is a key to gain competitive edge. In the case of Nomura, do you also have a strategy to tap on such competitive edge? And do you continue to implement -- plan to continue such strategy?

Thank you very much. Yes, is the answer. Wealth management, especially in the global markets -- we were rather weak in terms of product lineup. The platform or system or digitalization is a major key, but we were rather behind. And that has been our mindset. In the past couple of years, we've decided that those are weaknesses. So by switching to the platform, we are providing more products and strengthening digital technology and improving quality in the IT area. So on those 2 fronts, we are taking measures. I hope I answered your question.

A related question, in Japan, the business targeting the wealthy individuals and the major securities firms, including the bank-related companies are strengthening the business. And what is a unique strategy or unique strength unique to Nomura to further expand this business?

Yes. Thank you for your question. In Japan, this business is becoming very competitive. And the high net worth individuals market is an area which Nomura has been very strong in and we have -- we are maintaining very high market share. On the other hand, there are all sorts of financial institutions entering this market, providing different types of services. So the competitive environment is getting very intense. And what's important is, first of all, the quality of talent and somewhat related to the previous discussion, but what kind of services can we offer? And this is about products, but also about the private strategy, which I have been mentioning and the wealthy individuals have different needs. And the question is how to provide customized services for each individual. I think that is the key. And in that sense, Nomura is very focused on the wealth management team and also the teams covering the wealthy individuals -- doing the training for these teams and improving the capabilities of these teams. And also, we are thinking of what kind of services we can offer to what kind of customers and clients who are requiring different services. And that's what we cover in these training sessions. And we are seeking to improve the service level. And I think that's the only way to win in this business. And instead of trying to sell something, it's catering to the demands of the customers, providing them services or consulting. And there's a lot we can do outside of products. And for real estate, we have several qualifications that we are preparing internally. And there's been a big increase in the number of Nomura employees who can provide real estate-related services. So the key is to provide products, not just the traditional financial products, but new types of products to these individuals.

The next question is on return of capital to stakeholders. Basel III finalization is set to be near. How would that impact your capital adequacy level? And what would be the future capital policy of Nomura?

Thank you very much. This is CFO, Kitamura speaking. Thank you for the question. On Basel III, 2023 is the scheduled date for introduction. But there are rumors that this may be postponed slightly. At any rate, we will continue to watch closely and prepare ourselves on the assumption that it will be introduced in 2023. 17% -- somewhere in the 17% range is our CET ratio. Our target is 11%. At the results presentation, most recently -- we used to say the impact from Basel III is between 3% to 4%, and I said that it may be larger than 3% to 4%, but there are still some uncertainties, so we will respond at any rate. But we think that we will be able to absorb the impact within the buffer we already have. The other point of the question was stakeholder return. Our total return ratio is 50% or higher in dividend payout ratio. 30% as 1 criteria. And these policies remain unchanged. But if we look back to our historical track record, in terms of return, we have been quite active. So we will continue our position as such. We've decided on a quota for share buyback. So we will continue to inject efforts to return benefits to shareholders. As indicated in the presentation, 30%, 50%, if the performance changes quite significantly, the numbers in the calculation will change quite significantly. As our CEO, Mr. Okuda says, stabilization of our performance is the major goal. And once the performance is stabilized, then the numbers naturally will follow suit and stabilize. So the first priority is increasing stability in our performance and maximizing our top line and then returning the benefits

The next question. In terms of the spreading of the conduct. And although it may seem a long way around, but conduct and having that take route in Nomura will lead to corporate value. And we are looking forward to Nomura's active efforts in this area. Could you share any examples of this taking root in Nomura?

Yes. Thank you for your question. And we -- senior management have been promoting conduct, and we firmly believe that this leads to corporate value enhancement, and it also leads to the -- motivating our employees. And we have mentioned several times in the past, about our principles, the guidelines for -- our code of conduct, and we are making a firm-wide effort to get that to spread throughout Nomura. And we have the 5 Ss of Nomura. And a lot of our employees have that posted on their desks. And we want them to think about these 5 Ss whenever they make a decision in their everyday operations. And this is not just a onetime thing. We have to keep going back and discussing about these principles of our conduct. And we have this booklet or leaflet, which we will change and improve year-by-year and make sure the employees read this and understand this. And at the same time, we are also thinking about our purpose, and we have set up a team, a small team to start with to talk about this. And we have the VP level employees set up groups to talk about our purpose. And this is not something that will be top-down but we want the directors and the employees to discuss about what exactly Nomura Group's purpose is, what we exist for. And -- this is also not just a onetime thing, and we will continue this effort and have it cascade down throughout the group. And this is something that we started in the current fiscal year. And on top of that, just the other day we had the executive management meeting in spring and autumn. But for autumn, we have changed that to the senior management directors meeting, and we have invited the global members outside of Japan as well to talk about the next decade of Nomura Group and what we can do to speed up the reforms at Nomura. And we've been talking about this continuously from June, July of this year in each group, more than 10 times for some groups or about 6 or 7 times for the other groups. And we have also invited our outside directors to participate in these discussions. And the biggest theme that comes up is conduct and also the guidelines or the principles of our conduct and how to use that over the next 10 years. And to give you -- that was just 1 example. The top-level management of the group as well as the young employees of the group have been thinking about Nomura's raison d'etre and what we exist for. And these are very basic discussions, but we are starting from that level to think about our operations. So that would be 1 example that I would raise. Thank you.

Thank you very much. It's time to close. Thank you very much for your participation.