SBI Holdings,Inc. Q1 FY2027 earnings call

Overall Financial Results

• Group total Q1 revenue was 571 billion yen, with profit before income tax of 225.8 billion yen, profit for the period of 156.8 billion yen, and profit attributable to owners of 148.1 billion yen. All line items hit a record high for the first quarter, with pre-tax income increasing 149.9% year-on-year (2.5x the prior year's Q1 result).
• Annualized return on equity (ROE) reached 29%, far exceeding the 15% target set in the company's mid-term plan.

Strategic Progress on Core Priorities

• The company is advancing the "fourth mega bank" concept centered on SBI Shinsei Bank, after transferring ownership of Shimane Bank and Fukushima Bank from SBI Regional Holdings to SBI Shinsei Bank, converting the two regional banks to equity method affiliates. SBI Shinsei Bank currently has 92 regional financial institution partners, and completed 47.1 billion yen in loan asset distribution in Q1.
• SBI Securities' "Zero Revolution" and "Open Alliance" strategies have driven total client accounts over 16 million, with decelerating growth. The company is on track to hit the 100 trillion yen assets under custody target by March 29.
• The company has completed key strategic alliances aligned with its three core long-term objectives: a partnership with Anthropic for AI initiatives, multiple capital and business alliances and investments in global on-chain finance companies, and preliminary alliance discussions with Fuji Media for new media initiatives.

Product and Operational Milestones

• SBI Shinsei Bank's SBI Hyper Deposit sweep account, offered in collaboration with SBI Securities, grew to 1.43 trillion yen in just 9 months, improving deposit stickiness. Rising Japanese interest rates have improved net profitability, with a pass-through rate of less than 40% and a net interest spread of 0.55%.
• Retail investor realized capital gains hit 2.1 trillion yen cumulative from January to June, 3x the prior year's period, which management expects to boost reinvestment activity and create a virtuous cycle of revenue growth. Margin trading credit balance exceeded 3 trillion yen (a record high), driving a 57.7% year-on-year increase in financial revenues.
• SBI Securities ranked first among Japanese securities firms in Q1 retail Japanese Government Bond (JGB) sales, with total sales of 150 billion yen, and also ranked first in IPO underwriting with 10 deals and 90% market share of underwritten shares.
• SBI Asset Management targets 20 trillion yen in AUM this fiscal year (including inorganic growth from acquisitions) and 50 trillion yen in AUM by 2029.
• To prepare for the next crypto market upswing, the company has launched JPY stablecoin (JPYSC) and JPYSC lending services, and is prioritizing global on-chain finance development via alliances and investments in relevant platform providers.

1. Financial Services Business: Revenue and pre-tax profit reached record Q1 highs. Pre-tax profit was 116 billion yen, a 59.5% year-on-year increase. It contributed roughly 51.3% of total group pre-tax profit. Sub-segment results:

• Banking: All key P&L line items hit record Q1 highs; gross operating profit reached 52 billion yen (40% of the full-year 132 billion yen target) with total operating assets growing to 18.8 trillion yen.
• Securities: Q1 revenue hit 91.6 billion yen, up 47.5% year-on-year, with total assets under custody exceeding 75 trillion yen. Investment trust balance grew 64.2% year-on-year to 31 trillion yen, driving investment trust fees to a record 6.4 billion yen (up 60% year-on-year). U.S. stock trading revenue grew 3x compared to March 2022, and institutional investor core revenue grew 64.1% year-on-year.
• Insurance: Ordinary profit grew 23.3% year-on-year to a record high, with total policies reaching 3.25 million. Kyobo Life, now an equity method affiliate, contributed significant profit to the segment.

1. Asset Management Business: Both revenue and pre-tax profit hit record Q1 highs. Pre-tax profit increased 103.6% year-on-year to 2.7 billion yen, with total AUM reaching ~14 trillion yen. It contributed 1.2% of total group pre-tax profit.
2. PE Investment Business: Pre-tax profit grew 328% year-on-year to 119.9 billion yen, contributing ~53.1% of total group pre-tax profit. The segment holds 1.3 trillion yen in total private equity AUM, with 13 promising high-growth portfolio companies as of this fiscal year.
3. Crypto Asset Business: The segment reported a pre-tax loss of 1.4 billion yen due to sluggish market conditions. Global crypto market maker B2C2 remained profitable. The segment holds 530 billion yen in AUM across 2 million accounts; after acquiring BitBank as a wholly owned subsidiary in August, total accounts will reach ~3 million and total AUM will reach ~870 billion yen.
4. Next Generation Business: Both revenue and pre-tax profit hit record Q1 highs. Pre-tax profit increased 262.5% year-on-year to 3.6 billion yen, driven by 1.5 billion yen in equity earnings from affiliate MyNavi and gains from business reorganization. It contributed 1.6% of total group pre-tax profit.

• The company announced an interim dividend forecast for the first time ever after its Q1 results, and committed to delivering full-year dividends of at least the prior year's 95 yen per share post-stock split, with a final decision to be made after full-year results are finalized.
• SBI Shinsei Bank is tracking well against its full-year gross operating profit target of 132 billion yen, with 52 billion yen already achieved in Q1 (40% progress).
• SBI Securities targets 100 trillion yen in total assets under custody by March 29.
• SBI Global Asset Management targets 20 trillion yen in AUM for this fiscal year (including inorganic growth) and 50 trillion yen in AUM by 2029.

• Crypto asset prices have been sluggish as the market awaits passage of U.S. crypto regulatory clarity legislation, leading to a pre-tax loss for the crypto segment in Q1.
• Mortgage lending is expected to face increased impact from future Japanese interest rate hikes.
• Profit contribution from 7 of the 13 new high-potential PE portfolio companies is not expected until after Q1 this fiscal year, with only 6 companies contributing profit in Q1.

Q: (No relevant non-routine Q&A exchanges were included in the provided transcript, so no entries are included here.) A: