Prepared remarks
Good day, everyone, and welcome to today's Nomura Holdings third quarter 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. During the presentation, all the telephone lines are placed for listen-only mode. The question-and-answer session will be held after the presentation. 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 result, performance or other expectations implied by those projections. Such factors include economic and market conditions, political events and 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.
Good evening. This is Takumi Kitamura, CFO. I will now explain our financial results for the third quarter of the fiscal year ending March 2025, referring to the document titled Consolidated Results of Operations. Please turn to Page 2. Group-wide net revenue increased 4% quarter-on-quarter to JPY502 billion. Income before income taxes grew 4% to JPY138.3 billion. Net income was JPY101.4 billion, reflecting a 3% increase from the last quarter. EPS was JPY33.08, and the annualized return on equity reached 11.8%. This marks the seventh consecutive quarter of profit growth, building on a strong previous quarter, driven by the success of strategic initiatives implemented thus far. Enhancing profitability in our international operations has been a management focus, where we have made consistent progress. In global markets, we diversified our portfolio, leading to revenue increases across various products in every region.
Contributions to profits from Laser Digital, Nomura's digital assets subsidiary, have begun, and income before income taxes in the three international regions amounted to JPY51.8 billion, a 30% increase over the previous quarter. The international business now accounts for nearly 40% of our group-wide income before income taxes, while our effective tax rate decreased to 25% due to the utilization of tax loss carryforwards by some international entities. Income before income taxes for the three segments showed a total of JPY127.5 billion, the highest level in 17.5 years since the quarter ending June 2007. In wholesale, substantial growth in income before income taxes was led by international operations, while wealth management and investment management experienced stable revenue increases, reaching record highs amid net inflows. Before diving into each business segment, let’s first review results for the first nine months of the fiscal year.
Please turn to Page 3. As shown at the bottom left, net revenue for the period was JPY1,439.8 billion, a 29% increase from the same period last year. Income before income taxes grew 106% to JPY374.2 billion, and net income surged 146% to JPY268.8 billion. EPS was JPY87.66, and ROE was 10.4%. A breakdown of income before income taxes shows strong gains across all divisions, with three segment income before income taxes totaling JPY336.5 billion. This means that nine months into the fiscal year, we have already surpassed our target of JPY288 billion that we set at our Investor Day in May 2023 by nearly JPY50 billion. Net revenue in wealth management rose 18% due to comprehensive asset management services. Net inflows and improved performance significantly lifted recurring revenue assets such as investment trusts and discretionary investments to a record high, resulting in a 30% increase in recurring revenue.
In investment management, the asset management business demonstrated robust performance with assets under management at a record high and business revenue at its peak since the division's inception. Both divisions continued to cultivate stable revenues, which are tied to client asset levels. In wholesale, all business lines—fixed income, equities, and investment banking—across all regions reported stronger revenues compared to the same period last year, highlighting advancements in revenue diversification. Notably, we achieved greater operational leverage across all divisions, with revenues rising 27% while costs increased only 12%, resulting in a 2.1 times increase in income before income taxes compared to the previous year. The income before income taxes margin improved from 16% to 26%. Now, let’s review the third-quarter performance by segment. Please turn to Page 6. Wealth management net revenue remained steady at JPY116.3 billion, with income before income taxes increasing 2% to JPY46.2 billion.
This represents the seventh consecutive quarter of growth in income before income taxes, reaching the highest level in the nine and a half years since the quarter ended June 2015. Flow revenue slightly decreased to JPY65.9 billion, with a minor decline in revenue from Japanese stocks and bonds, though we noted growth in investment trusts and foreign stocks. Recurring revenue reached a record high of JPY50.4 billion. This category includes investment advisory fees recognized every second and fourth quarter, which were not applicable this quarter. However, we managed to offset this impact through other recurring businesses, including investment trusts, insurance, and discretionary investments. Due to continuous cost reduction, the division’s net non-interest expenses remained around JPY70 billion, leading to a recurring revenue cost coverage ratio of 72%, up 2 percentage points from the previous quarter, enhancing earnings stability.
Please turn to Page 7 for total sales by product. Total sales decreased by 11% quarter-on-quarter to JPY5.2 trillion, with stock sales dropping 12%. Demand for Japanese stocks weakened as investors largely paused ahead of significant political events in the US and Japan, resulting in a range-bound market. Conversely, sales of Japanese government bonds to retail investors increased as rising yen interest rates made them more appealing. Sales of foreign bonds fell, partly due to the lack of major primary transactions and increased demand for other products, including foreign stocks and a newly launched publicly offered investment trust focused on private credit. Sales of investment trusts rose by 9%, driven by demand for US growth stock investment trusts and the aforementioned private credit trust. While sales of insurance products and discretionary investments declined quarter-on-quarter, they held up reasonably well overall.
Investment trusts, discretionary investments, and insurance products are all categories where clients are responsive to our sales team’s advice and continue to sell effectively. Page 8 shows that we are ahead of target in all KPIs for the fiscal year. The bar chart at the top left illustrates net inflows of recurring revenue assets totaling JPY282.2 billion. Net inflows of recurring revenue assets exceeded JPY1.1 trillion in the first three quarters of the fiscal year, already surpassing our full-year target of JPY800 billion. At the top right, you can see that recurring revenue assets at quarter-end totaled JPY24.9 trillion, exceeding our target of JPY22.3 trillion. The figure at the bottom left shows that the number of flow business clients reached 1.48 million, an increase of 230,000 from the previous quarter, surpassing our full-year target of 1.46 million. This success is attributed to effective strategies from our sales partners in client-facing channels, new client acquisitions linked to the Tokyo Metro IPO, and clients engaging in transactions through their NISA accounts.
Please turn to Page 9 for investment management. Net revenue declined 18% to JPY45.7 billion, while income before income taxes dropped 41% to JPY18.9 billion. A key factor was a decline in valuation gains at American Century Investments. At the lower left, business revenue reached JPY42 billion, marking the highest level since the division's inception. The asset management sector saw a significant quarter, achieving net inflows for the seventh consecutive quarter and pushing assets under management to a record high of JPY93.5 trillion. Revenue also improved quarter-on-quarter for Nomura Babcock & Brown's aircraft leasing business. For an update on the asset management business, a major source of business revenue for investment management, assets under management stood at JPY93.5 trillion at the end of December. The chart at the lower left shows net inflows of JPY260 billion, which may appear low compared to previous quarters, but the investment trust business alone saw inflows of JPY490 billion, with improvements in the product mix driven by increased interest in private assets, global equities, and privately placed investment trusts with higher management fees.
The lower right chart indicates that alternative assets under management surpassed JPY2.5 trillion, an increase of JPY400 billion over the three months since the end of September, with JPY180 billion of new inflows. Next, please turn to Page 11 for wholesale. Net revenue rose 10% to JPY290.5 billion. Global markets revenues increased for the seventh consecutive quarter, while investment banking revenues reached their highest at this period since the fiscal year ended March 2017, as shown on the bottom right. The three international regions—America, EMEA, and AEJ—performed well, with combined net revenue rising 23%. Segment revenue grew while expenses only increased 5%, resulting in an improved cost to income ratio of 79%. Income before income taxes of JPY62.4 billion is the highest in four years since the quarter ended December 2020. Please turn to Page 12 for individual business line updates.
Global markets net revenue increased 8% to JPY239 billion. Although the quarter began slowly in October due to major political events in Japan and the US, net revenue improved month-on-month. Fixed income net revenue rose 9% to JPY139.9 billion, with increased revenues from FX/EM in EMEA and AEJ for macro products. Record high revenues were achieved in securitized products in the Americas, with heightened visibility for US rate cuts driving demand across various sub-products, including in origination and financing. Credit revenues grew in EMEA and AEJ. Equities net revenue increased 6% to JPY99.1 billion, with particularly strong performance in the Americas and growth in AEJ as we expanded our franchise. Please turn to Page 13 for investment banking. Net revenue rose 22% to JPY51.5 billion, driven by various M&A and ECM deals across all regions. Advisory revenues sharply increased as we capitalized on transactions in Japan, EMEA, and the Americas, including several financial sponsor and cross-border deals.
Revenues in financing and solutions also saw an increase. ECM revenues reached impressive levels, particularly from deals related to unwinding cross-shareholdings and significant IPOs, such as those for Kansai Electric Power, Tokyo Metro, Rigaku Holdings, and Kioxia Holdings. These are highlighted on the right. ALF revenues increased due to contributions from several finance and acquisition finance deals. Please turn to Page 14 concerning non-interest expenses. Group-wide expenses rose 4% to JPY363.7 billion. Compensation and benefits increased 3% to JPY190.9 billion, primarily driven by higher stock-based compensation related to our rising share price. Other expenses totaled JPY50 billion, reflecting a rise of approximately JPY9 billion from the prior quarter, attributed to increased professional fees, transaction-related expenses, and costs associated with software disposal. Please turn to Page 15 for an overview of our financial position.
The bottom left table indicates Tier 1 capital at around JPY3.6 trillion, an increase of JPY0.2 trillion since the end of September. Risk-weighted assets also grew by JPY0.8 trillion to JPY19.9 trillion, yielding a Tier 1 capital ratio of 18.1% and a common liquidity Tier 1 ratio of 16.3% as of the end of December. This concludes our overview of third quarter results. To summarize, we achieved an annualized ROE of 11.8% this quarter, the highest since December 2020. Previously, wholesale comprised about 60% of total income before income taxes, with a profit structure heavily skewed towards rates products. However, our earnings are now well-balanced across all three divisions, a shift that has not occurred overnight. We believe our strategically guided path is yielding tangible results. Recurring revenue in wealth management and business revenue in investment management, both stable revenue sources, climbed to an annualized level of JPY370 billion, raising the baseline pre-tax ROE to around the mid-4% range.
Pre-tax ROE is approximately 6% when recurring business, including financing in wholesale, is factored in. We believe that further accumulation of stable and recurring profits will enhance earnings reliability and increase our intrinsic earnings capability. Our goal is to achieve a consistent ROE of 8% to 10% or more by 2030. This implies we aim for at least 8% during challenging market conditions and over 10% in favorable times. We are committed to establishing a franchise capable of aiming higher while reducing our cost of capital by consistently achieving our minimum ROE target of 8%, supported by stable recurring ROE. Wealth management and wholesale experienced a somewhat slow start in January compared to the third quarter, yet revenue levels remain satisfactory. We continue to target bottom-line growth while delivering operational leverage through cost control. As mentioned today, for effective management resource utilization, our subsidiary, Nomura Properties, has signed a sale agreement for its training center at Takanawa.
The sale is scheduled for execution between mid-March and mid-April this year, and we anticipate booking a pre-tax income of about JPY56 billion upon completing the asset transfer. In conclusion, Nomura will celebrate its 100th anniversary on December 25th, 2025. To show appreciation to our shareholders for their ongoing support, we will issue a commemorative dividend of JPY10 per share to shareholders on record as of March 31st, 2025. We intend to persist in our pursuit of our purpose, aspiring to create a better world by leveraging the power of financial markets.
Questions and answers
We have a question-and-answer session now. (Operator Instructions) The first question is from SMBC Nikko Securities, Mr. Muraki. Muraki san, Please go ahead.
Thank you. This is Muraki from SMBC Nikko. I have two questions. First, regarding the wholesale fixed income business. On Page 12, it shows that the US and Americas had strong securitization while Europe saw strength in rates and FX, and other US brokers have noted strong securitization as well. The environment appears favorable, but what are the reasons behind the strong revenue situation? Additionally, how do you assess the sustainability of this strong revenue environment? What are the potential risks and opportunities? Kitamura san, you have mentioned before the impact of liquidity regulations on the securitization business. Considering the profitability of the fixed income segment, are you satisfied with the current profitability given the regulations? My second question concerns the sale of real estate you've announced. Looking at asset efficiency, there’s the real estate as well as the shares of NRI that you have been selling gradually. Are there additional targets for improving asset efficiency? What’s the plan for the asset sales? Will you be selling everything at once, or will it be done in phases? Please provide any insights on this.
Thank you. This is Kitamura. Thank you, Muraki san. Regarding your first question about wholesale fixed income, as you mentioned, our securitization business in the U.S. has been very strong. The securitized products business includes loans, sales, and secondary trading, all intertwined. For the loan aspect, we find that funds can become stagnant. Therefore, we are working to enhance the turnover of these funds in our operations. Once we originate loans, we promptly sell those positions to maintain control over our balance sheet. We consistently encourage our business units to recycle resources. In terms of profitability, this can vary depending on how we calculate it, but we believe we have secured a sufficient return on equity. We are diversifying our portfolio within the securitization segment, which now includes not just mortgages but also CLOs and private credit, introducing various product lines.
While we are seeing an improvement in profitability from securitized products and foreign exchange rates this year, there is still potential for further growth in rates products. In the third quarter, we are observing recovery signs, and compared to two years ago, we are undoubtedly on a recovery path; however, we still see opportunities to generate more earnings in this area, as we are not fully utilizing our capabilities. Concerning your second question about the real estate we own and the sale of these properties, as you know, we have our 100th anniversary approaching on December 25, 2025, and our new headquarters will be completed in 2026 with training facilities included. We decided to sell the Takanawa property, taking into account the properties’ usage, the current state of the real estate market, and future usage, leading us to sign the sale and disposal contract at this time. As for NRI stocks and other shares and their disposal, we do not anticipate altering the ratio of our holdings at this moment. Thank you.
Thank you. This is Muraki again. On Page 22, you show the P&L by region. And the other day, in the US, wholesale was quite strong and Europe was a challenge according to the CFO, but this time, there's Laser Digital profit contribution, that's booked in Europe, I think. And for wholesale ROE, the target is 6% to 8% on a pre-tax level. And for Europe and the Americas, is it within that range that you are targeting?
Yeah. Thank you for the question. The disclosed numbers are categorized by legal entity. So it's a bit different from the business performance that we track. And as you point out, in Europe this quarter, JPY16.2 billion of pre-tax income, and yes, Laser, the contribution from Laser is in that and it makes up a certain portion. Meanwhile, the wholesale business, as I said earlier, is showing signs of recovery, especially for fixed income. We replaced positions last year and the trading environment has been improving. So our earnings capability is recovering significantly. I think there is still room for improvement, but we are seeing signs of improvement and that is encouraging. In the US, we do have strong earnings capability.
The next question comes from BofA Securities, Ms. Tsujino. Please go ahead.
Thank you. I'd like to ask about your thoughts on shareholder returns. This year, the full-year dividend has a payout ratio of 40%, with an additional JPY10 added. I understand that you maintain a policy of a total return ratio of 50% or more, excluding the commemorative dividend. Based on the information available, the 40% return ratio is the current number. So for the full year, what should I expect? Earlier, you mentioned gains from property sales, and some proceeds from that could go towards dividend payouts, though it's unclear if this will happen in the fourth quarter or the first quarter. Currently, you have only announced the commemorative dividend, but at the end of April, when you release the full-year results, could there be announcements regarding buybacks or other shareholder returns to achieve the 50% or more target? Can we anticipate such announcements? Also, if profits or proceeds are reported in April, in order to hit the 50% target, you'll need to account for the shares you’ve already bought back. The buyback amount may be smaller than in the past, so if you receive JPY56 billion in April, considering that scenario, will you develop a plan moving forward, Kitamura-san? Is that correct? This is my first question.
Thank you for your analysis, Ms. Tsujino. Regarding the JPY10 commemorative dividend per share, it is strictly for commemoration and does not affect the regular dividend payout. The policy of maintaining a return ratio of 50% or more based on profit remains unchanged. The timing for recognizing proceeds from the sale is still uncertain, but these proceeds will be allocated for shareholder return in the fourth quarter. We have two months left before the quarter ends, and we will assess the final figures to determine the best approach for shareholder return policies, which may include some share buybacks. While I can't provide a definitive answer at this moment, that's my current perspective.
Regarding my second question, Mr. Kitamura, regarding investment trust, in wealth management, investment trust sale in November grew greatly. Then in December, it settled down. So private credit fund was originated newly. And moving forward, as for private credit products, are you going to be conducting the marketing in a more stable manner? Then in that case, investment trust sales, that will involve different profile or products, so the sales might be put on a quite different trajectory from here or is it not going to be the case? Could you give me some sense?
Thank you, Ms. Tsujino. As you say, private products are what we are strengthening right now, and our clients are becoming increasingly familiar with private products, but just because products are private, we do not sell just about anything. That's not the ideal approach of sale. Since we deal with private products, product governance is essential from our viewpoint. We would like to apply the screening so that we can only deliver offer products that we are confident about. So the frequency of launch of such products, even if we want to offer such products, since we want to be careful in screening products, it may not be so frequent and we would like to refer to the risk appetite of clients. So that's how we are going to recommend or offer products to customers.
The next question is from Mr. Watanabe from Daiwa Securities. Watanabe san, please go ahead.
Thank you. This is Watanabe from Daiwa. I have two questions. First, regarding wealth management, has the tightening of rules for client visits affected your sales and prebuild activities? Although it seems there has been little impact on the flows, I would like your thoughts on this. My second question concerns expenses. While you have achieved revenue growth in wealth management, I noticed that overall costs have declined. Can you maintain the cost-to-income ratio going forward? Additionally, in wholesale, the cost-to-income ratio has recovered to 79% after achieving the target of 80%. Will you be increasing costs moving forward? I would appreciate your insights on the direction of your costs.
Thank you. This is Kitamura. First, regarding wealth management, I believe the impact on our business has been minimal. We have established a relationship of trust with our clients and maintain communication with them. While some customers have expressed strong criticism, many still choose to continue their business with us, which contributes to the positive results we are presenting today. However, the tightening of rules around client visits has slightly slowed our efforts to acquire new customers. We aim to ensure that our clients feel comfortable working with Nomura and will strive to regain their trust. Your second question pertains to costs. In wealth management, we have maintained stable cost control and initiated cost reductions early on, which are reflected in our current numbers. Looking ahead, there is potential for improvements in our IT architecture, which will require investment.
In the short term, this might lead to a slight increase in costs, but we expect to offset that rise with future cost reductions. We will do our best to control overall expenditures and invest with the goal of achieving long-term cost savings. In our wholesale sector, we have reached a cost-income ratio of 79%, which we consider a solid outcome, made possible by revenue growth and rigorous cost management. We will persist in our cost control efforts, emphasizing that this is not just a short-term strategy, and we want to assure our stakeholders of this commitment. Although we began our cost reduction initiatives in wholesale a bit later—about two quarters behind wealth management—we anticipate seeing positive impacts in our profit and loss statements as we move forward. Additionally, we are dealing with significant inflationary pressures outside Japan, even more so than domestically. Despite our ongoing cost control measures, inflation will somewhat complicate our efforts, but we will continue to focus on managing costs effectively. Thank you.
Thank you. This is Watanabe. About wealth management, the IT architecture investment that you mentioned, when will this take place, from when to when? And how much will be the size? If you have any ideas, please.
Yes, this is Kitamura. It's already started partly actually, and this year, we have not started a full-fledged investment, but next year, we will make some investments. And this is an investment, so it will not immediately show up in our P&L. There will be a time lag. And as for size, I don't think we disclose that, so apologies, we will refrain from commenting, but we will of course be mindful of the bottom line when making these investments.
Now we move to the next question.
The next question.
As we couldn't confirm your affiliation, please state your company name and your name after hearing unmuted announcement. Now unmuted.
I'm Aray from J.P. Morgan Securities. I have two questions. First question is about the US business revenue and profit. Looking at geographical profit or revenue of wholesale, US top line seems to be growing significantly. On the other hand, looking at profit on Page 22, the profit amount is coming down. So how should I interpret these numbers? My second question is regarding the investment banking pipeline accumulation, and given the situation in January, what is the revenue forecast for the fourth quarter and next fiscal year? So those are my two questions. Thank you.
Thank you for your questions. With respect to your first question regarding Page 22, the figures presented are based on legal entities and do not directly reflect wholesale numbers. The investment gain/loss figures related to American Century Investments are included here. As previously mentioned, while the investment management division has reported positive investment gains, these gains are lower compared to last year primarily due to losses associated with ACI. Excluding this factor, our pre-tax profit in the Americas has seen a significant increase. Concerning the investment banking pipeline, particularly in Japan, we are witnessing strong activity, especially in M&A and ECM transactions. The advisory business has recently experienced rising customer engagement amid changing market conditions, and our M&A pipeline remains robust. Internationally, we have a strong pipeline, and the deregulatory measures and tax reductions initiated during the Trump administration are expected to positively impact the M&A sector.
Nevertheless, our international investment banking operations do not cover the full spectrum, which means our performance may not align completely with industry trends, but we remain focused on building our pipeline. Regarding ECM, we continue to see solid performance in both public offerings and IPOs. Although market fluctuations have impacted our pipeline, it still remains strong under the current conditions. This fiscal year, we anticipate selling strategically held shares even as we recognize that we may reach a peak in the future, but the current trend is expected to persist for a while. Thank you. That's my response.
Thank you very much, Mr. Kitamura.
The next question is from SBI Securities, Mr. Oscar.
Hello, this is Oscar from SBI Securities. Hope you can hear me.
Yes, thank you.
Two questions. First is about Laser Digital that you mentioned. How much was the profit, please, if you could give me some color or hints? That's my first question.
Apologies, we cannot disclose the numbers, but Laser Digital started business in 2022. It's only been two years since then and it turned profitable. Going forward, there are positive signs, particularly with the Trump market acting as a tailwind. In the mid to long term, crypto assets are expected to become a more regular asset class, and that trend will continue. The environment is positive for Laser Digital. In the realm of crypto and digital assets, there is significant volatility. This quarter, we achieved strong results, but we anticipate volatility in the future, which is another reason we will refrain from disclosing the numbers.
On Page 22, Europe, there was a quarter-on-quarter improvement in profit, and I wonder if it is included here.
No, not all of it. No. Not all of this is Laser.
I see. So you have your core businesses and the market factors was a bigger factor, I believe.
There's Laser contribution, and there's also the wholesale business like rates et cetera. And we cannot give you the exact breakdown.
Okay. I understand. My second question is regarding the Hiroshima mandate on Page 26, which mentioned that the Hiroshima incident did not have a significant negative impact. But for net inflows of cash and securities, was there any impact from the Hiroshima incident? You have reported strong numbers, yet there was not much change in Q2 and Q3. Overall, the wealth management sector is negative, but are there any other factors besides the incident?
Yes, thank you. On Page 26, Oscar san, you mentioned the negative number or is wealth management negative overall. And this includes the actions by the corporate clients. So this is kind of an irregular number. I think you should focus more on the retail-only line. And since a few years ago, we have started adding this retail-only disclosure and that's the reason for that. And if you look at the retail-only line, you can see how it was positive in this quarter as well and we achieved inflows for nine consecutive quarters. So I don't see any major issues here. Thank you.
Yes. This JPY467 billion, JPY168 billion, if we look at the retail only, is there any reason for this?
Well, October was somewhat slow. There was the Prime Minister election in Japan and the US presidential elections in early November, and customers were waiting and seeing. Within the quarter, October was relatively slow.
The next question comes from Citigroup Securities, Mr. Niwa.
Thank you. I am Niwa from Citi. I have two questions. So I'm deviating from the earnings release, but regarding the policy holding and 2030 management ambition of yours and regarding the policy holding of shares, the policy holdings held by Nomura, what is your policy in the securities report? I do understand you have provided an explanation, but the environment is changing now. So could you comment on the policy which may not be necessarily needed? So what is your view and how should I think about your policy holdings? And regarding ROE target for 2030, for you to conduct upward revision, what criteria needs to be met? So the vision seems to be a word that's not appropriate because the target seems to be too low right now. Then why are you not raising the target, making upward revision? Could you comment on those? Thank you.
Thank you for the question, Mr. Niwa. Regarding your first question, I didn't understand the intention of your first question. So are you saying that we should increase the policy holding of shares? What was your intention, Mr. Niwa?
Niwa speaking. So my intention, my message was you could completely eliminate the policyholding of shares.
Kitamura speaking. So we have disclosed our position, but quite quickly, we are setting down our position, and the ratio against Tier 1 capital right now is 2.8% or only around 3%, and 3% is affected by the stock price increase. So we have been quite aggressive in selling down our position in policy holdings, and that's our stance and we have a target number of shares to hold and we are quite proactive in selling those positions, but in the sense of the number of names, when it comes to the sale of unlisted, non-listed stocks, it's difficult because we do not have the market. So we have been quite aggressive in selling the shares held. But even though we have made progress and we have no intention of slowing down our initiatives, but it will be quite a challenge for us to completely eliminate the holdings. However, in terms of direction, shares we do not have to hold, we do not intend to hold.
Regarding your second question, why we are not raising the target, well, our target was set May two years ago, ROE of 8% to 10% plus. So rather than focusing on that range from 8% to 10% plus, but what's more important is for us to achieve profit no matter what the market environment is. No matter how poor the market environment is, we would like to achieve at least 8% in ROE steadily. So that's the background of our target. So in the past, as we held the 8% to 10% target, many people told us, many people asked us how are we going to achieve that target. They didn't see the pathway towards achieving that target. We received such quite harsh comments. So we have made efforts to achieve our ambition. In the last two quarters, we could achieve a level above 11%. So when situations change, people's comments also change. That's how I felt. But baseline ROE and recurring business expansion are our focus so that we can increase our underlying ROE. That is our first step. And on top of that, if market environment is favorable, then 10% plus, just like 11% this time or we could aim even higher. That's our thinking. Did that answer your question?
The next question is from Bank of America Securities, Tsujino san.
Thank you. This is Tsujino again. Regarding Laser Digital profit, could you clarify where it is recorded in Europe and which specific accounting line item it falls under?
Yes. This is Kitamura. In terms of segment, it is in others of others. Sorry for the complication. And in terms of the accounting item, it is trading P&L. Does that answer your question? So it's basically trading in P&L.
It's time to finish, and we would like to conclude the 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.
This is Kitamura. Thank you, everyone. In the second and third quarters, we could achieve ROE exceeding 11%. And our medium to long term initiatives that we have worked on seem to be delivering results that give us confidence as management members, but we are not overly optimistic. We will stay focused on stabilizing the top line, and we will stay focused on diversifying revenue streams while controlling cost and managing risks. So we will stay attentive to all those things. JPY268.8 billion of net profit has been achieved recently, and the highest level, record high of net profit may be just around the corner, but by working on the themes that I have worked on, we would like to keep up our efforts so that we can deliver a good performance. Thank you very much for your continued support. Thank you.
Thank you for taking your time. And that concludes today's conference call. You may now disconnect your lines.