Q2 2016 Shinsei Bank Ltd Earnings Presentation

8303.T - Shinsei Bank Ltd
Q2 2016 Shinsei Bank Ltd Earnings Presentation
Nov 02, 2015 / 05:00AM GMT 

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Corporate Participants
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   *  Hideyuki Kudo
      Shinsei Bank Ltd - Representative Director and President
   *  Masayuki Nankouin
      Shinsei Bank Ltd - CFO

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Presentation
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 Hideyuki Kudo,  Shinsei Bank Ltd - Representative Director and President   [1]
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 Good afternoon, ladies and gentlemen. My name is Kudo of Shinsei Bank. I'd like to thank you for coming despite the inclement weather. If I may remain seated as I speak.

 First of all, the first-half results and the way ahead, I'd like to talk about the main points related to these. First -- the first point, 2015 net income y-on-y -- year-on-year was 29% increase, JPY39.4b (sic - see slide 3 "JPY37.4b"). And so we're seeing smooth results and JPY70b of net income to that it's 54%.

 As regards the details, Mr. Nankouin will be going into that later on.

 The second point, the third term -- medium-term management plan, from 2016 the third medium-term management plan is being formulated at the present. In the latter half we will be announcing and we're proceeding with work toward this. And soon as we're ready to report we will do that.

 Third point, up until now I have mentioned this, so this will be a repetition of what I have already said. Capital policy remains a key management issue and so, at the present point in time, we're expanding returned earnings and we're aiming to pay dividends to the shareholders.

 After page 10 there are more details, so I would like to ask Mr. Nankouin to speak.

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 Masayuki Nankouin,  Shinsei Bank Ltd - CFO   [2]
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 This is Nankouin of Shinsei Bank, so let me explain the financial results. First please take a look at page 4. This is for this first-half results and this is your overview. So, I would like to go one by one from the top.

 First, the top-line revenue on year-on-year basis this saw a slight decline. It is JPY110.3b. In the -- let me give you the breakdown. The net interest income, slightly up, JPY61b. On the other hand, non-interest income, the details will be given later. On a year-on-year basis it declined to JPY49.3b. In total, the revenue declined slightly on year-on-year basis.

 Next, expenses. Expenses are almost in line with the previous year, which is JPY69.7b, and the net credit costs for the institutional group had the major reversal gain. On the other hand, for the consumer finance, steadily the business proceeded and the loan increased. So the loans are booking. So, the reversal was greater than the reserve booking; accordingly, the net credit cost was JPY1.2b.

 As a result, bottom line is 29% increase from the previous year, which is JPY37.4b.

 Next I would like to talk about the net interest income. Please go to page 5. So, as I said earlier on, the net interest income was JPY61b. The reason for the better net interest income, there are two factors.

 One, the funding cost continued to decrease which contributed JPY2b and the bank business steadily grew. So, the interest income increased, which is JPY1.9b. So, these are major factors for the increase compared to the previous fiscal year.

 Next please go to page 6, net interest margin. So, please take a look at this chart. The net interest income from 2.25% to 2.33% has improved a bit. The reasons are shown at the bottom. The yield on interest-earning assets declined and this situation will continue.

 Next, page 7, non-interest income. The left-hand side shows the trend of the non-interest income and the right-hand side shows the factors of the increase or decrease. As I said at the beginning, non-interest income declined on a year-on-year basis, because the principle transaction business saw the decline in revenue. So, this is the largest factor.

 And I'll touch upon this later, there's loss in the fund and then disposal was made. On the other hand, APLUS Financial, the installment credit, in the retail the sales of investment products are the areas that generate stable growth -- profits and that's been performing steadily. And the derivative products sales to customers, the markets business, also performed steadily. So, these are offset or cover the loss.

 Next please go to page 8. This is about expenses and expense to revenue ratio. Expenses, as I said earlier, on a year-on-year basis is almost flat. It is JPY69.7b. And expense to revenue ratio is almost the same as -- level as the previous year which is 63.2%.

 And our target for this fiscal year is still we're targeting between 50% and 60%. So, in the second half, we would like to further continue efficient operation on management in order to achieve this target.

 Next page 9. This is about asset quality. The balance of non-performing loans as shown on the left-hand side in September was JPY63b -- JPY36.5b, which is down by JPY24.4b. As a result, NPL ratio from 1.42% in March it declined to 0.83%. So, now we are less than 1%.

 Now please take a look at the right-hand side, net credit cost. The breakdown is shown here. First, the individual Group, so the Shinsei Bank Lake, the -- is increasing loans steadily, so the reserves increased.

 On the other hand, Shinsei Financial, there was a reversal of the reserves which is declining accordingly. Further, the APLUS financial, also the operating assets is growing steadily and I'll talk about the balance of loan to this later. Accordingly, the reserve is increasing.

 On the other hand, for the institutional business, as I said earlier, the major -- there is a collection of loans and there is [dispersal]. So, for the first quarter and second quarter together, as of September, was of JPY13.6b.

 Next please go to page 10, capital. So reflecting all this, the capital ratio in September, the consolidated capital ratio is 14.26%. And for the common equity Tier 1 ratio was 12.5%, which is above sufficient level.

 Next we'd like to talk about individual items, the loans and deposits of the assets. Loans was JPY4.463 trillion. Compared to March this is almost at the same level. However, there is a change in the breakdown. Consumer finance, as I said earlier, is performing strongly. In the non-consumer businesses which are a strong guard which is real estate, finance and project financing, even in these areas as you see the loans are increasing. So, they are performing strongly.

 Next, deposits was JPY5.4894 trillion. So, compared to March it increased. So, the funding cost, as I said earlier, is -- continued to improve. So, loan to deposit ratio 81%.

 Next I would like to talk about each business line. First, page 12. This is about unsecured personal loan. So, Shinsei Bank Lake and Shinsei Financial, sorry to repeat this but the balance as of September, JPY346.4b, which increased by 7%, which is growing steadily.

 The balance growth is, someone may say that this is on the same level as previous year, but in addition to traditional money lenders, the -- there is a competition. It has become tougher with the banks, as well. So, we think -- believe that this -- we are playing favorably.

 And additional reference, the growth of the personal loan, so the average of the major players are shown on the chart on the right bottom. This is for reference.

 And, going forward, in order to achieve our balance target we are planning to launch new commercials in order to raise the brand recognition. And also through using online strategies we'd like to further enhance the engagement of existing customers.

 Next is about retail banking and APLUS Financial. The retail banking, the investment trust or insurance and structured products, such as the management products, are growing steadily. So, both the amount and balance are increasingly steadily.

 Meanwhile, APLUS Financial, mainly for the general-merchandise shopping credit, is performing favorably. As a result, operating asset balance also increased compared to March.

 Next is the -- I'd like to talk about the institutional business, structured finance and institutional business. Left-hand side shows the structured finance. There is a bar chart shown. And the right-hand side is about institutional business.

 First, the structured finance, the real estate finance for the commercial facilities, office or distribution, logistical facilities, we are engaged in many areas. As a result, the balance is increased.

 On the other hand, project financing, the renewable energy and infrastructure-related projects, primarily in those projects we are gaining transactions. As a result we have been -- we are accumulating a balance.

 Next please go to page 15. Page 15 is about the markets and the principle transactions. First, the market business. The derivatives for customers, such transactions continue to perform strongly. So, this contributed to the increase in non-interest income. And principle transactions, as you see the bar chart and table, on year-on-year basis, last year the dividend from the investment target but there is no such dividend for this fiscal year. And also there is a revaluation of the fund investments. So, the revenue declined drastically.

 Lastly, the comparison shows the current situation compared to our targets in the second MTMP. For RORA, our target was around 1% and we are currently 1.3%. And expense revenue ratio we are targeting between 50% to 60% and currently the ratio is 63.2%. ROE, the target is around 10% and we are almost in line with the target, which is 10%.

 And the capital-related ratios or common equity Tier 1 ratio, the target is 7.5% and our current ratio is 12.5%. NPL ratio we are 0.83% toward the target below 3%.

 This concludes my presentation. Now I would like to open the floor for your questions. Thank you.

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Questions and Answers
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Unidentified Audience Member   [1]
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 I have two points. First, with related -- is related to MTMP and capital policy. I'm sorry, this may be a difficult question to answer. To the extent possible please answer.

 The MTMP, on the MTMP, what you have been studying up until now, the present studies, how far are you in your studies regarding MTMP? And you've always mentioned stable the profits to grow that and net income you wish to target for higher figures. Is there anything in addition to what you have been saying that you can communicate to us to the point possible at the present point?

 And on capital policy, traditionally public-funds repayment and MTMP was a integral one of one package, but the public-funds repayment negotiations where are you at, at the moment, to the extent possible? And MTMP perhaps the public-fund repayment may take longer. It may be postponed. So, that is our awareness, our impression. But to the extent possible could you answer these questions? And this is my first question.

 The second question is on net interest income, NII. You're growing without one-off factors and special factors and we are aware of that. But Lake-related business interest income, because of increased competition, is struggling. You are struggling on that front. So, specifically, new brands, you released something new, new brands you've advertised today. So, how do you intend to change the momentum? Could you add some color to your explanation?

 And on page 5, others, the institutional group interest income, the interest rate on loans is declining more than what we've expected. When will you see acceleration of the improvement of interest income, if you could give us an image of this, please? Thank you.

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 Hideyuki Kudo,  Shinsei Bank Ltd - Representative Director and President   [2]
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 Thank you. The first question I would like to address. The MTMP portion of this is such that, as I mentioned earlier, we are still in the process of framing the plan, external environment analysis, revenue stability and sustainability. Bearing all of this in mind, we are looking for where our strengths are as well as where our weaknesses are.

 We are doing an analysis at the present point. And, having done the analysis in our business there are growth areas, what we can call growth areas, and then there are stable growth areas. And then there are areas which should diminish. And we are sorting all of these out; we're classifying.

 In terms of numbers, I'm sorry, at the present point in time I -- we are not in a situation where we can give you answers. But qualitative directions we can give. So, let me add some explanation on that.

 Earlier I talked about the growth areas and there are areas where there is obvious growth. And so I'd like to mention two areas. One is, it may be obvious, consumer finance. This is an area. This is a money-lending business that has been revised in 2010 and we want to -- we feel that the market recovery to the levels before 2010 is quite possible.

 So, maintaining and growing market share is what we'd like to aim for and that is how we see things at present. For the time being we believe that there will be decent growth. And, in particular, marketing strategies and credit management and the way it ought to be, detailed fine tuning is what we have always done.

 But I -- as I have explained earlier, balanced growth, we are maintaining a decent level. But new acquisition of business is decelerating so a further marketing strategy is something we're formulating at the moment. I don't want to go into details but an appropriate marketing cost and so forth we are studying. We're trying to do different things in this area and in the next MTMP that will be a major pillar.

 One other point which I'd like to touch upon, structured finance, cash flow finance, structured products and high added value financed areas. You have seen our actual track record and you can see that we have achieved growth. In the next MTMP, this again will be a major pillar, and specifically real estate finance or, on the domestic scene, renewable energy centered project finance and natural project finances such that there are overseas projects. So in terms of balance all of these will contribute, that is what we think.

 And with regard to this area, with regard to domestic project finance we can say the following. Simply originating and holding onto it on our balance sheet, that is not what we plan to do. In each of the regions there are regional financial institutions and they are very enthusiastic about accumulating assets, they're ambitious about accumulating assets. In the latter half of this year co-working is something that we're seeing an increasing amount of, so we want to leverage our strengths and engage in syndications of this sort so we can further grow business. We believe that this is possible.

 The MTMP is as I have just explained in terms of our present status.

 In terms of public funds, and this is something that I also have mentioned earlier, it's a heavy responsibility that we shoulder, that is how we see it and internally we're making various studies, rather than it being a package we have to see the third MTMP firm up, otherwise we cannot study further for periods beyond. Of course there has to be money to repay and so the premise, the assumption has to be there, the MTMP formulation is something that we're working quickly on and we have to solidify the assumptions and the conditions first and so that is what we're doing.

 I'd like to turn to Mr. Nankouin to address the second part of your question.

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 Masayuki Nankouin,  Shinsei Bank Ltd - CFO   [3]
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 The second part of your question I'd like to answer. As mentioned earlier, today we talked about a new brand after the Lake brand and we've made a release on this. And on this new brand, traditionally what we have acquired in terms of knowhow at Lake we'd like to tap this and the customers that we'll be targeting will be a little bit different. So overall we want to maximize acquisition of customers and this is an attempt to do that.

 In terms of target, Shinsei Financial is looking at per customer amount and annual income and the image of that would be per customer annual income would be JPY2m to JPY4m, we're looking at such customers. In terms of marketing, M1, where males from 20 to 34 years of age, the M1 layer is the target for us.

 The new one, the Smart Card Loan Plus is different in that we'll be targeting M2, the M2 layer, these are males from 39 to 49 years of age. In terms of annual income from JPY4m to JPY6m, this is the target that we're looking at.

 And another distinctive feature is that what we have, a PowerFlex account, a linkage with the PowerFlex account, is something that we'll be emphasizing will be improving convenience. If you use PowerFlex 24-hour borrowing and repayment is possible, so convenience is the focal point in this structure.

 Of course this is not an absolute condition for borrowing but if you have the account it's very convenient. So because of this distinctive feature this product is such that for customers that have the PowerFlex account and our Group companies, customers of our Group companies, these are the central customers to which we want to promote sales and we want to grow customers through this and that is our strategy.

 And what was mentioned earlier, the institutional group net interest income is lackluster you said. Indeed that is true. The traditional corporate or institutional lending is such that competition is becoming increasingly severe, lending is such that regional banks are growing but interest margin is a very tough situation. So we have not formulated strategies to enter into this market where the balance may grow or may not grow, but we don't want to go into areas where there's too tough a competition. So first we'd like to look at structured finance in growing and so that is our strategy.

 Corporate businesses are lending, the decrease in this, how do we make up for this? Cash flow finance, structured finance, in terms of the institutional group those are our strengths. In terms of Lake, inclusive of the new card loans, we will cover the totality of all of this in our strategies to fight the competition.

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 Hideyuki Kudo,  Shinsei Bank Ltd - Representative Director and President   [4]
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 In addition to what Mr. Nankouin has said, let me supplement and mention the following. It's an extension of what has just been explained and the next MTMP is an extension of what we have described. There are areas in which we're struggling to achieve growth, corporate finance or where we have had an increase in profits due to one-off factors, exit of investments or NPL loans, reversal profits there from. These will no longer be there, so that is a fact.

 And so high-quality income is what we have to attain in order to make up for this, consumer finance, structured finance, these areas are such that we have strengths and there is room for improvement, various analyses show this and we know that.

 In English, recurring profits, sustainable profit and the makeup of this is to be increased where we have sustainable profits and we will fight back through this. That is what is on our mind.

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Unidentified Audience Member   [5]
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 And overall, since you assumed President, listening to your presentation, especially related to public funds repayment or improvement to shareholders return. Immediately after you assumed the office from what you said back then, slightly think now the situation is more stable, maybe because you have some problems, even the announcement of the MTMP accelerating it, I think you had such a tone. However, listening to your explanation today you said that it will be announced by the end of the second half, so I feel some kind of tone-down, although we have passionately listened to you, but now the situation you have sort of calmed down. Going into MTMP or operating the business, what are obstacles do you think as the top management? So could you please summarize that?

 And my second question is about the new brand of the consumer finance business. I rather think this is a little too late, even this year for the growth you shared concern earlier this year and there was a lot of plans and launching the brand now in terms of speed, I think it is a little too late. So in terms of accelerating the speed do you have any idea, if you do please share it with us. So these are two questions for Mr. Kudo, the President.

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 Hideyuki Kudo,  Shinsei Bank Ltd - Representative Director and President   [6]
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 Thank you for your questions. First, the first question it sounds like I have slowed down and is there any obstacles. It does not necessarily mean that the situation has changed fundamentally because I tend to rush, so I think that what we can do we should do it quickly, that has not changed. But the MTMP will start from next fiscal year and when it will be announced actually I did not particularly mention when we are going to announce it. I have not changed my mind at all that I want to announce it as soon as possible but because the plan is for the next fiscal year we have to make announcement by the end of this term. So in terms of speed, whether I have slowed down, I do not feel that we have slowed down.

 And to public funds repayment and shareholders return, of course once the key points of the next MTMP are decided then we will consider the details. Already there are various discussions internally that have already started and of course once assumptions are finalized otherwise we cannot go beyond that. So we are currently considering and studying the MTMP so we are not in the stage to share with you the details of our public funds repayment plan or shareholders return.

 And related to the new brand of the consumer finance business, well, it's as you pointed, there are some aspects that you have pointed out. The idea itself, we have had the idea earlier so we wish we could have released earlier, that's my honest feeling.

 Using the existing Lake platform without spending a lot of costs we plan to acquire new customers, so we believe that the cost benefit is high. So although it is maybe true that we were a little late but we have a high expectation on acquiring new customers going forward.

 Did I answer your questions?

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Unidentified Audience Member   [7]
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 On the MTMP, we've been listening to you explain that. Among the things that you are thinking of, at the present point in time topline growth is important. Is that what you think or do you think that bottom-line increase is important? ROE improvement, or is that the most important factor, or are you looking at this from a completely different perspective in coming up with pillars? What will be the central axis? The baseline thinking is what I'd like to hear. Thank you.

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 Hideyuki Kudo,  Shinsei Bank Ltd - Representative Director and President   [8]
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 In the ultimate end, what you have mentioned, there are different items which you have raised and I think it's all a matter of balance, that is what we think, so we're not prioritizing any of these. And in terms of management we're not prioritizing any single item but if you ask what we are aware of most, bottom line, medium-term maximization of bottom-line growth.

 With regard to the topline, of course to the extent possible we will be pursuing the potential growth, but if we look at the present macroeconomic environment and/or financial institutions competitive environment, when we take these into consideration we can't draw a picture of growth which is not capable of materializing and we would not be able to have the understanding of those around us. So we'll be pursuing the potential to the maximum extent.

 And if we want to grow our bottom line, of course cost control is something that we'll have to be looking at and naturally in the next MTMP we will incorporate specific measures to achieve that. We've tried to strike a balance, ROE will be within a reasonable line but it's not that we're only conscious of ROE; we're not focusing just on ROE.

 Have I answered your question?

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Unidentified Audience Member   [9]
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 In the MTMP JPY70b is a high figure, the JPY70b improvement of quality is the challenge in the next MTMP. I believe you have explained to this effect, so I'm gathering from what you have just said in the MTMP the bottom JPY70b is further, capable of further expansion? Are you capable of increasing that further?

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 Hideyuki Kudo,  Shinsei Bank Ltd - Representative Director and President   [10]
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 At the present point in time it's not appropriate for us to go into figures about the next MTMP so I will refrain from commenting on that. Thank you.

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Unidentified Audience Member   [11]
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 I have only one question. I'm not sure whether this trend will continue, about the loan growth, vis-a-vis loan growth the deposits balance is declining. As a result in either FY 2016 or 2017 you have to gather deposits at high interest rates, is there any such concern that you may have to gather such high interest rate deposits?

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 Hideyuki Kudo,  Shinsei Bank Ltd - Representative Director and President   [12]
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 Well, from the ALM perspective it's a world of fine tuning. Looking at the loan growth we have to consider our funding strategies. If you force your funding then if there's no investment destination then that will not work, so if there is an opportunity for the investment of course we will fine tune our fundraising strategies. Currently the balance between the funding and investment, we do not think that there is a major or large mismatch between the two.

 Do you have anything to add?

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 Masayuki Nankouin,  Shinsei Bank Ltd - CFO   [13]
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 Well, as the President mentioned, we are looking at the investment situation when we do fundraising and looking at the current loan growth it's almost flat, so even for the deposit balance we are not trying to gather forcefully. So this is a trend that we think will continue.

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Unidentified Audience Member   [14]
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 I have three questions. The first is the following. With regard to your evaluation of the capital, whether it's sufficient or deficient, and the risk-taking, whether that's sufficient or deficient. And with regard to losses related to investment, the present capital, whether it's sufficient or deficient, what is your evaluation of that please? That's the first question.

 Second is on page 9 you talked about asset quality and capital adequacy has improved considerably. The present asset quality is improving. So risk appetite framework for example, in view of the risk appetite framework, the asset side risk-taking, is that sufficient or deficient? If you feel that you can take on more risk, in what areas can you take risk, could you enlighten me on that? That's the second point.

 The third is fund investment revaluation loss. If possible, could you give us broad-brush figures, and internal and external sector equity or mezzanine, domestic and foreign equity mezzanine risks? What gave rise this loss and, if possible, could you tell us if it's a one-time loss? Fund investment revaluation loss, I'd like to confirm details on this. These are my three questions. Thank you.

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 Hideyuki Kudo,  Shinsei Bank Ltd - Representative Director and President   [15]
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 On the first two questions I will be answering those and the third question will be supplemented by Mr. Nankouin.

 On the capital situation, on equity capital, Shinsei Bank's capital adequacy is such that in the past several years we've seen remarkable growth in a certain sense. The present level is such that in performing our present business it's more than sufficient, we could probably say it's more than sufficient.

 And going ahead we have to consider public funds repayment, in view of these challenges and when we consider these challenges whether the present level is really sufficient or not there are different factors that we have to consider. And inclusive of these points to be considered in the future we will consider them and, to the extent possible, we will be thinking about enhancing shareholder returns.

 The second point on risk-taking and the way it ought to be. This is probably linked to your first question, to what extent do we have room to take on risk? I think we have an increase in the room we have to take on risk, our business leeway is expanding. But just because we have room doesn't mean we should use this extra space available, this is also related to the next MTMP discussion.

 What are the areas in which we can truly provide added-value to the customers, where are the areas of our strengths, we want to give priority to these and having given priority to these we would next consider taking on risk. And in the third MTMP we will be showing strategies of our growth areas and we will be sharing our strategies in our third MTMP.

 I'd like to defer to the next two points to Mr. Nankouin.

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 Masayuki Nankouin,  Shinsei Bank Ltd - CFO   [16]
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 I'd like to address the third point. With regard to fund investment, financial institutions investment funds is what we have invested in and this is what this pertains to. We have become more conservative in revaluating -- evaluating this and we have incurred losses as a result of this and this is a one-off factor. This is an individual transaction so I will not go into the specific figures.

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Unidentified Audience Member   [17]
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 Domestic and foreign, in terms of the breakdown of this, could you give us a breakdown?

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 Masayuki Nankouin,  Shinsei Bank Ltd - CFO   [18]
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 What do you mean domestic and foreign breakdown?

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Unidentified Audience Member   [19]
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 That is, is it a domestic risk or foreign risk?

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 Masayuki Nankouin,  Shinsei Bank Ltd - CFO   [20]
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 Oh, you mean about risk.

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Unidentified Audience Member   [21]
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 Where does the risk lie, is it domestic or foreign; the exposure, where is it? Is it substantially domestic or not?

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 Masayuki Nankouin,  Shinsei Bank Ltd - CFO   [22]
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 On this point, these are financial institutions so the entities that we invest in they are diverse -- or the entities that they invest in are diverse. At the present point in time I cannot give you a clear answer, I am sorry.

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Unidentified Audience Member   [23]
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 Understood, thank you.

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Unidentified Audience Member   [24]
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 Thank you for your presentation, I have two questions. One is related the pillars in the next MTMP which are consumer finance lending, and the President mentioned that the assumptions that they are going back to the market side at the time of, for 2010, when the (inaudible) business law was revised, I think there was a major political decision. So what's your understanding of the environment?

 And a related second question is about the expense to revenue ratio, you're targeting between 50% and 60% and that's going to be around JPY7b. Do you have to reduce the expenses in order to achieve the target? So, in the first half, so you made the expenses flat as previously and specifically what kind of cost-cutting initiatives are you planning for the second half?

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 Hideyuki Kudo,  Shinsei Bank Ltd - Representative Director and President   [25]
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 So, firstly about the consumer finance market, my understanding. Well, I'm not saying that that will be achieved in the next fiscal year or during the next MTMP period. We had the decline but that's the level that the market may recover. So it's not that we are developing a plan depending on that level but a bigger market expansion for the next several years is expected.

 And about the expense to revenue ratio, by the end of this fiscal year, achieving the target, that is not the message here. So in that sense any major restructuring that's expected in the second half, that's not what we are indicating.

 Do you have anything to add?

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 Masayuki Nankouin,  Shinsei Bank Ltd - CFO   [26]
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 Well, achieving between 50% to 60% level, on this page, the current number is 63.2%, so we are almost very close to the 50% level so in order to do this we are aiming at efficient operations.

 But what the president said, during the MTMP period we'd like to, in order to achieve the stable earnings including processes, we would like to review operations so that stably we can achieve 50% and 60% -- the expense ratio between 50% to 60%. It's not that we are planning anything specific but we would like to run the efficient operations to achieve this. And during the MTMP period, as the President mentioned, we will fundamentally review our expenses.

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Unidentified Audience Member   [27]
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 The first pertains to what you have said. The future growth strategy, consumer finance, the percentage to consolidated income is not big. If you grow this, I think there's a large margin for growth, for example, compared to the other two big companies you're seeing a higher growth rate. Maybe the credit criteria should be changed so that you can grow your profits, so they are of use to this effect. Would that happen?

 And the second point is with regard to another growth area, structured finance. The first is the following, renewable energy, going forward when it comes to the purchase price prospect the future is not too bright. It's with regard to what is your view regarding new transactions going forward?

 The next is related to real estate, you'll be more positive about real estate. How do you view the present real estate market? Some say that it's reached full potential in terms of growth or some say there's still room for much growth. Could I invite your views on this? Thank you.

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 Hideyuki Kudo,  Shinsei Bank Ltd - Representative Director and President   [28]
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 On consumer finance, as you have pointed out there is still room for growth, margin to growth relative to our competitors, there's still room for growth. Credit criteria or credit standards to relax or not, it's not as simple as that. But we'd like to look at the results; we are looking at the results to fine tune. We're a bit concerned about the following.

 Among the competition, in particular with regard to additional credit, maybe they are relaxing standards, credit control, they're relaxing credit control too much. There are certain portions where we see this happening and we feel that there is perhaps reason for concern and we want to be careful regarding this.

 And with regard to new customer acquisition, marketing strategies are being reviewed and in this process I think there's much that can be done. And, as mentioned earlier, we will be doing the overall review first and we'll be looking at areas where we'll aim for further growth than traditionally.

 And on structured finance, project finance, as you say, is such that the mega solar area will be peaking out. In the pipeline there are transactions but we'll take time to digest all of these. It's not that this will continue three or five years and it is, as you have pointed out, the purchasing price is going down and those sponsors that are not competitive will be gone from the market, so too these transactions will be selective in financing and that's with regard to the solar.

 And with regard to the other renewable energy transactions there is a broadening of the market in its own way. Wind power and geothermal might take some time but biomass, and there is a broadening of the market. So in terms of renewable energy the national objective is still to grow renewable energy and in view of this national objective we feel we don't need to be overly pessimistic about this.

 As for real estate finance, as you said, there are those who fear that the price has gone too high and I think it will depend on the asset type. For example, in an outstanding location in Tokyo the office building transaction yield has gone down to the near bottom and with regard to residences the situation is the same and we are wary of this.

 But on the other hand, the hospitality facilities, hotels, with regard to room for growth there are divergent views on this; inbound needs, the robustness of the inbound needs. In terms of demand and supply, the demand far outweighs supply and there's a mismatch and there are plans for development eyeing this difference which we hear of. Depending on the transaction we think we're capable of doing this.

 And the healthcare assets, there are strong needs in this area. It depends on what the target is and the nuance is different depending on what target you are looking at. So you can't generalize and say that the market overall is good or bad, that is not how we see things. We will be detailed in looking at the target in deciding whether to take this on or not.

 I hope I have answered your question.

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Unidentified Audience Member   [29]
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 There's no specific information about the MTMP, I understand that, but in other words how about 10 years later? About Shinsei Bank 10 years from now, what's your view? What kind of bank do you want Shinsei Bank to be? I think you were discussing that. As much as possible could you please share your idea with us?

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 Hideyuki Kudo,  Shinsei Bank Ltd - Representative Director and President   [30]
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 Well, slightly there is overlapping, but anyway, Shinsei Bank or the Shinsei Bank Group, their position in the financial world, the customers will not come to Shinsei Bank for those business that they can do with others, so based on that concept we have to have a very unique business model otherwise it's going to be difficult for us to operate, or run our business 10 years later.

 So, for example, what should be retail banking? Currently, based on Nikkei's retail capacity research we were ranked number one in our services or the products, so we received a good credit, or good evaluation. So we need to establish the earnings model, so in order to do so the strengths, not only just the physical strengths of the physical branches but even the virtual channels the strengths also need to be further enhanced and to that extension there will be so-called FinTech also be included in the area.

 So as I said, the strengths in multichannels need to be strengthened and further online operations need to be promoted. I think that will be the basic model. And such big trends, the personal loans will also be involved. We have a quite strong platform so we believe that we are positioned well.

 And in terms of the institutional business, probably we will be specializing or focusing on the areas that we can give added values, for example such as project finance or such as structured finance. Other than that, for example, equity investments or the credit trading, those that we used to call credit trading or those that had a risk of the price fluctuation, so such business. Still we maintain our core skills in those areas although we made progress in exiting.

 So the effect of the earnings accumulation cannot be expected in the MTMP but since we have accumulated such core skills in the medium and long run we would like to utilize such skills. So such unique services which are not available for others or focusing on specific areas. So those are apparently will be the direction.

 I hope I answered your question. Other questions? We still have some time. I believe we can entertain one more question or so. Would anyone care to raise further questions? Are we all happy?

 Then with this we would like to conclude today's program. We'd like to thank you very much for coming. As usual we have been shooting this meeting with a video and this evening or by tomorrow morning you'll be able to find this on our website. So thank you very much for your attendance. Thank you very much indeed.

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Editor   [31]
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 Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.




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