Nomura Holdings Inc

TSE:8604

Q4-2025 Earnings Call

[Operator]

Good day, everyone, and welcome to today's Nomura Holdings Fourth Quarter and Full Year Operating Results for Fiscal Year ending March 2025 Conference Call. Please be reminded that today's conference call is being recorded at the request of the hosting company. Should you have any objections, you may disconnect at this point in time. [Operator Instructions]

Please note that this telephone conference contains certain forward-looking statements and other projected results, which involve known and unknown risks, delays, uncertainties and other factors not under the company's control, which may cause actual results, performance or achievement of the company to be materially different from the results, performance or other expectations implied by those projections. Such factors include economic and market conditions, political events and the investor sentiment, liquidity of secondary market, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions.

With that, we would like to begin the conference. Mr. Takumi Kitamura, Chief Financial Officer, please go ahead.

[Takumi Kitamura, executive]

Good evening. This is Kitamura, CFO of Nomura Holdings. I will now give you an overview of our financial results for the fourth quarter and full year of fiscal year ended March 2025.

Please turn to Page 2. First of all, our full year results. As you can see on the bottom left, group's net revenue increased 21% year-on-year to JPY 1,892.5 billion, while income before income taxes grew 72% to JPY 472 billion. Net income increased to 2.1x the year earlier level to a record high JPY 340.7 billion. Earnings per share came to JPY 111.03 and return on equity was 10%, making a strong performance.

As shown on the bottom right, all 3 main segments performed solidly, and 3 segment income before income taxes grew by 80% to JPY 426.6 billion. I think it is important to highlight that earnings clearly show the fruits of our medium- to long-term initiatives.

Wealth Management recurring revenue grew by 30% on a continued net inflow into recurring revenue assets via the provision of comprehensive asset management services, coupled with growth in client assets, thanks to an upturn in market conditions. Investment Management saw a 20% increase in business revenue, thanks to a high level of assets under management, which reflected an eighth consecutive quarter of net inflows. Both divisions saw steady growth in stable revenues.

Meanwhile, Wholesale revenues grew in all business lines and all regions, thanks to the diversification of revenues, particularly overseas. Income before income taxes rose sharply on the back of revenue growth across all divisions as well as thoroughgoing cost controls. As a result, income before income taxes reached in 11-year high in Wealth Management, a 15-year high in Wholesale and the highest level at the Investment Management division since it was established in April 2021.

Turning to Page 3. As you can see on the left-hand side, all divisions achieved income before income taxes targets for the fiscal year ended March '25 presented at May '23 Investor Day. Profitability also improved sharply in the 3 international regions, as you can see on the right-hand side. Their combined income before income taxes came to JPY 137 billion, marking the highest level since we first disclosed geographic information in the year ended March 2003.

Our group-wide effective tax rate also fell to 26% as some international entities made use of tax losses carried forward. Please turn back to Page 2 again. In view of our strong performance for the period ended March 2025, we expect to pay an ordinary dividend of JPY 24 per share, in addition to the 100th anniversary commemorative dividend of JPY 10 per share we previously announced, making a total year-end dividend of JPY 34. This works out as an annual dividend of JPY 57 per share and a payout ratio of 49%.

Today, we resolved to set up a share buyback program in order to raise capital efficiently and ensure a flexible capital management policy and to deliver shares on exercise of stock-based compensation. The program will run from May 15 to December 30, and have an upper limit of 100 million shares with the upper limit of the aggregate amount of repurchase price being JPY 60 billion.

Next, let me give you an overview of our fourth quarter results. Please turn to Page 4. All the percentage figures I mentioned from now on are quarter-on-quarter comparisons. First of all, group net revenue fell 10% to JPY 452.7 billion. Income before income taxes fell 29% to JPY 97.7 billion. And net income was down 29% as JPY 72 billion. Earnings per share came to JPY 23.39. Compared with the previous quarter when performance was robust, conditions were more difficult amid rise in yen rates and a decline in the stock market. However, we achieved annualized ROE of 8.2%, exceeding the fourth consecutive quarter the lower bond of our ROE target of 8% to 10% or more by 2030.

As you can see on the bottom right, 3 segment income before income taxes totaled JPY 90.1 billion. Amid uncertain market conditions, the quarter saw a decline in flow revenue in Wealth Management and lower Fixed Income revenues in Wholesale, but stable revenues, specifically recurring revenue and business revenue increased further. And Equities and Investment Banking both achieved strong results.

Next, please turn to Page 7, and I will present an overview of each business in the fourth quarter. In Wealth Management, net revenue fell 10% to JPY 104.5 billion, and income before income taxes fell 20% to JPY 37 billion. We generated record high stable recurring revenue of JPY 51.6 billion on a boost from investment advisory fees booked half yearly and also achieved cost savings of 4%. As a result of which, our recurring revenue cost coverage ratio for the quarter rose sharply to 76%.

Flow revenue, et cetera, fell 20% to JPY 52.9 billion, owing to a 45% decline in primary stock subscriptions and a slowdown in secondary stock transitions -- transactions and investment trust purchases amid an uncertain market outlook.

Quarterly earnings tend to fluctuate owing to prevailing market conditions at a given time. But on a full year basis, you can see that the division achieved revenue growth of 12% or around JPY 49 billion in value terms, while keeping cost increases down to a modest JPY 1 billion. This can be seen as the fruits of our ongoing effort to reduce costs. As a result, leverage enabled us to achieve growth of 39% in income before income taxes.

Please turn to Page 8 for an update on total sales by product. Total sales rose 3% quarter-on-quarter to JPY 5.4 trillion. Sales of stock rose 6% to JPY 3.9 trillion, in part owing to a large lot purchase. Sales of bonds increased 16% with a contribution from Toyota Motor Credit Corporation's primary deal. Secondary sales of stocks, excluding the large lots purchase and sales of investment trust fell as investors stayed on the sidelines amid range-bound trading in equity markets and an uncertain outlook.

Next, on Page 9, we look at progress in KPIs. In Wealth Management, priority was given to 4 KPIs in the fiscal year: net inflows of recurring revenue assets, recurring revenue assets, flow business clients and workplace services. As you can see, targets were attained in all 4 KPIs. In particular, net inflows of recurring revenue assets, seen on the top left, came to JPY 1,374 billion, sharply exceeding the target of JPY 800 billion and contributing to growth in recurring revenue. On the bottom right, we see that 3.88 million units of workplace services were provided, and efforts to broaden the client base centered on ESOP-related services have been going well.

Please turn to Page 10 for Investment Management. Net revenue was down 6% to JPY 43 billion, while income before income taxes fell 18% of JPY 15.5 billion. Net revenue fell owing to investment gain/loss. Private equity investment firm, Nomura Capital Partners, recognized unrealized valuation gains as the value of portfolio companies appreciated, but investment valuation gains and losses related to American Century Investments turned slightly downwards.

Business revenue, which is a stable type of revenue, came to JPY 43.3 billion, a record high for the fifth straight quarter. Assets under management were down at end March owing to market factors, while asset management fees were a little changed from the strong previous quarter. Revenue rose in the aircraft leasing business.

Please turn to Page 11 for an update on asset management business, which is a key source of business revenue. As seen on the top left, assets under management at the end of March were JPY 89.3 trillion, exceeding the KPI target of JPY 89 trillion for the fiscal year ended March '25.

On the bottom left, net inflows came to JPY 314 billion, marking the eighth straight quarter of net inflows. Investment business -- Investment trust business accounted for about JPY 270 billion of inflows. There were outflows of JPY 420 billion for MRFs, hinting at prominent shifts of fund to new investments, while ETFs saw inflows of around 670 billion into Japanese stocks, mainly at the time of the market downturn in March. And there were inflows into investment trusts, including Japan's first publicly placed investment trust investing in private infrastructure company stocks as well as balanced funds.

On the lower right, we see that alternative assets under management came to a record high JPY 2.6 trillion. Yen appreciation had an adverse effect, but there were about JPY 170 billion in net inflows owing to inflows to the investment trusts we mentioned earlier that invest in private infrastructure company stocks and additional investments by institutional investors in response to capital calls.

Next, please look at Page 12 for Wholesale performance. Wholesale net revenue fell 11% to JPY 259.2 billion and income before income taxes declined 40% to JPY 37.5 billion. Equities revenues rose to -- for the fifth straight quarter and Investment Banking revenues increased on contributions from EMEA. Fixed Income revenues slowed relative to the previous quarter when they were strong.

On the top left, the cost-to-income ratio was 84%, and the ratio of revenue to modified RWA was 7.6% for the full year, beating the fiscal year KPI targets of 86% and at least 6%, respectively. Net revenue rose 22% and growth in expenses was held to 10%, producing income before income taxes of 3.1x the previous year's level.

Please turn to Page 13 for an update on each business line. First, Global Markets' net revenue declined 13% to JPY 206.9 billion. Fixed Income net revenue fell 24% to JPY 105.8 billion, partly in response to a strong performance through the previous quarter.

Rates revenue fell as client activity slowed in the latter half of the quarter. Credit revenues were unfavorable, owing to spread widening. On the other hand, FX/EM and Securitized Products revenues were down from the previous quarter when revenues were strong, but remained firm.

Equities net revenue rose for the fifth straight quarter to JPY 101.1 billion. Revenues were particularly strong in the Americas, and Derivatives revenues rose sharply on the backdrop of high volatility and increased client activity. Execution Services revenue were up, thanks to increased volume.

Next, Page 14, for Investment Banking. Net revenue was JPY 52.3 billion, the highest quarterly net revenue on record going back to the fiscal year ended March 2017, which is the span over which comparisons are possible. Advisory revenues were strong in the fourth quarter with several large cross-border and tender offer deals executed in Japan.

As shown on the top right, overseas deals related to renewables and beverages, mainly in EMEA, contributed to revenues. Advisory revenues accounted for half of Investment Banking net revenue.

Revenues in Financing and Solution fell from the previous quarter when ECM deals were strong in Japan, but we executed several deals in the fourth quarter, including a global PO for Japan Post Bank and SSA bonds, including Spanish government bonds.

Next, Page 15 for noninterest expenses. Group-wide expenses amounted to JPY 355 billion, down 2%. Compensation and benefits declined 10% to JPY 172.3 billion, mainly owing to a decline in bonus provisions linked to the top line.

Please turn to Page 16 for an update on our financial position. As shown on the bottom left, the Tier 1 capital ratio was 16.2% and the common equity Tier 1 ratio was 14.5% at the end of March, both down about 2 percentage points from the end of December. This reflects the start of the implementation of new capital requirements from the end of March as part of the Basel III finalization. We aim to maintain the common equity Tier 1 ratio at 11% or higher over the medium term and, thus, should be able to comfortably meet capital requirements even after the new rules are implemented.

This concludes our overview of our first -- fourth quarter results. To sum up, in May last year, we issued our Management Vision 2030, titled Reaching for Sustainable Growth. The numerical targets set forth in that vision included -- include consistently achieving ROE of 8% to 10% or more and generating more than JPY 500 billion in income before income taxes. In the year since we presented that management vision, we have made tremendous progress in building up a franchise capable of delivering sustainable growth for Nomura Group.

It is worth highlighting the steps we have taken to achieve sustainable growth of sustainable revenue. As discussed earlier, recurring revenue in Wealth Management and business revenue in Investment Management have risen to record levels. And just this week, we reached an agreement to acquire Macquarie Group's U.S. and European public asset management business. This acquisition makes Investment Management larger in size and also more global, setting up a major step change in the division's growth. Also just this month, we established a new banking division that will leverage the strengths of our banking and trust banking functions so that we can provide our clients with more diverse, high-quality services. In taking on these initiatives in Japan and globally, our aim is to put Nomura Group more solidly on the path to steady growth.

Our management team attaches great importance to capital efficiency. Basel III finalization took effect at the end of March, and our common equity Tier 1 capital ratio is comfortably higher than the target we have set for ourselves of 11% over the medium term. The decision regarding today's share buyback was made after considering both current capital levels and the prevailing stock price levels. Going forward, we intend to use our surplus capital to invest in strategically selected growth areas while also rewarding our shareholders.

The market environment has been turbulent and uncertain ever since the Trump administration revealed its reciprocal tariff policy. But it is precisely at times like these, Nomura -- that Nomura Group has an especially vital role to play. In April thus far, Wealth Management has seen a slowdown in net revenue as clients have retreated to the sidelines. But during the 3-day period of consecutive steep declines in the stock market, the division as a whole saw more buying than selling, with some investors choosing to buy on the correction.

Our sales partners provided our clients with timely and appropriate information that helped limit the extent of overdone selling among our client base. And recurring revenue assets in Private Wealth Management and Wealth Management domains have continued seeing net inflows. In Wholesale, the upsurge in market volatility has been accompanied by robust trading activity in Equities and FX/Emerging Markets. Net revenue in division is currently on track to be higher than in the fourth quarter of the fiscal year just ended.

I believe Nomura Group's talented and abundant human resources, robustly healthy financial position and powerful global reach will manifest as strengths, especially in times of uncertainty like now. As we celebrate our 100th anniversary, we will continue to strive for further growth, and we appreciate your continued support.

[Operator]

[Operator Instructions] The first question is by SMBC Nikko Securities, Muraki-san.

[Masao Muraki, analyst]

SMBC Nikko Securities' Muraki speaking. I have 2 questions. First of all, Global Markets, Page 13. Fixed Income year-on-year in comparison to U.S. peers, it seems weak. Equities seems to be at the right level, but I think that there's some weakness in Fixed Income. January, February, March, how was your business? And what's the latest situation this month in April? Can you elaborate, especially focusing on comparison with your peers?

My second question, Page 16. Capital policy. Basel III finalization, 14.5%. And from here onwards, acquisition of asset management, about 1.5% drop. And share buyback, 0.3% or slightly lower according to your plan. So 12.8% would probably be your target. Is my guess correct? And you will probably be showing your target next month in Investor Day, but target range was probably in your mind as you thought about CET1 13% in deciding the share buyback program. Is that the correct assumption?

[Takumi Kitamura, executive]

This is Kitamura speaking. Thank you, Muraki-san, for your question. Fixed Income, it appears to be weak and that's our view as well. First of all, product mix is a bit different. When we look at the scripts of competitors, we see comments saying that they were healthy in commodity. But as we have been saying, we don't have that business at all. So that's a factor that makes the difference. But we have no intention whatsoever to launch commodities business. So this is an area where we don't have any option.

And macro seems to be a bit weak. And in rates, structure rates, agency mortgage, the percentage of these products are high. Flow rates, it was good. But other rates, mortgage didn't do so well. And region mix-wise, Japan in comparison to our competitors, the share of proportion is high. And as you are well aware, JCB was rising in Japan, and therefore, challenging environment continued. So against this backdrop, unfortunately, in comparison to our peers, our performance may seem to have been weak.

Regarding monthly performance, January, 40%; February, slightly less than 40%; and March, slightly over 20%. Especially, we saw the drop of revenues in March, as I have introduced. But there's mixed fees regarding a possible rate hike and the domestic investors were on the sidelines and thus less liquidity. So those are some of the reasons behind. And as far as April is concerned, generally speaking, the average of Q4 is above the level we are observing for this month.

And on your second question, CET1 target. This time, we made a decision on share buyback program. We, of course, took a look at various indicators. And when we do analyst meetings, we usually talk about CET1. But you're the expert, I don't intend to preach. But Basel regulation is not just about CET1. There's Tier 1, there is capital adequacy and equity ratio. So we take a look at each of these indicators in order to decide the amount of share buyback.

And if you look at the capital structure of Nomura, much of it is CET1. So we took that into consideration and decided on the figure of JPY 60 billion. It's not necessarily the case that we've set the target at slightly lower than 13%. On the Investor Day, we will announce the target range, so if you could wait for some time to come.

[Masao Muraki, analyst]

On first point, I will deviate from this performance announcement, but capital that used to be concentrated in the U.S. is transferring to Europe. You are doing well in U.S., but you are facing difficulty in Europe. But trading included, are you beginning to see changes in that trend? Or it's premature to probably decide on change of resource allocation? But what do you think about trading resource allocation regional divide? Have you begun debate on this issue?

[Takumi Kitamura, executive]

This is Kitamura speaking. ECB rate reduction is -- so there was tailwind for Europe. But in principle, so far, it's not as significant as to change our resource allocation. But if this trend continues for longer than expected, maybe we will not be able to avoid having to make that -- to make such a decision.

[Operator]

Next question comes from Watanabe-san from Daiwa Securities.

[Kazuki Watanabe, analyst]

I am Watanabe from Daiwa. I have 2 questions. First question is about capital policy. Buyback of JPY 60 billion, what's the rationale for that amount? And as part of that, RSU portion is how much? And 3 months ago, commemorative dividend separate from usual dividend was talked about, but 10% of -- or more than [ JPY 30 billion ], is it pure buyback?

And regarding the reshuffling of the business portfolio, sale of Takanawa and also Macquarie asset management acquisition, so you are reshuffling the portfolio. But NRI stock and group stock, is there a plan to make a revision to the holdings?

[Takumi Kitamura, executive]

Why JPY 60 billion, the rationale behind the number is your question. The rationale is, as I mentioned in my answer to Mr. Muraki, we looked at various ratios and we came to JPY 60 billion. And in the JPY 60 billion, naturally, RSU portion is included. So even if we deduct that portion, more than 50%, our committed total return ratio is satisfied. Does that answer your question?

And your second question, various changes to portfolio includes the sale of Takanawa Training Center. And as we announced this week, acquisition of Macquarie business. So dynamically, there has been changes to our portfolio.

Reading NRI, at this point, we do not have a plan of making changes to our holding of stake in NRI. And there are other assets that we have to pay attention to.

[Kazuki Watanabe, analyst]

Regarding the first question, just to confirm, RSU portion. That's included in the JPY 60 billion, then total return ratio of 50%, then JPY 34 billion needs to be paid out for the buyback. That means that JPY 26 billion or less, that's the portion for RSU. Is that the right understanding?

[Takumi Kitamura, executive]

I leave you to speculate, but you are not far off from the mark. The JPY 49 billion or so, but there is a tax and other factors, then maybe that will be the size of contribution. As said repeatedly, excluding cumulative dividends, so there's regular dividend and also the buyback. So we are exceeding 50% with those.

[Operator]

The next question is by Tsujino-san of BofA Securities.

[Natsumu Tsujino, analyst]

I have 3 granular questions. First of all, IT. In the 3 months of Q4, IT expenditure went up. Is this onetime off phenomenon? Or will this be the general level going forward?

Second, M&A fee. In Q4, it was rather high. Again, increased and rather high. Last year, there was a big transaction. But recently, it had been calm. So can we expect that this number will begin to come down?

And thirdly, March investment trust sales was weak. What was the reason for this lack of performance? And one more point of confirmation. You said -- are you talking about FIC or is Equity included for April? You said April has been at the average of 4Q. Is that the total for the global market? That's all for me.

[Takumi Kitamura, executive]

This is the CFO speaking. Three questions. First of all, IT expenses. Many combinations have been included, and there were some fiscal year-end factors included. And half of the third quarter had been injected into Q4 bookings. So will this level continue? No. We don't think so. I hope I answered the first question.

And your second question, M&A. As you know, corporate governance, we're trying to strengthen corporate governance. And Japanese companies continue to be quite aggressive in their M&A strategies. That is our recognition. But partly due to the Trump tariff policies, most recently, I think we need to be cautious and we will be monitoring the situation closely.

And as I said in my presentation, the FX rate, JPY 143 to the dollar is probably the current level. It went down to JPY 160 to the dollar. So for Japanese businesses, there could be positive factors from such perspective. And also, shifting production to the U.S., invest more in the U.S. market, those are some of the things that the businesses are talking about. So corporate governance strengthening is irreversible.

Will there be some deals in the pipeline immediately? We have to stay calm and observe. And the pipeline overseas is not so bad. But again, stock price and market trend seems to be uncertain. So how will the tariff policy end? What will be the end point? We've heard that investors are taking a wait-and-see attitude. And March investment trust sales was poor.

First of all, in February, major private infrastructure fund deal took place. So new investment trusts have not been launched. And there's very little visibility in the market. So amidst such situation, investors are remaining on the sidelines. But although more so because we're in difficult times, I think the partnership should be leveraged. And also because of this environment, rather than trying to sell something to our clients, I think it's time to listen to the challenges that our clients are facing. So you may feel that the numbers are rather poor, but we are not pessimistic at all.

And on your final point, April. Well, basically, Q4 -- April has been following the pattern of Q4, slightly weak in Fixed Income, while Equity did well. And that trend remained unchanged. And I think that's the general trend in the GM as a whole.

[Operator]

The next question comes from Sato-san of JPMorgan Securities.

[Koki Sato, analyst]

I'm Sato from JPMorgan Securities. I have 2 questions. First question, in April, the market had a high volatility. And impact on flow was explained in many ways. But for example, what about the risk of certain loss counterparty or loan position-related loss? What about the risk of such loss? And what is the impact on risk asset? What is your view on those matters? My hope is that you would comment that you are not expecting anything significant in impact.

Second point is regarding cost-income ratio of Wholesale, how do you evaluate that throughout the year? You explained your evaluation, but looking back on the movement over the last several quarters in good way or bad, the top line progress has had impact on the cost-income ratio. Moving forward at the level of -- if the top line is at the level of the fourth quarter, then would it be possible to achieve 80% of cost-income ratio? So especially in the second, third and fourth quarters, looking at the progress of cost-income ratios and what is your evaluation? And also, could you comment on your future outlook?

[Takumi Kitamura, executive]

Thank you, Sato-san, for your questions. In -- since March or so, market -- we've been looking at the market trend and we have been taking quite risk-off positions. We have been tightly managing risks. From here, credit spread is widening, so that calls for our caution.

Recently -- we do not feel impact that have major impact on our positions, but we will be -- we will have to pay close attention to the progress from here. It's not just us, but this entire finance industry will have to pay close attention. But as mentioned earlier, we are being quite cautious. So we do not have cause for concern at this point in time.

Regarding the cost-income ratio, in the third quarter, it was down to 79%. Then it went to 86%. So as you pointed out, there's still room for us to control cost-income ratio. Especially for this time, cost-income ratio looks high, that's because Equities' execution made a progress. Revenue grew, but this business involves high cost, so cost ratio went up. But other than that, looking at the market data and other areas, we believe there is room for lowering the cost ratio.

And now various initiatives are underway, and it will take some more time for such initiatives to start taking effect on financial statements. In Wealth Management, we took some measures, and we see the effect in the P&L. But regarding the initiatives in the Wholesale division, we are working on various transformation initiatives, and it will take some time before we start to see the effect.

[Operator]

Citigroup Securities, Niwa-san.

[Koichi Niwa, analyst]

This is Niwa of Citi speaking, I have 2 questions. Value at risk and risk assets and the use. First, this was already replied to. There's overlap. But at Page 19, March numbers were quite low. So you said you were already in risk-off mode, but was this as a result of intentional control? Or was it due to market? What was the judgment that led to this operation? The direction seems to be rather different from your competitors. So if there's something that we need to keep in mind, please let us know. That's my first point.

Secondly, this fiscal year and future accounting years and the use of risk asset is the subject of my question. Already, you've announced the acquisition of asset management business. And brokerage strengthening was in some press reports. I thought that you used to do business within each division, but are you more aggressive in using risk assets? And including the pipeline, can you give us more color and detail?

[Takumi Kitamura, executive]

This is Kitamura speaking. Thank you, Niwa-san. The first point, VaR, we announced the full year results and we looked at the market. We had to announce the full year result, and we were rather subdued. What about the situation at our competitors? We haven't been monitoring so closely. For them, it was Q1. So they must have been more aggressive, but that's only my imagination. But we took into consideration the recent market situation and controlled quite stringently our business activities.

The second question is use of risk-weighted asset. And cash PV was touched upon, but that's only in the press reports. There's nothing that has been decided within the company. And it's not just cash PV, but we're always debating on various options, and nothing has been decided and that's a true fact. And the recent news was acquisition, which we announced earlier this week. And most recently, we have been spending much time debating on that deal.

Business-wise, in Wholesale, we've already introduced a self-funding concept. And within Wholesale, if they are to do new business, they would do that by switching the portfolio. On the other hand, the most recent announcement regarding the acquisition of the asset management business, it's about public -- it's a public company. And some of the people gave us comments saying that I thought you'd be acquiring private business.

But by having a strong franchise, we could do bolt-on M&A to lay over some private business on top of this platform. That could be a possibility. So we're not saying we won't be using risk assets. To a certain extent, we will be using risk assets. So if we discover such opportunity in the future, we will be using risk assets.

[Operator]

The next person asking that question is Otsuka-san from SBI Securities.

[Wataru Otsuka, analyst]

I am from Otsuka from SBI Securities. I have 2 questions. Page 7. First question is about Wealth Management. The flow revenue -- I have a question about flow revenue and so on. Looking at the most recent numbers, based upon the situation in April, what is the level of flow revenue? Is it at the same level as the fourth quarter when you look at April? Or is there going to be some slowdown? Even the qualitative explanation helps. That's my first question.

[Takumi Kitamura, executive]

Regarding Wealth Management, now I do not have numbers here. But looking at the quarter, in the third quarter, third quarter was the toughest quarter for us. And in April, the situation is not as severe as in March, but it's similar to the fourth quarter, where there is a decline in market, customers -- our clients are buying. But after that, there is some swing or fluctuations. So overall activities have slowed down somewhat.

But we are increasing the time to have dialogue with clients. And in a market condition like this, it is a good opportunity for us to listen to what customers have to say about their concerns, and customers have more and more concerns. So regarding their portfolio, by supporting customers with their portfolio and even though we see slowness right now by spending enough time with customers, eventually, our efforts will pay off later.

[Wataru Otsuka, analyst]

Next question, Page 2 is about Page 10, Investment Management division. The other day, you made announcements about Macquarie acquisition. But after the acquisition, as new initiative, not investment, but are you going to focus on business revenue?

[Takumi Kitamura, executive]

Yes.

[Wataru Otsuka, analyst]

Okay. And another question. Regarding American Century, in the fourth quarter, there was weakness. But then recently, investment gain/loss, American Century -- can we assume American Century continues to struggle?

[Takumi Kitamura, executive]

So your question, so the ACI, indeed, there is impact of market and there is volatility. For us, in order to mitigate volatility, we have hedge in place. So in the fourth quarter, our hedge took effect. So even if ACI performance goes up or down, we have hedge to mitigate the impact either way. So ACI evaluation, what is going to be the trend or end result in the first quarter, we cannot tell at this point, but what we aim to achieve is to hold down or suppress volatility.

[Wataru Otsuka, analyst]

Understood. Then it's a rough question, but compared to before, your hedge position -- you have more hedge position than before. So investment gain/loss impact, which used to be big in some quarters, but you won't be able to -- you will not be able to recognize such outsized loss as in the past.

[Takumi Kitamura, executive]

Regarding the ACI evaluation, some market factors are suppressed with hedging. So in that sense, volatility will be less than before. On the other hand, within ACI, there is some parameter that could move that cannot be hedgeable. For example, last year, so there were some fluctuations regarding ACI. That's because of the internal factors. So volatility -- we cannot guarantee that volatility comes to 0 completely.

[Operator]

[Operator Instructions] The next question is by Bloomberg Intelligence.

[Unknown Attendee]

I have 2 simple questions. Wealth Management, according to your presentation, net increase of -- against the JPY 80 billion KPI, in comparison to the first half of the quarter, in the second half, there was market movement. You said that 4Q was difficult, but Q3 was the bottom in terms of acquired assets. So my point is, in the second half of the year that ended versus the recent trend in market chaos, stock asset trend JPY 80 billion KPI. Have you entered into a stage that you are able to elevate the KPI further? From the run rate, was last year's performance rather strong? It's rather abstract, but that's my question.

And the second question is regarding details. JPY 60 billion buyback, CET1 ratio, you said that, that was in your mind, equity ratio. You already announced the Takanawa Training Center sales. Proceeds from that asset sales, if that's not included in shareholder return, then for next fiscal, that would be included in shareholder return? So that will be a repetition, but if you have some comments regarding that point as well, I'd appreciate.

[Takumi Kitamura, executive]

Thank you. This is Kitamura speaking. Regarding the increase in stock asset, first quarter and second quarter of last year, it was strong. And in a way, it was more than expected. But what we want you to focus is the red portion, which includes corporates. And there's quite big volatility. In the gray zone is the stock asset net gain and loss and you see that the level has been high and true that Q3 was low, but Q4 was at a high level.

Was Q3 the bottom? It's difficult to say. But if we look at the plunge in the market most recently, Wealth Management, which is our core and PWM, in these areas, buy outperformed sales and recurring asset increased on a net basis. So we see robustness. And I think we've been doing well in terms of our conversation with our customers.

And outside of WM and PWM, affluent class through digital means, we are providing services, so we are trying to achieve net gain. And the Wealth Management division is making all our efforts to do that this fiscal year as well. JPY 60 billion, Takanawa proceeds. Takanawa proceeds is recognized in Q1. And when we decided the shareholder return for last fiscal year, which was announced today, this was not included -- Takanawa was not included.

[Operator]

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

[Takumi Kitamura, executive]

Thank you for attending. As I said at the beginning, our initiatives are finally materializing as numbers. And on a full year basis, it was a strong performance. Profit was at a record high. In the 4 quarters in a row, 8% target was exceeded. That shows the stability of our performance.

Since April, we have established banking division and we have announced the acquisition of Macquarie assets, and we are implementing various initiatives. So in order to stabilize business, we are doing what we can -- everything we can do. On the other hand, market environment is quite severe and challenging. So I received a question about Wholesale, but cost control and the business process transformation still is only halfway -- at its halfway point. So just because the performance are strong this time, we would continue working on our initiatives. And by delivering the strong results continuously, hopefully, your view toward us will improve and market evaluation of us will improve. So continuously, we will make company-wide efforts.

And thank you very much for your continued support. Thank you.

[Operator]

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

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