Nomura Holdings Inc (NMR) 2016 Q2 法說會逐字稿

(interpreted) Good day everyone and a welcome to today's Nomura Holdings second-quarter operating results for fiscal year ending March 2016 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.

(Operator Instructions) 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 achievement 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'd like to begin the conference.

Mr. Shigesuke Kashiwagi, please go ahead.

(interpreted) This is Shigesuke Kashiwagi, CFO. I will now give you an overview of our results for the first half and second quarter of the fiscal year ending March 2016 using the document titled "Consolidated Results of Operations."

Please turn to page 2. For the six-month period, net revenue increased 2% year on year to JPY760.6 billion. The income before income taxes remained roughly unchanged at JPY125.9 billion and net income increased 59% to JPY115.3 billion as a result of a decline in tax expenses which I will explain in more detail in a moment. This level of net income for the first half is the second highest since the first six months of the year ended March 2002.

Annualized ROE for the period was 8.4% and EPS was JPY31.26. All business divisions reported higher revenues and income for the first half supported by a strong first quarter.

Our businesses are making steady progress as we work towards achieving the March 2020 management target announced last year.

The transformation of our retail business model is gaining traction. Annualized recurring revenue was JPY78.3 billion, up 30% from JPY60.4 billion in the second quarter last year. For the past year, asset management has reported JPY5.8 trillion of inflows, and as of the end of September assets under management had grown to JPY40 trillion.

Wholesale reported stronger revenues as equities and investment banking offset a slowdown in fixed income. Ongoing initiatives to improve profitability has helped push down costs on a dollar basis.

Today we also announced a dividend of JPY10 per share for shareholders of record as of the end of September. Our dividend payout ratio is 31%.

Please turn to page 3 for an overview of the second quarter. Market conditions proved to be challenging in the second quarter with concerns over an economic slowdown in China, and uncertainty around monetary policy in major markets causing turmoil in the equity markets and driving credit spreads wider.

Second quarter net revenue was JPY336.6 billion, down 21% quarter on quarter. Income before income taxes declined 81% to JPY19.9 billion, and net income declined 32% to JPY46.6 billion. ROE was 6.7% and EPS was JPY12.63.

The reason that net income is higher than pretax income is that income tax expense for the quarter exceeded negative JPY28 billion, meaning we received tax back. As noted at the bottom of this slide, Nomura Capital Markets has been used as our booking entity for derivatives transactions and we have consolidated our trading positions and risk there.

We started revising our booking entity strategy in 2012 and have decided to wind up NCM. As a result, tax expenses declined in the second quarter because we booked approximately JPY54 billion in deferred tax assets in relation to an unrealized loss on NCM shares held by Nomura Holdings.

Another extraordinary factor was the settlement with Banca Monte dei Paschi di Siena of around JPY35 billion which was fully recognized in the second quarter. Income before income taxes from our three business segments was JPY53.8 billion, down 35% from last quarter.

Please turn to page 6 for an overview of each business, starting with retail. Net revenue declined 12% to JPY115.7 billion, while income before income taxes declined 28% to JPY36.7 billion. Sales of stocks increased significantly driven by contributions from primary deals, but investment trusts and secondary market stocks were sluggish as investors sat on the sidelines due to sudden market corrections since mid-August.

We continued to gain traction in transforming our business model. As shown at the top left of page 7, second quarter annualized recurring revenue was JPY78.3 billion, roughly unchanged from the previous quarter despite the sharp market decline. By listening closely to the needs of our clients, and providing them with asset planning and life planning services, we have been able to book net inflows into discretionary investments and steadily grow client assets in these products as shown on the bottom left.

Sales of insurance products have also been solid as shown on the bottom right, which is the result of meeting the estate planning and cash flow needs of our retail clients.

Please turn to page 8 for asset management. Net revenue declined 15% to JPY22.9 billion on a drop in assets under management in investment trust due to market factors and as dividend income was not booked this quarter. Income before income taxes declined 28% to JPY8.4 billion. In the investment trust business, we saw ongoing inflows into ETFs, Japan's stock funds and products for discretionary investments.

The investment advisory business won a mandate from a Japanese public pension fund to manage foreign bonds, and we also saw a rise in mandates in Latin America. As a result, assets under management remained at JPY40 trillion as of the end of September.

Please turn to page 9. As you can see on the bottom left, the investment trust business booked outflows of about JPY400 billion with about JPY670 billion of outflows from MRFs and other funds and inflows of about JPY270 billion into core investment trusts. Investor demand for ETFs is increasing and in the second quarter alone, we saw around JPY1.3 trillion of inflows.

As shown on the right, we maintained a market share of nearly 50% and assets under management are growing steadily. As a result, our share of the public investment trust market has grown to 24.9%, as you can see on the top right.

Please turn to page 10 for an overview of wholesale. Net revenue declined 6% to JPY192.9 billion, and income before income taxes was down 56% at JPY8.6 billion. Equities slowed from a strong first quarter, while fixed income revenues remained roughly unchanged amidst slowdown in credit and securitized products. Investment banking reported stronger revenues on the back of revenue growth in Japan.

Please turn to page 11 for performance by business line. Global markets net revenue declined 10% to JPY158.7 billion. Fixed income net revenue remained roughly unchanged at JPY83.2 billion as rates and emerging markets FX offset the slowdown in securitized products and credit. As shown in the heat map on the right, the arrow for fixed income in EMEA is pointing up as revenues in all products increased.

AEJ is also up on contribution from emerging markets FX and structured credit, but the Americas is down on a slowdown in securitized products and credit, while Japan is also down due to the market uncertainty. Net revenue in equities was JPY75.5 billion, down 18% from the last quarter. As the heat map shows, the Americas was up on a robust performance in the equity execution services business, while EMEA and AEJ both slowed from the strong first quarter.

Please turn to page 12 for investment banking. As shown on the top left, second quarter net revenue was JPY34.2 billion, up 18% quarter on quarter. Gross revenue, which represents revenues before allocation to other divisions and businesses, was JPY63.1 billion representing the strongest quarter since the three-months to December 2009.

Revenues were driven by Japan, which reported substantial gains both quarter on quarter and year on year. The ECM business had a strong quarter and we won a number of mandates for foreign bond issuances by Japanese corporates. Internationally, although revenues were down Q on Q due partly to seasonal factors, revenues were up year on year amid a decline in the overall fee pool.

As shown on the right, the net revenue for the first half was JPY112.8 billion as all regions posted revenue gains year on year. By product, ECM made the biggest contribution to the revenues and the momentum is improving even outside of Japan, in EMEA and AEJ. Revenues from M&A, leveraged finance, and the solutions business all grew year on year, further diversifying our revenue base.

Please turn to page 13 for an overview of expenses. Second quarter's non-interest expenses was JPY316.7 billion. Compensation and benefits declined 4% thanks to cost reduction initiatives and lower bonus provisions in line with performance. Other expenses increased by 11% compared to last quarter due to an increase in expenses of consolidated subsidiary and a charge on decommissioning of IT systems.

Please turn to page 14. Total assets were JPY44 trillion, gross leverage was 15.9 times and net leverage was 9.7 times. Our Basel 3 Tier 1 and tier 1 common ratios were both 13.1%, down 0.4 percentage points from 13.5% at the end of June.

This is because tier 1 capital, which is the numerator in the calculations, declined due to the first-half dividend payout and yen appreciation. At the same time on the denominator side of the equation, risk assets increased due mainly to operational risk and credit risk.

That concludes my overview of our second-quarter results.

To sum up, I'd like to -- I'd say client activity was impacted by the global market turmoil in the second quarter, more recently in October. While the market is recovering, client activity hasn't returned to previous levels yet and we remain vigilant over the short term.

Looking at our domestic business, we are seeing a growing trend towards investment as transactions with new clients have increased significantly on the back of large primary transactions executed over the past few months and as individual investors shift funds parked in MRF into new investments to take advantage of the market dip.

We continue to lay the foundation to achieve our 2020 management targets. Our strategy won't be swayed by short-term performance and we remain focused on what needs to be done to create a leaner earnings structure.

Thank you very much for your continued support.

(interpreted) We have a question-and-answer session now. (Operator Instructions) Mr. Muraki, Deutsche Securities.

(interpreted) Regarding share buyback and also overseas business, I'd like to ask questions. Regarding share buyback, last year in the same timing with the ceiling of JPY28 billion, you announced share buyback, but this time at this timing you did not announce share buyback. What's the reason behind that?

In the first half, the one-off or extraordinary items include a profit of JPY54 billion and that entails a deferred tax asset, so 31% of that is JPY17 billion of non-cash. Against that, dividend will be paid out. When you decide on share buyback, non-cash based profit was it considered or did you look at PBR and stock price? And also did you take a look at the regulatory environment as well as you mentioned in the first half -- first quarter?

And also, did you also consider the profitability progress in October and then did you decide not to conduct the buyback of shares? As for overseas business, page 22 shows the profitability of overseas business and in the first-half, the Americas was negative JPY22 billion of loss.

And EMEA, without Monte dei Paschi, about JPY10 billion of loss and JPY24 billion profit in AEJ, and this fiscal year JPY50 billion in profit before tax is set as target in the first half against a JPY50 billion target for overseas. The progress seems to be slow.

Three years ago when you think of Fit for the Future and there seems to be a gap or do you see the gap widening or is it just a temporary thing because of the market environment and what do you foresaw in Fit for the Future is still relevant? Could you comment on those things?

(interpreted) As for your first question about the share buyback, our basic policy remains unchanged. So as we have been saying from the past and as you covered correctly in your question, the decision whether or not to buy back shares is based on the outlook on regulatory environment and also share price and also our earnings environment.

So we make a comprehensive decision and make well-balanced -- or conduct well-balanced returns to stakeholders. And 30% is a dividend payout ratio that we are setting as our policy and the remaining 70% is used to add up or build up our capital or -- and to respond to the regulatory environment or invested -- be invested in our business or used to buy back shares. We will decide based on the situation at the time.

This time, regulatory environment and also ratings and also the business outlook, in each aspect there was un-clarity. So we think we made the right choice on the short term and chose not to buy back our shares.

And in terms of your non-cash profits that you pointed out in your question, and whether that impacts our share buyback, well, in a sense I myself do not make a distinction between non-cash and cash. So 30% is the automatic payout that we are thinking of using in our policy and we will use the remaining portion to use -- we will use the remaining portion in share buybacks if we decide to do so.

Your second question about the profitability of our overseas business in relation to Fit for the Future and any discrepancy from the Fit for the Future, well, when we did the Fit for the Future, we planned to generate JPY50 billion this year, but unfortunately we feel there is some distance to the JPY50 billion.

And we are aware of the JPY50 billion, and we keep that in mind as a KPI, but it does not mean that we will be taking risks simply to achieve the JPY50 billion. So we're not using the JPY50 billion as a target for the sake of JPY50 billion, and we will not take risks for the sake of it and we will build our business accordingly.

But one thing I can say is that in Nomura's business the difference from two years or three years ago is that fixed income which used to be strong has been hit by the widening of the spreads, or the environment -- so the environment is less favorable for fixed income. So in preparation for that, or in response to that, we have been working on our equity business since last year and we have also been replacing some of the people in our trading businesses and we are starting to see the fruits of these efforts bear fruit and so we are able to mitigate the losses from the widening of spreads in the fixed income business.

And we will continue to manage our risks and control -- and costs adequately and also focus on pay for performance.

(interpreted) Thank you very much. The second question -- regarding the second question, three years ago you have made an assumption about the revenue pool for each region, and also the -- for each business line you assumed a profit, and if there is gap between the assumption and the reality, regarding the adjustment, will you be -- will the mild adjustments you've made so far being sufficient so far?

(interpreted) Yes, since I became CFO two-and-a-half years ago, I've been saying that. Compared to the western financial institutions -- I don't want to be rude, but compared with them, we have advantage of position in terms of balance sheet and also we are strong in our home country, so our basic view remains unchanged. We believe we are at an advantage. But the restructuring by the western financial institutions did not take place as much as possible.

So we were not able to gain as much market share as we expected. And another unexpected item is that we were expecting to gain businesses and share as our competitors retreat, but yes, financial institutions are doing quite well.

(interpreted) Thank you for your answer.

(interpreted) And in terms of the last point about the -- I don't exactly remember your question, but in terms of the discrepancy between our initial outlook and future -- and the current situation, and whether we have to make dynamic adjustments or not, the answer would be our adjustments do not have to be dynamic and we will make gradual adjustments as necessary and I do not feel the need to make dynamic adjustments or restructuring.

(interpreted) Understand. Thank you for your answer.

(interpreted) Natsumu Tsujino, JPMorgan Securities.

(interpreted) Regarding the [FIG], looking at the heat map, Japan is down. It's down by [15%] possibly. What's the background and how do you foresee the month of October? Also, the USA, according to the heat map, the arrow is trending down -- trending flat. According to Bloomberg, there were news reports about people leaving [recently] in the USA. For the recovery of profit in FIG, what kind of measures are you taking?

And in the third quarter, what kind of results are you expecting to achieve? What kind of expectations should I have? That's the second question.

My third question is about the new accounts in Japan. I was looking at the pace of increase in new accounts being opened in page 27. There is an over double pick-up first. There is impact of Toyota model AA class shares, and also in October, related to Japan Post opening, there must be an increase in the openings of new accounts. So down the road what kind of expectations do you have, could you comment on those?

(interpreted) Yes, thank you. First of all fixed income in Japan and the revenue decline, well, for rates business, client activity has slowed down, and throughout the period, revenue opportunities were limited. As for credit, Japan saw a widening of credit spreads like in the other regions, and client activity was also slow for credit. For FX, volatility was low and business -- there was not much business going on. So the fundamentals are strong, but client activity was slow. That's the situation in Japan.

As for October, in Japan, we are seeing a improvement, a gradual improvement, and for the Americas, there are various reasons for this performance. One is the widening of the credit spread and there were losses from the trading inventory, and in terms of client flow, there has been a big decline in the US. And the question is whether this is short term or whether we are going to see a sharp recovery in Q3.

I don't think we can be too optimistic on that and your concern about people leaving, and yes, there has been some media coverage about that and sometimes the tone is quite negative, but we don't see it as being that negative, and in fact, we are in some cases asking people to leave. And even when people leave, we are able to hire replacements. So the first people issue is not that much of an issue for us.

The credit spread widening has taken place, but now it seems to be stabilizing, and the thing that has not come back is the client business. And last August things were quiet and there was not much volatility, but it suddenly picked up in September, and in October the volatility increased. That's what happened last year. So it's hard to foresee what's going to happen in the near future, but as I said earlier, the three points, and it's not a fit person or it's not a talent issue person issue, and the spreads are in a favorable condition at the moment. But the client business has not really picked up, that's the main factor.

Your third question about new account openings in the retail business, yes, there was impact from Toyota. That was -- there was some impact in the June quarter and also in July, which is in the second quarter. There was more impact in July. And if you see the trend line, there has been an increase of about 20,000. But in the past there was 50,000 increase, so you can guess the impact of Toyota from the difference of these figures.

As for the Japan Post, I think we are able to do double the usual rate and this has started to be seen from the end of September, the positive impact from JP, and we would like to harvest the openings of these new accounts and secure new business. But frankly we have not really been able to do that yet because our retail branches are so busy, they're working overtime, so they don't have time to work on other products because they're so busy with JP, and I think they are handling record level of transactions.

So the question is next month onwards whether we can expand business with these new clients and how much money these clients have, what kind of needs they have. We have to start discussing with our clients about these issues and that's what we will work on from November onwards.

(interpreted) Usually, [the] three-months figure of 100,000 accounts were 90,000 accounts, so those were -- so looking at one set of that, probably in one month maybe done more than what you usually achieve over three months was achieved, is that what you are saying?

(interpreted) My answer earlier may have been misleading, but I was looking at the accounts with balance, but in terms of the new openings of account, it's not exactly double. But we still have a few days in October, so we have to see what happens in these days, but the feel that we get in retail is double.

(interpreted) Thank you very much for your answer.

(interpreted) Mr. Yamanaka, Credit Suisse.

(interpreted) My question is similar to the questions asked, so there may be some overlap, but regarding FIG, earlier according to your explanation, in relative terms, your capital standing is strong and in regulatory environment your position is advantageous. So your business model has been continued.

On the other hand, European players shares were picked up by American players. Now regulatory environment is becoming unclear and even though you say the home country is strong, but Japan is more in terms of the percentage of the fee pool.

So for Nomura the contribution from Japan will be limited and if you continue with the current model with a JPY50 billion target or whatever internal target you may have, with the current model in place, are you okay with your business?

(interpreted) Our management target is EPS JPY100 in 2020. And we will continue working on that plan. And March 2016 is one milestone and we were supposed to achieve JPY50 billion in the overseas PTI in this year. And we are working on revamping the IB business and also the equities business and we've been making the necessary investments. And investment banking in EMEA and also equities on a global basis has been improving.

And fixed income which has been supporting these positive trends will continue to maintain its earnings capability, but as I said earlier there has been the trends that we have seen in the interest rates. So things are getting tougher.

And as I answered Muraki San's question earlier, the western banks are starting to announce their restructuring plan and meanwhile Nomura with its strong capital-base and with fewer competitors, I do not feel the need to restructure our business or change our earnings model. As for the market share in fixed income in the Americas or in the US, right now we have moved up to rank 9. In the past, we were below 10 and we do not -- we were not in the top 10. But now we have moved up to number 9.

But of course there is a huge gap between number 8 and number 9. So I do not see Nomura becoming number 8 at all. But we will continue -- I think there's a fair chance we will continue to gain market share from the stronger players. As for rates, as I said earlier, we have changed our structure in EMEA and we have also had the trading [hedge] in the US, so -- in New York.

So our revenue structure has really changed a lot since last year. And the FX business in the emerging markets or in the G-10 and the emerging has been separated. And for emerging we are getting the same person to overlook the rates and FX and we are seeing clear signs or clear changes as a result of this. So if we can keep working in this direction, I think there's a lot of room for improvement. And for securitized products, the question is how to control the risks for these products while expanding our business franchise.

And we'd like to see how our peers retrench or withdraw from their business, and I think that will lead -- create opportunities for Nomura.

(interpreted) I want to ask additional question regarding the last part of your answer, regarding the securitized products. When you do the -- strengthen the risk management in securitized products, are you seeing emergence of issues in securitized products area?

(interpreted) From risk-weighted asset perspective, securitized products use up a lot of risk. So it's important to have a very strong client franchise and we generate money through our trading activities. And we have to keep monitoring the turnover of our inventory. I'd like to instruct our people to do that.

(interpreted) Thank you very much for your answer.

(interpreted) Watanabe San, Daiwa Securities.

(interpreted) I have two questions. First question is about the recent powerful months of the domestic retail business. The sales of investment trust, how does it -- is it trending compared with September? Earlier you talked about the increase in the Japan Post, the related transactions? What's the recent trend?

The second question is about page 13, about -- on compensation and benefits. On year on year it's increased, but other than normalization of an [FCR], is there any other factor?

(interpreted) Yes. In relation to investment trust, and this applies to the entire retail business, but July, August, September things tend to be slow or things are getting slower, and October the pace has not really picked up. And this is due to the market environment. And the retail division is putting in a lot of time and effort in taking care of our clients and also the sale of the JP as I have mentioned.

And this is very time-consuming because we are selling the shares in small lots. So we are seeing some impact, not just the investment trust, but to other products in retail, other businesses in retail. As for your second question about the compensation and benefits, in Q2, I think you are referring to -- just a minute please; on a year-on-year basis, it's just mainly currency issue or currency impact, and as for the impact from FCR which you mentioned, it's -- the impact is limited.

(interpreted) Thank you very much for your very clear answer.

(interpreted) David Lui, Guoco Management.

I have one question only. On page 21 of your presentation, you're showing that stock brokerage commissions declined from JPY78.7 billion in the first quarter to JPY71.3 billion in the second quarter. So it's a decline of about 10% and yet the trading value on the Tokyo Stock Exchange actually rose about 3% to 4% from the first quarter to the second quarter. Could you explain this, I would say inconsistency or discrepancy between the decline in US stock brokerage commission and the increase in trading value on the TSE?

(interpreted) Your question related to the brokerage commission on page 21, this includes not only the Tokyo Stock Exchange transaction volume, but also the other brokerage commission generated in our overseas offices including I think Internet. And the -- as for the equity transaction with the retail brokerage, I understand that we have seen a increase in transaction volume during the quarter, but that is driven by the transaction through the -- some of the Internet brokerage firms and also Internet brokerage capability rather than the face-to-face high-margin commission execution.

Is it fair to say that the face-to-face customers are not as active in the second quarter versus the first quarter despite the overall increase in activity on the TSE as shown in the data which was about a 3% to 4% increase in trading value?

(interpreted) Yes, if I remember correctly I think that there is a significant change in atmosphere on the client's activity after the probably fourth week of August. We observe the course of the Chinese market in August -- in August 20th I think if I remember correctly.

And the first one week the transaction was very active with the retail clients, but after that the -- a lot of the people got nervous about what's going on in the market and they stayed at the side line compared to the day-to-day brokerage traders.

Okay. Thank you very much Kashiwagi San. Have a good night.

(interpreted) Good night.

(interpreted) Mr. Tanaka, Goldman Sachs.

(interpreted) I have two questions. Regarding Nomura Capital Market's liquidation, in the next quarter onward, what kind of impact will there be such as regional profit, also effective tax rate, what kind of impact will there be from next quarter onward?

The second question is the FIG equity in global markets in the month of October, what's the current status?

(interpreted) Yes, as for your first question about tax issue of NCM, this is a one-off event. So there will not be an impact in the next quarter onwards.

Your second question about FIG and equities and there are some differences by region; Japan and AEJ are as you mentioned. Meanwhile EMEA and Americas made a very slow start.

(interpreted) Thank you very much. So then taxes -- and tax item is one-off. I understand that. And after winding up then booking will take place somewhere else moving forward and because of that regional profitability will be affected by that?

(interpreted) Well, that will be a really long story, but basically I think we have stopped booking new transactions in this booking entity about a year-and-a-half ago. And since then we have set up a new booking entity in Tokyo and we have been transferring the risks from London.

So we have not been booking new transactions at NCM, and since then we have been using the NFPS entity in Tokyo and NFPS has been directly facing our clients in the September quarter and we have shifted about 10 major clients to this new platform. So right now, the Tokyo entity called NFPS is facing our clients. So to answer your question, NCM was actually not coming up in our figures in the past and it will not do so in the future either. And the difference in between Q1 and Q2 is the fact that NFPS started facing our clients directly.

(interpreted) Thank you very much, I understand. Thank you for your answer.

(interpreted) Mr. Sasaki, Merrill Lynch.

(interpreted) I have two questions. This time, as one-off items you have explained NCM -- regarding NCM. What Nomura Securities held the holdings -- equity holdings, the unrealized loss is that through the gain? If so then the Nomura Securities on taxable income change -- as Nomura Securities' taxable income changes, is the gain from NCM liquidation change?

The second question is without these extraordinary items, what's the level of net income, the superficial net income, plus JPY35 billion in cost for MPS settlement and JPY54 billion gain from NCM liquidation? So all -- those are the -- all the factors to be considered when we think about the tax effect?

(interpreted) As for your first question, you said Nomura Securities, but actually it's Nomura Holdings, Inc. And going forward, no, there will be no increase or decrease.

Your second question, I didn't really quite understand what you were after. Which -- I don't think it's meaningful to discuss which one-off item is included, which is not, and also the increase or decline in OCV being our business. And what we usually focus on the most is whether the revenues or earnings of our three businesses increased or decreased. And in this period the PTI of the three businesses was JPY53.8 billion, which was weak.

(interpreted) Okay, understand. Regarding Monte dei Paschi, JPY35 billion, is it directly impacting the net impact? That was the question I wanted to ask about. Can you talk about that?

(interpreted) The JPY35 billion is directly impacting our bottom-line and that is included in others or other.

(interpreted) Understand. One more additional question. Regarding profitability, it's hard to carve out the profitability of overseas business alone, but the profitability of overseas business in Q2 seems to be in negative territory. Would this number -- how would this number trend in the third quarter onward? After October, based on the recent trend, how do you foresee the trend?

(interpreted) Well, basically, JPY50 billion from overseas is what we have been saying. So our quarterly income is one-fourth of that. That is what we have in our heads, and meanwhile we can also talk about the markets and also the environment. And I think I answered someone's questions earlier, but the three regions overseas, right now AEJ is doing quite well in terms of its performance, but EMEA and the Americas made a slow start to the year. So we believe that's a challenge.

(interpreted) Understand. Thank you very much.

(interpreted) Mr. Niwa, SMBC.

(interpreted) I have two questions. The first question is about an impact of the liquidation of the subsidiary. From around the beginning of this fiscal year, were you able to foresee this happening?

Separately from this, what's the volume of tax effect you are not being able to capture? How much of that are you -- will you be able to capture within next year?

Next question is about the retail business in Japan. Earlier you talked about the purchase from smaller [accounts], but would main parts of the sales force, the traditional channels of Nomura Securities or any other channels of sales?

(interpreted) As for your first question whether it was visible from the beginning of the fiscal year, as I explained earlier NCM was not being used and we knew that there was a chance that we will wind up NCM at some point. Yes, that was on our minds. But we made the decision in relation to the transfer to NFPS and that being a success and NFPS was able to face professional customers or clients properly, that's why we decided to wind up NCM.

So as for the second part of the question about whether they are tax affects that we are not being able to capture, no. And your second question about the domestic retail business, whether we need new channels. Well, no, nothing is on our mind in terms of immediate changes that are needed. And if you're saying that for very high net worth clients, the wealth management business has to cover them, and meanwhile we should also focus on low-cost sales like using the Internet. I don't know which you're referring to, I think it's more the latter in relation to the Internet-based channel, but, no, we do not have plans to focus on that channel at the moment. There are sales people who are covering our clients. So as we have been in the past, the sales people will continue to cover these clients and we do not see a sudden shift to the Internet.

(interpreted) Thank you very much. My questions were clarified. Thank you.

(interpreted) Well, thank you very much for participating until late in the evening. For the September quarter, the results -- we are not happy with the results, I think you can understand that. But meanwhile, we will not change our policy based on short-term changes or short-term issues as I mentioned in my presentation and we look forward to your continued support. Thank you.

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

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.