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

[Interpreted] This is Kentaro Okuda, Group CEO of Nomura. Thank you very much for joining the Nomura Investment Forum 2022. This year, the image is being held in a hybrid format with on-site meetings and online meetings for the first time in 3 years. And it's great to be able to meet investors face to face. Thank you very much for your participation. With that, I would like to move on to Nomura's presentation. First, I explained in the Nomura Investor Day in May this year that there is a paradigm shift taking place around us and we are in the midst of that shift. And the low interest rates, low inflation, which are the market assumptions that had been in place for years, has changed drastically over the past year. Central banks around the world have responded to runaway inflation by raising interest rates one after another quite significantly. And in June this year, the FRB began to taper, shrinking its balance sheet. The peak of inflation is yet to be seen. And the policy rate is expected to continue to rise for a while, next year onwards. The asset prices are being corrected with higher volatility in bonds and stocks causing their prices to fall in anticipation of a future recession. So the correction phase is ongoing at the moment. This slide shows Nomura's results on a half-year basis. The pretax income for the 3 segments for the first half of this year was down 46% year-on-year. Recurring revenue and asset management business, which are stable sources of revenue, remained relatively strong. And fixed income saw strong macro products due to higher volatility in rates and FX. On the other hand, with the changes in the market environment, the sentiment of retail investors has been affected and issuers are much less willing to raise money. Since the announcement of our first half results, we got a lot of questions from investors. In particular, there was strong interest in the ROE and whether it's going to recover and stabilize and also, we got questions about how to recover our top line in our core business as well as cost control. Those were the areas of interest. So today, I would like to zoom in, in terms of the subjects that I will talk about. First, our efforts to improve the profitability of retail. I will explain how we plan to expand our business. And as a result, how we will benefit from strengthening the segment approach, which we are currently working on as well as the status of our alliances with regional banks. And I'll also talk about the review of the cost structure of the retail division. The second point is about our efforts to stabilize and grow the performance of our wholesale division. This October, we appointed Christopher Willcox as Head of the Wholesale division. And I will talk about how we can stabilize and grow our business going forward with the new leadership in place. Regarding investment management. Today, I will focus on the expansion of our alternative product offering, which is being promoted under the initiative of expansion and enhancement of private domain in addition to public. So it'll just be a brief introduction today. And I'll also briefly touch on digital initiatives. There are two sides to digital. First is developing internal platforms and upgrading the systems. And number two is working on digital assets as a business area. Lastly, I will talk about the effectiveness of our Board and the engagement of employees, which is the priority for the Nomura management team. So let's talk about our first initiative, which is improving retail profitability. In retail, we have been transforming our business model. We made a shift towards the asset consulting business model with a mid- to long-term perspective in order to properly address the needs of each client and provide the right advice. While at the same time, we have expanded our service offering to include advice on inheritance and real estate as well as business succession needs. And we are starting to see the results of these efforts already. Recurring assets, mainly investment trusts and discretionary investment services have been building up steadily and recurring revenue has grown to over JPY 130 billion per year. There has also been growth in consulting revenues, including business succession, M&A, inheritance-related services, including insurance and real estate-related services. Recurring revenue, which is one of our key metrics has been steadily increasing. On the other hand, with respect to flow revenue, I believe that the uncertain market environment may have led to a weakening in investor sentiment. But on the other hand, maybe, we could have done better to meet the needs of our clients in our proposals. So we are now working to make further improvements. Our clients' needs vary greatly across the different segments. Wealth management is a highly competitive area where each player is trying to expand its services. We believe that the combination of the diverse expertise within the Nomura Group will enable us to meet demand and provide added value that exceeds the expectations of our clients. For startup founders, which are the high net worth individuals of the future, we are closely collaborating between investment banking, which handles corporate clients for IPOs and wealth management, which handles individuals in order to provide high value-added services. Corporates and owners have significant needs, not only for asset preservation and investing, but also for business succession as well as in their core businesses. So it's not just about asset preservation and investing. And in order to address these multiple needs, we will be focusing on the face-to-face strategy. That's quite effective. And in addition to share expertise, we will consolidate our sales partners in Tokyo, Nagoya and Osaka into one organization and further strengthen the collaboration within the group including investment banking and global markets. The high net worth segment is volume zone in terms of our revenue, and we plan to expand our business further by adding headcount to this area. And by expanding the number of high-quality personnel capable of providing high added value, we will not only expand volume, but also improve the productivity of each employee leading to higher revenue. As for the mass affluent clients, many of them have jobs and these customers tend to seek quick and accurate advice, especially in asset building and life planning. This is where the use of digital can really come into play. We will focus on providing asset management advice through online consultations as well as consulting on life planning and retirement fund asset management. Approaching next generations and future customers is also important. Currently, 40% of companies listed in Japan that have employee stock ownership programs are Nomura clients with which we have administrative outsourcing agreements. As of September end, the number of workplace services provided, which is a new KPI from this fiscal year, was 3.45 million accounts and we are on track to meet our target of 3.66 million. Out of these 3.45 million accounts, we will identify retirees who have a certain amount of financial assets and provide convenient services digitally by managing retirement and other financial assets and providing life planning services to them. And regarding the simply stock ownership program, this is an area of strength of Nomura and our peers are withdrawing their services -- suspending their services. So this will be an area of focus for Nomura and we want these clients to become loyal customers to Nomura. Each retired person has different needs and efficiency, productivity are, of course, important, but we also need to provide private and customized services. At the same time, we will further work on increasing the number of clients to which we provide workplace services or services for salaried employees. We'll strengthen the collaboration between investment banking, which covers relationships with companies and the investment management division, which develops, provides investment products to win new mandates. We can only reach a limited number of customers on our own. And we have branches in each prefecture of Japan but we only have 50 to 100 people in each branch. So it's quite hard to scale the business further. So we have started a new framework with San-in Godo Bank from September 2020 and Awa bank from April 2021. This comprehensive partnership is only 2 years old. But we are already seeing immediate results in terms of opening new accounts, and increase new money, which is faster than expected. And as originally planned, we are achieving synergies by combining the strong customer base of regional banks with Nomura's ability to provide products and services. The assets in custody, as you can see here, is steadily increasing. I visited the branches or the locations in person and spoke with the members. But the atmosphere was so cheerful and lively, and it was really nice to see the employees working energetically and vividly with the regional bank staff. And I'm looking forward to more positive results from this business. And we have announced our alliance with Oita Bank and also Fukui Bank. And through these alliances, we hope to contribute even more to the development of regional economies as well as financial and economic education. Lastly, about the cost of the retail division. Under the Head of Retail and our CFO, Kitamura-san, who is with us, we started a new project with an aim to promote business strategies in each segment and create an optimal balance of revenue and costs. In terms of costs, we identified room for a total reduction of about JPY 20 billion, including the control of personnel expenses through enhancing pay for performance, sharing common infrastructure within the group and reduction of IT expenses and optimizing SG&A. So we will improve our cost flexibility so that we can maintain a certain level of pretax income even if the revenue levels in this first half continue. And by the way, this is not just about lowering personnel expenses. We cannot meet the needs of our retail clients without a high degree of expertise. And pay for performance means we properly reward employees who are achievers with high levels of expertise. Now moving on to my second point, the wholesale business. The Wholesale division restructured its business platform in 2019 with the aim of strengthening its global franchise by concentrating management resources in areas in which it has expertise. As a result, we now have core products in each region with high market share and a range of core products. For example, we have 8.3% share of the people in U.S. agency bond trading, 12.5% share of U.S. listed options and 10.8% of the U.S. mortgage business. We've steadily increased our market presence in all of these areas compared to 6 years ago. Although the performance of each product varies depending on the market environment. In the first half of this fiscal year, we were able to maintain revenue growth through the diversification of our portfolio with fixed income macro products such as FX, emerging rates and absorbing the revenue decline in financing and securitization. Fixed income is a business that is sensitive to market fluctuations. To this end, we have restructured the franchise to focus on providing global liquidity and thorough risk management while concentrating our management resources on competitive core products and rebuilding our franchise. Today, the business has become much more muscular that is second only to large U.S. financial institutions in terms of market share and efficiency with sustained returns, and we are now ready to capture market upside when necessary. And recently, with the heightened volatility, macro products such as rates and FX are doing well. If interest rates peak next year, and then we should see a pickup in activity in securitization and other financing businesses. Investment Banking has been able to grow its advisory revenues despite a decline in financing deals. This is, thanks to our efforts, to strengthen the sustainability business, especially Nomura Greentech, which we acquired. And furthermore, in April of this year, we established GII, Greentech Industries and Infrastructure, with 150 bankers to develop the Greentech business model globally. And led by the globally coordinated GII team, we will work to strengthen our presence and market share by supporting our clients' growth strategies for decarbonization and other initiatives. Furthermore, we will assess our profitability and future potential invest intensively in areas where we have competitive strengths and make decisions quickly to review our strategy, including cost cutting, if necessary. On the profitability of the overseas wholesale business, this is a frequently asked question. So let us take a look at profitability. Pretax income for overseas disclosed in our financial statements are based on firm-wide financials, including legal expenses on past litigations and fair value gains and losses of overseas investments, which makes it difficult to track underlying profitability of overseas wholesale. The graph you are looking at shows the changes in pretax income for overseas wholesale and Americas wholesale. Here, we have adjusted goodwill impairment in 2019 and losses and gains on U.S. client transaction in March 2021. Our efforts to date have improved our underlying earning power and cost structure, and we have remained profitable since 2017. The Americas have been the driving force behind this improvement. In addition to our strength in fixed income and equity derivatives, we have selected and expanded the necessary [ factions ]. And as a result, the ability of wholesale Americas to generate profit has improved. We see our wholesale platform as having the power to make sure we capture revenue opportunities when the market moves. We aim not only to maintain this strength but also to improve the quality of our products. We are working to strengthen these 3 key areas for revenue growth in wholesale. Wholesale business is committed to diversifying and stabilizing its revenue sources. The scatter plot graph on the left is conceptual. Upper right direction indicates the business with stable revenues and light regulatory capital burdens. While the lower left direction indicates cyclical business with a heavy capital burdens and the size of the circle represents the size of the revenue. To further enhance the return and stability of the portfolio and build a business foundation that is less sensitive to external conditions, we need to increase the revenue contribution from equity advisory and wealth management businesses. What's important in these business is to increase the productivity of bankers and RMs and realized return on investment at the earliest possible timing. In addition, we will dynamically reallocate capital to improve capital efficiency in areas with relatively stable earnings and growth prospects, such as private markets on the lower right. By strengthening each area, we aim to build a well-diversified business portfolio and stabilize revenue. Next, investments and cost control in wholesale. In order to achieve an expense ratio of around 80%, we are working to achieve top line growth and stabilization as mentioned while at the same time, strengthening the monitoring of investments and making expenses variable, reducing fixed costs and continuously reviewing the business portfolio. Under the leadership of Chris Willcox, the newly appointed Head of the Division, we will continue to make strategic investments in areas that could serve as a foundation for creating added value while increasing efficiency through more thorough pay-for-performance, more flexible staffing and a review of low-margin businesses. As I mentioned at the beginning, to this point, I am focused on retail and wholesale, in areas where frequent questions are received. But I would also like to briefly mention that the recent expansion of product offerings and digital initiatives in investment managing using one slide for each of those topics. In order to provide diverse investment opportunities for a wide range of investors. The investment management division is expanding its alternative asset management products as shown on this slide. In May of this year, we announced the acquisition of shares in New Forests, the world's second largest and Asia Oceania's largest forest asset management company. Forest resource assets are attracting attention for their ability to absorb greenhouse gases and carbon dioxide. The total amount of forest assets managed by the company as of the end of June was AUD 8.7 billion and the total area of assets is 1.1 million hectares, about 5x of that of Tokyo. In August of this year, we established Nomura Real Asset investment, an asset management company to jointly manage real estate funds with Nomura Real Estate Group, leveraging our broad client base and Nomura Real Estates experience and track record in real estate fund management, the company plans to develop real estate fund businesses, including the commercialization of new asset class products. Over the past 10 years, major changes in finance have been driven by progress in digital technology. And in the next 10 years, with the new technologies, such as AI and blockchain, we shall experience even greater changes. Leveraging digital is essential to delivering new values. As I said at the beginning, our digital efforts are twofold. First, updating our digital infrastructure as a platform. We are also working to speedily strengthen our human resources to support this initiative. For example, in October, we hired an experienced group CIO, who has previously served as a CIO in an overseas company. I hope he will examine our IT system from a global perspective and bring it closer to global standards without being bound by what is considered as [ common says ] today or [ common sense ] in Japan. We will also strengthen our response to cyber security, which is a major priority for financial institutions. Second, initiative to provide business opportunities, areas such as efficient marketing using digital non-face-to-face approaches and user-friendliness of services through the web and apps have strong affinity with mass affluent business. The digital company and retail division work will work closely together to develop services that are easier for customers to use. And furthermore, we will work to improve the UI/UX of totally digitalized services that did not involve any human intervention. In October, we established a new company, Laser Digital in Switzerland to provide services related to digital assets. The company will collaborate with Komainu and other entities that have been engaged in this area for some time to capture new business opportunities. As a nontraditional funding solution, STO deals are also on the rise. For example, in June this year, when the Japan Exchange Group issued Japan's first, digitally based environmental bonds in the green digital track bond, Nomura Securities supported the issuance, while the subsidiary BOOSTRY, is engaged in the operations of the system. I also would like to discuss the increased effectiveness of the Board of Directors and employee engagement. Since the -- since assuming the position of Group CEO, I have engaged in exchange of views on optimizing governance in line with our global business development. In 2020, a third party evaluation of the effectiveness of the Board of Directors was conducted for an overall review. Through such process, we identified a few issues such as many of the members on the Board being Japanese and only a few with financial background despite Nomura's business, globalization. Recognizing these challenges, following the 2021 General Meeting of Shareholders, we have developed a governance structure that reflects the current state of our businesses with the addition of an outside director with experience in managing Japanese companies and 3 non-Japanese outside directors who have expertise on financial sectors of other countries, the micro economy and the regulatory environment of the 12, 8 are outside and of them 4 are non-Japanese. So the non-Japanese BoD member is the SEC Acting Chairman, who used to be Victor Chu and CFTC former Chair and Patricia was with FIRB for a long period of time currently based in Colombia, they have wealth of financial expertise who are members of the BoD and they give us practical advice as well. In terms of the revitalization of the BoD quality and quantity of discussions have changed. In particular, there was a significant increase in global macro environment events and global risks. Since late last year, I was asked by non-Japanese Board of Directors to name a few risks for Nomura. Back then, we were banned from traveling overseas. So they thought that I don't understand because I stayed in Japan. Overseas inflation was rising and rate going up, it was about 105 or 106 yen to the dollar back then, but they already gave us advice that we ought to be prepared to the yen depreciating to 140. And this was a Japanese director, but this director suggested we have to be well prepared for cyber attacks. And that had led to a review of our response against possible cyber attacks. So before the event actually occurs, we took measures in advance to enhance our preparedness. I, myself, not just me, but a few executives of Nomura and including non-Japanese Board members. I have at least one meeting per week to discuss individually with these members to talk about the challenges with internal and outside Board members to receive advice based upon their expertise. We've been engaged in extremely candid exchange of views. These are constructive conversations, I very much value such advising suggestions from the members of the Board, and I intend to apply them in the management policy. And in terms of engagement of our employees, yes, we're engaged in differentiation through digitalization, but ahead the keys would be people and contents, and it is, in fact, people who create content and the source of Nomura's strength is nothing but people. So, and [ stock ] management, therefore, I am strongly committed to employee engagement. We've been conducting annual employee service since 2020. The third survey, which was done in July this year, achieved a response rate of a high as close to 90%. In comparison, in global comparison, this is a high response rate. And there was also an open-ended question, and the average is around 35% in terms of response rate to these questions. But in the case of Nomura, when asked a question, what actions will Nomura Group take to become a better organization. We received a response rate of [ ESOP ] 55%. So there is a high level of interest amongst our employees. And about 80% of employees responded favorably to questions about the direction of the company. And when we look at the closer relationship for each question, I've been encouraging them to change the way of doing business or challenging new goals. But this kind of perception regarding challenge and transformation have a very strong closer relationship with engagement as research proves. And these employees are constantly taking the new challenges by thinking and acting to develop themselves and improve the organization. To encourage employees who are eager to take on challenges, in addition to company-led reassignments, we are expanding our internal recruitment system to encourage employees to voluntarily develop their careers. The number of applications has increased 4.6x in the recent years and the number of hires has increased 8.3x, which we believe is a good system for both hiring departments and employees to reduce mispatches in work and career plans. So we have a system in place where employees can choose the career path of their desire. As part of the project to celebrate Nomura's 100th year anniversary in 2025, a team was set up in July last year to discuss the group's purpose and many Nomura employees have participated in the discussions. This is not just about renewing or creating slogans. I believe that it is important for globally diverse members to enjoy discussions based upon their own purpose that expand the circle of communication across group and for them to feel accepted as they are. We have half of our employees, our Japanese, half are non-Japanese. So this is a very important endeavor. I want the employees to feel that they are accepted by being themselves by their team. And when young employees leave at exit interviews, they responded, they want to leave Nomura because they want a new life. They wanted to work for startup. So I thought it would be useful to create such opportunities for Nomura employees that have been retained. So we began an internal call for employees to be transferred to startups and venture companies while contributing as seat member in a venture company for approximately 1 year. The purpose of this program is to learn skills such as strategy planning, project promotion and business management. They don't always become CFOs just because they're from Nomura. And this year, in the first year, we have 5 people seconded to startups and the other day, there was a party to gather them together. And they said it was an opportunity. Do you think about how to utilize limited internal resources in an organization, which is much smaller than Nomura or experiencing the speed at a start, but open my eyes regarding the low speed of Nomura. So that was a good learning and I intend to offer more opportunities to our employees to go for such challenges and for them to grow so that we can foster the next generation of leaders. We will continue investment into human resources, and I'm strongly committed to employees who want to challenge new dreams. And no doubt that is going to be the driver for sustainable growth of Nomura. Our diverse business as a group are built on the trust of our clients and other stakeholders. And we believe that improving enterprise value of our company and the sustainable growth of the society at large are on the same path. We will continue our efforts to achieve sustainable growth. And I solicit your deep understanding and kind cooperation. And again, thank you for your kind attention.

[Interpreted] Thank you, Mr. Okuda. We will now take your questions. [Operator Instructions] The first question has come online, which I would like to read out. First, last year, in terms of the penetration of conduct at Nomura, has there been progress made so far after that? And do you have any examples of explaining how the conduct has been spread and penetrated within Nomura?

[Interpreted] Yes. This is Kitamura. Thank you for your question. In terms of conduct, we have the Nomura's [ 5S ] which we have thoroughly implemented to all of our employees. And this is -- we also have the code of conduct. And every year, we are renewing the code of conduct. It's not a full renewal, but we make adjustments to it depending on the timing and also the themes at the time. And there are each branch and departments are doing study sessions to deepen their understanding about conduct. And through these initiatives, and as Okuda-san said earlier, we have the employee survey. And I don't have the data with me at the moment, but we have seen an improvement in the awareness towards conduct. The scoring has improved.

[Interpreted] Yes, this is Okuda. Conduct is never-ending initiative. And every spring and autumn we have the SMD meeting with all the branch managers and department managers, and we have the senior managing directors come from all over the world. And every time we talk about the conduct of Nomura, and we engaged in discussions about conduct. And I myself, as the senior management, I think it's very important to send the tone from the top and send a message to the organization. And so this will be an ongoing effort. Thank you.

[Interpreted] The next question will be read by the moderator, which are submitted on the web. It's a related question. You are injecting efforts into engagement of your employees, which is applaudable, and the survey results are wonderful. But can you give us examples of actual cases of these results leading to actual business opportunities? Or potential of these results leading to business opportunities?

[Interpreted] This is Okuda speaking. But as we promote engagement to each individual, we always ask them to name a few goals for the particular year. And in this year's engagement, many of them said they want to establish new challenges. People who work in branches in Japan or overseas branches, some answer, they want to make the company a better company or to contribute more to their clients' happiness. So I get the feeling that they are trying to improve the situation and there are some proposals that could become proposals to the clients or they -- some of them responded that they want to host festivals for the local city that they serve to. And then is this leading to expanded revenues just because these ideas pop up through this engagement survey? Not really, but the high level of interest of our employees, leading to enthusiasm is something that we truly appreciate as top management.

[Interpreted] Thank you. Do we have any questions from the floor?

So I would just like to ask what the dividend policy of Nomura moving forward?

[Interpreted] Yes, this is Kitamura. Thank you for your question. We have officially been saying that our dividend policy is to use 30%, 30 percent as 1 benchmark or a metric. And aside from that, as for the total payout ratio, including share buybacks we use 50% or above. So no -- yes, we have been saying that from the past. And regarding this 30%, 50%, this -- we are not necessarily always bound by this. So we have many shareholders and our mission is to meet the expectations of the shareholders. So for example, in the first half of this year, the dividend payout ratio was 80%, extremely high. But our aim is to meet the expectations of our shareholders as much as possible and pay out -- or focus on shareholder return, including dividends. And over the past few years, there has been litigations and some losses from our legacy businesses. And we have been having to make some adjustments to accommodate that or address that. And we will continue to pay out the right level of dividends based on our dividend policy and also based on the environment and circumstances at the time. Thank you.

[Interpreted] The person on the second row, please.

Thank you very much for your presentation. It's a bit of a long question, but I believe you are uniquely capable of potentially addressing it. My understanding in speaking with some of your peers in the asset management and brokerage industry as you try to attract more customers who will invest in stocks, bonds in Japan as opposed to having so much of their assets in deposits at banks that will help the country in many, many different ways over time. However, my understanding is that while Japanese society in general is fairly conservative and very long-term focused. Japanese investors seem to be the opposite, very short-term focused, very momentum-driven. An example, over the last several years, I have heard many Japanese investors have loaded up on growth stocks that today are very much out of favor and so it results in a cycle where investors get very discouraged about investing in Japanese companies because they always seem to buy at the top and sell at the bottom. This has been going on for a very long time, and you have many of your own clients doing this. My first question is, do you agree with what I'm saying? And if you do, can you do something to help change that mentality within Japanese investors? Thank you so much.

Thank you very much for your question. And I agree and disagree on your opinion that first of all, that how to attract the Japanese investors, and also how to I mean [indiscernible] the move -- shift the money from the banking account to the investment account. This is a key for us. [indiscernible] Then that's still at the very -- that a huge amount of the money is still in banking account though the interest rate is negative. That's the situation. So and how to attract people and how to shoot their mindset changing. That's very important for, I think, the society. And also that how to make the chain of the money from the investors throughout the private sectors and public sectors. The cycle is very important. Then but one -- why I said disagree is as the broker or the investment banks, we are not just advising to make investment into Japanese public securities or the Japanese asset. We are now offering the global or [ merge ] asset to the investors. So that's a little bit different in my opinion. And for example, if I visit our local branches, I'm always asking to my sales team, what's the discussion with the clients then 2 years ago, most of the case, they are discussing about the U.S. opportunity because Japanese equity was like this for 20 years. So that type of things. So we are, of course, trying to shift the mindset of the investors and to shift the money from the banking account to the investment account. However, we are not just, I mean, advising to make investment into Japanese asset. That's the, I think, however, that you are thinking -- I'm saying is, I think, very much in line with our understanding. Am I answering to your question?

But even that seems to be saying, okay, U.S. stocks have done very, very well. So invest more in U.S. stocks and not in Japanese stocks. And that also creates this sort of highly volatile momentum-driven type of investing, which will discourage investors from continuing to do that.

Very difficult question.

Difficult question. Maybe no answer.

[Interpreted] Okay. Any other questions from the floor. Okay. We have one more questions online. Regarding the costs, on a global basis and when compared with your peers, the cost ratio is quite high. Do you have any target in mind?

[Interpreted] This is Kitamura. Thank you for your question. As you point out, yes, the cost income ratio is a key metric that we focus on. And at the moment, the cost income ratio for wholesale is 90%, extremely high. One reason is the level of the expenses and also with the current market environment, the top line has been somewhat weak as well. And for wholesale, with the -- with Chris Willcox, the new Head and the [indiscernible] of the finance team will work on lowering costs. And the target for wholesale is 80% cost-to-income ratio. And at the moment, we also have quite a high cost level at the firm-wide level as well. And as Okuda-san said earlier, we have plans to improve earnings in retail and change the earnings structure, and that should help improve the cost structure of retail. And going forward, we have wholesale, investment management and retail are 3 business lines. And we will be targeting 73% as the cost income ratio for the 3 business lines. And this is the level that we explained in May in the Investor Day, by Okuda-san. Thank you.

[Interpreted] The next question was also submitted to the web. The next question is also from the web. After Okuda-san became CEO, digital initiatives and steps have been taken for the next stage of growth. If these policies are implemented and growth is realized, what kind -- what would be the presence? What kind of presence will Nomura have in the society at large as a company?

[Interpreted] This is Okuda speaking. In the global context, what's the ranking, we're not so worried about that. But as I always say, to contribute to the society's sustainable growth, that's the kind of company we want to become. And our biggest priority is for Japan and the world to be well connected, and we see east and west, but bridging the east and west. And another priority for me personally is 27,000 employees on a global basis contribute to Nomura and I want them each and every one of them to be excited as they wake up every morning and go to work. Of course, ROE represents, we have numerics, which we share with the public, but those are the concepts behind those numeric targets.

[Interpreted] Thank you. Any final questions from the floor? Okay. With that, we have one more question online. In Japan, this shift from savings to investments. The regional financial institutions do not have the capabilities to support investments, not necessarily anyway. And -- so in that sense, your alliance with the regional banks is, I think there's an opportunity to accelerate that initiative. So please talk about how you plan to accelerate the alliance with regional banks?

[Interpreted] And we have already started with 2 regional banks, and we will be adding Oita and Fukui Bank totaling 4 regional banks that we work with. And we will kind of focus on our current initiatives and once we start achieving results, the other regions, other regional banks will start to want to join this alliance. So -- and the partnership may differ by each bank, but yes, we will continue to focus on the partnership and alliance with regional financial institutions. Thank you.

[Interpreted] Next question. And again, this question is through the web. U.S. financial sector and macro economy, regulatory areas, your new BoD members have expertise in such areas. What kind of suggestions and comments do they have with regards to Nomura's Americas business and strategy for the Americas?

[Interpreted] In that case, executives and nonexecutives are clearly separated in the governance structure that we have in place. And based upon that structure, the outside directors and especially the 3 based in the United States, are focused on clients, and they know that there is demand for the U.S. market amongst our clients, and they are granting us extremely effective and valuable advice from such perspective. So they support us, and they also criticize us.

[Interpreted] The next question. Any questions from the floor? Yes. Lady, yes, 5th floor from the front.

What is the strategic thinking within Nomura at the moment in the sentiment? Are you in growth mode, restructuring mode, crisis mode?

Sorry, I'm answering in Japanese. [Interpreted] Yes, the market is extremely volatile, and we would like to grow, of course, but we will make cautious investments. And as for the underperforming businesses, we will control costs and so we will try to reposition it for future growth. And as I explained, the business in Japan is undergoing a change of the business model. And for wholesale, we have changed the head and we plan to further reinforce our initiatives in wholesale. So we are doing what we can and what we should in this tough market environment. And when the market recovers, we would like to make sure to capture the opportunities and achieve results.

[Interpreted] Any other questions from the floor? Then let me select another question that has been submitted online. Overseas wealth management business, what's your prospect for business opportunities going forward in this area? And if any change would be required, what are the changes you need to implement?

[Interpreted] This is Okuda speaking. Thank you for the question. Since 2 years ago, centering around Asia, let's restructure our wealth management business. We replaced the head and we have been establishing a new team. Bankers RMs have been hired a new and focusing on Asia, business is expanding and AUM is also increasing. And already, this has been announced, but we're going to open an office in Dubai, again, and therefore, initiatives are being strengthened. What's the driver? I think that's what the question meant. Of course, human resources is the key. But wealth management is also a systems business. Systems, meaning IT system, systems, meaning compliance, LCC or system for the team operations. And I think this is a bit of a challenge for Nomura so that aspect included, we want to reinforce our strength to engage in this business. And this is not just about wealth management, but wealth management and asset management, M&A advisory for these areas, if there are opportunities, we want to capture such opportunities for growth.

[Interpreted] This is Kitamura speaking. Let me add some numbers. Two years ago, when we embarked upon the restructuring of this AUM was 6 billion, and it's current 12.5 billion. Well, it's in between 13 or 12 depending on the market value, but that's how much of the assets have expanded. We've gone through new hires. And as Mr. Okuda said, infrastructure was outdated. But during the past couple of years, we have revamped our infrastructure. And we have introduced infrastructure that's standard in the sector. And RM, who will be newly hired in the months and years ahead, will all be able to operate the system from day 1. So we have high hopes.

[Interpreted] This next question is, since Okuda-san's appointment, the number of press releases has increased. So we see a pickup in the group activity. And perhaps this may -- yes, are there any activities that still have not reflected on your earnings? Are there any focus areas in terms of activities that we should know about?

[Interpreted] Yes, the number of press releases, yes, they have increased quite significantly. And this is because we are doing all sorts of new things like in Japan, the alliance with regional banks and in investment banking, we are working with SPARX, Nomura Real Estate, Search funds. And in the U.S., we are working on private debt. And in Japan retail, we are changing the way we do business. And internationally, we have set up the digital company and we have set up several digital assets companies. So yes, we are doing all sorts of things. And we want to continue these new initiatives. And if they don't work, we will stop them and continue that kind of cycle. And on the other hand, things that don't show up in press releases, other activities. Well, and this is kind of related to the engagement we talked about earlier. But in the firm, we are talking about purpose and how we plan to change the firm. And we are having those discussions at each layer, including SMDs and the new graduates. And they are -- employees are actively engaged in these discussions. And despite the tough environment, how can we make Nomura Group better and I've always been saying from public to private. Nomura is quite strong globally in terms of products and services on the public arena, but private is still -- this applies to alternative products and also engaging with customers one by one and building a long-term relationship we still are not where we want to be. So the question is how to expand the private side of the business, and we are having a lot of discussions internally. And this, I think, will lead to new businesses, new strategies and I am trying to promote that within the firm. And in terms of training, just last week, we had the management seminar of Nomura, including international members. The MD level members joined. In Japan, they will be the [ bucho ] or the general managers, so [indiscernible] just right before becoming directors and we had about 30 participants spend 6 months and they gather several times a week and do the case studies and the role playing sessions and discuss with senior management as well. And just last week, we had the presentation of this management [ juku ] or management sessions, and [ Me ], Kitamura-san attended until late at night and heard the presentations by the global teams. And this is something that Nomura hasn't done in the past. Nomura is working together, both in Japan and the international members and the employees are trying to grow themselves as well as a firm. And we are finally able to do this kind of initiative in the past few years. So this is something that will lead to the next press release, I believe.

[Interpreted] It's close to the closing time. So the next question will be the final one. And first of all, there's a question regarding China. Currently on a global basis and on cross-industrial basis, China risk is receiving attention. What is the stance of Nomura regarding China business?

[Interpreted] Thank you. This is Okuda speaking. Regarding China business, centering around Hong Kong, Asia, offshore business, and we have the Head of Asia here and that's one focus point. And for onshore business, tilted towards wealth management. Since 2 years ago, we obtained license and have been engaged in such business. Office. Shanghai, Beijing, Guangdong, [ Shuguang ] 4 offices have been opened and 250-plus employees are onshore. And most of them are locals. So that's where we are in terms of our presence in the Mainland. As pointed out in the question, there is quite a high geopolitical risk. We are sensitively analyzing the geopolitical risk to engage vigilantly and continue investment carefully and cautiously. And if risk or if recovery begins, there's high growth potential in China. So whilst we will keep an eye on risk although extremely cautiously, we wish to continue our business in China. That is our position.

[Interpreted] Thank you very much. We are at about time. So with that, I would like to end Nomura's -- Nomura Holdings session. Thank you very much for joining.