Nomura Holdings, Inc. (NMR) Q4 2023 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to today's Nomura Holdings Fourth Quarter and Full Year Operating Results for Fiscal Year ended March 2023 Conference Call. Please be reminded that today's conference call is being recorded at the request of the hosting company. Do you have any objections, you may disconnect at this point in time. [Operator Instructions] Please note that this telephone conference contains total 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 those projections. Such factors include economic and market conditions, political events and the investor sentiment, liquidity of secondary markets, labor and the volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions. With that, we would like to begin the conference. Mr. Takumi Kitamura, Chief Financial Officer. Please go ahead.

Good evening. This is Takumi Kitamura, CFO of Nomura Holdings. I will now give you an overview of our financial results for the fourth quarter and full year ended March 2023, using the document titled Consolidated Results of Operations. Please turn to Page 2. First, the full year results. As you can see on the bottom left, net revenue declined 2% year-on-year to JPY 1,335.6 billion. Income before income taxes dropped 34% to JPY 149.5 billion. A breakdown of income before income taxes is shown on the bottom right. Segment Other, shown in the third row from the bottom, was JPY 73.4 billion, a marked improvement from last year, while three segment total was JPY 106.4 billion, down 48% year-on-year. The past year was dominated by market uncertainty as volatility spiked and asset prices slumped on the back of sharp interest rate hikes by central banks. In March this year, the market fluctuated widely as bank runs led to the failure of some major regional banks in the U.S., and this spilled over into crisis in the European banking sector. Amid this environment, retail reported income before income taxes of JPY 33.5 billion, a decline of 43% over last year. In the first half of the year, market uncertainty led to weaker investor sentiment and flow revenue dropped mainly from slower sales of stocks and investment trusts. At the same time, we were able to grow our recurring revenue assets such as discretionary investments, insurance and loans, and in turn, increase recurring revenue year-on-year. We did this by providing detailed consulting services taking a goal-based and portfolio management approach in order to protect our clients' assets and support their asset building over the medium to the long term. Investment Management booked stable business revenue in line with last year's performance. This year, as the airline industry started to recover from the pandemic Nomura Babcock & Brown reported an improvement in its aircraft leasing business. Investment gain loss declined from last year, resulting in divisional income before income taxes of JPY 43.5 billion, representing a drop of 39% year-on-year. Wholesale income before income taxes slumped 61% to JPY 29.4 billion. In Global Markets, Fixed Income reported stronger revenues underpinned by macro products, while equities revenues improved as losses related to transactions with a U.S. client booked in the previous year were no longer present. Investment Banking faced a challenging environment as fee pools [ph] dropped by over 40%, mainly in ECM and M&A. Our business remained relatively resilient, but revenues fell by about 20%. Wholesale expenses increased by JPY 110 billion, over 80% of which is due to yen depreciation. The remaining nearly 20% is mostly the result of higher fixed costs due to inflation. This increase in expenses due to macro factors impacted wholesale earnings. Based on this business performance, net income for the full year was JPY 92.8 billion, down 35% year-on-year. EPS was JPY 29.74, and ROE was 3.1%. For shareholders on record as of the end of March, we have announced a dividend of JPY 12 per share, taking our annual dividend to JPY 17 per share. Previously, we have strived to pay dividends using a consolidated payout ratio of 30% of each semi-annual consolidated earnings as a key indicator. Today, we announced that we will raise that to over 40%. We will continue to aim for a total payout ratio, which also includes share buybacks of at least 50%. We also approved a resolution to set up a share buyback program to raise capital efficiency and ensure a flexible capital management policy and to deliver shares on exercise of stock-based compensation. The share buyback program will run from May 16 to March 29, 2024, and have an upper limit of 35 million shares. The upper limit of the aggregate amount of the repurchase price will be JPY 20 billion. Please turn to Page 3 for an overview of our fourth quarter results. The percentage I referred from - now on, all are quarter-on-quarter comparisons. Group net revenue was JPY 324.9 billion, down 17%, while income before income taxes declined 73% to JPY 22.7 billion. Net income was down 89% at JPY 7.4 billion. Earnings per share was JPY 2.34, and ROE was 0.9%, underscoring how challenging the quarter was. As you can see on the bottom right, three segment income before income taxes was JPY 11.9 billion, down 73% as wholesale had a particularly difficult quarter. Segment other income before income taxes declined 74% to JPY 15.7 billion. The realized gain booked in the third quarter on the sale of shares in Nomura Research Institute was no longer present this quarter and gains from the sale of strategic shareholdings also slumped compared to last quarter. Please turn to Page 6 for an overview of fourth quarter performance in each business. Net revenue in Retail slipped 7% to JPY 75.3 billion, while income before income taxes slowed 26% to JPY 9.8 billion. As shown on the bottom left, recurring revenue remained roughly unchanged at JPY 33.7 billion. Efforts to control costs helped with our recurring revenue cost coverage ratio to 52%. However, flow revenue declined 11% due to weaker sales of insurance products and bonds. Total sales by product are shown on Page 7. As you can see in the bar graph on the left, total sales for the fourth quarter were JPY 4.4 trillion. Primary transactions such as an offering by Japan Post Bank made a strong contribution to sales of stocks, which increased 12% to JPY 2.7 trillion. Bond sales declined by 35%, but this was mainly due to weaker demand from corporate clients to purchase bonds for short-term investment purposes. Meanwhile, sales of JGBs [ph] for individuals and foreign bonds increased. Sales of investment trust slowed due to the market turmoil in March. That said, the reopen Japan Fund launched in January, targeting external demand and inbound saw demand of over JPY 100 billion and inflows were driven by Japan stock funds. Please turn to Page 8 for an update on KPIs. The top left shows net inflows of recurring revenue assets of JPY 65.4 billion, driven by investment trust, insurance and loans. Flow business clients shown on the bottom left represents clients who traded with us at least once since April. As of the end of March, that number was 1.45 million, which is slightly below last year. In the fourth quarter, we were able to increase the number of clients who newly transacted with us, thanks to the offerings I mentioned earlier Next, please turn to Page 9 for Investment Management. Net revenue was JPY 37.8 billion, down 34% and income before income taxes was down 51% to JPY 16.4 billion. Business revenue at the bottom left declined 8% due mainly to last quarter seeing stronger demand than normal for aircraft leasing transactions as airlines recovered from the pandemic. Our Asset Management business remains solid as assets under management continued to grow, and asset management fees remained around the same level as last quarter. Investment gain loss was JPY 9.1 billion. American Century Investments and private equity for Nomura Capital Partners, both booked unrealized gains this quarter, although lower compared to the significant contribution that we saw in the previous quarter. Please turn to Page 10.

As shown on the upper left, assets under management recovered from last quarter to JPY 67.3 trillion at the end of March. As shown on the bottom left, the Investment Trust business saw outflows of about JPY 360 billion as outflows from MRF where clients park idle cash were around the same level, indicating the funds flowed from MRF to new investments. ETFs reported outflows of about JPY 220 billion, while inflows into core investment trusts were about JPY 230 billion. Contributions came from the Nomura Securities channel underpinned by the reopened Japan Fund. The bank channel and the funds for defined contribution plans also reported ongoing inflows. The graph on the bottom right shows alternative assets under management which grew by JPY 110 billion from the end of December. Of this, JPY 70 billion is from inflows, particularly into infrastructure funds and real estate funds. Please turn to Page 11 for wholesale results. Net revenue declined 5% to JPY 178.8 billion. Fixed Income revenues grew slightly, but revenues from Equities and Investment Banking declined. Wholesale expenses increased slightly from last quarter due to business related expenses such as commissions and floor brokerage as well as decommissioning of IT systems. As a result, wholesale booked a loss before income taxes of JPY 14.2 billion. Please turn to Page 12 for an update by business line. First, Global Markets. Net revenue declined 3% to JPY 149.3 billion. Fixed income revenues were up 1% at JPY 87.5 billion. Rates started the quarter strong in Japan, but slowed due to the spike in volatility in March. ForEx Emerging reported a stronger revenues in AEJ, offsetting a slowdown in EMEA and Japan. Spread Products reported a slowdown in credit revenues in Japan and AEJ while revenues from securitized products increased. Equities revenue were JPY 61.8 billion, down 8% over last quarter, which included revenues of JPY 9.1 billion arising from transactions with the U.S. client. Excluding this, revenues were higher quarter-on-quarter, driven by equity products in the Americas and Japan on the back of an uptick in client activity. Please turn to Page 13 for Investment Banking. Net revenue declined 15% to JPY 29.6 billion. Advisory fee pools dropped due to market uncertainty and deals were postponed leading to lower revenues in the Americas and EMEA. Japan revenues increased on contributions from high-profile deals such as a tender offer for the privatization of Toshiba by Japan Industrial Partners, and the conversion of Techno Associe and Nissin Electric into wholly owned subsidiaries by Sumitomo Electric Industries. Financing revenues were up quarter-on-quarter. The ECM business reported stronger revenues as it supported several high-profile transactions such as a global offering by Japan Post Bank and the global IPO of SBI Sumishin Net Bank. Our DCM business continued to support multiple sustainability transactions, including acting as a joint book runner on a €6 billion green bond issuance by the European Union. Please turn to Page 14 for an overview of noninterest expenses. Group-wide noninterest expenses declined 3% to JPY 302.2 billion. Compensation and benefits remained in line with last quarter as a decline in severance-related expenses and yen appreciation offset an increase from year-end bonus adjustments. Commissions and floor brokerage declined 6% due to lower trading volumes and lower expenses related to origination of aircraft leases in investment management. Page 15 shows our financial position. The table on the bottom left shows Tier 1 capital of JPY 3.2 trillion, down about JPY 43 billion from the end of December. Risk-weighted assets declined by JPY 550 billion from the end of December to JPY 17.4 trillion. As a result, our CET1 capital ratio at the end of March was 16.2%. The waterfall chart on the bottom right shows changes to risk-weighted assets. Credit risk increased by JPY 190 billion and operational risk increased by JPY 100 billion. Meanwhile, market risk declined by JPY 840 billion due to changes to warehousing and trading positions, as well as yen appreciation. That concludes today's overview of our fourth quarter results. To sum up, looking back on the past year, we saw the fruits of our efforts to grow retail client assets and our recurring revenue cost coverage ratio increased to 51%. Investment Management booked a total of JPY 780 billion in inflows via the number of securities, bank and DC fund channels underlying progress in our focus on the broader asset management business. Wholesale saw a global slowdown in equity raising by issuers and M&A transactions, resulting in a challenging environment for investment banking. Rates, ForEx and other macro businesses were able to monetize the spike in volatility and higher client flows, particularly in the first half of the year. As such, we were able to gain some benefits from diversification of our business portfolio. Naturally, we are not satisfied with these results. The market uncertainty has remained in April. Retail revenues are roughly the same as in January and February. The personnel reshuffle announced in March is mostly complete, allowing us to optimally align our resources to client needs. Our comprehensive alliances with San-in Godo Bank and our Bank are delivering synergies beyond our initial plans. Our third alliance with Oita [ph] Bank commenced on March 27, with our enhanced organizational structure and bank alliances, we will increase client interactions and maximize opportunities for monetization. In wholesale, Japan and AEJ had a strong April in rates and credit on the back of demand for portfolio rebalancing and yield. However, equities and ForEx emerging have seen muted client flows and volatility resulting in a slow slot for wholesale. Concerns of persistent inflation and geopolitical risks mean we must remain vigilant. The shift to higher interest rates and global tensions may lead to new business opportunities such as investment demand to realign how funds are raised and supply chains. When we get more clarity on inflation and interest rates, origination deals that have been installed globally will likely start moving forward again. We will continue to watch the macro environment and market movements to ensure we can monetize business opportunities. Thank you for your kind attention.

We have a question-and-answer session now. [Operator Instructions] The first question is from SMBC Nikko Securities, Masao Muraki. Please go ahead. Masao, please go ahead.

Thank you. This is Masao Muraki from SMBC Nikko. Two questions, please. First is about Global Markets. On Page 12, your comment on Page 12. The volatility in March seems to have worked negatively for you. And when we hear the markets division of the U.S. banks, it wasn't really mentioned, but compared to January and February, what happened - what changed in March. Could you give us some more color about your Global Markets division, please? That's my first question.

Thank you. This is Kitamura. Thank you, Muraki. As I'm sure you're closely watching the market indices in the U.S., the U.S. treasury volatility and the index move, which shows [indiscernible] U S Treasuries. In March, reached the level - reached a record level since the global financial crisis, an extremely high level. And frankly, I'm not sure what's going on with our peers, but when I hear the analyst calls by our peers, it seems like for rates, they struggled in March, but they were able to barely withstand. And at Nomura, just like the U.S. players, we achieved an increase in revenue and profit year-on-year for rates. But -- so it wasn't that bad, but the scope of the business, the range of the business was much more narrow compared to our peers. And if you look back on the first quarter, January to March and the uncertainty in the market, it's good to have stable revenues outside of trading and that has a very strong effect. For example, the sourcing capacity in primary markets is something which the major banks have, but we do not. So that is a big difference with our bigger peers. And there is some seasonality to this business. And the U.S. banks, U.S. peers in this March quarter, and if we compare it with the previous quarter, there's about a 70%, 80% increase in revenue in fixed income compared to the previous quarter. And in our case, for the March quarter, we typically see a decline in our revenues. So there is some seasonality which differs to the U.S. peers. And in the January, March period, the U.S. banks generate about one third of their annual earnings. So they were able to absorb the decline in one product through revenues from other areas. And that's the difference with Nomura, I believe.

This is Muraki. Thank you very much. And by the way, although it's not that large scale, your CMBS ownership, which you disclosed in your financial disclosure, and there are also CRE loans in your inventory. What about these? What about markdowns or provisions? Has that not really affected your earnings?

This is Kitamura. It wasn't zero, the impact, but it wasn't that large.

This is Muraki. Thank you. Understood. My second question is about the ROE. There was a request by the TSE and also the G-SIBs, which had lower ROE in the Europe are facing crisis. And with this backdrop, how do you plan to ROE? And Nomura has been focused on capital efficiency and cost of capital, and you have been sophisticating your resource allocation, which you've explained in the past. But with this current situation, your ROE of 0.9%, and the U.S. banks achieved more than 10% of ROE even in this market environment, and the ROE is high in some banks, even in the Investment Banking Division. So how do you think about your future ROE? And what will drive the improvement of the group ROE and PBR? What is the -- what is hindering the improvement of these metrics? And could you explain several factors for this, starting with a more important one? And in this fiscal year, how do you plan to address these factors affecting your ROE and PBR? Thank you.

Yes, this is Kitamura. Thanks for your question. Yes, how to improve our ROE. Well, that is something which we have been discussing a lot at the senior management level. And first is the issue with the top line. And if we look at Nomura's business portfolio, that's one reason. But there were also market factors which worked adversely. And our existing businesses alone will not be enough to grow our top line that much. And so we are looking at the growth areas, and we have started several businesses in the growth areas. But these new businesses do take time, and it goes into like a J-curve situation. So costs tend to come first, and they tend to be a drag on our P&L, at least in the early years and then they start contributing to our earnings. So we are in that kind of phase plus the market environment, which leads to the slower start of these businesses. And on the cost side, yes, there is currency, which had an effect. And that should also hit our revenues. So currency should be neutral actually, but inflation has put some pressure on our earnings. And in order to retain good talent, the fixed pay has gone up, which we have to tolerate to a certain extent. And also if we look globally, the utilities expenses are going up, which is another drag on our cost line. And infrastructure, which includes IT infrastructure, for example, and we have quite a lot of IT infrastructure as a financial institution. And it's -- we are in the process of unweaving [ph] this spaghetti state of our IT infrastructure. And we do need to make investments if we are to achieve savings in the future, which is somewhat of a drag on our cost line as well. And this overlaps with the top line, but we do need to make growth investments, and that is leading to some upfront costs. And in terms of how to improve our ROE, well, the priority will be to grow the top line in each of our business lines, that will be the highest priority. And there are some businesses which are in between the different business segments, which are not covered by the current business segmentation, which we want to capture and monetize in the future. And in terms of resource allocation, we are looking at the margins through the cycle of each business and the PTI margin we're also looking at. And we are also looking at the concentration of the capital against -- revenue against RWA. That's also another important metric. And depending on the business line, they have different characteristics, which differ quite a bit. So we are trying to diversify and stabilize our business portfolio, which is also important. In any case, we need to stabilize our bottom line, that will be crucial. Otherwise, the cost of capital will not go down, especially when seen from the outside. So we'll keep these factors in mind and continue managing Nomura. Is that -- does that answer your question?

This is Muraki. Yes. I understand that it is quite hard. But in terms of time frame, so this is somewhat dependent to the revenue environment, but assuming that the revenue environment doesn't change, you are working on various initiatives. So for example, in the second half of this year, will there be some top line contribution or will there be a decline in your costs or perhaps will you be able to do some savings in your capital? Do you have any visible expectations in this fiscal year? And will the ROE improve to a certain extent in this fiscal year or are you looking a bit further ahead? Is it going to take a bit longer?

This is Kitamura. I can't really say there's going to be nothing in a whole year as CFO. So, of course, we would like to see some benefits from the efforts that we are making now. And we've been talking about how we are changing the retail earnings structure, and we are doing -- we are cutting costs by JPY20 billion by changing the way we make money, and we have been building up and making a lot of progress. So hopefully, we will see some contribution from that. And in Investment Banking, the environment was extremely tough last year. And that isn't going to change overnight just because we entered into a new fiscal year. But if we look at the current environment, it's not that bad actually, and then you average JPY28,000 and above. So towards the latter half of the fiscal year, I think we should be able to work through the pipeline, which is quite strong at the moment, and we should be able to execute those deals on the pipeline. But we can't just expect the market to pick up. And for example, there are some businesses which are losing their strategic rationale, and we will take away the capital from those businesses, and we need to take that kind of action as well.

The next question is by Watanabe-san [ph] of Daiwa Securities. Kazuki Watanabe the floor is yours. Q – Unidentified Analyst: This is Watanabe of Daiwa Securities. I have two questions. First of all, fixed monthly revenues, January, February, March breakdown will be appreciated? Second, on capital policy, 40% payout ratio you've elevated, why at this time in this decision? And what about the basis of buyback? JPY40 billion of impact to RSU, so the total payout ratio will be below 50%. Didn't you take that into account impact to RSU? Those are my two questions.

Let me answer those questions. Thank you very much. The monthly breakdown, I hit at it 5:4:1, 50%, 40%, 10%. That's the breakdown between January, February and March. When the results announcement took place previously, I told you that the start was fine. It was a rocky start in January, so we were able to gain a robust start. But due to change in tone in February, uncertainty elevated, so there was a slowdown. And in March, partly because of the reasons I told you before, the situation was very harsh. So 50% in January, 40% in February and 10% in March. That is the breakdown. So I hope I answered the first question. Going on to your second question, the reason why we elevated payout ratio to above 40%. Analysts and investors, we've talked to them, and stable dividend payment, there is high expectations from shareholders for us to pay stable dividends. Now conventionally, we used to talk about a 30% benchmark. But if you look at the actual results of Nomura, we have been paying above 30% payout ratio in good times and bad times. So that is why we've decided to change that benchmark to 40% this time around. Total payout ratio, 50%, amongst the universe of Japanese companies, it's now towards the lower end. So it's not bad, but a 30% dividend payout ratio is not really high toll. And therefore, that is why we decided to change this indicator. Share buyback, RSU dilution, of course, we take that into account. That concludes my answer. Q – Unidentified Analyst: Thank you. This is Watanabe again. To check what -- you mentioned the interest rate volatility for March, but can you name particular names in terms of unrealized losses? Were there any particular names? And you also said RSU dilution impact was taken into consideration, but even after the next fiscal year, you will factor in RSU dilution as you decide and plan for buyback, is that the prospect?

Let me answer your follow-up question. The first question was on whether there were specific names that led to losses, no. And your second point was RSU. Of course, there is no intention to dilute. So we also take into consideration the impact to RSU. Q – Unidentified Analyst: This is Watanabe again. You don't link it to each fiscal year, but some portion will be carried over into the next fiscal year?

Let me answer that. In 1 year, if you can recover what has been granted this year, no, that's not how we do it. So there is some time until execution takes place. So that timing change is taken into consideration.

The next question is from Mitsubishi UFJ Morgan Stanley Securities, Tsujino-san.

This is Tsujino. First of all, about cost control. You talked about the various cost pressures on your business. And your peers were okay in their revenue in Global Markets. So it's quite hard to reduce our headcount, I think. But your weak bottom line at Nomura, and if we think in the short term, like 1 year, what can you do to improve the bottom line? And what are you doing? What is in progress at the moment? And for example, in Q3, there were some one-off expenses to lower the personnel expenses going forward. But if we look at Q4, the personnel expenses remained flat. And you're doing some complicated things in Q4, for example, Instinet, and the commission fees outside of Japan, and there was the revenue and expenses, but you changed the way you book that, and there was about JPY10 billion of impact. And the expenses declined -- should decline by JPY10 billion, but it isn't. So there should be several billions of cost push in other areas. And I think that explains the reason why the headquarters outside of the business that's recently a linkage to those numbers. So my question is, how can you reduce these negative factors, negative cost pressures? And also some of your peers have high ROE and you have to pay a decent amount to secure good talent. But how are you going to make that work and retain the talent is my first question? And my second question is you are using dividend payout ratio as a metric this time, but your profit is very hard to forecast historically as well. And if you're going to change your dividend policy, then perhaps you could use the DME for the first time in the securities industry, but you chose to use profit? And so why are you using that in your dividend policy?

This is Kitamura. I wasn't sure what you were after in your first question, but how are we going to control our costs, I believe. So that's how I interpreted it. If we look Q-on-Q and if we look at our cost on a quarterly basis, there is a lot of noise. So when we think about the cost, I think we should take a longer-term perspective. And in terms of the cost reduction measures over the short term, and one of the reasons why costs went up in this period was the IT -- the retirement of the IT and the disposal of those IT assets, which will lower costs in the next fiscal period onwards. And I believe it was in January when we implemented some cost reduction measures, mainly outside of Japan. And that has been booked as retirement expenses in this period, but in the next period onwards, we will become lighter in terms of our cost base. And this is not so much dependent on our actions, but it's more about how we book our accounts. So it's more technical. But, for example, we have some variable compensation to our employees, which we pay out as deferred compensation. And in this period, if we look at the expenses, there is some deferred compensation from the compensation that we granted back in FY March 2022, and we realized those expenses in this current period, and that leads to quite a big amount. And you asked about how we're going to retain talent. But the performance this year, the number wasn't that high. So -- and we are continuing to pay for performance very thoroughly. But we have been impacted by the deferred compensation, which we granted in the previous fiscal year, and that has been realized in this current fiscal year. That's why the expenses seem a bit inflated. So this was more of an accounting issue. And so through pay for performance, we are controlling the bonuses this year and the deferred comp, which will be paid out in the next fiscal year or the current fiscal year will be reduced to a certain extent. That is the first question. And your second question about dividend payout ratio and how we reviewed the dividend policy. Was -- as you said, Tsujino-san, we do have some volatility in our earnings, and yes, it is hard to forecast. But we are aiming to secure a certain bottom line and pay out the dividend. And yes, DOE is one way to think about it. But our first priority is to generate the bottom line. And one of the challenges for Nomura is to stabilize the earnings and raise the overall level. That is of high priority. So as a result of that, we want to make sure to pay out sufficient level of dividends.

Yes, this is Tsujino. And just to add on, you mentioned the 5:4:1 breakdown for the March quarter. But at the moment, what is the current situation in April?

This is Kitamura. You want to know about the performance in April?

Yes, that's right. So March was 10%, but that's one-off. So what is it right now?

Yes, this is Kitamura. Well, March was quite an extraordinary situation, I think. And there has been a recovery compared to margin. But as explained in the previous call, I said January was quite strong, but it's not that strong in April.

I see. So maybe -- yes, still weaker than January, February, I guess. Is that right? Yes. Understood. Okay. Understood.

[Operator Instructions] The next question will be by Niwa-san of Citigroup Securities.

Can you hear my voice?

Yes.

[indiscernible] markets. I'm not sure whether others are interested in this, but if we look at markets, well, the market moves quite significantly. It seems that your share drops. Is that the right interpretation? You touched upon that when Muraki-san asked you a question.

This is Kitamura speaking. Niwa-san, your voice is coming through choppy. We're having difficulty in understanding what you are saying.

This is Niwa. Is this better? My question is on markets. When the market is fluctuating significantly, it seems that Nomura's global share drops. Is that the right interpretation? The reason has already been commented, but if there are any countermeasures available or what are those responses that you can implement? That is my question.

Thank you. Let me answer your question. Fourth quarter, we have analyzed the results of the fourth quarter, but we don't believe that our share has dropped so significantly. As I said, one of the trends of Q4 is that the U.S. peers are quite strong in the January, March quarter, while for us, we are strong in the third quarter. So on a full year basis, we do not believe that our share has dropped so significantly. Even with a longer horizon in the areas where Nomura places focus, we have been gaining share. That is our recognition.

This is Niwa again. Let me ask a follow-up question. So that said, in order to maximize revenue, you don't think that M&A is necessary. There seems to be some displacement in the Western market amongst the financial institutions. But Nomura doesn't consider this as an opportunity. So can you comment on non-organic growth?

Thank you very much. Let me try to respond to that question. We are looking in depth. And in the global fee pool, there are regions and there are products, and by product and by region, we are looking at the size of the fee pool. So if I may give you an example, so there is quite a significant fee pool in a certain area, but there are certain areas where Nomura's share is very small. I don't think we need to have our hands on everything, but maybe we should place more weight on some such areas in order to diversify our revenue stream. Then does that mean we will be embarking upon M&A? Acquisition of company is not that easy, but maybe acquisition of a team or hiring a team that could be quite a wise option. As you know in Europe, there has been some confusion in the financial sector. There could be some outflow of talents into the market. So you may say that, that also means inorganic growth, but maybe something like a team hiring, not going as far as M&A, but maybe taking such steps in order to increase revenue.

Sorry, this is Niwa. I have a follow-up question. Even then, will you be careful about cost control in terms of operation or will you not be so conscious?

Well, let me answer that question. We're constantly keeping in mind a J-curve. And in terms of business opportunity, there could be differences in the depth of J. And the term that would be exposed could be different. So we look at the portfolio as a whole and think about the depth of J-curve that we can tolerate. It's probably not so easy just to think about expanding size. So constantly, we need to be conscious of cost, but at the same time, we need to take steps for future growth or else, we will begin to shrink. And therefore, from such perspective, we will study future growth opportunities. That concludes my response.

[Operator Instructions] The next question is from Ban-san from Jefferies.

Yes. This is Ban from Jefferies. Just a follow-up question to what you explained today is my first question. In growing your top line, well, you need to grow your top line and you have your existing businesses and you're also launching new businesses, and at the moment, the costs are coming first. So at the moment, costs are coming first, but when we think about this fiscal year, will there be some contribution to the top line depending on the business area or region or product line? Are there going to be any contributors this year? And what are you looking forward to in the current fiscal year in terms of contribution? That's my first question. My second question is, and this overlaps with the previous questions. But in the March quarter, there were some one-off costs in Wholesale and the cost income ratio was above 100%. But you're working on cost control. And so even if the revenue environment doesn't change, the cost income ratio should go below 100%. I'm not asking for a commitment, but I'd like to hear your outlook on that in the second -- or the next 2 to 3 quarters, where will the cost income ratio go, please?

Thank you. This is Kitamura. We have begun several new initiatives. And we don't know how much bottom line contribution there will be. But one is the International Wealth Management for which we have strong expectations. And you may have seen the press releases, but we have set up an office in Dubai, and we are targeting the high net worth clients in that area. And over the -- for the next few years, we will hire the new head and we will build the foundation for this business. We have been building the foundation over the past few years because we need a strong foundation if we are to do this business. And even so we were able to grow our AUM and double AUM actually. So from here on, we will be entering the monetization phase. And we have hired the North Asia Head as well. So we would like to have these businesses leads to revenue contribution. And we've been talking a lot about Wholesale today, but on the Retail side, we have been taking the segment-based approach, and that's been strengthened. And in March, we have made some appointments. So we are now ready to fully implement this new structure. So we have laid the groundwork now, and we are ready to face the clients, customers and support them. And that should naturally lead to growth in top line. And for Wholesale, the cost income ratio, cost income ratio is above 100%. And that means basically, we're loss-making. So management cannot tolerate that. And, of course, we would like to bring it down to below 100%. And that is the commitment which we should make.

Yes. Understood.

We would like to conclude question-and-answer session. If you have some more questions, please ask our Nomura Holdings IR Department. In the end, we would like to make closing address by Nomura Holdings.

This is Kitamura. Thank you very much for joining, everyone. And unfortunately, in Q4 and the full year, we are not happy with these results. I feel that at a personal level as well. So we will work to improve our earnings, and that should lead to the share price, and that is of highest priority. So in order to do that, we need to make sure that the initiatives that we are working on lead to better P&L. And we have the growth expectations from our stakeholders and also we should lower the cost of capital or that should lead to lower cost of capital. And hopefully, we should see some progress there in this fiscal year. And we are aware of how Nomura is seen from outside. So we will reference that in managing the firm. And we look forward to your continued advice. Thank you very much.

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