SBI Holdings Inc

TSE:8473

Earnings Call Transcript 2022-Q3

[Yoshitaka Kitao, executive]

Thank you very much for taking your time out of your very busy schedule today to listen to financial results for the 9-month period ended December 31, 2021. We have about 70 attendees; and online, there are about 130 audience. We start usually at 4 p.m., but we are starting at the 3:30 p.m. I have previous engagement starting from 6:00 p.m., and we must stop at 6 p.m., my apologies.

This is before the consolidation of Shinsei Bank. In the second quarter -- in the third quarter, before consolidating Shinsei Bank, consolidated performance for these periods will be presented today. Shinsei Bank is under J-GAAP and we have adopted IFRS. And to put these 2 entities with different accounting standards together has been quite burdensome, and it was not easy to make announcement consolidating Shinsei Bank. And Shinsei also announced its consolidated financial results for the fourth quarter on January 28 under J-GAAP.

On February 8, as scheduled, Mr. Kawashima will be assuming the position of CEO at Extraordinary Shareholders' Meeting of Shinsei. And according to that schedule, Shinsei Bank is also moving ahead. Shinsei Bank consolidated P/L will be incorporated for the financial year ending March 2022, only for the fourth quarter of the financial year.

Turning to our performance. Revenue was JPY 527.4 billion. This was an increase of 45.6% year-on-year. Profit before income tax expense was JPY 171.4 billion. This was also an increase of 82.9% year-on-year. Profit for the period was JPY 143.8 billion. This was an increase of 107.8%. Profit attributable to owners of the company increased to JPY 132.2 billion by 117.4%. All of these were historical highs.

In April 2021, we announced a midterm vision where our target is set at JPY 300 billion of revenue before income tax expenses and new business is to account for 20%. This was announced in our midterm vision. But if we consolidate Shinsei Bank in this fiscal year, we already will be exceeding JPY 300 billion level in consolidated profit before income tax expense, even including negative goodwill. That is what is expected. And our performance is steadily growing. That is a huge factor.

Regarding return on equity, in the 9 months to December, 27.7%. In the first half, on a consolidated basis, it was up 24.6%, but it has grown further to 27.7%. Among financial institutions in Japan, I do not believe any other institutions were able to achieve this high ROE. We were able to achieve extremely high return on equity.

Earnings results are not announced by Nomura yet, but Daiwa and SMBC Nikko and we have made announcements. And if you compare amongst major face-to-face securities companies, in comparison to Daiwa and SMBC Nikko Securities, we have large gap between ourselves and them. Nomura will be announcing their results on February 1, and their results are to be seen.

Before Shinsei Bank consolidation, according to IFRS, this is the performance by segments. Financial Service Business, both revenue and profit before income tax expense achieved record high. Asset Management Business likewise achieved record high in both revenue and profit before income tax expense. In particular, profit before income tax expense of Asset Management Business rose 194.3% to JPY 127,322 billion. Biotechnology, Healthcare & Medical Informatics Business was able to reduce deficit by a large margin and achieved a record high revenue in a steady fashion. Focus on selection is making progress in this business.

As for the shareholder benefits, it will be announced today. There are 2 options to start from as usual. First is shareholder benefits mainly in the form of ALA products or the other option is crypto-asset XRP.

As for business results, securities-related business, average daily individual brokerage trading value increased 12.4%. Our profit did not ride as fast as the trading value because we are reducing our commissions to implement Neo-securities initiative. Despite that, we were able to achieve record high revenue and income. Neo-securities initiatives are underway.

Online stock transactions. The commission will be eliminated for online stock transactions. In order to achieve this, we have to diversify the sources of revenue, and we have indeed diversified revenue sources. As a result, towards eliminating commission, we have made advances and at the same time, we have diversified revenue sources. While maintaining profit, we were able to proceed with Neo-securities initiative.

We are maintaining revenue and moving towards elimination of commissions. And as a result, we may have a very large increase in the number of customers. Online account number is 30 million for online brokerage total. And by chance, we may have to prepare ourselves for the event that all 30,000 -- all 30 million accounts may come to us, and we are making preparations. And the remaining point is the systems, not only for the front office, but for the back office, there are various systems. We have to have robust systems. Otherwise, if we see rapid increase of customers without the systems, that will be a problem. And we have systems that can accommodate about 11 million customers or accounts. Before the end of the fiscal year, I would like to complete the preparation of the systems.

This is the comparison with major online securities companies. SBI is compared with others, including Rakuten. And as you can see, in terms of operating income, we have a gap of more than fourfold between Rakuten and Matsui. As for assets under management and in terms of share of individual stock trading value, we have very large gap.

Next is banking-related business. SBI Sumishin Net Bank has applied to be listed on TSE on October 8, 2021. We expect that listing to be approved before too long. But we will have to closely monitor the market conditions, so that we are able to bring the company public at the valuation level that we expect. This also is a record high. This is based on equity in earnings for SBI Holdings of SBI Sumishin Net Bank under IFRS. This is a 50-50 joint venture. And if the number is doubled, that will be the total revenue -- that will be the total earnings.

This is the change in ordinary income of SBI Sumishin Net Bank under J-GAAP. Business was started in June -- September 2007, and profit was achieved shortly and growth was achieved, and it declined after a negative interest rate. A policy was started by BoJ, but resumed growth. And this year, once again, is on pace to achieve record high.

Insurance-related business is also achieving steady growth in ordinary revenue and ordinary profit and profit attributable to parent of the company. In all of these respects, record highs were achieved.

As for Asset Management Business, revenue is JPY 243.1 billion, which is plus 88.7% year-on-year. Profit before income tax expense was JPY 127.3 billion. This was an increase of 194.3% year-on-year. And these are once again record highs and record highs are renewed once again.

Bio, Healthcare & Medical Informatics Business. As I mentioned earlier, the Quark in the U.S. was not so successful. There were about 3 products in Phase III, but in the end, results were not successful, and we decided to liquidate and we are preparing for complete withdrawal. And quite soon, this will be completed, and there will no longer be any negative from Quark. As for ALA-related businesses, SBI Pharmaceuticals is spending much on R&D. ALApromo has grown its revenue and profit by a wide margin.

As for SBI Biotech, it has licensed out some products, 4 products to be specific. Out of 4, 2 have achieved predetermined milestone, resulting in milestone payment, which was a plus JPY 466 million. As for Biotech pipelines, anti-ILT7 antibody is shown here. This is for collagenic disease or allergies. And this drug is to suppress these conditions and development of such drug is underway.

Erythematosus is collagenic disease. And with Kyowa Kirin, autoimmune disease drug is being developed. The self-immunity is damaging the cells of oneself. That is the autoimmune disease. One will be suppressing cancer and the other will be suppressing autoimmune disease. And we have products such as antibodies. These are 2 major topics of research and development.

And we are focused on suppressing autoimmune disease, Kyowa Kirin, Asahi Kasei, Carna Biosciences. With Carna Biosciences, we are developing agent for solid cancers. We are not developing drugs ourselves, but we are licensing out technologies, which means that it doesn't require too large an investment.

As I have discussed so far, we are -- we have been able to grow our profit to significantly higher level. And why have we been able to achieve exponential growth in profit? This is my own summary. Business strategies were implemented to create competitive advantage and enlarge the customer base. And these strategies have borne fruit, and there are several points listed here.

As for profit level, fiscal 2012, fiscal 2013, since then, consolidated profit before income tax expense is shown in bar graph and return on equity is shown in line graph. There is a sharp drop in 2019, and this is because of the surge in COVID cases. And there was serious uncertainties about the future, and profit and return on equity both declined. However, there's an awareness that vaccines are effective. And with vaccination, it will not be so severe. And that is also how Omicron variant is described these days.

Fiscal 2016 was a bottom. And basically, the performance has grown steadily since then. ROE is also achieving a very high level and it's maintaining a high level. There were European crisis or deceleration of U.S. economy. And in these different circumstances, we have been able to achieve these profit and ROE. Especially, we have seen steady growth in Financial Services.

Asset Management Business around fiscal 2016, fiscal 2017 began to see more rapid growth and have begun to blossom on a full-fledged basis in fiscal 2018, but there was a slight decline in fiscal 2019, as I discussed earlier. But in fiscal 2020, fiscal 2021, fiscal 2022, especially after fiscal 2018, in Asset Management, we have seen very strong growth.

Bio, because of Quark with 3 Phase III programs, very large research expenses were incurred for clinical trials. And we had to incur very large losses in the past and results were not what we expected or what we desired to see, but we have decided to discontinue and have decided to wind down the company. Now Biotechnology business will become a more profitable business.

Why is Asset Management Business achieving rapid growth? This is a result of bold execution of shared investment strategies. First, we have captured since the wave of technological innovations and made concentrated investment in advanced fields. This contributed to increase in financial performance. Kondratieff cycle is set to be 50- to 60-year cycle.

In the business cycles, around 2010, there was an emergence of blockchain, Internet of Things, AI, robotics, big data, these various technological innovations emerged, including communication technology and also in biotechnology area, iPS cell and genetic engineering techniques, various different techniques were emerging. It will be 5G security technologies, quantum computing technologies, one after another new technologies will continue to be developed.

And since around this time, thoroughly, we have focused our investment on fintech. As a result of that, in the term ending March 2013, profit/loss from the change in fair value and profit/loss on sales of investment securities was only JPY 8.4 billion, but it has increased by 1091% to JPY 100 billion for the 9 months of fiscal 2021. What we have done is that in December 2015, we have established FinTech Fund at JPY 30 billion. In January 2018, A&B Fund was established. This is AI&Blockchain Fund. This fund was established. And in April 2020, 4+5, Industry 4.0 and Society 5.0 related investment fund was established.

One after another, investments were made worldwide, and they have been very effective. And now we are in a period of recouping the result of the investment. For example, SBI Group, through 2 funds established by SBI Investment made concentrated investment in fintech areas. So far, JPY 127 billion was invested in 171 companies in the fintech sector. Not only through the fund, but from SBI Group itself, investment was made in the form of co-investment from SBI Holdings to the tune of JPY 49 billion. FinTech Fund JPY 30 billion and SBI A&B Fund JPY 60 billion, these 2 funds that were established are now starting to recoup the return on investment. Concentrated investment have been made in fintech. Those in red boxes had already been taken public. Those in blue boxes were exited through M&A.

I will mention just some numbers. Get out or exits in IPO, M&A deals in full year fiscal 2020 was 22. And for full year 2021, the expected number of deals is 30. Is that the end of the story? Now going forward, we expect a large number of IPOs and M&As. FinTech Fund and A&B Fund and the 4+5 Fund will all be entering the period of recouping investments. And 40 exit is expected in April, December 2022; 48 in 2023; and 79 IPOs in 2024 are expected.

Furthermore, 4+5 Fund is a size of JPY 100 billion, a huge fund. As a venture fund in Japan, it is one of the largest at JPY 100 billion to invest in core industrial areas of the next generation. This fund also is making concentrated investments.

Secondly, early-stage investment into overseas financial services is leading to success. In particular, we are also investing or looking at near-bankrupt companies and have taken them as subsidiaries and turned them around. SBI Savings Banking, the Republic of Korea, this used to be called Hyundai Swiss, and this was near bankrupt. Nonperforming loan percentage was 51%, and we invested JPY 130 billion to acquire that bank. And the result is in March 2013, we acquired shares and made it a subsidiary. And in a short period of time, we were able to turn the company around to a profitable situation. And in the first 9 months of fiscal 2021, the record high profit of JPY 25.3 billion was achieved.

In a similar way, we have invested in a bank in Russia. This was also a near-bankrupt bank. And we have made up most effort to turn this bank around, and is putting that on a trajectory for growth. Business turnaround, especially a turnaround of a bank is not particularly difficult in my view. And why I believe this is the case is that banks in any country collect deposit -- small deposits from general public and we'll invest the deposit into promising industries by providing loans. And interest rate is set and various other policies and frameworks are in place so as not to cause impairment of small lot deposits from the depositors.

So from our perspective, banking sector is one of an area of investment where we can make investment with a sense of reassurance. The banks that were overstretched and went near bankrupt, for example, Hyundai Swiss Bank in Korea, which today's SBI Savings Bank, was a case of example. They had invested in real estate development in large amount and was focused on short-term profits. And once real estate bubble burst, that was the end of the story, similar to Evergrande of China today.

We will not permit as such overstretched situation. Basically, in principle, it is to develop business steadily and to strategically develop business within a certain framework. In this way, we have been able to grow our profits.

Net income of SBI Savings Bank is as shown here. From January to December under K-GAAP, and this is in Korean won, KRW 349.4 billion of net income is achieved. This is a growth of 35.3% year-on-year. And because of the views of the financial regulatory authorities, provisioning is strengthened for borrowers with multiple debts. And there are also a precautionary strengthening of provisioning. However, we were able to achieve record high profits. And as I mentioned earlier, it used to be that nonperforming loan was 51.6%, but it's now as low as 1.39%. It has been turned around into a very profitable bank.

Secondly, active investment has been successful in the financial services field in Southeast Asian countries, which are entering a period of high economic growth. This is a graph showing population size and economic growth. Southeast Asia will be enjoying high growth in comparison to other groups such as EU or NAFTA. By far, population is large and growth rate will be faster. That is our outlook. Southeast Asia is about to enter into a high-growth period. And from early on, I have decided to make investment in this region.

For example, Philippines Bank, this has changed in name. It used to be FPT, but now it is TPBank. It was listed in April 2018 in Vietnam. In Vietnam, investment ratio was 19.9%, since foreign investment above 19% is not permitted. And market cap of the company is JPY 327.4 billion as of the end of December, whereas it was JPY 219.3 billion at the end of September. And profit before income tax expense is increasing and FPT Securities is also enjoying growth.

Looking at the economy. The economy will be supported by -- first, by the financial sector -- financial services sector and then manufacturing sector will follow. That was exactly the pattern in Japan and also in China. Therefore, from early in development stage of the economy, I have invested in these countries. And these investments are now starting to blossom.

Cambodia and Thailand. In Cambodia, we have bought mid-tier microfinance company and has turned it into the bank and has achieved the profit very quickly, and this is growing. I think this is promising. In Cambodia, SBI Royal Securities was established, and this is the only Japanese securities company in Cambodia and brokerage business, underwriting business are carried out by this company. In Thailand, we have online brokerage. And steadily, it is increasing profit.

We are also making investments to help address social issues. We are investing in SDG-related securities or companies, solve social issues and help achieve sustainable society. These are the investee companies. And in the broad range, we are making SDG-related investments. And we also have a subsidiary called SBI Energy in our group for farm-based solar power. This is farm-based because there are solar panels, but solar panels are inclined so that there will be sunlight on the farm field and cultivation is possible. The farm-based solar power plant has a soya or wheat or horseradish are grown on the field. There are 3 that are already in operation, and we do not have to worry so much about sunlight, whether it is shining or not, we are able to enjoy stable profit. And this is also benefiting the local farmers and local governments.

CVC Fund, Corporate Venture Capital. In establishing Corporate Venture Capital, no matter how big a company may be, it is now becoming more difficult to establish CVC on one's own and high-quality research and development and high-quality staff and high-quality results are difficult to obtain. There are various technologies developed by start-up companies and products made by start-up companies, and they have to be evaluated and invested, and that will be more efficient. That is why we are seeing increasing number of Corporate Venture Capitals and we are seeing increase in commitment amount.

Innovation is pursued. Carbon neutral climate change-related CVC funds in these areas are jointly established with us. And these companies, CVCs are being established, and all combined, it has reached JPY 105 billion.

Another important way to address social issue in the form of investment is business succession. It's difficult to find successors. Top management is reaching the age of retirement. They are in their 70s. They have established their businesses. But going forward, prospect is quite uncertain. And as a parent, a parent does not want to pass the business on to his or her child in many cases. And we are, therefore, focused also on business succession. JPY 10.9 billion was collected for the first fund, and this was closed and JPY 30 billion was collected for the second fund in the first half of this fiscal year. And we would like to increase this to a total of JPY 100 billion.

The second factor that contributed to increase in revenue is securities-related business and security-related business revenue has been diversified to realize Neo-securities initiative, and this has led to synergies among the companies in this business and diversification of products and services such as margin trading, foreign stocks, investment trusts, et cetera, and it has promoted business to grow and increase the customer base.

By diversifying revenue source, SBI Securities steadily increased profits. Neo-securities initiative -- what we are calling Neo-securities initiative is also advancing in the United States. Robinhood Markets, it went public the other day, and was much talked about. And Robinhood Markets eliminated commissions for stock transaction and is also offering FX transactions and is expanding its business.

Why is it possible in the United States to adopt such a business model? They want more customers to transact. And liquidity is made available to market makers who transact in high-frequency algorithm transactions. And the orders from the customers will be related to these market makers. And in its return, rebate can be received. And this is possible in the United States, and that has led to the growth of the likes of Robinhood Markets. But this system is not allowed in Japan. Charles Schwab and E-Trade are also implementing pay for liquidity.

In Japan, because we do not have a system of pay for liquidity, does that mean that it is not possible to implement Neo-securities initiative? It should be possible in Japan. And first, we have started by diversifying sources of revenue. And my feeling is that it is indeed possible. SBI Securities operating income and the individual brokerage trading value trends are shown trading value declined, but operating income is increasing and trading value declined once again, but operating income increased, fiscal 2020 -- fiscal 2019 COVID impacted us. But in fiscal 2020, operating income once again grew. And for fiscal 2021, this is for the first 3 quarters of the year. And we have been able to achieve overwhelming profitability.

A reality, for online transaction for domestic stock brokerage, we are trying to eliminate the commission and what the current level of commission is, it's 13.3%. Out of the operating revenue, the percentage has declined and now it's 13.3% for people 25 or below in age. Domestic stock transaction commission is already 0 for those who are 25 years of age or younger. And under Neo-securities initiative, we would like to eliminate fee for everyone. And if we eliminate commission and how much loss have we incurred as a result? Commission is JPY 300 billion. If we do not eliminate, it will be [ JPY 34 billion ]. So about JPY 40 billion has been lost as a result of eliminating commission. But others grew more than offsetting the loss of JPY 40 billion.

Customers are transacting ordinary stocks, and they may be interested in transacting foreign stocks or margin trading or FX trading or crypto-asset trading. And we are diversifying our offerings to cater to these needs of the customers. When we have 30 million customers, we are able to grow other businesses. And even by eliminating commission, we still are able to grow profit. And that is the business model adopted only by SBI Holdings.

Increase in income through diversification of revenue sources is indeed surpassing decline in brokerage commission income. We are also focused on wholesale, underwriting, offering commissions. We have been growing these commissions. It has grown 42.5% year-on-year. Financial revenue, this is not only in kind trading, but margin trading has been expanded. And financial revenue increased 16.9% to JPY 33,291 million. Other commissions by enlarging the investment trust asset under management, the commission is now JPY 20.1 billion, 42.2% increase year-on-year. And we are able to grow our business one after another as illustrated here.

And with this, we would like to realize Neo-securities initiative. In the end, we would like to capture 30 million accounts. System is not sufficient yet. And we are making all our efforts to improve our systems so that the systems can support 30 million customers. And I am instructing our systems people to be fully prepared.

Wholesale business, stock sales business will be enhanced. Products and services will be enhanced and SBI SECURITIES will be supported by enhancing FX business and through crypto-asset business.

Rapid increase in interest credit bands due to interest rate revisions, 16.9% increase in financial revenue. And further increase the balance of the investment trusts through purchases using shared points and accumulation service by credit card, the investment trust fee has increased by 48.7% year-on-year. And wrap management, SBI Wrap in March 2022, it's going to be started. And with the diversification of various services, we would like to increase the revenue sources and the corporate sales will be enhanced and IPO and underwriting business is rapidly increasing. This is number of cases or deals underwritten.

If you take a look at this, you can see that this is growing steadily. And the dark blue is the IPO underwriting, and light blue is a secondary offering, public offering of the companies that have already made IPO. From March 2018, the blue -- light blue has increased and has overtaken the dark blue. So it's not just IPO, but we have been able to enter into the secondary business as well. And also a number of deals where we have the lead managers is increasing. And this 18 companies from -- between April 2021 through December 31, 2021, and 15 companies in 1 year and 18 companies in this period. And from April to December, there were 105 companies that have made IPO. And we have been involved in 103. So 98.1% is the involvement rate.

And private underwriting, not the IPO, initial public offering, but PO, what is called PO, it has increased by 1.5x year-on-year, and also corporate bond underwriting business has increased by 2.6x year-on-year. And public bonds and electricity bonds are now asking us to get involved voluntary.

And also, FX business is increasing steadily, and JPY 9.897 billion or 30.2% increase. And also, a crypto-asset-related business JPY 6.55 billion or minus 7.9%.

And SBI SECURITIES foreign stock trading value, if we look at fiscal year 2018 as one, then the third quarter this fiscal year, 5.6x in trading volume and revenue 5.7x. And as a new area, real estate finance business is something that we're entering, and there are several companies that have been acquired already. And with these small lot real estate financing is going to be grown rapidly.

And security-related business has been diverse its revenue sources in order to realize Neo-securities initiatives. And -- so the number of brokerage accounts is -- has topped 8 million, which is the largest in Japan.

And compound annual growth rate from March 2009 to March 2021 12.1% as opposed to 1.2% in Nomura -- 1.5% rather in Nomura. So the gap is widening. And alliance with Society is being utilized to provide a wide variety of service channels. And Sumitomo Mitsui Bank and Sumitomo Mitsui Card. We are working with those companies through SBI SECURITIES and also investment -- periodic investment service will be provided. And also, you can do the simultaneous application of SBI SECURITIES general account and Sumitomo Mitsui Card credit card. And we believe that this is going to increase rapidly because we obtained 300 applications on the first day of launch.

And as for NeoMobile Securities, SMBC has invested in 20% of the share. And with the linkage of balance, the usefulness will be raised. And also with the automatic fund transfer, there will be seamless deposit and withdrawal implemented.

And MONEY PLAZA is going to have 14 co-management shops. In 14 banks -- 22 shops with 14 banks around. And there are 18 shops where SMBC Nikko Securities has signed a contract to assign personnel.

And focus on the provision of the products and services that meet the needs of younger population. NeoMobile customers are in their 20s and 30s, and that represent 51% of the customers. And FX and warranty and warrant and IPOs will be offered so that we can capture those generations.

And then as for service diversification, the SBC Trade -- SBI VC Trade and TaoTao were merged. And the periodic investment service for crypto-assets was released in December 12, 2021. And crypto-asset lending business has been -- is going to be -- or has been started in January 26, 2022. So from March 16, those services will be applied to all 7 crypto currencies.

And as for B2C2, continued expansion of client base contributed to in growing volumes. And in 2021, it was 1.9x of 2019 and 14.3x by volume by client. And the B2C2 is a market maker which is the largest -- world's largest market maker for cryptocurrency. And after our acquisition, the performance has been growing rapidly and new -- not just spot trading but new features and NDF, options, CFD and lending, those wide variety of products are being offered to customers. So we believe that this is going to increase further.

And we have attracted a large number of new investors through newly opened NISA accounts. The number of NISA accounts has been rapidly increasing. Nomura is shown in red. And if you look at the NISA customer attributes, the new customers are 76.1%, existing customers 23.9%. 76.1% of the -- of which 71.8% are beginner investors. And SBI SECURITIES number of Junior NISA accounts reached 192,000. And it's about 30% of the entire securities industry's Junior NISA accounts.

iDeCo, or Individual Defined Contribution Pension Business, this is now also increasing rapidly. This is the cumulative number of SBI Benefit Systems subscribers for DC, 45.7% CAGR. And as for balance of the investment trust for 401(k) individual-type distributed by SBI SECURITIES, compound annual growth rate of 52.0% from fiscal 2015 to 2021. And a cumulative number of customers for iDeCo, we are the top in the industry.

And third factor is open alliance strategy, which dramatically expand the group's customer base. And we have made rapid growth in profitability. And this is the third factor behind that. And the first one, the open alliance was structuring a multi-point ecosystem through open alliances.

If you look at the Rakuten Securities, operating income and number of accounts. Rakuten points were offered and number of accounts is increasing, but operating margin has started to decline rapidly. And this is Rakuten Securities.

And as for Rakuten Bank, operating income is declining. So the points are the expenses, the loyalty points expenses. The more you offer loyalty points and the profitability or margin would decline. So Rakuten Securities profitability is less than 1/4 of -- that of others. And so I believe that this self-contained point ecosystem is not something that we are going to establish.

So we used to have SBI points and try to come up with self-contained ecosystem, but we stopped doing that. And what we need to do is to establish multi-point ecosystem. And also for the commissions, we have to be most competitive. So with the profitability, we can be competitive in commissions. Without profitability, we can't do anything. And strategically, the biggest failure, in my view, is the decline in profitability or margin. So as we -- as I do my own business, I'm always focused on profitability, not the number of accounts. If you sacrifice profitability and if you are increasing the number of accounts only, then you would burst at some point in time. With the profitability, you can be the winner in the commission competition.

And the Rakuten Securities change in the point system. We have been seeing an increase in account transfers from Rakuten Securities. The Rakuten has -- they have stopped the contract with Rakuten Securities for the point system, and they are flowing into our business. And -- so we have decided the SBI SECURITIES pays a full amount of fees paid by customers to other companies before the transfer of investment trusts, which is called the Investment Trust Transfer Program, which will be -- which has been launched in January. And also, we are -- have launched SBI Premium Choice, an active fund carefully selected by SBI SECURITIES to support long-term asset building.

Now as I said, the self-contained point ecosystem is just a matter of time to go burst because profitability is bound to decline basically. So that's why we have to develop multi-point ecosystem, T-Point and Ponta Point and V-Point of SMBC we're working with those, and we have already made a deal with 2, and we are going to have 5 in the end. And that would help enhance the convenience of the customers and everybody can divide the burden of expenses. So by declining or reducing the burden of expenses, we can benefit.

And the number of T-Point, the number of members is more than 70 million. V-Point, 27 million number of accounts holders. Number of members utilizing this service is 103 million per year. And we do have the connection with SMBC. And as we consider something like this, you have to have multi-point, otherwise, it won't work. Whether we can make that decision or not would be a key factor to decide whether you can win or beat the competition or not. That will be the deciding factor.

So SBI Sumishin Net Bank promotes the expansion of its customer base through Neo-bank initiatives. So the Neo-bank initiatives to use the function of banks that you partner with, and you provide that bank functions without sparing anything. And we will be just working as behind the scene after, and we can get some commission. A number of accounts since opening 5.17 million and deposits JPY 7,025 billion. So steadily, the deposit balance and number of accounts have been increasing.

And now from -- starting from Bank of Yokohama, net online banks and regional banks, we are at the 16th in the ranking, but we set up our banking business in 2007. And Bank of Yokohama, how many years? More than 100 years of history that they have.

And if you look at the third one, JPY 12,274 billion, Bank of Fukuoka. This is the balance of deposits. And SBI acquired Shinsei Bank. And SBI Sumishin, JPY 12.8 trillion, combining all these 3. So we would be placed third already.

And Neo-bank initiatives promoted in collaboration with major business corporations, starting from JAL, and T Money, Yamada Finance Services and Open House and Takashimaya and Dai-ichi Life Insurance, we are working with all these partners, and so the scope is expanding. And with that, we can expand the customer base.

And by strengthening alliance with internal and external parties, we can expand the insurance-related business. And in compound annual growth rate, from March 2016 to December 2021, it was 16.1% CAGR. And we think we can take advantage of synergy with the companies within the group to expand sales and channels and enhanced services in insurance. For example, in non-life insurance, Net Bank is what we are taking advantage of.

And if you look at the fire insurance acquisition, 43% is coming from the bank. And as of December 2021, the group credit life insurance in relation to the business in bank is increasing and growing rapidly. And so within the group, we are enjoying the synergistic effect. And if you look at outside of the group, we are working with various parties to enhance the alliances. And that is what we call, and I would call, open alliance strategy.

And furthermore, the group credit insurance system scheme is being provided to the financial institutions. And we have established association. The Group General Incorporated Association Zenkoku Danshin Suishin Kyokai, which was established in January 1 and 36 already signed up.

And SBI Nihon SSI's insurance application system and real estate company's application management system are linked in terms of data, and we would further accelerate this to expand the customer base, and we would have sales network with various companies within the group. And then promote an alliance strategy to expand SBI Group's customer base and support regional financial institutions to address their various issues.

Now as for the initiatives for regional banks, we have explained many times already, but it's not just financial institutions, but now we're talking about regional economies and local business parties and partners. We are going to approach all these as well in various forms. And so we have established a regional revitalization partners and Concordia and Shinsei and Yamaguchi Financial have been involved as well or [ Sendai ] Bank is involved. So we are establishing the mechanism where we can approach the local economies directly.

And what we have done so far is the partnership with financial institutions. And we will continue on with these initiatives, and the number is increasing rapidly. Every time we have the earnings report, we show this, and you can see how much growth we have made if you compare this to the past documents. And Asset Management Group, the regional institutions or financial institutions that have entrusted asset management has reached 112 and 64.6% of the regional banks have entrusted the asset management to SBI Asset Management Group, which is quite a huge achievement.

And the asset under management from regional financial institutions have surpassed JPY 2.1 trillion. And there are banks that we have made capital and business alliances and that would represent only 35% of those that have been trusted with us and the remaining 65% are coming from those who are not in alliance. So we're not intending to just to provide the services to those that we have alliance with. If our management resources are of use to any party, then we would be willing and happy to provide them.

And SBI Asset Management Group supports human resources development for regional financial institutions. So in Asset Management Group, we accept personnel from regional financial institutions so that once they go back to their own institutions, they can take advantage of the skills that they have learned at the Asset Management Business. So we are trying to develop those trainees.

Now the fourth factor, aggressive promotion of M&As contributed to the expansion of the group's overall performance. So when we made earnings report, we share with you the basic approach for M&As. There is a synergistic effect with existing business or cross evolution or expand the economic range of activity or rapidly increasing industry share or forming a stepping stone toward global development. Those are the areas where we will focus in coming up with M&A strategies. For example, FX and cryptocurrency or M&A specialists or asset management companies, those are the some of the samples. And you can see M&A results since 2020, those are the companies that we have acquired.

With regard to insurance-related business, we have acquired businesses that have a small-amount and small-term insurance business. And this small-amount small-term insurance, there are 2 groups. And those 2 predecessor groups. If you exclude these, then we are the #1.

Now those are already contributing to the group's overall profit. The consolidated subsidiaries with the 6 companies combined, in the third quarter of this fiscal year, JPY 6.956 billion in yen contribution. The analysts are not able to read this. So their consensus estimate for our business is really low. So I'm just wondering what they are actually analyzing. I used to be an analyst. And it's quite difficult to do analysis. And especially for companies like us that are quite diversified in businesses, it's very difficult to do analysis.

Now equity method associates, there are 4, JPY 166 million in total for all the 4. So we are diversifying the revenue sources and the customer base is expanding. And Shinsei Bank will be adding to this, so we can further reduce our dependency on securities market rapidly.

Now expanded scale and strengthened profitability from M&As create a virtuous cycle that leads to further M&As. You will promote M&As and expand the business portfolio and expand the balance sheet, and you can further strengthen fundraising capabilities. So our rating -- credit rating is now on the upgrading direction. So once we are upgraded, then the funding cost will be further reduced.

Now the selection and concentration is something that I referred to in the Biotechnology area. The Quark was the main reason, but we have been suffering from deficits for quite a long time. And complete sale of Quark is expected in March 2022. And -- so deficit will become 0. And the companies, that we hold on the other hand, are expected to grow further.

And this is the pipeline of the pharmaceuticals using 5-ALA, the bladder cancer, the intraoperative diagnostic agent, we have completed the Phase III, and we have obtained the approval, but we are going to do a Phase III study for usage change. And it won't take such time -- such a long time in Japan. And as intraoperative diagnosis for breast cancer tumor in the U.S. And as for meningioma, it has been designated to orphan drug by FDA of the U.S. U.S., Germany and Austria, Phase III is underway.

And iPDT, this is about therapy or it's not diagnostic agent, but therapeutic agent. And we are now in Phase IIb. The malignant glioma for secondary and primary, those are 2 separate studies. Both are being done in Germany, one is in University of Münster, and the other is in LMU or Munich.

And as a therapeutic agent, cardiac ischemia reperfusion injury. If it works, it's going to be a huge. Oxford and Birmingham are the sites that are doing this study. For example, if you do the heart bypass surgery, you stop the blood stream once. And then through reperfusion, you revive the blood stream. And then the coagulation of the clots -- blood clots could clog the blood stream in cerebral. And that could make people die.

For example, the pericardium carditis could occur within 2 weeks of the contraction of COVID-19. And why is it? If you look at children, you can see that the small children are exhibiting the symptoms, which is similar to Kawasaki disease. And this -- there are COVID-19 virus in the blood vessels, and this could hinder the bloodstream. For example, vein in the limbs or lower limbs are clogged because of these clots. And with this reperfusion, well, before the bypass surgery, you take ALA -- 5-ALA once. Then after reperfusion, the problem -- the risk of having that problem would decline rapidly. And that's what was professor of Oxford said, referring to rat study. And now they are doing this with humans. And before injection for myself, we -- I increased the dose of ALA 50 milligrams in the morning and another 50 in the evening, 100 for the day, but we -- I take another 50 during lunch -- after lunch or 150 or 200 3 days -- up until 3 days after the reperfusion. I'm not saying this because of the clinical study, but this is what I do personally.

And this is a usage change approval. So the cystoscope is inserted, but it used to be used 3 hours before cystoscope insertion, but now we're trying to get approval on the use of 2 to 8 hours before cystoscope. And Nippon Kayaku company is going to be the selling company in Japan and drugs. And foods that may cause photosensitivity were removed -- were actually contraindicated. But now this could be removed and eliminated in the co-administration -- contraindication for co-administration or precautions. Of course, epidemic genetic problem may cause this for [indiscernible], but for ordinary people, it's not the case.

SBI ALApromo is launching various products with food with functional claims using 5-ALA. Compared to prior year, it has increased 58% in terms of sales. One of the reason is ALAPLUS Mental Care and ALAPLUS Toh (Sugar) Down ALACIA. ALA and Salacia have the same effect of lowering the blood glucose level. So we are selling ALACIA. Both of them are foods with functional claims. Here, you see ALAPLUS Mental Care, ALAPLUS Toh Down ALACIA, these are the foods with functional claims and dietary supplement. We add an extra -- we added 20 milligrams ALAPLUS 5-ALA20 supplement, mainly sold at drug stores.

And furthermore, this is a product that has been approved by the Consumer Affairs Agency, which is the ALAPLUS Gold Hirokan Keigen recovering fatigue. This is planned to be launched in spring 2022. And also, we are developing foods with functional claims, other ones such as male menopause improvement, men do have been menopause too. And we are conducting clinical trials in collaboration with Juntendo University. And also, a fatigue reduction after exercising. This also, we are conducting clinical trials in collaboration with Juntendo University.

So in a steady manner, our product line is increasing and developing a new growth business that utilizes and collects medical statistics and medical information. We're doing this together with Medical Data Vision. We have the shareholding of 22.48% as of December 2021. SBI Insurance can develop a new insurance product based on medical big data with Medical Data Vision. COVID is -- the patients are vulnerable to have a COVID that have an underlining condition. And what are those? Diabetes is the main one. And those things can confirm by utilizing these big data.

You can't just talk about things by just sensing it like a nonscientific data. You do have to have a solid data. And we are going to acquire more shares and accelerate the business alliances.

Two major strategies for the next generation to build a business foundation that enables sustainable growth. So we concluded this generation, but now aiming for the next generation what kind of strategies are we going to come up with and what are we trying to proceed. First of all, new dimensional initiatives for the early realization of regional revitalization. The first is the next-generation banking account system. From the beginning, I was saying to think about the issues faced by the regional financial institutions. There are 2 major issues. They cannot have an advanced level of operation. They don't have the capability, and that is one of the causes of dragging their operation.

And another thing is about the system, especially the banking account system. When they renew their systems, maybe once a year or upgrade every few years or else they will no longer be able to maintain it, so they need to replace it is what they're told by the vendors. And when they do so, there are several billion yens of cost that is going to incur. So we -- I was thinking if there's anything we can do about that. So I thought of changing that cost from fixed cost to variable cost. And Mr. Asakura will be working on that regarding the system and changing from the fixed cost to variable cost.

Well, we were thinking of using IBM -- no, Hitachi, IBM. We were thinking of utilizing Hitachi, IBM, Amazon, but it didn't go well. Well, Hitachi gave up. And we were wondering what we can do. And when we were doing that, then, of course, God extended the hand of help and introduced us to other vendor. And together with that company -- well, of course, we gone through various discussions. But in order to realize this, we are working together, and we are starting to see the end of the tunnel. And this company, I'm talking about is future architect.

Within the financial institutions, they do have a track record in various ways, cloud-based. They have developed a next-generation banking system, including an account system that can be operated on a cloud basis. And Asakura-san is really putting his full efforts into working on it. This is a breakthrough type of initiative. And Fukushima Bank has decided to adopt this. And this was developed. And by 2030 -- fiscal year 2030, we would like to introduce this new system to the regional banks when they need to upgrade their system. And this anonymous partnership will become a partnership making profit due to this. And the regional banks will also experience a large improvement on their profitability. So system-wise, we believe that -- and we are ensured that -- or we are confident that we will be able to move ahead with this.

The second is the database concept. We would like to realize that utilizing this database, the regional financial institutions. We'll be able to have them promote the DX within their businesses in each region manufacturing, restaurant, medical, retail, construction, et cetera, all of these industries will be categorized and the databases included will be incorporated and each company will be provided with each area. And more than 100 companies are planning to join this initiative.

Ehime Bank, Shimane Bank, Tsukuba Bank and Fukushima Bank, those will be the initial partners. And we have begun the cooperation with them. And we will contribute to enhancing the consultation capability and et cetera. We developed it on the Morningstar and this investment trust, which one is the best, which is the medium size? Even though we explained about the things that we have developed in a securities company, no one is going to purchase that. We need to make it to be utilized more and say that this data is good to be incorporated, that is what Morningstar was able to do. It's the same thing. Meaning utilizing this type of data base, they should have conduct their sales activity. Until now, we do not have these weapons even though they had sales activities. All the bank people can say, please open account, please open an account. But now with this, the bank will be able to see various things. And that is a big weapon. And so as this, together with the regional financial institutions, we would like to contribute to the sustainable development of local communities.

Measures to be promoted in cooperation with the local governments. Regional currency business. With the joint venture company from SBI Holdings, CHIKUHO BANK and Kyushu Electric Power. And from September 2021, we have created the core system using Corda Enterprise blockchain distributed ledger platform, and we are expanding this.

And the health account business. With the current insurance system, it was ahead of the global situation, but this health account is responding to the declining population and the aging society. The growing agent society cannot be supported with the declining population due to low birth rate. So we thought we need to come up with a business that will respond to this. So that's why we have come up with self-help, mutual help and public help with medical expense technologies. We are related to that, but we have started this system to start at Ogaki Kyoritsu Bank. The hospitals will be involved. And next, we would like to make it a simple one to have the regional banks be able to implement it.

Next is the Michi-no Eki roadside station. The other day, in the Nikkei newspaper as of November 20, roadside stations -- 22 roadside stations annual sales over is JPY 1 billion. So here, have the recharge station for EVs. Or in terms of disaster prevention, if they come here, they'll be able to have electricity or a simple shower facilities are here. We are hoping that we can create this disaster prevention facility here.

And we have an investment ratio of 53% of Nippon Charge Infra Company Limited. And in various roadside stations, Michi-no-Eki, we are installing charging infrastructures. Location 227 Michi-no-Eki roadside stations and 17 public facilities. So we would like to further increase that, and we would like to install quick chargers more. And with the large size area of this Michi-no-Eki, we would like to also provide them with the disaster prevention functions, with cooperation with the industry companies.

And next is corporate version of Furusato Taxation. When former Prime Minister Suga was the Chief Cabinet Secretary, he was promoting this. but we were thinking that why don't corporations do that because until now it was done at the individual level because even for companies, they do have tax benefits. So the venture company, RCG is working on it. We have an investment there. So in cooperation with them, we are going to -- we see the benefit of contributing to the regional local revitalization. Companies will have manufacturing plants in the regional areas. So the companies should contact this corporate version of Furusato Taxation for those type of factories too.

We endeavor to establish an overwhelming advanced digital ecosystem in the vast range of business domains beyond finance to respond to the accelerating changes in society in the digital space. Having the finance business at the center, we are going to further expand the business using digital and realization of digital space. Recently, we hear the word Web 3.0 quite often. And we, in the financial area, are specialized in that. We have fintech 1.0, fintech.5, fintech 2.0. And this 2.0 was affluently utilizing a blockchain and not necessarily require the web, but just with the blockchain various applications can be formed on the -- on top of the blockchain, and we're working to develop such structure.

And the concept of Web 3.0 is not limited to the financial sector but also expand into the other areas, expand to the overall society, have the whole society involved. And here, we should create the ecosystem of the digital space is what we are thinking. And in the era of Web 3.0, SBI Group will further expand the digital finance ecosystem it has established and leap beyond the realm of finance into the digital space ecosystem. Within the Web 3.0 era, the basic technology is blockchain. This is the most important backbone technology. Digital finance, Neo-culture, e-Sports, metaverse, one after another new concepts are being generated.

In the finance area, security token offering, this too, globally, various projects are starting. NFT, non-fungible token, this also is steadily growing and used in various ways. CBDC, Central Bank Digital Currency. China and the Beijing Olympics, how are they going to utilize this is what I'm interested in. And Metaverse, this also is quite interesting. This also is the base of this world AR, VR, virtual reality, augmented reality will also expand this space, but the basic fundamental technology in order to further expand this and the important technology is a blockchain is what I think.

As for the security token, in our group, we are developing the issuing channel. And we use 3 cases to issuing on our own 2020, 2021, and this was the first in Japan, we have been working on that. And the asset-backed or the real estate asset-backed security token was also issued. This is the example of the real estate asset-backed security token. Together with Mitsubishi UFJ Trust and Banking Corporation, we have used this program of theirs. And this has been conducted in a very successful manner, single property investment, a small investment securities, and this is managed by experts. So the real estate investment can be done in small amounts, more on lots and the properties to be invested in are better defined than J-REIT. So I think this also is going to develop in an interesting way.

And also for the distribution, the Osaka Digital Exchange Company Limited, we are working with them to move this forward. The PTS handling using STs. This is going to be the first attempt domestically we have started. And then there, Sumitomo Mitsui Financial Group from the beginning has a 20% interest and Nomura Holdings of 5%, Daiwa Securities Group 5%. With these 4 companies, and also the overseas financial companies are requesting for their participation. But at this initial stage, we would like to start with these 4 companies and endeavor to create the world's largest global corridor through alliances with group's domestic and overseas investees.

Well, when others are not moving that much, but we invested in the digital asset exchange part of the Boerse Stuttgart Group. We have announced it in December 2019. And from the Swiss bank authority, we have been granted the banking license. We invested in the Sygnum Bank AG, the world's first digital asset bank. This was announced in February in 2021. And also in Thailand, we will be making in Singapore-based digital exchange in Singapore, but the SCB10x will fund this. This is a subsidiary of Siam Commercial Bank, a major Thai bank.

And ODX, Osaka Digital Exchange, I already talked about it. And the SIX Group in Switzerland, founded Asia Digital Exchange, which is ADX. That is founded. And in 2020, it will officially launch its service. So we have the distribution network that is going to be established that is going to cover the overall world.

And issuance, distribution and custody. As for custody in this Asian region, we will create it together with the SIX group, and we are thinking of starting the preparation in Japan.

Next, non-fungible token. This market is rapidly expanding. This is a non-fungible token. For example, this artwork is authentic -- or this artwork is authentic. We -- it will be -- we will make it so that it can be proved. That is the real thing. Digital artwork world or it will expand into the gaming world. It will expand into various areas. But by far, the younger generation are participating NFT market marketplace business in various ways so we would like to conduct this business.

And we implemented nanakusa, which is the first in Japan, our largest NFT trading platform business and Smartapp, and CEO was Mr. Ko, but it has been integrated into the consolidated subsidiary of SBI Group and changed its name to SBI NFT for trading. And focused on the NFT marketplace business that supports public chains such as Polygon and Ethereum and to become a global leader in the distribution of valuable NFTs such as domestic and overseas art, entertainment and tickets.

And as for the auctions at the SBI Art Auction, we have done this, too. And there is a company called Startbahn, which we have an investment ratio of 4.18%. And those would like to bid for the art work, we are issuing a blockchain certificates, Cert. Wherever this art work is a traded or distributed. If you have this, you can prove that it is the real thing authentic.

And also, the record and browse information about works and artists will be online and automatically recorded. And Japan's first NFT art auction, NFT in the History of Contemporary Art, held on October 30, 2021, and the price was quite high.

And now Metaverse. This was also taken up by Nikkei newspaper, renewed interest in the metaverse and related technologies rapidly. 18 years ago, in 2003, the company called Linden Lab Level, located in San Francisco of the United States, came up with the revolutionary service Second Life. And at that time, I really jumped on to it at that time and wanted to create a similar thing. However, the originating company, Linden Lab went bankrupt and did not succeed at that time. The reason being is because VR, AR world was not fully developed yet. And also, without this, it was lacking the immersiveness.

And with this, cryptocurrency, when that is used in this world, what is going to happen is what we need to think. Probably as of our 2022 Metaverse, when you compare it to now, though they had the basic functions, the points I mentioned were not being able to resolve in 2017, the active users started to show a decline and the Second Life did not take its roots. But due to the VR, AR and blockchain technology, the actual world lifetime will be shifted over to the virtual world or virtual living space. And very soon, many specialists of the cryptocurrency think that way. And I think that way too.

So of course, grading the system will be difficult. But various things such as the games and Virtual Osaka starting, but -- and various initiatives are starting such as combining Metaverse in fashion and expanding to various areas. But the issue is the legal or regulatory framework. Unless this part is fully developed, it is going to be difficult to truly expand this business.

The crypto currency game idea and everything, the development cost for software and programs related to the virtual world, such as games, avatars, conference rooms are recorded as intangible assets in the same way as ordinary software and content. So it is difficult to measure the value and growth potential brought by these metaverse initiatives. Therefore, Microsoft acquired online gaming company world of -- excuse me, acquired Activision Blizzard, developer of the famous game World of Warcraft online game series for JPY 7.8 trillion, and net worth as of end of September 2021 was only JPY 1.9 trillion, and the goodwill portion was just under JPY 6 trillion. And this JPY 6 trillion cannot be clearly considered to be intangible value that cannot be clearly apprehended under the current accounting standards. So under the current accounting standards, they cannot respond to the occurrence of the new era.

And the crypto assets, they don't have the ledger. It's registered as an intangible asset or inventory asset. So there are many ambiguous points accounting-wise. And these parts need to be resolved. Or else, these initiatives cannot make a large step forward. So moving over, I'm sure various discussions will be conducted for this. Well, that was the situation.

And next, Central Bank Digital Currency. As for this, e-CNY, how is that going to progress. January 4, e-CNY was launched in 11 regions nationwide. The wallet numbers is held by 261 million individuals and the locations at 8.08 million locations and the total transaction amount or total payment is CNY 87.5 billion. This vast amount is already being traded within China. And maybe, this may destroy the dollar being the key currency.

There are various laws and regulation related issues to this. And towards those issues, it should be thought in that way or if you promote it in this certain way, there should be no problems, are the things that we will like to recommend and propose to the government, and we need to make the framework for that? STO is still an easy area. And even with that, we need to develop, establish it, and we have received the approval of the established institution.

What that this digital asset area or metaverse is a very difficult concept. So SBI Financial Economic Research Institute is something that we've established to collect the information and have a grasp on the situation. And e-Sports is something that we'll be able to strengthen to contact with digital generation. We have started working on it early on, and many young generation people are showing interest in e-Sports. And YouTube traffic regarding this is increasing. And when the professionals show up, the viewing number of YouTube also increase. And we are thinking how we can utilize this regional revitalization Shima-gin e-Sports Day, our first official SEGA, Puyo Puyo Programming, of course, in Yamagata Prefecture, something that will catch the interest of the digital generation and also contributes to the regional revitalization.

So as the pioneer in the age of digital spaces, we would like to launch a new branding strategy to gain recognition from next fiscal year Neo Culture, Neo Sports will be the angle that we will approach. And we would like to provide the measures and events based on the interest of the target audience. And that by keeping in mind the regional revitalization, we will have the regional communities being involved in this.

SBI Group is evolving rapidly and steadily. And there are other reference materials attached in the slide deck. However, I would like you to refer to them because they will be distributed to you as reference materials.

So I would like to conclude my presentation and now open the floor for your questions.