Nomura Holdings Inc (NMR) 0 Q0 法說會逐字稿

Good day, everyone, and welcome to today's Nomura Holdings fourth quarter opening results for fiscal year ending March 2010 conference call.

Please be reminded that today's conference call is being recorded at the request of the hosting company, should you have any objections you may disconnect at this point in time. During the presentation all the telephones lines are placed in a listen-only mode. The question and answer session will be held after the presentation.

Please note that this telephone conference contains certain forward-looking statements and other projected results which involve known and unknown risks, delays, uncertainties, and other factors not under the Company's control, which may cause actual results, performance, or achievements of the Company to be materially different from the results, performance, or other expectations implied by these projections. Such factors include economic and market conditions, political events and investor sentiment, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions, and size, number, and timing of transactions.

With that we would like to begin the conference. Mr. Masafumi Nakada, please go ahead.

Thank you for taking the time to join us. I am Masafumi Nakada, CFO of Nomura Holdings. First, I am pleased to report that we returned to profit for the full fiscal year ended March 31, 2010, representing a turnaround from the substantial loss booked the year before.

Well, before going into the documents, I just would like to make one remark. So there was a big turnaround from the year previous, so we have returned to profit for the full fiscal year. We were profitable for four straight quarters throughout the year and all of our five business divisions, Retail, Asset Management, Investment Banking, Global Markets and Merchant Banking, posted profits. In addition, each region in our international operations, the US, Europe and Asia, were profitable for the full year.

We had dealt with legacy assets in the previous year and embarked on a strategic build out over new business platform. Over the past year our new business platform started delivering real results. Turning into profitable result was the biggest goal for us while focusing on the clients' business. So I can characterize the past one year as such.

Now I will give you an overview of our full year and fourth quarter results using the document entitled Consolidated Results of Operations. Please turn to page four of your document. First, for the full year I will give you the explanation.

For the full year net revenue was, as indicated on the right hand side of this page, JPY1,150.8b, income before income taxes was JPY105.2b and net income attributable to Nomura Holdings was JPY67.8b. I will repeat that this represents our first year of profit after two years of losses.

Over the past year we have seen positive results from the Lehman Brothers acquisitions. Our wholesale operations are now well established as a second driver of revenues and we are seeing revenue levels in our international operations come close to Japan revenue levels.

In Japan, our Retail business maintained its commitment to providing customers with detailed consulting services, resulting in an increase in revenues of over 30% compared to the prior year.

Please turn to page five. As you can see here on the right, business segment income before income taxes, which gives you a better indication of how our underlying businesses are performing, was JPY223.8b. So this is the presentation over the full year.

Please go back to page four again, I'd like to talk about net revenue for the fourth quarter. Net revenue for the fourth quarter was JPY277.9b, income before income taxes was JPY28.6b and net income attributable to Nomura Holdings was JPY18.4b. So we have booked four consecutive quarters of profit and all five business divisions were also profitable in the fourth quarter, the first time in the fiscal year under review.

Of particular note for the fourth quarter was the IPO of Dai-ichi Life, this was the biggest IPO of the year and we successfully brought together our global capabilities to help our client achieve a strong result.

The Retail and Asset Management divisions had a good quarter with a significant increase in client accounts on the back of solid demand for purchases of primary market issues and robust sales of investment trust. In Wholesale we continued to expand our client platform.

Please turn to page six. This page gives you an overview of highlights in our business segments for the quarter. The graph in the middle shows a breakdown of net revenue by division; our Wholesale operations already make up over half of our revenues.

Continuing on, turn to page seven, this page shows regional highlights for the fourth quarter. You can see how our international -- outside the pie chart you have the full year results, so you have both results, you can see how our international business is expanding in each region. On the right hand side, the red portion and non-Japan revenues now represent nearly half of total revenues. As a result, fourth quarter business segment income before income taxes was JPY56b or, after accounting adjustments, JPY28.6b

Next I will give you a brief outline of fourth quarter highlights for each business division. Please turn to page eight, this is the Retail. First, as a result of providing client-focused consulting services, as I said earlier on, Retail recorded average monthly purchases of over JPY1 trillion, as shown here on the left.

The graph on the right shows how overall client accounts increased substantially. By offering products matched to the needs of Retail investors, net revenue in Retail is over JPY95.5b and income before income taxes was JPY24b.

The next page shows Asset Management, page nine. During the fourth quarter a number of new funds were launched, such as the Nomura Brazil infrastructure Stock Fund and Nomura New Emerging Bond Fund. So these were the new funds introduced.

The graph on the right shows how we are winning many investment advisory mandates from Asia-based institutional investors. As a result, net revenue in Asset Management, the assets in custody increased so the Asset Management revenue was JPY18b and income before income taxes was JPY4.9b.

Please turn to the next page, page 10. In Investment Banking we maintained our dominant position in Japan and won mandates on a number of high profile deals in Europe and Asia. In Japan we took the number one position in ECM after working on deals such as Dai-ichi Life's IPO. We also hold the leading market share for advising on mergers and acquisitions.

The graph on the left hand side shows our share of the JPY6 trillion equity underwriting market and the graph on the right shows our market share for the full year and our share has been overwhelming and, as you can see, on the full year we have a 35% share. And the numbers are not included, but 25% in terms of bond underwriting and M&A we have a market share of 33%.

Now looking abroad on page 11, the next page shows, on a full-term basis within Investment Banking the various business lines, the main deals, are shown. And in the fourth quarter, for example in M&A Europe, in the private equity fund KKR they acquired Pets at Home, a British pets company, and so we participated in the syndicate and we acted as advisor. And this is debt capital market, we underwrote a bond issued by Greece.

And again in M&A in Asia we are advising National Australia Bank on the acquisition of AXA Asia Pacific Holding. So this is the track record that we have and, as a result, Investment Banking net revenue for the fourth quarter was JPY27.8b while income before income taxes was JPY600m. This marks the second consecutive quarter of profit for Investment Banking.

Next, on page 12, this shows the Global Markets. In Global Markets from the beginning of the term we focused on client business and high liquidity products business, so we decided to focus there and, by doing so, we wanted to expand the client base and increase our profits. That was the strategy that we have been implementing, so in that sense, expanding the client base and increasing the number of clients was a very important indicator. Therefore, on page 12, this shows the growth in the number of derivative accounts indexed by region.

As you can see, the derivative business client base expanded significantly in the fourth quarter and the US business also increased substantially. And so by region you see the differences and, especially in the United States client base and client businesses have substantially increased. And in the four regional blocks, derivative client accounts have increased in the respective blocks.

And now, going on to the next page, page 13, this shows in the Global Markets, the key area, the launching of the US business. This is an update. And, as I mentioned earlier, the expansion of client base and the product line have been expanded and have been strengthened and, as a result, in the United States as well in Equity Fixed Income, in the various areas, transaction buoyancy has been increasing. So, including these aspects as a whole, Global Markets net revenue was JPY133b and income before income taxes was JPY13b.

It's not attached in the handout (inaudible) but for Merchant Banking we booked a valuation markup as we continue to raise the value of existing investments and in the fourth quarter, we marked to market and there was a valuation markup. And in the fourth quarter we have been seeing valuation gains and net revenue as a result was JPY7.6b and income before income taxes was JPY4.6b, so we are making profits in Merchant Banking on a full year basis.

So now I'd like to explain the segment others, so we would like to ask you to refer to page 31, please jump to page 31. And we have changed the way the breakdown in this segment has been disclosed and, in the figures here, there were voices saying that the breakdown was a little difficult to understand and, in response to this, we have changed the way the breakdown of this segment has been disclosed.

And specifically, up until now, in the topmost line -- well, if you look at unrealized gains and losses from outstanding bonds that were caused by changes to Nomura Holdings, credits were previously included under net gain and losses on trading related to economic hedging transactions, and this has been moved to others.

And at the top line only the gains and losses on economic hedging transactions are now included here, so it's just pure gains and losses on economic hedging transactions that are shown. And not just for the fourth quarter, we're going back and making the corrections, so chronologically you can now compare. So this is the change that we've made.

And, as show in the graph, the fourth quarter loss before income taxes in others was JPY40.9b and this is an improvement of JPY25b compared to the previous quarter. And the main factor underlying this is that Nomura Holdings public offerings of CE, the judgments here, this was seen in the third quarter and we have already explained this with this portion. And also, up until the third quarter, we saw conversion costs for Nomura Holding convertible bonds.

So these were one-off factors that disappeared in the fourth quarter and so these are the factors that contributed to the improvement in credit valuation adjustments and our losses related to economic hedging transactions. So there were overall improvements seen.

Now again please turn back to page 15, I would now like to report to you an overview of our financial position and risk assets. If you look at the upper left hand side, at the end of March our capital ratio, on a flash basis, was 24.3%, our Tier 1 ratio was 17.4% (sic - see presentation) and Tier 1 Common ratio was 17.3%.

We had total assets in our balance sheet of JPY32.2 trillion and, compared to one year ago, it was JPY24.8 trillion so the absolute volume of our balance sheet has gone up. But, as I mentioned earlier, from the beginning of the term client flow business is where we focused on and we focused on high liquidity products and business, so by providing liquidity we expanded client base and were able to expand profits. So based on these strategies focusing we increased our highly liquid products. So this was done strategically but leading to these results.

And for shareholders equity, last year it was JPY1.5 trillion but this year it's JPY2.13 trillion, so we raised capital and through funds our shareholder equity has been enhanced. Gross leverage was 15.2 times adjusted leverage was 9.3 times.

And I'd like to add that we expect that any impact from introduction of FAS 166 and FAS 167 from the year ending March 2011 will be immaterial, so these will be applied and implemented but impact to our Company at this point in time we anticipate to be immaterial.

Please turn to the next page, these are our sources of funding, we are funding on a longer term basis. I'm sorry, the numbers, I'm sorry, I said 17.3 but it should be 17.3% for Tier 1 ratio, Tier 1 Common ratio is 17.3%. I just wanted to correct the Tier 1 ratio 17.3%.

Now I'd like to turn your attention to page 16. In the fourth quarter, as you well know, in the United States we issued for the first time US dollar-denominated notes. We raised a total of $3b and similarly in the fourth quarter we raised GBP500m through a sterling bond issuance and we will continue to raise long-term debt -- procurement through debt at JPY2 trillion and so in this year we proactively raised funds through debt.

And in this year as well we will focus mainly on long-term financing through debt and by doing so we'd like to stabilize our financial position. And thus we will diversify our funding in terms of currencies and geographies and especially because we will be expanding our overseas business, we have taken this strategy going forward.

On page 17 this reports on Level 3 assets. Level 3 assets, as you well know, are the assets with lower liquidity, so for Level 3 assets in order to appropriately manage this, this is very important and this is what we have been endeavoring to do from the beginning of the year. So specifically we want to reduce the balance and the ratio to Tier 1 we'd like to reduce, so we embarked upon these two goals.

And ratio to Tier 1 we would like to bring it to the 50s, so we started from 98% but in the fourth quarter we are now under 50% at 44%. We are under 50% we are now at 44%. And so in that sense highly illiquid products are the areas that we will be focusing on, we'd like to expand business in this area.

Next on pages 18 and 19 these show our very important indicators that we'd like to ask you to refer to, especially on page 19 towards the lower right on costs and expenses. Looking at the costs as a whole, non-interest expenses in the fourth quarter declined by 2.8% compared to the third quarter. On the full year basis we reduced costs by JPY47b from the previous year.

And in the term ending March 2010, we were able to cut the combined total of personnel expenses and non-personnel expenses by our target set at the beginning of the year of JPY100b, and we are grateful that we were able to achieve these targets, and our compensation to net revenue ratio is now 41% in this quarter. So we will maintain our tight control of costs going forward in this year as well.

And lastly regard to dividends, in line with our dividend policy we will be paying a dividend of JPY4 per share to shareholders of record as of March 31, 2010. This has already been described in the financial highlights as well. And regard to the dividends this year, for the current fiscal year we will strive to pay stable dividends using a consolidated payout ratio of 30% as a key indicator.

Any dividend payment will be determined taking into account a comprehensive range of factors such as the tightening of Basel regulations and other changes to the regulatory environment, as well as the Company's consolidated financial performance.

And lastly, looking again ahead, we will endeavor to maintain our robust financial position, remain committed to serving our clients better and to work towards becoming a top tier global investment bank.

That is all from my part, but before finishing I think we have already sent out the notice to you already, but I'd like to mention that we will be holding an Investor Day in Tokyo on May 10. This is right after Golden Week and on that day our CEO, Kenichi Watanabe, and COO, Takumi Shibata, will speak along with the President and COO of our newly established Wholesale Division, Jesse Bhattal, and our Chief Risk Officer, David Benson, and our Business Division CEOs. So a total of nine members of our Senior Management Team will speak on our strategies going forward. So we hope that many of you will be able to attend Investment Day.

So now we'd like to entertain questions from all of you.

(Operator Instructions). First question Daiwa Securities, Mr. Muraki. Mr. Muraki, please proceed with your question.

Thank you, I have three questions. First is regarding the revenue of market fixed income and equity in each segment. Region wide revenue I want to know as well as the position of inventory. What is the revenue coming from the inventory position? The customers' transaction is the source of revenue and indirect revenue would come from the inventory position.

The second question, derivative regulations, yesterday the derivative -- there was a bill passed in the Parliament for the derivatives centralized form and in the US a similar discussion is going on, and the JPY2b would be the scope of impact that is the guidance shown. So regarding derivative regulations, what is the impact on the performance and what is going to be the impact onto the derivatives business expansion going forward? If you know I'd like to be advised of that.

On page 16 there was a presentation of the funding by CB and you are increasing the funding denominated in foreign currencies, but at my hand, on the 16th, Mr. Nakada submitted the public comments to Basel commission. I have the copy of that regarding the liquidity regulation there is a concern expressed in this writing. So after this full year term, currently you have the long-term borrowing of JPY7 trillion, to what extent are you going to increase that? Do you have to increase and it will incur a certain cost, so currently 22% is the foreign funding, how much are you going to increase this foreign proportion in terms of funding? In other words, it is the policy regarding ALM. Thank you.

First of all, regarding Global Markets, fixed income and equity specific, I will start from regions. So fixed income on a regional basis, Japan, Europe these would be about the same level, of course there are certain ups and downs but largely speaking like 40% or slightly stronger than 40%, I think that's the feeling.

Now the Americas, fixed income will be launched and it's sooner with the launching, so it's around 10%. The rest, the remainder, would be Asia ex-Japan, so that's the fixed income situation more or less.

On the equity side, Americas in the fourth quarter the single digit percentage, well, of course it is between 5% and 10% but still it's on the single digit basis. Now Japan, Europe, Asia more or less of the same levels, so you can understand the investor weigh in that vein.

Next is the revenue from customer flow as well as the revenue from trading; that was your second question. On the fixed income side, largely speaking, in terms of levels it's the same as we said in the past 70% to 80%; that would be the level more or less, the remainder will be revenue coming from trading. Regarding equity, the percentage -- the customer flow business would be a little lower, in the past we used to say 50/50 but customer business proportion has increased a little more than that.

Continuing on with your questions, derivative regulation, as we said in the past -- I will be repeating what I said in the past, it's not limited to derivatives, there is a general tendency of a re-regulation or strengthening of the regulations. If it happens, agency cost is going to go up for us it means and, therefore, it will have an impact on revenue and income. It could be a negative element on revenue and income.

as far as our Company is concerned, directly or outside that, direct or indirect, irrespective of that we would like to use various means so that monetary market, financial market and capital market should have appropriate and fair competition going on, and that level of good competition must be maintained. The appropriate competition must be maintained, that is our view and we are positively committed in this message to the market.

Next one is the procurement by fundraising by bonds -- corporate bonds.  Last fiscal year, as I said earlier on, altogether JPY2 trillion worth of funding was done in this domain.  Regarding this fiscal year, basically we want to continue funding by debt, as I explained in my presentation.

Now foreign currency denomination, how much is it going to be in terms of proportion? Naturally we will have to look into the costs. So while we watch the trend of costs, we will look into the best possible combination with flexibility. We would like to cast a flexible judgment. But basically I want to say that on the left-hand side of the balance sheet, that is asset side, asset side situation we will be matching with what we do. So that's the basic thinking in this regard.

It means that foreign business -- overseas businesses would be enlarged furthermore. And then revenue and income would be enlarged. We can anticipate that. That is the thinking as of now. We can anticipate that. It means that, commensurate with that, certain proportion of foreign currency-denominated funding will have to be pursued and then excess return could be obtained. And we will put the managerial resources into the transaction which we can increase the excess return. That is all. Thank you.

Thank you. On the trading from the market situation, on that point, well, compared to your competitors, January to March, if you look at the share for the fixed income or equity, your share seems to be going down. But compared to overseas financial institutions, what led to the decline in the January/March period. And beyond April, how is this going to change or is it -- if you could elaborate please?

Well, compared to other firms, on their performance, well, it's not to say that everything has been disclosed. So in portion we have to speculate or guess what their actual performance is. But with this in the backdrop, when we compare ourselves with them, first of all the market Americas, the market, our presence there, our market share there, that is a big reason for the differences, that is the result of our analysis. And for some of the companies' regional profit distribution, some companies disclose this.

But if we look at their disclosed distribution, half or a little over half they derive their revenue from the United States. And so if we extrapolate from that for other firms as well, I think their situations are quite similar to that. So in that sense, as I mentioned before, in our case we have just begun to launch our business in the United States. So their contribution to revenue is yet low. And therefore that's one of the differences if we compare ourselves to the overseas financial institutions.

And beyond this fiscal year, going forward, this is a big challenge. So we have to enhance our presence and structure in the United States, expand the client base. We have to accelerate the speed of growth in the United States.

Thank you very much.

Next question comes from JP Morgan Securities, Mr. Tsujino. So Tsujino San, please proceed.

I have two questions regarding the trading and I have one question regarding IB. Regarding trading, you mentioned that 10% about the fixed income US ratio, I think the number is coming up from the last time. On the other hand, this time around, overall situation of fixed income, especially retail -- excluding retail-related global market portion has reduced number. So US in actual money amount, what is the situation? How much is increasing? Can you elaborate on that in more specific terms?

On page 13, looking into the slide on page 13, regarding interest rates, you mentioned there December, three months, and this time around the three months, it's leveling off. Exchange rate has changed, but in terms of the absolute amount, you can show that there is a smooth growth, smooth expansion. Can you talk about it?

Another point, maybe I missed in your presentation fixed income revenue with respect to that. Non-client flow base, unrelated client flow base, you have some portion of that not related to client flow base. This time, in terms of the general trend, I wonder why, in Europe, also compared with other investment banks, relatively speaking, how come revenue has come down? Can you elucidate this part of the question?

Earlier on, US presence is high in your case, Investment Banking. But the European revenue is very good for other companies. And even considering certain conditions, I don't think that the revenue is declining in other companies. So can you talk about the reason why your situation is like that, like what you presented? For example, the proportion of derivatives, the -- how is it in terms of European fixed income revenue? Plain vanilla securities proportion is a lot in your case maybe. So can you give me some suggestions as to the analysis of the current situation? So these are the two questions.

Another point, Investment Bank related commission, is a question. Overseas segment is making contribution in the fourth quarter underwriting and M&A. How much contribution did it make? Throughout the full year, former Lehman Brothers portion may have made a certain contribution, and this may have been lagging behind so far. But fiscal 2010 it may change going forward. Can you expect that this aspect is going to change? So this is the third question. Thank you.

All right. Thank you very much. Your first question is related to trading. I'd like to respond. Now US fixed income side of the story, so situation. So in absolute money terms, how much would it be? That was your question.

In terms of the number, trading gains, how much and what is the money amount from other transactions, from which regions, in the past we did not disclose those numbers. So we have the page 13, as you can see on this slide. We have the indices. So index is the number that you are seeing. I hope you understand the situation. As I mentioned earlier on, in terms of fixed income, it is occupying about 10%, slightly strong of 10% of the whole. And that is the level of contribution. That's the number of the fourth quarter. So you can infer from that situation.

As you can understand from page 13, as you said, credit exchange, credit is growing. So overall the fixed income revenue has gone -- has grown by 2 times, of course, compared with the third quarter, that is.

Another point, European fixed income, you have asked a question regarding European fixed income situation. Certainly in Europe, compared with the third quarter fixed income portion, the revenue is not growing. So that's the situation.

One thing is this lineup, the product lines compared with other companies, product line has not developed fully. For example, commodities. Regarding commodities, as you know, in our Company's case, we don't have almost anything. So that's the situation. Because of that situation in the recent past, a commodity boutique kind of company was acquired because of this situation. So we are in the process of making platform based on this acquisition. So product line expansion is important, as I said, as a region. In addition to the regional expansion, product line expansion is going to be very important. This is going to be an issue and challenge for us during this fiscal year.

Another point that I can talk about Europe is that, especially in the case of fourth quarter, we had the Greek problem. Or including the Greek problem it is called the [GEEPS]. So GEEPS-related problems came up. We are not particularly having great losses because of this problem per se. So there is no problem about that. But because of the situation, market as a whole has come to harbor unstable sentiment and investors were impacted by that.

As you can see, in our case, customer flow is the focus. So we have shifted our weight into customer flow business. So that's where we are expanding. So customer flow goes down then we are naturally feeling the impact. We are prone to have the impact from that. And maybe this degree of impact is larger than other competitors maybe. So that is my thinking on this.

Next one, M&A. The M&A fees, the overseas proportion, how much is it? That was your question. For example, in the fourth quarter, talking about the fourth quarter, roughly speaking slightly shy of 60%. That would be the level. On the full year basis, it's not reaching 50%, but slightly shy of 50%. That would be the number that I can speak regarding your question. Thank you very much.

A little under 60% is, I'm sorry, is M&A commissions? M&A fee income 60% or less comes from overseas. And up until recently, it used to be less than half?

No, this is full term for the previous year.

And here, in terms of cost, it doesn't meet, I don't think. But for fiscal 2010, you're going to go forward based on the speed or this pace?

Well, if you look at the quarterly figures, the first, second quarter, it is true that we have not been able to cover the cost. But in the third and fourth quarter as well, so similar to third quarter, and in fourth quarter there were special factors, for example, funding in Japan accelerated. Well, but despite this special environment, we were seeing profit in the fourth quarter. And so we feel that the revenue base has been expanding. And, as a result, with our IB as well in the United States, we have to enhance our basis for the business, as Tsujino San mentioned, we are not growing as is right now. So IB revenue will -- we will make sure that it improves, that it recovers.

And lastly, fixed income in Europe. Well, how shall I put it? Cash, products and derivatives, can you give us a breakdown, a ratio of cash versus -- cash products versus derivative products?

I'm sorry, well, we have not disclosed our breakdowns to that detail yet. I'm sorry, we cannot.

Understood. Thank you.

Next question from Morgan Stanley Securities, Shinoda San. Shinoda San, please, the floor is yours.

Just one point. Trading business in North America, the recent situation, if you will elaborate. What type of trading assets to what extent have been seen? And compared to the previous quarter, is it increasing or decreasing? And trading assets in the United States, to what extent is this going to be expanding? So what scale do you anticipate and at what point in time? So if you can give us a scheduling, a timeline going forward, if you could please elaborate.

Yes. Trading in the United States, well, I think your question was on the situation there. And first of all, I'd like to say that for the breakdown, the content of the assets, for the details I'm not at liberty to disclose. But basically, on a global basis, our strategy is in line with our global strategy. And so we are focusing on higher liquidity products. And we are focusing on expanding flow business. That is our strategy.

And therefore as assets, for example, government products or highly illiquid mortgage products, these will be the center of the assets that we will be focusing on. And also, in addition, repos. Repo transactions will also be a very important business for us going forward. And so in these areas, the assets, we hope, are increasing steadily.

So going forward, on the medium term, what will probably happen is that in the United States, the balance sheet that we have there will grow. We will be expanding. So this is our plan going forward. And again, we will look at the balance sheet. But we have not disclosed the balance sheet by region. So I am not at liberty to disclose the specific figures. But in the previous term as well, in launching the US business, the balance sheet, at a considerable base, has been expanded. And so in this term as well, we will continue to focus on highly liquid products and use our balance sheet to do this. That is all. Thank you.

Could I ask you one additional question? You have funded a certain amount. And a part of that is going to be put into a North American transaction. On that point, you raise new funds. And regarding this capital, is very much used in the United States? Am I fair to say that? Or the previously funded money is not used for the time being? And existing capital is more or less put into the North American business, is that the case, or the formerly funded money is redeployed in expanding the trade? Which is the case? So you have raised capital before, and how much of that is used in North America? Can I ask you this question?

Shinoda San, your question, you are asking capital, right? Not funds but capital?

Yes, right. Capital, yes. Capital.

So in that sense, last fiscal year, on two occasions, to be more accurate, at the end of the previous fiscal year and also during the previous fiscal year, we have raised capital, especially regarding the second capital funding. That capital, for example, is it going to be deployed in the United States? No, we have not come to that point yet. Currently more or less what we are doing is that funds, for example, in the United States, I said that the $3b was raised by debt. So a certain portion of that certainly would be used in the United States. So that's a way that we are expanding our balance sheet. That's the current situation.

For example, American business, regarding American business, there is one thing that I can talk about, and that is CMO, so-called CMO, the mortgage bonds with high liquidity. CMO business in January/March period, January in terms of ranking, it was sixth. And in February 11th. And 10th in March. So we have not reached the top five rank on a solid base, steady base. But considerably high liquidity, it is said that this is the market which has even higher liquidity than the treasuries. So we have increasing our -- the transaction in that field.

So funds as well as capital in the process of expansion would be more utilized going forward. So, in any event, we would like to put more managerial resources to this field. Thank you very much.

The next question, MF Global, Yamanaka San. Yamanaka San, please take the microphone.

Thank you. Just one point. On a quarterly basis, by region, pre-tax profit, the trends in the United States -- is going up, and Asia-Oceania is going up as well. But what are the factors underlying this? Does it have something to do with the way it's booked?

Well, Yamanaka San, as you have correctly mentioned, the booking, well, actually there are issues in how booking is done. So specifically what this means is that from this time, well including cross-border business, overseas business is expanding. And so under trading, the so-called transfer price model we'd like to rebuild once -- we wanted to build and redeploy once again. So we introduced this one again. So financially there was a shift of income on a cross-border basis, so there was an income transfer.

Next question, Ohno San from Credit Suisse Securities. Ohno San, please take the floor.

Thank you very much. Three questions. First question, according to media reports, I hear including Nomura management, some people moved to some other companies. So in the actual field or in actual marketing situation, are you experiencing some confusion because of the flow out of certain human resources? Or what is the situation? What is the atmosphere of the actual working field?

Second point, regarding trading. January, February and March, what was the trend? And come April, what is going to be the feel of the trend? So can you talk about what is happening in the recent situation?

Last point is dividend. My understanding is that you have to consider Basel and other strict rules. So if strict rules are to be applied, you are saying that a payout ratio of 30%. But you may end up in having a lower payout with the stricter regulations. So I think including that possibility you have added certain phrases and sentences this time around. Am I right in saying so?

Now, first question, the human resources flowing out from Nomura Group, that was your question. First and foremost, what I want to say is this. You have the media report, well, what media portrays is true. But I think media tries to portray when people leave the Company. As you know, when it comes to the human resources market or liquidity thereof, in this sector, in a way, it is given that people move, especially in this way globalization is going on in our business sector. Naturally we are operating in the global competition.

So human resources management has to be done against a backdrop of globalization. So I think on that point we are now actually entering into the globalised business sector. In terms of management, naturally we are always bearing in mind that risk in running our Company.

In the recent past, the annual performance evaluation is done and the compensation is to be determined. That's this timing. So in a time like this, liquidity or the mobility of the people certainly becomes high. Naturally people move out, move in. And what is the sentiment and the atmosphere of the working field? The salient point is that, for example, senior position people leave the Company. If that happens, point is how we cover that leaving. The point is how quick we can fill the gap. That is the most important point.

So, as I said at the outset, there is a report about people leaving. But actually we are fulfilling the vacant positions. Sometimes it is the promotion from inside. Sometimes we have the mid-career hire from outside. So as an organization, we don't have any problems. And I do not observe any weakening of the organizational capability. So the morale and sentiment in the actual working field has not been impacted by the people's mobility. So that's my response to your first question.

Second question, the January/March period, what is the trend of our trading? So that was your second question. January, towards the end of one year previous, market activities declined, especially hedge funds. Last year, from around November, hedge funds were closing their deals. I think you remember that. So in that sense, January, it's the beginning of the new year, and European businesses went into new fiscal year. And customers' activities returned to the market. That was in January.

But from February to March, for example, the Greek problem happened, as I mentioned earlier on. And aside from Greek problems, there were certain movements in the field of regulation. There were certain opaqueness and uncertainties happening in the market. So investors' moves became rather slow. So market turnover itself declined. And the volatility also became lower.

So in that sense, February, March, in terms of trends, it was on a descending downward trend. So that was the market trend.

But regarding the United States, I can say that looking into the performance of competitor companies, it's very clear. For example, in terms of credits or commodities in -- of the United States, in these fields, there was a lot of revenue opportunities. Unfortunately, however, our Company was not able to take advantage of this available revenue opportunities.

Furthermore, dividend. You asked a question regarding dividend. Exactly as Ohno San said, the story is exactly as Ohno San said. On the second point, on the trading, entering April, the activity, what is the level of activities right now? What situation pertains -- is prevalent regarding trading activities? Well, this is quite recent. And so I cannot give numbers as to the current situation. However, as I mentioned before, February, March, it was a down trend. But in comparison, April, well this is a new fiscal year for us, so entering the new fiscal year, it's so-so, I think is the situation for fixed income.

And for equity, relatively speaking, volatility and market transactions, if you look at the deal, especially in Japan, as you well know, it is as is. And compared to fixed income in terms of environment for equity, there are still remaining difficulties. But overall, as I mentioned before, it's so-so in terms of the feel that we have for the level of activities. Thank you.

(Operator Instructions).

There seem to be no further questions. With this, we'd like to close the Q&A session. From Nomura Holdings, we'd like to extend greetings and we'd like to thank so many of you for participating, despite your very busy schedule, as we mentioned before.

In this fiscal year as well we will continue to expand client base and expand our business. And we'd like to ask for your support and cooperation. Thank you so very much.

Thank you for taking your time, and that concludes today's conference call. You may now disconnect your lines.

Speaker statements on this transcript were interpreted on the conference call by an Interpreter present on the live call. The Interpreter was provided by the Company sponsoring this Event.