Nomura Holdings, Inc. (NMR) Q2 2022 Earnings Report, Transcript and Summary

Good evening. This is Takumi Kitamura, CFO of Nomura Holdings. I will now give you an overview of our financial results for the first half and second quarter of the fiscal year ending March 2022, using the document titled Consolidated Results of Operations. Please turn to Page 2 for an overview of the first half. Firm-wide net revenue declined 19% year-on-year to ¥672.1 billion. Income before income taxes was ¥97 billion, down 63%, while net income declined 75% to ¥51.7 billion. There are two main reasons why earnings declined from the previous year. First, in the first quarter, we booked an additional loss of ¥65.4 billion. As in May, we completed unwinding our positions related to transactions with our U.S. client in March this year. This is included in wholesale in the business segment results shown on the bottom right. The second factor is in segment, Other. We booked a provision for legal costs in the second quarter of ¥39 billion related to legacy transactions in the Americas from before the global financial crisis in 2007 to 2008. As this is still ongoing, we cannot discuss the details of this. Both of these factors together resulted in a total impact of around ¥100 billion. With that backdrop, let’s now look at the business segment results. Retail income before income taxes remained roughly unchanged year-on-year at ¥36 billion. Brokerage commissions from the sale of stocks and investment trusts slowed, but recurring revenue increased on growth in investment trust and discretionary investment client assets. Investment Management posted strong growth with income before income taxes rising to ¥59.9 billion. Assets under management continued to climb and business revenue increased, while investment gain loss was particularly strong, driven by the listing of an investee company. Wholesale results were impacted by the ¥65.4 billion additional loss I just mentioned. Wholesale booked a loss before income taxes of ¥3.4 billion. Even excluding this ¥65.4 billion, pretax income declined by about ¥90 billion. This is mainly due to a slowdown in macro products such as rates and FX emerging, which were particularly strong in the same period last year as the fixed income market rallied last year. Investment Banking posted a 60% increase in revenues on the back of strong performance in M&A and ECM. Segment Other posted a loss before income taxes of ¥800 million due to the ¥39 billion provision I mentioned. That concludes the overview of our first half results. Today, we announced a dividend of ¥80 per share for shareholders of record as of the end of September. We also launched a share buyback program to raise capital efficiency and ensure a flexible capital management policy and to deliver as stock-based compensation. The upper limit of total shares will be 80 million shares and the upper limit for total value will be ¥50 billion. The program will run from November 16, 2021 to March 31, 2022. Please turn to Page 3 for an overview of second quarter results. Firm-wide income before income taxes declined 76% quarter-on-quarter to ¥18.5 billion. This included a pretax loss of ¥40.4 billion in segment Other, which includes the ¥39 billion provision for legal expenses. Income before income taxes from our three core businesses was ¥57 billion, up 60% from last quarter as wholesale performance improved due to the impact from transactions with a U.S. client no longer present. Second quarter net income was ¥3.2 billion, and ROE was 0.5%. Unfortunately, the ¥39 billion provision in the Americas significantly impacted our bottom line in this quarter. Now please turn to Page 6 for an overview of results by business, starting with Retail. Net revenue was ¥85.2 billion, as market uncertainty persisted through July and into August, brokerage commissions from sales of secondary stocks, investment trusts and bonds declined. However, recurring revenue and contributions from primary stocks both increased, resulting in revenues remaining roughly flat quarter-on-quarter. Income before income taxes was ¥17 billion, a decline of 11% over last quarter when costs were unusually low. Please turn to Page 7 for an update on key performance indicators. We are taking a number of steps to grow our Retail business over the medium to long term. On the top right, you can see Investment Trust net inflows of ¥78.1 billion and discretionary investment net inflows of ¥90.2 billion, representing continued monthly net inflows since April. This ongoing buildup has helped lift recurring assets to a record high of ¥19.5 trillion, and we are on track to reach our March 2023 KPI target of ¥21 trillion. Recurring revenue derived from recurring assets was ¥27.2 billion, accounting for over 30% of total retail revenues and 40% of expenses. Consulting-related revenue shown in the bottom left was ¥4.5 billion, representing an improvement from last quarter, driven by the real estate-related business and annuities. Please turn to Page 8 for Investment Management. Net revenue declined 46% quarter-on-quarter to ¥34.3 billion. Income before income taxes was ¥15 billion, down 67% from last quarter, when we booked a contribution of ¥24 billion from the listing of Nomura Capital Partners investee company. This quarter’s results slowed as that uplift was not present this quarter and American Century Investments related gain/loss declined. That said, our Asset Management business remains solid. Business revenue grew 4% and to ¥29.3 billion. And as shown on the bottom left, assets under management reached a record high of ¥67.8 trillion. Assets under management were lifted by market factors and inflows as shown on Page 9. This quarter, we saw total inflows of ¥1 trillion, comprising ¥270 billion from the Investment Trust business and ¥770 billion from the investment advisory and international businesses. The graph on the bottom left gives a breakdown of the investment trust business, the dark red portion showing solid inflows into core investment trust with ¥180 billion of inflows via the regional banks and the bank’s channel alone. The Investment Advisory business reported more than ¥400 billion inflows in Japan and international inflows stood at ¥350 billion. In the international business, shown on the top right, assets under management increased ¥2.5 trillion over the last year, ¥1 trillion, of which is from inflows. Inflows were particularly seen in well-performing fixed income funds. In private markets, alternative assets under management continued to grow steadily, reaching ¥690 billion. Please turn to Page 10 for Wholesale. Net revenue increased 30% to ¥172.7 billion and income before income taxes improved from last quarter to ¥25 billion. The improvement comes as the last quarter was impacted by ¥65.4 billion loss related to the transaction with a U.S. client. Looking at net revenue by region on the bottom left. The Americas improved from last quarter as the impact of the loss was not present this quarter. Japan’s revenues remained roughly unchanged as equities and investment banking offset a slowdown in fixed income. Asia reported stronger revenues across all businesses, while EMEA revenues slowed in fixed income driven by rates and securitized products. Please turn to Page 11 for an overview by business line, starting with Global Markets. Second quarter net revenue in Global Markets increased 41% Q-on-Q to ¥137.2 billion. Equities revenue jumped 7.3x from last quarter to ¥66.5 billion as the last quarter included the loss and because Japan and AEJ revenues both increased. Fixed income revenues were ¥70.7 billion, AEJ and Japan credit had a solid quarter, but macro products such as rates and FX emerging markets declined 20% on lower client activity. You will also find regional highlights on the right of this page. Turning now to Page 12 for Investment Banking, revenues remained strong for the fourth straight quarter at ¥35.4 billion. M&A had another good quarter, and the sustainability-related deals shown in green on the top right as well as cross-border mandates contributed to revenues. The Japan ECM business had a strong quarter, executing global deals such as a follow-on offering by West Japan Railway and supporting multiple Solutions transactions. Internationally, M&A was strong in the Americas and EMEA, while our collaborations with Wolfe Research in the Americas helped us win a number of ECM mandates. Please turn to Page 13 for an overview of non-interest expenses. Firm-wide costs increased 9% to ¥300.4 billion. Notably, other expenses shown on the second row from the bottom, increased 60% Q-on-Q to ¥76.9 billion. While the ¥9.3 billion loan loss provision booked last year was not present this quarter, we booked a provision of ¥39 billion, as I discussed earlier. Compensation and benefits declined 5% to ¥129.2 billion due to lower bonus provisions in line with pay for performance. Next, our financial position on Page 14, as shown on the bottom left, there is no real change to our financial position from June with our September and Tier 1 capital ratio at 20.2% and CET1 capital ratio at 17.6%. That concludes the discussion of our second quarter results. This quarter’s results unfortunately included an impact to our bottom line by the provision booked for legacy transactions from before global financial crisis. At the same time, in our core businesses, Retail saw recurring assets and recurring revenue hit a record high and net inflows into investment trusts and discretionary investments have continued into October. Our strategically important contact center started to gain traction with its remote consulting services for clients in their 50s and 60s who are currently working age – who are currently at working age or have faced the big lifetime event of retirement. Investment Management reported ongoing inflows from regional banks, the bank’s channel, DC business and investment advisory business, lifting assets under management to a record high and achieving steady growth across the broader asset management business. In wholesale, where our fixed income business holds a competitive advantage in macro products, we faced a challenging market environment. October also saw wholesale revenues get off to a slow start primarily in rates. But as the macro environment becomes clearer, we expect to see market participant activity pick up. Investment banking is starting to deliver, with revenues remaining elevated for four straight quarters. We recently appointed Jeffrey McDermott, the Founder of Greentech Capital as Global Co-Head of Investment Banking. Looking ahead, in addition to our strength in secondary business, we will strengthen our advisory and sustainability-related businesses to further diversify our revenue mix and deliver more consistent revenues. Today, we also announced initiatives to enhance our risk management. Following the incident in the U.S., we conducted a comprehensive review of our risk management. Based on this, we have been implementing initiatives to enhance our risk management. This consists of three main points. At the Board level, we established a Board Risk Committee consisting mainly of outside directors. On the execution side, we realigned our committees and created a Group Risk Management Committee and the Steering Committee for enhancement of risk management. We aim to achieve sustainable growth while working hard to enhance our risk management. Thank you very much.

Hello. This is Muraki from SMBC Nikko Securities. Two questions, please. First, regarding the legal reserve or litigation provision of ¥39 billion, last year, first half, ¥24 billion, second half, several billions of yen of provisions I believe. And it’s been quite a while since the global financial crisis, but you have been booking these provisions consecutively. What is your future outlook about booking further provisions? I believe the risk has pretty much peaked out. Is that the way to think about it or as of August 16, you calculated the ¥68 billion of maximum probable loss, which exceeds the provisions amount? And so I believe there are some expected losses in other issues, other cases. So, how do you view the future risk? And from the outside, I am sure there are some contingencies, but how can we estimate the expected future losses such as this? And my second question is regarding your capital strategy. And this time, you announced ¥50 billion of share buyback, your total payout ratio, 144%, 145%. Why did you choose to exceed 100% in your payout? Did you change your definition of your profit for income or do you feel there is some abundant capital and which allows you to make this payout? Thank you.

Thank you. This is Kitamura. Your first point about the provision, what I can say as of today is that right now, we have made the necessary provisions. And in the future – future possibilities, frankly, I don’t think it’s appropriate to comment. And this is an issue which took place quite a while ago, but yes, we do have to make provisions like this. So, it is disappointing for us, but we have made the provisions that we need as of today. And we do conduct business globally. So, there is – we cannot completely mitigate litigation risk outside of Japan. On the other hand, it is through conducting the appropriate business that we can reduce the future litigation risk. And as announced, we are enhancing our risk management. And by conducting business appropriately, we would like to reduce these cases as much as possible in the future. Your second question about our capital policy as you pointed out, the share buyback and dividend total payout ratio of above 140%. In the previous results announcement I believe, we – there was the U.S. client incident and you asked – we were asked about whether the losses from the incident are being factored into the dividend or the payout? And yes, we said that we will consider it to a certain extent. So we have made some adjustments to our income, which we use for the payout calculation. And we are going to use some of the share buyback for the RSU or the stock option. So on the surface, the total payout ratio is very high. And yes, we have made some adjustments to the income that we use for the payout calculation. And in terms of your question about whether we have excess capital? At the moment, that 120.2% above – I said 117.6%. So as of today, yes, we do have sufficient or somewhat excess capital. And the FRTB impact as we have been explaining from the past that is the key issue. And for FRTB, the JFSA announced – made an announcement and from – we have submitted our opinions from the financial industry. And I believe the discussions will kick off from here. And based on the current balance sheet and the current position if we make some assumptions, we said the FRTB impact here was 3% to 4%. That, as I said, has gone up slightly from that level. Meanwhile, in order to control the impact, there are some mitigation plans and that we will be conducting reviews of the businesses related. So I believe we can control the impact to a certain extent. So the outlook remains unclear, but as of today, we do have somewhat excess capital or room in our capital. Thank you.

Thank you. This is Muraki. About your second – about the second point. In the announcement by JFSA, there was a market risk, credit risk and CVA and there was the proposed revision for these items. But the impact of 3 to 4 or exceeding 3 to 4 is mainly market risk. Is that the way to understand this?

Yes. Kitamura, this is – that’s correct. The market risk impact is the large portion. And because of the – because there will be no correlation, this market risk has the biggest impact to Nomura.

Understood. Thank you.

This is Watanabe from Daiwa. I have two questions. First question is about global markets, equity and fixed revenue. And what’s the composition of trading and client flow in the second quarter? Second question is about Page 10. Regarding cost of wholesale, cost/income ratio is 86%, which is above the 80% target. It appears that fixed cost is on the rise. But in terms of run rate, what was the run rate level in Q2? Thank you.

Thank you very much for the question. This is Kitamura. Firstly, equity, fixed income, client revenue and trading revenue split for fixed income – both fixed income and equity, how should I put it, roughly speaking, 90% to 10%. Client revenue, 90% and risk revenue or trading revenue representing the remaining 10%. Then to your second question, wholesale divisions cost. Cost income ratio is 86%. It looks high, as you pointed out. Partially we are applying cost control. On the other hand, in growth areas, in other words, private area, also advisory area, also Wealth Management business in Asia, AEJ. In those growth areas, we are making investment. So we are spending – making advance investment and cost is being incurred, while the secondary trading revenue is being normalized. As a result, the cost appears high as a result. However, as we promised, ¥1 billion cost reduction in wholesale has been completed. Moving forward, we will focus on growing revenue. In this context, if we can achieve PTI of ¥150 billion, then we will be able to achieve the target of cost income ratio.

My follow-up question is regarding equity revenue. What is your trend compared with U.S. peers? And your revenue level seems weak, but what’s the background? Is it the impact coming from the shrinkage – shrinking scale back of prime brokerage business?

Thank you very much for the question. So your impression seems to be that our equity is weak – this is Kitamura, but that’s not our impression. Equity business has performed solidly. That’s our understanding. As you pointed out, U.S. peers released good results. But there were multiple IPOs and also with the increase in stock prices, cash trading contributed well to them. Equity derivatives is our mainstay business, and I do not believe equity derivative business looks weaker relatively speaking. So you touched upon the potential impact from prime brokerage, but that’s not our view at all. Thank you.

Thank you very much for your clear explanation.

Thank you. This is Tsujino. First of all, in Japan, the September monthly sales figures and the Investment Trust September, there was growth – positive growth, but July, August was weak. And September, there wasn’t that much of a recovery. So over a 3 year – if we compare it with your peers, you seem to have lost your past momentum compared to the past. And what are your thoughts about this? And you mentioned how in October, the client assets or AUM is growing, but in terms of the sales – and there is a rise because of the pricing – price rise. So what was the actual increase in sales in September and leading to today? Could you explain the sales trend, please? And that’s my first point. Second, this ¥39 billion of provision as of June end – sorry, not June end, August – middle August, the ¥68 billion maximum loss, which was in the Q1 disclosure, which is ¥20 billion-or-so increase from March end. And this kind of information is disclosed in the YUHO disclosure, the financial disclosure. And does this reflect the ¥20 billion or so increase? Or does this provision – is it something new which you realized before, this ¥20 billion? And we have to wait until the quarterly disclosure to find out these losses, these numbers. But is the number declining by about ¥40 billion as expected or not? Could you give me more color on that, please?

Thank you. This is Kitamura. Your first point about the Investment Trust sales, frankly, I don’t think it’s appropriate to compare with our peers. But at Nomura, we are promoting the gold-based asset management and also portfolio management. And we are also promoting mid to long-term ownership of assets to contribute to our clients as we have been explaining several times from the past. And in order to do this, instead of trading, we are shifting to our asset consulting business, focusing on the fees – recurring fees. So the Investment Trust sales per quarter does not exactly match the trends in the market. And this client-focused business, we are now in the 5-year of focusing on this type of business. So this has become the norm at Nomura. And last year, in June or since last June, the market recovered. And our clients’ assets unrealized gains continued to rise. And in September, there was an average of more than 20% or around 20% growth in the unrealized gain or valuation gain. And by the unrealized gain increasing, our client satisfaction is improving. And this gives an incentive for them to own their assets over the mid to long-term. On the other hand, because asset’s prices have risen, some clients choose to sell their assets and convert it to cash. And that kind of needs is declining at the moment. And you – I talked about the 20% or so unrealized gain or valuation gain. In the past, when the unrealized gain increases, there was an increase in the switching of investment trust in proportion to the rise in the unrealized gains. But recently, the correlation between the unrealized gain and the switching between Investment Trust has disappeared. There is no correlation anymore. So right now, the unrealized gain is rising, but the rate of customers switching to other investment trust has really fallen. And investment trust if the customers sell investment trust, that also is booked as a sale, but we do not – we are not pursuing that at the moment. We want our clients’ customers to be satisfied with their unrealized gain and put in more money into their accounts. And if your point is that we need to do more work in this area, then maybe that’s true, but just because the investment trust-related numbers are not as strong as our peers. Yes, that is true. But this is as I just explained, there has been a change in the way we face our clients, and this is the background for the investment trust figures. And we are making use of the unrealized gains that are being generated, and we want more customers to hand their client assets to us for us to manage. The second point, about the provision, in terms of the maximum probable loss which we disclosed in Q1, the ¥68 billion, whether the provision was included in that ¥68 billion or not, it was not included. And we cannot go into detail about each individual situation case, but when there is a rational reason to expect a loss and if the amount of the loss can be rationally and logically calculated, in that case, we calculate the maximum probable loss and we stated in the disclosure. And this time, as Tsujino-san, you mentioned, after we disclosed the YUHO disclosure, there was progress made for this case until today. So this number was not included in the probable maximum loss as of Q1, and that was booked as the provision. And your other point about the next maximum problem loss, which we will announce in November and whether the number will be included in that. Well, we would like to ask you to wait for a little longer. Thank you.

Understood. Thank you.

Thank you. This is Otsuka from JPMorgan Securities. So could you answer my question – every question – right after I ask a question. So the first question, including buyback in the first half. I would like to ask you – ask you about the shareholder return. So earlier, a net profit of ¥51.7 billion was not used. So some adjustment was made. So the payout ratio or total payout ratio looks different. But on what basis did you make a decision on this dividend? So if we do the back calculation from ¥80, then – ¥80 billion in profit seems to be the threshold. And based upon that, it appears you determined the buyback.

Kitamura speaking. It’s a question that’s difficult to answer. But Mr. Otsuka, your thinking is not far off the mark.

Then, profit is down as Kitamura-san explained, this is due to the U.S. incident and also the provision booked in the second quarter. So they suppressed profit. But those two incidents are subtracted, then that means the ¥51.7 billion is kind of inflated because you are not excluding those two factors.

It’s difficult to precisely say which factors are not included. But in the previous IR telephone conference, I talked about this, but a lot related to the incident in the U.S. To a certain extent, I said that we will consider that, to some extent, and we’ve done so.

Thank you. My second question, Mr. Kitamura, is that regarding the initial profit in the second quarter, as you explained the underlying profit. But for segment profit in the second quarter, ¥57 billion, could you explain ¥57 billion end of segment profit? The intention of my question is that as you explained, wholesale cost seems high this time. And retail division’s profitability seems low. So is it – are they the run-rate level or is it temporary – temporarily elevated levels in the second quarter?

Thank you. This is Kitamura speaking. How do you think about seasonality is a difficult question. But my feeling is that second quarter tends to have weak numbers because second quarter has summer. In this situation, looking back at the second quarter, macro business, macro product business was quite challenged in the second quarter. In this situation, ¥billion of wholesale number, which is not commendable from your perspective, about ¥25 billion of bottom line profit was secured for wholesale. That means we have done. We have taken actions to secure that. Macro product environment that we are seeing today will not persist forever. So, as client activities come back, we are expecting the macro environment to recover as well. So, in that sense, we can have certain level of expectation our optimism towards wholesale. As for retail division, in the first quarter, expense was at a low level related to the technical factor of when the personnel expense was booked. And as a result, in the second quarter, the expense ratio looks higher. But we are not taking overstretched approach. We are placing clients at the center of what we are doing in our business. And we come to this number. And as Ms. Tsujino asked earlier, July and August have summer vacation, and we had Olympic Games, then customer activities were quite slow. Still, we could secure this bottom line profit. So – and again, I would like to reiterate the point that we are not taking a far-fetched approach. Still, we could secure this bottom line profit. That’s how we look at this number.

Thank you. Then going back to wholesale, Mr. Kitamura, the last three months cost is ¥147 billion. Of course, if revenue goes up, then due to pay for performance, cost also increases, but this kind of chunk as run rate seen from outside, should we expect this level of run rate cost?

Kitamura speaking. As I mentioned, in areas which we see as growth area, we are making advance investment. In that sense, the level of costs that we are seeing now in wholesale, that’s one level or benchmark or baseline level. But compared with our first quarter, the environment was quite difficult in the second quarter. And as a result, the cost income ratio is elevated. But when top line grows due to pay for performance, expense will be increased as well, but cost/income ratio will surely come down.

Thank you very much Mr. Kitamura for your clear explanation.

Thank you. This is from Mr. Niwa from Citi. I would like to ask about the asset management business and the risk issue. First of all, on Page 8, the recurring-type products have increased and asset-building type products, is that true? And what is behind this? And what is the condition for this trends to continue? My second point is while considering your bottom profits, when there is risk, your risks – your profits tends to shrink quite dramatically in relation to the past issues and you say you will control your costs, but I am sure you will be growing your top line revenue? And how do you think about the risks you are taking versus the revenues? And how will you proceed with your reforms? What will the balance be between risk and revenue? Thank you.

Yes, this is Kitamura. About the recurring revenue and the recurring revenue assets increasing, yes, we have been working on this. And we are finally – we have now seeing the results of our efforts, I believe. And discretionary we – using the expertise of the CIO group and we are reviewing the scope of investments and we are also conducting a more careful follow-up to our customers, leading to the increase in the discretionary investments. And as Tsujino-san asked about earlier, the fact that we are taking this goal-based approach is now being absorbed and understood by our partners. And they are taking a holistic approach against the total assets of our customers. And we can – we have been able to control the amount of selling of assets following volatility in the market. So, I believe it’s a result of each of these efforts and that is leading to the buildup of the recurring revenue assets. So, we are not doing anything special, which means I believe this is sustainable. And your second point, this provision is related to an issue which took place a long while ago. And this is very disappointing and we would like to apologize to our stakeholders. But as I explained earlier, this was – this took place before the global financial crisis and since the financial crisis, there has been the tightening of regulations and the whole industry has enhanced its risk management, including Nomura. And at the moment, for the trading business, the question is how much – how to provide liquidity to clients, that is the main objective. And we monitor what’s going on in the market and are taking risks cautiously. And in Q2, as we have been explaining from the past, macro trading faced a very tough fixed environment. And the revenue versus risk-weighted asset was 7.1%, which I believe was a reasonably good result. And personally, I believe our revenue versus risk or revenue versus resources, I am always monitoring these KPIs. And I will continue to do this going forward. So, we will steadily improve our – we want to steadily improve our profitability while controlling risks. And today, as we announced in the press release, we will further enhance our risk management. And this is in order for Nomura to grow even further and help contribute to an enriched society. We will sophisticate and enhance our risk management. And we believe that it is crucial for Nomura to fulfill its mission. So, we will move forward with a very strong resolution on this risk management. Thank you.

Thank you for showing such detail. One follow-up question, for retail, I understood your initiatives. But in terms of your peers, I know it’s quite hard to calculate the share, but is your market share rising or falling, if you could comment on that, please?

Yes, this is Kitamura. Yes, our peers are – there seems to be some growth in investment trust. And that itself is a very good thing for the Japanese securities industry or for Japan as a whole. The young generation are getting very interested in investing. And in terms of whether our share is rising or not, frankly, we don’t have the statistics, but the net inflow in investment trust, which is continuing for Nomura. If we look at the age group of the customers, it is increasing in a wide range of generations. But in terms of net inflow, people in their 50s and 60s account for roughly half, so they form the volume zone. And we worked on the channel formation 2 years ago. And I believe we have talked about this several times in this analyst conference, but we set up the contact center. I believe this is a remote contact center. And these – the generations, people in their 50s and 60s and as well as people are starting to finally see the results of their savings or people who are about to retire. These people are being approached by the contact centers and this approach is working very well. And the money of these customers is flowing in. These are active people and active generation. And people always say Nomura’s clients are too old. But actually, we are seeing an increase or decline in the age group of the active customers of Nomura. And so in terms of the share of Nomura, I don’t think it has fallen that much. I believe it is – it should be recovering or I hope it’s recovering. But sorry, I cannot give you a very clear answer, but we do feel that things are moving positively at the moment in the market.

Understood. Thank you very much.

Thank you. This is Tsujino. I have one more question. Regarding overseas fixed income, as absolute amount, EMEA is down in a significant manner. Looking at the heat map, I cannot clearly see it. So as usual, by region, I would like to know the percentage by region. And the reason why EMEA declined greatly, what is the reason for that? Then, is it specific to the second quarter and it will not continue into the third quarter, or do we see the same factors affecting negatively EMEA in the third quarter as well? Once I can obtain the breakdown, then we can tell that the issue is EMEA.

Thank you for your question. This is Kitamura. Regarding the fixed incomes’ regional breakdown of revenue, Americas has the biggest portion, more than 40% and AEJ has about 30% and EMEA has a bit more than 10% and Japan remaining 10% or so. So, that’s the rough split. As you say, EMEA faced difficulty. For one thing, there was a seasonality factor. Every year, in summertime, EMEA, government bond issuance slowed down at this time of year. And EGB is the central part of our business. And that’s what we are good at. So, newly issued bond trading in EGBs, the volume of trading was small. In that sense, it was the seasonal factor. Also, there was a macro factor. It’s not limited to Europe, but it’s a global factor. The end of monetary easing seems to be on the horizon. So, market is now searching for the new level of interest rate. In this situation, market participants are trying to identify where the interest rates will end up. That seems to be the current situation. These days, concerned about prolonged inflation, has been expressed on the other hand. So, investment into – not many investors are investing into long-dated bonds. In this situation, due to seasonality, primary and secondary trading got affected and client activities were slow. And some – a little bit of news fluctuate interest rates. And looking at the yield curve there, we haven’t been able to identify consistency. So, honestly speaking, the current environment will not persist a long time. The issuance market, to a certain extent, will come back to the normalized level. And the yield spread, the short-dated, the long-dated yield spread will come back to normal level. So, the summertime situation will not continue for a long time. That’s our assumption. Did that answer your question?

Tsujino speaking. So, looking back at the past four quarters, the current level is about 50% of what it was before. Still, the last four quarters, the level will not go back up to the level of the previous four quarters given the current situation?

Kitamura speaking. Last year, the level of last year, we enjoyed the tailwind of the market. So, we are not expecting the rebound to the level of last year. But second quarter, especially macro or rates business, which is the core business for us, it faced – the macro business faced a challenging situation. So, we are expecting the rates business to recover from here.

Tsujino speaking. Thank you very much.

Thank you. This is Kitamura. Thank you very much for participating today. So, we were held back by our past issues and we had to make these provisions. And this was very disappointing for us. However, we are starting to see the results of our efforts that we have been working on in the past. We are gradually seeing the fruits of our efforts. And you can – we can see this in the expansion of the recurring revenue as well as the unrealized gains of our clients. And this is a result of our client consulting and asset management business, which is very client-focused. And we feel the results of this shift in our business. And in wholesale, in the macro business where we have strengthened, the environment was extremely tough. But even so, even in this environment, we were able to book ¥25 billion of bottom line. And I believe this is a result of our past cost reduction efforts as well as Greentech, which we acquired last April. The synergies with Greentech are starting to help the overseas M&A, especially in the U.S. from the second half of last year. And as I mentioned earlier, we appointed as Global Co-Head of Investment Banking, the Founder of Greentech, Jeff. Going forward, we will focus on the advisory business in the U.S. and the strength lies in sustainability. So, we will make sure to grow these businesses to grow the next driver of our earnings. And that will help stabilize Nomura’s revenues. And it will diversify our business as well. We are also working on the enhancement of our risk management, as explained. And this is in order for Nomura to move forward and take the next step. This is a critical issue that we need to work on. And by focusing on the implementation of this enhancement, we will make sure to continue to provide services to our clients and we look forward to your continued support. Thank you very much.