Nomura Holdings, Inc. (NMR) Q1 2017 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to today's Nomura Holdings First Quarter Operating Results for Fiscal Year Ending March 2017 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 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 sentiments, liquidity of secondary market level and the volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and the timing of transactions. With that, we'd like to begin the conference. Mr. Takumi Kitamura, please go ahead.

This is Kitamura, CFO. I will now give you an overview of our result for the first-quarter using the document titled Consolidated Results of Operations. Please turn to Page 2. The market remained volatile during the first quarter due to the impacts from monetary policy around the world and the Brexit vote in the UK. Retail investor sentiment was subdued on the back of yen appreciation and weaker equity markets. The fixed income market started to stabilize and client activity increased. Amidst this environment, we were able to report a significant rebound in performance with income before income taxes of JPY62.8 billion as we delivered solutions matched to client needs and continued to act as a liquidity provider. The three international regions reported total income before income taxes of JPY16.9 billion thanks partly to cost reduction initiatives. This resulted in a decline in our effective tax rate to 25%. Net income was JPY46.8 billion, ROE was 7% and EPS was JPY12.71, representing a good start to the fiscal year. As you can see on the bottom right, income before income taxes from the three business segments was JPY67.5 billion, up significantly from last quarter. Retail reported lower income before income taxes as the retail investors sat on the sidelines, but asset management income before income taxes doubled, lifted by dividend income and other factors. In wholesale, fixed income had a good quarter as client activity and the trading environment improved. Cost reductions also took effect and income before income taxes rebounded strongly. Today we also announced a share buyback program with an upper limit of 100 million shares or JPY45 billion in order to allot shares upon the exercise of stock options and to improve capital efficiency and maintain a flexible capital policy. Let's now take a look at the results for each division, starting with retail. Please turn to Page 5. Retail reported net revenue of JPY83.8 billion, down 1% quarter-on-quarter. The decline is mainly due to slower sales of stocks and bonds. However, investment trusts and discretionary investments improved from the weak prior quarter. Income before income taxes declined 29% to JPY8.7 billion. Please turn to Page 6. This quarter saw a continued volatility in the equities and FX markets and a further decline in interest rates, representing a challenging environment – investment environment for our retail clients. In times like these, we place even greater focus on maintaining close dialogue with our clients and provide solutions that meet their exact needs. As you can see on the bottom right, we emphasis discussions on discretionary investments to uncover our clients' latent needs. This resulted in a doubling of net inflows into discretionary investments to JPY107.2 billion. Despite of a negative impact from market factors, asset under management and discretionary investments grew to over JPY2.2 trillion, as shown here on the bottom left. Next, please turn to Page 7 for asset management. Net revenue increased by 28%, lifted by dividend income, realized gains from the potential liquidation of an overseas entity and other factors. Income before income taxes was JPY12.2 billion, the highest level since September 2007. Assets under management declined by JPY2.8 trillion from March to JPY37.3 trillion due mainly to market factors. This also includes the impact of outflows of corporate short-term funds from money market funds. The investment trust business continued to take inflows into privately placed funds and investment trust for discretionary investments. In the investment advisory business, we saw outflows from Japanese public pension funds and Japanese equity products overseas. However, we continued to book inflows into U.S. high yield products. As you can see on the bottom right of Page 8, our investment into American Century Investments was completed on May 19th. We have established a Business Opportunity Committee and set up working groups to draw up concrete strategies to realize the benefits of collaboration. Please turn to Page 9 for an overview of the wholesale segment. Net revenue was JPY190.9 billion, up 40% quarter-on-quarter. Fixed income made a strong contribution to revenues across all regions and products. Expenses were JPY144.3 billion and have been steadily declining each quarter. Our cost base has been lowered significantly, mainly in compensation and benefits following the strategic review of our EMEA and Americas businesses. As a result, income before income taxes rebounded to JPY46.6 billion. Let's now look at each business line in more detail. Please turn to Page 10. Global markets booked net revenue of JPY170.5 billion, up 57% quarter-on-quarter. Fixed income net revenue was JPY107.9 billion, increasing nearly four-fold quarter on quarter. As the heat map on the right shows, the arrows in all regions are pointing up with rates products having a particularly strong quarter in each region. In the Americas, spread products such as credit and securitized products improved, while credit also reported strong revenues in Asia-Pacific. Meanwhile, equities net revenue declined 22% quarter-on-quarter as last quarter included a gain on the sale of Chi-X shares and client activity slowed in the first quarter. Please turn to Page 11 for investment banking. As shown in the bar chart on the top left, first quarter net revenue was JPY20.4 billion down 27% from last quarter. Gross revenue was JPY33.9 billion, declining on the back of fewer ECM transactions and the impact of the yen appreciation. In Japan, market turmoil and seasonal factors led to a shrink in the people. However, we retained the top spot on the Japan ECM league table by accurately capturing the needs of issuers. Revenues from industrial realignment and consolidation transactions and cross-border M&A were relatively strong. Our international business booked stronger revenues, driven by the Americas. M&A multiproduct deals and large bond offering by financial institutions and other clients contributed to revenues. Please turn to Page 12 for an overview of expenses. Group net interest expenses for the first quarter totaled JPY275.7 billion, down 6% quarter-on-quarter, due mainly to yen appreciation and lower business development expenses and occupancy and related depreciation. Looking at the quarterly trend, you can see we are making progress through our ongoing cost reduction program, steadily lowering Group-wide expenses. Expenses are down 13% on a year-on-year basis. Compensation and benefits have declined 19% compared to the same period last year as with the implementation of pay for performance and as we worked on reducing costs mainly in our international operations. We will continue to lower our fixed costs globally by having the front, middle and back offices work together to drive further cost efficiencies. Please turn to Page 13 for our balance sheet. Total assets were JPY42.9 trillion, gross leverage was 16.2 times and the net leverage was 9.8 times. Our tier 1 ratio was 16.9% and our CET1 ratio was 16.3%, both up significantly from March due to the lower market risk. Applying the fully-loaded 2019 Basel 3 standard to our balance sheet at the end of June gives a CET1 ratio of 15.5%. Our leverage ratio was 4.28% and our LCR or liquidity coverage ratio was 190.8%. That concludes the overview of our first-quarter results. To sum up, the first quarter was marked by volatile market conditions, but in our Japan business we enhanced dialogue with clients and worked with them to find the best solution for their needs. Internationally, we gained traction in addressing our key management challenge of returning our international business to profitability by undertaking a strategic review of our EMEA and Americas businesses to concentrate our resources on areas where our clients rely on us. These initiatives in Japan and abroad are still a work-in-progress, but we are pleased with the direction we are moving in. We will maintain our fundamental strategic direction globally, put clients' needs first and step up cross divisional and regional collaboration to best meet the needs of our clients, and this will put us in an even better position to deliver consistent earnings. We look forward to your continued support. Thank you

We have a question-and-answer session now. [Operator Instructions] The first question is by Mr. Muraki from Deutsche Securities.

Thank you very much. This is Muraki. The first question is about wholesale, the second question is about capital policy. The first question – related to the first question, this time fixed income revenue, as you show in Page 10, in the previous quarter it was on JPY27.6 billion and it went up to JPY107.9 billion out of JPY107.9 billion, the client revenue related portion and portion trading related portion, if you try to divide that up into those portions could you give me the breakdown?

Yes, this is Kitamura. The client revenue for this quarter slightly declined and in fixed income rates business was strong, but in the other product there was a slight slowdown Q-on-Q. In terms of the client flow business and how much it accounts for the total business, client flow is more than 60% and trading revenues is close to 40%, a little bit less than 40%.

Thank you very much. That means related to trading – the trading portion this time is quite big. This level itself, what's the sustainability of this level given the recent trend? Could you give me that kind of a detail? And regarding wholesale, the SG&A or cost has come down significantly. This cost level, how sustainable is it from this current level? Can we consider this level as the launch pad to a starting point? In this material, Page 9, looking at – I'm looking at Page 9. In wholesale, the revenue compared with the Q2 of last year, it's about the same level. But expense, it's about – it's down by about JPY40 billion. This cost level, is it going to be the run rate going forward? So the second point I want to mention is regarding the share buyback. This time, at this point you've made the announcement. What's the reason for deciding to make the announcement at this point? Is it because you looked at the stock price? Usually, you conduct it for the second quarter, but are you accelerating that decision? And also the period of implementation is pretty long, till the announcement of the third quarter results. So can we assume that you've accelerated this process? And also regarding the regulation, can we assume that you do not have a particular concern about the regulatory environment? Thank you.

Thank you. Okay, let me begin with the first point, the fixed income revenues and the sustainability or repeatability of the revenues. In terms of the revenue environment – the market environment, this will change from time to time. So frankly it's quite hard to say. And the April to June quarter in terms of the first quarter, the rates business picked up, which was – it was quite slow in the March quarter thanks to the slow market flow and of the client activity. So rates enjoyed the strongest environment. And in Q4 of last year, the securitization and credit businesses – basically, the spread products suffered, but in Q1 things normalized for the credit products. That was another major factor. In terms of the current environment and also the future outlook, as for the current environment, I can't go into too much detail, but in Q1 there have been no major changes from the trends we saw in Q1. And moving on to the wholesale expenses, the Q1 expenses – you used the term launch pad or starting point and whether you can compare the future costs or expenses based on the Q1 results bottom. I think, yes, you can, you can compare it with the Q1 results. And as for the strategic revision of our business which we announced in April, I think we are starting to see the result of these revisions already. But in Q1, which tends to be the first quarter of the year, expenses tend to be somewhat lower compared to the other quarters. And also I talked about the slight slowdown in client flow, and as a result, the transaction fees or the revenues also slowed down. So I think the overall cost base was a bit lower compared to the typical quarter. And your next question about buyback in terms of why now, in March – when we announced the results for March 2016, there were a lot of changes ongoing in the market environment. And as for our international business, which we had just announced the revision, strategic revisions, so there was a lot of unclarity about our business outlook. But now, in this quarter, we were able to achieve robust bottom line earnings and we gained confidence about the future. That was a major factor in choosing now as the timing of the buyback. And of course we – the share price is a major factor and if we do a share buyback with the current share price, I think it will have a bigger impact in terms of shareholder benefit or shareholder return and that's why we chose to do the buyback at this time.

Thank you very much. Thank you for the clear explanation.

The next question is from Mr. Yamanaka of Credit Suisse Securities.

Thank you. This is Yamanaka. I have two questions. The first is – this may overlap with Muraki-san's question, but your expenses and whether we can use Q1 as the base for future analysis. And you said yes, although it may be a bit higher than a typical quarter. And compensation and benefits and the other expenses, there was quite a lot of impact from currency. So how much was the currency impact and how do you – how should we expect the future impact from currency? That's my first point. My second question is the recovery of your fixed income business and this applies to not just for the Q1, but the ongoing quarters. But the competitive environment with your peers, could you explain the competitive environment? And I think there are benefits or contribution from your cost reduction efforts, but what is your positioning compared to your peers? And if there is an impact on the sovereign, what would be the impact to Nomura compared to your peers? So these two questions please.

Thank you for your question. Firstly, the cost, in the first quarter it's not tend to be high, but it tends to be low. Regarding the impact of currency, yen is appreciating and you see fixed impact – and of course there is some impact, but the impact of currency even exceeding that impact, the cost itself is down. The cost impact of FX, I would like to refrain from mentioning a specific figure. And the impact of currency moving forward, how do we look at that? It's difficult to speculate on the trend of the FX market. But the yen-dollar rate, if the current rate continues, then from where we stand FX factor will be limited. Then regarding the recovery of fixed income business and competitive landscape – our view towards the competitive landscape, there are several details which I cannot comment on. But frankly speaking, our market share is steadily increasing, spending in the last couple of years. We've continued providing liquidity. As a result – our clients have better recognized Nomura as a brand as a result. Especially, in the USA, our share in the market has edged up. And also regarding the sovereign impact, how do we respond to that? Well, it depends on the size of the impact. Well, we cannot foresee the size of the impact, but impact on sovereign could result in the downgrading of Nomura. That's a possibility. But as of now, the impact – grave impact on business is not anticipated now for the entire deal the banking industry in Japan. The credit rating agencies rating, the sensitivity to the rating depends on the firm. But as of now, the grave impact on business is not anticipated as of now.

This is a follow-up question related to my second point, the sovereign ratings and the impact it could have on Nomura. And you talked about how your market share is growing mainly in the U.S. and whether the sovereign ratings could have an impact on your business and how you view that please?

As I mentioned, the counterparty of us – in light of the possibility of downgrading of sovereign, our suspicion is that financial institutions are not placing much importance to the credit rating by the credit agency. So even though our rating is downgraded, of course our positions are going to be explained clearly to credit rating agencies so that we can avoid downgrading. But even if our rating is downgraded, impact on our business will be limited.

Thank you.

The next question is by Mr. Watanabe from Daiwa Securities.

I have two questions. The first question is about impact of Brexit. In the short-term event it worked as a positive for the revenue, but what's the impact, mid-to long-term impact on revenue from Brexit? Investor Day, back in April, you talked about the best case scenario of 8% reduction. If your view stayed the same from back then? That's the first question. The second question is regarding asset management. Oversea – liquidation of overseas subsidiary and a gain from the potential liquidation and what's the details and what's the size of the gain or positive impact? Thank you.

Yes, this is Kitamura. The impact from Brexit in the short-term is – as you pointed out, it worked positively to our revenues. And this was because we have been controlling our risks and positions at the time of Brexit. And in terms of the decision of the UK to leave, which was unexpected to us, but our clients are adjusting their positions leading to an increase in the client flow for us and we are making sure we meet the needs of our clients and we have been able to monetize from these changes made. As for the mid-to long-term impact from Brexit, the new cabinet and the setting up of the new cabinet was earlier than expected with Ms. May as the new PM. So I think the stabilization of the government came earlier than expected. Meanwhile, in terms of whether UK will trigger Article 50, which it has not yet, so the negotiations with the EU has not begun yet. And during the negotiation period, it depends on how the discussions will pan out and that will determine the structure of the relationship between UK and EU. So there is a lot of un-clarity at the moment and it's still too early to comment on the mid-to long-term impact of Brexit. We'll continue to monitor the situation and make the necessary responses. Your second question regarding asset management and the overseas subsidiary liquidation and the gains from the liquidation. This is the joint venture company in India and we sold the shares and the holding Company, interim holding Company which owns the shares. There was some currency translation gains at this holding Company level. As for the amount of the gains, I would say like double-digit of yen or several billions of yen, that's the kind of rough estimation [ph] you should have.

Thank you very much for the very clear explanation.

The next question is from Mr. Tsujino of JPMorgan.

Thank you. This is Tsujino. First of all, Slide 30, the headcount, your international headcount. These are the figures shown as for your headcount. But I guess the expenses are not being incurred by some of these people. So what is the number of that headcount which is not leading to expenses at the moment? And in relation to your compensation and benefits, in FIG, I think the historic – you're generating historical highs in some regions, but your compensation and benefits has been controlled at this kind of level. So I'd like to ask about how you're making provisions for your bonuses. Have you made any changes? My next question is in relation to the FIG revenue, April, May, June how did things trend? So if you index it a 100, what – was it 30, 40 – 30, 30, 40 or how – not index, but what is the breakdown of the total amount? Let's say, a 100, is it 30, 30, 40 between April to June? Lastly, the tier 1 ratio has gone up a lot and this is partly due to the decline in positions and I think there's also an impact from the currency. In your previous explanations, there were some changes like counterparty risk, your internal model, whether you're going to use internal model, et cetera. And it could have a 2 percentage point decline, lead to a 2 percentage point decline and you also talked about the deterioration in a market conditions. So you have been somewhat – so we have been somewhat cautious. But in your earlier explanation, I think some of these concerns have been removed. So could you add some more color to that, could you give us the background of that?

I supposed you asked four questions. First, Page 30 regarding headcounts on Page 30. The specifics of headcount reduction cannot be disclosed unfortunately. But at Capital there was a question, but in reality this time in Europe 250 came down. But because of the aggregation related reasons, there is some portion that hasn't lead to the reduction of headcount. The impact of that is going to appear in the second quarter. As for the specific number, I cannot comment on that. But I hope that you will look at the relevant information to come. As for the personnel expansion, compensation and benefits, the methodology for the bonus reserve, whether we've changed our approach for that. We haven't changed our approach for bonus reserve. Our pay for performance thinking has been advanced further. That's the correct way of explaining it. But in the overall industry of finance, the bonus level has come down. So Nomura to be in line with the industry, we are thinking about the appropriate level of bonus. But our thinking behind the bonus reserve hasn't changed at all. We are just more thoroughly implementing pay for performance. The third question was about fixed income and monthly trend of fixed income revenue. April was the best month in the quarter. Rates product and currency effects and securitized products all recovered and generating revenue of high level and May saw some slowdown. Though rates business continually performed well, but other businesses normalized, where the performance subsided a bit. And in the month of June – the trend of May continued into June. So until 22nd of June – the May trend continued till June 22nd. But immediately after the outcome of Brexit voting, volatility sharply went up, clients adjusted their portfolios and related activities went up or increased. So in the month of June that made a revenue contribution to our macrobusiness. Then the fourth question that you asked regarding the regulatory environment, whether we are confident about the regulatory environment. When it comes to regulation, our view has not changed largely. From as of March 2016, the market condition greatly changed and also, as mentioned, our business structure was reviewed and revised strategically and timing was immediately after that. I think I told Tsujino-san at that time, but we were very conservative at that time as we made the comment back then. But our concern about regulations with regard to our business or Nomura – so you can suppose that our concern has subsided regarding our business.

Thank you. Your fixed income monthly, is it like 40, 30, 30 in April, May, June?

Yes, that's not far off.

Thank you.

Next question is asked by Mr. Sasaki from Merrill Lynch Japan Securities.

This is Sasaki from Merrill Lynch. I have two questions. The first question is about balance sheet. On the reported basis balance sheet, the trading asset and the repo accounts as of end of March it went up. On the other hand, risk-weighted asset until June it went down. And this gap is coming from what? Can you explain where the gap is coming from? The second question is about the headcounts, which is going up in Japan. Have you hired newly for Japan even though the headcount is coming down overseas? Can you make a more specific comment about domestic headcounts? Thank you.

Okay. Your first point about the trading position and the balance sheet, JPY42.9 trillion. Meanwhile, risk-weighted asset has declined. As you mentioned in your question, this is in relation to the repo transaction, which we increased slightly. And the risk-weighted assets – we don't have to use that much risk-weighted assets for these businesses and there are revenue opportunities in the reverse repo transactions, so we used some of the balance sheet. And your second point about the domestic headcount and the increase in domestic headcount, this is due to the hires of new graduates from universities.

The first answer, for the trading accounts from the end of March till June, the trading account balance went up and the value at risk shows increase in risk. But is it natural to see this kind of gap? Did you change the measurement methodology? There seems to be other factors that you didn't mention.

In terms of the trading assets, as I have explained earlier, this is due to the rates products doing well and we increased our positions slightly.

Then the composition has changed slightly, that's the reason?

Yes, that's right. And the reason why the bar has gone up is mainly because in Q1 we carefully monitored and controlled our risk and that lead to the decline in risk-weighted assets. Meanwhile, the bar increase was due to the volatility increase following Brexit. So the barometer went up and the bar ended up increasing.

Understand. Thank you very much for your answer.

The next question is from Mr. Ban of Morgan Stanley MUFJ Securities.

Thank you. This is Ban. I have two questions, the first is related to your expenses. And sorry for going back to this topic again, but you talked about how we can use Q1 as the starting point. But as for the wholesale expenses and your cost cutting towards March 2018, what is the progress made as of Q1 of this year and also how much progress do you plan to make by March 2017, how much will come up in your results? Did you have some rough color on that, could you share it with us? That's my first point. My second question is about your domestic retail business, and as you explained in your presentation, you said you are making steadfast efforts to improve your – improve things. But as of Q1, the PBT – PBT like is less than JPY10 billion. Is your strategy to keep building up the assets and the profits and improve your pre-tax income? In terms of your revenue earning capability of your domestic retail business, if you could share with us some details or some measures which you were thinking of could you share that with us please?

Regarding the first question about cost, the strategic review – the contribution from strategic review, well, the cost reduction, $5.9 billion of last year's level of cost. And on Investors Day in April, we said that $700 million is going to be taken out from that level. That's the message we sent out on Investors Day. So it's a little below $5.2 billion. Wholesale cost is 140 billion. Of course it depends on what exchange rate you are going to use, but in dollar it's about $5.4 billion. I already answered the previous question, but the number seems to be looking a bit lower. And given the recent run rate, $5.5 billion or so seems to be more natural number because the fee that we pay has come down. So the cost last year is $5.9 billion and our target is $5.2 billion or so. And right now we are down to about $5.5 billion. So the cost reduction, 50% of what we're trying to achieve has come to materialize I think.

So you still have another 50% coming up, is that right?

Well, the strategic review and other cost savings initiatives, we are not separating them, please do not separate them. Including every initiatives we are trying to reach $5.2 billion.

Also the question about retail, the capability of generating revenue to increase the revenue is there any specific or special measures?

There is no magical measures so we can implement. The market environment is very likely to stay severe. And more than ever by accumulating recurring revenue, hopefully we will come up with a structure that's not affected by the market conditions. At Capital there was a question asked that in this year, starting from this year in the market – market environment has become tougher for retailer investors to participate. The flip side of that is that the clients concerns or worries are very deep rooted, so now seems to be the time for us to spend time with clients in person. As a result, as you see in our graph, the number of interviews conducted has risen sharply and that led to increase in net inflow into discretionary investment. Of course discretionary investment is not the sole purpose for which we are conducting hearing or interviews. We do offer other solutions as well, and we need to take time for us to materialize full fledged revenue. So I hope you will watch over us with a longer term perspective to see how our initiatives will lead into a better performance in the future. Regarding the cost, more than ever – well, we have continued implementing pay for performance and we will continue implementing that continuously and we will work on cost control as well as improvement of business efficiency and we will stay focused on those things.

Okay. Thank you.

The next question is going to be asked by Mr. Niwa from SMBC Nikko Securities.

Thank you. I have a question about retail business as well as the overall environment. First, regarding the domestic retail division, the discretionary investment, net inflow in the fourth quarter – compared with fourth quarter, the inflow is double. From here what kind of products performed well and is there any change in the minds of investors from your perspective? In the negative interest rate environment, clients seems to be getting more used to the negative interest rate environment. So is there any sign that you can expect increase in sales of products? The second question is, in the summary there's mention – so the start was quite decent for this quarter. But looking at profit level, the profit seems to be pretty high. If anything, I wonder if the environment is improving sufficiently so that you can be optimistic about future outcome. Thank you.

Thank you. In terms of the discretionary investments in retail and how things doubled compared to Q4 – you asked about the changes in the investor sentiment or investor mindset. In Q4 of last year things were very tough and that continued in Q1 and under these circumstances we met clients and we conducted interviews, had follow-up interviews with our clients. And as a result, we were able to grasp the concerns and the intentions of our customers and we offered rebalancing of the fund wrap and we made proposals which meet the needs of our clients and that led to the increase or the inflow into discretionary investments. In terms of the products in our fund wrap and some products are conservative, some are more aggressive. I think the conservative portfolios are being preferred by our clients. This is due to the negative interest rate and investors are worried or concerned about where to put their money. We also offer SMA. We have achieved large mandates in SMA, so it's not just fund wrap. And I wouldn't say we're seeing a major change in the trend, the change is not that strong. It's quite hard to say whether the change is strong, but I think we are starting to see some signs of changes in the trend. And in terms of my comment about the decent start in Q1 and your implication that Q1 was quite a good start actually, well, the reason why I said we made quite a decent start is because if you multiply the 12.7 EPS, if you annualize it, you get JPY50. So that's what I meant by a decent start. In terms of the current business environment and whether things are improving or rebounding, we are somewhat cautious on that. There was the Brexit vote and we have to access the outcome of that and how discussions will pan out. We also have to keep in mind the geopolitical risks and various political issues. So we are not overly optimistic about the future. But having said that – and I also mentioned this in my previous answer, but our market share has been steadily growing and the strategic review announced in April has led to a decline in our expenses, as we announced today. So I think we have improved our profitability and we are less likely to book loses. That's the feel I have. So in terms of the future, yes, I think you can keep your expectations high about the future.

Thank you very much. That was very clear.

[Operator Instructions] The next question is from Mr. Ono of Rockhampton Investment.

Just one question about the share buyback. The number of shares and the amount, if you do the math, you get JPY450. In the past you said – or you did not do a share buyback if the share price was higher than the BPF. So I'd like to ask your thinking about share buybacks and your share, please.

Regarding how we buyback our shares, I would like to refrain from commenting it about specifics I’m sorry.

Okay. Thank you.

[Operator Instructions]