Thank you very much for waiting. Thank you for attending Daiwa Securities Group Investor Conference call for the fourth quarter of FY 2021 financial results. It is time. We would now like to begin the call. From Daiwa Securities Group, we have Eiji Sato, Executive Managing Director, CFO. My name is Mishiba, and I have been assigned as the Head of IR Office starting in April. From Sato, he will share with us the earnings results for Q4 for FY 2021, and then we will take questions after the explanation. Also, today's call will be streamed to the Retail investors through internet. We would now like to begin the explanation.
My name is Sato from Daiwa Securities Group. Thank you for taking time out of your busy schedule to attend our conference call today. I will now explain the financial results for the fourth quarter of fiscal year 2021, which we announced today in accordance with the financial results presentation material posted on our website. Now first, please turn to page four. First, I would like to provide a summary of the consolidated earnings results. Percentage figures of comparison with the third quarter of FY 2021. In Q4, net operating revenues and ordinary income declined due to adjustments in the stock markets. In the Retail division, sales of stock investment trusts and trading of foreign stocks declined. In the wholesale division, global markets posted higher FICC revenues, but lower income due to lower equity revenues. In global investment banking, equity and debt underwriting declined. Net income attributable to owners of the parent was JPY 17.9 billion, a decrease of 32.6%.
ROE was 5.3% on an annualized basis. BPS was 925.81 JPY, the highest ever. Year-end dividend is JPY 16 per share. Interim dividend was JPY 17. On a full year basis, the dividend will be JPY 33 per share. Dividend payout ratio is 52.2%. Also, as part of our capital policy, we have set up a share repurchase program of up to 33 million shares and a total amount of JPY 25 billion. Also, we have resolved for the cancellation of treasury shares up to 130 million shares. Please turn to page 10. The following is an explanation of the income statement. Commissions received totaled JPY 69.2 billion or -18%. The breakdown of commissions received is shown on page 23.
Brokers' commissions amounted to JPY 17.6 billion, down 12.1% due to a decrease in trading of both Japanese and foreign stocks. Underwriting and secondary offering commissions were JPY 5 billion or minus 63% due to a decrease in both equity and bond underwriting deals. Distribution commissions were JPY 3.4 billion, down 38.8% due to a decrease in sales of equity investment trust. M&A-related commissions were JPY 7.5 billion or - 4.7%. Please turn to page 11. We will now explain about the SG&A. SG&A was down by 2.6% to JPY 94.8 billion. Personnel expenses, including earnings-linked bonuses, decreased. Please turn to page 13. Next, I will explain the ordinary income in the overseas operations.
Ordinary income for the overseas operations totaled JPY 3.7 billion, up 34.7% from the previous quarter. In Europe, primary revenues, which were strong in the previous quarter, declined. In Asia and Oceania, primary earnings declined. Equity and earnings of Daiwa Securities contributed to the high level of income. In Americas, M&A revenues declined, while FICC revenues increased on the back of higher interest rate volatility, resulting in higher revenues and income. I will now explain our performance by segment. Please turn to page 14. First, let me explain the income and expenses of the Retail division. Net operating revenue was JPY 42 billion, down 15.5%, and ordinary income was JPY 6.7 billion, down 47.2%. Equity income decreased due to lower trading of both Japanese and foreign equities.
Distribution commission for investment trust increased due to a decline in sales of stock investment trust. Agency fees for investment trust decreased due to a decline in the balance of the investment trust sold. Asset-based revenues increased to JPY 18.9 billion. As a percentage of operating revenues in Retail division, it accounted for 46.1%. Please turn to page 15. Here is the status of product offerings and sales in Daiwa Securities Retail division and the topics for this quarter under review. In wrap account services, the balance of assets under contracts as of March 31st, 2021 was at JPY 2.9573 trillion, a record high.
In stock investment trust, sales of investment trust related to U.S. growth type stocks declined, although purchase of value type stock investment trust grew. In domestic bonds, sales volume increased due to SoftBank Group corporate bonds and JGBs for Retail investors. The lower left-hand side of the slide shows a graph of the amount and net increase in the amount of wrap and equity investment trusts offered and sold. The net increase rate was 14.5%. Please turn to page 16. I would like to explain about the wholesale division. Starting off with global market, net operating revenues were JPY 34.2 billion, down 4.7%. Ordinary income was JPY 10.3 billion, down 8.1%. Equity revenues declined. Foreign equities and derivatives revenues were down. FICC revenues increased.
In Japan, customer order flows for JGBs and derivatives increased, although revenues from the credit was stagnant. In the Americas, revenues improved for treasuries, MBS, and repo on the back of higher interest rates and higher volatility. Please turn to page 18. This page is on the global investment banking. Net operating revenues were JPY 10.7 billion, down 38.7%, and ordinary income was a loss of JPY 700 million. In the equity underwriting business, we accumulated a track record of mandates meeting various financing needs. In the debt underwriting business, we accumulated deals serving as a lead manager of 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 17.7 billion, down 2.7%, and ordinary income was JPY 11.2 billion, which was down 0.8%. Both the revenues and ordinary income were record highs on an annual basis. Daiwa Asset Management net revenues declined on the back of lower AUM due to the market value factor, even though capital inflows or publicly offered investment trust were net positive. With regards to the real estate Asset Management, increase in equity method investment gains from some of the Asset Management contributed to increase in profits. Please turn to page 21. Let me explain the results in the investment division. Net operating revenues were JPY 4.1 billion, up 30.2%, and ordinary income was JPY 4.1 billion, up 137.4%.
Both net operating revenues and ordinary income of Daiwa Energy & Infrastructure increased on the back of income and capital gains. Daiwa PI Partners secured a high level of monetary claims investment income. This completes my explanation of the results in Q4 FY2021. Stock market in 2021 was a wild ride after recording the highest level in 31 years at Nikkei Average of 30,670 yen on the back of expectations towards global economy normalization and the new government, and then going into a big correction upon repeated bad news one after another, such as resurgence of COVID cases, global rate hikes, deterioration of Russia-Ukraine circumstance, and so forth. In this environment, we secured JPY 135.8 billion, the high level for the first time after four years, making a good start as the first year of the medium-term management plan.
Retail, Asset Management, and Investment divisions grew their performance, offsetting a slowdown of the wholesale division, which demonstrated our comprehensive capabilities as a group. In particular, the performance of the Retail division showed a remarkable recovery, which is a steady result of the transition to wealth management business model and cost structure reform, which we have taken time to address carefully. With regard to right now in April, the market continues to be unstable. However, the customer activities are recovering after hitting the bottom in February. When I look at product sales, I see somewhat slower start with regard to Japanese equities, yet sales of foreign equities and equity investment trusts are improving. Furthermore, I see continuously robust needs towards medium to long-term asset formation needs, therefore, fund wrap sales are maintained at the high level.
We are committed to work continuously to establish wealth management business model and a hybrid business model towards building stronger income model, which is not susceptible to market changes. I appreciate your continued support and cooperation to us. Thank you very much.
We would now like to open the floor for questions. We have simultaneous interpretation, so you can pose your questions in English as well. Those of you with questions, either in Japanese or English, please press one after the star key. If you'd like to withdraw your question, press two after the star key. Also, for the Q&A, we would like to first answer to Japanese questions, after which we would also open the floor for English questions. When your name is called, please start your question. We would like to introduce the first question from SMBC Nikko, Muraki-san, please.
This is Muraki. I have two questions. In the last point you have mentioned, the current situation in April. In comparison to the average for the other January-March quarter, Retail markets and also from investment banking. What is the current situation for the customer's activities and also the revenue situation? If you can give us more color for the month of April, that will be helpful. That's the first question. The second question relates to the Retail investors, the funds flow. For page 15 on the left-hand side, if you look at this chart, given this current market situation, so net increase in funds, perhaps it's slowing down in terms of the net inflows or net increase. If you go to page 33 for the Daiwa Next Bank, the yen-denominated deposit has been on the decline for this quarter. Where exactly are the Retail funds going?
What is your analysis? If you can share those with us, again, that would be highly appreciated. Is it going to the individual equities or is it had actually been remitted to other banks? What is the current flow that you are seeing resulting in the situation? Those are the two questions.
Thank you very much. Related to the first part of your question. Let's talk about Retail division, the current situation in Retail division. Of course, the month of April is not fully over, but what we are forecasting right now. In comparison to the March quarter, it is stronger in the foreign equity and in also the equity investment trust. In the wrap business, the wrap service actually was strong for March, but it is even stronger in April.
About 20%-30% better in comparison to the average of the previous quarter. Now, for the domestic equity, it is somewhat slowing down in comparison to the March quarter. Bonds, again, it's slowing down somewhat. That is our current observation for the month of April. In terms of the global market, we have equity and FICC. If you would look at those. Equity, the market continues to be unstable. We are impacted by that trend. But on the other hand, in the Retail division, we are seeing more of the aggressive buying for the foreign equity. That is positive. Really, we are watching the trend in April as we see the fiscal year. In terms of FICC, it is seeing.
For the derivatives, it's been quite positive. Now, in terms of the domestic front, we are seeing increase in the interest rate volatility. We are seeing flow for FX. Also credit, we are seeing improvement from Q4. Also, in terms of the Americas, with the increase in the volatility for the interest rates, the customer flows have been on the increase and bid-offer spread is also improving. Through treasury, we are seeing some active activities going on. Now the Americas, for January, February, March, we are seeing some improvement as we progress. We continue to see this positive trend continuing into the month of April.
In terms of Europe, the credit has been sluggish, but in comparison to Q4, we are seeing some improvement in the month of April. Related to the second part of your question about Next Bank, the decline in the deposit. As far as I was concerned, we're not necessarily seeing this as a negative trend. In fact, it is really about the aggressive buying within the market. It is actually buying those products. That's where the funds are being used. We haven't fully captured how much they have turned to other banks. We do believe basically it is used for buying, further aggressive buying the products. Next Bank, actually, the deposit is not just from the retail investors only. All in all, we do not perceive the deposit amount to be significantly declined. We do not believe that these account holders are churning.
Thank you very much. Fully understood.
Mr. Muraki, thank you so much for your questions. Next questions are from Mitsubishi UFJ Morgan Stanley. Ms. Tsujino. Ms. Tsujino, please go ahead with your questions.
Hi. Thank you so much for taking my questions. I have three detailed questions. First, the accounting trading PL and financial PL, if you add them together, then you get trading income. Under the managerial accounting, the FX and bond trading income is also reported under the managerial accounting, which is the sum of trading income and financial income. There are other items included. There is sometimes a difference. This time JPY 32 billion for three quarters, for fourth quarter. Under the managerial accounting, it's raised by JPY 4 billion. What's included in each? In the past, there was some special item included. Would you please explain what's included? Second question is related to extraordinary loss.
Again, there are various items included, like a market-related expense, fixed assets, disposal loss. What are they included in the extraordinary loss? That's my second question. My third question, investment division, Daiwa Energy & Infrastructure, income gain was posted, and you received a capital gain as well. In the investment division, the performance in the fourth quarter was very strong. Under the accounting reporting, if I look at PL, where is that strong performance included? Marketable securities related PL was slightly good in the fourth quarter. Would you please give me more breakdown?
Thank you so much. You have given me very difficult questions, so I don't know if I can answer all of your questions specifically, but let me try. First, financial accounting reported financial income. Income is not only for Daiwa Securities, but also, the income is also from the Investment division. For example, Daiwa Next Bank, fund-related financial income and other operating profit, it's accounted for in various lines. Therefore, there are variances in each quarter, so it's really difficult to identify the specific factors for the fourth quarter only. There are various items. Second question related to the extraordinary loss relating to the market-related loss. We have losses coming from Japan and overseas arising from a multiple number of businesses scaling down or withdrawal.
As a result, we have accounted for the extraordinary loss. For the specific items, we have just made a decision on the policy and execution of the disposal or scaling down or a withdrawal is going to be happening from now on.
We'd like to decline from giving you more details on that. Related to Daiwa Energy income gain, capital gain, which are the lines in the PL capturing those. Operating expense, and also it's also accounted for as the decline in revenue, not only expense, but decline in revenue too.
Understood. For my first question and second question, I'm sorry. I have a follow-up question to my first question. You said it was difficult for you to answer, but it's -JPY 4 billion for the fourth quarter, which is relatively large on the consolidated basis, trading and financial income, the financial reported number and the managerial reported number. Daiwa Next Bank, if there is a negative number for that bank, is this substantial economic significance, or can I just ignore this variance? About the extraordinary loss, understood, but in the future, is there any possibility that you are going to report the similar nature of the extraordinary loss in the future?
To your first question, follow-up question. Daiwa Next Bank, this is related to the hedge position changes. Again, I'm very sorry, but if you look at this number on a quarterly basis, numbers naturally move, so it's really difficult to give you the technical answer. To your second follow-up question, extraordinary loss, is there any possibility that we are going to see this again? For unprofitable businesses, from the perspective of improving ROE, we'd like to scale down or withdraw from unprofitable businesses. That's something that we need to do in the future. We have to continuously do the selection and focus. There may be some extraordinary loss, but if any, the scale of that extraordinary loss in the future is not going to be large.
Thank you so much.
Thank you very much, Tsujino-san. We would now like to move on to the next question. From Nomura Securities, Sakamaki-san, please. Sakamaki-san, please.
Thank you. This is Naruhiko Sakamaki from Nomura. I have two questions. First question relates to the share repurchases, the background to which deciding on the amount. What were some of the elements you have considered? That is the first question. Second question relates to Retail division. This is page 14. In terms of the asset-based revenue, Q2 and Q3, if you look at the past quarter, it's about JPY 19 billion or so. For the past nine months or so, it has been flat. Of course, we do understand the market situation that impacted for the March quarter. In terms of the asset-based revenue, if you can actually summarize on the performance for the past 12 months, that would be helpful.
Thank you very much for that question. First of all, in terms of the share repurchases, how we set about deciding on the amount. This is just repeating of what we have shared with you in the past. Our shareholders return, we have 50% or higher in terms of the dividend payout ratio. That is what we're committed to. On top of that, we will consider share repurchases depending on the financial soundness and also the pipeline for the growth investment and also the management situation, regulations, also share price. We would actually take all these into consideration and conduct these on a flexible manner. We have conducted on a fairly integrated, comprehensive consideration, and that is why we have decided on this amount.
As for this fiscal year, if you were to look back, it has been fairly challenging in terms of the operating environment, but we have been able to cope with such tough environment. Following our past policy, we looked at the investment pipeline and as well as the financial soundness and the share price have been taken into consideration to decide on the current amount. Now in terms of share buybacks, it's for 2021, the additional shareholders' return. We would continue to also explore shareholders' return for FY 2022 as well. Also relating to the second part of your question. Flat.
Perhaps it is flat, as you mentioned, but there has been a drop in the share price, which has posed a large impact because the asset base, the revenue, it is really based on the market price. We are seeing some inflows, stronger inflows. Because of the drop in the market price, the actual amount balance has stayed flat. As I have mentioned previously, on a global basis, the stock market has been going through a major correction. The investment trust sales have significantly declined. However, on the other end, we have the international diversified investment and also fund wrap that has had relatively positive performance. In terms of the contract AUMs and so forth, actually has been trending stronger than what we have forecasted in the midterm plan.
In terms of fund wrap, as of March end, about 97% or higher are the customers, okay? In terms, more than JPY 400 billion is the total under unrealized gains. There is certain level of resilience vis-a-vis the share price drop in the market. We do perceive that we have had a fairly good performance. Fund wrap, the customer satisfaction continues to be high. The average duration of holding is longer than eight years. Also, in terms of the contract, it is getting larger in terms of the size. Also we have 40% in terms of the...
Anyways, we would believe the fund wrap would actually core fund would be established as the core product for enhancing the asset base revenue. We might have shared this with you, but we have JPY 900 billion, which is 7.2% within the individual account. This is for the U.S. fund wrap. It's sevenfold or even higher in the U.S. in terms of the fund wrap. We do believe there's much room to further improve this in Japan. We are seeing the prolonging of the Russian invasion into Ukraine and there are some negative elements. However, the market have already factored these into consideration, so we do not expect to see similar disruption as we have seen in Q4.
Even if the current unstable market continues, we can leverage on our strengths, which is our wealth management planning tool. We would like to leverage on this, we can actually make proposal to the customers. The stock related products, we would also aim to increase the revenue for these. Also, when the market subsides, now we would have more, the profit coming in from the higher balance of the asset-based revenue. We could have maybe JPY 10 billion or so on a quarterly basis. That could be the potential. That is how we intend to execute our sales strategy.
Thank you very much for the detailed explanation. Very useful. Thank you very much.
Mr. Sakamaki, thank you so much. Next questions are from Bank of America. Sasaki-san, please go ahead with the question.
Hi, my name is Sasaki from Bank of America. I have two questions. First, I would like to know more color on the results for the fourth quarter. When I look at performance by segment, other adjustments, which is at the bottom of the page in the fourth quarter, -9,078. Since 2010, since you started disclosing this format, it's the largest amount. What is included in -JPY 9 billion? And then, effective tax was lower up to 20% in the fourth quarter. What was the reason for the lower tax?
First, other adjustments. It's really technical. Everything related to the performance of group companies, consolidation adjustments and the profit and losses which do not belong to the segmentation and financial accounting, financial managerial accounting related items. Everything else is all included in there. It's -JPY 9 billion. That's not due to any special extraordinary factors, it's just the accumulation of many different things. As an example, funds that we own and the securities income from that has decreased and our business deteriorated in some group companies and comments or fintech which are affiliated companies. Deterioration of the performance. Throughout the whole year, -JPY 9.3 billion, and last year it was -JPY 13.5 billion, which is lower compared to the last fiscal year.
There are so many items included, so it's a little difficult to forecast for the future. We are trying to focus on the hybrid business model, which should expand in the future. As it expands, I think it should be positive on this other category. To your second question, lower tax. Among consolidated subsidiaries, there are minority shareholders in some of our subsidiaries. And as before tax, we can account for 100%, but because of the profit of those affiliate companies and also equity method companies, our profit increased. So on the after-tax basis, then, we can account for the improved profit from equity method applied companies. And that's also the reason. Understood. If that's the case, to my first question, there was nothing extraordinary.
If it's just permanent or chronic, then - 9 multiplied by four, is that a rough amount as an imagine for the annual number? No, that's not what I mean. There is a seasonality, so throughout the whole year, the amount is not going to be so large. If you look at it on the quarterly basis, then sometimes in some quarters this number can be large at times. This amount is not going to continue in the future. Understood. In your medium-term management plan, do you need to review or revise your midterm plan? What is your stance on the needs of division? This year average is assumed to be JPY 35,000 or so as an assumption for the business environment, but right now it's JPY 26,000 or so.
Business environment surrounding your business has changed. At this point, do you think you need to revise your current midterm plan? What is your stance there? Well, as you mentioned, market assumption. As I explained in the management strategy meeting, looking at stock market and other market conditions, currently they are lower compared to the time when we announced a midterm plan. But our business portfolio is well diversified. Equity business is not the only business. We have a primary and a secondary equity market impacting our business of course, but we have other businesses that are growing too. Right now, do we need to revise or review our midterm plan? No, we have just finished the first year. In the future, we are going to keep our eyes on the market environment.
JPY 50 billion ordinary profit is a target for hybrid business. We are going to see how we progress and then make adjustment if we need to revise or not.
Understood. Thank you so much.
Thank you very much, Sasaki. Next question from Mitsubishi UFJ Morgan Stanley. Tsujino-san, please start your question.
About the dividend payout ratio. You've mentioned 50% is the target you have. Recently, you have been trending higher than that 50%. Is there a certain reason why you have set up 50%? Perhaps the dividend payout ratio, do you intend to enhance it? Is that why you're trending around 52%-53% in the recent quarter? You still intend to actually keep it higher than 50%. Is there a certain intent behind this? You do have the baseline of 50%, but do you also intend to gradually raise that line or not?
That is the first question. Also, the second point, this is just confirmation. The 20 billion, the buyback of JPY 25 billion. You've mentioned this is the add-on for the shareholder return for FY 2021. For 2022, you will consider the shareholder return. Why are you doing this by the end of March? I just want to clarify about the intent of the share repurchases. First of all, in terms of the dividend, every six months, we aim to go higher than 50% for the dividend payout ratio. The EPS would also be higher than 50%, so we actually go by yen. I said that will make a difference by JPY 1.5 billion.
This is indeed a technical issue. 49.9% will not suffice. We need to have 50%. We need to be higher than 50%. Also, the second part of your question, perhaps, I was misleading in my statement. For FY 2021, this is the additional shareholder return on top of the dividend. But the end of March is the time we have set. In the past years, when we set up the share repurchases, if you were to check the timeline, it's always been end of March. This is all about setting up the share repurchases plan. We have actually set up, on purpose, a long duration. But of course, if we complete the share repurchases before that, then we will do so. This is just a program that we have set up.
Understood then. JPY 25 billion is additional shareholders return for FY2021 then?
Yes. That is right.
Thank you very much for that. Thank you so much. Let us repeat. If you have questions, please press asterisk one on your keypad. We are receiving questions from the audience. Next questions are from Citigroup Securities. Miwa-san. Miwa-san, please go ahead.
Hi. I have two questions. First, about the buyback, and the second, comparison versus your peer in the Retail division. My first question is on the buyback. You have canceled some, but do you think you are going to keep 5% without cancellation? What is the criteria of deciding how much you keep and how much you cancel? Second question is on the stock business, wealth management business in comparison to your peer. Looking at the past 12 months, your peer is trying to chase you, catching up with you. Your peer is trying to address this business, trying to catch up with you. In the actual sales field, do you feel a threat from the competitor, or do you think you have been maintaining competitive edge against your competitor in the wealth management business? Would you please give us your feel on the competitive advantage? Thank you so much.
About the cancellation of treasury stock. Well, there's no intention on our side to keep more than we need. We have stock option or limited, restricted treasury stocks. There are some treasury stocks that we have to keep to some extent. On top of that, there is a possibility to use treasury shares for the future M&A. Considering all of that, we decided the amount of cancellation of treasury shares. Again, it's a little difficult to precisely answer. I would like to keep the amount of shares that we need, we think we need, and then, everything else is to be canceled.
To your second question, competitive advantage against our competitor. It's really difficult for me to give you a quantifiable answer, but we've been doing this business since five years ago. We have taken a long time addressing this business, trying to change the corporate culture, changing HR system, investing in IT systems, in people. We have been training sales people too, which is not easy. We have been carefully addressing this business by taking time, especially wealth management planning, we have a tool to analyze customers' assets. I think amount of assets of our customers having account with other competitors is more than JPY 8 trillion.
We analyze not only the assets that they entrust with us, but we analyze assets of our customers in our competitors or other companies' accounts too. I think this is very advanced way of analyzing customers' assets. That is leading to the inflow of customers' assets from our competitor. Our biggest strength is fund wrap. We have very good services in customer care for our fund wrap service. Performance of our fund wrap is also good. It's really difficult to compare our performance versus the performance of other companies. In the fourth quarter, in the stage where the market was stagnant, our performance of fund wrap service was very good. Customers really do evaluate on our fund wrap service highly, comprehensively looking at all of those factors.
The competitors is focusing on this business. There's no end to the goal. We keep brushing up our capabilities, and our wealth management business model is the business that we have to provide solutions to fit customers' needs. Sorry for this lengthy answer, but I hope I answered your question.
Thank you so much. Understood. Thank you.