SBI Holdings, Inc. (8473) Earnings Call Transcript & Summary

Thank you very much for joining us today for this earnings announcement of SBI Holdings despite your tight schedule. And thank you very much for a big turnout on the Internet. This time, this is the announcement of first quarter results. So on behalf of Mr. Kitao, let me walk you through the results. Already, the report is public, but let me read out the numbers. Revenue, JPY 571 billion. Profit before income tax expense, JPY 225.8 billion. Profit for the period, JPY 156.8 billion; profit attributable to owners of the company, JPY 148.1 billion. In all line items, it's record high for the first quarter. Last year, the results were relatively good, but this year's results would much better. For the pretax income, it's about 2.5x, 149.9% increase. On an annualized basis, ROE is 29%. So against 15% in the midterm plan, it is much better than the plan number. The comparison of consolidated results with major securities groups, both the pretax profit and the quarterly profit attributable to owners of the company, we outpaced Nomura Holdings. We were ranked #1. Our ROE is 29% compared to other companies. It is a very high number. By segment, performance by segment. With the CLARITY Act anticipated, the crypto asset business market is struggling. Without this business, Financial Services business, Asset Management, PE Investment, Nextgen business, in all of these businesses, both revenue and pretax profit hit record highs as first quarter numbers, driven by especially the Financial Services business, given the very robust equity market, we saw big growth. Year-on-year basis, 59.5% increase in terms of pretax profit with JPY 116 billion, and we have been investing in advanced areas as PE Investment business and with multiple number of names, M&As and funding continued. And here again, we saw a very good performance year-on-year basis, up 328% or JPY 119.9 billion. Given very good results of the first quarter, we have decided to issue the forecast of the interim dividend payout for the very first time after the first quarter. In the previous year, after the share split, we increased from JPY 20 to JPY 30 by JPY 10. And on an annual basis, for the year-end dividend payout, eventually, we are going to make judgment based on the full year results. Last year, it was JPY 95 after the split, and we'd like to clear at least that level. By segment, starting with Financial Services business, both revenue and pretax profit, record highs. And in this business, 3 major businesses, namely banking, securities and insurance, in all of these businesses, year-on-year basis, the growth rate was more than 50%, especially for insurance business, in January this year, Kyobo Seimei, which became the equity method company, which made a big contribution to the profit. And SBI Insurance Group listed company is growing very steadily year-on-year basis, up 262.7% or JPY 13.5 billion. More specifically, banking business. SBI Shinsei Bank on a J-GAAP basis, already announcement was made by the banks. Gross operating profit, net operating profit before credit costs and the pretax profit hit record highs as first quarter numbers. As to gross operating profit in the first quarter already, the JPY 100 billion mark was surpassed. And focusing on corporate business and operating asset has been accumulated very stably and also the commission revenue is increasing that all of these things are reflected in those results. As to SBI Shinsei Bank for this fiscal year, JPY 132 billion is the target. But already in the first quarter, JPY 52 billion or 40% the progress ratio. So it is a very good, the progress, for pretax profit. Retail account and the total amount of deposit of the bank are also increasing. It was JPY 6.3 trillion. Now it is JPY 17.5 trillion. Now the account number is 4.46 million. Especially in September last year, the SBI Hyper Deposit, our sweep account in collaboration with SBI Securities, is performing very well. Only in 9 months, it grew to JPY 1.43 trillion. So with this collaboration with the securities side, it assures good stickiness of deposits. And as for operating assets, the balance is increasing at JPY 18.8 trillion. The interest rates are rising in Japan and profitability along with that is improving. We have Hyper Deposit. So we don't need to raise deposit rate so much to secure deposit amount. So pass-through rate is less than 40%. Currently, 0.1% increase. So the interest spread is 0.55%. As to corporate side, the lending side, mortgage rate, that is expected to see more impact from the rate hikes. And for Shinsei Bank, together with Shimane Bank and Fukushima Bank, we have turned them into equity method affiliates of the company. SBI Regional Holdings used to own it, but it has been transferred to SBI Shinsei Bank. With this, we believe we can further advance the fourth mega bank concept with SBI Shinsei Bank at its core as a wide area regional platform within the SBI Group. On a group-wide basis, more than 100 regional financial institutions have transactional relationships with us. And for Shinsei Bank, it has relationships with 92 financial institutional partners. Dedicated lending and loan asset distribution is underway. And in Q1, distribution was JPY 47.1 billion from Shinsei Bank. Next is the Securities business. The stock market has been extremely brisk. Therefore, it has led to higher trading volume. And we have been diversifying our revenue source, which has proved to be successful, leading to record highs at each level on the P&L. Looking at the revenue breakdown, compared to last fiscal year Q1, JPY 91.6 billion was the revenue this fiscal year in Q1, up by 47.5% year-on-year, especially for financial revenues, which I will explain later, we have been seeing a higher margin trading balance. And also, we have been seeing the other items increase as well substantially. Compared to the previous quarter, we have been seeing an increase in revenues by 18.3%. The number of security accounts due to the ZERO Revolution and the Open Alliance that has turned out to be successful, we are now exceeding 16 million accounts, especially in June 2019, when we announced the ZERO Revolution. We have started to see an increase in the number of accounts and this pace has not decelerated. So assets under custody of SBI Group Securities business has now exceeded JPY 75 trillion. Up until March 29, we are striving to achieve JPY 100 trillion in assets under custody. Next, for this page, we are sharing this for the first time, which is capital gains realized by retail investors. because the stock market is robust and risk, we have been seeing investors realize capital gains as well. As of June, that stood at JPY 464.7 billion. Comparing against last year, accumulated -- cumulative for last fiscal year from January to June, it used to be JPY 700 billion, but now it has went up by 3x to JPY 2.1 trillion. So the capacity to reinvest has been boosted. So additional investments and shift of funds into other financial products is anticipated. And we believe that we could generate a virtuous cycle. For these numbers, we have general accounts and NISA account, capital gains are not included here. So we believe the actual number is even higher than what we show here. Earlier, I touched upon the open interest credit balance. It has exceeded JPY 3 trillion, which is a record high. Because of this, for financial revenues as well, we have been reaching record highs. Year-over-year, the increase has been 57.7%. On top of that, for Q1 and trading revenues, we were able to achieve a record high, especially for FX. Spot revenue is about the same as last year, but currencies that are high rates have been high in demand. So swap revenue has been record highs. Also, customers have been realizing gains. Therefore, based off the gains, additional investments and a virtuous cycle is expected here as well. Regarding investment trust fees, increase in investment trust balance enables record highs. Regarding the balance, we were able to see an increase of 64.2% at JPY 31 trillion. In investment trust, fees were able to reach record highs of JPY 6.4 billion or an increase of 60%. And monthly accumulation, it was about JPY 300 billion as of end of March, and this was JPY 330 billion as of end of June. So in 3 months, it increased by JPY 30 billion. So at JPY 330 billion, it should reach JPY 4 trillion on an annual basis. So we are expecting a further growth of investment trust balance in the future as well. Also, because of the semiconductor market, foreign stocks revenue has been increasing substantially. SpaceX, which listed recently and memory ETFs as well as semiconductor-related stocks in South Korea has also boosted trading volume. Regarding U.S. stock trading value, we were able to see JPY 4.4 trillion and also margin trading also has been increasing to JPY 1.4 trillion. Due to this trend of revenue, foreign stocks have been increasing by 3x compared to March 2022. SBI Securities Institutional Investor business. Here again, another pillar for future revenue, it is showing rapid growth. The Institutional Investor Trading value increased 51.3% year-on-year. Along with that, the core revenue increased by 64.1% year-on-year. The retail JGBs. Currently, interest rates are really good, so very popular among customers. So in the future, who is going to buy JGB is one aspect. And SBI Securities is positioning retail JGB as one of the strategic products, and we are promoting sales to our customers. In the first quarter, JPY 150 billion is the sales amount among securities firms. I think we are ranked #1. Going forward, the more interest rate hike is anticipated. So this JGB is going to be more attractive to retail investors. SBI Securities' primary and secondary underwriting business for stocks and bonds is the strengthening 16 million accounts we have. And as to ranking or IPO ranking, SBI is ranked #1 with 10 cases and 90% of underwriting shares. And with underwriting of corporate bonds and government bonds, we are getting very good yen-denominated revenue. Moving on to Insurance business. So a listed company, SBI Insurance Group. Here again, for each line item, our numbers hit record highs. As to ordinary revenue year-on-year basis -- excuse me, for the ordinary profit, it grew by 23.3% year-on-year basis, driven by increasing number of policies. It surpassed 3 million in 2025 and now 3.25 million that is increasing at 13.6% CAGR. And in January, Kyobo Life became equity method company, and it is generating the big impact. On an IFRS basis, about JPY 8.9 billion was booked as the share in investment profit. Kyobo is 1 of the 3 largest Korean life companies. And for their core business, it is increasing its profit and other 2 big insurers in Korea are not doing so. And about JPY 16 trillion of total asset, we can expect various business tie-ups with them, and we are discussing them about that, discussing with them about that. Asset Management business. Here, both revenue and profit hit record high numbers. As to pretax profit, it increased 103.6% year-on-year, more than doubled at JPY 2.7 billion. Listed company, SBI Global Asset Management on a J-GAAP basis for every line item numbers are record highs. And for profit attributable to owners of the company, JPY 1.4 billion, up 177.2%, driven by increasing AUM. Now it is about JPY 14 trillion. This fiscal year, inorganic strategy included, we'd like to target at JPY 20 billion -- JPY 20 trillion. And for 2029, we target at JPY 50 trillion. PE Investment business, performance was very good. The pretax profit increased by 328% at JPY 119.9 billion. Especially in advanced sector, we have started the investment much earlier and now it is paying off the defense, energy and the quantum physics and so on. We have M&As and other deals, and we could achieve good results. IPO M&A results. We already exited 5 companies and the forecast for the full year is 27. These advanced area investees, promising investees, they are expected to drive good results. This fiscal year, we have about 13 investee companies, such promising companies or 20 or so for the next year included, the 5 semiconductors, 2 fintech and AI energy, defense, digital assets, quantum technology and so on, 1 each. So out of the 13 companies, 6 companies recognized profits in Q1. Going forward, there are high likelihood of 5 companies and 2 medium likelihood companies that are likely to contribute profit-wise. Regarding Ripple, XRP prices, I talked about the CLARITY law earlier, but people are waiting for it to pass. Therefore, prices have been sluggish. But even so just with the Ripple's holdings, it is at JPY 6.6 trillion right now. Regarding the assets under management of the PE business, we are at JPY 1.3 trillion for the Private Equity business. Next is the crypto asset business. Like explained, the market has been sluggish, leading to minus JPY 1.4 billion in profit before income tax expense. On the other hand, the global crypto asset market maker, B2C2, has recognized positive profits. On top of that, regarding the CLARITY Act, before it passes in Japan, various laws and regulations are already in place. So during this period of time, in order to maximize earnings during the next market upswing, we are implementing various measures. For VC Trade, we have started to carry JPYSC. On top of that, JPYSC lending services has started as well. And globally, on-chain finance will be our focus and alliances or business tie-ups with platformers or investments are being made into these entities. For VC Trade, we currently have about 2 million accounts. For AUM, it's around JPY 530 billion. And Bitbank, we are planning to make it a wholly owned subsidiary. It will be done in August and the number of accounts overall should reach approximately 3 million. And assets under custody will reach approximately JPY 170 billion, enabling SBI Group amongst the industry leaders. Finally, I'd like to talk about the next-generation business. Revenue and profit before income tax expense have reached record highs. Profit before income tax expense increased by 252.5% at JPY 3.6 billion. Essentially, there was JPY 1.5 billion equity in earnings of affiliates from Mynavi. And due to the business reorganization, we have been able to recognize profits from that, reaching the record highs. So that was an update of each of our segments. From here on, starting from April up until July, we have been making news releases of some items. And here, we raised some key topics. Last fiscal year, Mr. Kitao talked about our 3 key strategic objectives. There are many releases that we made in relationship to this objective, and we are seeing steady progress made. For AI-related, we have engaged an alliance with Anthropic. And for on-chain related, we have been doing various capital and business alliances with global companies and have also made investments. And for neo-media related, with Fuji Media, we have started discussions to engage in alliance with them. For details, it is in the presentation deck. So I hope you can read through later. That is all for me. Thank you very much.