SBI Holdings, Inc. (ticker: 8473) reported a strong start to the fiscal year with its first-quarter revenue reaching ¥330 billion, alongside a profit before income tax of ¥51 billion and a net profit of ¥38 billion. Despite these gains, the profit attributable to owners stood at ¥21 billion, reflecting a decline due to non-recurring items.
The company's core businesses, including financial services, asset management, and crypto-assets, achieved record-high revenues and pre-tax profits. SBI Holdings also emphasized its strategic focus on digital assets, international expansion, particularly in Southeast Asia, and entry into the semiconductor sector.
Key Takeaways
- SBI Holdings' Q1 consolidated revenue was ¥330 billion, with a profit before income tax of ¥51 billion and a net profit of ¥38 billion.
- The financial service, asset management, and crypto-asset segments recorded record-high revenues and pre-tax profits.
- Profit attributable to company owners was ¥21 billion, affected by non-recurring factors.
- The company is reinforcing its banking business, expanding co-managed stores, and rolling out a next-generation account system.
- SBI Holdings' securities business has seen record-high revenue and profit, with a focus on strengthening M&A and growing its international presence.
- Plans are in place to list emissions credits related products and to focus on business growth in Southeast Asia.
- The company is venturing into the semiconductor business to revitalize the Japanese manufacturing industry.
Company Outlook
- SBI Holdings is focused on reinforcing profitability in its banking business and expanding its co-managed stores.
- The next-generation account system implementation is underway.
- The company is strengthening its M&A business and expanding its presence in foreign markets, particularly in Southeast Asia.
- SBI Holdings is developing new financial products in the realm of digital assets, including cryptocurrencies and security tokens.
- The company is actively involved in the semiconductor business, with plans to revitalize the regional community in Japan.
Bearish Highlights
- Profit attributable to owners showed a negative year-on-year figure due to the sale of shares by Sumishin SBI Net Bank and an extraordinary loss at gumi.
- SBI Insurance Group reported negative profits due to one-off factors, despite positive year-on-year growth in ordinary revenue.
Bullish Highlights
- Record-high revenue and profit before income tax expenses were achieved in the financial service, asset management, and crypto-asset businesses.
- The securities business achieved record-high revenue and profit.
- Growth in revenue from foreign stocks and record-high margin trading was reported.
- The company's Cambodian bank subsidiary LY HOUR and Vietnamese bank subsidiary TPBank reported strong profits.
Misses
- Valuation losses were booked for some listed securities, although profits were secured for unlisted securities.
Q&A Highlights
- The company received positive feedback from regional financial institutions regarding their semiconductor foundry business.
- SBI Holdings is planning to hold a seminar for corporates to accelerate partnerships in the semiconductor sector.
- Multiple companies under SBI Holdings' umbrella are anticipated to go public in the future, contributing to the company's growth trajectory.
SBI Holdings' earnings call revealed a multifaceted approach to growth and profitability, with significant achievements in its core businesses and strategic moves into new markets and industries. Despite some setbacks, the company's diverse portfolio and international expansion plans position it well for future success.
Full transcript - None (SBHGF) Q1 2025:
Yoshitaka Kitao: Thank you very much for gathering despite your busy schedules and thank you to many of you for participating online as well. It is the First Quarter Results Explanation. On behalf of Kitao, I will be providing the explanation. Without further ado I would like to start. This is the consolidated performance. Revenue ¥330 billion; profit before income tax expenses ¥51 billion; profit for the period ¥38 billion. Out of that profit attributable to owners of the company is ¥21 billion. Therefore revenue profit before income tax expense and profit for the period, each one of them for Q1 has resulted in a record high. Profit attributable for owners of the company year-on-year basis is showing a negative number. However, regarding this, this was a temporary factor or temporary market situation changes impacted this number. Therefore on a full-year basis, we believe that this is not a problem. Regarding the details I would like to explain using the following page. Our company, the calculation of the total shareholders' return is using the profit before income tax expenses of the financial businesses. Therefore, we consider this profit before income taxes expenses index to be one of the important indicators for making management decisions. And compared on a year-on-year basis, profit before income tax expenses was 20.3% year-on-year an increase to ¥51.7 billion. Main factor is the financial service business. Led by the SBI Shinsei Bank Group's corporate business expanded and an extraordinary profit from the liquidation of a subsidiary, the numbers were strong. And as you know from second half of last fiscal year, we have been executing ZERO Revolution. And there was unusual income regarding that, but the securities business is performing strongly. And therefore in Q1 the profit before income tax expenses was a record high. And the negative number year-on-year basis profit attributable to owners of the company, there are several factors behind this. And as for the temporary factors last fiscal year, Sumishin SBI Net Bank IPO-ed and sold part of their shares and the gain from that was ¥1.5 billion, which fell off this fiscal year. In addition to that this fiscal year, gumi, which was the equity method affiliate has recorded an extraordinary loss and we had to take that in. Therefore it was ¥1 billion at gumi. And at the other equity method affiliates, similar situations occurred. That is why we have experienced a negative this time. In addition to that our company applies IFRS and due to that it is impacted by the market price. And last fiscal year was ¥5.2 billion, the fair value of direct investment listed stocks but there was Jimoto Holdings’ ¥2 billion as a fair value loss and this is the direct investment. So, that negative figure is down to the profit attributable to the owners of the company. As for the foreign currency-denominated exposure right now we have the hedging. However, having said that, first quarter there was the rapid and weakening and the hedge position regarding this, the parent company is leading that. Therefore that loss has been reflected in the profit attribute to owners of the company. And as for the foreign currency-denominated investment securities and as for the loss and gains of the foreign exchange, there is a part that is held by the external fund and that is recorded as a non-controlling interest. Therefore, the profit before income tax expenses is impacted. But when it comes to the profit attributable to owners of the company, it shows the impact. However, once the end strengthens, we believe that this is going to be showing a different number. This is repeating myself. We are applying IFRS in a short-term basis. The market situations impact especially we have the market cap value. And due to the temporary factors it shows a large change. But if we look at the short-term it is starting to calm down. So for us we are putting importance on the full-year growth and this is the point that we would like you to understand. This is by segment performance. Financial service business, asset management business, crypto-asset business at each segment, the revenue and profit before income expenses both for Q1 has recorded a record high. As for the investment business as I've explained the listed companies negative figure this term it is minus ¥4.6 billion. And as for the next generation business I have explained Gumi just before. And the investment that we are making for next-generation business due to temporary factors it is showing a negative ¥5.4 billion. And from now onwards in the last result announcement explanation Kitao mentioned that we are reorganizing the business portfolio and we are showing you several progresses and I'm hoping that I can share with you each one of them. First of all, is the bank business is promoting thoroughly reinforcing its profitability through allocating business resources. And this week at 0.25 the rate has increased. And ahead of this we have been implementing our initiatives and we are seeing the effect of that now. SBI Securities is under our group so there's a strong image that we conduct the securities of business. However in fact within the financial services businesses, if we look at the ratio of this business if you look at the far right you will know the banking business it is 62%. That is the situation that we are reaching now. And the policy interest rate was increased and what is the situation going to be is the question that I assume will be asked so we have created this slide. First of all, regarding Shinsei Bank there's a positive and negative factors, but in the full year it's about ¥2.1 billion increase in profit is what we're assuming. On the other hand for the net banking business within the housing loan the majority is the variable rates. And for asset management, the majority is variable rate. So if you look at the overall picture it's about ¥13 billion increase in profit that we expect. Shinsei Bank's first quarter JGAAP results are shown here. Net profit was ¥31.9 billion which is 143% year-on-year. Starting with APLUS the corporate business has grown and derivative-related revenue has increased as well and extraordinary profit due to the liquidation of a subsidiary. As a result of this the net profit was ¥31.9 billion. Furthermore, IFRS making the bank into IFRS-applied business there are various impacts. Currently, JGAAP was ¥36.4 billion and IFRS was ¥34.8 billion. So it’s a situation where there's not much of a difference. And this is the Shinsei Bank's retail accounts and total deposits. It's been about two years since it became our subsidiary company. As for the deposit amount it's about slightly under twice of the amount which is slightly under ¥11.7 trillion. And this is showing Shinsei Bank's operating assets. We have implemented various initiatives. In two years they have increased about 50% and it has reached ¥12.3 trillion. And furthermore, as a different initiative, we have partially acquired NEC Capital Solutions Limited and have entered the basic agreement on business alliance. We have the voting rights of 33.32%, and therefore, it has become the equity method affiliate. As a result of this NEC Capital Solutions revenue, we will be able to take it and we will have the synergy with Showa Leasing and it will be a comprehensive complement to each other's business, SBI Shinsei Bank and SBI MONEYPLAZA’s co-managed stores. We have been increasing, the co-managed stores from August of 2022 and we have expanded to 22 of them with the AUM has exceeded JPY300 billion and the majority of the customers are in the wealthy segment. Next is SBI Sumishin Net Bank’s performance. Regarding JGAAP ordinary business profit, year-on-year basis plus 13.3%, which is JPY9 billion and it is steadily performing. IFRS we have 31.9% interest and we had the intake of that part. We have converted to IFRS. For example, the upfront fee was deferred in this fiscal year the JJB [ph] and others due to the rise in interest rate that was market valued and that was impacted by the decline in valuation and that is why it has resulted in JPY1.1 billion. SBI Net Bank this is showing deposits and the number of accounts. Since the start of this business, we have gradually increased it and recently it is at the level same as the top players in the regional banks in 16 years we were able to achieve this result. And this is South Korea's SBI Savings Bank. If you look at the IFRS number year-on-year, the change is plus 144%. It's KRW4.297 billion. If you look at the South Korean economy, the business condition sentiment continues to remain weak, and other saving banks have real estate project finance, which they are struggling with but with our SBI Savings Bank we have been containing real estate project financing, therefore, as a result we are seeing an upside on our earnings. And also if you look at our delinquency rate of our receivables, at the end of March was 5.6% but now it has improved to 5.4%. When we actually made it a subsidiary, it was 51.6% in delinquency rate but we have been lowering that level gradually like this and we continue to keep this delinquency rate low. And even if our peers are struggling, we continue to remain at the very low level. So if we see the economy of South Korea turn around then we can expect greater profitability here. This is the situation on the next-generation account system. So, from July 16, 2024, we have begun to see operation at the Fukushima Bank. It has been designed and built on AWS to achieve high scalability. What's noticeable here is that in all accounting programs where there's great burden, especially when there is a migration switch-over, there's a large upfront cost and there's depreciation cost following that. But because we're using a silent partnership scheme, we are using an annual fee model, which change the cost from fixed cost to a variable cost structure. At this point in time, leveraging our know-how from the operation, we will be implementing this at Shimane Bank, so we will be able to support the smooth implementation of the system. Next is on our securities business. Through this initiative called ZERO Revolution in securities business which we have actually carried out, of course, there was a substantial amount of lost revenue, but we have overcome this and have actually achieved increasing revenue and profit in Q1. In all items, you can see we have record high. Since four years ago, we have tried to diversify our revenue sources and this is an outcome result of that. If you compare ourselves with the peers, this is what it looks like. If you look at the operating profit, you can see that we are maintaining a very high level. Meanwhile, online securities, if we compare ourselves with them, many of the online brokers are negative. However, we have been positive and you can see that we have actually gained profit. According to our calculation this time, because the stock market is quite active, if you go the conventional calculation in just one quarter, there will be ¥1.1 billion in lost profit, ¥9.1 billion excuse me. Now, this is a comparison of the revenue structure. This is the fees where we have basically lost and it's nearly zero, where it's light blue. But if you look at the financial revenues and trading revenues, we have substantial increase which we have offset these losses on the online brokerage from the domestic stocks. And therefore we have seen 11.2% increase year-over-year and is ¥56.7 billion. In particular the financial revenues, we've been able to generate ¥20 billion. I think this is a major point. This is the quarterly trend. The left two, this is before ZERO Revolution and the three on the right-hand side is after ZERO Revolution. So we have been preparing from ZERO Revolution and you can see that bear fruit. And year-over-year, we have now booked plus 11.2% increase. Earlier I mentioned briefly about margin trading up and interest credit balance and financial revenue. This is ¥2 trillion exceeded that ¥2 trillion. This is 42.5% year-over-year. This is expected to continue to increase. This is trading revenue. Sales of foreign bond continue to make a significant contribution. And the FX market has quite a bit of a volatility, but even then FX revenue is increasing. And in fact, we have actually recorded a record high in foreign bonds. This is the investment trust. You can see stable stock revenue from investment trust business. Again, we are recording a record high. Since NISA started within just six months, we have been able to increase the balance to 1.5 times. As a result, investment trust fee, you can see, we continued to record a very high level of fees. In investment trust, in particular, there's an impact from accumulation type of investment trust as of July 22. On a monthly basis, we have exceeded JPY 230 billion. On an annual basis this is JPY 7 trillion -- excuse me, it's JPY 2.7 trillion. So, we can expect to see increase in investment trust fees even going forward. With regards to SBI Wrap, this is a robot adviser. Since the start of the service AUM is approximately JPY 115 billion. What's interesting is that SBI Shinsei Bank’s branches face-to-face branches they started handling this and this has actually exceeded JPY 50 billion in AUM just within a year and nine months. With regards to SBI Securities, they're a strengthening wholesale business as well. You can see IPO underwriting. We are continuing to maintain the number one position in terms of share. Also PO underwriting business is strong. Just in one quarter we have underwritten two POs one of which was lead manager. And with regards to corporate bond underwriting, you can see we're growing very steadily. We wrote 11 corporate bonds in this Q1. Now with regards to the M&A business targeting SMEs, we have been strengthening this. We have established a joint venture with TSUJI HONGO M&A Solutions, and you can see that we're also increasing this business as well. With regards to the revenue from foreign stocks, U.S. trading volume continues to be strong. We're continuing to see growth. With regards to margin trading, we can see it’s record high. It's JPY 700 billion. We're very close to JPY 700 billion. In terms of revenue from foreign stocks, if you're trying to quantify this, in 2023 Q1 compared to that we have actually grown by 1.7 times. Again, ZERO Revolution Part 3, this is elimination of real-time foreign exchange fees and this has really boosted the number of customers. With regards to the futures options and individual stock option, with regards to future options trading, since ZERO Revolution, we continue to see a nice increase. With regards to individual stock options trading, we continue to see if you quantify this compared to 2023, you can see we have grown by 3.5 times in Q1 2024. Going forward through ZERO Revolution, the customers that we have acquired as a result of that we will offer diverse products. Therefore as a result of that we can see the individual stock options trading become very interesting and we're trying to strengthen this business. This is the situation of SBI Cross. For this one, we're preparing it to become Dark Pool (NASDAQ:POOL) and TSE, PTS and others including the Dark Pool. Towards the customers who have four markets APLUS, SBI Cross, they'll be able to order and execute from the best one out of the four. Therefore, from the customers' perspective, with a favorable price they'll be able to execute. And for us as well depending on the trading amount, we are paying the commission to TSE, but we are able to lower that fee as well. And this revenue high revenue of over JPY 9 billion in Q1, why we're able to do that is because we have been expanding our customer base. June 2019 we have announced zero commission fee. And from that time, the number of accounts have been rapidly increased. And as of July 16th, it has surpassed 13 million accounts. This is the share of trading value, plus margin and spot. Both has hit the record high. Both of them has exceeded 50%, especially for the margin trading. It is close to 50, excuse me, 60%. As for the NISA accounts, currently, we are strongly trying to chase up to RUCTAN. And on a daily basis, we are rapidly increasing the number of accounts. NISA purchase amount, after the new NISA has commenced, it is increasing significantly. Before NISA commenced, it was $601 billion. And now it is $2.6 trillion. And this is the positive impact of new NISA and zero revolution. In addition to that, iDeCo, we are looking at it as a strategic product. SBI Group, from 2001, this 401K's possibility is what we have seen as the future potential. And we have established this SBI benefit system and have been responding to this situation. And from there, it has rapidly grown. And the CAGR is at 32.4%. And the number of subscribers, individual and corporate together, has reached JPY 1.226 million. And as for iDeCo, it's the largest in industry. It's 970,000 and is maintaining the top position. And as for FX already, the customer base that we have acquired through zero revolution, we are seeing an inflow from that. And SBI, FX business, the number of accounts is increasing significantly. A number of accounts in AUM is positioned to be the top player in industry, 2.3 in the number of accounts. And as for AUM, it is customer margin deposit is JPY 400 billion. And next is turning asset management into a new pillar of revenue. As for the SBI Global Asset Management JGAP, consolidated results is as shown. In all line of loss and profit, it has hit a record high. SBI Global Asset Management's group asset under management is increasing. And it is approximately increased to 6.5 trillion yen. And for others, the management companies belonging to this segment, Rheos Hifumi, Okasan Asset Management, both are experiencing an increase in both revenue and profit. For Okasan Asset Management, once it became a subsidiary company, we had a strict cost control, and they have shown a significant increase in profit. And SBI Group's asset under management, overall, in total, has surpassed JPY 10 trillion. And this is a stable revenue, and it is contributing to our financial performance. In addition, towards our customers, we would like to provide diverse products and respond to various needs. Therefore, under this way of thinking, we have a business alliance with overseas asset management companies. And one of them is the Franklin Templeton, which is a leading asset management firm. Regarding the digital asset management, we will be developing products together with them. They are already managing the Bitcoin ETF and also have been receiving the approval. In the future not just for crypto-asset, but for security token for the other digital assets we will be developing products as well. Next is the alliance with the Man Group. This is a multi-strategy fund and we have already started offering this. Usually, in this type of funds there's a large amount of fixed fee and performance-based fee that is taken. However, for us we are customercentric therefore, there is no performance base fee. And for the fixed fee, we have realized it being under 1% as for both fees and commissions. We also have some alliance and alternative investment products at private equity. We will be developing new products for the asset management business. Through these initiatives and by FY2027, we are endeavoring to achieving an AUM surpassing ¥20 trillion of diversifying products and that is why we're focusing on the development of products. If we're able to achieve this we'll be able to secure stable stock revenue. Next is strengthening efforts in digital asset area and in creating new financial products. This is number of customers in crypto-assets. We are already seeing the effect of ZERO Revolution. This is plus 10% Q-o-Q increase. SBI VC Trade and BITPOINT achieved a customer balance of ¥100 billion respectively. That's the situation. Also in order to meet the needs of the customers, we are handling a variety of crypto assets and there is a lineup of cryptocurrencies that only we handle in Japan. In addition to that, we offer stacking services. This is very similar to investment trust. Customers have paid a certain amount of interest equivalent compensation and they will be entrusting their crypto-assets to us. With an active crypto-asset market, we begin to see increase in balance. We're already seeing increasing large customers transferring to us. So the contribution to the revenue is increasing gradually as well. This is security token. At Osaka Digital Exchange, they are developing new products. There are three real estate STs, which are already listed and the market cap is approximately ¥10 billion. Also going forward, they will look into corporate bond-type of ST, and we're discussing this with different experts from the industry, so that we can develop this product going forward. This is Dojima. They have already been handling precious metals. But from June, we have been given a permission from the Ministry of Forestry and Fisheries, and we have been able to establish and list Rice Index Market. We basically make an index of more than 100 varieties of rice nationwide. Going forward, there is a joint venture that we have a partnership with and we will list emissions credits related products in the future, or within the prospect linkages to Carbon EX the Group's carbon credit and emissions credit exchanges. So our overseas business. We are particularly focused in Southeast Asia where there's a great contribution from population bonus in Cambodia and Vietnam. We have banking and security businesses, which we have made into subsidiaries. LY HOUR, this is a Cambodian bank. This is a company that was given birth as a result of partnering with a major conglomerate in Cambodia. In the first half, we have already seen a profit before tax of ¥963 million in the first half and we're now expecting this to continue to increase. TPBank, this is a bank in Vietnam. We have 20% ownership. We actually acquired an additional ownership of 20% and made it an equity method affiliate in February 2023 last year. TPBank, they have generated ¥21.3 billion in the first half. And in the first half, we have a ¥0.9 billion contribution to the financial services business as part of the equity method. Others the size is not so substantial yet but we have businesses in Thailand and Cambodia as well. Moving to Russia. Despite this current situation in Russia, we have downsized and we have been managing the operations very cautiously. Meanwhile, we have been able to maintain the role as a local financial infrastructure mainly for the Japanese companies as a result of their need. And because of an increase of the policy interest rates in Russia, they have recorded a pre-tax profit of ¥2.206 billion this year in first half. Below that is Cambodia. This is a LY HOUR partnership again. We have established an insurance company with LY HOUR Group. Also again, this is an insurance business in a country where we can expect population growth, therefore, business growth in the future as well. UDC Finance is a subsidiary of Shinsei Bank. It's the largest non-bank in New Zealand. We also have a bank in Vietnam. This is MB Shinsei Finance. It's a Military Commercial Joint Stock Bank, which was established in Vietnam. Again, this is a non-bank but we continue to hold them. Others. We have formed a business alliance with Shin Nippon Biomedical Laboratories, SNBL Group. We have decided to establish business incubation in Washington State. The two groups will also agree to establish a fund in the United States as well. Moving on to semiconductor business. Along with Shimizu Construction, we have started designing and we are trying to calculate the cost. The semiconductor business for us is not just grow it as a semiconductor business but this is revitalization of the regional community in Japan as well as manufacturing itself. So we're not so concerned about our investment ratio but we want to solicit the investment widely from like-minded companies, so for example, manufacturers of materials or semiconductor manufacturers trading firms or even semiconductor users or financial institutions. We want to jointly and in solidarity rebuild the Japanese manufacturing. In July this year that was July 19, we held a special seminar for regional financial institutions on the semiconductor foundry business and there were 108 financial institutions participating across Japan. We also did a site visit where the foundry is expected to be built and we had special seminars. And there were 14 heads of the regional financial institutions. After the seminar we took a survey, and as a result you can see that it has been received quite well. An individual feedback we have received indicated that they are very interested in this foundry business. Also, on November 19, we are planning to hold a seminar for the corporates as well, so that we can accelerate partnership with financial and business corporations including local companies. In addition to this, this is not just a semiconductor business standalone, but we will collaborate with other financial institutions business of the Group, so that we can work closely with the customers and we can that way enhance our financial institutions business as well. So this is other main businesses. SBI Insurance Group. This is accounted on a J-GAAP basis. Ordinary revenue year-on-year was plus 10.8%. This was JPY 30.9 billion. Ordinary profit and also profit attributable to owners of the company was actually negative year-on-year JPY 3.7 and JPY 2 billion respectively. But in the life insurance business in the previous year, we changed the ceding ratio and there was a reversal to the policy reserve, which we actually booked as a one-off item of JPY 1.7 billion. So without this one-off factor the business is actually growing and booking profits steadily. And this is policies in-force. You can see on a CAGR basis, it's 14.6%. You see steady growth. This is investment business. In some of the listed securities, we have booked valuation losses. But for unlisted securities, we have been able to secure profit. Especially in the listed securities, in some of the securities, we were holding on to them since they were unlisted and they went public. Usually, the valuation goes up, but then the share prices fell. As a result we had to book valuation losses. So that's the picture, I think, you can see from here. This is IPOs and M&As of the investees. Prospects is 36, and we're expecting to see multiple companies going public. That is all from me on the explanations. Thank you.
End of Q&A:
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