ORIX Corporation Q2 FY2026 earnings call

Management Statement and Operational Highlights

• Revised Earnings Forecast: Raised net profit forecast from JPY 380 billion to JPY 440 billion, increased full-year dividend forecast, and expanded share buyback program to JPY 150 billion.
• Joint PE Fund with Qatar Investment Authority: Established a USD 2.5 billion PE fund with Qatar Investment Authority, with ORIX contributing 60% and QIA 40%, targeting investments in Japanese companies.
• Future Business Expansion with Hilco Global: Acquired Hilco Global, a U.S. company, to use as a platform for ABL investment fund creation and expand private credit business.
• Osaka IR Project: Construction began in April 2025, with cost revised to approx. JPY 1.51 trillion, and aiming to open by fall 2030.
• Portfolio Optimization: Sold shares in various businesses, continued capital recycling, and aimed to optimize portfolio based on growth potential, capital efficiency, etc.

Segment Performance

• Corporate Financial Services and Maintenance Leasing: Profit increased by JPY 13.1 billion or 29% to JPY 58.6 billion.
• Real Estate: Profit decreased by JPY 1.3 billion, 3% year-on-year to JPY 49.1 billion.
• PE Investment and Concession: Segment profit increased by JPY 9.7 billion or 21% year-on-year to JPY 56.7 billion.
• Environment and Energy: Profit increased by JPY 117.3 billion year-on-year to JPY 119.7 billion.
• Insurance: Profit increased by JPY 10 billion or 24% to JPY 50.9 billion.
• Banking and Credit: Profit decreased by JPY 600 million or 5% year-on-year to JPY 12.5 billion.
• Aircraft and Ships: Profit decreased by JPY 10.1 billion or 31% year-on-year to JPY 22 billion.
• ORIX USA: Segment profit decreased by JPY 18.1 billion year-on-year, resulting in a loss of JPY 1.8 billion.
• ORIX Europe: Segment profit increased by JPY 1.3 billion or 6% year-on-year to JPY 22.1 billion.
• Asia and Australia: Segment profit increased by JPY 600 million or 3% year-on-year to JPY 19.7 billion.

Guidance

• Net Profit: Raised full-year net profit forecast from JPY 380 billion to JPY 440 billion.
• Dividend: Increased full-year dividend forecast per share from JPY 132.13 to JPY 153.67.
• Share Buyback: Expanded share buyback program from JPY 100 billion to JPY 150 billion.
• ROE and AUM: Aim to achieve 11% ROE and JPY 100 trillion in AUM by March 2028.
• Capital Recycling: Forecasted realization and new investments of JPY 600 billion to JPY 800 billion for fiscal year 2026.

Risks

• ORIX USA Operating Environment: Uncertainty in the operating environment, including credit risks in real estate and private equity investments.
• Interest Rate Impact: Potential impact of interest rate changes on insurance liabilities and portfolio performance.
• Economic Uncertainty: Impact of uncertain economic conditions on asset evaluation and disposal services in Hilco Global.

Question and Answer

• Q: About joint PE establishment with QIA and impact on balance sheet: A: Takahashi explained that negotiations with QIA spanned about 2 years, and the joint fund aims to invest in Japanese companies, with ORIX contributing 60% and QIA 40%, and the fund size is USD 2.5 billion. It won't significantly bloat the balance sheet but aims to capture larger deals.
• Q: ROE target and initiatives: A: Yamamoto noted that interest rate changes and accounting gaps are being considered, and they aim to monitor and take initiatives to achieve the 11% ROE target by March 2028.
• Q: Lending forecast and next year's profit outlook: A: Yamamoto and Takahashi discussed that ORIX Bank is reshuffling portfolios and ORIX USA is managing risks, with plans to resolve issues by the end of the second half or early next year, and aiming for sustainable profit growth.
• Q: Environment and Energy segment performance: A: Takahashi stated that the segment has mixed performance, with some businesses in recovery phase, but no major impairment losses recognized.