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

Good morning. I am Okuda from Nomura Holdings. Thank you very much for attending our Investor Day event despite your busy schedule. In Japan, the status of COVID was lowered to Class V on May 8, the same level as seasonal flu. Before the COVID, major changes that change the structure of society as a whole gradually spread over 10 to 20 years. However, over the past few years, we have been forced to make radical changes in our lifestyles and the ways of working with digitalization being an example. These changes might have happened even without the COVID. But I think the pace of change has accelerated sharply. With that, we are seeing changes in every business that we wouldn't have expected otherwise. Of course, macroeconomics and the financial markets are no exception. We are confronted with the fact that things that had been taken as normal, such as globalization, low inflation, low interest rates, low-cost financing, safety of financial institutions and so on were never taken for granted. The environment around us has changed dramatically and will continue to change with speed. We have to keep up with those changes. Now let me use the slide and proceed with my presentation. In the U.S.A. inflation has accelerated sharply since 2021 against the backdrop of supply constraints associated with the reopening of the economy after the pandemic geopolitical risks. Although there are recent signs of improvement, the labor market has remained tight for a long time and the concerns about the prolonged inflation and high policy interest rates remain strong. Against the backdrop of a strong labor market, the Fed began raising rates in March 2022 and in June, began reducing its assets in a move known as quantitative tightening. With looming uncertainties over the U.S. regional bank sector, there are concerns about the negative impact from potential credit crunch weighing on the economy. Interest rate and currency volatility increased in the bond market following the Fed's rapid rate hikes. In March, the collapse of major U.S. regional banks and the UBS takeover of Credit Suisse were announced. And the move interest rate volatility index, the bond version of the FIA index sort to above the levels reached during the 2020 pandemic. On the contrary, stock market volatility gradually remained low. In addition, there was a market tendency for companies to refrain from raising funds and conducting M&As. If you look at the global people of investment banking in the last one year, it has almost halved since its peak in 2021. In the previous fiscal year ended March 2023, total revenue in the 3 segments increased 2% year-on-year. Macro products were particularly strong in Wholesale Division. We were able to achieve significant earnings growth on the back of increased interest rate and currency volatility and increased client activity. Broader asset management businesses, such as investment management business revenue and Retail Division recurring revenue were also performing well. And these stable sources of revenue supported performance in times of great market volatility. On the other hand, for all other key businesses, the results were generally [ cream. ] These major environmental changes are also creating new business opportunities for Nomura. Three years ago on this occasion, I talked about taking Nomura to a different place -- a different stage from where it stands now. And in addition to public expanding into private areas of the strategy to realize this. We realized that investors' needs for private assets and alternative assets will increase in the future. Investing in alternative assets that are less correlated with traditional asset classes such as stocks and bonds, provides diversification benefits, of course. But infrastructure and real estate also provide a hedge against inflation as they make it easier to raise the fees as price rises. Private market funds are also expected to be a source of liquidity at a time when banks are taking a harder line on lending due to a series of failures of U.S. regional banks. The expansion of the private debt market in the first place was driven by the need for new financing tools to fill the vacuum created by tighter regulations on bank lending following the 2008 global financial crisis. We already have a proven track record in these areas and will continue to expand business as the market expands. In Japan, under the government's asset-based income doubling plan, there is a growing movement to shift personal financial assets from savings to investment, including the expansion of NISA, N-I-S-A. With the increasing possibility of major shift in household financial assets in Japan, we recognize that we have a significant role to play and that represents a significant business opportunity. Now I would like to discuss Nomura Group's strategies to increase its corporate value. In the past 3 years, under the strategy of expanding into and strengthening private areas in addition to the public, we have strengthened corporate governance, enhanced risk management reinforced platform within the group entered into alliance to expand private and alternative investments and set sustainable finance goals and other initiatives. The strategic alliance with regional financial institutions that began in September 2020 is one of our key projects. So far, we have started partnership with San-in Godo Bank, Awa Bank, Oita Bank and Fukui Bank. At Nomura, we have expanded our existing business areas and constantly evolve our services. We aim to bring that service to more customers than ever before. At the same time, we hope to take a longer-term view and contribute to the local economy together. In the field of digital, in May 2022, we established laser digital, a new digital asset-related subsidiary in Switzerland. The environment surrounding digital assets is undergoing a major transition, including the collapse of FDX in November last year. We believe that in the current environment, it is important for financial institutions trusted by customers to provide services. As a group, we'd like to enjoy the growth opportunity in new areas such as digital assets. On the other hand, overseas, we are also revisiting resources for non-core businesses. The Credit Suisse incident drew attention to risks of AT1 bonds. At Nomura, while establishing segment-based structure in Japan, we have worked to provide products that meet clients' needs and circumstances. I believe such approach of ours was highly appreciated by clients in the form of high level of satisfaction. We won the top spot in the 2022 M&A advisory ranking, and we're also the leader by value in the recently released rankings for the first 3 months of this year. At Nomura Asset Management, a total of 17 funds won awards, including 8 top fund awards at the R&I Fund Awards 2023. Also the Refinitiv Lipper Fund Awards Japan 2023, Nam won awards for best fund and best company in the defined contribution pension equity category. In addition, as you see on this slide, we have a high share in many areas. Each division head will explain details of business strategy later. In Retail Division, we have completed the development of a segment approach to provide services according to each client's needs that we have been pursuing since 2019, and we will steadily produce results from alliances with regional financial institutions. The Investment Management Division has worked to expand needs of expanded -- investment opportunities in private assets to meet diverse needs of investors. We aim to fund further build up our assets under management but through a joint venture established with Nomura Real Estate and launching a fund to invest in private credit in the United States. Wholesale Division is working to diversify and stabilize earnings to build a business portfolio that is less susceptible to market conditions. At the same time, the key theme is to select and focus on strong business and to exercise cost control. We are also further expanding our International Wealth Management services to ultra-high net worth clients by opening a Dubai branch as a new location for Wealth Management. In addition, we believe that there are new business opportunities, but we have not been able to monetize in the past because they were in between different dividends and departments. From a standpoint of optimizing the whole group, the departments will cooperate with each other to deliver ever more added value and achieve business results and earnings. I will ask Mr. Nakajima, Deputy President to lead this effort from a group perspective. In the private markets area, which we see as the future growth area, we will aggressively pursue growth opportunities, including inorganic and aim for top line growth. At the same time, we will promote structural reforms throughout the group with clear goals and deadlines. We also established the Structural Reform Committee which is led by Mr. Sugiyama Deputy President. The mission of this committee is to look at how we can do business more efficiently and do it with a set time frame from the front, middle and back office operations, we are thinking of a fundamental review of the way we work as a whole. As a result, over the medium term, we will strive to establish a business model that can achieve a stable ROE of 8% to 10%. To achieve our goals, we will work on 3 priority issues. The first is the recovery of the top line and the expansion of businesses that are less susceptible to market conditions. The second is cost control through thorough structural reforms. And the third is appropriate resource allocation. As for the first one, the expansion of the top line, we aim for total revenue growth at about 20% in the 3 segments toward fiscal year 2024, '25. Of course, this is not enough for the ROE we are aiming for. We hope to achieve this by creating new revenue opportunities through interdivisional cooperation, controlling costs and pursuing inorganic growth opportunities. Next is on continuous cost control efforts. The total cost level for the 3 segments for fiscal year 2022, '23 was JPY 1.1 trillion up about JPY 120 billion year-on-year. Most of that is attributed to the Wholesale Division. 95% of the increase in Wholesale, about JPY 115 billion was due to the impact of the weaker yen and the increase in fixed compensation caused by inflation, especially overseas. Even if this environment is to continue, we will continue to lower our cost levels to ensure that we are profitable. We will aim to reduce cost by JPY 50 billion as a short-term measure for fiscal year 2024, '25. And with further structural reforms in the medium term, we will strive to lower cost by an additional JPY 12 billion. Each department head will explain the measures taken by each department, such as the cost income restructuring project of Retail Division. We evaluate businesses quantitatively and qualitatively and allocate and manage resources, primarily from the perspectives of ROE growth potential and stability as part of the concept of capital allocation to continue enhancing corporate value. We evaluate based on rigorous criteria that include specific indicators such as whether there is the potential to consistently generate stable profits, whether we can contribute to improving our services for our clients, increasing market share and stabilizing the overall portfolio and whether we see a cultural fit. In other words, adaptability to a corporate culture or not. We are also considering the short-term and medium-term financial impact of investing capital and make decisions comprehensively. Even after the allocation of capital, periodic reviews are conducted to improve capital efficiency based on the progress of the strategy and changes in the external environment. We will continue to maintain resource allocation discipline as a group while considering various options such as reduction of resources or recovery of capital or exit as needed. Looking at the risk-weighted assets usage by divisions. At the end of March 2023, Wholesale Division accounts for about 2/3 of the total. As for the other 2 divisions, Retail does not use much regulatory capital and investment management is a regulatory capital light business aside from investment business. Wholesale Division inevitably uses a greater amount of capital to fulfill its group-wide product sourcing and client liquidity provision functions. Going forward, taking into account the risk return characteristics of each business, and its role within the group. We hope to achieve a stable 8% to 10% ROE over the medium term for the group as a whole, while demonstrating our strength in each business and addressing challenges. We have conducted disciplined business management in line with the concept of resource allocation, including strategic investments in growth areas and portfolio readjustment. Against this backdrop, we have also made exits to reallocate management resources for future growth, such as decisions to sell businesses that have lost strategic significance due to changes in the business and regulatory environment. In addition, given the limitations to doing everything by ourselves, we have been actively working to create new added value and synergy through alliances with regional financial institutions, with a strong customer base in recent years. In order to lift corporate value sustainably, we believe it is important to optimize the balance between financial softness, investment for growth and shareholder returns. As for our shareholder return policy, we raised the dividend payout ratio from 30% to 40% or more, taking into account industry averages. While we have left the total payout ratio of 50% or more unchanged. Because we are sufficiently competitive with other companies. We will continue to flexibly repurchase our own shares in light of our stock price and business performance. While adhering to investment discipline, we will always consider organic, inorganic investment for sustainable growth and improve client services, adding new capabilities through M&A and expanding our client base as options. Despite the current uncertain market environment and the prospect of the finalization of Basel rules, we recognize that our capital level is sufficient. We are engaged in communication with shareholders, especially with individual investors as well as institutional investors. With the intention to entice individual investors to watch carefully, we held an online briefing for individual investors in March last year, inviting a famous comic storyteller with an interview format. This year, with a slightly more serious note, we hosted Professor [indiscernible] of Masahiro University Business School to talk talk about the Nomura Group's strength and the way we want to be. The number of views of the video far exceeded that of last year, and I hear that it is close to 100,000 times now. We hope to turn as many individual investors as possible into fans of Nomura. Finally, I would like to talk about the foundation that underpins Nomura Group's sustainable growth. The plan to double asset-based income also addresses the need to enhance financial and economic education to install the importance of stable asset building. Since the 1990s, Nomura has provided financial and economic education ahead of peers. Today, we offer a wide range of programs to all generations from elementary, junior high, senior high school and college students to corporate executives and staff to senior citizens after retirement. The total number of participants in the course exceeds 1 million. We will also continue to provide financial and economic education through a collaboration with alliance partners and companies outside financial services industries. About 40% of Nomura Group's employees work in more than 30 countries and regions, and there are about 90 nationalities. Our diverse human resources and diverse values are the source of our competitiveness. A breakdown of the hires in the year ended March 2022 shows that in Japan, more than 50% of new employees were mid-career hires rather than new graduates. In addition, 7 out of 15 newly appointed executives who took office in April this year, started their careers outside Nomura. We believe that, along with more visible diversity such as gender, it is equally important to have what we call task type diversity, such as the education received abilities of and the work experience accumulated of individuals. Last October, we added equity to the group's diversity statement. In order to continue to provide high value-added services to our clients in a rapidly changing environment, it is important to have an environmental structure that enables each individual to make the most of his or her abilities. We want to focus on individual abilities and experiences so that everyone has a fair chance and develop a career. To that end, we are implementing various initiatives. In recent years, we have expanded our second career support program for employees, launched alumina which is a network of retirees and rehired employees who had left Nomura. We were always saying we welcome back those that had once left us by experiencing working for other companies. They are exposed to diverse values and criteria. So they are able to look at Nomura more objectively, allowing them to more easily take on challenges and new ideas without fixated on existing ways of doing business. They can also exert significant influence over people around them as they chose to come back after experiencing working at other companies and comparing them to support 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 spontaneously develop their careers. The number of applications has increased 4.6x in recent years, and the number of hires has increased by 8.3x. We believe it is a good system for both hiring departments and employees to reduce mismatches in work and career plans. In fiscal year 2022, '23, approximately 540 employees applied and about 210 employees were transferred to their desired departments. In addition, in order to encourage employees to take on new challenges, we had a training program last year for young employees to be seconded to venture companies for 1 year to engage in business. I hear that they were able to learn strategic planning, project promotion and business management skills and experience the steady business development and innovation creation unique to venture companies. I spoke to the members that participated in the program, and I could really sense a huge change. Reskilling and recurrent education is gaining attention for the purpose of developing digital savvy human resources. We are living in an era where the competitiveness of global financial institutions is determined by digital knowledge. This is a skill set for the future. In order to expand the initiatives to date on a group-wide basis, reskilling is indispensable, which means that all the employees in the group will have to upgrade their knowledge and skills, not just limited to those in IT-related departments. In 2021, we launched Digital IQ, which is an online program to support the acquisition of digital-related knowledge. We host events and educational activities to improve basic digital knowledge as well as offering customized curricular, fine-tuning the course to fit the needs of specific of teams and roles. The promotion of healthy management is expected to enhance business performance and corporate value by revitalizing the organization through improvement in productivity and vitality of individuals. The company is also focused on initiatives to maintain and improve employee health. In March this year, the company was selected as 1 of the 49 Health and Productivity 2023 Stocks jointly sponsored by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange. This is to introduce companies that are attractive from a healthy management standpoint to investors that consider enhancement of corporate value to the long-term perspective. We are also strongly committed to employee engagement. In an employee survey conducted in July last year, about 80% of the employees responded favorably to a question about the direction of the company. The third, the results clearly show that the challenging and changing mindsets have a clear causal relationship to engagement. An organization can truly demonstrate its ability only when all the employees are aligned after clearly showing the direction the company is heading into and what is intended to be achieved as a group. We need initiatives and structure in place to move in the same direction through day-to-day work, where all employees are fully convinced about the direction rather than simply present a vision. As part of such initiatives, we set up what is called CEO corner on the internet. To let the staff feel less distant, I talk about my own situation or one is on my mind lately or answer questions directly from the staff. We also created a series of videos where the executive in charge of Corporate Communications would interview the members of the top management team regarding Nomura's management strategy. The first installment was about me, and I was given a soccer ball and was asked to hit the ball. We recognize and our strengthening corporate governance is one the most important issues in achieving our management objectives. Since 2010, our Board of Directors has had a majority of non-Japanese outside directors. In 2015, Outside directors meeting was established to discuss our business and corporate governance issues on a regular basis. In 2019, all 3 committees were chaired by outside directors in order to further upgrade the government system. As the outside board members have become more diverse, I have come to realize that the effectiveness of the Board has increased. For example, we would receive -- we would be given views from people overseas that would not easily come up if you only had Japanese members on the board or we would be given professional advice on finance or would receive suggestions from a perspective of a manager. Furthermore, in 2021, as part of our efforts to enhance our risk management, we established a new specialized supervisory body, the Board Risk Committee to strengthen supervision from an independent perspective. At Nomura Asset Management, they have also had 2 outside directors since 2015 and 3 out of 8 directors currently serve as outside directors, including the Chairperson. Two of them are experienced heads of foreign and domestic management companies. As the head of the group, I believe my role is to push for change as well as create change. The current movements and changes in financial and capital markets are very rapid and significant. We want to be more vigilant and carry out our business more carefully than ever, including risk management. On the other hand, a volatile market environment is also a great business opportunity for us. In Japan, I believe there's a huge business opportunity ahead of us, thanks in part to the policy push, such as the expansion of NISA. Since I was appointed the head of Nomura 3 years ago, under consistent strategy, we have made the necessary moves. The structures and platforms necessary for driving change are being put in place. In this fiscal year, we will continue to do what we need to do and discontinue what we should stop. We would be taking measures that are decisive and effective we would like to make a concerted effort as a group to steadily promote our business and achieve solid results. Thank you very much for your attention.

Our next speaker is Mr. Sugiyama, the Head of Retail Division. Mr. Sugiyama, please.

I am Sugiyama in charge of Retail Division. I'd like to talk about Retail Division's performance of last year and the initiatives and then explain our strategy going forward. Firstly, I would like to start by looking back at the initiatives of the year ended March 2023. In the last fiscal year, the stock market has lacked a sense of direction throughout the year, creating a significant headwind, especially for flow revenue. However, there were signs of recovery in the second half, and the flow revenues were on a recovery track. In addition, we were able to secure a net increase in recurring assets amid sluggish growth in the investment trust and other assets across the industry, partly due to a decline in sentiment caused by deteriorating performance of client assets. Our ongoing efforts to control cost helped us improve our recurring revenue expense coverage ratio from the previous fiscal year and maintain upward trend from the fiscal year ended March 2020 when we began our business design initiative. On the other hand, with respect to the results below the plan, we believe that there was an issue that segmentation and resource allocation were not optimized. In our efforts to expand our segment-based approach, it has become clear that segment needs -- customer needs very greatly depending on the size of their assets. However, we believe were unable to adequately respond to the needs of our customers due to the lack of a well-defined resource allocation for these needs, resulting in unproductive situation. To address these challenges, we have implemented extensive segmentation and optimization of resource allocation, which I'd like to explain. The organizational change this year aims to improve productivity in each area by splitting customer needs into face-to-face needs and non face-to-face needs and allocating resources appropriately to meet their needs. Well, the red part in the chart on the right is in the segment. Is the segment with high face-to-face service needs, which will be a key area where we can maximize our strengths. We believe that our value proposition is that we provide customized services to customers with complex assets concerned through in-depth face-to-face communication to increase satisfaction and lead to the next business, creating a positive cycle. On the other hand, there are many customers, especially those in the working generations who are busy or have relatively simple concerns about their assets who love light-touch services. From this perspective, we have implemented organizational changes to clarify customer targeting based on needs and to dedicate significant partner resources to face-to-face needs. For non face-to-face needs, we will narrow down our staff, and we will aim to expand the business by combining the added values delivered by our partners with digital tools. With a series of organizational changes as key drivers, we aim to improve the profitability of the Retail Division with optimized resource allocation. From here, I would like to explain the KGI and KPI targets for the fiscal year ending March 2025. First of all, we aim for a recurring revenue of at least JPY 150 billion. We aim to establish a stable revenue base by providing portfolio management services, including investment trust and discretionary services with our focus on face-to-face business. As the division's target KPI to measure progress towards that goal, we have placed recurring asset balance of JPY 21.6 trillion and a net increase in recurring asset of JPY 800 billion per year. Next, we will aim for a flow revenue of more than JPY 200 billion. To achieve this, we have set a goal of 1.46 million flow business customers as a divisional KPI. In light of uncertain market environment, that's expected to continue. We have factored in a stagnation and decline in voluntary transactions, particularly for customers with non face-to-face needs, while we hope to achieve significant expansion in flow business with customers with face-to-face needs. We are aiming for pretax income of JPY 95 billion, which is KGI by reducing costs by JPY 20 billion, while achieving 309 -- JPY 360 billion in revenue. We have also set 3.66 million accounts as the number of workplace services provided, and we'll work to expand our customer base. Next, I would like to explain our efforts to achieve the KGI and KPI goals I mentioned. The key will be the scale of face-to-face services and increased profitability. I would like to explain the organizational changes that have been implemented in various areas to achieve this goal and the objectives of these changes. First comes the wealth management and corporate ownership areas. This will be an area where we will focus on particularly complex and highly individualized corporate businesses. But we have come to see that consolidating a certain number of people as a team and promoting knowledge sharing will greatly contribute to business expansion. And based on this, we consolidated channels for the corporate ownership territory of our neighboring branches in Tokyo, Nagoya and Osaka and in other major cities, while simultaneously pursuing integrated management with wealth management which also engages in sophisticated corporate businesses, making us the largest private banking force in Japan with a total of 600 members. We will continue to upgrade our business solutions by strengthening group collaboration and headquarters coverage as we narrow down our location. Next comes the high net worth segment where there is a strong need for customized face-to-face services for each customer and where we have the most depth and strength. In fact, although the overall number of flow business customers was weak last fiscal year overall, the number has not declined in this area, high net worth area, and we have been able to steadily capture customer needs and move toward expansion in a difficult market. On the other hand, in this customer segment, high net worth segment, improving customer satisfaction through careful communication with customers is the key. So we believe that by narrowing the number of customers assigned to each partner productivity is expected to increase. So in this context, a significant increase in personnel was implemented this spring, resulting in an organization with 4,200 partners. In addition to improving the productivity of each partner by activating existing customers, have not been able to realize their needs. We will work on acquisition of new clients, which has been stalled due to the pandemic. Then the blue part on the left, bottom left, the mass affluent area. This is an important area for expanding the investor base. But there are many customers who want easy and user-friendly services rather than high-touch support. And we believe that this is a customer segment that is difficult to scale solely on the strength of our partners. From this perspective, the digital customer service department has been established with the aim of establishing a business approach that is not an extension of the conventional approach. This organization achieves a combination of digital and partner services, providing services digital for providing information and checking investment status while providing high-quality services by partners are the appropriate time such as product proposal. We hope to achieve early results in terms of improving productivity while putting the business on a medium- to long-term growth track. This slide is about our cost strategy. As the graph shows, we have been able to achieve cost reduction on a continuous basis, but we launched a project to reform the revenue and expense structure last fiscal year and hope to achieve a reduction of about JPY 20 billion from the fiscal year ended March 2022 at the run rate basis as of the end of March 2025. At present, we have identified items that achieved 60% of the target saving through measures such as curbing outsourcing and optimizing human resource allocation, and we expect to see a substantial reduction effect from this fiscal year. On the other hand, there are also factors that could cause expenses to increase, such as the effects of inflation and seeing increase in expenses due to the fact under the alliance with a regional bank, revenues are once fully recorded by ourselves first, and then fees are paid back to the partner regional banks as expenses while making the necessary investments to expand our business, we will continue to control costs and realize a shift to a more lean organizational structure. Now let me explain the medium-term strategies we need to achieve sustainable growth. The most important thing is to establish a dominant brand in an expanding high net worth segment. The financial assets held by individuals above the high-net-worth class in Japan are JPY 364 trillion, a fertile market that has doubled in the last 10 years,and it's expected to continue to grow. In addition, due to inflation and other factors that have recently become apparent, we expect that the number of people who have trouble managing their assets will increase. And the number of clients who find out it value to our face-to-face services will increase. Therefore, we would like to establish a dominant brand in the high-net-worth market. designating this client segment as our main target. In order to achieve high productivity as well as franchise expansion, it is necessary to establish a mechanism to attract new clients. The strategy of non face-to-face business, which is highly compatible with the new Nisa and workplace business and alliance will become important as customer acquisition channels unique to Nomura. These strategies will contribute to expanding the base of investment by focusing on productivity in our various strategies and continuing to work on cost control, we will increase our recurring revenue expense coverage ratio to the 70% ratio and create a structure that will enable us to keep profits our KGI stable. Next, I would like to touch on the direction of non face-to-face business and workplace business and alliances. In terms of the direction of non-face-to-face business, Retail transformation initiatives will be important. We define this as revamping our service offerings and client coverage in response to customer behavior and social and environmental changes. Through this initiative, we hope to develop a sustainable service system for customers with non-face-to-face needs. One example of this is digital customer service department that you just saw. As an example of this -- one example of this is as a result of test case implementation last year, we have been able to focus on partners resources on customer service and dramatically increase the number of customers we can serve by replacing administrative procedures and marketing information services with digital services in light of changes in customer needs and behavioral patterns. However, the decline in customer satisfaction and their exit are limited. In order to further increase the business productivity, we offer a variety of digital services for our customers, including the Nomura app and online services. And through UI improvements, we aim to improve productivity by providing services that allow customers to enjoy light-touch services. Next, workplace business. Workplace accounts are our major strength and approximately 1 million of the total number of work-related services provided are accounts with balances originating in the workplace, making a significant contribution to new customer acquisition base. In order to maximize its business potential, we are currently working on a pathway from workplace services to our proprietary securities business. By combining B2E, financial and economic education and laying the groundwork for employees to open securities accounts with us, we hope to help strengthen human capital at our client corporates and realize business with their employees in the future, leading to a medium to long-term expansion of our base. Finally, I'd like to explain the alliance. Our comprehensive business alliance with San-in Godo Bank and Awa Bank has been steadily producing results in a challenging market environment. Penetration of recurring businesses, in particular, has been remarkable with a net increase of more than JPY 40 billion in investment trust and discretionary funds in the fiscal year ended March 2023, and a substantial increase in the ratio of recurring revenue strategy that embodies the direction we are aiming for. One of synergies of this alliance strategy is that we can reach out customers that we couldn't buy ourselves. Thanks to the regional banks, extensive branch network routed across the regions, but it is also a business model that contributes to productivity growth of both regional banks and Nomura. By sharing the middle back-office functions, know-how and infrastructure, including the systems for the securities business, we have been able to pursue efficiency and as a result, help improve the profitability of regional financial institutions and ourselves. We started a partnership with Oita Bank in March and with Fukui Bank in May, and we would like to consider expanding if there is a regional financial institution that can share our philosophy. That concludes my explanation. We hope to hear your frank opinions and questions later. Thank you very much.

We will move on to have the Head of Investment Management, Mr. Namura to give a presentation. Mr. Namura, floor is yours.

Good morning to you. I am Yoshihiro Namura, Head of Investment Management. We aim to expand our product offerings and improve our services to meet the diversifying asset management needs of our clients. It's been 2 years since the division was founded. And so far, we have been digging deep into businesses in the public market areas as well as exploring new businesses in the private space. I would like to explain our strategy within the division. First, I would like to review the past fiscal year and outline our goals for the fiscal year ending March 2025. In fiscal year 2022, '23, market conditions remained challenging due to global inflation and monetary tightening in major countries. Investment gain was declined on year and expenses in our core business increased due to the weaker yen inflation, increased operating expenses and front model investments. Even in this market environment, we were able to maintain the top line at the same level as the previous year. However, compared to the assumption held a year ago, assets under management have been trending at a slower pace than expected, and the investment gain loss has also been affected by the tightening of monetary policy in the United States. Therefore, we revised our target for fiscal year 2024, '25, to aim for income before income taxes of JPY 63 billion. In public markets, we will work to grow AUM and provide higher value-added asset management, while in the private markets, we will work to expand our business in Japan and abroad and will fully launch the real asset business. Next, I will go over the key points in achieving our targets. Please look at the graph. The graph on the left shows the trend line we have followed over the past 10 years with the AUM on the horizontal access and management fees on the vertical axis. While assets under management grew significantly, there was continued downward pressure on management fees due in part to the intensifying competitive environment in the industry. The size of AUM and fee levels determines our base revenue, which accounts for the bulk of the operating revenues of our Asset Management business. Through the growth of our existing businesses, we aim to further expand our AUM while focusing on areas with higher added value and higher fee levels. As shown in the chart on the right, as part of the medium- to long-term business portfolio. In the public markets, we will focus on expanding credit investments and sustainable strategies outside Japan and strengthening in-house investment management through strengthening product governance in Japan, while in the private markets, we will concentrate on growth in areas with higher fees, focusing on scaling business in Japan, fully launching overseas businesses and expanding into the real asset space. Now let me start with the initiatives in the public markets business. In the public markets, we will continue to expand our assets under management through strategic initiatives in growth areas in each of the 4 channels, investment trust for individuals, Japanese institutional investors, ETF and global business. First, I will talk about the Investment Trust business. We will provide products that help individual investors build long-term assets through a wide range of distribution channels nationwide. For example, the AUM of Nomura Asset Management Wrap Fund or Nomuwrap, its flagship product has nearly tripled in the last 4 years. In defined contribution plans, we will increase the use of these plans as default product for DC plans, especially for target year funds and the government's plan to double asset-based income. The government has set a goal of doubling the amount of purchases and the number of accounts in 5 years under the new NISA program. This is an important tailwind for our future expansion of our Investment Trust business. Nomura Asset Management aims to strengthen product governance and focused its management capabilities on high-quality funds to deliver competitive performance. We also aim to grow the investment trust business by contributing to the partner companies. Next is on our efforts in the ETF business. As for ETF we believe there is a great deal of room to expand as an asset management tool in Japan. Since Nomura Asset Management established its ETF business strategy department in 2021, we have expanded product offerings, mainly foreign stocks and bonds as tools for real-time investment in overseas markets. In total, there are currently 67 listed ETFs. We also believe that the TSE will continue to diversify its products and asset classes with the TSE establishing an active ETF listing system. We will continue to expand the investor base of ETFs through the following 3 avenues: Expanding contacts with domestic institutional investors, digital marketing for individual investors with a focus on internal channels and marketing for overseas investors with a focus on Japanese stocks. Next, I will explain our efforts in international business. One area where the decrease in AUM was relatively large compared to what was assumed a year ago was international business. This is not unique to our company. And looking at the UCITS market, which is a common European fund standard. Last year was a very tough year. But even in this challenging environment, we are prepared for our next extension. In addition to our current core investment strategies of high-yield bonds, Japanese stocks and agent stocks. We are further expanding our in-house management capabilities. To expand Nomura's strength in credit management, we hired outside managers in the management of hybrid securities and emerging market corporate bonds. We are also expanding our offerings of sustainable strategies in compliance with the European Sustainable Finance disclosure regulations. Expecting investment needs after the end of interest rate hike cycle, we will expand our business again by developing competitive products globally, including enhancing access to areas outside of Europe. Next, let me explain what we are doing in the private markets business. First, we are working to expand our alternative assets under management. Currently, our alternative assets AUM, our alternative assets under management have expanded to about JPY 1.2 trillion. This space includes gatekeeping management capabilities developed through more than 20 years of experience in evaluating and managing alternative funds and providing solutions to meet investors' needs. A year ago, taking advantage of that strength. We launched Japan's first publicly offered investment trust that invest in unlisted U.S. REITs, the Blackstone U.S. Real Estate Income Investment Trust for individuals. It heralded the democratization of alternative investment in Japan. In parallel, since we established the division, we have expanded our in-house investment strategy in alternative assets. Going forward, we will continue to provide investment opportunities to a wide range of investors, while at the same time, expanding our in-house investment strategy with the aim of further building up our assets. In the area of domestic private corporate investment, we have steadily implemented disciplined investment activities from buyouts to growth investments. In buyouts investment, the enhancement of the value of acquired companies and exits are progressing. In addition, the investment activities of the Search Fund, which invests in business succession buyouts, Japan Growth Capital Investment Cooperation, which invests in unlisted stocks and Mezzanine investment have also made steady progress. In the future, we will scale our investment business by establishing a next fund, aiming to have AUM of about JPY 100 billion over the medium term, we will move to the next stage in domestic private market. Next, in the overseas private market, we will fully launch our private asset management business in the United States. In the United States, Nomura Private Capital was established in May last year to create a fund that invests in private credit and has just begun investment management. The fund targets high-net-worth individuals in the U.S. as investors. In the future, we will strengthen our management structure for our new investment strategy with higher added value in private credit and aim to capture institutional capital. Over to medium to long term, we are looking to achieve scale in our U.S. private asset management business. In addition to investing in the private market companies mentioned so far, we position real asset management as a major driver of growth. In April this year, Nomura Real Asset Investment, a joint venture with Nomura Real Estate Holdings, began managing a JPY 90 billion private real estate fund. The company aims to provide pioneering investment solutions in the field of real assets by pursuing synergies between finance and real estate. In collaboration with other divisions, we aim to expand our property sourcing channels, provide solutions to operating companies and wealthy individuals with real estate holdings and expand our investment management into new areas such as infrastructure. We will utilize our group network to reach a wide range of individual and institutional clients in Japan and outside of Japan. Lastly, in addition to real estate, the real asset business is also looking to expand its business in the areas of aircraft leasing and force investment. After the pandemic induced downturn, the aircraft leasing business picked up last fiscal year, but the airline industry is expected to recover further this fiscal year. Taking advantage of an improving market environment for growth opportunities, we will leverage our strength to solidify our position as a leading brand in the domestic aircraft leasing industry. In the new area of real assets, we acquired a stake in New Forests, the world's second largest forest asset management company in January. Global forest assets have wide scope for investment and growth of global investments as expected. By conducting marketing activities using the group's global client network, we provide access to markets that are expected to grow. In the future, we anticipate the expansion into agricultural fund and carbon credits as new areas. So I have explained the strategy and initiatives of the investment management division. So there are 3 business areas of public, private and real assets, we will expand our assets under management and create high added value, aiming for medium to long-term growth that will satisfy our stakeholders. Thank you very much.

Next presenter is Mr. Christopher Willcox, the Head of Wholesale division. Chris, please?

Thank you, and good morning, everyone. My name is Chris Willcox, and I'm the Head of Wholesale. I joined Nomura in April 2021. And over my 30-year career, I have led businesses globally across investment banking and asset management at both Citi and JPMorgan. My last role before Nomura was the CEO of JPMorgan Asset Management. Today, I will start by outlining our franchise, the strengths that we've built, the competitive advantages we enjoy and the progress that we have made. I will talk through our financial performance and address directly how we will uplift profitability and improve shareholder returns. I will outline a plan based on 3 fundamental tenets: stability, growth and diversification. I will discuss our immediate plans to tackle our high cost income ratio to restore earnings. And finally, I will explain why our growth plans are realistic, achievable and affordable. The last financial year witnessed arguably the most challenging market conditions since the financial crisis. Bond volatility reached 15-year highs and U.S. treasury yields recorded their largest 3-day decline since Black Monday in October 1987. And even now the banking crisis that erupted in March continues to unsettle institutional markets. This dislocation translated into a 14% drop in wholesale fee pools with investment banking bearing the brunt declining over 42%. On a relative basis, Nomura's financial performance remained resilient and we gained market share across both markets and banking. By product, our macro businesses, as Okuda-san pointed out, FX and rates saw year-on-year increases in revenue, bolstered by a 14% increase in our client activity. And while Investment Banking declined, a 20% increase in our advisory productivity mitigated the steeper drop seen across the street. This positive story is true on a relative basis but not yet on an absolute basis. If we look here at our performance in dollar terms, removing the flattering impact of yen depreciation, we see a 7% decline in revenues year-on-year. However, this translated into a 60% decline in earnings on a pretax basis, and this is clearly a suboptimal outcome. Looking back over the past few years, we have made strong progress in reorienting our platform. Our overall revenue performance has stepped up since our restructuring plan 3 years ago but this was not sufficient to absorb a 14% decline in the fee pool. So my conclusion is that we have meaningful structural challenges to address. Firstly, stability. We need to build a globalized platform that is cost efficient, standardized and scalable. Secondly, growth. We need to increase market share in our core businesses, get to scale and unlock operating leverage with particular emphasis on our client franchise. And thirdly, diversification. We need to reach critical mass in wealth and asset management internationally to create repeatable, stable earnings at attractive ROE levels. These are our critical tasks ahead. But importantly, we are not starting from ground zero. We have much of this platform built. We have product strengths and capabilities that are already in place. This slide evidences that point. Over time, we've steadily built a mature set of businesses that can serve as the bedrock of our future earnings. In Japan, we hold #1 market positions across fixed income, equities and investment banking. Internationally, we've also secured over 5% market share across a set of core businesses. And furthermore, we've built new profitable businesses, deploying capital into growth areas such as private markets. These businesses enjoy high margins with PTI increasing by $450 million in recent years. Lastly, we have been quick to take action where businesses are not competitive and do not deliver adequate returns. We restructured parts of our EMEA business in the last 2 years, and we took a much larger scale action in previous years. Turning to the next slide, it is evident that this has been part of the broader transformation of our wholesale franchise. A decade ago, we had a business model that was significantly misaligned to the market opportunity partly as an overhang of the Lehman acquisition. We were underinvested in the U.S., the largest fee pool globally, and we were overallocated in EMEA. Over time, we have addressed this balance, putting more capital to work in the U.S. which has increased from 34% to 44% of our RWA allocation. At the same time, we've increased our resource deployment in Asia ex Japan, which continues to deliver consistent returns whilst still maintaining our dominant position in our home market of Japan. On the next graph, we show our global products in terms of profitability versus resource allocation. And as you can see, there is a healthy correlation. Thanks to action taken historically, the majority of our products have been at or near the threshold required to achieve approximately 8% post tax wholesale ROE over the past 3 years. Equity derivatives continues to stand out as a significant contributor to our ROE. And while last year saw significant market headwinds, securitized products remains core to our own capabilities and balances our strength in macro and equity products. So overall, this is a picture of progress and a platform ready for growth. However, there is still much more to do. Fundamentally, we have 3 challenges to address. Firstly, costs. We need to globalize and standardize our processes and functions to remove duplication and to simplify our operations. In the front office, we need to tighten non-personnel expense controls and streamline non-revenue-producing functions. Secondly, scale. We've built differentiated businesses with leading intellectual capital, structuring expertise and strong risk management but we lack critical mass and we need to address gaps in our product lineup as well as regional gaps. To do this, we need to systematically expand our wallet share with our most important clients. Thirdly, diversification. We need to accelerate growth in international wealth management. And finally, as Namura-san mentioned before, we need to expand our investment management business internationally. None of the above requires a dramatic increase in either headcount or financial resources. The platform is built, we need to take it to the next level. So let me talk through the plan, starting with our current pretax income level of JPY 29 billion. Firstly, costs. As I will shortly explain, we've already taken action to reduce costs. And we should realize the full benefit of these saves in this financial year. And additionally, we're committing to further saves in line with broader group programs around structural perform -- reform and the impact of these savings will feed into our '24, '25 financials. As well as reducing costs, we're also pulling back on some larger scale long gestation investment plans and pushing calendarization of some of the investments over longer periods of time. Following a resizing of the IB platform, we are refocusing on more targeted incremental growth. Given the longer J-curve associated with investment banking bills, we feel this is a prudent approach in the current market environment. We are, therefore, reducing our PTI expectations from the banking business, while ensuring that it remains accretive to the bottom line in the medium term. Global markets remains in line with our previous commitments. However, as I will lay out shortly, we affirmed up our plans to ensure we maximize our ability to deliver on these targets. And finally, we expect Wealth Management to continue its revenue growth and contribute meaningfully to our longer-term earnings profile. This leads us to a '24, '25 PTI of around JPY 130 billion on a fiscal basis, lower than our prior targets, but more realistic given the market environment and this increases to a JPY 160 billion to JPY 180 billion range post '24, '25. In terms of KPIs, we expect to continue to exceed 6% revenue over RWA even on a post Basel III basis, which is a sign of our continued discipline around resource management. We will look to exit '24-'25 at an 80% cost income ratio on a run rate basis and continue to grow our fee and commission revenues towards our $1.5 billion goal. This adds up to a realistic path to improved profitability that is calibrated to the markets that we are currently experiencing. We're focusing on cost saves, and we are centering growth on businesses with proven track records. One of my first steps in the wholesale seat was to launch an immediate review of our cost base front to back. Over the prior 2 years, we made progress in cost optimization, some of which we rightly reinvested into our remediation program to improve controls and processes. Nevertheless, my observation was that there were still areas where we were lacking efficiencies or we were duplicating roles. As part of this exercise, we reviewed over 2,000 roles, and we executed a plan to streamline the organizational model. In Investment Banking, we also took action this January to refocus our efforts around core sectors and products. These combined actions will yield in excess of $120 million in savings this financial year. And looking ahead, we will increase these savings by at least a further $150 million. This requires a group-wide and more structural effort to reform our operating model. The key levers of this program include de-regionalization, vendor and change management and further efforts to standardize across our platform. This will, in aggregate, allow us to reduce our baseline costs, and we see further potential for save beyond '24, '25 from longer-term efforts such as location strategy. We will look to reinvest a smaller portion of these saves into revenue-producing roles as part of our growth plans. And any further compensation cost increases will be linked to improved revenue performance. So these will be variable rather than fixed costs. I'm talking a lot about the need to achieve scale in this presentation. To preface our growth plans, I wanted to briefly illustrate the point. On this graph, we are showing our targeted market share growth plan from 2% to 2.6% over the next 2 years. As we increase client revenues and build scale, we expect our increase in costs to be more incremental. The products, platforms and support infrastructure are largely in place. Therefore, small increases in market share will materially increase earnings and drive down our cost/income ratio towards our 80% short-term goal. This is essential. We need to drive more revenue of our current platform. Our Investment Banking business has had to navigate a difficult fee pool environment this year. Having targeted -- having a targeted IB model where we are clear about our strengths is essential to allow us to build a sustainable global platform. And at the core of our strategy is creating scale around client opportunities in area where Nomura can truly differentiate itself. We have a global competitive offering centered around sustainability and around our market-leading Japan IB franchise. We are now focused on increasing productivity. Advisory MD productivity increased 100% over the past 4 years, and we aim to drive this level higher. We have also expanded on multi-product traction by 20% globally, and we have grown repeat business by 30% over the past few years. We're now focused on systematically enhancing these efforts to drive higher profitability and returns in our IB business. Sustainability is a great example of our differentiated approach in Investment Banking. This mega trend continues to be high on client agendas, and we are committed to maintain our competitive advantage in this space. Since the successful integration of Nomura Greentech, we have globalized our content offering and invested in new talent, increasing international headcount 3x, primarily in the U.S. International productivity has increased consistently over that period. We have expanded coverage across a diversified subsector mix across the full range of sustainability spectrum. This positions Nomura as a leading investment bank with relevance for incumbents, innovators and investors in the sustainability space. And we will continue to pursue this targeted approach across our other globally scaled groups. Global Markets is a key enabler of our ambition for wholesale. Over the last decade, we have built market-leading businesses in GM. We remain the go-to house in Japan with more than 35% market share in credit, 26% in equities and 16% in rates. Likewise, we are consistently recognized and rewarded by clients for our core international strength. We now need to industrialize and globalize our approach to growth. The next phase will come from scaling up areas where we are already strong, whilst also expanding into waste spaces in adjacent regions and products. In equities, a large part of the upside lies in expanding in EMEA and AEJ, leveraging our strength in the U.S. and Japan. Conversely, in credit and FX, there is an opportunity to selectively expand in the U.S. and EMEA by building on our strong Asia Pacific platform. In securitized products, our robust U.S. platform strengths can be replicated and rapidly scaled up in other regions. And in rates, we have a deep global franchise that we intend to grow further. Growing both cyclical and countercyclical businesses across macro, spread and equities will provide diversification benefits and helps this stable through the cycle performance. To support this ambition, we have globalized our organization under an experienced management team. We appointed Rig Karkhanis as the Head of Global Markets, and we created global leadership across all our core asset classes. We have put together a detailed growth plan with an ambition to grow revenues by around 20% in '24, '25. There was a clear road map and executable plans have been developed for each product. For example, in equities, we will globalize our structured products capabilities and deepen solutions and financing activity across regions. In securitized products, we will bolster the core structured finance and trading businesses whilst also expanding into new areas such as trade finance. And in rates, we will expand our core product strengths and increase our client financing and derivatives activity. We, therefore, have a well-defined path to growth but it is critical to ensure we have the resources to support this plan. This entails modest investments to hire the right talent, and these hires are expected to contribute to the bottom line in year 1 as they capitalize on the existing platform and systems. And a number of these hires have already been completed, including the recent build-out of our AEJ equity derivatives team. Expanding these businesses unlocks economies of scale, and it will drive increases in productivity and resource efficiency in our firm. Underpinning this growth is our client strategy. We recently appointed a new Global Head of Sales, Samir Patel, who will partner with our Head of Client Account Management, Anu Jayanti to systematically identify growth opportunities to energize our franchisees. Our clients are sophisticated and the largest ones are present across multiple products and geographies. We have grown our wallet share with our top 100 clients who now represent over 40% of our overall client revenues, but we can do more. We will identify further opportunities based on a forensic database assessment of our wallet gaps to ensure that we are deepening our share with this important client base. And Japan is the bedrock of our client franchise, and we are focused on bringing our full international product suite to our domestic client base in Japan. One notable example of this is the distribution of international private markets products, which we have rapidly scaled up and which are on track to grow further. And finally, we will look to increase our cross-sell across international regions as part of our global sales structure. Finally, I wanted to outline our plans in wealth management internationally. 4 years ago, we integrated this business into the wholesale division to extract the synergies with our markets and banking businesses. We also hired Ravi Raju in September 2020 to take over our expansion efforts. And since then, we have more than doubled AUM to over $15 billion. We've opened 1,200 accounts, 60% of these brought in by newly hired relationship managers, and we continue to make real progress on our core KPIs, increasing net new money by $2.8 billion when our competitors were shrinking, growing overall revenues by 50% and increasing RM productivity by 15%. We also made a series of important strategic announcements in the past 12 months, including the launch of our Dubai office and new leadership to build out our North Asia business. So for our medium-term plan, we expect to achieve over $35 billion in AUM, and we'll look for opportunities to further build on this target. In conclusion, I believe we have the foundations of a business that can deliver consistent returns and shareholder value over the medium term. However, we first need to address the core structural issues of cost inefficiencies, lack of scale and lack of diversification. What I have outlined today is a path towards addressing these challenges. And that plan is already underway. We've already taken action to reduce costs, and we are going to accelerate those efforts at the wholesale and group levels. We have achievable plans in IB and global markets, which are already in execution mode. And these plans will drive economies of scale, improve our core earnings across wholesale. So I look forward to updating you further in the future on our progress in delivering this plan, and I thank you very much for your time and attention this morning.

[Interpreted] This is the first person asking question. Mr. Watanabe from Daiwa Securities.

[Interpreted] This is Watanabe from Daiwa Securities. I have 2 questions. First question is on the outlook of the cost. Page 23 of Mr. Okuda's presentation is what I'm looking at. Wholesale cost will be calculated backward as JPY 800 billion. That goes up compared to the previous fiscal year. But does that assume that the cost will go up temporarily and will eventually come down. Also on Page 11, short-term measures to be taken, JPY 50 billion of cost reductions is mentioned. But how much is the new measures this time around? And what is the allocation over different segments? My second question is on capital policy, which is on Page 15. So the estimated 2% to 3% compared to 3% to 4% seems to be smaller in terms of the finalization of Basel rules. And the timing is delayed. So does that mean that there's increased flexibility in capital? In terms of shareholder policy, the total shareholder return of 50% or more is mentioned. But given the issuance of RSU -- but compared to Mr. Nagais times, I have the impression that the pace of share buyback may be slowing down. So do you have any thoughts on that?

[Interpreted] Thank you, Mr. Watanabe. So regarding wholesale cost, we have Mr. Chris Willcox with us. So he will talk about the thinking behind this. And after that, Mr. Kitamura will talk about capital policy. So Chris, please? Are you ready to answer the question? Or perhaps Mr. Kitamura will take the second question. Sorry, we are waiting for the interpretation. Mr. Kitamura will answer the second question first.

[Interpreted] Mr. Watanabe, Chris will answer the wholesale-related question. So on Page 11, there's additional cost reduction measures mentioned and a few of the items here. For instance, the third one, the retail profitability improvement plan. This has to do with the reduction of cost in the retail. So this is included in retail dividend projection. And as management, the cost/income ratio staying at the high level. This is something that we need to resolve. So what will be the potential options, we will have the discussions around that and have come up with different plans. There are more granular detailed initiatives under this, but by implementing these, we will reduce the cost and will reduce the cost income ratio. And the second question -- second part of your second question was about capital policy. The finalization of Basel III mills will be in the year ended March 2025. That's in our sight. The impact from Basel III has become clear now. So your question was around how we seem to have more room in terms of capital and at the moment, we believe we do. We have 17 trillion risk-weighted assets as of end of March this year. Looking at the capital of the company, we could use bigger risk-weighted assets. On the other hand, the market environment, as Chris mentioned earlier, it is quite uncertain and challenging so this is not the timing for businesses to take risk. So as a result, there is a slight surplus of capital or it appears to be that way. That is one reason. But in practical terms, there is some room for capital. So whether we will use the capital for inorganic growth and if there are no such opportunities, then it will probably be appropriate to return that to shareholders. And as for the slowing pace of share buyback, or how it appears to be that way, with the dilution, was more than 3.8 billion shares. So by implementing share buyback, the ballooned up outstanding shares needed to come down. So back in Nagai-san, Mr. Nagai's time, we have been doing that. Now it's down to 3 billion shares or so. So we have progressed with the share buyback at a brisk pace. So it will normalize to a certain extent. We are not saying that we will not be doing it. It will probably be difficult to do it at the same pace that we did in the past. That is all for me.

I'm not sure which slide you were referring to on costs, but I think the question was around costs for wholesale. As I said before, we have instituted a set of cost changes that will reflect in the full year forecast for '22/'23 and those add up to about $120 million of run rate. And then on top of that, we're participating in the broader cost reductions as part of the structural reforms, which we expect to add up over time to another $150 million. In terms of Slide 11, obviously, there's an impact here from the FX rate, which makes these costs look higher. But bear in mind that obviously, the FX rate change applies to revenues as well. So proportionately, that doesn't necessarily -- so long as you're making money, doesn't necessarily impact your overall profitability in the same way. The main drivers for us in terms of reducing costs have obviously come from rightsizing some parts of the business that -- where we see the opportunities as having changed. And we're looking for new global structure at eliminating or double hatting some of the regional roles with global roles. So there are some opportunities for us to get more productivity out of some of our people in the new global odd structure that we have going forward. And there will be a degree of self-funding. So if you look at overall what we expect to see going forward is probably around about $300 million of cost saves and reinvestment of maybe a maximum of about 1/3 of that cost save into growth opportunities and hiring of new talent going forward.

[Interpreted] The next question comes from SMBC Nikko, Mr. Muraki.

I'm Muraki of SMBC Nikko. I have roughly just one question regarding ROE, ROE improvement. So including external directors, the Board, I believe you have had a discussion, but what's the status of discussions going on at the Board of Directors meeting. So needless to say, the ROE level as I believe, has been perceived as a area of challenge from the management viewpoint, but specifically, the wholesales cost -- well, looking at Page 7 of wholesale presentation, so 4% cost reduction over a 2-year period. So is it sufficient? And also Page 12, the global markets headcounts to be grown by 5% as part of growth investment. But what's the probability of recoupment of investment from the viewpoint of holding company in HI. And also, Mr. Okuda's presentation, Page 13, capital allocation is shown, but the 64% capital for wholesale. And also as part of others, there is number of real estate holdings shares held, I believe but against the capital used. So when we consider the return against the capital used, the current allocation of capital, how do you view it? I believe there are different opinions among the directors on the Board but what kind of discussion is going on? Could you share with me the discussion that's going on at the Board level.

[Interpreted] Okay. First, Mr. Kitamura is going to explain, then I will add explanation to Mr. Kitamura's answer.