Q2 2016 SBI Holdings Inc Earnings Presentation

8473.T - SBI Holdings Inc
Q2 2016 SBI Holdings Inc Earnings Presentation
Oct 29, 2015 / 07:30AM GMT 

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Corporate Participants
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   *  Yoshitaka Kitao
      SBI Holdings In - CEO

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Presentation
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 Yoshitaka Kitao,  SBI Holdings In - CEO   [1]
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 (Interpreted) Thank you very much for taking the time out of your busy schedules to come today. I am very grateful that we have many participants today. So without further ado let me provide you with the results for the six month period ending September 30, 2015.

 So let me start with the financial results. Revenue was 1.5% year-on-year increase, JPY115,183 million. Pre-tax profit was minus 38.7% year-on-year, JPY19,906 million.

 If you just look at the numbers it seems as though we have booked losses, but last year, in the first half, we sold two companies so that had contributed very largely to the revenue and the profits of the previous year first half.

 So we have a slide which presents to you what happens if we did not have this impact from the sales last year. You can see that a lot of the debt was the SBI Mortgage and SBI Life Living, so if you look at the number which excludes these two companies, in terms of revenue it was actually plus 27.7% and in terms of pre-tax profit it was actually an increase of 36.7%. So that's the situation.

 So we believe that our performance did not deteriorate at all. We think it is moving exactly in line with our plan.

 Now in terms of revenue by segment, so for example financial services it was plus 20.5%, this is excluding the sales of the two companies. So you can see that actually revenue grew in financial services.

 Now in terms of asset management you can see there's an increase because of some extraordinary reasons. Morningstar, which was in the financial services business segment, we moved it to asset management. There was a reason why we moved it but (inaudible).

 So this first half would have increased if there was the portion of Morningstar Japan. Here's a decrease by JPY2135 million, if there was no transfer it would have been positive.

 Now asset management business, it says increased by JPY2332 million, so this should be deducted, but this is an apple-to-apple comparison of the first half so SBI Mortgage, ARUHI today, or -- we need -- also SBI Life Living we need to have the similar thinking.

 So asset management was 32.6% increase, bio related, this is plus 304%. Others, this excludes Life Living. So if you exclude that impact it's actually plus 111.2%.

 In terms of pre-tax profit that's 21.4% and asset management, Morningstar was added but it's still negative in pre-tax profit. Buyer related, again, there was a great element of positive increase so it has improved significantly but in terms of pre-tax profit level it's still booking negative.

 Now in terms of consolidated financial indicators, ROA at the end of September 2015 was 6.4%, so it's quite a high level. This is actually deducting the customers' assets and liability accounts of the security companies. If you include that it's actually larger in the amount.

 Then interest bearing debt ratio was 115.6% and if you include the percentage of equity attributable to the parent it's 20.1%. So I think it's appropriate to exclude this in principle.

 So at the end of March what has decreased is the actual execution of return to the shareholders of JPY17.6 billion in total. Dividend, as we have been saying before in the interim, we will be paying out JPY10 per share towards the end of the year, it is undecided. But in terms of the total return to the shareholders we are aiming to achieve 40% in payout ratio, so that is our line of thinking.

 Now in terms of the foreign shareholdings it has increased again. This is at the end of September, 46.2%. Domestic financial institutions 19.3%. So the shareholdings by institutional investors is at a high level of 65.5% but then we see a decrease of private investors, which is 26.7%.

 So in terms of highlights of each of the business segments, let's look at the financial services. SBI Securities, starting at the top. You can see that much has -- many have recorded a record high. SBI Securities on the IFRS basis in pre-tax profit it's actually plus 32.1% increase. Liquidity Market was plus 63.8%, FX trade, plus 112.7%.

 Japan next. Securities, plus 32.6%. Money Plaza, plus 35%.

 Meanwhile SBI Insurance losses were JPY786 million, which is minus JPY510 million year-on-year. Let me explain the reason later on. In terms of Sumishin SBI Net Bank, if you calculate on an IFRS basis on the first half it was JPY1144 million in terms of contribution. Now on November 12 they will announce their results, but their business is very steady. But if you look at it on an IFRS basis the way they evaluate the bond this is what happens.

 Then SBI Holdings, if you look at the Comparison Website Business it was 17.4%. Remit has also recorded record highs. Benefit Systems is also a historical high.

 So in financial services, this is our main pillar of the business -- and you can see that each of the businesses are doing very well.

 So let me look at it from SBI Securities. This is looking at the trend in average -- the individual brokerage trading value. It has increased 17.9% year-on-year. If you look at the market, the market itself has plummeted because of China shock but everything else I think is maintaining a very nice high level.

 Therefore, as a result because the performance was good -- this is based on the J-GAAP but revenue, operating revenue, which is according to sales, was JPY44,368 million, was plus 26.6%. Ordinary income was plus 33.8% increase year-on-year, that's JPY20,121 million.

 So this is comparing the main online brokers. So the SBI alone, exceeded the JPY20 billion mark. What is interesting about those results are the Nomura, Daiwa, SMBC Nikko, for the first half of the year they are all in big negative numbers, while the online securities, although some of them are suffering from some negative numbers, basically they are all [at risk] positive numbers.

 The Monex, in the previous term, they were not doing very well so we are seeing some debt increase, partly due to the turnaround in their US business. This is for Monex. So even when the market aggravated basically there is no -- the sudden big decline in the numbers. So there is a strong rigidity against downwards the trend. In other words, the fixed costs have been reduced so we are in a very strong position.

 This is stock brokerage trading. Significantly increased. Plus 28.3% year-on-year and commissions increased, plus 27.5% year-on-year. I'd like to add one comment here. So wholesale, basically it's supporting the [large real] companies, brick and mortar companies, but once the wholesale goes down then who has the dominant share in the retail, SBI and other online securities firms. On the retail side we are not seeing the big decline numbers even when the market aggravates.

 When it comes to wholesale, when the market is bad and the wholesale business stops. So that's a big difference between wholesale and the retail.

 As to the open interest credit balance in the second quarter, somewhat decreased but on the very high level. The individual retail, both the buying and selling, those transactions are going very well, the very high level.

 Financial revenue. This time we have reduced the fundraising from outside, using cash at hand (inaudible) to earn the interest income.

 So that was our strategy.

 So even when the market goes down and the results are likely to go down, we can reduce the borrowing from outside, we should do that, so that we can increase some interest income even before September we thought that there was something bad is happening and we gave instruction to execute that strategy.

 The investment trust balance and trust fees are at the very high level and they are expanding very steadily. The 33.3% year-on-year increase for the investment trust fees.

 As to the number of accounts, we are completely dominant, with the 3409 thousand (inaudible) accounts, and JPY9 trillion of deposit assets of the customers, and other players like Monex and so on have very little business here.

 Enitity of the commission rate, we are dominant, though Monex has a very high, the other one, though we have a very low commission rate under such circumstances for the share of individual stock trading of value in the first half.

 On the full year basis, 2014 was 38.1%, and in the first half, the 41.7% in the first half of 2014 fiscal year, (inaudible) 36.8%. We are increasing it from 36.8% to 41.7%. Then as to individual margin trading value, though we increased from 38.4% to 45.7% on the full year basis, is 40.5%. For the month of September it's 51.4%.

 Now, the SBI Liquidity Market FX trading. First of all, the SBI Group, the number of accounts and customer deposit assets. As you can see, in the FX players, we are dominantly number one in terms of deposit assets and trading accounts on both terms. So in the FX trading, we have the leading position.

 So this is SBI SECURITIES, SBI FXTRADE and SBI Sumishin Net Bank, this is the total of these three SBI Group companies. SBI Liquidity Market, [OTC] market, through that market these players are doing business.

 As to SBI Liquidity Market financial results, as to the operating income before allocation, JPY6674 million. This means that the [demand] before its allocation of profits to affiliated companies, namely SBI SECURITIES, SBI Sumishin Net Bank and SBI FXTRADE. That's in other words this total operating income before allocation, the 56.2% increase. In particular, SBI FXTRADE, SBI SECURITIES, SBI Sumishin Net Bank, those who do not have accounts at those players and those who have small but frequent trades, SBI FXTRADE was established for such customers. So here SBI FXTRADE is absorbing those customers and the business is increasing.

 The MONEY SQUARE and Money Partners, the listed companies, compared to them, we started in May 2012. The other companies, for them, they took the two years or five years to grow their business, but in a very much short period of time, SBI FXTRADE established their business.

 Next, SBI Japannext, the 32.7% increase compared to the previous year, the same period of the previous year. The volume is decreasing, but it's very steady. In the first half, JPY698 million in the first half. So on date of 12 November, the results will be announced for the banking business, so not so much details here.

 But it exceeded JPY3.5 trillion, that is of 28 October, almost at the record high numbers. This is deposits of six internet banks, on the right-hand side, Daiwa [with its] announcement they're JPY3.2 trillion against the JPY3.4 trillion of SBI Sumishin. Daiwa is now trying to catch up with SBI Sumishin.

 Next, SBI Hybrid Deposits, depending on the markets, as you can see. The reserved money and the actual (inaudible) trading money. The record high is JPY1369.4 billion in May 2015, and this was the largest reserved waiting the money, and when the market goes down, it goes to [the other] market. When I say market, it means equity market.

 Next to housing loans balance at the banking business. JPY2030.1 billion, so at the end of September it exceed JPY2 trillion. As for the housing loans, JPY2.5 trillion. So you can see that it has been a very rapid increase. Not just housing loans, but in order to expand the offering, we are doing many other things. But there is room for further expansion for housing loans.

 SBI Mortgage was sold off, so we were not that focused on Flat 35. But in order to expand the housing loans product offering, we started a full scale offering of Flat 35 and long term fixed rate products from September 2015.

 Card Loans. 19 October it exceeded JPY100 billion. We are very focused in this area. Also, those specific purpose loans and auto loans, with various measures in management. The acquired deposits are managed and invested in these manners.

 Ordinary income. In the first quarter it was about JPY5.2 billion, but then in the second quarter was how much it's going to be. It's been very good. Daiwa Securities made announcement of JPY3.6 billion or so, so what would be the number that we're going to announce? On the 12th we're going to announce it anyway.

 Insurance business. Again, the number of contracts and also the direct premiums written, we enjoyed double-digits growth. We are still enjoying double-digit growth, respectively 12.9% year-on-year and 12.3%.

 Also a very important factor is combined ratio. This is 91.4%, so we are almost in the realm of making profits. So how come we couldn't make profits JPY786 million minus [why] in the first half.

 Then because of the Silver Week and Tropical Storm Etau and Typhoon Goni, there are many accidents, the number of accidents increased. There were also several unfortunately significant insurance payments.

 Having said that, regarding [non-life] insurance, I made a commitment to generate profits. No matter what, we will generate profits.

 As I said before, without these extraordinary factors, we are sure to be able to make profits. Regarding such natural disasters, we can't really forecast natural disasters, so that's where the difficulty lies.

 To the extent possible, under normal conditions we can make profits. Even with some extraordinary factors, even with the tropical storm like Etau or Typhoon Goni, we can still make profits.

 SBI Life Insurance. The fully fledged sales activities have not been started. I wouldn't say that we have done nothing, we have been making a lot of preparations, hiring persons, for instance. When we brought it, the group of people who do administration or the salespeople, there were none, there was nobody when we bought it, only some people who were doing the management.

 As for the systems, we must make systems that are good for us, and marketing. Especially since we will be focusing on the internet [web] life insurance. There are other channels that we have inbound-outbound call centers for instance, or using small shops. Insurance marketing activities; these will become necessary going forward so we need to hire such people.

 We are about to make preparations, of course we will have to develop new products. February next year is one milestone that we would like to have in our mind to make preparations. A JPY160 billion assets are there. So when we make profits -- and we do make profits, according to J-GAAP, JPY1.2 billion.

 In the case of life insurance companies, even in Western countries, particularly in Europe, IFRS is not adopted as it is because in the case of life insurance, the special accounting methodology is used.

 In principle, we use J-GAAP only in our announcements, that's what we intend to do. Otherwise it can be misleading as its size it is on the increase and we do mark to market evaluation, then life insurance accounting can be very misleading.

 Again, the small amount short term insurance companies, both in the number of contracts are in both cases increasing. MONEY PLAZA, the operating income increased by 34.9%. This time we had the [below], financially business has been [really] brisk.

 Under normal conditions, the asset management business should be generating profits. But unfortunately, there was a China Shock. [Besides] on the [x day] at the end of September, that actually determines the mark to market value, end of March, September, December.

 With the FX rate and share prices with these FVTPL with [fair] values through profit and loss, everything is evaluated, our performance is evaluated. For listed shares, it plummeted at the end of September and losses of JPY8.1 billion.

 We have unrealized profits of JPY3.4 billion. [If it's] J-GAAP, we didn't have to recognize anything, yet JPY8.1 billion was recognized. Unlisted ones are expanding revenues and second finance and with third finance is financed with a higher value, that's the performance, and JPY3.3 billion plus.

 FX is JPY119.8 with stronger yen, and that really hit us. Nikkei [average] 14.1% and Shanghai Composite Index minus 28.6%, and Chinese share prices negative figures really hit these figures. But again, they are on the rise again, it doesn't drop on December and then we will see how this will be reflected.

 Now, Korean savings bank, South Korea Savings Bank. Compared with the April-June period, if you look at the July-September, it decreased slightly JPY1345 million.

 We thought we would be able to clear JPY2 billion but it's actually lower by JPY1 billion. Why? Because there were two trial cases and we lost these trial cases. One, in the first instance and second instance we won, and we were expecting a win.

 Maybe we didn't pay the attorneys enough, but in the third instance we lost the case. We have looked at the Japanese company. I'm not talking about, I don't want to talk about the Sankei newspaper, but perhaps people might have some concerns. So all the more we have to be careful. To the South Korea people, I communicated this very meticulously.

 Litigation related to JPY1 billion provision has been made. In reality, there has been an improvement, we don't have to worry about making injection. K-GAAP in July-September, it's now in the positive territory, KRW5.9 billion positive figures.

 The [non-performing] loans in March 2012, that was the bottom, but it's increasing, especially the June 2014 is on the increase. The retail performing loans are now on the increase, in the retail it's doing very well.

 So this is looking at the changes in new retail credits. As you can see, this is an increase of about 59.1% or so. So we have increased sales and new product sales, marketing and internet online.

 So as we aggressively promote these initiatives, or we have done some consolidation mergers, and I think we are begging to see the fruits of that. In terms of the delinquency situation, if you look at it in terms of delinquency ratio of retail loan among the entire loan is 22.4% and retail loan is 12%. So you can see the loan quality improving significantly.

 Furthermore, the Korean Savings Bank, as I read in the newspapers in Korea, it seems as though they [write-up] as Korean savings banks are the evil banks. When we become the largest, and we're Japanese as well, we are written so negatively.

 They say that we charge interest rate of exceeding 30%, the maximum is 34.9%. But actually, in reality, our average retail loan is only 16%, so we're actually lending at a very low rate. So no matter how people look at it, there's no better savings bank than us, but we tend to be spoken negatively.

 But the young customers understand us, so we see an increasing number of young customers and we see good, high quality loans. But we need to not just have the younger customers understand, we need to have everyone understand very clearly that our interest rates are low.

 So that is why we are planning to release a new medium interest rate product, about 10% level per year, and we will launch a very large publicity on this to show that even the statutory interest rate maximum is 34.9% and they may say that it will be lowered down to 30% or even lower, but we are even much lower than that are there's no impact on us whatsoever.

 Even going forward, we can continue to be profitable. In fact, the basic thinking of SBI is that we are customer oriented, we place customer's profit interest first, and this is something that we are consistent in South Korea as well.

 So for the borrowers, or excuse me, those who deposit money with us, we want to provide them with the highest interest as possible, in terms for the borrowers, to lower this interest as much as possible.

 So Morningstar, they do their own financial announcements, so I will not go through in detail, but they're doing very well. Operating margin is 32.5%, so I think they're [Asakura] is doing a very nice job in managing the company.

 This is M&A and IPO prospect for 2015. We're expecting 20 here deals, listed here. Actually, there are preparations underway for an IPO promising biotech investee company in the fourth quarter FY2015.

 We're expecting this deal to be quite substantial.

 SBI Investment also manages funds. These funds are investing in robot, space and cyber security recently. The fund would like to invest in these areas as much as possible. The Japanese players, though we are not limiting ourselves to just Japanese players, we are extending our antennas out to different countries.

 So for example, Argus Cyber Security, this is an Israeli company, it utilizes Israeli defense technology. So we would like to incorporate these companies like this into our portfolio. We actually send some of our employees to Israel and we work with Israeli venture capital and we set up a fund.

 SBI Investment KOREA, in the first half they have been successful in raising funds and being commissioned by the government of nearly KRW200 billion. We are expecting to have new commitment as well.

 Right now the total commitment is KRW70 billion in JPY7.7 billion. The Korean Government is very different from Japan in that they encourage venture capital. It seems as though in Japan a lot of money is sent to government related funds and the performance isn't very well. So we should follow after Korea more.

 Now, bio-related. As I have said earlier, profitability is improving quite significantly, particularly in terms of SBI Biotech. You can see that it was negative but it is JPY33.9 million it's positive.

 This is because SBI Biotech has 100% subsidiary called Quark Pharmaceuticals. In a milestone agreement, they received an upfront fee of USD20 million. So as a result, they have become profitable in the first half. SBI ALApromo, it used to be booking more than JPY300 million in losses, but now it's been reduced to JPY54 million. This is because they had cut down promotion expenses.

 Now, SBI Biotech, they currently working with Novartis, we have signed a milestone agreement with Novartis. We are in phase III in seven institutions, primarily in the US, but Canada, Germany, Brazil and other countries, and they are near completion of the clinical trials there.

 The first administration to patients is expected in December 2015. The other AKI is in phase II; again, they are nearing completion of preparations for clinical trials at 50 institutions, mainly in the US and Germany.

 The Biocon, this is India's major pharma company, this is in phase II and III. They have completed the preparations for a clinical trial in the United States and they are expecting to start with the first patients in November 2015, and for China, as soon as they acquire the license and then regulatory approval, they will start this. I believe this is extremely promotional.

 This again, we have one acute angle closure glaucoma in phase II.

 Also we have one with Pfizer, which is a mega pharma, we have glaucoma and DME pipelines which we have signed milestone agreements with. In terms of Anti-ILT7 antibody, we work with MedImmune, it's a subsidiary of AstraZeneca, they are doing pre-clinicals right now. So you can see we have a very abundant, ample pipeline.

 So in the United States, this condition actually satisfies the requirements for a public offering at NASDAQ market. Because of the situation, there's quite a heightened interest in Quark among the listed companies in Europe and North America.

 We have actually started a due diligence process with two companies. We are agreeing to concrete discussions with a preliminary valuation of USD300 million. So based on the due diligences done based on this valuation, and after that's through due diligence, if for so-and-so reason they want to lower the valuation but they maybe want to purchase it or maybe we can, actually, in parallel, we are preparing IPO on NASDAQ for Quark. So this will be done simultaneously.

 As for ALApromo, we have more than 5000 stores. These are the consulting pharmacies and drug stores that actually offer ALApromo products. More than 5000.

 We have a product called the ALAplus Drink, it's a beauty drink. We have actually secured orders for the first production batch of approximately 80,000 bottles.

 Now, as I look at our current business environment, I believe this is our second stage for leaps and rapid growth. The first stage of high growth leaps is when I started up the business in 1999.

 I believe that we're entering the second stage, so I want to talk about a little bit of that. It was in 1999 when the Company was founded, I was working at SoftBank as a CFO.

 SoftBank would lead the internet area and I would be leading the financial services area. So let's create SoftBank Finance and I will be responsible for financial services. What I saw at that time was an internet revolution and an affinity between internet financial services. I believe that if I start now, we can win for sure.

 But what was an indispensable condition at that time was the financial deregulation. In other words, if I may reword it, we needed to see deregulation of fees and commissions.

 During the administration of [Ryutaro Hashimoto], we were about 20 years behind the United States, 10 years behind the UK, and the big bang was just about to start in Japan. We saw that as a good opportunity and we wanted to become the first FinTech and we started out as a FinTech.

 Since then, 16 years have passed. In our Group, we now have employees of 5646 from 55 employees in 1999; operating revenue was zero, we're now JPY245 billion; we had no consolidated subsidiaries, we had [2027]; at peak we have 11 public-owned companies but now we have five; capital, [Mr Song] gave me JPY50 million but I have never gone and asked for more and now we have JPY81.7 billion capital; net assets was JPY50 million, now it's JPY410.5 billion; the Group customer base, which is important more than anything else, we have 18,951,000. So we are by far and utmost the largest and the greatest player in the internet online finance services.

 In terms of SBI SECURITIES, the Company annual growth rate is, in terms of number of accounts, 28.1%. This is since the date of launch of the online transaction operations. Actually, we bought Osawa Securities because we needed license, so we bought Osawa Securities, we reorganized it and we made an online securities company.

 SBI Sumishin Net Bank even has a higher growth rate. The compound annual growth rate was 51.7%. I believe that internet bank, that Sumishin Net Bank will exceed the number of accounts of the SBI SECURITIES. Now, SBI Insurance, they started in January 2008, now today they have 780,000, and in fact their growth rate is highest. I believe they will continue to increase the number of accounts.

 Now we are making the second leap forward. What is that? Well, we are finally seeing global interest in FinTech. It's a combination of finance and technologies , and then finally talk about FinTech, and we've been saying this 16 years ago.

 And what we are saying these days is that the global investment in FinTech ventures tripled to USD12.21 billion in 2014, clearly signifying that the digital revolution has arrived in the financial services sector. Established financial services players are starting to take bold steps to engage with emerging innovations. That's what Accenture is saying in the future of FinTech and banking.

 We understand this without it being said; even from 16 years ago we saw this coming. I can say now it's too late. But having said that, why is our future driver for growth, that is China, South Korea and other nations. In these different regions financial authorities are leading this internet and mobile financial services initiatives.

 Even in China for example they will now -- you can actually see new guidelines being issued. South Korea FSC is trying to grant license for pure play internet banks. They don't even have love for for pure play internet banks, and you need JPY50 billion to establish capital.

 But they say they currently are urging -- the President's office is actually urging the companies to establish a pure play internet bank. Someone had approached us to become a member of that, but Banking Act is not in place for a pure play internet bank so we decided not to do it.

 And because the Banking Act is not in place, the main companies like our [decider] for example, [KT] and [Damonkawa Interparks] have decided, they have announced, but you can't enter into internet banking when the capital is so spread out; someone has to be responsible. So we feel as though this is a very difficult stage is to enter this market.

 In Thailand, first, Online Securities is actually our subsidiary, commenced its operations this October. It's called SBI Thai Online Securities. So you will see online financial institutions all around the world. We have many visitors from Taiwan, from China, even long before, and we have many Korean companies visit us. We are becoming the model in the world.

 Not only that, since Mr Abe has become the Prime Minister, he has implemented Abenomics, and he calls it the new Abenomics but in principle it's the creation of new industry, new companies and have the money flow into financial services. That's the mechanism he is trying to build, and encourage and accelerate this flow from savings and investment so we begin to see such policies being introduced.

 So in that aspect NISA, it's the abbreviation of Nippon Individual Savings Account modelled after UK ISA, but they are trying to expand as they will now begin junior NISA. Also, the Japan [policy group's] three companies will become listed. This is very good.

 I made a quite a bit of comment on our lead arranger. I think the way they decided it is strange. I don't think that a minister of finance should decide something like this, but there's some questions about what they are doing.

 They have the (inaudible) being listed and they used to oppose it, but they're doing it now and there is no accountability to it but they're going to do this. But in terms of broker point of view as a player this will lead to increasing number of accounts and this will attract new investors, people who have no experience in investing in the equity market. In other words, in guiding the customers from savings to investment these initiatives and move will play a big role.

 Now, in terms of defined contribution pension for individual type, this will again expand because of the revisionary law. So without the reform in social security there is no way to go around it, we are in a deadlock. We need to have a major change in pension scheme as well, and these are all [following] tailwinds for us.

 And we are beginning to see a great number of benefit system, so this is pension reform. Now, the three new arrows, this is not received quite well because the people say there's no substance to it, but the first arrow was very easy to understand. It was monetary easing, big monetary deregulation, this was easy to understand; they told BOJ what to do.

 The second was somewhat more difficult to understand but the second -- the new arrows -- [he says] the first arrow to achieve nominal GDP to JPY600 trillion within six years or so and Japan has to continue to grow 3% nominally to achieve this in five to six years. This is something they must achieve because if they don't then there's something wrong with the policymakers.

 So in order to achieve this they need to encourage employment of women and elderly and they need to revitalize the regions. And when they always talk about revitalizing the regions, how do attract companies into invest in regions? You have to utilize special zones or strategic zones better, and these are things that they must continue to do.

 And fiscal consolidation, that's something that is unavoidable for other administrations, this is part of the social security reform they must implement. And this will lead to healthy financial condition of the country and I think it has the greatest weight on this so they are probably will start these reforms. And that's how Mr [Suga] described it the other day as well.

 And in terms of the example from revitalization and domestic stock market stimulation led by the government, so the three Japan policy group companies will be listed on November 4, and have with the -- a public offering price will be decided. So PBR 0.4, 0.5, 0.7. This level, I think people who buy it will become profitable, will make money.

 So people who have good success experience will continue to stay in the equity market, which is actually very important for us in the securities market. And 80% of the shares will be offered to the domestic investors and 95% of that will be offered to the private investors.

 Lead arrangers should be comprised by us who is actually taking leadership in this retail market, but the government officials (inaudible) the Ministry of Finance did not understand the reality. They gave it to Nomura and they gave a little bit to us.

 But if you look at JAL's public offering, it's always open the accounts because our commissions are overwhelmingly low-cost, so that channel is already built up so I know that we will continue to be able to increase account openings with us.

 NISA. In terms of number of account openings and number of accounts utilized, activated, in terms of the total amount of investments you can see it's JPY2.768 trillion. It's not a very good situation, and in the near future we will carry out a questionnaire so that we can grasp the reality and substance.

 And securities industry should analyze that result and we need to continue to make requests and demands to the government. So we'll see Junior NISA workplace savings NISA, we will be very (inaudible) in taking these opportunities. So because of these business circumstances it will allow us to make that next step of growth.

 Now, FinTech, I have explained this already. So in 1999 October SBI Securities started its business and we have been able to establish -- we built this financial conglomerate and during this time we have been able to build a system that pursues synergies between core businesses. And meanwhile, we have tried to merge the internet (inaudible) face-to-face with Money Plaza and SBI Securities.

 With the success of SBI Securities, although we have the other subsidiaries, with the supporting functions, so nobody can beat us. And the next step, we are going to have double FinTech strategy. We are going to do the FinTech ourselves and it's going to be [doubly]. What does that mean?

 Well, any of the other players with good technology will be our partners and we are going to execute double FinTech strategy so that we are going to be unbeatable Group. On top of that, we have some FinTech companies in the Group, interesting entities in the Group, and those are the companies that will be integrated and will be more profitable. And they are going to change their names and will be listed as a FinTech company. That's our strategy.

 As to the domestic financial services businesses, I would like to give some supplemental explanation, starting with the securities. We are going to focus on wholesale business. When it comes to wholesale we will start with IPO.

 For the April through September period, 80.5% of the listed companies in that period SBI has been involved as the lead managers for some cases, and it's a very big step because we are going to continue to have relationships with those listed companies, and we are going to be ready for underwriting for the secondary market.

 What about NISA? Though we successfully obtained lots of the other accounts, the 720,00 accounts, and we already exceeded the number of (inaudible) as of the end of September.

 In the case of SBI Securities, is very important to be noted that there are many new customers who have never invested before. 38% of the new customers are -- the number of new customers opening NISA accounts account to 38% and among which two-thirds, 66.7%, are beginner investors.

 What about the other securities industry? The beginners are 19.8% and the active account ratio of SBI is 59.5% against 51.1% of the industry average ratio. So we have a very high active account ratio as well.

 So the NISA tax-exempt investments (inaudible) will be increased to JPY1.2 million and Junior NISA will also start in 2016 and there was a release to start accepting -- start opening account. And the other we already have 8.5 multiple against the other number of applications in August.

 And also, SBI liquidity market and its SBI FX trade, this is SBI liquidity market subsidiary, which have been under the other SBI Holdings, are now the other subsidiary of SBI Securities.

 Well, what is the objective there? One of the objectives to familiarize the customers of SBI Securities with the FX trading. SBI Securities will continue to promote aggressively FX trading. And also there are many number of the customers of SBI FX trade, which is like grandchild of SBI Securities if you like, and we would like to establish customers' traffic from SBI FX trade to SBI Securities.

 We would like them to open accounts at SBI Securities. And for example, for this fiscal year that would push up the SBI Securities profit by more than JPY2 billion. So far, SBI is the only example among all the online securities companies to have separate FX trading entity.

 In the case of GMO CLICK, most of the profit comes from FX trading. Of course GMO CLICK sometimes is running in [direct] number so I don't know about their this year's performance, but the most of their profit, when there is profit, comes from FX trading. But in our case, if SBI FX trade becomes a subsidiary of SBI Securities, that will push up the profit by more than JPY2 billion.

 And we would like to make this FX trading business into the world's largest OTC market and for that purpose, FX trading from the mainland China, Asian countries and from the Middle East are centering around Hong Kong, the liquidity is centering around in Hong Kong and we established a subsidiary in May 2015 in Hong Kong.

 As to the other structured bonds, self-origination of the structured bonds, which are the very profitable business for the foreign-affiliated companies, but we are going to do that on our own. And so we have been producing profits for the external entities, mainly the foreign-affiliated companies. We will stop doing that.

 As to the structured bond business, within 2016, we are going to originate and distribute the structured bonds equivalent to JPY25 billion and we have established [JTI the bits] and we have been using 36 vendors. So fine, we're going to halve that number.

 Why have we been using so many vendors? One of the reasons is that the entertainment provided by vendors we have prohibited any kind of entertainments, social entertainment by any vendors. If you are involved in that, you will be fired from SBI.

 And so those vendors, who are very costly, are there [I know]. To start with, we need to draw on bargaining power to cut the costs, but we have been wasting JPY30 billion per annum for the system's cost, but in 10 years we are going to cut it by 20% as the first step, and we are now preparing for that.

 Now, with the banking-related business, the card business is the key. The other (inaudible) bank acquired SBI Card on October 1. Now, we have been promoting the new card holders as the Group effort and we are going to turn around the card business absolutely in the next fiscal year, and the card business is going to be the main profit source for the other banking business.

 Now, the insurance. Within this fiscal year we are going to establish a reinsurance company. We have almost completed that process. We have obtained with the other license we would like to complete the process to start up reinsurance business within this fiscal year.

 And we are going to operate in an integrated manner, both SBI Insurance and SBI Life Insurance. In other words, we are going to retain money in the Group. We will avoid the cash outflow as much as possible. And I have that philosophy from the very beginning of this business; that philosophy applies to the systems.

 Why do we have to pay so much for the vendors? The solution is to have internal system company, and the solution here is to have reinsurance company within the Group.

 But that is not sufficient. In the insurance business in order to make progress, to make advancements, especially for the life insurance, we need to have (inaudible) personalized insurance products, and for that purpose, and the external entities with technology and with ideas will be our partners.

 For example, our alliance with ZMP is one of such examples, or Argus is another example. One site, Internet of Things, IOT, is making advancements. When it comes to aircraft or automobiles there will be the cyber risks (inaudible) by hackers. Though when you want to open a door, the door does not open; when you want to go straight, everything goes to the right, and such (inaudible) attacks by hackers can be very risky. The aircraft carrying the important people could be attacked by hackers.

 So the cyber-security that is the specialty of Argus and we think Argus is very promising so we have invested in Argus. And the automobile companies are very much interested in this Argus.

 Everything is connected to internet is good, that will be more convenient. That said, the other side of the coin is some risks. Since things are connected, when there is a cyber-risk the risk will be much greater. It's a very big risk.

 So we need to think about the risk. We need to think about the risk and without thinking about the risk we should not make advancements on the other side of the coin and that kind of concept is being well embedded in the US. Cyber-risk protection is important, and if you are not protected against it, the other things cannot be sold in the US or you could be sued by customers.

 Asset management business. We would like to write on the other way and with the FinTech-related companies. And we are going to invest in FinTech-related business through FinTech business innovation LPS and the financial service business companies will give support and we can get the good technology and the performance then we will be the better for them, and so it is a win-win situation.

 The overseas business, we are going to set up the other lease company with INESA in Shanghai and the SBI Thai Online are 55% of the stake held by SBI Group and 45% by financier Syrus Securities Group. In Vietnam and in other areas, we have been investing in promising companies.

 Asset management; I'm really focused on this. One of the major reasons is bank insurance securities, especially life insurance which has high quality long-term funding, it must be managed and that's within the Group. So there are needs for management investment at the highest level of quality we must make this.

 SBI Global Asset Management has been established. We don't have good hedge funds in Japan so by having a partnership with International Asset Management, IAM, we are trying to do this.

 Energy, renewable energy. [PV fans]. They have been sold in many places but again we intend to do these together with others. SBI Energy is established here. I will come back to this.

 Real estate and newly-established asset management company which specializes in bond investment. This will be established [a new] SBI Global Asset Management. Under this SBI Global Asset Management, Morningstar Asset Management will be moved under this.

 [Sinau Sakura] will be appointed as the CEO. And the COO we haven't made announcement but we have already made a decision, a very competent person.

 And for versatile management needs, these are the people who are very, very competent. We have already made a decision, the same [corporation], a housing mortgage finance company and it was held by a buyout fund.

 And the group SBI equity 79.7%, so as a SBI company putting into our resources and the name is now changed to -- and put under the umbrella of the SBI Global asset management. Net Profit is already JPY300 million.

 Once we start tackling this business JPY1 billion level of profits can be generated easily. In terms of managing life insurance long term fund, there is a good match to this housing mortgage.

 Renewable energy fund, not just for the (inaudible) power, but biomas thermal and mini-scale hydroelectric, they will be tackled and SBI Energy Company will be established.

 As for the (inaudible) (spoken in Japanese), the -- will be appointed the CEO. (Spoken in Japanese), is very versatile -- very expert in finance. The person who is well versed in renewable energy as well. In this area you have to have connection with local governments. That's one of the reasons why we are going to appoint him as the CEO.

 ALA related business, ALA is now about to enjoy a major leap. ALA researches are conducted in 77 clinics, academia and hospitals. (Inaudible) is now talking about the function (inaudible) science and medical obligations of 5-ALA focused on diagnosis and treatment of cancer.

 ALA (inaudible) research society in October -- society is now improving their activities. 48 cutting edge experts have organized or compiled this book and ALA partners. There are so many partners, academic institutions and others in various areas.

 For the human kind health promotion, if we are asked to name three, soap, antibiotics and steroids. I just say these three and then what is the number four and I will say ALA. I would say ALA. It's the fourth item.

 Why? This is a single substance and many researchers at many universities for many different diseases studies are ongoing. It is almost unprecedented in my opinion.

 Journal of Applied Physiology in the US physiology is an academic journal -- this is a very authoritative organization. The paper on reduction of oxygen consumption and carbon emissions during exercise suppression for lactic acid value elevation in blood by taking 5-ALA.

 Nakajima CSO and Shinshu University Professor Nose they co-authored this paper in English to athletes in the Olympics. We should make sure they take this. That's my opinion because oxygen in a very efficient manner can be used and lactic acid value can be suppressed.

 It doesn't increase and also it's not detected in doping related tests because it is produced inside our bodies.

 In the world, again co-research is ongoing at Bahrain is diabetics related attracting a lot of attention and also PDD devoted dynamic therapy is also attracting a lot of attention. Already for bladder cancer, 10 successful operations have been conducted using ALA administration.

 We also have the light emitting source using our technology and in Bahrain more than 10 successful operations have been conducted. On November 1, at the Royal College of -- at the -- there will be an announcement of the conducted at the Bahrain Defense Force Royal Medical Service Hospital.

 Also, the (inaudible) is prophylactic and improving patient who's active ingredients 5-ALA for (inaudible) constitution (inaudible) wrinkles. We were able to acquire patent in the United States.

 Again, for diabetics we were able to acquire patent in various parts of the world, 10 cases in 20 countries -- we already acquired 10 patents in Japan and in the United States. Again we acquired patent for method to treat diabetics containing 5-ALA.

 On October 27, 2009 we filed the application. We were able to get this patent. It takes time. SBI Pharma, the ALAGLIO -- this is for the inter-operative cancer diagnostic Phase III. This is for carcinoma vesicae and designated as an orphan drug at five universities.

 Investigator led trials -- where those investigator led trials were held we are doing our corporate trials at Osaka University. The peritoneal dissemination centered investigator led trials.

 Again this starts from November 2015 and chemotherapy for Anemia. Chemotherapy once it is taken 42%-43% develop the malignant anemia and there is no drug to handle this. It looks like this may turn out to be effective.

 Again the investigator led trials Phase II is conducted onsite at a medical university. The ARO (inaudible) Kitasato Academic Research Organization is doing this.

 At Oxford, together with Birmingham Hospital, Phase II being planned and this is for the preventing cardiac ischemic reperfusion injury after the cardiac surgery. While the operation might be success, because they stop the blood circulation, so once the circulation is restarted there might several stroke.

 There might be the blood clot found in the brain. While the operation is

 successful -- cardiac operation is successful, people might be killed in the (inaudible).

 Professor Houman at University of Oxford taking this substance that risk can be reduced to one third. He wanted to do this clinical trial. Phase I, non-toxic -- just taking this drug for five days before operation so that they're trying to really work (inaudible) health.

 This I think is very [book making] mitochondrial diseases. It is very difficult to treat. Normally the person dies at two years old. Again, at Saitama Medical University investigator led trials are being conducted.

 The Nobel laureate in medicine and physiology was awarded to Chinese scientist -- this is for malaria. She won this prize. She read the classical literature in China and she found herbal medical treatment.

 She analyzed the substance and then developed that into a drug. This is mainly sold by (inaudible) Pharmaceuticals. With University of Tokyo we did joint research for suppressing the malaria parasite, the ALA.

 In the rats test we found the ALA effective. It doesn't cause -- it helps also prevent the recurrence reinfections -- so called silver bullet -- because of the resistance the other drugs are not effective.

 Even after 230 days it was still effective according to the test result it was still effective after 230 days. Even if you think that you have recovered from malaria and then if you get stung by this mosquito -- particular mosquito, you will develop malaria.

 That's why in the world there is still hundreds of millions of people suffering from malaria. It's difficult to really cure. There are many people who are re-infected because this parasite doesn't die.

 In China we are now building the production system at Yian Biotech. Bahrain GCP good clinical practice complied with this standard for the first time in the Arabian world. GCP compliance tests are conducted.

 The food intervention test -- let me explain. In Bahrain at the Bahrain Defense Force Royal Medical Service Hospital there are type 2 diabetes patients who are hospitalized. Administer ALA as food -- give them as food. As a result up to 200 milligrams safety has been confirmed.

 For high concentration the ALA administration safety has been confirmed. Also, HbA1c is closely related to a diabetic's hemoglobin A1c. For the directly related diabetes decreasing significantly as a result of ingestion of test meals for 12 weeks.

 Sometimes in cases after taking it, it doesn't really go down. Sometimes this age, where A1c remains at a very high level, even with two or three kinds of different drugs taken sometimes this level remains as high.

 Then when ALA was administered then this HbA1c lowered. November 1, 2015 the hospital will make a press conference and then the paper will be listed in the academic journal. Bahrain's Minister of Health and Director of the Hospital and Japanese Ambassador are to participate in this big conference -- in this conference. It's going to be big news.

 Next, about various measures toward the realization of an early profitability product offer. We are trying to get the approved for the labelling system for foods with functional claims.

 With Kenkou Corporation announcement was made today -- business alliance with Kenkou Corporation. It is a strong promotion for sales of health products and cosmetic products. Kenkou Corporation agree to absorb the majority of the promotion cost.

 I met many Presidents and I felt that this company has the best marketing capability. By tying up with this company we decided to do the promotional activities -- a partnership with RIZAP.

 For out-licensing, the many measures are taken. It's about pharmaceuticals. There is this company diagnostic agent for cancer treatment (inaudible) and mitochondrial diseases and central nervous system diseases including Parkinson's disease and Alzheimer's diseases.

 Some company again talk to us -- approached us and including ALAGLIO discussing out-licensing technology to obtain approvals for the sales of inter-operative diagnostic agents that include ALAGLIO for malaria in China.

 Additionally, discussing more comprehensive business alliance with Company F involving both pharmaceuticals and health foods including the possibility of capital alliance.

 Planning to acquire a German pharmaceutical company -- on a global scale the ALA business pharmaceuticals and a health food and cosmetics we are planning to deploy our businesses.

 For ALA, again we can really see the future.

 Along with a continued promotion of the business selection and concentration processes, after March 12, due to JPY45 billion for 2014, we have recovered JPY16.6 billion and this for SBI Cards this term.

 We are going to sell it and collect JPY4 billion, so that will really improve the results and Phnom Penh Commercial Bank of Cambodia we are going -- we've already made announcement to sell it off.

 As for the real estate that we are -- we already recovered JPY4.2 billion and JPY1.2 billion has already been recovered. We are going to monetize them one by one.

 About the Cambodia, Phnom Penh Commercial Bank, Koreans are very interested and 10 companies have already approached us. We are going to start the due diligence process.

 (Inaudible) JPY101 million (sic see slide 126, "$110 million") if it's sold. Then the JPY10 billion we can recover and before the tax we can get JPY3 billion. October 27, there is an expert article about speculation of sales published in the Korea Economic Daily.

 This is about investment. Bank officials said even though Cambodian economy shows growth rate -- correction sales value PPCB is expected to be from KRW130 billion to KRW150 billion level according to financial industry officials.

 Investment bank officials said even though Cambodian economy shows growth rate of 7% per year, bank usage rate is still low. There is a strong possibility for financial companies to grow their business in Cambodia.

 Financial industry officials said to acquire PPCB acquirer may expand its sales channel for local people according to the excerpt.

 Focus on securing and developing human resources, this is one of the most important things. 55 businesses we started in 1999. There are at the moment 5,464 and the number of new graduates in 2006 was 43, it's now 312.

 In Korea 4 persons, in China 5 persons on top of the Japanese we are going to hire these. The Japanese (inaudible) people say that go to Vietnam, go to Cambodia. Japanese employee still sometimes are reluctant, but the Chinese and Koreans are willing to go to such countries.

 Again, also many of them can speak English. Chinese, English or Japanese or Korean, Japanese, English -- some people can speak such languages and that's the kind of people we hire.

 Also, we need to cultivate people to promote higher than the Deputy GM at the SBI Graduate School. SBI Graduate School courses one must take several courses and one must pass this, otherwise one cannot be promoted. That's the system.

 This is executive management training. I looked at other companies but we have our own graduate schools. It's best. Also, my credo is that the persons is most important. In order to foster, based on that philosophy I thought that it would be best to dispatch our people to other graduate school.

 We are also using the very youngest people for the executive ones, the President of listed companies subsidiary aged 28. This was really the youngest one and this SBI Holdings Director and Executive Officer aged 31.

 These are historic young people and the female manager ratio is 17.8%. The gender colleague, those group (inaudible) it has nothing to do with our promotion. Within the Group when somebody wants to really move to other Group company we will try and accommodate their request as much as possible.

 We call this career opening system. From very early period we have adopted that if the performance is good we also give bonuses and stock options. This is in exchange for consideration and for benefits again now we have this kind of food coupon system.

 We also have a clinic -- Tokyo International Clinic and payment in full of the cost of a complete physical examination. This is really the cutting edge facilities at Tokyo International Clinic.

 Influenza -- the vaccination is provided at a specially discounted price. There is a -- in (spoken in Japanese) a temple called Baisoin (inaudible) school of Buddhism. Irrespective of such different schools of Buddhism they can offer service.

 We established a Company owned tomb. It says the worker must have worked at least 20 years, but we are flexible. For those people who are from the rural areas it can be a long distance from Tokyo.

 For instance the second or the third sons or the women who are married, out of the families who do not often go back to their own homes, we as a company wanted to have a company owned tomb.

 I think this is rather unusual but we wanted to make sure we honored the souls of the deceased.

 Also the planned abolished age limit for re-employment after mandatory retirement. As long as these people are considered to still perform with great power, energy and intellect after going through a thorough medical checkup at our Tokyo International Clinic and based on their own desire we would like to hire them.

 With this I would like to conclude my presentation. It's about six o'clock almost. I skipped two or three pages. I don't know why, but I think I covered almost everything verbally. I don't really think I have anything left.

 Now we would like to entertain your questions.




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