Daiwa Securities Group Inc

TSE:8601

Earnings Call Transcript 2024-Q1

[Motoi Mishiba, executive]

Hello, investors. Thank you very much for waiting, and thank you for joining the financial reporting call of Daiwa Securities Group for the first quarter of FY 2023. It's time, so let us begin. Today speaker is from Daiwa Securities Group: Sato, Executive Managing Director and CFO. I am Mishiba of IR Division serving as a facilitator. So today, we'll start with the presentation of the results of Q1 FY '23. And then we will take questions after the presentation. Please be reminded that this call is also arranged accessible for investors on the Internet. Thank you, let us start.

[Eiji Sato, executive]

I am Sato of Daiwa Securities Group. Thank you very much for joining our call despite your busy schedules. Now I'd like to explain our Q1 financial results of FY '23 that we announced just today by following the material, you can find on our website.

So let me start from Page 4 for consolidated financial summary. The percentage of change is a comparison to the Q4 FY '22. The net operating revenues were JPY 134.1 billion, up 6.7% and ordinary income was JPY 36 billion, up 17.1%. In the retail division, both revenue and income increased due to the increase in stock trading investment trust sales and the wrap account contract amounts. In the Wholesale Division, Global Markets had a significant revenue growth in both equity and FICC, while Global Investment Banking decreased M&A-related revenues resulting in a drop in both revenues and income. Net income attributable to owners of the parent was JPY 23.7 billion, up 38.5% and annualized ROE was 6.6%.

Please move to Page 10 for P&L summary. The commission received was JPY 82.3 billion, up 13%. Its breakdown is on Page 23. The brokerage commission was JPY 21.7 billion, up 33.2%. Underwriting commission was JPY 11.4 billion, up 29%. Distribution commission was JPY 3.8 billion up 87.8%. And M&A related commission was JPY 7.9 billion, down 19.5%. Net gains on trading grew 47.4% backed by the equity revenue increase.

Now please turn to Page 11 for SG&A. SG&A was JPY 103.3 billion, up 1.5%. Trading-related expenses increased as commission paid increased.

Next is Page 13 for overseas operations. Total ordinary income was JPY 5 billion, down 9.9% from the previous quarter. Last quarter, Europe enjoyed revenue expansion from ESG-related funds as well as D.C. Europe, but this quarter, M&A-related revenues remarkably dropped. Asia and Louisiana reported income growth due to higher primary revenues and the contribution from the wealth management business. In Americas, amid rising interest rates FICC revenues increased strongly due to the effective monetization of customer order loads.

Next is segment information. Let's move to Page 14 for Retail Division to start with. Net operating revenues were JPY 49.8 billion, up 22.9% and ordinary income was JPY 13.5 billion, up 115.9%. Equity revenues increased with the recovery of both domestic and foreign equity tradings. FICC revenue increased with the contribution coming from a large-scale bond sales. Investment trust distribution commission grew due to the increase in equity investment trust sales. Asset-based revenues were JPY 21.8 billion, accounting for 45.3% of the net operating revenues in Retail Division.

Please move to Page 15 for sales and distribution amount by product of Retail Division and our topics of the quarter. In wrap account services, the contract amount and the net inflow were JPY 172 billion and JPY 96 billion, respectively, the highest level in about 8 years, and the contract AUM amounted to JPY 3.484 trillion, an equity investment trust Daiwa Blackstone Private Credit Fund, BCRED, which invest in private credit fund was distributed as much as JPY 44.6 billion. Total distribution amount grew by 1.5x. That graph on the left down below shows sales and distribution amount of wrap and equity investment trust, net increase was 20.4%.

Let me go to page 16 for the Wholesale Division. The global market net operating revenue was JPY 36.8 billion, up 46.5% and ordinary income was JPY 9.7 billion, 49x of the previous quarter.

Equity saw a recovery in customer order flow for both Japanese and foreign equities resulting in an increase in revenues. FICC also reported a significant increase in revenues. In Japan, revenues increased mainly due to improved customer order flows in our credits. For overseas, despite rising interest rates, revenues increased due to the accurate monetization of customer assets.

Please turn to Page 18. Let us now brief you on Global Investment Banking business. Net operating revenue was JPY 14.7 billion, down 18.7%. And ordinary income was JPY 0.8 billion, down 72.6%. Revenues from equity and debt underwriting increased due to contributions from large-scale deals. Revenue from M&A increased substantially in Japan, but declined in Europe and the U.S. due to a strong sense of uncertainty about the external environment.

Please turn to Page 6 -- 19. We will now like to brief you on the result of the Asset Management Division. Net operating revenue was JPY 17.3 billion, down 1.5%.

And ordinary income was JPY 9 billion, down 24.8%. The average balance of Daiwa Asset Management for the period increased due to net asset inflow in publicly offered equity investment trust, excluding ETFs, higher market value resulting in an increase in both revenue and income. AUM increased at Daiwa Real Estate Asset Management and Samty Residential Investment Corp. However, the Real Estate Asset Management segment reported a decrease in profit due to the absence of gains on the sales of property recorded in the previous quarter at Daiwa Office Investment Corporation and the recording of onetime expenses at Samty.

Please turn to Page 21. I would like to explain about the Investment Division. Net operating revenue was JPY 1.8 billion, down 73.9%, and ordinary income was JPY 2.9 billion, down 54.7%. Revenues and earnings decreased mainly due to lower revenue from investments in monetary claims.

That is all for my brief explanation of the financial results of the first quarter of FY 2023. During the period, the Nikkei stock average rose sharply to post double high on the back of further weakening of yen, continued monetary easing policies and purchases of Japanese equity by foreign investors with expectations that for end of deflation and income for our corporate governance in Japan.

Against this backdrop, the company secured consolidated ordinary income, JPY 36 billion and made a good start in the final year of the medium-term management plan. We believe that our efforts to reform our business structure in terms of both revenue and cost combined with the favorable market environment led to the strong performance of our retail and Wholesale Division, which doubled last year due to the severe market environment.

The strong momentum was especially notable in Retail Division with ordinary income reaching to JPY 13.5 billion, a high since the third quarter of FY 2017 or after 22 quarters. The balance space revenue, which we regard important expanded to JPY 21.8 billion, which translates to [ 11% ] growth over the past 1 year. We are gaining much confidence in the retail business for [indiscernible].

Now as for the month of July, both retail and wholesale businesses are off to a good start. In retail, nearly all products, including equity, fixed income investment trusts and fund wrap services are progressing faster in the first quarter averages.

In particular, the amount of contracts were [indiscernible], which allows for internationally diverse investments is at a record high level and retail customers are steadily shifting their money from core assets such as savings accounts. Growing need for hedging against inflation and currency risks are the backdrop to this trend. We believe this need is due to a structural shift in investment sentiment, which is not easily influenced by short-term market trends. And therefore, we are increasingly confident of sustained growth in our retail business.

On the other hand, in the Global Markets business Wholesale Division, the [indiscernible] volume per business day in July was down slightly less than 10% from June. And while equity got off to a slightly favorable start, bonds are off to a good start. In the investment banking business of the Wholesale Division, M&A are showing strong results, while corporate bond issuance is at a high level.

Currently in Japan, the COVID pandemic has settled and the economic resumption is accelerated and the country is at a major turning point in its escape from deflation, which is providing strong tailwinds for the securities business. While firmly seizing these business opportunities, we will make conscientious effort to shift our business to a wealth management business model and to expand hybrid businesses, aiming to establish a profit structure that is less susceptible to the market environment. So thank you for your interest and attention, and we seek for your continued support and cooperation. Thank you, and this concludes the presentation.

[Motoi Mishiba, executive]

Now we will take questions. [Operator Instructions] The first question is from SMBC Nikko, Muraki-san.

[Masao Muraki, analyst]

This is Muraki of Nikko. I have 2 questions. First one is about the retail business. At the very last part, you said that JPY 13.5 billion of ordinary income was the landing point. In the 3 -- in the 1 quarter, I thought that you have just driven the business towards the end of the quarter, although you had a slow start. So when it comes to the contribution of composition, can you give me the briefing of how you have driven your business in terms of the profit from April to June, can you break that down? And also the transaction had gone slow a little bit as recently in July, but it seems that was driven by the retail business, how do you see the sustainability of the retail business?

And if that starts to slow down, what is going to be the plan B that you are going to be booking the gap once the retail business starts to slow down? Now second part of my question is about the overseas operations. This first quarter, I think the FICC business in Americas was good. But Americas and the Europe's M&A advisers, we were quite small, I think you've been given losses. So what's your perspective for the Americas and Europe's FICC business? .

[Eiji Sato, executive]

Yes. Thank you. To answer your first part of the question, and the last quarter, the composition of each month's sales, the monthly sales is not disclosed. So I will just give you some color. For the month of April, it was better compared to March. And then in May, it got better. And in June, it picked up the speed. So I think the contribution was made in the order. I think you're safe to assume like that.

When we look at the average transaction size per industry on the Tokyo Prime stock market is also starting to grow. And equity sales is growing at the backdrop of the rising stock price in that market. So therefore, the first quarter figure is probably getting the contribution half and half. The half is coming from the current momentum. In the first quarter -- when we look at the first quarter, with the transaction volume itself has declined from the month of June to July. However, the momentum is expected to, to some extent, continue.

And the sustainability of the equity business, the retail business is, as I mentioned in May, with the Investors meeting, that's coming from, for example, the asset-based business is going to -- with that, we are going to accumulate JPY 100 billion so that with the brokerage business and the brokerage risk commission is not going to be something that we are going to be strongly placed our emphasis. But we think we are not going to change the policy of where to accumulate. And when the stock market goes down, then equity income, of course, going to go down.

So instead of thinking about how to bridge that gap, we will be just thinking about the accumulation of the asset base. So in that sense, for the month of July, we have hit the record high for the fund wrap business. The other products are also strong but the equity transaction volume and I think the flow is basically flat for the foreign equities that's been going beyond what we have achieved the previous quarter.

Now the second part of your question, overseas operations, FICC was strong, as you said. Well, first of all, the business model is quite different, domestic and overseas, but when we compare ourselves with the foreign capital, the core business for us, it's more like a treasury repo that's rate related, I think. But it's not only currency or commodities because we didn't have larger exposure. So that's the difference. The overseas FICC, the reason for the good performance was because of the bankruptcy of the regional banks, the interest rate goes down and volatility was up. Against that backdrop, the flow had expanded.

And in May, because of the up limit of the debt, the liquidity was down in the United States. So the [ over-body ] spread has expanded to some extent. And then flow also expanded, and we were able to see that opportunity to monetize especially in the treasury trading has been expanding. And since 1986, we have been the treasury primary dealer. So in that market, we've been positioned as one of the top players. So that's the reason why we think we are also getting the benefit out of that to get the good business.

Now the poor performance of the M&A-related business, especially that was quite poor in the European side. The reason is because in Europe, the market has gone down by about 40%. And also even by the [indiscernible], it was down by about 20%. So it's not that compared to the other global peers, our M&A business was really down. It was -- I think, as an entire industry, it was down.

The second quarter of the overseas business is the first quarter of the domestic business for us because of the calendar difference. But this quarter, I think the cases of the M&A does not really happen a lot. And also, it's not that the M&A deals did not exist, but it takes time to close. So as a pipeline, it's as rich as last year. So with the passage of time, we think we'll be able to see the increase in this business. There are some concerns about the recessions and also the rising interest rates, but those concerns have been started to disappear. So we are expecting to have a recovery going forward until the end of the year -- towards the end of the year. Thank you very much.

[Motoi Mishiba, executive]

So the next person from Mitsubishi UFJ Morgan Stanley, Tsujino-san is going to be asking the question.

[Natsumu Tsujino, analyst]

So earlier [indiscernible] retail more than the first quarter, the momentum was, I forgot your expression, was better. I think was something that you had kind of briefed us. I don't know what would happen in August. But if you were to continue this momentum, the retail profit is going to be higher than that of the first quarter. Well, that is the assumption? Or are you assuming that? And also the share price has been moving on. And especially in the structured bond, those that had made it. So where is it that the money going to the direction, in other words?

And after July, from a structure point, is there any kind of direction that they are pursuing in the [ menu ] that is shifting from structured plan. If there's any kind of idea, please share with us .

[Eiji Sato, executive]

First of all, answer the first question. As to the momentum, of the retail business after the trend. April, May, June, we continue the upward trend. But then from July, the trading volume has started to slow down. But as compared to the average, it is still remaining to be higher. So what would happen from here down the road in the month of August, of course, there's going to be summer vacations.

But ordinarily, seasonally, August is not a strong month, as you know. But what we can say at this point in time. So it is very much dependent on the equity market, of course, the retail business performance. But of course, as we have been repeatedly saying, we're aiming at, of course, increasing our selling balance. So as an balance base revenue [indiscernible] investment to us as well as fund wrap, and that is trending still strongly. It is not, of course, that easy to see significant growth just in a quarter but still. And as to the structured fund from last year. I think the impact that almost going away, where has the money going to, well, to various different direction, I would say. [indiscernible]

[Natsumu Tsujino, analyst]

And there are still, of course, investors who are standing by, you can see applying a [indiscernible].

My question is, where has the money gone? There may perhaps be still remaining kind of at a standstill? Or have they been standstill or they may go into like investment drive a bond or fund wrap in accordance with the needs of the investors.

We have been introducing because we are pursuing the way of wealth management business model, and we are trying to impose -- align ourselves with the investor needs that is. I'm sorry for being very technical.

Other operating revenue. And on first quarter, it has declined to JPY 10.4 billion from JPY 19.2 billion. And [indiscernible] was increased and solar power and also other real estate assets. And the fourth quarter was quite pretty significant. But this time, the first quarter is almost back to normal, I suppose. That is my understanding.

So this is why there was a bit of a fluctuation in the numbers for the season. And if that is the case. So the gain on sales was how much or was there none, almost. If JPY 21 billion to JPY 29 billion, JPY 2.1 billion to JPY 2.9 billion. So what kind of gains on sales were you able to enjoy?

[Eiji Sato, executive]

Well, first of all, so others that you're referring to, the revenue and income. Of course, there are -- it is a mix of gain on sales. Mostly real estate assets that was disposed. So that was included in others. But this time, there were not as much as it was back in the last quarter. And if I may repeat myself, in the fourth quarter, because we do have a company that has a real estate asset management and especially the investment division, we have the solar power-related businesses. So there was this transfer of or gains on sales.

And we, of course, had to subtract other expenses from that, but we did manage to generate a pretty much gain on the sales of different assets in the fourth quarter. And as the ESG, gain on sales or other, it is not quite a divestment, but in the fourth quarter, there were some dividend received on our part as well. And that has contributed to these others as well in the fourth quarter.

[Motoi Mishiba, executive]

Next question is from SBI, Otsuka-san.

[Yujin Otsuka, analyst]

This is SBI, Otsuka. Can you hear me?

[Eiji Sato, executive]

Yes.

[Yujin Otsuka, analyst]

I have 2 questions. The first one first. My first question is about the BOJ momentary policy. They had a meeting last week. Based upon that result, domestic JGB FICC business, profitability might be influenced. If you could give any feedback or color?

Well, volume volatility, I think I do understand where that is going to go. But still, that rate has been gone up to 0.6 today. So the trading is probably going to get the tailwind with that. So I just wanted to know the tone about that. That's my first question.

[Eiji Sato, executive]

Okay. Thank you very much. As you said, the BOJ monetary policy was revised slightly and the rate hike, volatility hike, liquidity hike are going to be like referred. So that for the recovery of the market function is going to be happening so that the customer flow is probably going to be improving. However, if the JGB goes up, then that is going to have the ripple effect for the other bonds or other debt. So in the past, we just had 0 interest rate, but that is going to be with interest rate. So that is going to be a big change so that the customer flow is going to increase. The customer order flow is going to increase, but it's going to push up the income for us. So that's going to be a favorable win for us. So simple answer was that like that.

[Yujin Otsuka, analyst]

So for JGBs, the policy change of this time is not going to be a negative factor? Any points to consider?

[Eiji Sato, executive]

No, this is really positive, as we think. Well, July, July is quite good, and we are only expecting that it's going to further drive into the positive side.

[Yujin Otsuka, analyst]

My second question is on Slide 33, about the Next Bank. When we look at the first quarter that almost looks like an annual income level. With this level of the income, the interest rate is up. So I'm just wondering whether this is sustainable? Or do you also have some one-off kind of extraordinary factor kicking in? I just want to know the environment surrounding this Next Bank.

[Eiji Sato, executive]

As for the business model of Next Bank, basically, we want to have it as an operation in market. Where the deposits are collected and they will be managed in the market. So the gap that we [indiscernible] is the yield. So looking at the first quarter, the interest rate was up in the world so that the interest over the world has gone up for us as well. Now without the increase the interest margin for the Next Bank, people said that it is conservative. However, in order to have the portfolio financial soundness -- in order to secure that we need to have the rebalancing for the debt portfolio that we have invested. So at the time of the interest rate hike, we wanted to, of course, lock in the profit, but with an aggressive initiative to make sure that we do have a positive one to have and we did not have any negative side of the impact.

With the fluctuation of the currency, depending upon the currency, there was some big movement that has resulted in a big change. However, we want to, of course, seize the opportunity for the expansion on the positive side as well.

Now looking at the second quarter, well, the first quarter was too good, actually, to finish. So it's not likely to continue as is. But continuously, the interest rate is probably going to continue hiking or staying at the high plateau. So the interest margin, we hope to be able to come in quite steadily. So for the target 2023, JPY 6 billion is what we are expected to grow. And the portfolio is JPY 5.5 trillion today.

Assuming that 10 basis improvement in the net interest margin that's going to be JPY 5.5 billion difference to enjoy. So probably, there is going to be some ups and downs fluctuation. However, we think the potential is quite high for this business.

[Yujin Otsuka, analyst]

So just building on to that. So the net interest margin is going to expand continuously. Is that the trend that you're thinking about, net interest margin?

[Eiji Sato, executive]

Well, that probably depends on the currency you're talking about. But for domestic, it's going to be uptrend. And the majority is, of course, the majority of the exposure is for the domestic. So you're safe to assume that is going to be on the uptrend.

[Motoi Mishiba, executive]

So the next question from Citigroup Securities, Niwa-san, over to you.

[Koichi Niwa, analyst]

I hope you can hear my voice okay.

[Eiji Sato, executive]

Yes, we can.

[Koichi Niwa, analyst]

So there are 2 questions. First of all, is with regard to the retail businesses. And the next is the overall financial results. First of all, the retail businesses, the stock business in other recurring businesses, what you're considering right now is almost the progress that could be comparable to the market. So the retail business is stuck business growth, how can you break it down to your assets that is unique to your assets or the market according to the audit condition. So on what basis do you perceive the result, give me the color? And as to the ROE, say, currently, it is 6.6%, whereas your plan is 10%. What has been missing in achieving the goal?

So inclusive of your confidence in arriving at wherever that may be from 6.6%. So that is the first part of my question.

[Eiji Sato, executive]

So first of all, the stock revenue. So that is the outstanding balance base revenue. So during the period, so if the market is [indiscernible], of course, has gone up by 18%. It doesn't mean to say that our numbers would go up by 18%. There are certain time lag after the market performance. So whether it is almost comparable to the market average, just as I have explained earlier, net increase in fund wrap, so on a net increase basis, it is increasing at a much faster pace. So this is giving us some confidence.

It is kind of difficult to segregate between our own effort versus the market conditions. So if you refer to the outstanding balance of [indiscernible], this time JPY 3.4 trillion and last year was JPY 2.9 trillion. So the net increase portion was about 60%. So therefore, we are really persistent on this net increase. So this is why we have a high regard for what we have achieved. And as to the ROE, 6.6%, so we do regard that to be a challenge as we had shared back in May of this year. But we would like to achieve a steady increase in revenue as well as income. And 7% to 8% of ROE is to be achieved based on our capital and on top it up to reach the 10%.

So from that perspective, for the brokerage business or trading business, are we going to dedicate much of the resources in order to top up for that kind of shortcoming, but it may fluctuate ups or downs over time. Well then, it may be experiencing some shortcomings at the moment, but we would like to continue to prudently and honestly continue to build up our asset base. Whether we'll be able to achieve the ROE target. Within this new term business plan, we don't know, but we will continue to work harder to achieve this goal in any case. So that's what we intend to do.

[Koichi Niwa, analyst]

There's 1 follow-up question. At the time of May presentation, the wholesale capital, I think you had said that you're going to have a good control over it. What was the progress that was made? if there was to be any kind of progress that was made in line with your strategy, if you could be so kind enough to share, we'd be grateful.

[Eiji Sato, executive]

Well, as you have pointed out, just by taking up the second quarter, the capital, of course, declining in a significant manner is not the case for sure. But if we were to talk about this base capital in the last quarter, unfortunately, it has declined somewhat. So talking about the control that we had shared back then. By business line, the profitability and also the capital efficiency and also the profitability is what we are referring to in allocating our capital in the optimal way. So going forward, we hope to bring about a positive result based on our strategy.

This is Sato speaking, sorry. Within the wholesale, you were talking about the required capital in the wholesale business. So regards to the guidance, just to give you information for the first quarter '23, the average of FY '20 -- compared to the average of '22, the degradation of the recurring capital is less than 10% compared to the year before.

[Motoi Mishiba, executive]

Next question is from Morgan Stanley MUFJ Nagasaka-san. Nagasaka-san, over to you. .

[Mia Nagasaka, analyst]

This is Nagasaka of Morgan Stanley MUFG. I have 2 questions. First of all, about the NISA division. Well, again, we just want to know how you're building up the NISA business. How is it progressing? And also the Daiwa Connect. By utilizing the Daiwa Connect, are you enjoying the synergy to get the NISA business? That's my first question.

The second one is about the Slide 13 overseas business. The ordinary income for Asia Oceania, revenue have increased dramatically. You said that the primary global offering impact was kicking in. But now when we look at the wealth management, there was a big upside as well. And when we think about the potential upside, that could probably help us to forecast the business. So please let us the color.

[Eiji Sato, executive]

Okay. Regarding the NISA business, Well, this is going to be kind of overhauling starting from next year. So not only for the wealth management or the asset formation, this is going to be a product to make an approach to the general customer base because there is a growing attention by the other customers. And there are a lot of seminars held by our company for NISA or iDeCo and the number of participants in audience have been expanding quite steadily. So the promotional activities, the campaigns, conference we've been trying to do a lot actively.

Now the positioning of the Connect, Daiwa Connect. I think the customer base is also different because Daiwa Connect is more lean towards the asset information or the wealth management kind of business. So we will look at the decade ahead or the 2 decades ahead, we have to think about the strategy. That's what we are trying to use as a catch. That is for us to expand the customer base in the LEAP. Thus the positioning of the Connect, it's been 3 years since the foundation of the Connect. We've been expanding the products and trying to get aligned with the third-party companies. And it's strictly getting the results, and we feel that.

And also, we have the new NISA system to come in. So that is going to be another driving force to make the progress of this business. So Daiwa -- it's been changing its name, renames Daiwa Connect Securities. That is going to give us the opportunity to further enhance and reinforce our business like the referral of the customers getting the synergy effect, building up the business more as a result coming from the NISA. And we hope that we are going to have the uptrend for this business, too.

Moving on to your second part, for the Asia -- the overseas operations in the Asia Oceania, on the Y-o-Y comparison, the global offering primary increase and road to business to equity is also growing. The debt sales is -- as you know, particularly, overseas transaction is also increasing. So that -- and also the Singapore wealth management is making contribution to the profit. On Q-on-Q equity increased, Singapore wealth management business for the high net worth is also increasing.

In addition to that, [indiscernible] we have equity method company. So the income coming from that equity method company also increased.

Well the potential growth in the wealth management business is -- well, the wealth management business itself is an area that we are focusing and emphasizing. So the support structure from overseas have been enhanced. The domestic retail business is going to be stronger, and we see a growth potential, much more headwind is left. However, this is for the high net worth business. So we need to have assortment of the product to offer for the potential customers. And this business, in the short-term perspective, there will be some ups and downs. But in the longer-term period, we only expect to grow this business.

[Motoi Mishiba, executive]

Over to the next person from Nomura Securities. [indiscernible]. No Sasaki-san. Over to you, Sasaki-san.

[Daisuke Sasaki, analyst]

I am Sasaki from Nomura Securities. I hope you can hear my voice okay. I have 2 questions, if I may. So the retail business in the first quarter. So equity income has grown significantly with the explanation. But the Japanese equity improvement and U.S. equity improvement, which one, in fact, were more significant, if you could give me the color. And also, U.S. equity for the retail investors, if you have increased the trading I suppose it has been brought about some positive impact to the trading side of the business as well. So was there any impact at what I mentioned?

And also, the second -- so the product sales, in fact, has been trending pretty well in [ ADC ]. So how can I perceive that? So these are the questions.

[Eiji Sato, executive]

For the first question . Japanese equity versus U.S equity. If I were to split the 2. So in the fourth quarter, Japanese equity contributed more percentage-wise. Japanese equity was much larger. I'm sorry, I would like to refrain from giving you any numbers in terms of the breakdown because after all, the Japanese equity trading volume has grown significantly, and so was the share price.

NASDAQ was only up by 12% to 13%, whereas Japanese equity was up by 18%, so from that perspective, there will be a contribution from the Japanese equity.

And in the case of U.S. equity, for sure, it would give an impact to the trading side of our business. What the kind of impact were there. Was the question? It was not that significant. Yes, there was some impact, but not to a significant extent. As to the asset inflow, well, it's hard to kind of explain this because equity price has gone up so much. And of course, there is some unrealized gain. And of course, there are some people who may decide to lock in the profit by selling the proportion. There are some people from that perspective.

The [indiscernible] investors, they were both inflow as well as outflow, and that is not about the results that we have shared. But what I want to point out here, with regard to the retail investors. So the annualized gain, in fact, is growing pretty much. And that, in fact, is improving the investor's sentiment for sure. But if I were to just explain that, the fund wrap, almost 100% of the investors are enjoying unrealized gain. At end of June, it was about JPY 500 billion. So just for your reference that is.

[Daisuke Sasaki, analyst]

So on Page 28 of your deck, So the foreign equity transaction and from fourth quarter, it has doubled almost in the first quarter. Despite of the fact that it has grown so much. But it is not doing about that much of an impact.

[Eiji Sato, executive]

Well, it has given some kind of impact. But I'm just saying that the Japanese equity impact was much larger.

[Motoi Mishiba, executive]

[Operator Instructions] But it seems that we have answered all the questions. So now I would like to wrap up the Q&A session. So with that, we'd like to close today's conference call. Thank you very much for joining us.

[Eiji Sato, executive]

This is Sato speaking again for all the investors on call. Thank you very much to join today. We have so much of the following wind now, and we feel that today. But without changing our strategy that we have followed, we want to make a strong profit structure to make, which is resilient to the market conditions and the market macro change. And I would like to see your continued support for us. Thank you very much for joining today again, and have a good day.