Thank you all very much for waiting, and thank you very much for joining the financial reporting conference for the third quarter of FY 2021 of Daiwa Securities Group. It is time, so let us start. Again, thank you very much for joining our telephone conference today despite your busy schedules. Today's speaker from Daiwa Securities Group is Sato, Executive Managing Director and CFO. I am Fujino of IR Division, serving as a facilitator today. We will start with the presentation of the third quarter of FY 2021 results, and then we'll take questions. Please be reminded that this call is also accessible on the internet. Let's start. I am Sato of Daiwa Securities Group. Thank you very much for joining our telephone conference today. Today, we released our financial results of the Q3 of FY 2021. I will now explain the results by following the earnings announcement material which is available on our website. First, please turn to page 4 for consolidated financial summary. Here, the percentage of change is a comparison to the Q2 FY 2021. The third quarter of FY 2021 on a consolidated basis, we recorded growth in both revenue and income. Retail Division ordinary income was JPY 12.7 billion, up 2.7%, exceeding JPY 10 billion for four consecutive quarters. In Wholesale Division, Global Markets had FICC revenue recovery and Global Investment Banking had equity underwriting revenue growth. Net income attributable to owners of the parent was JPY 26.6 billion, up 0.2%. Annualized ROE was 8%, and the BPS hit a record high JPY 897, 76%. Now please turn to page 10 for P&L summary. Commission received was JPY 84.4 billion, up 1.8%. The breakdown of the commission received is on page 23. Transaction volume of Japanese equities increased, and the brokerage commission recorded JPY 20.1 billion, up 3%. Underwriting commission had a contribution of large-sized equity underwriting, recording JPY 13.7 billion, up 39.4%. As for distribution commission, equity fund sales volume declined, finishing at JPY 5.5 billion or down 10.1%. M&A-related commission was JPY 7.9 billion, down 33.3%. Due to the real estate transfer, which was acquired as warehousing for group's real estate asset management business, other operating revenues and expenses increased for almost the same amount. Let us move to page 11 for SG&A. SG&A was JPY 98.3 billion, down 0.2%. Trading-related expenses increased in line items such as commission paid. As for personal expenses, earnings related to bonuses overseas decreased. Now please turn to page 13 for overseas operations. The ordinary income totals JPY 2.7 billion, up 79.9% compared to the previous quarter. In Europe, while M&A revenue fell, primary revenue increased so that the result in total improved. Asia and Oceania had a growth of primary revenues and gains from equity method investments in SSI Securities. Thus, the region delivered high level of profit. Americas had revenue increase in FICC and the primary, as a result of which the region recorded revenue growth. Next is segment information. Let me start from Retail Division on page 14. Net operating revenues were JPY 49.7 billion, up 0.3%, with the ordinary income of JPY 12.7 billion, up 2.7%. Equity revenue gained with the growth of sales commission tied with underwriting deals. Investment trust distribution commission revenue fell due to the decline of sales amount of equity investment trust. Agency fee for investment trust increased as the asset under custody increased. In the line of others, wrap-related revenues increased. Asset-based revenue expanded to JPY 19.6 billion, accounting for 40.4% of the net operating revenues in the Retail division. Please turn to page 15 for sales and distribution amounts by products of Retail division and our topics of the quarter. Equity distribution increased significantly with the Japan Post Holdings Global PO, the largest PO deal of this year, which has positive impact on new account open and asset inflow. As for wrap account service, with the rise of contract amounts and net inflows, the contract AUM hit a record high of JPY 2,925.9 billion. The graph on the left down below shows sales and the distribution amount of wrap and equity investment trust. Net increase ratio was 22.4%. Please turn to page 16. Let me next explain about the Wholesale division. Starting off with Global Markets, net operating revenues were JPY 35.8 billion, up 10.2%. Ordinary income was JPY 11.2 billion, up 27.9%. Equity revenues declined. Although customer order flows for Japanese and foreign equities remained firm, derivative revenues were down. FICC revenues increased both for domestic and overseas. In Japan, customer order flows for JGBs and derivatives recovered. In Americas, revenues improved due to higher interest rates and volatility. Please turn to page 18. This is on the Global Investment Banking. Net operating revenues were JPY 17.5 billion, down 2.7%, and ordinary income was JPY 4.8 billion, up 40.5%. In the equity underwriting business, we served as a lead underwriter for the largest PO mandate this year, Japan Post Holdings, and accumulated a multiple number of lead underwriter mandates. In the debt underwriting business, we accumulated the track record of serving as a lead underwriter for straight bonds and subordinate bonds. With regards to mandates, we made steady execution of mandates both in Japan and overseas. Please turn to page 19. Let me next explain Asset Management Division. Net operating revenues were JPY 18.2 billion, up 3.3%, and ordinary income was JPY 11.2 billion, which was down 11.5%. Daiwa Asset Management revenue increased on the back of net capital inflows into publicly offered investment trust, as well as higher AUM during the quarter. With regards to the real estate asset management, AUM has increased both for Daiwa Real Estate Asset Management and Samty Asset Management. Please turn to page 21. Let me explain the results in the investment division. Net operating revenues were JPY 3.1 billion, up 209%, and ordinary income was JPY 1.7 billion. We secured a profit driven by exits from a multiple number of existing investments. This completes my explanation of the results in the third quarter of FY 2021. The stock market in the third quarter went up and down on the back of crosscurrents, such as global economy normalization, expectation toward solid corporate results, resurgence of COVID cases and cautious views toward inflation, and so on. In this environment, we demonstrated our comprehensive capabilities as a group, with an increase in profits to consolidated ordinary income of JPY 40.5 billion and profit attributable to the owners of the parent of JPY 26.6 billion. In particular, Retail division has been generating more than JPY 10 billion for 4 quarters in a row, which is a result of our efforts of transforming to wealth management style business model and our cost structure reform, which we have been taking our time, which contributed to stable growth in our performance. So far in January, it is true that Retail division is seeing some dullness in trading of Japanese and foreign stocks compared to before, driven by more wait-and-see attitude of retail investors upon the big correction of the market. On the other hand, we have not seen the big shift of investor segment so far with increased unrealized gains from the upward run in the market up to this point. Actually, we see movements of buy- the- dip behaviors as well. Furthermore, there is strong demand for long-term diversified investments. Our fund wrap sales are still doing very well. Total product sales amount is almost the same level as the average of the third quarter. Having said that, there are more uncertainties in the market. Many of our customers are in need of professional advice. Now is the high time when we actively put out our proposals of products and services which fit each one of the customers' mid- to long-term asset building needs to accelerate the transformation into Wealth Management business model and contribute to the achievement of our customers' goals. I appreciate your continued support and cooperation to us. Thank you so much. Now, we'd like to open the line for the questions from you. Today, due to the system, we receive questions in Japanese only. If you have questions in English, please contact the IR department. Thank you so much for your understanding. If you have questions, please press asterisk one on your keypad. To cancel your question, please press asterisk two. Now the line is open for your questions. The first question is from SMBC, Muraki-san. Hello, this is Muraki of SMBC. Thank you very much for taking my questions. I have two. B oth of my questions are regarding the outlook for Retail and Wholesale. In the last comment, you talked about the current situation of the Retail division. W hen we think about the future of what is going to happen, so far, your emphasis has been placed upon the foreign equities. When we think about the stocks, mainly the focus was on technology stocks, I think. Now, when it comes to the business of the foreign stocks, how is the current correction working and going to have an impact? Increasing of those foreign equities, as you also mentioned. When we imagine what is going to happen in the month of February and beyond, what kind of a downside and the upside do you think you'll be able to see? Also, the other part of my question is regarding the pandemic-related, especially in U.S. It seems that the financial reporting has had turmoil, but it seems that there will be a monetary tightening policy to come, and the market has been moving in the months of January. What kind of impact does it have on your FICC business? Those are my two questions. Thank you very much for your question, Muraki-san. First of all, for the retail business, regarding the sentiment in the retail business. The foreign equities was the main focus. However, the price has been down mainly. So far, there was a trend of the upside. It seems that there has been a lot that have been done so far, and the main has been somewhat unclear, they're not being good so much. For the gains that we've achieved, although what your point was that we have gained a lot from the foreign equities. Although there was a bit exposure to that, for now, when we talk about Japanese equities account for about 70%. Even though there was impact on the foreign equities because of the currency changes, that does not really have much impact on us because their representation is not that big now. Rather than that, there has been much more demand for buys are quite strong, and we see a great demand still continuing for the buys. In the stock market, of course, we will see some volatility, ups and downs that will be happening. Our estimate is that for the whole WM business, the market does not really have the marks that were beyond the expectation or below the expectation. As soon as we see a trajectory much more clearly and have much more visibility, then we think that there'll be a certain expansion of what we have had for the future, and that's what we are estimating to happen. Also in January, the capital inflow has increased. Even compared to the normal days, it is steadily increasing. I think that there is attention being paid to that business. Now, moving on to the Wholesale business. Because of the monetary policy change, what kind of impact it is going to have on our business? Now, the FICC has been quite smooth and quite steady, but there are some market factors and also the other. Of course, the market factor does exist, but for us, I think our competitiveness was quite resilient to those changes in the policy, and our trading capability is quite high. Of course, in the domestic market, but also for the U.S., the Treasury primary dealer is a position that we have enjoyed for a long time. With the expertise and the know-how that we have established, not only in the U.S. but also globally, I think, even in Japan, we were able to enjoy the situation from the institutional investors. Also with the rise of the volatility, the flow is also increasing. In the U.S., the Treasury-related flow of the customers is also on the rise. So far, like, last year, the big contributing factor was the MBS, mortgage-backed securities. T his has been stagnant because of the market condition. Going forward, as tapering forges ahead, the spread is going to probably become wider, so the secondary flow might be happening. MBS is something that we also need to pay attention to. Also the interest rate hike and the stock price down is going to invite the credit widening, the credit spread widening. That's where we need to monitor closely, continuously. Did I answer your question? Thank you very much. Regarding the point number one, in January, the capital inflow was quite steady and increased compared to the previous quarter. Now, the asset class that enjoyed those inflow, what kind of product is that from the retail investors? T hank you very much. First of all, there was a large size debt issuance. That attracted inflow. Also wrap is certainly increasing, and AUM is increasing. The same specific fund is also increasing, and the net inflow is also increasing. There are some movement that we see from the U.S. market, so that the U.S. equity or the related investment trust, we will need to see consciously. Okay, thank you very much. Thank you very much for answering. Thank you so much, Mr. Muraki. Next questions are from Mitsubishi UFJ Morgan Stanley Securities, Natsumi Tsujino. Hi, I have a similar question. First, in the Retail division, the asset-based fee plan in the third quarter increased from Q2 to Q3, and other areas declined. What's selling better? What's selling less? Asset-based fee plan? I don't know about this particular situation for the asset-based fee plan sales trend, so just please give me more color. What's selling well? What's not selling well? From the beginning of January, due to the high volatility of the markets, what changes have you seen in investors or retail investors' behavior? Would you please give me more color on those? Furthermore, the stock flow in the Retail division is somewhat slow, you said, but what about a transaction value of the foreign equities? This year, in Q2, Q3, the transaction value of foreign equities has been increasing, probably on the back of a rise of the market. In this high, large, downward trend of the stock market, I wonder what is happening to the transaction value of foreign equities. In January, you didn't see any impact at all from the transaction value of foreign equities, in January in particular? Like, fire selling, is that happening? Would you please give me more color on those? With regards to overseas. Looking at a P&L in a business unit, in FICC business unit, domestic represents more than 80%, and then equities, domestic represents, 85%. So FICC overseas is probably around JPY 3 billion or so per quarter. That's my impression, which was different totally in the last fiscal year. This level of around JPY 3 billion per quarter, is there any scenario where you expect this JPY 3 billion to go down furthermore? You talked about confusion of the credit market, but what's under what scenario do you think this JPY 3 billion will be much lower going forward? Thank you so much, Tsujino-san. What's selling well, what's not selling well? In principle, growth related equity investment trusts are slowing down due to this environment. On the other hand, value investment trusts are performing well, roughly speaking. For foreign equity, we see somewhat slowdown of the transactions. Asset-based fee plan is selling very well. That's because, relatively speaking, Nasdaq-linked products or growth U.S. equities are betting on U.S. growth. Those are driving the strong performance of asset-based fee plan. What's happening to the transaction value of the foreign equities? Due to the big stock market correction for foreign equities, I think we are off to a slow start to the year. For Japanese equities, I think the transaction value is increasing. Some products are selling better. There are products that are selling less, offsetting to each other. There are stronger investor behaviors of buying the dip, if you will. FICC [inaudible] Japanese portion is quite large for FICC business. For overseas scenario- [inaudible] In the future, the interest rates are expected to go up, but we have MBS, and we have other U.S. related products, and we have European products as well. In the global market, in FICC, what is the risk scenario? The market confusion, volatility. With this increasing volatility, there are actually profit-making opportunities. There are some losses expected by the investors as well. As I mentioned, risk scenario, for us is more stable compared to players who are making big transactions using the balance sheet. U.S. Treasuries and MBS, you said European credit? I couldn't hear what you said. Okay. Credit. Understood. European credit. Understood. Thank you very much. Thank you very much, Tsujino-san. Next question is from Mitsubishi UFJ Morgan Stanley Securities, Mia Nagasaka. T his is Nagasaka of Mitsubishi UFJ Morgan Stanley Securities. Thank you very much for your explanation. I have two questions. One is about Global Investment Banking outlook for the future. Now, there is a correction phase of the equity price. Especially equity in the M&A business seems to have had an impact from that correction. Opportunity and also pricing impact, I think, are going to be seen so that maybe there might be some influence, if you could explain. The second point is about the return to shareholders. Last April, you had announced the buyback of up to JPY 30 billion, and that was subject to the return for the year fiscal 2020. The current year, your performance has been quite strong. For the FY 2021, do you have any policy for the return to shareholders or any conditions or the trigger for us to make a decision for buyback? If you could give any comments on that. Thank you. Thank you very much. The first question about the outlook. C urrently there has been some correction of the equity price. In the longer term periods, the company's M&A, I think there has been quite a big demand. The thinking about the trend for the expansion of that business itself, I think, we could probably talk about that, but for the fourth quarter only, for the APM business, the impact coming from the equity price correction might have some hit. At this point of time, the impact has been quite limited, but it seems that the flow has been a little bit slow. As you mentioned, the growth stock has been mainly coming down in price. For the startup companies, it seems that the price has been valued or discounted. At the time, there might be some company which is going to have somewhat of a hard time going forward. However, the market has been seeing the current situation, which is quite good. There might be some bias on equity itself, but from the industrial side, under that situation, these IT business related cases are probably going to see some pickup faster than the other industry. Also for the DCM, the issuance is relatively staying at a high level. It seems that companies might come up with the issuance timing ahead of their original schedule if they face some financial constraints. For the M&A, when we look at the material, it seems that the pace is slowing down slightly. The market itself is slowing down. There has been a growing uncertainty and concerns about what is going to happen. Some deals or mandates might need to have some time until that is closed or make the decision. It does not necessarily mean that there are no pipelines or no deals or no mandates. A s I mentioned earlier, for domestic Japan, the pipeline has expanded by about 20%-30% and the level has been really hitting a record high level. The market, we will just see very closely on what is going to happen and then make sure to steadily pursue what will be available. For the shareholder return for the year 2020, we have the 45 million shares available. Just thinking about the timing that we have done that, we will look at the performance and the result of the fourth quarter of this year. We will think about the pipeline for the growth opportunity or the investment in the future growth in the business. We have to assure that our policy for the shareholder return does not change. Whenever there will be a surplus, we will think about the balance of how to share, how to return to shareholders, inclusive of the options of the buyback. Okay. Well understood. Thank you very much. Thank you so much. Next questions are from Bank of America, Kazuharu Sasaki. Hi. Sasaki from Bank of America speaking. I have two questions. Number one, on page 27 of the presentation, AUM, let me ask you about how I should interpret this. JPY 75.5 trillion and it declined in Q2 or versus Q2, and that decline is driven by equities. The broader stock index is up. According to explanation, the capital inflow is firm. You'd assume this should increase, but why equity balance is down at the end of the third quarter? My second question, again, page 30 of the presentation, asset-based revenue. Going forward, if the correction of the stock market continues, this asset-based revenue, which has been increasing, do you think it's going to be starting to decline? Or it's not as simple as that. How should I interpret this asset-based revenues as market corrections continue? Thank you so much. First, with regards to assets under custody, equity assets under custody is down. In the Retail division, it's up, it's positive. Capital inflow is positive. In the Wholesale division, partially there was some outflow. That's why assets under custody are down. Among equities under our custody, there are some names where the market value declined. That's why in total, the assets under custody were down for equities. Asset balance-based revenue, we've been outpacing against our target in the medium-term management plan. Fund wrap and then trust, investment trust, I would like to drive this asset-based revenues by selling more of those. This is linked to the balance. If there has a big correction of the stock market, inevitably asset-based revenues could go down. We'd like to keep increasing the balance on the net basis. To my first question, you mentioned that in the Wholesale there was capital outflow. Is that financial, commercial, corporate clients or retail? For the asset-based revenues in the third quarter, JPY 48.6 and then JPY 19.6. What is the breakdown within that? Like, 30% for wrap, and then, 60% for equities. Would you please give us more breakdown within 48.6 and at 19.6? Okay. To your first question, we do not disclose specific categories of customers, so we cannot really answer that question. Then asset-based revenue breakdown, again, we have to refrain from disclosing the breakdown. Okay. For example, page 30 in the footnote, clearly it says agency fee for investment trust, investment advisory and account management fees, clearly. I can just add up all the disclosed figures to arrive at 19.6? Would you please give me some comment, rough comment, as to what, which fee is more and which fee is less? Although I cannot give you the absolute amount for each type of fee, but the big ones are fund wrap fee, that's the largest component, and then our agency fee follows. Those are the two big components within JPY 19.6. The third largest one is the account management fee. Understood. Okay, I will think through later on. Okay. Thank you very much for questions. Now I repeat, if you have a question, press asterisk and the number one. We are taking questions now. Next question is from Wataru Otsuka of JPMorgan. This is Otsuka of JPMorgan. Thank you. Can I ask question one? I want to ask a question one by one. The first one is about retail. On page 15, so Sato you made a remark on this presentation for the fourth quarter since January. You said in the presentation that the... Just looking at this product, just a confirmation, but the equity investment trust is not decreasing that much, but equity distribution primary is included in the 15 on this page 15. S econdary means that the domestic side is increasing, but foreign side is decreasing. So when we compare to the previous month or the previous quarter, that's basically flattish. Is that correct? That's my question, my first question. R egarding the equity, the Japanese equity is increasing and the foreign equity is decreasing. So is it remaining flat? Slightly negative, I should say. For the equity investment trust, compared to the third quarter, the investment trust of the foreign equities is slow. But for wrap account, compared to the third quarter average, it is becoming stronger. Okay, that's the image. Thank you. Thank you very much. It's clear. My second question is about wholesale. On slide 16, if you could refer to that page to use the figures. For FICC, you see that the revenues are on the right. F or domestic and the foreign, can you break those figures into two? Because the US banks, their financial period for the second quarter, third quarter, they seem to have the FICC decline. That happened for a lot of US banks, I think. In this region, the FICC, I'm just wondering where you were able to seize and capture the opportunity for growth. FICC revenues. T his is comparison to the second quarter. JPY 13.3-JPY 15.1, there has an increase from the second quarter to the third quarter. I wanna see where it increased and how it is increased. Okay. This growth. B oth the foreign, the domestic and the foreign have increased, but I would say the magnitude is much bigger for the domestic. Roughly speaking, domestic is about 40%. So about 40% of the increase came from the domestic, and the 10% came from the overseas. So that's JGB and derivatives. Okay. Understood. Clear. And also JGB's point is quite different. We were able to capture the flow on JGB, which was a contributing factor. Okay. Thank you so much. Thank you so much. Next questions are from Koichi Niwa. Citigroup, Niwa speaking. I have two questions. First question is on the expenses overseas outlook of that, and domestic IPO market. With regards to the first question, there was big change in expenses relating to labor costs in the M&A business, as I understand. Mainly U.S. companies are seeing cost increases, cost inflation, and is it impacted on your business? Are you anticipating the cost inflation going forward? What is your view for the profitability of your overseas business? The second question, there has been so much discussion going on, but relating to how the valuation price is determined or calculated for IPO prices. Like, there are so many discussions about potentially shortening the period for the variation calculation. What is the anticipated impact? Is it a positive opportunity for you, or there has more negative pressure on your business? Thank you so much. With regards to M&A in the investment banking business, that's the hottest business area at the moment. As you know, major investment banks are struggling to retain strong talents. Therefore, there has cost inflation. The strong cost inflation trend. On the other hand, in the whole industry recently, there is this movement to increase the base salary rather than bonus. Considering that, there are some cost pressures, upward pressures. On the other hand, our target, which is a mid- cap market, compared to other players targeting at large cap, the level is lower. The outlook for the cost inflation is not that high in the middle cap. The people who are joining our company... Daiwa is well-known as a company who is strong in Asia. For example, Europe and the Americas, there are those companies who operate only in those markets, but there has perception that when they join Daiwa Group, then they can work globally, not only in Asia. We have 500 people excluding employees in Japan. I think we have the competitive advantage in terms of human resources. In the whole industry we see the cost inflation trend, but we think we can control the labor cost. For example, in the M&A business, M&A business is big in Europe, the Americas, followed by Asia. We are currently making upfront investment for the future industrial healthcare. Other areas, for example, where we'd like to strengthen our capabilities. Costs can only increase as our business performance increases. Our IPO pricing issue, according to our understanding, from September last year, in the IPO market, there has a task force group discussing variation methods of calculation of IPO price, including issuer side and academia. Professionals are involved in the discussion. The reason why IPO in Japan, our price is high, is specific to Japan. About the scheme to determine the IPO price, if there is any area from the issuer side that needs to be improved, then definitely we would like to cooperate. We understand that we are not operating this business in such a way that has a risk from that perspective. We'd like to do our best to cooperate to the appropriate pricing. Looking at the IPO market, IPO price in some deals is less or decline. We do value opinions from investors too. We'd like to continue to study. At this stage it's really difficult for us to measure the potential impact on our profitability. At this point, we don't think the impact is large. Understood. Thank you so much. Niwa, thank you very much for your questions.