Nomura Holdings' Management Discusses F4Q 2014 Results - Earnings Call Transcript

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 |  About: Nomura Holdings, Inc. (NMR)
by: SA Transcripts

Operator

Good day everyone and welcome to today's Nomura Holdings Fourth Quarter and Full Year Operating Results for Fiscal Year ended March 2014 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 involves known and unknown risks, delays, uncertainties, and other factors not under the Company's control, which may cause actual results, performance or achievements of the Company to be materially different from the results, performance or other expectations implied by these projections.

Such factors include economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions.

With that, we'd like to begin the conference. Mr. Shigesuke Kashiwagi, please go ahead.

Shigesuke Kashiwagi

This is Shigesuke Kashiwagi, CFO of Nomura Holdings. I will now give you an overview of our financial results for the full year and fourth quarter ended March 2014, using the document titled consolidated results of operations.

Please turn to page 2; first, the full year results. As shown on the right, all business segments reported significantly higher pre-tax income, driven by the stock market rally in Japan, and successful initiatives to improve profitability. As a result, Group earnings were at their highest level since the year ended March 2006.

Net revenue for the full year was JPY1,557.1 billion, representing a decline of 14% compared to last year, due to the deconsolidation of Nomura Real Estate Holdings. Excluding this, revenues increased year-on-year.

Pre-tax income grew by 52% from the prior year, to JPY361.6 billion yen, and net income roughly doubled, increasing by 99% to JPY213.6 billion. ROE for the full year was 8.9% and earnings per share was JPY55.81.

We have announced a year-end dividend of JPY9 per share for shareholders of record as of March 31, 2014. That takes our annual dividends to JPY17 per share, giving a dividend payout ratio of 29.5%.

In addition, our Board of Directors today approved a resolution to set up a share buyback program in order to raise capital efficiency and ensure a flexible capital policy. The total number of shares to be repurchased is 100 million, which equates to 2.6% of outstanding shares, and the maximum value is JPY70 billion. Of these 100 million shares, 44 million will be used for stock options exercised in the future. The remaining 56 million will be used flexibly for various purposes related to our capital management policy.

Please turn to page 3 for an overview of our fourth quarter results; at the Group level, robust performance in our international operations and the realized gain on the sale of an equity stake, more than offset a slowdown in Japan related businesses, resulting in stronger revenues and pre-tax income compared to last quarter. International pre-tax income was JPY15.9 billion, a marked improvement from the pre-tax loss last quarter. Group net revenue was JPY389.9 billion; pre-tax income was JPY88.6 billion, net income was JPY61.3 billion, and annualized ROE for the quarter was 9.8%.

Pre-tax income from the three business segments totaled JPY62.1 billion, down 26% from the previous quarter. Retail reported a slowdown from the third quarter, as market conditions deteriorated and demand declined, following the end of tax rates. Wholesale reported stronger pre-tax income, driven by solid revenues in the Americas and EMEA. I will discuss each business in more detail in a moment.

Pre-tax income in the other segment was JPY34.2 billion. This includes a JPY17.9 billion gain from the sale of our stake in Fortress; a gain of JPY2.7 billion from changes to our own and counterparty spreads is also included here.

To-date, we announced impairment charges in Nomura Holdings' unconsolidated financial statements related to investments in subsidiaries. You will see in footnote 1, that the majority of the charges have been included as the financial results of these subsidiaries in our consolidated financial results through to the third quarter.

Please turn to page 6 for an overview of Retail; full year net revenue in Retail was JPY511.9 billion, an increase of 29% year-on-year. Pre-tax income jumped 91% to JPY192 billion, which is close to record level since the year ended March 2002. Fourth quarter net revenue was JPY97.9 billion and pre-tax income was JPY23.3 billion. Market uncertainty and a drop-off in demand following the end of tax breaks, led to lower revenues and pre-tax income quarter-on-quarter.

Please turn to page 7; looking at each product, sales of stocks and investment trusts slowed with total sales declining 23% from the previous quarter. As shown on the bottom left, recurring revenue showed steady growth at JPY54.5 billion on an annualized basis.

Although client assets in investment trusts declined due to market factors, as shown on the bottom right, net inflows into investment trusts and discretionary accounts, both of which are sources of recurring revenue, totaled JPY189.2 billion.

As shown on the bottom left, Retail client assets reported net outflows of JPY503.3 billion, due mainly to an outflow of corporate funds related to the end of the fiscal year. The majority of these outflows have returned as inflows in April. We will continue to work towards ensuring a sustainable revenue structure by focusing more on providing consulting based services, that [indiscernible] long term investment.

Unidentified Company Speaker

Please turn to Page 8 for Asset Management. Full year net revenue increased 17% to JPY80.5 billion. Pre-tax income increased at 28% year-on-year to JPY27.1 billion, the best year since the year ended March 2008.

Fourth quarter net revenue was JPY20.5 billion, down 4% compared to the previous quarter which included dividend income. Revenues remain strong supported by an increase in performance fee.

Pre-tax income declined 40% sequentially to JPY5.3 billion due to a one-off charge related to an asset revaluation.

Please turn to Page 9; the graph on the bottom left shows investment trust net inflows excluding ETFs, up JPY873 billion in the third quarter and JPY820 billion of net outflows in the fourth quarter. This is due to fluctuation in MRF. Last quarter, client's parked [ph]funds gained from selling out of positions before the end of tax breaks into MRF. During the fourth quarter, these funds have flowed back into investment trusts, stocks including ETFs, JGBs for individuals, foreign bonds and other products.

ETFs reported net inflows of JPY501 billion boosting assets under management in ETFs to JPY4 trillion. The acquisition of ING Group's Taiwanese subsidiary that I mentioned last quarter, has been approved by local regulators, and the company became a consolidated subsidiary of Nomura Holdings in April.

Please turn to Page 10 for an update of Wholesale; full year net revenue in Wholesale was JPY765.1 billion, with all regions and business lines reporting stronger revenues year-on-year. Successful strategic refinement and cost reduction initiatives contributed to the strongest pre-tax income since the year ended March 2010 at JPY111.8 billion.

Fourth quarter net revenue increased % quarter-on-quarter to JPY198.5 billion. Pre-tax income grew 20% to JPY33.5 billion, as solid performance in Americas and EMEA more than offset a slowdown in Japan and AEJ.

Please turn to Page 11 for an overview of fourth quarter results for each business line. First, Global Markets; fixed income net revenue increased 9% to JPY107.7 billion, the heat map on the top right shows a solid quarter in rates and securitized products in the Americas and resilient performance in raising credit in EMEA.

Japan reported higher revenues compared to the prior quarter, which was impacted by a change to our definitive valuation method in AEJ. The Fortress [ph] business had a challenging quarter, particularly in emerging market currencies, equities net revenue was JPY59 billion, roughly in line with a prior quarter, as stronger revenues from cash equities and derivatives in the Americas and EMEA offset a slowdown in Japan and AEJ.

Please turn to Page 12 for Investment Banking; net revenue of JPY31.7 billion was 3% higher than the strong third quarter, which included private equity unrealized gains, reflecting a solid quarter in Japan and significant growth across all international regions. Investment Banking gross revenue shown at the top of the graph on the top left was JPY55.4 billion, the best quarter since December 2010, when there was a rush of equity financing among Japanese corporates.

In Japan, revenues were driven by high profile ECM deals, while revenues from new products and solutions business continue to grow. Internationally, net revenue roughly doubled both quarter-on-quarter and year-on-year. We executed a number of cross-border multi-product M&A deals and solutions businesses.

Please turn to Page 13 for an overview of expenses; full year Group-wide expenses totaled JPY1195.5 billion, representing a 24% decline compared to last year, due to the deconsolidation of Nomura Real Estate Holdings. Excluding Nomura Real Estate Holdings, expenses increased by 12% on the back of improved performance and yen depreciation.

Fourth quarter expenses etched up a 3% quarter-on-quarter to JPY301.4 billion. Other expenses increased 24% due to the one-off charge related to the revaluation of assets held by asset management. The decommissioning of the IT systems related to global markets, and higher consultant fees related to international transactions.

Page 14 shows our balance sheet; total assets were JPY43.5 trillion; gross leverage was 17.3 times and net leverage was 10.4 times. Our Basel III tier 1 and tier 1 common ratios were both 13.3%, which is an improvement from under 12% at the end of December. This is mostly due to a decline in exposure to lower rated counterparty, which reduced our risk weighted asset. Applying the fully loaded Basel III 2019 standards to our balance sheet at the end of March, gives a tier 1 ratio of 12.2%.

At the start of the presentation, I mentioned that we are setting up a share buyback program. We will continue to keep a close watch on the regulatory environment, and [indiscernible] earnings required for growth, while taking a flexible approach to using surplus capital, including to enhance shareholder returns, such as dividends and share buybacks.

That concludes the presentation on our full year results and fourth quarter results.

Question-and-Answer Session

Operator

We will have the question-and-answer session now. (Operator Instructions) The first question is from Deutsche Securities, Mr. Muraki. Mr. Muraki, please proceed.

Masao Muraki - Deutsche Securities

Yes, thank you. My first question is on Page 7, for the Retail division. The investment trust and the discretionary increases, or net increases are shown here from this quarter. What is the target for the next, or for this current fiscal year, for the investment trust and discretionary account sales? And in Q4, it was about JPY190 billion and the total net increase is about JPY1.9 trillion, so your share -- the market share is about 10%. What are your plans for the current fiscal year, in terms of the sale? And also, you have changed your sales method and there has been some big change -- movement in your personnel, but when do you think the impact from these changes will settle down, if you have an outlook on that, please share that with us, that's the first question related to the Retail business.

Shigesuke Kashiwagi

This is Kashiwagi. As for your first point about the target, sales target, there are no figures which we can disclose. We do have targets for the total recurring revenue, the JPY69.6 billion per year, and we want to build up the figure by March 2016, that remains unchanged. And part of that will be, the sales of the investment trust and also the discretionary accounts. That will be the main component of the JPY69.6 billion.

The second point about the Retail division and the big change in our personnel structure, when the impact of that will terminate. Basically, as we answered questions in the press release, I think there were some questions about potential confusion, as a result of these changes. But at the moment, I do not see that much confusion or turmoil resulting from these changes. But the shifts from retail sales to consulting sales, and also growing of the stock or recurring revenue, I think it's going to take quite a long time for this to be achieved. So we have to be patient in monitoring the progress here.

Masao Muraki - Deutsche Securities

This is Muraki again. Thank you. MY second question is in relation to your capital policy; and if possible, I'd like you to share some figures. The Basel III fully loaded basis for 2019, you show the figure on page 14, 12% or more than 12%. Now the risk asset, I think this is MBIA, or MBIA-related -- that led to a decline in risk assets. But if you apply the standard method, what would the ratio be? I guess it will decline from the 12% or so, but how much decline will there be? Also, based on the most recent Basel proposal, the leverage ratio, what percent is it, based on the most recent Basel proposal?

Shigesuke Kashiwagi

As for your first point, if we apply the standard method, quite frankly speaking, we have not conducted that calculation, so we are not sure. Yes we do guess that it will decline, but we do not have the exact figure.

Your second point about the leverage ratio, the most recent data shows that the leverage ratio, which is as of March end, there has been no change since the previous disclosure, so the upper 3% range.

Masao Muraki - Deutsche Securities

Okay, this is Muraki again. So for the tier 1 ratio, the required level is 7% common equity and also 1.5%. So if you apply surcharge, and also if you add some buffer, even so, 12% is sufficient for tier 1? I think 12% is sufficient. And also the leverage ratio, the required level is 3%, which you seem to have already overcome. So going forward, unless there is an increase in the business risk, you do not have to fill that or increase your capital, is that the way to think about it?

Shigesuke Kashiwagi

This is Kashiwagi again. Based on the Basel capital regulations, yes, as you point out, we have already cleared or overcome the required level. 12.2% on a fully loaded basis is sufficient, and that's why we believe, we have decided to move ahead with the share buyback. As for the leverage regulations, we are currently in the upper 3% range. So as of today, we think that is sufficient. But we will -- as in relation to the leverage regulations, there still are discussions going on in the West, and there will be more stringent regulations applied to the major players, under the Basel regulations. So to this point, we will continue to carefully monitor the outcome.

Masao Muraki - Deutsche Securities

Thank you.

Operator

The next is by JP Morgan Securities, Ms. Tsujino. Ms. Tsujino, the floor is yours.

Natsumu Tsujino - JP Morgan Securities

Thank you very much. First of all, corporate items negative number, JPY3.7 billion. There has been a significant decline. Could you describe the reasons behind?

Unidentified Company Speaker

Thank you very much. Corporate items pre-tax JPY3.8 billion negative. Ms. Tsujino, you're better versed than myself, there are several items. The main items are liquidity pool, related expenses, and unused real estate headquarters portion, and the issuance of corporate bonds and mismatch of timing. JPY800 million of issuance of corporate bonds and liquidity pool would be the other items, and unused real estate at headquarters. And liquidity pool, there has been a significant decline and unused real estate expenses has also declined.

Q3, it was an improvement by JPY10.3 billion and the remainder would be the mismatch in timings.

Natsumu Tsujino - JP Morgan Securities

The mismatch in timings, means in Q1 or the expenses have been deferred to Q1, is that what you mean, when you say mismatch in timing?

Unidentified Company Speaker

No. the decline in Q3.

Natsumu Tsujino - JP Morgan Securities

Right. I have to look back to the past record. But deferral from Q3 to Q4, or expenditure that should have been incurred in Q4 is being deferred to Q1. So you're saying its more from Q3 to Q4?

Unidentified Company Speaker

Yes.

Natsumu Tsujino - JP Morgan Securities

Another question. You mentioned domestic retail business and the realignment, and that transformation will take time. That being said, investment trust sales since the beginning of April has remained unchanged from Q3 or Q4. Is that what you're trying to point out?

In Q4, 44% decline had been recorded. Q4, if I describe the most recent trend, on equity, the turnover has declined. So there has been some sluggishness in Retail, but that is offset by increase in investment trust. So in comparison to Q4, so far investment trust sales have been somewhat robust. The drop in Q4 was quite significant, so when you say it has been increasing since the beginning of this month, at what pace has it been increasing?

Unidentified Company Speaker

Well, mentally we feel that increase of investment trust sales at the beginning of this month. Thank you very much.

Operator

The next question is from Credit Suisse Securities, Mr. Yamanaka.

Takehito Yamanaka - Credit Suisse Securities

Yes, thank you. This is Yamanaka. Just one question for me. In relation to the share buybacks and the treasury stock and usage of the treasury stock. I think what you said, you will use it for various capital strategies, but could you share with us what you can, about what kind of options you are thinking of, in terms of the usage of the treasury stocks? And I am sure canceling -- or if canceling the treasury share is one of the options?

Shigesuke Kashiwagi

This is Kashiwagi. Basically, the options we are thinking of are M&A using -- or there could be a possibility that we could use it for M&A, through a share swap. But, there are no actual M&A deals -- concrete deals that we are looking at, and the cancellation is one of the options as well. And as of today, there is nothing decided about the timing.

Takehito Yamanaka - Credit Suisse Securities

Thank you.

Operator

The next question is by Daiwa Securities, Mr. Shiota. Mr. Shiota, the floor is yours.

Jun Shiota - Daiwa Securities Capital Markets

Thank you very much. First question -- this is Shiota of Daiwa Securities speaking. First of all, with regards to asset management, revaluation of assets led to one time of charge, what was the specific item and what size was the charge-off? How big was the charge-off? Page 9, JPY820 billion of net outflows excluding ETFs. There has been a switch from MRF to investment trust. That being included, there has been a net outflow, why was that? Could you elaborate on the reasons behind?

Shigesuke Kashiwagi

Kashiwagi speaking. Asset management, quarter-to-quarter JPY2.8 billion was the expenses increase, and about 80% of that expense increase was due to impairment. And the impairment was done for our [indiscernible] asset management company and impairment occurred in that company.

To reply to your second question, JPY820 billion of outflow, investment trust business, JPY1 trillion of outflow from MRF, and of that JPY200 billion went to sales of stocks, and the remaining JPY800 billion was pure outflow ETF, JPY200 billion and other retail Japan, U.S., or foreign equities and bonds, these were some of the investments that have been done.

Jun Shiota - Daiwa Securities Capital Markets

Thank you very much. Second question is share buyback. As this timing decision was made, could you describe the backdrop behind? I think that there are still discussions ongoing with regards to the leverage ratio. But could you describe the backdrop to why this decision was made at this timing, and your thoughts with regards to the continuation of this program?

Shigesuke Kashiwagi

Kashiwagi speaking. As far as the share buyback is concerned. Capital adequacy ratio and leverage ratio deliberations will be followed very closely, and the share price at the moment and the mindset of the stakeholders were taking into consideration, as we came up to this decision of share buyback program.

In the future, the same would apply, we will monitor the regulatory trend, the share price, as well as the stakeholders and lenders and their mindsets, as we make flexible decisions.

Jun Shiota - Daiwa Securities Capital Markets

Thank you very much.

Operator

The next question is from Mitsubishi UFJ Morgan Stanley Securities, Mr. Sasaki.

Futoshi Sasaki - Mitsubishi UFJ Morgan Stanley Securities

Hello. This is Sasaki, thank you. On Page 7, the bottom right, the discretionary account net inflows. Is this basically the Nomura Fund Wrap, are you referring to this, or what products are you referring to here? My second point is in relation to your earnings capability or profitability. On top of the investment trust business, how should we consider the earning potential for the discretionary account?

My second question is, just a confirmation of the figures. On Page 23, the segment Others, in the other items in segment Others, there is some change here, some fluctuation here. So what is this due to?

Shigesuke Kashiwagi

This is Kashiwagi. In answer to your first question. The Fund Wrap products is one of the products which we are selling, and to give you some detail, the borderline is JPY10 million, and it’s a premium program for above JPY10 million. We also have a value program from JPY5 million and above. This is index managed funds. We have two products, and on top of this, we have the discretionary accounts, which we show here, which is the SMA, separately managed account, and we make the clients give us discretion to make decisions about the management of these accounts. And here, the minimum amount is JPY300 million or above, and we receive fees for this.

The Fund Wrap includes the investment trust component and also business fee for the investment trust balance, and also the fees for the management that is confined to us.

The second question, just a minute please. And as for the discretionary account fee level, it is disclosed on the web page and the maximum level is 1.2% to 1.3% -- between 1.2% to 1.3%. And for the SMA, it depends on the client, but we do receive a fee for the discretionary account, which is about 10 basis points, and the SMA fee of about 1.2% to 1.3% or so.

Your second question about the other line or other item in segment Others. There is a big change of JPY19.1 billion quarter-on-quarter. This includes the Fortress related, realized gain from the sale of JPY17.9 billion, and also the impact, equity method impact from Fortress; and the total is JPY21 billion as previously disclosed. It also includes some realized gains from JAFCO, plus Ashikaga Holdings' unrealized gain as well. And on top of this, there are the operating entities, such as banks, which do not belong to various segments. There was a slight decline quarter-on-quarter for this quarter. And other than this is the difference from the financial and management accounting, etcetera. And as we explained in the previous conference, the trend, I think is improving, so description is getting easier to understand I think.

Futoshi Sasaki - Mitsubishi UFJ Morgan Stanley Securities

Thank you. Just to add to the first question. The SMA, is there -- do you charge a success fee for the SMA management?

Shigesuke Kashiwagi

I believe not. We will get back to you, if it turns out that there is. But I believe not.

Futoshi Sasaki - Mitsubishi UFJ Morgan Stanley Securities

Sorry, just one more follow-up. In relation to the P&L. For Q4, the effective tax rate seems to be quite low, compared to your usual levels. Could you explain the background for this? What has impacted this change?

Shigesuke Kashiwagi

The reason why the effective tax rate is low, is because of the improvement in the international earnings. The impact from the Japan's tax structure, that had a slight impact downwards, but basically, its because of the improvement in our earnings overseas. So the effective tax rate has declined.

Futoshi Sasaki - Mitsubishi UFJ Morgan Stanley Securities

Does that mean that from Q1 onwards, if the earnings from overseas remains same at Q4, then the same effective tax rate will continue, is that the way to look at it?

Shigesuke Kashiwagi

Well I think the level of the tax rate for Q4 was below 30%. I am not sure if this level is sustainable, its hard to commit that its going to be sustainable. Domestic tax rate, 36% and if the overseas earnings continues at a certain level, then I think we can keep it at the lower 30% range.

Futoshi Sasaki - Mitsubishi UFJ Morgan Stanley Securities

Thank you.

Operator

The next question is by JP Morgan, Ms. Tsujino. Ms. Tsujino, the floor is yours.

Natsumu Tsujino - JP Morgan Securities

Thank you. I failed to ask a question previously, with regards to the less expensive and the liquidity pool. This is with regards to the corporate items, and is it correct to consider that this is due to allocation to the segment, or the corporate-wide expenditure going down?

Unidentified Company Speaker

Both.

Natsumu Tsujino - JP Morgan Securities

Corporate wide expenses are coming down, and at the same time, in corporate items, allocation to the segment from the corporate items is progressing, and that has reduced the total, by JPY2 billion or JPY3 billion. Is that the size or scale?

Unidentified Company Speaker

Well, I will leave it up to you to consider, but JPY3.8 billion is the total and JPY800 million is the bond issuance.

Natsumu Tsujino - JP Morgan Securities

Then that being said, there could be a bigger impact. If there is allocation to the segment or liquidity pool allocation, in that sense, Q-o-Q improvement by segment when compared, is it correct to consider that in wholesale on Q-o-Q basis, there had been a significant improvement? I had expected a more detailed answer with regards to backdrops of these numerics. Is that correct?

Unidentified Company Speaker

Its not a reduction at corporate-wide level. It was due to allocation. If we compare apple-to-apple basis, gross profit improvement would have been bigger than what is reported.

Natsumu Tsujino - JP Morgan Securities

Casually speaking, if you say that has been [indiscernible], you almost persuade me; but did wholesale increase profits by billions of yen? I would be skeptical in judging from the substantive trends. But Q-o-Q financial expenditure has been coming down, interest expenses. So is that the reason on profit and loss basis? Interest expenses and interest income items, even if we look at the profit and loss of securities treating income, bond, sales, gains and loss coupons and derivative income, all of them would have to be comprehensively looked at, and we are only looking at a part of that. Just because these natural expenses had gone down, does that mean that cost in totality had gone down at Nomura?

Unidentified Company Speaker

No.

Natsumu Tsujino - JP Morgan Securities

Thank you very much. FBA will be included in FIG, so you're not going to be cutting that out in your disclosure and you also said that you're not calculating. This time, the cost was negligible, is that correct?

Unidentified Company Speaker

Casually speaking, we haven't calculated FBA in Q4, so this will be included in the fixed income. So its difficult to say whether it was significant or not. Well casually speaking once again, there is no another, so we cannot make any judgment on whether it was big or small.

Operator

The next question is from SMBC Nikko Securities, Mr. Niwa.

Koichi Niwa - SMBC Nikko Securities

Thank you, this is Niwa. For the wholesale division, I have two questions. One is in relation to the market business, markets division. Could you give me the product breakdown or the geographical breakdown for client flow and non-client flow business, what the breakdown was for each product? And also, in April onwards, how are the markets trending? Could you give me some color on where the market is going in April? That's my first question.

Secondly, in relation to investment banking and the earnings for Q4, which was robust. I think JPY30 billion or so of revenue, but is this sustainable or does it include some one time or one-off items, could you give me some color on that too, please?

Shigesuke Kashiwagi

Yes, this is Kashiwagi. As for your first question, about the global markets and the geographical breakdown. For fixed income, Japan was 20%, EMEA 40%, Americas 30%, AEJ 10%. And for equity, Japan 30%, EMEA 20%, Americas 40%, AEJ 10%; and within that, for the overall fixed income business, the client revenue and also the risk driven or trading driven revenue breakdown was eight to two. Client revenue was 80%. For equities, client revenue versus trading revenue was nine to one. I think that's a rough breakdown.

As for the rend in the market, in the new fiscal year from April, I think for both fixed income and equities, the market made a slow start in the new year. And in terms of geography, New York is strong, where as AJ is continuing to be -- or will continue to be slow in Q1 I think. And for products, I think the securitized product is trending strongly. Rates, I think it depends on the region. There are some strong and weak regions. For investment banking, we are continuing to see a lot of deals in the pipeline. There is a lot of ECM deals and also cross-border deals as well.

However for Q4, I think Q4 was somewhat strong compared to the run-rate level. In terms of the cross-border transaction, there was a deal which closed in January or in Q4, and we have been working on this deal since the previous calendar year, and that was executed in Q4, and this was a multi-product, and we booked revenues for this deal, plus there was ECM business in Japan.

So in total, I think it will be difficult to maintain the levels we achieved in Q4, in the current fiscal year. But I think the overall momentum will remain positive, especially if you look at the international business, there has been 33% growth year-on-year. We are improving the collaboration among the divisions and also the geographies, which we will continue. So Investment Banking, the trends in Investment Banking should continue to be upward. But it will not be four times the level that we achieve in Q4.

Koichi Niwa - SMBC Nikko Securities

Thank you very much.

Operator

The next question is by Goldman Sachs, Mr. Tanaka. Mr. Tanaka, please go ahead.

Katsunori Tanaka - Goldman Sachs

I have two questions, this is Tanaka speaking from Goldman Sachs. First of all, how we should interpret the overseas business profitability, at capital [indiscernible] club, you disclosed profits; Fortress and counterparty spreads excluded. It seems that you're still incurring losses. On managerial accounting basis, how would the overseas business profitability appear excluding Fortress? Is it correct to consider that the overseas business is breaking even, excluding Fortress, that's my first point? Secondly, treasury shares and how we should be interpreting? You reserve all possibilities and options, but in terms of time horizon, how long can you keep in treasury stocks without using them on maximum basis? If you cannot find a good purpose, by when will you be canceling these shares? Those are the two questions.

Unidentified Company Speaker

Thank you very much. To respond to your second question first, yes as you have rightly pointed out, we are keeping all options, and we are keeping all options in terms of time horizon as well. So nothing has been decided at this juncture. And whether the international business is profitable or loss making, if we exclude Fortress, the total would be negative. But then on the other hand, as we disclosed in managerial accounting, America is profitable, and all in all, the situation was good. So we did record profit. And for EMEA, loss making fundamentally, but that's partly due to the booking structure, and the funding costs being incurred.

So business-wise, EMEA was also profitable. And Asia excluding Japan, loss making. Since January, Ukraine issues, the [indiscernible]. First it was Argentine, then that was followed by Ukraine and the devaluation of the renminbi. So the renminbi weakening was a trigger that decelerated the performance, and this dropdown on performance still continues as we speak.

Katsunori Tanaka - Goldman Sachs

Thank you very much.

Operator

(Operator Instructions).

Shigesuke Kashiwagi

Well thank you very much everyone for participating. Since a year ago I became CFO, this is the fifth time that we have conducted the call, and let me share with you, the feel that I have right now. Over the past year, I think it was a good year, and the wholesale division, we worked on expanding our client business, and there was the ratings upgrade by Fitch and also closer cross divisional and cross regional collaboration. I think that helped diversify revenues, and also ensure stable performance.

And for the Retail business, Q4 was a tough quarter, in terms of market environment, and we are working on the reform of our business model. But I think it was a tough quarter, based on market conditions, and we are continuing to work on reforming the business, and also winning the trust of our clients and expanding the business. I think all of our team is working hard on this. And although we achieved our March 2016 management target of JPY50 EPS ahead of schedule, we remain committed to becoming a lean organization, that can deliver consistent earnings under any environment, while expanding recurring revenues, and improving the profitability of our international operations.

Thank you very much.

Operator

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

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