Q2 2013 Shinsei Bank Ltd Earnings Conference Call
Nov 09, 2012 AM EST
8303.T - Shinsei Bank Ltd
Q2 2013 Shinsei Bank Ltd Earnings Conference Call
Nov 09, 2012 / 01:00PM GMT
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Corporate Participants
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* Shigeru Tsukamoto
Shinsei Bank Ltd - CFO
* Hitomi Sato
Shinsei Bank Ltd - Senior Managing Executive Officer
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Conference Call Participants
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* Nick Linnane
Cube Capital - Analyst
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Presentation
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Operator [1]
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Hello, and welcome to the Shinsei Bank fiscal 2012 interim results conference all. As a reminder, today's call is being recorded. At this time I'd like to turn the conference over to MR. Shigeru Tsukamoto, CFO. Please go ahead.
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Shigeru Tsukamoto, Shinsei Bank Ltd - CFO [2]
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(Interpreted). This is Tsukamoto, CFO speaking, and we would like to report to you the interim results for the fiscal year to end in March 2013, which was announced yesterday.
First of all, consolidated reported basis net income was JPY25.7b while the cash basis net income was JPY30.6b. Non-consolidated net income ended at JPY15.6b.
If I may give you some of the highlights of the past six months, because of the significant increase in revenues gained at the non-consolidated level by the parent, the gap between consolidated and non-consolidated results narrowed.
Another trend that had already begun in the previous fiscal year was the reduction in non-recurring items, and therefore the sales efforts have actually directly led to increased revenues. At the same time expenses as well as credit costs continued to decline.
Yet, however, one point with regard to expenses that had increased slightly year on year because of the depreciation of the IT system that was implemented in the second half of the previous term.
Talking about capital adequacy ratio because of the retained earnings and reduction in the deductibles, the numerator, the capital increased while we were able to increase efficiency in terms of risk assets. And therefore, total capital adequacy was 11.71% while Tier 1 stood at 9.7%. Both ratios were an improvement of approximately 1 percentage point.
The absolute amount of non-performing loans had declined by approximately JPY20b while total credit had increased, and thus non-performing loan ratio had dropped from the previous record of 6.6% to 6.16%.
We are currently maintaining the forecast for the full year announced last May of JPY51b for consolidated for consolidated reported basis net income and JPY22b for the non-consolidated net income.
That wraps up the outline of the interim results. And I'd be happy to respond to your questions.
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Questions and Answers
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Operator [1]
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Thank you. (Operator Instructions). We'll take our first question.
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Nick Linnane, Cube Capital - Analyst [2]
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Hello. This is Nick Linnane from Cube Capital here. I just had a couple of questions if I can ask. I notice there has been a continued drop in your non-core assets, in particular, the divestible securities.
Can you say whether the amount of assets you have in real estate and also private equity funds has decreased or if that amount has stayed roughly the same and the reduction in the securities has come mostly from selling corporate securities?
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Shigeru Tsukamoto, Shinsei Bank Ltd - CFO [3]
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(Interpreted). The business item that has declined most significantly during the past six months was marketable securities (background noise) 60 points.
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Nick Linnane, Cube Capital - Analyst [4]
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If I could ask a second question, you give on page 16 of your presentation an estimate for your Basel 3 Core Tier 1 currently. When I do the calculation that seems actually slightly higher than your Basel 2 Core Tier 1 at the moment, Basel 2.5 Core Tier 1 at the moment. Can you confirm if that's correct or not and explain how that is the case?
And a second part of that I noticed you issued recently some new lower Tier 2 debt. I'd be interested if you can say anything about what direction you get from the FSA, if any, about the sort of hybrid debt they would like to see you have, whether they want to see you issuing new Core Tier 1 debt -- sorry not Core Tier 1 debt new other Tier 1 debt as well or if they are content if you just have equity and lower Tier 2 debt in future.
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Shigeru Tsukamoto, Shinsei Bank Ltd - CFO [5]
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(Interpreted). Let me respond to the second question first. The Japanese regulatory authorities, the JFSA does not give any guidance to the issuer like ourselves or they do not manifest their desire with regards to individual banks' capital structure.
It was purely upon our managerial decision that we issued the Tier 2 paper which is eligible under Basel 2. And we've also announced, and you should know that we did a funding of JPY6.4b. And in early November we also implemented a call on the subordinated bonds that had been issued three years ago.
Now FSA will allow for such call on bonds as long as it does not undermine the capital of the bank. However, if there is some risk that the capital of the bank would be undermined FSA would be rather reluctant or impose restrictions on even such calls as well.
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Hitomi Sato, Shinsei Bank Ltd - Senior Managing Executive Officer [6]
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(Interpreted). And now let me respond to your first question. This is Sato speaking. So let me take this question because it's rather technical and I will respond on behalf of Mr. Tsukamoto.
Under the Basel 2 rules the lower rated securities or unrated securitized products are deducted from the denominator the total capital. And during this first half of the current fiscal year the Bank disposed of such assets. And that is why the improvement of total capital adequacy ratio is more than the improvement that we had experienced in Tier 1 capital ratio under Basel 2.
However, in the case of Basel 3 low credit paper as well as unrated assets are considered as risk assets. And the percentage of 1,250% would apply to such risk assets. And therefore, that would hit the denominator.
And since the Bank had disposed of such assets, that has the impact of reducing the risk-weighted assets on Basel 3 basis. And therefore if you compare the total capital adequacy ratio and the Tier 1 capital ratio there is some difference in the degree of improvement in comparison between Basel 2 and Basel 3 basis.
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Nick Linnane, Cube Capital - Analyst [7]
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But just to clarify am I correct in understand that what you show is that your core Tier 1 ratio is higher under Basel 3 than it is currently under Basel 2. That seems to be what the figures show.
(technical difficulty)
Sorry, just focusing on that figure I guess the thing that stands out is your common equity Tier 1 ratio under Basel 3 is the same as your Tier 1 capital ratio under Basel 3.
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Hitomi Sato, Shinsei Bank Ltd - Senior Managing Executive Officer [8]
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(Interpreted). Since the concept between Basel 2 and 3 are different there is no such concept as common equity Tier 1 ratio on Basel 2 basis.
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Nick Linnane, Cube Capital - Analyst [9]
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Okay. Thank you very much for taking my question.
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Operator [10]
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Thank you. (Operator Instructions). There are no further questions at this time.
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Shigeru Tsukamoto, Shinsei Bank Ltd - CFO [11]
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(Interpreted). Thank you very much for participating in this teleconference. You might not have had enough time to study in detail the interim results of Shinsei Bank, so should you have any follow up questions please feel free to contact our IR communications. Thank you very much once again for attending.
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Operator [12]
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Ladies and gentlemen, thank you for your participation this will conclude today's conference.
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Editor [13]
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Portions of this transcript that are noted "interpreted" were interpreted on the conference call by an Interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.
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