ORIX Corporation ($8591)

Thank you very much for joining us. This is the financial results briefing for the fiscal year ended March 2026 of ORIX Corporation. will be the facilitator. I am [ Uchida ], General Manager of Corporate Communications Department. So let me first introduce the speakers. Hidetake Takahashi, Member of The Board of Directors, Representative Executive Officer, President and CEO; Masataka Yamada; Senior Managing Executive Officer, CFO and CSO. So those 2 gentlemen will be presenting. In addition, there are 4 attendees: Mr. [ Satoru Matsuzaki], the member of the Board of Directors, Deputy President, Executive Officer, COO of Japan and APAC; [indiscernible] Managing Executive Officer, COO of USA and Europe; [indiscernible] managing Executive Officer, COO of Infrastructure Business Unit; Kazuki Yamamoto, Operating Officer, Corporate Strategy and Management Unit, Head of Corporate Planning, Investor Relations and Sustainability. So those 4 people will be joining. First, I will call upon Mr. Takahashi and Mr. Yamada to present, and then we take questions. We plan to spend about 90 minutes in total. Now over to you, Mr. Takahashi.

Ladies and gentlemen, and again, thank you very much for joining us despite a very good schedule for our group's financial results briefing. I'm Takahashi, Group CEO. For the fiscal year ended March 2026, the uncertainty has become the norm that was a macroeconomic environment. But for us, it was the first year to [indiscernible] and also an important year of management transition. And we spent 12 months off, and we have made steady steps forward and made progress toward our goals and we did the earnings announcement just now. And thanks for your support, we were able to achieve record highs for both net income and market capitalization. A robust organization and management structure are essential in order to steadily execute our growth strategy going forward. To this end, we introduced organized reform from January 1 this year and implemented a [indiscernible] system as of first of April. We have recruited Yamada from outside of the company as CFO/CSO. Additionally, reviewed guidelines and expanded the investment and financing authority delegated to each business division, enabling faster and accountable decision-making. Furthermore, with the CFO and CRO, taking the lead in maintaining strong financial discipline and sophisticated risk management, we aim to take good risks speedily and proactively to achieve growth at a new level. And that's just for the opening remarks. And I would like to hand over CFO, Yamada, who will explain the results for the fiscal year ending March '26 and guidance for the fiscal year ending March 2027.

Thank you for the introduction. I'm CFO and CSO, Masataka Yamada. Please refer to Page 2 of results presentation on the screen in front of you. These are the points I'd had to cover during today's briefing. There are 3, as you can see. Number one, FY '26 March results and FY '27 March guidance, and FY '26 March in review. And the third point is initiative for FY '27 March. I would like to discuss the first topic, FY '26 March results and the '27 March guidance. And then CEO will follow and explain the second and third points. Please proceed to Page 3. These are the slides for the fiscal year ended March '26. Please look at the graph on the left. This shows our year net income for full year. Net income for FY '26 March was JPY 447.3 billion exceeding the full year forecast of JPY 440 billion that was revised upward at the first half results that was announced in November last year. This marks the third year in a row that ORIX achieved record profits. This represents an increase of JPY 95.6 billion or 27% in net income compared to the previous year. ROE was 10.4%, up 1.6 percentage points from the prior year. Q4 net income was JPY 57.6 billion. We recorded a total impairment of JPY 97.2 billion primarily at ORIX USA, resulting in a lower net income compared to the JPY 118.6 billion posted in the third quarter. The ORIX USA segment, [ OCP SR ] Capital Partners, we are proceeding with our phased withdrawal from the PE business and capital recycling efforts. As a result, we recorded goodwill impairment in the fourth quarter. That's the major factor. Next, please proceed to Page 4. I would like to explain our [indiscernible] profit for the fiscal year ended March 26, using 3 categories: finance, operation and investments. The upper table compares segment profits, pretax profits and net income for the last 2 fiscal years. As shown in the second row, pretax profits for the fiscal year ending March 2026 were JPY 691.4 billion, an increase of JPY 211 billion or 44% compared to the prior fiscal year. Next, please look at the graph at the lower left. Dark blue represents finance, light blue represent operation, and the deep green represents investments. The upper bar graph shows segment profits for the fiscal year ended March '25, and the lower bar graph fiscal year ended March '26. All 3 categories saw profit growth the investment category posted profit growth even excluding JPY 95 billion in gains from the [indiscernible] sales and valuation gains. In the finance category, investing income rose sharply in insurance segment and corporate financial services achieved growth in fee income. The result -- this resulted in an increase of JPY 12.9 billion or 7%, year-over-year. In operation, [ Wilson ] businesses have recently have been affected by geopolitical risks inbound-related businesses such as hotels, ins and airport concessions as well as [indiscernible], automobiles and ships performed strongly in the fiscal year ended March '26. In addition, the sales of some ORIX stake in [indiscernible] following the firm's IPO and gains from the sale of [ Seclin ] contributed to growth, resulting in an increase of 70 -- sorry, JPY 37 billion or 18% compared to the previous fiscal year. In the investment category, ORIX saw a significant increase in segment profits of JPY 138.1 billion or 82% compared to the previous fiscal year. This was driven primarily gains from the sale of valuation gains of Greenko as well as large gains from real estate and earnings of -- from PE investments, including Toshiba. Breakdown of each show the 10 segments provided on Pages 40 and 41 for your reference later. Please turn to Page 5. The bar chart on the left shows results for ROE. Segment profits and allocated capital for each of the 3 categories. For the fiscal year ended March 2026 as well as the changes from the prior fiscal year. The [indiscernible] take finance category has advocated capital of JPY 1.7 trillion, with ROE holding steadily at the same level of 8.2% from the prior year. Light blue [indiscernible] operation has [ acted ] capital of JPY 1.4 trillion, with ROE rising from 13.5% of the prior fiscal year to 13.9%. And [ dark blue bubble ] Investment has [indiscernible] capital of JPY 1.6 trillion, with [ AR ] significantly improving from 7.4% to 13.6% due to realized gains from the sales of Greenko stake and hotel sales. On Page 6, we show historical trends of ROE and ROA of each of the 3 categories. In the operation category, profitability improvement has outpaced asset expansion with our improvement, an additional 1.0 percentage points over the past 5 years. In the investment category, ROE and ROA increased by 6.2 percentage points and 3.6 percentage points, respectively, compared to the prior fiscal year. We continue to create value and routed assets while enhancing efficiency, as mentioned before. Next, please proceed to Page 7. For the fiscal year ending March '27, we target net income of JPY 530 billion, an increase of JPY 82.7 billion. the prior year. And the target of ROE is 11.7%. [indiscernible] exclude specific [indiscernible] will be explained by our CEO, Takahashi, later on. But we aim to increase profit and also improve ROE by continuing to optimize our portfolio. Regarding shareholder returns. I will touch on this again after presenting breakdown of our earnings guidance. Please turn to Page 8. I will explain the pretax profit guidance for the fiscal year ending March 2027 for each of the 3 categories. First, please look at the latter table. As shown in the second row, expected pretax profit for fiscal year ending March '27 will be JPY 760 billion, an increase of JPY 68.6 billion or 10% year-over-year. Please look at the lower left graph. Overall, we expect the finance and operation categories to achieve profit growth, but the investments will see a decline. However, excluding the JPY 95 billion in gains from the sales of [indiscernible] FY '26 March Investment segment profits are also expected to increase. Next, I'd like to explain the trend for each categories. Finance. As announced in April, we have concluded share transfer agreement with [ Dynex ] Bank, a consolidated subsidiary of [ Ativa Securities Group ] for all shares of ORIX Bank. We plan to record a gain on sales from the transaction of approximately JPY 124.2 billion at the pretax level for fiscal year ending March '27. In preferability from ORIX USA is expected to contribute as well. As a result, we expect [indiscernible] segment profit of JPY 308.3 billion, an increase of JPY 119.1 billion or 67% -- sorry, 63% compared to the prior year. Within operation, we expect the inbound-related business to see lower profits due to the impact of our geopolitical tensions. Despite this, we expect solid growth in aircraft leasing and U.S.-based [ Hilco Global ] and we are guiding operations category segment profit of JPY 240.7 billion, an increase of JPY 3.6 billion or 2% compared to the fiscal year ending March '26. Finally, investment category, in addition to the sale of domestic investments [indiscernible], which was announced in March, we are proceeding with exits from multiple [ PEDs ] in the U.S. We also expect profit contributions from Toshiba, which is performing well. As a result, our guidance for the segment profit is to JPY 290 billion. Next, please turn to Page 9. Last point that I would like to explain is about the shareholder returns. For the fiscal '26 March, the full year dividend per share was the record high of JPY 156.1 up 30% year-on-year. Additionally, we fully executed the entire 150 billion buyback program and canceled all shares exceeding 2% of the total shares outstanding. For the fiscal '27 March, we will maintain the dividend payout ratio of 39%. Thus, the full year dividend per share will be JPY 187.36 based on the projected net income of JPY 530 billion. We have set the share buyback program of JPY 250 billion, up JPY 100 billion year-on-year. This was decided after considering cash inflows and capital release resulting from the sale of ORIX Bank as well as the future profit levels, ROE and financial soundness. The projected total return ratio, as you can see here, is 85.9%. That concludes my presentation. I will hand it back to Mr. Takahashi, CEO Group CEO.

Thank you, Mr. Yamada. First, I'd like to summarize the previous fiscal year from the perspective of the 3 key initiatives for realizing our long-term vision we explained at last year's financial results briefing. The first strategic initiative is portfolio optimization. We have been reviewing our portfolio considering the growth potential, capital efficiency and impact on the credit ratings for each business. Major examples are shown on the slide, the sale of our Greenko stake and new investment in [ AM Green ] convertible bonds as well as the sale of the ORIX Asset Management and loan services. As mentioned, last month, we announced that we would sell ORIX Bank during the fiscal March '27. The second initiative is sophisticated risk management. We have strengthened our management's decision-making platform by both integrating and visualizing risk information. And through this, we have established a system that enables quantitative risk assessment and agile reflection of this assessment in our management decisions. Starting this year, we have integrated individual finance deal screening department with the portfolio management department, establishing a system that enables end-to-end risk management. The third initiative is new business creation. Construction on the Osaka IR project commenced in April last year and is progressing smoothly. In October, there was an application for the [indiscernible] and it's going very smoothly. Through the acquisition of [ HECO ] Global in the United States, we have entered professional advisory services businesses, including asset valuation, primarily in the United States, will also build an asset-backed financing platform going forward. Using the [ HUGO ] Global, we will be also building the asset-backed financing platform. Also, investment in [ INET ] and conversion of [indiscernible] industry into the subsidiary are part of our efforts to create new businesses in strategic investment areas. Through those priority initiatives, we steadily improved ROE, and I'm pleased to report that both net income and market cap reached record high levels for the first fiscal March '26. Please turn to next page. For the fiscal '27 March, we will continue to promote the 3 key initiatives aimed at realizing our long-term vision, including portfolio optimization, sophisticated risk management and new business creation. In addition, under the new management structure, we would add a new key initiative that is the business model transformation. We will achieve this by deepening and evolving our 2 core business models as set forth in our growth strategy, alternative investment and operations and business solutions. Let me explain the specific details later on. Now please proceed to the next page. This is ORIX Group's new management structure. In January this year, I myself, Takahashi assumed the position of CEO. And we organized our firm into 5 business units and 5 corporate units. Following this, we introduced the [ CXO ] system in April. This organizational reform aims to optimize the allocation of management resources under the CEO and create new businesses through the interunit collaboration. By introducing CXO system, we are expanding the dedication of authority to individual BU to help achieve both faster and more accountable decision-making by business division COOs. Our CFO, CRO, will be responsible for the maintenance of the strong financial discipline and risk management, respectively. Each CXO will not only be responsible for their respective areas, but we also serve role top management overseeing the entire group alongside the CEO. Today's attendees, Mr. [ Matsuzaki], Deputy President; and Mr. [ Suzuki], the Senior Managing Executive Officer, there will be the COO of Japan and APAC as well as COO of U.S.A., Europe, and COO of Infrastructure business for Mr. [indiscernible]. And today, Mr. [ Otsuka ] is not present. He is the Managing Executive Officer, and he will be in charge of the risk management unit and group CRO. In Japan and APAC business unit, we would have a wide range of financial businesses from [ debt ] to equity in APAC. Including Japan going forward, we will capture the growth opportunities by expanding the diverse businesses. We have cultivated domestically into APAC. U.S.A. and Europe, is the core of our overseas asset management business in addition to the public assets centered on [indiscernible] and private credit at ORIX USA, we will expand asset classes into other alternative assets and pursue AUM growth through strengthening sales collaboration. Infrastructure business unit will refine its expertise in the development management and operation of real assets such as real estate, energy and aircraft and ships, while promoting the shift to asset management to expand the business scale through asset rotation. With this new structure, we believe we have established a management system that is more resilient to environmental changes and capable of making sound decisions on both offensive defensive fronts. Please turn to the next page. Now let me elaborate on our business model transformation, which has been introduced as a new key initiative. Until now, our alternative investments and operations have primarily been in our alternative assets on the balance sheet, where we can leverage our hands on asset operation and management capabilities. Going forward, we will continue to build up assets such as real estate and renewable energy development while efficiently utilizing our balance sheet. We would accelerate the investment in assets suitable for shifting to and asset management, asset manager type model and connect this to medium- to long-term AUM expansion. Also, our business solutions model, we continue to value touch points with our customers, and we'll expand the services originating in client needs. Through this, we aim to grow our asset under management and fee income. Please refer to the slide as examples of the initiatives of each business unit. Please go to the next page. Next, I would like to discuss our financial and risk management strategies. To steadily execute our growth strategy going forward, we will continue to strengthen financial discipline and risk management. The environment surrounding us is changing daily, including the situation in the Middle East, resulting energy crisis and highly volatile financial markets and uncertainty has become the norm. As I said earlier, in this climate, it is essential to thoroughly enforce financial discipline and risk management and to enhance resilience. We would not only respond to the changes, but also grow amid the changes. By targetly implementing management focused on the capital efficiency and optimizing capital allocation across the group. We will concentrate management resources in areas where we have a strong competitive edge. We will pursue maximum profitability and sustainable enhancement of the corporate value under any circumstances. Please go to the next page. Finally, let me summarize the core messages today. The previous fiscal year was one of the steady progress towards realizing our long-term vision, as I said at the outset. Additionally, we recently announced the sale of ORIX Bank. Regarding portfolio optimization, we will continue to pursue this strategy without having any secretaries. Under the new management structure, we will continue to balance growth investments shareholder returns while aiming to maximize corporate value over the medium to long term with a focus on improving capital efficiency and profit growth, we will steadily execute each initiative. Finally, on the July 2 of this year, we plan to hold our first-ever Investor Day in London. We continue to value dialogue with our stakeholders and apply it to our management. We appreciate your continued support. Thank you very much for your attention.

Now we would like to open the floor for questions.

[Operator Instructions].

My name is [indiscernible]. Two questions. Question one, ORIX Bank sales was decided. What are the reasons? What is the background? Can you please remind us of that? And the sales of the bank and I know that there's a lot of cash coming in from that and other sales. So what is the purpose of this cash? How do you intend to spend this cash in the future? Do you have any plans already?

I would like to respond to this question. The reason to sell that ORIX Bank, there are multiple reasons behind this. The biggest being well, [ Bionix Bank ] and also we're here at the venue but there's a very good affinity with ORIX Bank and also direct security group has been [indiscernible] appreciating the ORIX Bank highly. Business-wise, ORIX Bank doesn't already have ordinary deposits. It's basically [indiscernible], but the interest rate is favorable, and the bank is also providing real estate collateral loans. And actually, the deposit to loan ratio is higher than 10% slightly, which is very unique, but the deposit stickiness is weaker. And therefore, in order to grow the business, the interest rate for the term deposit will have to be higher to be more attractive. And we have to basically do the investment with loans. But of course, there is competitiveness as well. So it's very difficult to get the margin these days. And as far as I know, [ Bionix ] bank is going the opposite way. In other words, they have a relationship with the securities brokers business, and it's really easy for them to collect the deposits. But once they get the deposits, they had challenges in terms of how to invest or manage that money. So this combination, I understand that the 2 entities will be integrated. But as a new bank, we believe that we can aim for further growth, bigger growth and that is the reason why we decided to sell the bank. With regard to next question, we also do divestments and also investments. When we gain on sale, we are not necessarily thinking about spending money for specific porters. But we want to focus on where we are competitive when it comes to investments. And also -- if you invest against the macro environment, it also work. So we need to really consider the economic environment. and identify good areas for investment. To be more specific, according to the older segment, for example, PE investments within Japan is something that will be still be actively investing into going forward and real estate as well as aircraft. Those new assets -- they have a strong resistance against inflation. This is what we believe and also operational capabilities of ORIX and workraft-turnaround capacities would help us to generate business value on our own. So investment into new assets is another area where we could allocate capital. I hope that answers your question.

Any other questions? Please raise your hand.

[ Nakahara ] from [indiscernible]. Related question to the first question. I'd like to ask 2 things about the numbers. On Page 8, that in the finance section, March '27, the segment profit, JPY 300 billion. ORIX bank sale is JPY 124 billion upside. So JPY 300 billion. So in the finance segment, is this going to be the highest record. I'd like to clarify that. So that's the first point. And then [indiscernible] question, I think it's the other side of her question. But benefits of sale, you talked about that. But at the same time, as a management decision in the finance segment, continue to hold ORIX bank. I think that was one way of doing business. So could you talk about the balance -- could you explain that once again?

Yes. To your first question, the financing and investment business, we did not have that category in the past and 20 years. So I don't have the precise data in my head, but about the JPY 300 billion segment profit, as the record high profit in finance, I believe, that is a forecast. So why don't we maintain it? Or why don't we keep it? One thing is that the ORIX Bank compared to other banks in terms of ROA, relatively speaking, was at the higher level. But in the ORIX Group ROA, relatively speaking, was lower. And in finance sector, the ROA comparison or bank was relatively in the ORIX financial finance sector was relatively low. Therefore, making significant improvement of the ROA based on the banking business is difficult. So in order to improve ROA, we need to increase the leverage. And naturally, it's a regulated business. And also, there is a certain limitation to that. So when you look at the overall business portfolio, we wanted to focus more on the ROA, ROE. Then the bank business for us is not a noncore business. That is the major background. Thank you very much.

Any other questions? If you have a question, please raise your hand. Yes, the person in the fifth row.

My name is [indiscernible]. I have 3 questions. Mr. Takahashi, you said that domestic PE real estate and craft and real assets are the areas that you see opportunities in. But in terms of macroeconomics, which areas are you more wary of? In other words, you talked about uncertainty becoming the norm. So where are you being more careful? When the interest rate is hiked, what kind of impact would it have on your business? Well, interest rate hike so far has been positive for the management ORIX Group? And if the rate hike accelerates or exceeds the threshold, do you need be more wary of that? The third point is total payout ratio was 80-some percent from -- in last fiscal year. What is your basic policy for shareholder return? Can you please explain that one again?

With regard to the first question, are there any areas that we have cautions about? For domestic business, in [ Kansai ], we are operating 3 airports. And for inbound credit business, we have hotels, inns. We also operate those and it's very [indiscernible]. But since last autumn, relationship between Japan and China has weakened politically. And [indiscernible] International Airport receives about 30% of the flights from China. But out of that 30%, approximately 2/3 have been reduced, the number of flights have been reduced and there is a 3-month lag in terms of impact of performance. So for the prior fiscal year, we are only accounting for the number of [indiscernible] airport up to December last year, so the impact is minimal, but if the flight reduction continues, the impact will be bigger going forward. But there's also a positive factor. We are receiving a few [indiscernible] just from China, but we are [indiscernible] visitors from South Korea and Taiwan. So it is not just a simple reduction of 2/3 of the 30%, like I said, but a certain amount of impact is expected, so we need to be careful. Similarly for hotels, we don't have many hotels that accept group tourists and only about 10% of the visitors from China in terms of occupancy, it's fine. But in terms of room rate. Maybe it was too high during some period. Generally, the numbers are softening and therefore, revenue from the hotels and be impacted to some extent as well. Now with regard to the overseas. in the United States, fundamental measures have been implemented. We believe that we have already entered the phase of recovery. private credit, especially SaaS company exposure impact is of concern for many. So if there is money coming from individuals, there are redemptions happening. But in terms of a private equity exposure and SaaS-related lending, that's approximately 70 -- sorry, 7%, 7% of the total. For the industry, the average is about 20%. So that means that impact for us is very much limited. Having said that, inflation and interest rate reduction compared to expectations from 1 to 2 years ago, inflation pace and also that the interest change pace is down. So we have to close attention to how this will impact us in the future. Just one more thing. Within about the portfolio of Chinese business, we need to control the exposure generally. And there are some part of portfolio that will have to be turned around. So we will strengthen our structure and continue to provide monitoring of that business. So those are the 3 points that we believe that we need to be careful about. Now interest rate sensitivity. Interest rate is being hiked. And if it is slow, mostly in Japan, of course, the funding cost will increase, but we can respond to that. And is that they will have an overall positive impact. 1% interest rate change sensitivity is about 1% by segment, the payment level. So it's limited. However, as you asked if there is a sound interest hike, a very fast interest hike, it is possible that we will fail to catch up or there will be a time lag, which will result in potential impact. That at the current pace as long as the [indiscernible] is happening slowly, we believe that the impact will be positive for us. And the third question was about dividend, I believe. Yes, the return policy. As I mentioned in my presentation, investment for future growth and the maintenance of financial soundness and return to shareholders, we need to strike the right balance between the 3 elements. So we continue to sustain this policy. Over the last 3 fiscal years or so, we had some gains from temporary sales or divestiture. And profit was really going up. And dividend per share has been going up as well, quite a lot. So DPS growth on a continuous basis is something that we're aiming for. And also at the same time, we'll be focusing on the balance of the 3 elements. And this is how we decide our dividend policy. I hope that answers your question.

Yes, another person in the fourth row.

From [indiscernible]. Two questions, please. But the ORIX Bank gain on sales of it. So JPY 70 billion is the price. And for this fiscal year, there is JPY 124.2 billion. So it's a part of that gain, and the remaining will be reflected in the next fiscal year and onwards. Could you explain that? That's my first question. The second is that about the Middle East situation due to the situation, different industries are being affected. Maybe you have not seen the negative impact for yourself. So the disruption in Middle East what could be the negative impacts or positive impacts, if there are any? So if you can summarize that.

Yes. I'd like to respond about the [indiscernible]. I would like to refrain from talking about the details. But roughly speaking, the financial net asset of the bank is about JPY 250 billion. So JPY 370 billion, the sale -- the price of sale, the difference between the 2 will be our gains. So for this fiscal year, we plan to close this. So if -- unless there is a postponement of the closing, the -- it is not likely that we would book the profit from this transaction across the different fiscal years. So that's my answer to your first question. As about the Middle East, you're right. The subsidiaries or affiliates that we have in Saudi Arabia, we have a leasing company called [indiscernible]. In Pakistan, so the [ OP ] is a leasing and financing company. But in terms of exposure, those are the 2 companies, it's about JPY 15 billion. So exposure is limited. Also the potential impact on the businesses, aircraft business? Well, we have a high credit level company. So -- so far, no major impact is forecasted due to the Middle East situation. The [indiscernible] fuel if this current Middle Eastern situation continues, there could be a shortage of the jet fuel. And then including LCC, it's possible that they will reduce the number of the flights then the airline performance will deteriorate and [ Spirit ] is another story that when used to [indiscernible]. And it's possible that there could be some airlines who would credit would deteriorate. So we are not too optimistic. So we'd like to look at the credit situation and the aircraft situation, we are watching that closely. Another thing is, especially in Asia, Southeast Asia, as you all know, there's -- the energy reserve is at low level as countries. So if it lingers in different senses, the Southeast Asian macro economy could be impacted and if that if that happens, then the credit quality goes down. So direct impact, as you correctly said, is limited for us. But if it lingers further, then there could be some indirect impact. So in that sense, we have to enhance the risk management, as I said, we'd like to focus on that and would like to respond to the situation. That's all the questions -- the answer, sorry.

Any other questions? Second row on the right-hand side.

[indiscernible]. My name is [indiscernible]. I have 2 questions. insurance business positioning within your portfolio. You talked about ROE and also business model transformation. Against that background, how do you position your insurance business? That's my first question. My second question is about the 3 airports in the Kansai area. What is the significance of this business? And what is your outlook of this business going forward?

With regard to your first question about our insurance business. Insurance, as you may know, is balance sheet heavy and also a regulated business and therefore, we need to build a certain amount of capital. It is also a capital intensive business. And we need to use the balance sheet in order to grow the business. And therefore, if you just apply the ROE perspective, then insurance business is a little bit different from the rest of the portfolio. However, there are 2 things we need to consider. One is, if you look at other alternative asset managers, they are doing something similar. Through insurance policies, you gain liabilities. And the noninsurance business usually cannot really finance this kind of our long-term debt and you can do that through insurance. And this is something that we can really use for other assets within the group, including the utilization of reinsurance. So if we can allocate it like that in terms of our financing, we believe that there is a good synergy. That's one point. And the second point is that when we obtain a debt and also sell insurance. Well, the third category insurance for targeted at individuals were advertised on TV. We were also focusing on online sales as well. But now we live in the world where we have interest rates. So life insurance, death coverage and also wealthy individual insurance, we have started this several years ago. Now Corporate Financial Services in -- of ORIX is one of the best sales agents in Japan. So we believe that there is synergy in terms of obtaining insurance policies as well. There's actually a third point. If you just look at ROE, it's only about 7%. So you may consider that we should be selling this business. However, as you could see from the performance of the prior year, for pretax segment profit, we are generating more than JPY 100 billion from this segment and considering the nature of the insurance business, this kind of revenue or profit is very stable. So we do not just apply the ROE perspective. So this is similar to the bank business. Well, in other words, we don't really consider to sell insurance like we did with the bank, just looking at ROE. We have to look at the debt structure of ORIX Group as a whole and also asset management structure as well and how to utilize insurance business within that framework. That's what we consider. Now with regard to the 3 airports, there are certain factors that are in our control and out of control. Relationship between Japan and China was already explained earlier. We don't just sit by and watch the situation change or improve. As I said before, we are getting more visitors from South Korea and Taiwan and Indonesia, Thailand and other Southeastern airlines, we are approaching ourselves teams approaching that because this is a great opportunity. Traditionally, we were relying on a single market for 30% of our sales of revenue, but this is a great opportunity to change that structure to reduce the dependency and now the risks have materialized. We want to make sure that the lesson is learned and same problem will not be repeated so that we can operate this business over the long term. That's all.

The person in the sixth row.

[ Carlos ] from [ Nikkei ]. About China, I'd like to ask a question. Earlier, Mr. Takahashi, in your presentation, you said that the portfolio in China and exposure needs to be controlled and maybe turnaround is necessary in part. And in the distribution materials about the Greater China, you are saying that you will be controlling your business. So more specifically, the areas that you were not invest in or you -- where are they? And how do you control the exposure. When you say you will be more restrictive means that you won't be not really reducing it totally, but what are the areas that you are referring to? And also the APAC business, Asia Pacific, I mean, so in APAC, how do you position China? Excluding China, you want to enhance the APAC? Is that the framework of APAC, excluding China, could you explain that?

About China, [indiscernible] U.S., it's the second largest market. So we are not going to redraw it completely from China. That's not something that we expect. But at the same time, including the investment of the limited -- sorry, the listed companies, the minority investment think that the horizon of the investment is becoming longer. So the capital recycling will be promoted so that assets will be rotated. So that's our investment policy. There are no exceptions. So in comparison to others, the minority investment and the investment period will be longer. So we would need to rotate our assets there. But for example, in Hong Kong, market compared to 2 years ago, is recovering quite a bit. So pre-IPO investment in the technology is the main investment that we make. So that is relatively short term and we have experiences. So we'd like to continue working on investments. So it doesn't mean that we saw exit our businesses from China. That is not the case. We will look at the individual assets. And if it's longer term, we would rotate the asset at a whole. We are not going to increase the overall exposure so much. So we want to control the level of exposure as much as we can. And that's the situation in China. So what about APAC? It's not just one market, some multiple countries and multiple markets in APAC. So in terms of -- as a region, is APAC region, Mather with us is in charge. And if you look at each country or each market, and joint cultures and institutions, there are differences. So if we can take advantage of our strength, then we would like to expand the businesses. So for example, in Asia Pacific in the area of the Pacific, Australia, conventionally, the auto leasing was the major business, but the real estate-related financing, are there opportunities there. So already one or 2 are being executed. So we would like to continue to form a -- to promote this and also India, there could be similar opportunities. So rather than thinking about it as one region, we'd like to look at each country or each market individually and do whatever we can do.

Next question is going to be the last one from the press.

My name is [indiscernible] newspaper, I had 2 questions. First of all, at ORIX Bank, lending competition and getting more difficult to get the margin. Now [ BOC ] rate hike for example, is pushing up the deposit interest rate. And ORIX Bank deposit interest rate, you found it difficult to increase the rate to get more money maybe the business model wasn't working very well. So was BOJ rate hike, one of the factors behind this? That's my first question. Second question is about portfolio optimization. There is no secret area, you said. But within your view, Mr. Takahashi, what are the specific challenges? And what are the specific focuses?

With regard to the first question, I think there are pros and cons, both positive and negative. [ BOJ's ] rate hike policy will that monetary policy has changed and the now interest rate is positive and the stickiness is weak, we are beginning to find that out. And it is more difficult to get the arbitrage or the -- sorry, margin. Now for the finance sector or the bank sector as a whole, it has a positive impact on the sales variation of the banks is -- was lower than 1. But now it's beyond 1.0x. And there was a question about the gain on sales earlier. But basically, we got a positive gain on sales and found a very good partner for this business as well. If PPR was below 1x there was no incentive to probably to sell well, maybe not. There was not an incentive to sell by generating loss. But anyway, we decided the sales, and I think it had both positive and negative factors. And what was your second question? Could you please repeat?

About portfolio optimization, you said you will leave no stone unturned. But what are the specific challenges you see in doing this?

We say there is no secret area, no stone intents there is no sense of challenge. We will be implementing the reform steadily logically. And as I said in the summary of the last fiscal year, when we consider capital recycling. It's not just about getting capital gain. We look at the ROE and the financial state as a snapshot. So based on the snapshot, some indices are better or worse. And we also look at whether or not they would improve or further grow in the following several years. So in that sense, we look at growth capacity growth potential. And thirdly, we want to look at the impact on rating -- credit rating because when we acquire something for portfolio, we have to consider the goodwill as well. And as I said, in the China business, minority investment does have an impact on S&P rate credit rating. So we have to think about that impact as well. As I said before, we will just not look at the numbers. We will also look at the qualitative aspects, whether there's synergy within the group whether it's meaningful for the group to have it. So we will look at all of these aspects in terms of portfolio position.

That's all the questions we take from the press. So we would like to take [ Tomioka ] of IR will be leading.

Thank you very much. So I would like to take questions from analysts and investors. There are some remote participants First of all, we would like to take questions from the people who are present here. Any questions? Anyone here, the person in the front.

Muraki from SMBC Nikko. I have 2 questions. On Page 15, you talked about ROE. So I'd like to ask you a question. So 11.7% is expected for fiscal year, so you exceeded your target. So ORIX bank sale gains, and also AK, again, I think those are included. But in the underlying capability, it's above 11%. Are you feeling that? So that's my first question. Second question is on Page 14 on the left-hand side. The capital usage, utilization and the current. What is the current investment environment? And if the situation continues to be the same, the share price being too high. You cannot make investments. Is it possible that this number goes down further. So is there such possibility happening?

About the ROE, underlying ROE. As I explained earlier, for this fiscal year, ORIX Bank gains on sale and the major sale of others are included. And in the previous fiscal year, the Toshiba was showing strong. So there was a gain in relation to [ Kioxia ], which are also included. So in terms of our feeding, in real terms, maybe we are very close to 11%, but we have to work a little bit harder. That's how we feel. So that's a very honest feeling that I can share. As for the capital utilization, relatively speaking, the divestment under the current environment, the setting I think I wouldn't say easier, but easy to handle than buying. So divestment is leading. And so divestment are happening at the relatively high price. So therefore, the collection is proceeding and then the capital utilization comes down and our liquidity position goes up. So that has been the trend. As you correctly said, in terms of the real assets, the real estate and also the aircraft and also the PE, the variations rising. So under those circumstances, the projects that were interested in working with us. The many of those examples or how can we increase those projects be the key. It's not the easy environment to invest in unique investment opportunities are the ones that we would like to continue to pursue. Thank you.

I'm Watanabe from Daiwa Securities. I have 2 questions. Page 49. And [indiscernible] capital ratio, since April, we had exits and [indiscernible] Bank and [indiscernible]. Based on the pipeline, do you have the pro forma employed capital ratio? How much is that right now? On Page 49, on the left-hand side, insurance debt assessment evaluation. Compared to end of December, the amount of debt is actually bigger. So have you changed the valuation method? What is the background for this?

With regard to import capital ratio for '26 March, 86%. And ORIX Bank sales was mentioned before and also [indiscernible], this is pre-investment, so this is in and out. But anyway, those are not really reflected in these numbers yet. And ORIX Bank sales, if this is included, roughly speaking, employed capital ratio at the end of the will be coming down to about 80% according to our pro forma calculations. So as I have explained, the investment and the real asset-focused investments will be accelerated. Regarding your second question, a [ bit ] aviation. Method of evaluation has been changed. That is true. And I would like to ask Yamamoto to explain the details of this.

Yes, I would like to provide some additional explanation for insurance policies acquisition. Things are progressing smoothly, and this is pushing up the amount of liabilities and liabilities valuation, especially for long term interest. In order to be able to apply this more stably, we did something -- well, our corporate debt market was quite unstable for a while. So we combine multiple indices in order to evaluate it more accurately. So this is pushing up the number. And in terms of net asset, this is basically a negative impact. That's all from me.

The person in the third row.

Sakamaki from Mizuho Securities. I have 2 questions. The first is on Page 15. The ROE, 15% FY [ '35 ] March, I think you included your enthusiasm there. So a year passed, and I think you have already made a progress. is the feasibility of achieving 15% is it becoming better. So could you talk about that? And the second question, U.S. business, restructuring is progressing. So what is the time frame that before you see the improvement of the profitability?

So 15%, how confident are we? I think that's your question. So last fiscal year and this fiscal year, if you look at the numbers on Page 7, there is a comparison to the FY March '25. I think it's increasing and getting close to that level. I think that's the reason why you asked this question/So frankly speaking, our feeling is that we really have to work very much harder to get to this level. How can I say this? What should we do to reach that level? With us, that we have our COO and CFO. We have a CRO. We have the top management team. We have a very frequent discussion and we are updating content. So going through the PDCA and as long as we take a steady initiatives, I think we can get close to this level. I strongly believe in that. And of course, that there could be some temporary improvement of our ROE and ROA and also, there is a decline some time, but there is still 9 years to go. So we'd like to make sure that we make the linear growth. And if you look at the 3, 5 years' time frame, we would like to get closer to these targets. So we would continue to execute what we need to do one by one. So about the ORIX USA, there are several in March, April in the area of the private equity portfolio, we made announcement about the sale and in addition to those, there are core and noncore, and we are changing the rotating the portfolio. So maybe we have reached the bottom in order to get to the normal profit level, I think we would probably need a few more years. And the size of the business could shrink, but we'd like to make sure that we recover the profitability is our priority. So in charge of U.S. and Europe, the COO, [ Suzuki ] is here with us. So [ Suzuki ] is usually in New York, but very frequently, we have [indiscernible] with him to take necessary initiatives. So we'd like to spend a few more years so that we can normalize the profitability level. So that's a very frank views that I shared.

Any other questions? Third row from the front.

Takemura from Morgan Stanley. I have 2 questions. My first question is related to the last question. How do you view the future of the United States? What is your outlook? Page 8 shows that the finance category profit. JPY 189.2 billion and excluding the onetime factors, JPY 175.8 billion. So this is minus JPY 13.4 billion. Now last fiscal year -- I'm sorry, correction. The United States actually included in finance, I think. But anyway, the recovery gain on sales was about JPY 8 billion or JPY 7 billion last year. So I think there's an absence of this. And also you now you now have absence of the profit from the bank. So naturally, it should be about minus JPY 20 billion, but actually JPY 13.4 billion. So the difference explains the recovery in the United States. Is that the correct understanding? Can you please also talk about the background? That's my first question.

There are multiple factors. And therefore, it is very difficult to do an apple-to-apple comparison, but what you said is largely correct. Gain on sales of the service. And also for ORIX Bank, sales in the first half, that is the assumption. So second half profit will not be coming in ORIX bank. But last fiscal year, we had a movement coming in for the full year, contributing for the full year. So net-net for the finance category, we believe that the profit will increase slightly. And as you have mentioned, ex-USA recovery is accounted for. credit cost allocation was attuned for ORIX USA in the prior fiscal year. This was a big allocation. And the [indiscernible] of this will lead to recovery, big recovery. There are many positive and negative factors. I cannot explain everything today. That is basically the picture. Outlook for the United States, this is a very difficult question to answer. In terms of the businesses that we have downside protection wise, we have done everything we could in the last fiscal year already, basically. So it's just a question of how long will it take to recover. Example, deal project sales is now ongoing and potential buyers sometimes private equities. And private equity also has private debt business. Private equity, private debt within the current U.S. environment, including the major players, basically struggling. And the EPDs are listed suffering from much lower share prices as well. So when these problems start to materialize to a greater extent, then speed of asset recycling will slow down. And therefore, we don't have an extremely positive outlook for the United States. Rather than that, we need to take a very close look at what's happening in the seton day-by-day basis. Just this weekend, Suzuki has come back from the United States. So I think maybe he has a comment about his own assessment.

I'm in charge of Europe and the U.S. My name is [ Suzuki ]. Our CEO, Takahashi, has basically given you the overall picture of the United States already. Macroeconomic environment wise, when you look at the nonbank business, including the fund business, private debt impact [indiscernible] slow things down. With regard to ORIX USA, thankfully, the impact is quite small, as was explained before. Business partners are impacted, affected by this. So again, we are exiting some private equity business and also there is a noncore portion compared to when we were planning things last year, timing of sales and also the amount that we can get from that is something that we have to pay close attention to and we need to follow up closely in terms of recovery of the assets. Now with regard to new projects, new deals? There are 3 things that we're considering, largely speaking. One is a company [ holdco ] and [ Hilco ] can do asset-based [ leasing ] as this financing based on the asset valuation capabilities, and we can turn this into an asset management business. So this is alternative asset management, product structure that can be done for the future. And product mix-wise, we also want to focus on real estate. This is, of course, real assets. In the United States, agency targeted mortgage in real estate has been our focus, but we want to expand further including multifamily residential financing and also not just financing, but also equity investments. These are the potential areas that we want to get into and also other areas where we have real estate-related opportunities. Now asset management and alternative focused asset management. This is something that we will continue to promote and [ NXT ] is on the [indiscernible] lending. The market recognition has improved and the first closing of a new fund [indiscernible] launch was also successful. So we want to continue to promote this. But will we see the result of this already within 6 months? The answer would be no. It will take a little bit longer. We will continue to run this business meticulately over the long term.

I have one more question about dividend. ORIX Bank sales expected in the first half. Surgical so first half. So first half dividend is 39% against the profit of the first half? Is that the correct understanding? And also, this year, you'll be paying out a lot of dividend. Is this going to be the baseline for the next fiscal year's dividend?

With regard to your first question, your understanding is correct. And with regard to your second question, at the Board of Directors, we are debating this quite a lot, and we need some more time to debate this. We thought that this question will be asked. So let me explain about Toshiba. [ Kioxia ] share based on the large shareholding report sold by several percentage points by March and equity ratio is already 17.6% as far as we know. This is what we found out at the end of this call year. Now Toshiba uses U.S. accounting standards. So the accounting process, well, they'll be doing the earnings call, 15th of May. We have to wait for that. see how they will do this. But Toshiba may reclassify [ Kioxia ] to marketable securities. This is a possibility. So according to U.S. accounting standards, it will no longer be equity method. It will be marked to market, which means that based on the share price of last fiscal year end, it's possible that they want to capture the gain on valuation. So whether Toshiba will sell [ Kioxia ], even if they don't sell [ Kioxia ], if it's reclassified to marketable securities, then the evaluation will be different based on the share price at the end of the term. And whatever Toshiba captures will be captured by us based on the equity method, based on the statement. And I'm sure as analysts, you have already did the calculation, but we have to take that into consideration. And last year's prior dividend, you've been used as a [indiscernible], maybe when you consider sustainable return policy. So there is still a potential debate there, and we need some more time, and we would like to deliberate this at the Board level and decide on the policy direction.

So next, I'd like to take a question from the remote participants. JPMorgan Securities, Sato-san, go ahead.

This is Sato speaking. Two questions, please. First, the U.S., especially the credit business, I'd like to know more about the current situation. I think you referred to it earlier, and the credit -- the creation expenses is included. And in the supplementary information is about JPY 10 billion, the lending support. And this, I think, is mostly U.S. I mentioned that the risk is not so big. And so what is your recognition about this credit loss being included here? Could you explain that? Second is about the capital gain. On Page 46, this fiscal year capital gains are mentioned. And already, something which was discussed bank. And [ Sugico ], JPY 180 billion, I think and now the capital gain in comparison to your plan, the normal level, something that might emerge from now on. I think that the budget for that is quite controlled. But other sales is that -- does that mean [indiscernible] very aggressive about that? So this is about the capital gain plan. Could you explain the capital gain and a little bit further?

Sato-san, thank you. About the U.S. credit cost, if you go deeper and calculate, I think you will be able to get the numbers roughly speaking, about the JPY 24 billion credit cost included in the previous fiscal year. The breakdowns include, as we mentioned in the past earnings call. One thing as it was mentioned earlier, is the mortgage business for the agencies. We have that business. So with the high interest rate, which is continuing, the borrowers' credit quality is coming down. And so among the numbers that we mentioned, the major credit expense is for the real estate mortgage business. Another is the growth capital for the startups, the financing business. So in that portfolio, specific names, the situation is not so great. So we have some reserves for that. So those are the 2 that is mortgage related and the gross capital financing. It's the reserve for a specific name. Those 2 are the major parts of -- and of course, that -- we do have a debt business, which is very much diversified. So even at the normal level, a certain level of the reserve becomes necessary and that would continue to be the case. When we announced the interim results, we mentioned this. So as much as we can foresee when we can reserve or have a provision in the first half, we would like to have a conservative approach to have that. So for this fiscal year, expect that we can reach to that normalized level. As for the capital gain, then. It just happens that a -- it's not really toward the end of the fiscal year, but at the beginning of the fiscal year, there are some major gains from the sale. It just happened to be happening at that timing. But it doesn't mean that there will be a major time lag. We have to look at the market and we would like to try to maximize our assets when we consider the timing of the sale. So I would mention the specific name or specific number, but in the case of real estate and the renewable projects and the private equity, we continue to do the asset rotation and the capital recycling. We apply our strategies. So for this fiscal year, on the month and 11 months ago. So we would proceed with the sale from now on, and there will be some the proceeds or the gains from those sales are booked eventually.

One point of clarification. Earlier U.S. in the United States. What I wanted to ask was that on Page 32, especially the credit business line and for the full year reserve provision was mentioned, the end of the fiscal year, the credit line probably was [indiscernible]. So that's the growth capital. This is for the start-up lending. That is the debt. So that is where the reserve proportion happened.

Yes, that's correct. Your understanding is correct.

Thank you, Mr. Sato. We see 2 more hands up. Nomura Securities, Sasaki-san.

This is Sasaki. Nomura Securities. Page 8 of the presentation material, I would like to understand how to read this slide. So for FY '27, March, profit is high. And then for '28 March, considering the following fiscal year. I think you have big names with a latent profit. So until March '28, I expect the profit level to continue to be high or continue to increase. But what about FY '29 March, or 2030 March? Is there going to be some ups and downs? Or do you think the profit growth trend will still continue? What is the management's understanding. That's my question.

Last year, Greenko gain on sales. and also ORIX service sales a little bit smaller. And also for this fiscal year, we have a latent gain for sales for ORIX Bank, but these are one-offs. This is not something that we can book year after year, as you can imagine. In order to maintain the growth in profitability, we believe that there are a lot of latent profit in core business as well. But we have to materialize that, but we don't want to sell things just for that purpose. Real estate, energy and aircraft, we will be recycling assets, so we buy and sell and buy and sell. We need to continuously do that. So [indiscernible] going up and down, after year, we want to grow a recurring capital gain on a comp basis as much as possible. But it depends on the market situation. Sometimes you can sell at a higher price or lower price, against our expectations. Considering the recent environment, we are seeing some deals which are priced higher than our rational expectations. But can we continue this trend into the next fiscal year and the following fiscal year? Well, we have to think about the macroeconomic environment impact. We're not talking about 2035. But we're not just thinking about next fiscal year, the fourth fiscal year, we're really focused on executing what we can within this current fiscal year, meaning that we want to capture all the profit opportunities. And also we have a long-term vision into 2035. And there was a question about visibility of this. We will be focusing both on RE and profit growth and we have a mid- to long-term plan, but we -- as management, focused on what we execute within this current fiscal year in terms of resource and also time. I know that I'm not answering your question directly, I'm sorry, but that is what we're thinking.

We are getting close to the ending end time. I'd like to take one last question. BofA, Tsujino-san.

Two questions. This year's forecast business investment and equity profit, it's difficult, I'm sure, to try to come up with the expectations. So higher than last year and relatively conservative forecast, I think, is shown. Third year, you mentioned that there could be investment securities or it's possible that the shares are being sold quite a bit. So in that sense, you're having a conservative view. That's how you got to JPY 530 billion. That's my first question.

Should I go one by one? So to your first question, you're referring to Toshiba. This JPY 550 billion, the assumption that we have is that Toshiba has at [ Kioxia ] under the equity method and ORIX also have that under the equity method. So we are the -- so how the Toshiba will announce their business results, we don't know. But after checking on their business earnings, if the clarification changes, then from the equity method to the investment securities, it could change. I'm talking about the [indiscernible]. So we need to look at how they announced their business results. And once again, based on that, we would like to make the variation. So think that there is a sale on the gain on sale of the [indiscernible]. And based on a certain level of assumption you made this [indiscernible] forecast number. Well, there's a 3-month delay to incorporate the equity profit of [indiscernible] to Toshiba. And as far as we can confirm, during the last fiscal year, there was a sale and -- the unit price of the cell is not known, but we base our forecast on the reasonable price and the parts that were are incorporated into the forecast.

As for the forecast for this fiscal year, environment and energy, the impairment, I thought I expected a bigger impairment, but it was smaller than what I expected -- that is I think in Q4, it -- so this March '27, I think there could be some additional impairment. Is that the case?

Now? No. I was the head of the energy environment in the past. So Tsujino-san probably thought that this is low. But I was actually -- my impression was that this was quite high. So I'm -- this is regrettable. So we have no plans to incorporate any additional impairment.

Just one point. March '28, the ROE of 11%. It's a long way in the future and probably it's up to Toshiba. And I'm sure that it was difficult for you to come up with this number, but -- those are the very rough numbers. So if no changes from Toshiba, then 11% probably is difficult to achieve. Is that right?

Well, earlier during the Q&A with mass media. There was a similar question. And of course, it's not an easy number for us to achieve. We need to make further efforts. And naturally, when we made the plan in fiscal year, we said that our target remains the same at 11%. So we continue to make efforts, and it's is a number that we -- it is an achievable number. So right now, we are May '26. So March '28, there is still 2 years to go. So I think there are many initiatives that we can take. So we are not changing this. And as a management team who are here today, we will be working hard in coming 2 years in order to get to this level.

Thank you very much. And that concludes the earnings call. And before closing, we would like to ask our CEO, Takahashi to say a few words.

Again, thank you very much for joining us today. As I said in the beginning, last year, we announced a long-term vision and also long-term financial objectives that we want to achieve over time. We're talking about long duration, and there are many things that will need to be executed. And tough months have passed. We have 9 years still to go. It's a very long duration, but we just need to focus on execution. We will be implementing action plans one by one [ study ] in order to achieve our goals. And to that end, the whole management team work closely together. And we really appreciate your kind support going forward. And I would like to thank you again for today.

Thank you very much. And that concludes the earnings call. Thank you very much for your participation.