Daiwa Securities Group Inc

TSE:8601

Earnings Call Transcript 2023-Q3

[Unknown Executive]

Dear investors, thank you very much for waiting and thank you for taking time out of your busy schedule today to participate in the telephone conference for the third quarter of fiscal year 2022 of Daiwa Securities Group. It is time, and we will now like to begin the conference call.

We have Mr. Eiji Sato, Executive Managing Director and CFO of Daiwa Securities Group. I am Mishiba, Head of the Investor Relations office, and I will be the facilitator for the entire meeting. Thank you very much for your cooperation. First, Mr. Sato will explain the financial results for Q3 of fiscal year 2022. We will take your questions after the presentation.

Today's meeting will be open to general investors via the Internet. We will now begin the explanation.

[Eiji Sato, executive]

My name is Sato from Daiwa Securities Group. Thank you for taking time out of your busy schedule to attend our telephone conference today. I will now explain our financial results for Q3 of FY 2022, which we announced today. In accordance with the financial results presentation material posted on our website.

First, please turn to Page 4. I will explain the summary of consolidated financial results. The percentage change in the figure is compared to Q2 of FY 2022.

Net operating revenues for Q3 of FY 2022 were up by 9.5% to JPY 121.4 billion. Ordinary income was up by 56% to JPY 23.1 billion.

In the Retail division, flow revenues such as equity and bond revenues increased and fund-related revenues also increased.

In the Wholesale Division, Global Markets improved Q-on-Q due to an increase in FICC revenues, while Global Investment Banking reported higher revenues and income. Net income attributable to owners of the parent decreased by 21.9% to JPY 15.2 billion.

ROE was 4.3% on an annualized basis.

Please turn to Page 10.

I will now explain the income statement. Commissions received were down by 1.3% to JPY 69.5 billion. The breakdown of commissions received is shown on Page 23. Brokerage commissions increased by 3.5% to JPY 16.6 billion due to an increase in trading of Japanese stocks. Underwriting and secondary offering commissions were up by 21.6% to JPY 7.6 billion. Distribution commissions were down by 15.2% to JPY 2.5 billion. M&A-related commissions were JPY 6.3 billion, down 31.9%.

Trading income increased by 21.1% due to an increase in FICC income.

Please turn to Page 11. I would like to explain the status of SG&A expenses. SG&A expenses were up by 1% to JPY 99.9 billion and personnel expenses, earnings-linked bonuses increased. Office cost, system-related outsourcing costs increased.

Please turn to Page 13. Next, I will explain the ordinary income and expenses of the overseas operations. The total ordinary income of the overseas operations were up by 80.8% to JPY 6.2 billion.

In Europe, in addition to an increase in Japan-related primary revenues, gains from the sale of equity and ESG-related funds, which we are developing by leveraging our knowledging network and infrastructure sector, M&A contributed to the increase.

Ordinary income was JPY 3.3 billion. And Asia and Oceania, in addition to the contribution of the wealth management business, primary revenues increase, resulting in no high-level profit and amounts while FICC income increase, M&A income decreased, resulting in a decline in overall income.

I will now explain the results by segment. Please turn to Page 14. First, I will explain the income and expenditure of the Retail Division. Net operating revenues were increased by 2.5% to JPY 42.2 billion. and ordinary income was up by 16.5% to JPY 7.1 billion. Equity income increased due to a recovery in trading of Japanese equities. Bond income rose due to an increase in sales of domestic bonds.

Distribution commission for investment trust decreased due to a decline in sales of equity investment trust. Agency fees for investment trust decreased due to a decline in the balance of investment trust. Wrap-related revenues increased due to an increase in the balance of assets under contract.

Asset-based revenues totaled JPY 20.6 billion, amounting accounting for 50.5% of Retail division revenues.

Please turn to Page 15. This page shows the status of product offerings and sales and topics in the Retail Division of Daiwa Securities.

In the Wrap account service, the amount of contracts signed was JPY 137.1 billion with a net increase of JPY 59.4 billion and stock investment trust, sales of inbound-related Japanese equity funds and funds investing in global undervalued growth stocks were strong.

The lower left-hand side of the slide shows a graph of the total amount of the net increase in the amount of wrap and equity investment trust offered and sold.

Please turn to Page 16. I will now explain the Wholesale Division. Starting off with the global markets. Net operating revenues were JPY 27.9 billion, up 10.5%. Ordinary income was JPY 0.2 billion. Equity revenue declined on the back of lower customer flows due to investor wait-and-see attitude for foreign equities and the derivatives and uncertain market environment.

FICC revenues increased. In Japan, revenues from JGBs increased upon higher interest rate volatility. In overseas, revenues increased driven by Treasury, repo and MBS.

Please turn to Page 18. This page is on the Global Investment Banking. Net operating revenues were JPY 14.8 billion, up 9.1% and ordinary income was JPY 1.9 billion, up 162.3%. Revenues from equity underwriting business increased as we accumulated the track record of mandates as a lead manager. In the debt underwriting business, we accumulated a track record of serving as a lead manager of straight bonds and so on. And when ACE income increased as we executed M&A mandates steadily in Japan as well as overseas.

Please turn to Page 19. Let me next explain the Asset Management division. Net operating revenues were JPY 17.2 billion, up 2%. And ordinary income was JPY 10.5 billion, which was down 2%. Daiwa Asset Management net revenue went down due to a decline in AUM associated with the drop in market values, even though we secured positive net capital inflows. With regards to the real estate asset management, revenues and income increased. AUM Asset Management increased.

Please turn to Page 21. Let me explain the results in the Investment Division. Net operating revenues were JPY 3.7 billion, up 97.7% and ordinary income was JPY 1.2 billion, up 56.4%. Daiwa PI Partners achieved a revenue increase from investments in monetary claims.

With regards to Daiwa Energy Infrastructure, income from investments in renewable energy increased. This completes my explanation of the results in the third quarter of FY 2022.

In the third quarter, consolidated ordinary income was JPY 23.1 billion, which was up 56% Q-on-Q, which demonstrated our comprehensive capabilities as a group as well as our ability to quickly respond to a difficult market environment.

Retail division secured ordinary income of JPY 7.1 billion, which showed steady progress of the shift to wealth management business model and cost structure reform we have been working on from before. We were able to grow income in total, driven by increase in fixed income sales, both in Japan and overseas, reflecting higher needs of customers as a result of rise in interest rates. We have been even more confident that we can increase revenues furthermore on the equity market restore stability.

In the Wholesale division, upon the rise in interest rates and interest rate volatility, fixed income trading revenues recovered as well as underwriting and M&A-related businesses. As a result, as a whole division, we were able to turn it around into profitability.

In addition, in overseas divisions, we posted profits in all regions with increase in ordinary income to JPY 6.2 billion in total. We concentrate on areas where we have strength and competitive edge overseas. As a result, we secure increase in revenue, even in the difficult environment with stringent cost control.

Now with regards to what we are seeing right now in January, uncertainties in the market environment still remain. However, we see some signs of light particularly looking at customers' activities.

In the Retail Division, we have been maintaining high levels of un-dropped sales and the number of new accounts opened per month has been trending very well. It is at the highest level so far in this fiscal year on the top business day business.

With regards to equity and equity investment trust sales, we are off to a slightly slow start. However, we presume that more investors are trying to capture the timing of the equity market turnaround in the future.

On the other hand, in the market division, income environment in domestic fixed income business is improving on the back of higher customer flows and volatility while there is more attention globally towards BOJ's monetary policy.

In addition, U.S. FICC business has been maintaining its good performance.

We are determined to stay focused on promoting sales reform. In other words, the shift to wealth management business model by putting improvement in customer satisfaction at the core and contributed to realized doubling asset income for Japanese people, led by the government regardless of any market changes.

In addition, we'd like to establish income structure, which is insusceptable to the market environment by promoting expanding hybrid business model and cost structure reform.

I appreciate your continued support and cooperation to us. Thank you very much.

[Unknown Executive]

This concludes the explanation. We would now like to continue by taking your questions. We have simultaneous interpretation. Therefore, we also take questions in English as well. [Operator Instructions]

Please note that today's Q&A session will begin with Q&A session in Japanese followed by a Q&A session in English. Please pose your question with your name.

[Unknown Executive]

I would like to introduce the first question from SMBC Nikko, Muraki-san.

[Masao Muraki, analyst]

This is Muraki from SMBC Nikko. Couple of questions related to fixed income. As mentioned about the improvement of the volatility, and therefore, the operating environment is improving. That was the comment you have made at the end. So if you were to see the trajectory in the months, so since November onwards with the BOJ policy change, Does that pose a huge impact on your performance? But of course, the market was even prior to the announcement by BOJ. So what sort of initiatives have you taken? And what are the expectations in terms of the improvement of the revenue and income going forward? So that is a question related to fixed income.

Second question relates to cost reduction. On the 25th of November, according to the material that has been posted, JPY 6.5 billion of additional cost reduction [indiscernible] and JPY 5 billion to JPY 10 billion in global market cost reduction that has been mentioned within the presentation. So if you can tell us the progress so far. On the progress in terms of the measures related to cost reduction.

Also this JPY 5 billion to JPY 10 billion, you mentioned this is new amount. If you have any update related to these measures, that would be helpful.

[Eiji Sato, executive]

Thank you very much for that question. The first question about JGB. So in terms of the policy change. So, the in terms of the direct impact from the policy change, perhaps even prior to the policy announcement in terms of the volatility has been on the rise. And therefore, in terms of the operating environment and revenue environment was favorable for us. That is why we've been able to increase the revenue.

So after the policy change, the volatility continues to be fairly high. So we do expect and we have been seeing improvement in the environment. Also, this is not just for JCB in terms of credit as well.

In fact, there's been a need for replacement within the portfolio of divestures. So for primary and secondary, if it's more settled down, then we do believe it will be further improvement in the revenue.

Also in terms there is an impact on our wholesale division, which is also the bond investment by the retail investors. So of course, we have been seeing a fairly low -- ultra-low interest rate, but now we are seeing changes. So we are seeing some increase in the demand for the retail investors as well.

So all in all, for FICC and so forth, we are definitely seeing an improvement.

The second question relates to the Global Markets cost reduction. So within the material, the JPY 6.5 billion. So we mentioned about JPY 5 billion additional for global markets. But aside from that, we have -- I'd like to give you a separate explanation. So let's start off with Global Markets. So JPY 5 billion of additional cost reduction. And as we speak, we have just over JPY 4 billion of concrete initiatives underway.

However, there is a time lag. So in terms of the impact within this fiscal term, it will be limited. So perhaps next year, about 80% of the impact of the cost reduction would happen. And the 2 years from that 20% remainder, we'll see the impact from cost reduction.

Also for the overall JPY 6.5 billion of cost reduction. To give you more accurate information for 2019. Since we started the cost reduction, so we will be reducing JPY 30 billion. That was the initial plan for this year and also going forward given the outlook for the operating environment, we have been looking into additional cost reduction. So up until now, -- so up until FY 2023, additional of approximately JPY 6 billion. And for 2024, another -- so JPY 3 billion. So all in all, JPY 9 billion of additional cost reduction is expected. But of course, there's time lag until the actual impact would take form.

So we'll definitely like to share on a run rate basis what the impact has been. Did we answer your question?

[Masao Muraki, analyst]

Also the second question, the last point you mentioned about the total of JPY 9 billion. So you mentioned about JPY 6.5 billion. That has been increased to JPY 9 billion. Could I just confirm the number?

[Eiji Sato, executive]

Indeed, indeed. So JPY 6.5 billion and with the addition of global markets. So excluding the overlap, the total is JPY 9 billion.

[Masao Muraki, analyst]

Also related to fixed income related to that question, Page 9, the presentation, up until Q2, we have exposure. And I think Q3, there's been a decrease. So if you look at the derivatives, for instance, on Page 8, so as of September end, there has been a significant increase. So I believe this is fixed income. So what sort of operations have been doing with this?

[Eiji Sato, executive]

In terms of exposure -- about the increase in exposure, the largest part, the total asset has been a record high. And this is related to JCB and also the position in the overseas. So basically, it's not as if we are taking more risk. That's not the case. Also, you mentioned perhaps there is a derivative of the increase. But here, it's related to increase in the interest rate. So that is reflected in the performance. So this is related to market factor. That is the reason behind that.

And as Muraki-san, you mentioned, as of December end, the JPY 28 trillion is a total asset. So we do believe that we shall see improvement going forward.

[Unknown Executive]

Next questions are from [indiscernible] Morgan Stanley.

[Unknown Analyst]

So in this third quarter, ordinary income on the Q-on-Q basis increased by JPY 8.3 billion. And when I look at segment profit, then I get the situation for this increase by segment. But looking at the segment disclosure, there are some other adjustments. So my question is, in the second quarter, other adjustments were negative. And this time, it's a positive. So on a Q-on-Q basis, the adjustment line improved by JPY 1.4 billion. So as a result, looking at the segment PL. When I look at JPY 4.1 billion, then it's an improvement of [ JPY 8.3 billion ]. So I think it's totally explained by this other adjustment. It's doubling due to this improvement in other adjustment line. And this is quite large.

So I'd like to know what's included in other adjustments. That's number one.

My second question you've been talking about cost reduction initiatives. But in the next fiscal year, legal cost is expected to increase quite a lot. So according to the press reports, when I look at the anticipated cost increase, if you execute on that, then probably cost reduction benefit will be offset by that? Or can you cover this labor cost increase by cost reduction, additional cost reductions? That's my second question.

[Eiji Sato, executive]

Thank you so much for first question. Other adjustment line I'm sorry, every time I try to explain, but it's really difficult to really convey what's really happening in that line. So let me try again.

So other adjustments. These are related to 30 group companies other than New Zealand and also the items that do not belong to any segment like miscellaneous items, which do not belong to any segment. And that's why there is a certain volatility on a quarterly basis.

And compared to Q2, there were some positive factors in the third quarter, such as there were next bank. They were Research Institute. Those group companies' performance went up. And we have strategic investments in funds.

The other day, on November announcement date, we talked about fund performance, but we have some investments in funds strategically. And we have incomes which are increasing from securities. So there are many items included in other adjustments. So it's really difficult to give you a clear answer. But in total, the amount of the difference between Q2 and Q3 becomes that large.

[Unknown Analyst]

Okay. May I ask you a follow-up question? So Daiwa Next bank. So you disclosed their standard on performance. But on a Q-on-Q basis, it's only the improvement of only a few hundreds of millions of yen. And you have investments -- strategic investments in funds. So I assume that contribution from that is larger. So this time, you sold stakes in ESG fund and that belongs to Global Investment Banking. Am I right? So if that's the case, then other than that, are other contributions, which are not included in segment profit? Are there so many?

[Eiji Sato, executive]

Well, first, Daiwa Next Bank improved from Q2 to Q3 by JPY 270 million. But by entity, the impact or improvement is not that large. But we have 30 group companies. So including all other group companies, improvement is quite large. And also ESG fund, you are right. It belongs to the Global Investment Banking, which is a series of M&A mandates.

And if you look at the presentation material in November, for example, IP bridge fund, ACA, capital alliance fund or fund with the other partner. So there is quite significant size of our strategic investment in those funds. And we do not disclose the AUM to balancing those funds.

Did I answer your questions, Mr. [indiscernible]?

[Unknown Analyst]

Yes.

[Eiji Sato, executive]

And also, according to mass media, reported a wage increase of 4%. And in terms of the scale size, our wage increase is under study. So there's no specific rate increase size that we can announce and including group companies, we have not finalized the magnitude of wage increase, so we cannot really answer directly to your question.

But in the last fiscal year, in FY 2022, wage increase and bonus increase were 3.5%. Increased by 3.5% , which was about JPY 2.5 billion in the last fiscal year. So cost reduction benefit is large enough to cover all of that.

[Unknown Analyst]

So for 2023, do you think you are going to raise more, right? Of course, benefit is going to be more -- a little bit more on the net basis after offsetting the wage increase Net positive right, after offsetting wage increase in 2023?

[Eiji Sato, executive]

Yes, that's right.

[Unknown Executive]

Next question is from Morgan Stanley MUFG, Nagasaka-san.

[Mia Nagasaka, analyst]

Morgan Stanley MUFG, this is Nagasaka. I have 2 questions. First question relates to wholesale division, the global investment banking business. So for ECM to DCM, if you can tell us the pipeline and also the appetite of the issuers. If you can give us a feel of those, that would be helpful.

So ECM, I do believe we have a number of projects and number of deals underway, but perhaps the PO market as a whole seems rather weak. So what is the current appetite of the issuers?

And also for DCM and perhaps with the BOJ policy, there's still some uncertainty. So perhaps there's still a wait and see attitude. So what is the outlook in terms of the pipeline next year onwards? If you can share your outlook as much as you can, that would be helpful.

And the second point, this is more of a detailed question related to Retail division. So in terms of the equity investment, Stockholm investment. You mentioned about there are some moves to capture the reversal within the market by January onwards and peers, they're also setting up large-scale funds. So what is the -- your strategy related to products? So those are the 2 questions.

[Eiji Sato, executive]

Thank you very much for those questions. The first question relates to the pipeline. As you already mentioned, so ECM market as a whole. So if you look at Q3, so there's an increase in the new -- the setting new launch since the first half of the year. So we do have some growth expectation, and we are starting to see signs of change in the risk appetite from the investors. So now in terms of the pipeline, for IPO, the number of deals in comparison to 2021 or so, it's pretty much the same level.

However, whether that will be fully listed or not, it really depends on the market situation. Also for large scale and mid-scale deals, whether they would come through or not, Again, we would like to -- we need to closely launch the market situation.

Now in terms of PO -- the pipeline perhaps is somewhat slow in terms of the pipeline feeling. And in terms of DCM, it's just, as you mentioned, at this particular moment. So this -- the monetary -- the financial policy, there's some uncertainty. So I do believe that both the investors and the issuers are taking a wait-and-see attitude. So perhaps it's somewhat a weak in terms of the pipeline. But of course, if we move on to the next fiscal year So with the new administration of BOJ, we shall see some weighing of the uncertainty. So there will definitely be needs for funding given the outlook for the rate hike. So I do believe there will be -- that the pipeline would expand into next year.

Also in terms of M&A-related funds, would you like to know about that?

[Mia Nagasaka, analyst]

Yes, I would like to know about that.

[Eiji Sato, executive]

So for M&A, if you look at the pipeline on a global basis, in terms of the number of transactions, it's pretty much similar to the previous year, and we are seeing a healthy accumulation of the balance as well.

Also in Japan, in terms of the transaction, it's similar in terms of amount, there's an increase. In terms of overseas, we have seen a record high. And so both in terms of the amount and the number of transactions, overseas has been growing.

Also related to the second part of your question, about the stock investment. So the strategy going forward. So we are very much customer-centric. So we're trying to optimize the portfolio that will best suit the customers and aligned with the market, we try to provide and offer what is optimal to the customers. So based on the market environment and based on the needs of the customers, we have seen type funds has been one of the major products that we have been offering.

So in terms of the cumulative and investment trust, so we have been focusing on that as well in order to have diversification of time. So in terms of our policy is basically to capture and to give the optimal solution to the customers.

I hope I answered your question.

[Unknown Executive]

Next question is from Banco America, Sasaki-san.

[Futoshi Sasaki, analyst]

Hi. This is Sasaki from Bank of America. I have 2 questions. On Page 13, at the top, there's a balloon that talks about ESG-related funds contributed to secure high level profit. How much profit was it specifically speaking? And what is the reason for this timing for the fund sales? That's my first question.

And the second question, domestic JGB business, which improved you said. And please correct me if I'm wrong, but there's less liquidity in the JGB market. So I think it's really difficult for you to really demonstrate the edge. So I think it's market is becoming more difficult for you to really secure the trading income. And there is a totally exhaustion of issuance of subordinated debt. That has been my impression. But in this irregular environment, simply when the volatility is up, you can get more profits. Is that as simple as that?

[Eiji Sato, executive]

Thank you so much for your questions. To your first question, ESG-related funds. Please look at the presentation material dated on November 25. And please go to Page 33, and you see the details there. And originally, this ESG-related funds in Europe, catering to -- strengthening M&A-related business, but [ BICP ] Europe, we have network and knowledge in the network. So we have expectation for infrastructure investments in the funds. And we have invested seed money. And the amount of the investment is not really disclosed. So we have to defend from talking about the specific figure.

But from external investments, we have been notified of them are wanting to buy the stake from us, and that's why we decided to sell. Number one point and also number two point. If you look at Page 33, you get the details for Fund 1 and 2. So we do this to generate synergies with M&A business and also the investment return.

And to your second question, JGB trading environment. As you know, for each maturity, liquidity is getting less and less. But even in this environment, there is some volatility and some spread widening. And also on the global basis, there's so much attention to the monetary policy of Japan, and there are global investors. And there's investor flow in the JGB market. So we're trying to capture those investors flow in the JGB market trying to expand profit.

But we have to really do the position management. So it's not as simple as when the volatility is up, then we can always make money. That's not as simple as that.

[Futoshi Sasaki, analyst]

So to the first question, it's okay that you don't disclose the amount, but JPY 2.4 billion profit is reported by segment but excluding ESG-related funds profit, is it positive or negative? Is it profitable or not profitable, excluding income from gains from ESG-related funds.

[Eiji Sato, executive]

This is due to the specific funds in particular. So we have to be careful from answering that question as well.

[Futoshi Sasaki, analyst]

Understood. For the [indiscernible] postponed the announcement of the results. So is there any impact on the past figures and also future figures from the postponement of the announcement of the results?

[Eiji Sato, executive]

With regards to [indiscernible], it's an affiliated company [indiscernible] company. And right now, our Special Investigation Committee is investigating. So it's really difficult for us to answer the expected impact. But I cannot assert. However, what's written in the press release. To that extent, based upon that impact on our business performance is going to be limited.

[Unknown Executive]

Next question comes from Citigroup Securities, Niwa-san.

[Koichi Niwa, analyst]

This is Niwa from Citi. I have 2 questions. First relates to the unrealized gains loss at the bank. And also the second point, the outlook for next fiscal term, for the group-wide performance.

So first point, in terms of the -- we had some unrealized gains for the bank as a whole. But however, if you are the next bank, the market is moving. So perhaps you'll see more unrealized loss on the bond side. So my question is, are you planning to do any optimization in terms of the portfolio of the bonds in order to make it more sound?

Also, if there are some unrealized loss then, would that pose an impact on your dividend policy for the group as a whole? So that's the first question.

The second question relates to -- for the ordinary income, JPY 200 billion for FY 2023. So perhaps [ GM ] is somewhat challenging. So I do believe you are taking various measures as explained. But again, towards this target number, are you going to revisit these numbers? Or should we just treat it as a market sector because the ROE target, perhaps there's a bit of a divergence from your initial target. So are you -- would you continue to uphold the numerical targets? What is your take on these?

[Eiji Sato, executive]

In terms of Next Bank question. Globally, there's been an interest rate hike. So the spread is expanding. So giving that into perspective, in order to ensure softness, we would need to conduct the optimization of the portfolio. That is definitely under question. So as needed, those have been conducted. So the reason why the income improvement is somewhat mild for Daiwa Next Bank is because of these measures.

Also in terms of the dividend policy, 50% of the bottom line. So every 6 months or so, those will be reflected in the dividend policy. So 50% or higher, that is the amount that we are committed to.

So no change whatsoever in terms of our dividend policy as we speak. Also, as far as JPY 200 billion is concerned, ROE 10% is for the -- the cost of capital. So given those into perspective, ROE 10% is necessary. And that is the reason why we had posed that number with the JPY 200 billion. Unfortunately, the wholesale division especially for Global division, JPY 69 billion. So we were initially hoping to generate more than half from the global markets. But perhaps now it's becoming much more challenging, given the current situation.

So we do have a diversified business portfolio. So we own some business that are lagging. But of course, there are some divisions and businesses that are outperforming. So as we speak at this particular juncture, we have no intention to lower or let's just say, eliminate this JPY 200 billion of target. And in terms of global markets, as we have mentioned in November, we may be able to generate JPY 40 billion of cost reduction will be conducted. And we do believe this will boost up the revenue. And the past 5 years' average, it's just short of JPY 40 billion of ordinary income. That has been the average in the past 5 years.

So depending on the market, we do believe they still have a chance to generate that number. So for the retail and the institutional investors, regardless of those, given this new market environment, it would need for the market rebalance and additional buying. So I would like to capture those needs as much as possible to generate the number.

[Koichi Niwa, analyst]

I was able to see the general direction of the strategy. Thank you very much.

[Unknown Executive]

[Operator Instructions]

Next questions are from Ms. Tsujino from Mitsubishi UFJ Morgan Stanley Securities.

[Natsumu Tsujino, analyst]

I'm sorry, it does not really related to the third quarter results, but I have a question about the fund draft balance, AUM. So there are investors who are pursuing lower risks. So rather than the commission level, but our performance is always underperforming against the commission that they are paying, Structure-wise, how much is a portion of those types of AUMs? Those are customers of a security company. So there are not so many customers of such.

[Eiji Sato, executive]

It depends on the definition of the performance, but I'd like to show you the disclosure. For example, the average holding period is over 10 years now. So for this duration for the past 10 years, the average return per year -- for the conservative stable type of investment is about 3.5% positive. And the balanced type. Return is 5.9% on the average per year, and aggressive active type, 8.2% positive performance. So as long as they hold for a long period of time, there's a compounding impact and also the return is stable and high. This is after the commission.

So people who hold for long term are benefiting from the positive performance. Well for 10 years, yes, the period of 10 years includes Abenomics. And the period of strong markets before COVID. If you take this 10-year period. Then let's take the period over 3 years.

After commissions, plus 1.2% for stability. Balance type 2.3% and active type plus 5.4%. So those are the levels of positive performance for each type. As per the deduction of commission.

[Unknown Executive]

[Operator Instructions]

We still have some time. It seems as if there are no more questions. So with that, we would like to conclude the Q&A session.

Thank you all for staying with us until the very end, the die Securities Group. As we have been repeating this, we are very much focusing on our asset-based business and hybrid business is the main focus. So we would like to resilient against the fluctuation within the market. We'd like to build a fairly solid and strong robust system. We would like to ask for your continued support. Thank you very much for your time today.

[Portions of this transcript were spoken by an interpreter present on the live call.]