Moving Towards Further Growth as the Core Bank of the SBI Group
We would like to express our sincere gratitude for your continued patronage.
More than two years have passed since the SBI Shinsei Bank Group joined the SBI Group. During the past year, we continued to thoroughly adhere to the "Customer-centric Principle" and worked to expand our customer and earnings base. We changed our corporate name to SBI Shinsei Bank and made significant progress in integrating with the SBI Group. We are opening SBI Shinsei Wealth Management, joint branches offering pioneering and diverse products and services for our individual customers. By the end of fiscal 2024, all 22 branches will be joint branches. In fiscal 2023, synergies with the SBI Group, including those in the institutional business and securities investment areas, amounted to 13.5 billion yen, significantly higher than the 5 billion yen in the previous fiscal year. We are seeing steady results being part of the SBI Group.
In September 2023, our shares were delisted in order to further integrate with the SBI Group and establish and execute a medium-to long-term management strategy. I would like to thank all of our shareholders for your continued support. Subsequently, following the share consolidation, in February 2024, the Bank repaid part of the public funds (approximately 19.3 billion yen) for the first time since 2018 through the purchase of fractional shares held by the Deposit Insurance Corporation of Japan. We are currently in the process of reviewing the public fund repayment schemes based on contracts with four parties: the Bank, SBI Holdings, the Deposit Insurance Corporation of Japan, and the Resolution and Collection Corporation. We plan to reach an agreement on specific structures regarding the repayment of public funds by June 2025.
In the second year of the medium-term management plan, "The Medium-Term Vision of the SBI Shinsei Bank Group," the Bank promoted integration as the core bank of the SBI Group and achieved significant results. Total revenue and ordinary business profit both reached the highest levels since fiscal 2011, and net income rose 36% to 57.9 billion yen. The balance of operating assets increased by 1.1 trillion yen to 11.4 trillion yen and the balance of deposits increased by 1.6 trillion yen to 11.5 trillion yen. As a result, the Bank's customer base and core profitability expanded significantly. These achievements are largely attributable to the thorough adherence to the SBI Group's "Customer-centric Principle" and the pursuit of synergies with the SBI Group companies.
In the individual businesses, we have focused on creating a full offering of products and services amid the full-fledged social trend of shifting “from savings to investment.” We have produced results mainly through collaboration with SBI SECURITIES Co., Ltd. and SBI MONEYPLAZA Co., Ltd. The number of joint branches with SBI MONEYPLAZA, which started in August 2022, has expanded to eight (as of the end of March 2024). By the end of fiscal 2024, we intend to convert all 22 branches into joint branches. In June 2024, we changed the name of the joint branch to "SBI Shinsei Wealth Management" to create a system for providing high-quality consulting services in asset management of individual customers. At the end of March 2024, 1 year and 7 months after the opening of the first joint branch, offering pioneering and diverse products and services, asset under management exceeded 200 billion yen. The joint branches are well-regarded by a large number of customers. In deposits and housing loans, which form the foundation of our transactions with customers, we are thoroughly adhering to the "Customer-centric Principle" and providing competitive interest rates even after the end of negative interest rates policy by Bank of Japan. As a result of these efforts, the number of retail accounts, which was approximately three million prior to joining the SBI Group, began to grow significantly, and expanded to 3.53 million accounts over the 2-year period (as of the end of March 2024).
In institutional business, we focused on developing and deepening customer and business relationships, mainly in structured finance and corporate business, which are one of our strengths. As a result, our operating assets expanded significantly and profitability steadily improved. In collaboration with the SBI Group, we established a system in which SBI Investment Co., Ltd. and SBI SECURITIES provide one-stop service everything from investment to financing. In addition to introducing borrowers, we provided venture debt to SBI Investment’s investment destinations and executed nonrecourse loans for STO (Security Token Offering) projects for which SBI SECURITIES is the lead manager. In this way, we achieved a cumulative total of 128 cases (as of the end of March 2024) for investment and securitization projects, amounting to 558.7 billion yen.
The Triangle Strategy, in which the SBI Group, the Bank Group, and regional financial institutions work in a trinity to promote regional revitalization, has led to steady progress in collaboration with regional financial institutions. Specifically, the Bank has strengthened its relationships with regional financial institutions in a wide range of fields, including introductions to regional financial institutions for loan projects originated by the Bank, cofinancing with regional financial institutions for local companies, origination and provision of sustainable finance, for which demand has been rising in recent years in society, and transactions through Group companies such as APLUS, Shinsei Financial, and Showa Leasing. As a platformer for regional financial institutions, the Bank has expanded its business with 93 regional banks nationwide.
In Overseas Business, the business performance of UDC Finance Limited, New Zealand's largest nonbank, remained steady. In addition, we comprehensively reviewed the business and companies in each region in terms of profitability and growth potential, and conducted business restructuring.
With a view to strengthen our medium-term profitability, we have expanded our investment portfolio from investments in government bonds to investments in securitized products related to investment trusts and credit. In this way, we have expanded the scale of our investment portfolio and diversified our products.
Continued from the previous fiscal year, we made our efforts to reorganize the SBI Group as a whole. We integrated the private equity business, conducted by Shinsei Corporate Investment, within the Group, and incorporated the Shinsei Securities into SBI SECURITIES substantially. As a result, we expect to realize annual cost-savings of around 1.5 billion yen from fiscal 2024 onward. In January 2024, we acquired Diamond Asset Finance Company Limited through M&A, which operates a real estate finance business for individual and institutional customers, and made it a new wholly owned company. In this way, we are also working to achieve inorganic growth.
In terms of sustainability management, the Group aims to achieve a virtuous cycle between "long-term contribution to the environment, society, and customers through our business” and “sustainable growth of our group." By fully utilizing the functions of the SBI Group and working to resolve customers’ challenges, we believe that it will have a positive impact on our customers' businesses and the surrounding environment/society, and will lead to the enhancement of the Group's corporate value.
Sustainable Finance in the institutional business is one of our distinctive initiatives as a contribution to sustainability through our business. In February 2020, we established the Sustainable Impact Assessment Department to internalize the evaluation of sustainable finance, thereby achieving evaluation and high economic efficiency based on the deep understanding of our customers. One of our sustainability goals is to originate sustainable financing for a cumulative total of five trillion yen by the end of fiscal 2030. In addition to providing financing such as green loans and social loans, we also engage in transition finance through dialogue with customers as part of our support for corporate decarbonization from the standpoint of a financial institution. Sustainable finance is of great interest to regional financial institutions, and in addition to cooperating in individual projects, the Bank also supports the promotion of sustainability in the region through personnel exchanges and training programs. We are committed to contributing to sustainability through our business to solve a variety of environmental and social issues, though the formation of funds for environmentally conscious houses (Net Zero Energy House, etc.) at Showa Leasing and the handling of "sustainability deposits" in the individual business.
We believe that human resources are the most important capital for financial institutions. The Bank Group provides opportunities for employees to learn and develop their abilities to maximize their potential, as well as to create an environment conducive to career development. In addition, we are working to introduce various personnel systems and create an organizational culture so that they can engage in businesses while choosing flexible work styles according to life stages and life events, and to fully demonstrate their abilities. In September 2023, we launched the Group Diversity and Inclusion Committee to promote initiatives that contribute to the active participation of diverse human resources, not limited to women's active participation and gender issues. By bringing together personnel with various personalities and abilities, and organically connecting them, we aim to create new added value that is not constrained by existing concepts, and provide financial products and services that meet the diverse values and needs of our customers.
Fiscal 2024 is the final year of the medium-term management plan. As originally planned, we have set a consolidated net income target of 70 billion yen for fiscal 2024, and we will do our utmost to achieve this target. We will also make preparations for future growth. The SBI Group continues to evolve and expand its corporate ecosystem on a daily basis with the concept of "Going Beyond Finance with Finance as its Core." The launch of the “Zero Revolution” (no charge on domestic equity trading commissions) by SBI SECURITIES and the entry into the semiconductor business, which the SBI Group is currently planning, will have a significant impact on the expansion of the Group's customer base and business domains. By proactively participating in these developments as the core bank of the SBI Group, we will contribute to the expansion of corporate ecosystems and aim to grow further.
The "world with interest rates" began, and financial institutions are facing a historical turning point. Amid enormous changes in the external environment, it is necessary for us to change pioneering and innovative by ourselves. As the core bank of the SBI Group, the SBI Shinsei Bank will continue to promote the speed and entrepreneur spirit of the SBI Group and achieve growth together by repeating the process of "self-denial, self-transformation, and self-evolution."
July 2024
Katsuya Kawashima
President and Chief Executive Officer
