In order to build a business platform capable of achieving sustainable growth, we will expand our risk-light businesses and create a structure for consistent revenues while taking steps to further improve our ROE. Thank you.
Q – Masao Muraki: Hi, Muraki, SMBC Nikko. I have two questions. Page 13, investment banking for Japan. In the presentation, you mentioned the Denso Asahi deals. These are deals that are related to strategic holdings and Benesse was deal to delist and make it non-public. Can you describe the mid-term potential fee pool of these deals? And the revenues that you are expecting in the mid to long run? And of course, in the case of Denso, there are various stakeholders and interested parties. So, it took time for you to structure the deal. But if you have these — more of these deals in the fourth quarter or first quarter, do you think that you will be able to sustain such high level of revenues through reference? And what is the structural demand?
And for the time being, what’s the pipeline? Do you think the pipeline is enough to sustain this level of revenue? That’s my first question. Second, Page 15, capital policy. All three finalization impact which you had disclosed most recently, ¥700 billion of capital buffer exists. But why at this timing of quarter three gross, — this is gross prior to stock option offsetting. And why did you decide on that if you think about the stock option, is this within the profit level? It could have been set at a higher level, so why at this timing? And what kind of discussion has taken place in order to decide on this ceiling amount?
Takumi Kitamura: Thank you very much. First of all, on the IB pipeline, in Japan and some other regions, we think that there will be deals as the backdrop, there’s a requirement for governance reform. In other words, top management of corporates are beginning to think more seriously about governance. So, the funds that used to be affiliated with strategic holdings can be freed up for more strategic investment for growth. On the other hand, there could be MBOs in order to step down from the market. That kind of action is being taken by corporates and we think that this will be a continued trend. You specifically mentioned the Denso deal. Reduction of such policy holdings further the delisting of parent and subsidiary, we think that this kind of trend will continue quarter-after-quarter.
Will there be constant flow of these deals? Of course, there could be uncertainties, but such kind of strategic holdings, it’s estimated at ¥50 trillion, ¥60 trillion. So, in order to free-up those holdings, we think that we will likely see continuation of these transactions. Secondly, Basel III impact. At the CEO Forum, we said that we think that we have a sufficient buffer. And why at this timing? We wanted to secure flexibility as we have been saying, but strategic policy to-date and in third quarter, we were encouraged by the performance. So, those are the biggest factors that we decided to do this resolution at this particular timing. We are a financial institution and we have various corporate-related information. So, we cannot just arbitrarily set up such buyback scheme.
There was a window of opportunity at this timing and that’s one of the reasons why we made a decision ¥100 billion, is that high or low? I think that it’s an appropriate level. The business side hasn’t used up its capital and as mentioned by Muraki-san, there could be more. We will, however, look at business opportunities and opportunities for growth and ¥100 billion was the level that we decided upon to strike a balance between those requirements. Thank you.
Masao Muraki: Thank you very much. Related to the first question, you mentioned governance, but what’s Nomura’s policy? This hasn’t really impacted the bottom-line, but the sales proceeds of the strategic holdings is there, you offset that with the unrealized losses, but you’ve sold many of your policy holdings. But what’s the strategy? Which stocks did you sell? And what about listed group companies, are you continuing your discussions on what to do with those holdings?
Takumi Kitamura: Thank you very much. In our case, as you have mentioned, realized gains and losses and unrealized gains and losses are offset. So, it’s a fact that we have sold some holdings, but we refrain from disclosing the names. In June, the securities report will be published. So, you will know that we have sold some of our holdings. Our strategic holdings. Regarding sales, since a few years ago, we have been engaged very seriously. On regular basis, we are monitoring the purpose of those holdings and we have been engaged in measures to reduce the amount. This major policy hasn’t changed and because of the rally in the stock price, the amount outstanding may have not gone down, but the number of names has decreased. Against Tier 1 capital, the ratio is currently 2.7%.
It’s as low as 2.7% already. And this isn’t the end point. We are going to reduce the number of names and we’ve made that commitment publicly. And I don’t intend to talk about our peers, but as a financial institution in terms of sales of strategic holdings, we are one of the financial institutions that are doing this very actively.
Masao Muraki: Thank you very much. So, you will continue to discuss your holdings in listed companies.
Takumi Kitamura: Yes, of course.
Masao Muraki: Thank you very much.
Wataru Otsuka: Thank you. I’m Otsuka from SBI Securities. I have two questions, but could you answer each of my question one-by-one. First, Retail divisions numbers, could you teach me how to understand the numbers, Page 6 and 7? In the third quarter, in Page 7, total sales number seems to have come down. But Page 6, revenue has increased. So, there may be — I want to know the mix of various elements there? And also in Page 6, net inflow of cash and securities, plus ¥1.2 trillion, but net increase of investment trust or Page 8, recurring asset net increase. But looking at the net inflow of cash and securities, I would have expected a bigger increase. But in the fourth quarter, is there going to be more net inflow for net inflows of cash and securities? That’s my first question.
Takumi Kitamura: Thank you. The total sales come down, however, the numbers are looking robust [Indiscernible]. In the third quarter, many products were handled, secondary buying activities were small. But in the primary area, primary products more than offset the weakness in the secondary area.
Wataru Otsuka: And the second question about the pace of increase in net inflows of cash and securities, ¥1.2 trillion of increase.
Takumi Kitamura: Of course, this is not just as a result of buying activities, but the deposit of equity or stock certificates. So, that’s involved. So, it’s difficult to do the matching perfectly. So, for example, our sales partners who visit our clients and to build trust, they are working on such activities. But sometimes that results in immediate buying activities, but sometimes clients assets in the form of equity or stock certificate, we receive the deposit of certificate sometimes. So, in that sense, there isn’t a perfect linkage to buying activities by customers. And regarding the stock certificates, that’s not included in the recurring revenue asset net inflows. So, as you say, it’s difficult to see consistency among different numbers.
Wataru Otsuka: Okay. Then a qualitative question. Including net inflows of cash and securities, the number is positive, then moving forward, this is a tailwind for the business is the right way to understand it?
Takumi Kitamura: Increase in net cash and securities, it is a positive thing for us. If we just receive deposit, it doesn’t automatically create revenue, but this is likely to result in the next action. So, is it negative or positive? It’s definitely positive for us.
