Daiwa Securities Group Inc

TSE:8601

Earnings Call Transcript 2019-Q4

[Operator]

Amidst your very busy schedule, thank you very much for coming to the fourth quarter FY 2018 results announcement. [ At this ] time, we would now like to begin the teleconference.

[Hidenori Yamaguchi, executive]

Hello, everyone. Thank you very much for coming to our telephone conference amidst your very busy schedule. So from Daiwa Securities, we have Eiji Sato, Senior Managing Director, CFO attending. I am Yamaguchi, Head of IR Office. I will be the moderator for today. So first of all, Eiji Sato will share with you the first quarter FY 2018 earnings results. We would like to receive questions from you at the end of the presentation. And also, the content of the teleconference has been opened to the general investors through Internet. So I would like to begin the explanation.

[Eiji Sato, executive]

My name is Sato, I have been appointed as CFO as of 1st of April. Thank you very much for taking time for us. And amidst your very busy schedule, thank you very much for participating in our telephone conference. So we'd like to share with you the results for the first quarter for FY 2018 according to the materials that has been uploaded on our website. So please jump to Page 4. I would first like to share with you the summary for the consolidated results. The percentage change of figures denotes changes from Q3 of FY 2018. Q4 FY 2018 net operating revenue was up by 2.5% to JPY 107.4 billion. Retail Division in comparison to the previous quarter with large underwriting deals, equity revenue dropped. Therefore, the overall revenue decreased. Wholesale Division and Global Investment Banking, equity underwriting revenue dropped, while M&A business, Global Markets equity and FICC grew its revenue. Therefore, the overall revenue increased.

Ordinary income was down by 9.3% to JPY 17.6 billion. As for SG&A, trading-related expenses declined, while earnings-linked bonuses overseas increase. Therefore, the overall ordinary income decreased by 0.1% to JPY 94 billion. Profit attributable to owners of parent was down by 5% to JPY 13.4 billion.

ROE on an annualized basis, 4.3%. BPS book value per share was JPY 794.54. Please turn to Page 10. [ I would ] like to share with you the content of the profit and loss statement. Commissions required was down by 17.5% to JPY 64.6 billion. As for the breakdown for the commissions received, please refer to Page 23. All in all, with the decline in Japan equity trading, brokerage commissions was down by 13.9% to JPY 12.4 billion. There was a significant decline in equity underwriting. Therefore, underwriting and secondary offering commissions was down by 65.2% to JPY 6.2 billion. With the decline in the sales of stock investment trust, distribution commission decreased by 1.6% to JPY 5.4 billion. As for net trading income, there was an increase of customers order flow for both foreign equities and FICC. Therefore, there wasn't a real increase.

Net gain losses on private equity, we had a loss due to revaluation of the existing investment. Also, with the reduction of securities for strategic purposes, gains from sales of investment securities were booked as extraordinary profit. Please turn to Page 11. We'd like to share with you the status of SG&A. Trading-related expenses, there was a decline due to the decrease of commissions related to trading volume and AMP related to sales promotion. Personnel expenses, there was a decline in Japan. However, earnings-linked bonus in North America at the M&A subsidiary DC increased.

As for the real estate expenses, IT system-related insurance expenses increased. Office costs, office expenses decreased.

Please turn to Page 13. We'd now like to share with you the consolidated ordinary income of overseas operations. The total ordinary income was increased by 624.8% to JPY 2.1 billion. So it's stayed in black for 3 consecutive years and 12 consecutive quarters.

By region. In Europe, there was a recovery for equity. However, revenue related to equity underwriting decreased. In Asia and Oceania, wealth management business contributed. Equity and FICC both increased. Therefore, the overall revenue rose. In Americas, the FICC revenue and M&A revenue increased. With the decline in goodwill amortization at DC, revenue increased. Now we'd like to give you earnings by division.

Please turn to Page 14. This is a situation with the Retail Division. Net operating revenues was down by 10.4% to JPY 41.5 billion. Ordinary income decreased by 68.3% to JPY 1.9 billion. So there was a decline in both revenue and earnings. Equity revenue. On one hand, the foreign equity trading volume increased. However, sales commission from equity underwriting decreased. Domestic equity trading declined. Therefore, overall revenue decreased.

Fixed income. With the increase due to rising sales of foreign equity, there was an increase. In terms of stock investment trust, there was a decline in the switching transaction of funds. Therefore, distribution commission for investment trust decreased slightly. Agency fee for investment trust decreased due to the decline in average level of AUC during the quarter.

Please turn to Page 15. This page is on the sales and distribution amount and topics in the fourth quarter in the Retail Division of Daiwa Securities. With regards to the stock investment trust funds, which mainly invest in genome-related stock, saw strong sales.

Contract AUM of wrap account service declined Q-on-Q. However, it increased on the net basis in all month of this fiscal year. In this quarter, the contract AUM of wrap service account at the end of March increased to JPY 2.1456 trillion, driven by increase in revaluation associated with the market recovery.

Please turn to Page 16. Let me next explain the results of the Wholesale Division. Starting off with Global Markets. Net operating revenues were JPY 28.4 billion, up 45.2%, and ordinary income was JPY 5.6 billion. With regards to the equity business, although Japanese stock trading volume declined, the client flow of foreign equities remained firm towards the end of the fiscal year on the back of the recovery of the U.S. equity market. Equity revenues were up with higher proprietary trading revenues. With regards to the fixed income, customer order flows increased associated with the decline of interest rates in [ develop of the markets ]. [ If ] FICC revenue increased as revenues from proprietary trading recovered.

Please turn to Page 18. This page is on the Global Investment Banking. Net operating revenues were JPY 14.2 billion, down 18.9%, and ordinary income was JPY 1.6 billion. In the equity underwriting business, we won lead underwriter mandate for POs and IPOs of multiple REITs. However, revenues were down compared to the last quarter when we had underwriting of large deals. In the debt underwriting business, we accumulated mandates where we served as a lead underwriter for subordinated debt, samurai bonds and others. We also focused on SDG-related bonds, such as publicly offered hybrid bonds, which was a first in Japan as a green bond.

Revenues from M&As were driven by overseas and cross-border deals, utilizing our global network.

Please turn to Page 19. Let me next explain Asset Management Division. Net operating revenues were JPY 11.7 billion, down 3.1%. And ordinary income was JPY 6.5 billion, which was down 6.6%. Daiwa Asset Management average AUM of public equity investment trust, excluding ETF during the quarter, was down Q-on-Q, thereby revenues and income were down as well. With regards to Daiwa real estate asset management, management fees increased on the back of the record-high AUM of JPY 907.4 billion with property acquisitions.

Please turn to Page 21. Let me explain the results in the Investment Division. We posted net operating loss of JPY 0.3 billion and ordinary loss of JPY 1.1 billion, associated with a loss from revaluation of existing investments. This completes my explanation of the results in the fourth quarter of FY 2018. Now we'd like to open the line for questions.

For this telephone conference, we are going to proceed with questions both in English and in Japanese. [Operator Instructions] We are going to receive questions in Japanese first, and then followed by questions in English. [Operator Instructions] We'd like to start the Q&A session. We are going to have the simultaneous translation for the Q&A session. We are going receive questions in Japanese first and then questions in English. Please follow the instruction of the operator.

[Operator]

[Operator Instructions] We'd like to introduce the first question, Muraki-san from Deutsche Securities.

[Masao Muraki, analyst]

I have 2 questions. The first question relates to Page 14 about the Retail Division. So in the fourth quarter, there has been a recovery in equity and stock price, but the overall investor activities has been on the decline as if -- and it seems as if it had declined. What do you think are the reasons behind that? Also, going forward, what is the outlook for the retail investors going forward? That is the first question.

Then the second question, please turn to Page 12 about the cost. So there is a breakdown of the cost structure. So in comparison to the second quarter of FY 2017, the revenue was down by 18%. However, in terms of SG&A, it's 3%, and fixed cost increased by 7% or so. So of course, you have the advisory companies newly consolidated, I believe that it's part of the impact. But overall, the cost seems to be on the increase. So Nomura Holdings the other day, for the wholesale cost, they cut down the cost by 20% and also 10% declined by retail and likewise declined in the number of branches. Nomura had announced the cost-cutting measures. So what about for Daiwa? So within the guidance for this year and the outlook for the future, that would be highly appreciated.

[Eiji Sato, executive]

Thank you very much, Muraki-san. The first question is the outlook for the retail investors. So as you're aware -- so in terms of the equity and so forth, everything dropped quite significantly in December. And since the beginning of calendar year, that trend had continued. But as you may be aware, the stock price, especially the U.S. equity, we are seeing a recovery. So for the months of January, February and March, there has definitely been a recovery in comparison to December. So investors' activities are getting more active. So especially for the overseas funds, we are seeing a recovery. Also, the fund wrap -- account wrap service and also fixed income, again, we have seen a recovery from December.

So what is exactly happening in this month in April? So it is quite steady in comparison to March. But in terms of the equity, our transaction activities, perhaps we are not seeing a full-fledged recovery yet. The second part of your question relates to cost, the comment where the overall cost tends to be on the rise. So for this year -- so for FY 2018, the fixed cost has been on the rise. But as you have expected, the M&A in Americas and also consolidation of the entities, the personnel expenses has gone up. Also, system-related cost has been on the rise. The system compliance with regulations and also some of the sales infrastructure increased the overall IT-related expenses. But otherwise, just a reason is indeed the consolidation of the M&A subsidiaries. With the interest of acquisition cost for FY 2018, we have spent quite a lot. But for FY 2019, inclusive of the goodwill amortization, of course, personnel expenses inclusive, we expect to see a significant decline for this fiscal term.

[Masao Muraki, analyst]

So the second point you've mentioned -- this is a follow-up question to the point you've mentioned. So in comparison to Nomura's, the wholesale 20%, retail 10% cost cut, so there are some area -- there is an overlap with Daiwa, different in comparison to Nomura. So how do you perceive the cost-cutting initiatives of your competitors or your peers?

[Eiji Sato, executive]

As we speak, according to the mid-term management plan, of course, we are focusing on making our operation more efficient. Also, for a branch system, we are trying to have more of the low-cost branches. We would expand those branches. And if there is an overlap of franchise, for instance, the Nagoya branch, several branches have been merged together last year in Nada. So these are some of the activities. So we have been continuously involved in cost-reduction measures. As you know, the operating climate continues to be tough, so we do expect this climate to continue. So in addition to the existing measures, we are reevaluating what could be done more. So once we have more details, we should be able to share those with you.

[Operator]

We'd like to go to the next person from Mitsubishi UFJ Morgan Stanley Securities, Tsujino-san.

[Natsumu Tsujino, analyst]

My first question, about sales of investment trusts of equities. For this quarter, on the surface, if you look at the numbers, it looks like it has declined significantly. But bull-bear switching is one or part of the reason for the decline, but would you please explain the details about the reason in the bull-bear switching? Excluding bull-bear switching, the equity investment trust has declined. In October to December quarter, there was a negative -- significant negative impact from the switching, but in the future, what should change for us to see the improvement for this equity investment trust sales? That's my first question. Second question, at the press conference, your company mentioned that it would take unique measures to reduce the cost, and you're going to step up the cost-reduction initiatives. Would you please give me more image? Would you please give me more color on the unique cost initiatives?

[Eiji Sato, executive]

Thank you so much for your questions. To your first question about equity investment trust sales, which is prevalent, there's a significant impact on the external environment. However, I think that main reason is the market and equity investment trust sales amount hit the bottom in December. The market recovered since then. Every month, the equity investment, our trust sales increased. And especially genome-related business funds are sitting very well. In the future, to expand our sales, what actions are we going to take? We have wide product suites, and we'd like to capture the needs in each segmentation of the customer base. So we'd like to segment the customers in more detail so that we provide customers with the products that they need. And also, we'd like to provide them with the products to stimulate the demand from the customers. Those are the actions that we'd like to take. However, we see not only the investment trust. Depending upon the risk appetite, we have fund wrap, where customers can customize a portfolio on -- and other products. We have a wide array of products. So depending upon the market environment, equity investment trust mix may change, may decline. To your second question, cost initiatives, what concrete cost initiatives are we planning to implement? Currently, we are studying what we can do, including the productivity improvement of our business, we are reviewing many things. So once details become available, we are going to let the market know.

[Natsumu Tsujino, analyst]

To your first part of your answer, market was the reason. And our average age of your customers is increasing, your customer base is aging. So because of that, is there any factor from the aging of your customer base? That's a structural issue maybe you're facing. Do you think that's one of the reasons for the stagnant sales of equity investment trust? And when the market recovers, to what level do you think your equity investment trust sales will recover?

[Eiji Sato, executive]

Well, due to the aging of our customer base, is that the reason for the stagnancy of the equity investment sales? To that question, looking at the trend in the long term, there may be some impact from the aging of our customer base over time. But in principle, we are trying to capture the demand of the handover of the assets from the older generation to the next generation, younger generation. We'd like to approach to the assets that are handed over from the parent generation to the younger generation. So as I said, we are trying to segment the customer base in more details. And to the senior people, we have special service for senior people in 70 locations for their inheritance services. And we are trying to access to their family members or children so that they can benefit from the services that we are providing to their parent generation.

And we are working on the asset creation or asset building needs. And the needs of digital-native generation are different from the older generation, so we are trying to leverage the digital channels to approach younger generation efficiently. And the other day, we announced our partnership with KDDI Asset Management. And it's a fintech venture, Shinotech, which is the first venture from Tokyo University, to approach to the asset-building demand customer segment. And the other day, in March, March 25, we have announced to make ORIX Living our subsidiary. This is to provide services in Tokyo metropolitan area, where the population is aging. They have over 30 locations. And we are trying to acquire the high quality of senior living operators -- senior living housing operators, and we think we can generate synergies with Daiwa Securities in that venture because Daiwa Securities and ORIX Living are in the senior life-support business.

So we are trying to provide better solutions to senior people, and we'd like to refer customers to each other between the 2 companies to generate synergies, not only to the elderly people, but I would like to expand a point of contact with their families such as children and family members to generate more synergies with ORIX Living. And we'd like to provide services to the family members or residents who are living in the senior housing of ORIX Living, and we'd like to refer our customers to ORIX Living as well. So we'd like to reinforce and strengthen the relationship between the 2 to capture the demand from the assets that are handed over from the parent generation to the younger generation smoothly.

[Operator]

We would now like to take on the next question from SMBC Nikko, Nakamura-san.

[Shinichiro Nakamura, analyst]

This is Nakamura from SMBC Nikko. I have 2 questions. First question relates to Page 17. It's about the FICC for the net trading income. So 4Q, so it increased by 75% for FICC. So the domestic and foreign and also Retail Division, where exactly have you seen the recovery for FICC? Also, for the March quarter, what has been the trend and also the recent trend in the months of April? So that is the first question. The second question, Muraki-san just mentioned about cost. So according to the midterm plan, the ordinary income, JPY 200 billion, perhaps you will not be able to achieve it because of the worsening of the operating environment, but are there any additional measures required for cost reduction? So for instance, investment into new areas. And so perhaps your assumptions have changed since you have implemented the midterm plan. So have you made any changes?

[Eiji Sato, executive]

Thank you very much for that question. The first question about FYCC (sic) [ FICC ], about the income here so both in terms of domestic in Japan in the last quarter, so interest of the JGB position was difficult to attain. So we have seen a recovery for this quarter. Also, the credit spread, we have seen -- given the change in the credit spread, we have seen more customer order inflows. So all in all, the domestic revenue -- the domestic income has been on the rise. Now in terms of overseas, the U.S., we are seeing increase in the FICC area.

So as you may be aware, in our U.S. bases, back in 1986, we have acquired a license as primary dealer. So it's been over 30 years accumulating on our expertise. Also, we have a fully extensive customer base. So given the decline in the interest rate, we would have more customer order inflows. So MBS and credit, so we can expect to have more cost sales. So in comparison to before, we are having more stable income. So of course, it is very much dependent on the interest rate climate, but all in all, we expect to see a stable results going forward. Now for Europe, to be honest with you, low interest rate and low volatility has been the market situation. No change so far. So unlike the U.S., the market is perhaps not -- doesn't have much depth as we have seen in the U.S. And therefore, in Q4, we could not really capture the order flow.

Also, aside from cost reduction and the sort of additional initiatives required, so we announced our midterm plan. And so we have 2 pillars in line to become #1 in quality and to become an integrated securities group with hybrid business model. These are the 2 main pillars. So some of the assumptions behind this midterm plan. The U.K. average was -- seem to be higher than now. But given there is an upturn in the market, we would like to be selected, chosen by the customers. So we'd like to win the trust of the customers. So that is why we have a Daiwa version of MPS system that is running, so we can enhance the customer satisfaction. So we have been engaging in reform of the sales organizations. Also, we are focusing on enhancing the quality to be ready for the right timing.

Now in terms of the integrated securities group with hybrid business model, securities group, we have no choice but to be influenced by the market performance. Therefore, we need to have the stable source of revenue. And the basis for forming that is to establish its hybrid business model. So aside from the existing businesses, we were looking into perishable businesses as well. So INTA Tech, the fintech company, has been established to develop a new type of financial products and new type of financial services, and Daiwa Energy has been engaging renewable energy. So we would also like to expand on this front.

So these are more on the mid- to long-term perspective. Agriculture is another area. So in the agri tech area, we are seeing involving of the technology. And the productivity has been on the rise, but right now, there has been not much of an investment in this area. So we would like to expand this business into other financial institutions. So we would like to have -- commercialize these products that would provide us with future stable revenue. That is area we're looking at. Also, just to go back to the retail business, that's part of our strategy. So according to our midterm plan -- so we are engaging MPS to enhance the customer satisfaction. And just to repeat myself, customer segmentation is our main strategy.

Also, in terms of our brand strategy, we need to have a small size operation that is highly efficient. So we have 43 of such branches right now. We have been doing so since 2012 or so. So some of the issues we are facing is how we can acquire new customers. So we have 3 million accounts right now, but there are many customers we have not been able to reach so far. So it is all about how we can enhance the contact with customers. That is key. So these are the area we'd like to expand. Also, in the overseas market, the retail securities in the U.S., the number of branches have been on the increase in order to enhance the customer satisfaction. Also, given our past experience, we have conducted various analysis. On a per capita per salesperson basis, we have been [ conducting various ] analysis. And in terms of -- so for instance, inflow of customer asset and also per head productivity basis, we are seeing impact perhaps double or triple times, given the evaluation. So our area marketing is the key force for us to grow our business in the overseas front as well.

[Operator]

Next question is from JPMorgan, Otsuka-san.

[Wataru Otsuka, analyst]

My name is Otsuka from JPMorgan. Sorry to go back to the Retail Division again. Actually, I wanted to ask you about this fourth quarter ordinary income of JPY 1.9 billion. How do you evaluate this level of the ordinary income? The intention to my question is as follows. The reason why I did not grow as you expected it to grow, and I understand the reasons, but it's about JPY 160 billion. So it's about the same level in terms of the top line. So the wrap account growth is stagnant, it seems, and equity investment trust switching was at a low level. But still, in the areas that are not related to the topics, the ordinary income of the profit growth is quite stagnant, it seems. Would you please give me insights of your views?

[Eiji Sato, executive]

Thank you so much. The performance of our business in the Retail Division, my evaluation, looking at the result, simply in the Retail Division, JPY 1.9 billion in the quarter. When I look at fourth quarter of 2008 at that time, we had only the number on the parent basis as segmentation is different. So it's not apples-to-apples comparison. But in the fourth quarter of 2008, the level was JPY 1.9 billion. So we have to really take this sincerely about this low level, but there are a complex of reasons behind this low level of JPY 1.9 billion. And about the cost, the bonus in the Retail Division is related or linked to the consolidated performance of the company. So because of the better result on the consolidated basis compared to the decline of the profit in the Retail Division, our cost in the Retail Division are hoovered at the high level. There was quite a large impact from that. And again, let me repeat that because of this decline in December of the market, and also, we need to take care of our customers after the IPO of SoftBank. So in February and March, we saw the recovery. So if you look at wrap time or with some time back, I think it's coming back gradually in February and March. But if you look at the whole quarter, it looks like the profit is depressed. You're right.

[Wataru Otsuka, analyst]

Sorry, additional question about the bonus in the Retail Division. In the Retail Division, for example, when the ordinary operating revenue is JPY 42 billion, the human resource cost in the Retail Division is not linked to this level, but rather, it's adding to the wholesale performance. When the wholesale performance is good, then on the consolidated basis, your company's profit goes up. So you don't need to decrease the Retail Division's human resource cost. Sorry, my explanation was not good. I was talking about bonus only, bonus or people in the Retail Division that's linked to the consolidated performance of the company. So even though the performance of the Retail Division is depressed, bonus is not decreased as much. It's not linked to the wholesale performance, but it's linked to the whole consolidated performance. On the consolidated basis, if your result is high, then you don't really think about the bonus level separately for the retail?

[Eiji Sato, executive]

That's right. It's linked to the whole consolidated performance of the company.

[Operator]

We would now like to introduce the next question from Merrill Lynch Japan, Sasaki-san.

[Futoshi Sasaki, analyst]

This is Sasaki from Merrill Lynch Japan. Just one question from me about shareholders' return. So in the fourth quarter, at the time of results announcement, there was no announcement or share buybacks. But your stock price since Abenomics -- so it has been depressed. And also, the balance sheet, you have enough capital. So whether you could have done share buybacks this time around, you could have done that. If you can give us color and reason as to why you have not conducted share buybacks at the time of the results announcement.

[Eiji Sato, executive]

Thank you very much for that question. In the previous quarter, so in the second half, the total payout ratio was over 100% right now. Right now, in -- we are aiming to become the integrated securities group with hybrid business model. So we are investing in our gross. And for instance, the ORIX Living is one of the entities that we have acquired. So our basic strategy for a shareholder's return is to, first of all, secure enough funds, enough capital for future growth businesses. And then beyond that, we will be proactive in returning the [ funds ] to the shareholders. But of course, we have been looking into our credit rating as well as the financial institution. So to answer your question about share buyback, just as we done before, we will look into the operating environment, the earnings performance and also the finance regulations and also opportunities for investment. And of course, share price. Those would all be taken into consideration for us to make a decision on share buybacks.

[Futoshi Sasaki, analyst]

So if that is the case, how do you perceive the balance sheet? So in terms of your capital position, so I think it seems as if you have enough capital. Despite the excess capital, despite the fact you may invest in those growth policies, there was the basal regulation becoming more tightened. So in terms of own shareholders' equity, we may have it -- see a decline. So currently we're trending about 22% or so in terms of the shareholders' equity. So there is room for us to explore for a gross investment, but now the question is, what is the kind of pipeline we have for future growth?

[Eiji Sato, executive]

So from my end, it is difficult for me to say that we have room for share buybacks, access for share buybacks. But again, we take more of a comprehensive approach to make the decision. So as you pointed out -- so the shareholders' equity ratio is high. And with the tightening of the regulation, that might come down. So the question is, how much can we allocate the capital to gross policies, those businesses? So if we have enough capital after conducting those investment, then we would, of course, be looking into returning to the shareholders. But as of this moment, we cannot clearly make the decision.

[Futoshi Sasaki, analyst]

So how should you perceive this? So you have enough capital, and you have all the projects. So are you saying that perhaps this is not the timing to look into shareholders' return? Because you have been looking into more investments. So there's no change in your outlook then about the shareholders' return? This might not be the right timing for that?

[Eiji Sato, executive]

In terms of the direction, it is very difficult for me to share that. But historically, if you can confirm our shareholders' return policy, so payout ratio has been -- risen from 40% to over 50%. And also, like with share buybacks, 55 million shares or so have been bought back. So we have been definitely looking into shareholders' return. But as we speak, it is difficult for us to give you a clear guidance. But historically, we have been conducting measures to return to shareholders.

[Operator]

[Operator Instructions] Now I would like to move to the questions in English. Now we would like to welcome questions in English. Our first question comes from David Lui from Guoco Management Company.

[David Lui, analyst]

I have a question on Page 28. It's about foreign equities. We can see that the foreign equity trading value increased substantially in the March quarter, whereas for domestic, it was down. So may I know if it is still mostly U.S. equities, or you have been able to diversify your foreign equity trading value beyond the U.S.? That's my first question.

[Eiji Sato, executive]

David, thank you so much for your questions. About trading value of foreign equities, is that mostly the U.S. equity? 90% is U.S. equities. And within U.S. equities, up until now, GAFA stocks were mainly the equities included in this value, but now we have 5G-related stocks and other themes of equities. So themes are being diversified. And because of the market rise of foreign equities, value -- trading value of foreign equities is increasing.

[David Lui, analyst]

It's good to hear that the foreign equity trading commission is becoming more and more important. I guess my only concern is that there is a very heavy dependence on the U.S. Is the company, Daiwa, promoting other countries' stocks other than the U.S. to your domestic clients right now?

[Eiji Sato, executive]

David, thank you so much for your second question. Currently, it's U.S. equity-heavy, you're right, right now. But as you pointed out correctly, we have to promote more equities in other countries. So other than U.S. equities, China, Europe or Australian equities. We are trying to provide our customers with information related to the equities in those countries in the future to promote more.

[David Lui, analyst]

Let's go to Page 23, please, 23. There, for the March quarter, brokerage commission was JPY 12,495,000,000. Can you give me a breakdown of domestic equity trading revenue, whether it is face-to-face or online versus international foreign equity trading revenue, commission revenue?

[Eiji Sato, executive]

Thank you so much for waiting. About brokerage commission breakdown, we cannot give you the details precisely, but it's mostly coming from domestic Japanese equities. JPY 12.4 billion is mostly from domestic Japanese equities mostly.

[David Lui, analyst]

Okay. My last question is about cost cuts, which you have already talked about because several other analysts were asking questions about cost cuts. But one area that you did not specifically bring up was branch closures, which your competitor, I believe, is closing about, I think, 20% of its branches domestically. You talked about some consolidation of branches in Nagoya or Nara. Would you consider taking more drastic measures like closing branches, which would save you even more money?

[Eiji Sato, executive]

Thank you for that question. In the securities business, the roles of branches, we think we have been expanding the network, but we're trying to improve the efficiency of visiting customers. These are locations for our sales reps visiting customers. So we would like to expand the sales reps' locations, but in the areas where there are overlaps or duplications. We talked about Nagoya branch and Nagoya station fund branch, consolidation or integration of the 2. So in the future, in the areas where there are overlaps, we'd like to integrate or merge. That's something that we'd like to study. And we cannot give you the specifics about that yet at this point, but while expanding the sales reps location where there are overlaps, we would like to consolidate and emerge to improve the efficiency in the future.

[David Lui, analyst]

Okay. My one last question, Sato-san, is about the private equity investment that you decided to write down in this current quarter. Can you say if it came from one single investment, that big write-off there, that big loss there in the investments division? Was it one single investment or multiple investments? And could you shed some light on why there was a big write-down? Was it just unrealized loss? Or actually, the loss was very certain and was required by your accountant?

[Eiji Sato, executive]

Thank you. About PE business, in some quarters, we make money. In some quarters, sometimes we lose money. It's relatively a high-risk and high-return business. But in this quarter, we needed to post devaluation loss impairment. And about the reasons in the number of investments that are causing this loss, we have to refrain from talking about specifics. So please allow me not to talk about the specifics, sorry.

[Operator]

As there are no more question, we now conclude our question-and-answer session.

[Hidenori Yamaguchi, executive]

With this, we would like to conclude the telephone conference. So Sato would like to give a closing remark.

[Eiji Sato, executive]

FY 2018 was the toughest year for us since Abenomics started in the environment, where the direction of the market was not really clear with the influence from unclear political and economic situations of the world. On the other hand, we made a good progress on the fundamental reform of our sales structure to improve our customer satisfaction. We were able to see the result from our effort, such as that the asset inflow in the Retail Division surpassed over JPY 1.2 trillion, which was the record high since 2008. Last year was also the year when we made a strategic move to enrich our business portfolio as a group adding renewable energy, infrastructure, agriculture, healthcare and so forth.

Looking at the state of the world, uncertainties are still there, in which environment, our customers are looking for truly valuable information, advice and solutions. We are determined to continue our reform and challenges so that we become the securities group which is trusted and are chosen by the customers. I would appreciate your continued support to us. Thank you so much for attending the conference call today.

[Operator]

Now I would like to complete the telephone conference today. Thank you so much for joining.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]