Q2 2018 Shinsei Bank Ltd Earnings Presentation
Nov 01, 2017 AM EDT
8303.T - Shinsei Bank Ltd
Q2 2018 Shinsei Bank Ltd Earnings Presentation
Nov 02, 2017 / 01:30AM GMT
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Corporate Participants
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* Hideyuki Kudo
Shinsei Bank, Limited - CEO, President and Representative Director
* Shouichi Hirano
Shinsei Bank, Limited - Exec. Officer & GM of Corporate Planning Division
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Conference Call Participants
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* Akira Takai
Daiwa Securities Co. Ltd., Research Division - Chief Analyst
* Katsuhito Sasajima
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst
* Katsunori Tanaka
Goldman Sachs Group Inc., Research Division - MD and Head of Tokyo Financials Research
* Ken Takamiya
Nomura Securities Co. Ltd., Research Division - MD and Head of Asia-Pacific Banks and Other Financials Research
* Rie Nishihara
JP Morgan Chase & Co, Research Division - Senior Analyst
* Shinichiro Nakamura
SMBC Nikko Securities Inc., Research Division - Senior Analyst
* Toyoki Sameshima
BNP Paribas, Research Division - Head of Banks, Japan
* Yoshinobu Yamada
Deutsche Bank AG, Research Division - MD and Senior Analyst of Banking
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Presentation
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Unidentified Company Representative, [1]
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It is time to begin the session to announce the Financial Results of the First Half of Fiscal Year 2017 of Shinsei Bank.
I have a couple of housekeeping announcements and requests. First of all, as we proceed with the session from this point in time, through the Internet, both the Japanese and English voices are being live streamed on the Internet. And as indicated, this scene will be recorded on video, and at the earliest this evening or on Monday, it will become downloadable from our website.
We have distributed to you the questionnaire. The format has been slightly changed. Unlike other banking groups, on the day of the financial results announcement for full year results and midterm results, we had not been conducting a teleconference. But yesterday, we had a teleconference. And we want to know whether you think that it is useful to have a teleconference before the day of the session of results announcements. So we would like to have your feedback. And also, we would like to have your feedback on whether Internet live streaming is useful or not. And lastly, there is a section where you can freely write down whatever your opinions and requests are towards Shinsei Bank. So we would very much appreciate if you could write down your opinions. Thank you for your attention.
First, I would like to now then call the President of Shinsei Bank, Mr. Kudo, for opening remarks. Mr. Kudo, the floor is yours.
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Hideyuki Kudo, Shinsei Bank, Limited - CEO, President and Representative Director [2]
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This is Kudo speaking. Thank you very much for coming this morning.
First of all, I will give you the overview of the first half of the fiscal year 2017 and the highlights, and the details will be given by Mr. Hirano, the Executive Officer in Charge of Investors Relations.
Please turn to Page 3. The first point is on profits. As far as bottom line is concerned, it was up 1% compared to the previous year, JPY 25.1 billion. And against the JPY 51 billion full year forecast, 49% progression. OBP, ordinary business profit, was up 6% compared to the previous term, JPY 44.2 billion. Against the JPY 85 billion of full year forecast, the progress rate is 52%. So we are doing fairly well in terms of the progression towards the full year forecast.
For individual businesses, first of all, unsecured card loan balance was JPY 508 billion, up 12% from September 2016. Structured finance, JPY 1,391,000,000,000. Since September 2016, there has been an increase by 22%.
Stable retail deposit is financing these products and relatively high profitable products, secured card loans and structured finance products are being sold. This is our business model and we want this area to further achieve growth. And I think we are doing healthily in terms of this strategy.
Thirdly, shareholder benefits. This is our highest priority and maintenance of total return [issue] shall be sustained and improved. And that is the only comment we have with regards to shareholder return and no additional comments hereinafter.
Page 4. This summarizes the first half results. The key point on this page is with increase in total revenue, expense ratio is 61.8%, slightly down. Of course, later, the expense control will be touched upon through the productivity improvement project and expenses being subdued through productivity improvement. Credit-related costs, 62% net credit cost, this number seems to be outstanding, in the Q4, there was the removal or reversal of the grey zone reserve at Shinsei Financial, JPY 3.9 billion was accounted for. And this could be factored in, in the big picture. In terms of the grey zone, Kabarai, this will be touched upon later.
Page 5. This is for your information and it is titled as Reference page. Unfortunately, by chance, on the day we announced our third midterm management plan, the negative interest rate policy introduction was announced. So we had not been able to factor in the impact of the negative interest rate policy so far. And in fact, this had caused some confusion. We are now at the timing when we will embark upon the budgeting for the fiscal year 2018. So I'm not saying that we will be making a major announcement at this time around. But based upon the midterm management policy, what would be the impact from the negative interest rate policy? We thought that it might be useful to communicate to you what impact we foresee. Of course, there are several factors of change occurring in the environment, in addition to negative interest rate policy, and our intention is not to pick up all of those factors. But we are just focusing on the negative interest rate policy in order to decipher what impact it may had.
Impact on fiscal year 2016 results caused by NIRP, there are 2 items. One is net interest income and the other is retail asset management product-related income. These are the 2 income areas that had impact. And we estimate that JPY 3.5 billion was the impact on net interest income, while retail asset management was impacted by JPY 4 billion. And that is respectively, JPY 7.5 billion and JPY 3 billion for fiscal year 2017. JPY 7.5 billion loans will be rolled over. So in terms of full year impact, this is our estimation of full year impact for the current fiscal year.
And in terms of retail asset management products-related income, there was a plunge from the level we assumed. And further, the financial institutions are taking some measures not to rely just on one-time fee income but to increase the asset under management in terms of retail asset management products. And therefore, profitability per unit is coming down in this environment. So there will be a downward trend once, and we estimate that this would be the magnitude of the decline. However, we do not deem this as a continuing trend. But in the upcoming fiscal year, which will be the final year of the current midterm management plan, we want to offset the negative impact from the NIRP. And we are thinking of what measures to take. And this is for your reference.
Now I give the microphone to Mr. Hirano for a more detailed explanation.
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Shouichi Hirano, Shinsei Bank, Limited - Exec. Officer & GM of Corporate Planning Division [3]
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So let me give you details on financial results.
First, on Page 6, this shows a net interest income and net interest margin. Net interest income on yearly basis is increased by 6% to JPY 64.1 billion. Of this, unsecured card loans income increased by 8% to JPY 34.1 billion. So the total net interest income, which represent 53%. Right please -- right-hand side, the net interest margin is 2.42%. We saw a slight increase, and the details will be given later.
Next, please move to Page 7, noninterest income. On a year-on basis, it decreased 2% to JPY 51.7 billion. Retail Banking asset management product balance, shown on the right-hand side, the balance on a year on basis, it decreased. The asset management product-related income also decreased on a year-on-year basis. So the recovery is behind the schedule, as expected, compared to our expectation.
Next, on Page 8, net credit cost, JPY 19.8 billion, which is slightly increased. The unsecured card loans and APLUS FINANCIAL balance increased. In addition, as explained, in the first quarter, there is an update of the reserve ratio but these are major causes. The credit cost -- of the unsecured card loans is shown on the right-hand side. On a normalized basis, from 4.5% to 5% range, this is then will be controlled within that range.
Next, please move to Page 9. This shows the situation of capital. On fully loaded basis, international based CET1 ratio is 12.2%. Risk assets increase centered on growth area. The operational assets increased. The sufficient level has been maintained.
Next, Page 10, interest repayment for Kabarai or grey zone. Please turn to left-hand side, 2017 and the second quarter, the first 3 months, the number of disclosure claims, it decreased by 40% on year-on-year basis, and the actual payout on year-on-year basis decreased by 50%. The grey zone reserves, we reasonably estimated the future loss and sufficient amount has been provisioned. And this time, for the reasonable future loss is lower -- it's likely to be lower than our grey zone reserves. Accordingly, we released some grey zone reserves. So group total grey zone reserves, as shown on the bar chart, is JPY 85 billion, which is maintained at sufficient level.
Next, I would like to move to Page 12. This page shows net interest income and noninterest income by segment. Net interest income, unsecured card loan increased -- this contributed the increase in net interest income. For the noninterest income, principal transactions and corporate business increased, so this offsets the decrease at treasury.
Next, Page 13, yield on interest-earning assets. Our net interest margin first, on investment side, the spreads are tightening so there is such impact. However, consumer finance balance increased. So this contributed to the improvement of the yield, which is 2.72%. So this has been flat. Now for the securities, yield increased at 1.14%. This is due to the increase, including dividend.
Next, funding side. The foreign currency assets increased. So to control the [maturity] gap widening, currency swap and for the lengthening of the deposits, so the total funding cost increased. As a result, for the net interest margin was 2.42%, which slightly improved.
Next, Page 14, expenses. Expense-to-revenue ratio was 61.8%, we saw an improvement. Through the productivity enhancement project centralized the headquarter functions. And for group-wide, the branch network has been consolidated. So we have been making progress steadily.
So that is all for the interim financial results for FY 2017.
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Questions and Answers
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Unidentified Company Representative, [1]
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Now we would like to move to the Q&A session. (Operator Instructions)
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Shinichiro Nakamura, SMBC Nikko Securities Inc., Research Division - Senior Analyst [2]
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It's Nakamura of SMBC Nikko Securities. I have 2 questions. First one is OBP after credit costs. Consumer finance increased by JPY 1 billion from JPY 3.7 billion to JPY 4.7 billion, although the top line increased. But in the consolidated basis, it decreased from JPY 27.1 billion to JPY 24.8 billion to JPY 2.3 billion. APLUS credit cost increased at JPY 2 billion and the corporate also increased with JPY 1.2 billion. So for the OBP after credit cost, it's not increased for both consolidated, nonconsolidated. So what needs to be improved to make this positive? What's your plan? So the credit cost increase the first half was relatively large and it will be stabilized in the second half or are you going to reduce more expenses? Or what's the plan or outlook does the president have? That's my first question. And second question is regarding bank card loan, as the self-regulation is tightening. So the consumer finance new customers appear to be an uptrend. But how is this sustainable? And in January next year, the instant cash in will be suspended or prohibited. So what will this impact the performance? And what's your view? So these are my 2 questions.
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Hideyuki Kudo, Shinsei Bank, Limited - CEO, President and Representative Director [3]
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Thank you. First, I'm not sure whether I can answer to the questions in such a forward manner. There are some special factors for this credit cost, and this reversal of the grey zone reserves, so these are the 2 special factors. The latter, the claims decreased, and that is directly reflected. And it is expected to continue to stabilize. But for the former, centered on the Lake business or including APLUS controlling the credit cost, so far, we do not think that we have to change our full year forecast. So partly because of the technical reasons this is being progressed faster. However, what we need to watch carefully is -- so for example, on Page 8, credit costs, as shown here, the range of the control, although this is -- it would be in the range that we can control based on the business model, however, we have to be careful. And the trend and the recent card loans by banks mainly, there are some moves that will be to control the operations. And as the sort of society, there is a possibility that this will lead to deterioration of the credit standing of customers. So the net credit cost ratio and collection, these are need to be operated very carefully. And related to this issue, unsecured card loan business sustainability, at least in terms of the growth potential [ability], it will slow down. The point what you've mentioned, probably there is a coverage regarding the antisocial force database. But that itself was the development. I think that is -- the question needs to be asked to the Japanese Bankers Association. However, we are also running a lot of estimation or simulation in a short run for business growth, it will be a negative impact. There are a lot of controlled operations, but whether that will lead to the sustained soundness of the industry. So this is not necessarily totally negative. Or we should not necessarily be pessimistic. Our business itself originally we started from the money lending business. So based on the money lending business discipline we have been operating in a disciplined manner. So in a total market our impact will be relatively small.
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Yoshinobu Yamada, Deutsche Bank AG, Research Division - MD and Senior Analyst of Banking [4]
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Yamada, Deutsche Securities. Page 8. Again, on the right-hand side on the chart, credit cost seems to be coming up gradually, and then on Page 16, approval rate is also going up. In other words, when balance goes up and contract rate goes up, you think that is very natural that credit cost goes up? No measures to be taken? If we look at other consumer lending companies, they also see the same trend increase. And what's your focus on credit cost? And would that impact the approval rate? And then on Page 9, capital ratio, although the degree is light, there's a decline. Risk asset goes up with loans going up and then that would push down capital ratio. But higher the capital adequacy ratio, the buffer or liberty will be afforded to capital policy. So how do you plan to steer capital policy with risk assets increased Tier 1 and CET1 will come down, and you will allow that to happen? Or do you have any measures to increase capital ratio going forward?
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Hideyuki Kudo, Shinsei Bank, Limited - CEO, President and Representative Director [5]
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First of all, on your first point, at Shinsei, in our card loan business, in the growth of this business, yes, approval rate is going up as you have rightly mentioned. And if I may give you the facts, it's not the case that we're relaxing the screening criteria. Because we are taking measures, high creditworthy -- high-quality customers are attracted. So I think you can just read the facts and accept the facts as they are. On the other hand, as you have indicated, if we take a look at the right-hand side diagram on Page 8, it appears to be going up. I said it appears to be going up. And we are conscious of that. As I said before, it's within the range that we want to keep this ratio. But is this the result of our intentional control? Or could there be some trend related factor that has led to this outcome? We are conducting detailed analysis. For the time being, if we look at our portfolio, is there an increase in multiple debtors? Not really. Frankly speaking, there is no such phenomena occurring in our portfolio. But if that's the trend in the ecosystem in general then, of course, that person probably is not just borrowing from one company. Those people may be borrowing from multiple sources. So we would naturally be impacted. And therefore, we have to be extremely vigilant in continuous monitoring of such numbers. Thank you -- oh sorry, capital ratio, 12.2, 12.3. This small fluctuation is nothing to worry. We are a domestic standard bank, and therefore, already, we have sufficient capital in order to run our business. So you mentioned the freedom of capital policy. With this degree of change, we don't think that this will constrain the freedom we gain for capital policy. Thank you.
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Katsunori Tanaka, Goldman Sachs Group Inc., Research Division - MD and Head of Tokyo Financials Research [6]
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Tanaka, Goldman Sachs. Regarding your antisocial forces database, I don't think this has been decided yet, but if the instant cashing or borrowing that is prohibited by the Japanese Bankers Association, so Lake will be prohibited and outcome, profits (inaudible) will be available. So if there's such a competitive environment, what will be the impact? Do you think the impact will be large? Or do you think the impact will not be so significant? So if it's a significant impact, so once again, instead of handling the Lake Bank at bank, or moving this back to nonbank, would it be practically possible? That's my first question. And second question, I'm not sure whether you can answer this question. JC Flowers is considering to exit from Shinsei. There's some media reports regarding that. So if JC Flowers exit from Shinsei, replaced by other shareholder, is there any impact on your strategies going forward? So these are my [2] questions.
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Hideyuki Kudo, Shinsei Bank, Limited - CEO, President and Representative Director [7]
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Thank you for your questions. Well, regarding the first question, first of all, as I said earlier, ultimately, that is what will be decided by the Japan Bankers Association and I hope (inaudible) interview with them. But, of course, we are making a lot of [assimilation]. Whether we have the impact or not, there will be a certain impact. So based on that, a lot of responses or approaches are being studied. Today, at this moment, our plan or policy, there's nothing that we can announce today, but of course, this is a significant theme. So we are considering or discussing internally. And regarding JC Flowers' move, I have been [telling] in this, but they are investment fund. So at some point in time, they have to exit from Shinsei anyway. So specifically, what activities are done, we are not sure. But it's not something unusual. The strategy that we are implementing today and the representative of JC Flowers, Mr. Christopher Flowers, is one of the directors. So of course, as the director's opinion, his opinions also reflected to our strategies. But that does not decide everything. So as an overall direction is unlikely to change.
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Unidentified Company Representative, [8]
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Other questions?
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Ken Takamiya, Nomura Securities Co. Ltd., Research Division - MD and Head of Asia-Pacific Banks and Other Financials Research [9]
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Takamiya from Nomura Securities. Your policy on shareholder return, on Page 3, you have a summary. Here it says annual plan, that means fiscal year 2017? That's just for confirmation.
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Hideyuki Kudo, Shinsei Bank, Limited - CEO, President and Representative Director [10]
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Yes, the answer is yes.
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Ken Takamiya, Nomura Securities Co. Ltd., Research Division - MD and Head of Asia-Pacific Banks and Other Financials Research [11]
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And also, the bank intends to at least maintain or preferably improve the total payout ratio, here it says. Can you elaborate on this so that it's easier for us to understand what we should expect? And in conjunction to that point, we -- you just talked about the capital level and the constraints. There are a few constraints as a company considers its capital policy. External environment is 1 factor, internal financial position, the balance sheet as well as profit momentum at the moment and forecast of profit must be taken into consideration. So the external environment and your own fiscal situation, financial situation. Do you consider them to be major constraints to at least maintain or preferably improve the total payout ratio? So the meaning of maintain or improve the total payout ratio versus whether the external environment and internal financial position are major constraints.
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Hideyuki Kudo, Shinsei Bank, Limited - CEO, President and Representative Director [12]
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Mr. Takamiya, I'm not sure whether I really understand what issue you are talking about. But when we say we want to maintain or improve the total payout ratio, it literally means that that's what we want to do. And total payout ratio has its definition. So maintain or improve would mean that on year-on-year basis in comparison to the previous fiscal year, we want to either maintain or improve the ratio. That's the desire and will of the top management. And, of course, dividend and share buyback are both -- or included in the payout to the shareholders but external environment has to be taken into consideration. Dramatic policies cannot be implemented at times of crisis. And further, this was the previous year performance. And we are saying we want to maintain the payout ratio. So, of course, we take into consideration the most recent profitability situation, and we are impacted by that. But how do we look at those 2 factors? First of all, in the external factor, is there any obstacle that prevents us from maintaining total payout ratio? No, and what about our current financial position and profitability, the same answer. Does that answer your question?
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Ken Takamiya, Nomura Securities Co. Ltd., Research Division - MD and Head of Asia-Pacific Banks and Other Financials Research [13]
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Yes, I received the answer I had wanted to hear.
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Katsuhito Sasajima, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [14]
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Sasajima of Mitsubishi UFJ Morgan. On Page 24, productivity enhancement project, does this -- the right-hand side, there's a box that's for 2017 plan, about JPY 2 billion effect and progressing well in line with the plan. This JPY 2 billion in these interim results on PL, the [interim] amount may not be large. But how is this reflected to the results of the interim -- results?
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Hideyuki Kudo, Shinsei Bank, Limited - CEO, President and Representative Director [15]
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Well, specifically that is a little difficult. But the themes are shown on the left-hand side. These are the several themes. And there's a combination of these shown -- so for example, group entities, the reduction of back office nonpersonnel expenses, centralization of procurement; and that is shown on the personnel expenses, nonpersonnel expenses and others. But there is the improvement of processes or the consolidation of the back office functions or call centers. We call this FTE, number of people. The workload decrease, if that is the case, then the number of people handling that work will be reduced. That will be the effect. The retirees, we also have retirees. So we are hiring new grads and also mid-career employees. And that can be reduced. So that is reflected to personnel expenses.
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Katsuhito Sasajima, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [16]
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So that means on Page 14, on the right-hand side, so that is what you have said is mostly reflected to these numbers on Page 14, correct?
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Hideyuki Kudo, Shinsei Bank, Limited - CEO, President and Representative Director [17]
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Yes, in a sense that they are allocated. The back office portion is significant. So that is allocated to many different businesses.
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Toyoki Sameshima, BNP Paribas, Research Division - Head of Banks, Japan [18]
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BNP Paribas, my name is Sameshima. I have also one question. At the IR in February, it was discussed that in retail banking, there has to be maximization of quality and quantity of customers. Six months have passed, more than half a year has passed. Has there been progress in this area? I do understand that the environment is challenging. Are you thinking of any additional new measures? Those are my questions.
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Hideyuki Kudo, Shinsei Bank, Limited - CEO, President and Representative Director [19]
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As a major project -- we have embarked upon quite a major project and after we've been able to come up with a well-defined plan, then we want to host a separate opportunity to explain to you the program we wish to implement. But let me give you some conceptual clues on what we're trying to do. We talk about retail, but there are several elements. So we will disintegrate the retail business into various elements, into various issues such as management accounting review. And then there is the area of the mortgage loan or asset management product sale or financing -- retail as a function of financing. And we will disintegrate the whole business into these elements. And we are trying to look at where there is room for improvement through this overhaul. And at the same time, we are also reviewing the total business strategy. In order to take advantage of Shinsei Bank's strength, what's the true profile of the customers we need to focus on? And in order to be more focused on customer attraction, there could be different designs of the loyalty program, which we are reviewing. And also, the channels as well. To begin with, we never had such high number of branches. And some of the branches are already dedicated to consultancy in terms of asset management, is the geographical layout desirable? And what about the consolidation of the channels? Internet and video included integration. Is this being successful? We are conducting a general review on the channel as well, and that also includes expense structure. And we think that we need to revamp the whole operational system as such. And this kind of project is currently ongoing. Thank you very much.
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Rie Nishihara, JP Morgan Chase & Co, Research Division - Senior Analyst [20]
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Nishihara, JPMorgan. I have 2 questions. On Page 17, unsecured card loan growth rate is shown. The president mentioned that going forward, the instant lending of the change and the [balance] depends on the decision by the Japan Bankers Association. But in the short run, do you think that their business growth potential may deteriorate? But in the medium and long run, related to the more sustainable growth. But on the left-hand side on Page 17, looking at these numbers, currently, the total bank card loan is from 14% to 8%. It's slowing down. So from your medium and short term and the long term, what these are at the period end? You said that there is meetings [assimilation] internally. What do you think the total growth of the entire market? That's my first question. And the second question is regarding -- as impact on Shinsei Bank, the second quarter was 12% on rate and the quarter was 15%. So similarly, as the entire market, also down. And similarly as the entire market, it will go down. But do you assume or you forecast it to increase. So what do you think about growth potential and same for the next credit cards? Although you are going to watch this carefully, but do you expect the deterioration and the stabilization after that? Could you please elaborate on that?
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Hideyuki Kudo, Shinsei Bank, Limited - CEO, President and Representative Director [21]
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I see. The market outlook, in the short run, other than us, the banks are being controlled and -- starting to control their marketing activities. So macro-wise, we are expecting a slowdown. This [impacts] growth rate, so it does not mean that it's declining. 7% or 8%, as the Japanese Financial -- the business, still means that they are maintaining high growth. So temporarily, it may decline. That was on the IR day, we tried to make the outlook for the longer term, which represented a little more severe outlook. Considering the moves of the Japanese population, apparently it is not appropriate to assume the continuing growth. So [they will be trading points somewhere] in the 5 or 10 years' time and we [personally] assume that for the next 2 to 3 years, whether it is also unlikely that the market would deteriorate drastically. By each player making their controlled operation, the soundness may be sustained for a little longer than expected. But anyway, it is sure that they would reach a [straightened] point at some point. Accordingly, we are considering development of the consumer finance business in Asia, and we started joint venture in Vietnam. And also we offered our system in Thailand. And in Hong Kong, we are also considering the business development. So together with such a growth strategy, we are engaging in this business. Shinsei Bank -- regarding Shinsei Bank itself, the position in a big picture, our business is being operated under the money lending business discipline. So even if the growth of the total market declines, we do not think that their needs to our business would decrease significantly. So as a question, in the short run, there will be the impact on our initiatives. So it is -- we are aware that it is a big challenge to us how to respond to the impact. But looking at the broad picture, we do not think the growth potential is behind compared with other players. And for the credit costs, we believe that there will be controlling portfolio. But their customers' credit standing will also be impacted by our peers' move. So we are aware that we have to be careful. Not only the emergence of multi-debtors as said, but the credit shrinkage may -- if it occurs, there could also be the temporary impact. And taking that into account, we are operating the business.
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Akira Takai, Daiwa Securities Co. Ltd., Research Division - Chief Analyst [22]
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Takai of Daiwa Securities. This is a broad and ambiguous question, but at many banks with Fintech increasing, they're beginning to say we probably don't need half the headcount, neither do we need the branches. But you're a bank with fewer headcounts and fewer branches to begin with. Maybe you have the luxury of not having to think about headcount or branch risk. When people or branches become less necessary in comparison to other megabanks, how are you inferior? Institutional roster, institutional client roster, maybe that would be one area where you would be subordinated from the megabanks. But what do you think is your weakness? Sorry about the very abstract question.
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Hideyuki Kudo, Shinsei Bank, Limited - CEO, President and Representative Director [23]
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Well, I'm wondering what I should focus on to respond to that question, but are we behind in any area? Not really so. I can't think of any area because what's about to happen in this society is in short something like digitalization. And naturally, user interface is changing drastically. So far, there had been face-to-face transactions, which will diminish. And the number of people who require face-to-face will also go down. And they may not need the physical branches. They can connect to employees through video. So it may no longer be necessary to have several and high number of physical business offices. And that advantage is becoming less in value. We don't have that to begin with. So relatively speaking, do we have an advantage? Obviously, that kind of trend should work to our favor. And I may sound cynical, but some are saying we have too many people, too many branches. But they could say that's an upside potential. But then there's the Japanese labor practice. And what other banks are saying is that they will do this and that in the next 10 years or 15 years. So it's not that something drastic is about to happen in the short run. So rather than focusing on that particular point, we think about digitalization, AI, robotics and be at the frontier and do whatever we can quickly. So I don't think we are inferior in any aspect. That's my impression. Thank you very much.
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Unidentified Company Representative, [24]
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Any other questions? We still have time. So if you have any questions, we would like to accept it.
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Ken Takamiya, Nomura Securities Co. Ltd., Research Division - MD and Head of Asia-Pacific Banks and Other Financials Research [25]
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Takamiya of Nomura Securities. On Page 5, regarding review of the management plan, I would like to ask 2 questions. One is considering the future changing environment, there's [a description]. So we understand there is change made, including negative interest rate policy. But do you expect any other change? And the second question is, this has to be reviewed? Or are the boxes under review? Several investors also asked what they mean by under review? If it's decided then -- but it's just we consider that you're going to review it. So to be reviewed or under review, why did you intentionally right under review? If this means it's only under discussion, we understand that. But do you have anything to indicate or explain? Actually some investors are having a hard time to understand this. So to help them rather this isn't my question, but rather for investors, if there is any additional information.
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Hideyuki Kudo, Shinsei Bank, Limited - CEO, President and Representative Director [26]
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Understood. Well you do not need to look at this too in detail or consider, I'm sorry that if this the words or terms are misleading. On the third midterm management plan, next fiscal year will be the final year of the plan. And this fiscal year or next fiscal year, the review -- actually, we wish we could present this earlier. However, we could not do that. So (inaudible) and the next fiscal year business plan is about to start. So in that sense, we are not -- it's not that we are going to review the midterm management plan itself. In the process of the developing the next fiscal year plan, there are a lot of factors will be taken into account, and this does not mean anything more.
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Unidentified Company Representative, [27]
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We are close to the closing time. But are there any more questions? We have more time to accept questions. And if you don't want to ask questions here, you can contact the IR. It seems that there are no more questions. With this, we would like to close this session. Thank you once again for coming. Thank you very much for coming.
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