Orix Corp

TSE:8591

Earnings Call Transcript 2019-Q1

[Operator]

Good evening, ladies and gentlemen. Thank you for joining the telephone conference of ORIX Corporation for first quarter consolidated financial results for 3-month period ended June 30, 2018. The attendees at today's conference are Executive Officer and Head of Treasury and Accounting Headquarters, Mr. Inoue. Mr. Inoue will give you a presentation on the third (sic) [ first ] quarter financial results for about 20 minutes, and we will move to a Q&A session. The whole conference will take about an hour.

At this time, I would like to turn the call over to Mr. Inoue. Please go ahead. So Mr. Inoue, please.

[Makoto Inoue, executive]

So I am Inoue. Good afternoon. And I'm the Head of Treasury and Accounting Headquarters. Thank you for your participation this part of the business schedule today. Without further ado, let us get started with a presentation on the first quarter consolidated financial results for fiscal year '19.

Please turn to Page 2 of the PowerPoint slide that has the title of Overview 1.

Now we have the ROE as well as the net profit on this page. The net profit for the first quarter of fiscal period 2019 was JPY 79.9 billion. This is a decline by 11% from the same quarter of the prior year, but annualized ROE was 11.9%.

And we have come up with a midterm target for ROE recently, and we, I think, has stated that the growth was 4% to 8%, and to maintain the midterm target of 11% for ROE. And our profit is almost in line with this initial expectation, which means that we have made progress to about 25% for the full year. So this 11.9%, in fact, is still above this midterm target of 11% of ROE, which is almost in line with our initial plan and we perceive this result to be a solid result.

Now over to the next page. And this shows the trends by segment. The total segment profit was JPY 113.4 billion. So while I will explain about the performance by segment later on, I'd like to draw your attention to the table on the right-hand side, where you can see that the decline relatively was larger at Real Estate segment and Investment and Operation segment. As to the Real Estate segment, we posted the gain of JPY 20 billion plus, as a result of this disposing office buildings in Yokohama and a multiple numbers of logistic facilities in the same quarter of last year. Although Investment and Operation segment was firm overall, the amount of capital gain from the sales of shares declined year-on-year. Daikyo's condo sales plan tends to skew towards the second half of the year and for the reason, we posted loss in the first quarter. But our focus for the full year is -- should in the line with our initial expectations.

Please turn to the next page. Now this page shows you the trend of the segment assets and ROA. Segment assets was JPY 9.1172 trillion in total, which is almost flat as compared to the end of fiscal period of 2018. Segment asset ROA was higher than the year-end of fiscal period of 2018.

Asset increased in Retail segment, Investment and Operation and Maintenance Leasing segment. The increase in Retail segment, as it is due to an increase in investment securities, the asset managed by ORIX Life Insurance as well as the increase in installment loans extended by ORIX Bank.

In the Investment and Operation segment, asset increased due to an increase in inventory and the Daikyo, as well as asset in Environment Energy related. Increase in assets were Maintenance Leasing came from increase in new auto leases. So let me turn to the next page to go on to the -- to explain about the results by segment.

So first of all, I will talk about the Corporate Finance segment. The Corporate Finance segment profit became JPY 7.8 billion compared with previous year, it has 24% decline in the profit. Because in the previous year, the equity and the security has been sold and that JPY 20.5 billion was accounted in the previous year, and also because of the decline of the lease and loans and bonds decline, therefore, financial revenue have declined. And on the other hand, service revenue has increased by JPY 900 million. And the segment asset, the finance lease assets and the installment loans declined JPY 976.1 billion, a 2% decline compared to the previous term.

And the Maintenance Lease segment profit became JPY 9.7 billion, that is 2% decline in profit compared to the same term previous year.

In operating lease revenue, does include the used car sales profit declined, however, in the automotive lease -- automobile lease, a new exclusion has increased by 9%. So we are -- accumulating asset is by the very stiff competition.

Other results. Segment asset became JPY 855.3 billion compared to the 1% increase compared to the previous term.

And then please look at the next page. This is the Real Estate segment. Segment profit is JPY 22.2 billion. In the previous year, Yokohoma office building and there are several operational facilities have been sold, but in this term, the Osaka hotel has been sold, which is the operational facility. And in this revenues coming from this sales is accounted in a service revenue on accounting term. In the segment asset it became JPY 598.1 billion, which is 4% decline from the previous term. But the -- on the other hand, there's also a new opening of the operational facilities being developed as well. On July 12, ORIX Real Estate including consortium is being selected as the development -- developer for the next 2-term region in Osaka city. And in the previous experience of the development in the grand center Osaka, we have the track record of doing that region -- work on the other cities.

So the segment profit for Investment and Operation was JPY 11.9 billion. The reason for the decline by 29% year-on-year is due to a reduction in capital gain from listed shares as well as the sales of condo at Daikyo remain to be limited during the quarter. As for the progress in the Environment and Energy, secured projects for domestic photovoltaic solar power generation reached to about 1,000 megawatt in total, with 710 megawatt already in operation. The profit that generated from Environment and Energy in the prior year included a transient factor, which caused a slight decline in the profit this quarter. However, we expect a steady growth to continue going forward. And as to the concession, it is enjoying rose year-on-year.

Segment asset increased by 2% year-on-year to JPY 876.8 billion, majority of the increase came from Daikyo and Environment and Energy related. No new investment in PE or any new disposition. And if I may perhaps give a further explanation to do with this segment, and which does not appear on the stage as a matter of fact. So in fact, the operating revenue as well as profit, in fact, seems to have declined according to the figures that you're seeing. But this is due to a private equities sales decline at the -- as certain entity. But there has been a decline in expenses that corresponds with this decline in the sales. So the impact that is given to the profit is going to be minimal. So I just wanted to add this to the explanation.

Please move on to the next segment, which appears on Page 9. And this is the Retail segment. Profit of Retail segment was at JPY 21.8 billion. Segment profit was down by JPY 200 million due to an overshooting earnings of former Hartford Life in the prior year.

But the earnings of ORIX Life, excluding former Hartford banking and credit, continue to grow.

At ORIX Life Insurance, premium grew due to an increase in the number of policies, while financial revenue of ORIX Bank increased. Segment asset grew by 2% to JPY 3.2366 trillion, mostly due to an increase in investment securities at ORIX Life and an increase in installment loans at the ORIX Bank.

So let us move on to the next page. Now this page shows an overview of Overseas segment then -- segment, the profit was down by 7% to JPY 40 billion.

So a sluggishness in the investment by equity method in Asian region were the major reason for the decline, while business in Americas as well as the aircrafts are trending well.

As for the capital gain, we posted gains from partial sales of Houlihan Lokey. However, the amount is smaller as compared to the prior year due to announcement of exits, we had including energy-related businesses in Korea, STX Energy in the last year. And this disposition of investment securities in Americas proceeded, while ship loans declined, resulting in the segment asset declining by 1% year-on-year to JPY 2.5742 trillion.

By the way, on July 2, 2018, we issued a release announcing an acquisition of loan, asset manager, next, NXT Capital in the United States. We will continue to take this down towards investing in the prospective growth area. So this concludes the explanation of performance by segment.

Next I'd like to talk about pretax profits and also the increase or decrease factors for segment assets, I'd like to explain on each of the element. Please look at the left chart. The pretax profit as of March 2019, the first quarter pretax profit declined by JPY 24.7 billion compared to the previous year. The gains on the investment gains from the sales of the Investment, as well as from the sales of Real Estate, while in the previous year JPY 57.8 billion, this year -- this term, it's JPY 41.6 billion, so JPY 16.2 billion decline. Even though, Life Insurance concession is in a good term, but Overseas segment equity method apply. The companies are not in a good shape, and the profit declined by JPY 4.5 billion.

On the right-hand side chart segment asset, segment asset have increased by JPY 18.2 billion compared to the previous term. And former Hartford Life Insurance asset has declined but for the existing business, JPY 70 billion increase compared to previous term. And life insurance banking, Environment and Energy, Daikyo, automobile business, we have seen the increase of the asset.

Please look at the next page. This is the portfolio, 3 classifications and ROA -- actuals of ROA. In this graph, the former Hartford Life, P&L fully hand equity sales profits, those factors are excluded in this actual numbers.

In Finance, in the growth section of Finance, it has mainly decreased the profit in Overseas, because in Asian companies, where the equity method investment has been applied, so therefore, and that is the main reason. And then, business, it is flat compared to the previous year, or previous term. And the Financial Service, Life Insurance business and the Environment and infrastructure and concession business has been going very well. Investment is the decline in its profit compared to the previous year same term. And the incline investment in aircraft business is going well. But in the previous term, the Yokohama office building gains from the sales of building have impacted on the decline of the profit and also equity investment is also decline, and for Daikyo sales schedule has been -- decreased its profit as well.

So summary. The 2019 March, first quarter, net income is JPY 79.9 billion, 11% decline in profits compared to the previous year, ROE is annualized 11.9%. Due to the sustainable growth, we will look at the market trend, and we will continue our new investment.

And the midterm directions, the growth rate is 4% to 8%, ROE is 11%. And to gain the credit rating of A, we have been continuing to make efforts to achieve those numbers.

That concludes my explanation. Thank you very much for listening.

[Operator]

[Operator Instructions] This is a question from Mr. Muraki of Deutsche Securities.

[Masao Muraki, analyst]

This is Muraki from Deutsche Securities. I hope you can hear me.

[Makoto Inoue, executive]

Yes, we do hear you well.

[Masao Muraki, analyst]

I have 2 questions. First of all, on Page 7 to the left-hand side, you have shown in the Real Estate segment, the service income, you've mentioned about this sales, and also, this investment project in Osaka, I think that was mentioned by -- in your explanation. And with related to IR integrated resort, what is your direction towards making an investment in the Real Estate space in Osaka? I'm sorry about this. Unfortunately, the telecommunication lines seems to be a little broken. Can you hear us?

[Makoto Inoue, executive]

We can hear you well. From our exit, we can hear you well. But -- So you have the first question, I think the second question was regard to [ Unikida ] investment or development project. And also, there is a possibility of engagement in IR.

[Masao Muraki, analyst]

Yes, that's the second question.

So in the Osaka related areas, the exposure that you intend to have, so inclusive of the possibility of integrated resort, so would you be managing your asset, while you proceed with the disposition of some of your asset on the other hand is the question? And the first question is with regard to the Overseas businesses. So those -- you said that there is a sluggishness experienced by the equity method health companies in the Asian region. Would you be so kind enough to elaborate on the explanation that you have given to us?

[Makoto Inoue, executive]

As for the first question, so our view dependent on the types of businesses, and also, we approach from the risk profile perspective as well. So in other words, we try to view the business in the matrix of the 2. So in talking about the Osaka, we are not specifically focusing on Osaka as an area, because Real Estate business, as you know, we are, in fact, downsizing our asset, Osaka [indiscernible], in fact, this far out in future. So we're going to be continuing on in terms of our involvement in the project. As to IR, the bill has just been passed at the diet, so we have to, of course, continue to study the feasibility of our involvement in the project, and we may perhaps consider, or to get onto our -- onto the table for consideration. And we are quite open, and perhaps, slightly positive in terms of making an entrance into an unknown area and the new business area. And talking about Osaka in more specific terms. Osaka, in fact, is the place of origin for ORIX in any case. So it's not that we have made up our mind as to increasing or decreasing our exposure, that we do have some affinity to the Osaka geography.

So we would like to continue to have some kind of relations with Osaka Real Estate. Now the second question is Overseas. In India, [ Ayer ] Enterprise, in fact, is the name of the company that we own, and 23% is the ownership of ours by equity method that is. And we are making an infrastructure investment through this company, and we want to enlarge our asset here. And this -- and we cannot recognize, of course, the sales or the profit as of now. And we are paying out the interest as of now. And this is why, unfortunately, there was a decline in the profit generation from our side of Japan.

[Masao Muraki, analyst]

Universal port disposition, how much of it is accounted for the service income?

[Makoto Inoue, executive]

It is about JPY 10 billion in total, it should be, to be precise JPY 12.8 billion in total.

[Operator]

Then from Mr. Watanabe from Daiwa Securities, please.

[Kazuki Watanabe, analyst]

My name is Watanabe from Daiwa Securities. I have 2 questions. First question, in each quarter, how you see the profit in the first quarter, tend to have more concentration in the first quarter in terms of profit. But this is -- this time, however, it is about 1/4 of the total year. In terms of capital gains, or maybe they are changed in the policy of trying to get the gains or the profit. The second question, in the Page 13, for the new investment for the -- looking at the market trend, you are mentioning -- but under what condition you're going to do more new investment? Or what is the idea on that?

[Makoto Inoue, executive]

In terms of profit, the -- we did not change our policies in terms of generating a profit. But there is a gain from the sales, because of the counterparty exit. So in each quarter, we can -- it's not something that we can always achieve the sales in the first quarter, it just so happened that those sales and the 2 years ago last year, as well as 2 years ago, we had the concentration of the sales, a gain has been countered in the first quarter. On the other hand, in terms of -- we do not depend on upon just the sales -- gain from the sales, but the other sustainable growth of the profit that we are thinking of. So -- but for the time being, I think, we'll continue to have the gains or the profits from the sales. But in the Real Estate, I think, this time, we're going to sell some of the asset as well. So there's nothing it can't change. It just so happens, there is some fluctuation depending on the quarter.

And for your next question on the Investment. As we have mentioned this before by Mr. Kojima, in terms of investment, we want to pursue the active investment. In looking at the market trend, but in the current market is so good today, so instead of getting investing in or buying in higher prices, but rather, just because the market is good, we're not thinking of buying at a higher price, but we will look at the more valued price. And then if there something happens, then we will have to find some of the opportunities. So that's what he meant by the -- looking at the market trend. In that sense, even if the market gets worse, and it's easier for us to approach it so to buy. But we will continue to do our investment. And actually, in the previous term in the financial closing -- full year closing, Mr. Inoue has already mentioned, in actual pipeline, we do have various things in the pipeline. And today, there are many inquiries and discussions, and depending on situation there are things that we will be -- we'll be able to announce it or something that may not be actualized but we will continue to do so.

[Operator]

So this is Mr. Nakamura from SMBC Nikko Securities.

[Shinichiro Nakamura, analyst]

So I have 2 questions to ask. The first question, so the decline in the profit from the existing businesses, and you had explained about this equity method holding in India as one of the reasons. But this -- the impression that I have got is that you seem to have experienced some weaknesses in almost all areas, almost across the board, high board. And if you could be so kind enough to share with us your expectation down the road? And there may be some redundancy in terms of the second question, any -- excluding the ForEx impact, it's not just the investment. So the growth of the asset Overseas may not have been as great as it could have been in the past. And also at the same time, there seems to be a decline in the capital gain. So although you said, there are some deals in the pipeline, but by different asset class. What kind of color can you give to us?

[Makoto Inoue, executive]

Thank you so much for your question. So first of all, as to the existing businesses, it is true that the existing business had experienced a decline in profit. However, this negative result and also IOS, and the Overseas business, in fact, was almost -- was a decline as also, it is almost flat as we conclude for the first quarter. But if we go into much of the nitty-gritties of the result, it is -- it would become a little complex like former Hartford was a negative, because we had enjoyed quite a large capital gain the prior year. But it's not that as a kind of a gut feeling that we have. We do not regard this quarter to be a deceleration. Domestic financial business, in fact, is still facing difficulties for sure. So of course, we are converting these businesses into a fee-generation business, very much so. So we -- all in all, our takeaway is that we are not pessimistic over the results of the first quarter. So that's the answer to your first question. And as to the second question of yours, so the decline in the total amount of asset as been written here, CLO issuance, I know, it sounds a little kind of weird, but in United States, so it is not just a matter of issuing CLO in order to carry out the financing, but the asset by different rate -- credit rating, we had that thought from the top layer down to the equity level. So therefore, from the asset business, we are trying to transform ourselves to a fee-generation business -- or asset generation business. And this is not just limited to the former Hartford Life Insurance. For the existing businesses, I think we're trying to increase the basis for profit generation in the future. But as to the pipeline, I'm sorry that I won't be able to go into the individual possible deals, because I would be infringing inside our information, of course, rules and regulations, so -- but I can, once again, share with you that we do have an abundant deals in the pipeline. By segment, Investment and Operations, private equity investment, we will be continued and the Energy, Environment, concession, there's still -- the trend is remaining to be intact. We want to continue on to increase our investment in those areas. And in all, because we do have this multiple numbers of deals sitting in our pipeline for sure.

[Operator]

Next from Merrill Lynch, Mr. Sasaki from Merrill Lynch Japan.

[Futoshi Sasaki, analyst]

My name is Sasaki. Can you hear me? I am from Merrill Lynch Japan.

[Makoto Inoue, executive]

Yes, I can hear you.

[Futoshi Sasaki, analyst]

I have 2 questions. One, in Asian region, equity method being applied, then, therefore, Indian renewable energy company investment that you have just explained before. In the presentation, it says, it is not in good condition, but it's because the -- some of the recurring profits has been misaligned, that is why -- is it all not doing the business well? How should I understand the business?

[Makoto Inoue, executive]

Well, should I answer your first question?

[Futoshi Sasaki, analyst]

Yes, please.

[Makoto Inoue, executive]

Well, it is not the misalignment, but this company does the infrastructure investment like road and so on. In that sense, it is -- have to be done in a very long cycle, long term. So it's not, unfortunately, the misalignment of the term or duration, no. So we have made some of the prior investment, but we have not gained sufficient return from that yet. But in the performance is not very -- doing very well, is not doing very well. And for us, in 23% investor, but in total, we don't have the 100%. So therefore, as in -- so it is our investment.

[Futoshi Sasaki, analyst]

Is this -- so it is not wind power, but it is the other asset class like you started the investment, like in the road that has impacted on your financial closing?

[Makoto Inoue, executive]

In terms of wind power, there is no impact on there.

[Futoshi Sasaki, analyst]

I see. And then in terms of the return to the shareholders, in just like the previous sketch in the -- after finance -- announcing the second quarter Finance, then full year dividend outlook to be explained, that is the same schedule, as you'll be doing. Also, for the own stock to be explained in the new midterm plan that you've explained about own stock purchase buyback and 8% then 11% ROE. And looking at these numbers, I think you would decide on how you do that. But in 4% to 8%, unless it reaches the 4% to 8% the higher number, the growth rate, then in the -- looking at the situation in June and July, how are you thinking of the -- your purchase buyback or your -- buying your own share. If you could explain that, your thinking in this will be appreciated.

[Makoto Inoue, executive]

In terms of this time line of schedule, there's nothing that I can promise you today. But with -- in our annual -- if you look at our annual flow, in the second quarter, usually, we will make some communication to you, what we will be doing about it. And so, therefore, so it is not -- cannot make a promise, but usually in after -- at the point of completing the second quarter, then we can see some what will be happening in the second half of the year, then may be able to talk about that, obviously. We think that is a situation that we will be talking about. So I'll be thinking of being able to address that in that way.

In terms of buying our own equity or stock. Today, as I mentioned earlier, this time, it is the -- profit has declined. However, in terms of the midterm plan goal, we are going very well to be on track and looking at the situation on the second quarter and in looking at that numbers, then we make our judgment on that. And let me repeat that last year, in the first quarter profit is the JPY 300 billion annual goal. That was about 30% by the first quarter achievement. But in total, we had JPY 310 billion in actual last year. But this year, is a 4% to 8% growth rate has been targeted and then -- to achieve that and that in the profit. And that's why what happened to those numbers in the second quarter is important for us. Of course, we would be willing to provide some returns to the shareholders, but the -- in promising that 4% to 8% growth rate as well as the more than 11% ROE by -- we would like to proceed being able to achieve those numbers. Thank you.

[Koki Sato, analyst]

So can you hear me? This is Sato from Mizuho Securities. So I have 2 questions. First of all, I'm sorry to repeat the same question again, but in the existing areas of businesses, on Page 11, you have indicated JPY 4.5 billion of a negative. And largest reasons is attributable to the business in India. But also at the same time, the major -- other major factors, I know, that there are certain areas that had managed to increase the profit. So like, JPY 1 billion, JPY 2 billion, here and there. If you could be so kind enough to tell us the magnitude by different area, positive than negative. And also, SG&A, the fourth quarter, I know that there has been some kind of front-loading somewhat, the first -- since the first quarter has started. So the marketing cost, how much has been generated, and what is your policy? The second question is going to be pretty short, so I'm going to be asking the question later on.

[Makoto Inoue, executive]

Now as for the existing businesses, I'm sorry that we have given you much concerns over existing lines of businesses. But in fact, so if it was not for the IRS, it is almost -- in almost all regards -- I would say that it is almost flat, so there's no kind of major discrepancies that I can elaborate on. And in the areas of like Corporate Financial Services, the fee income may have increased slightly in the Retail and so all the segments. There had not been any major changes as such, so slight positive, slight negative. So there is no specific areas of business that is to be specially noted. But if I may just talk about the negative, Daikyo in the first quarter, unfortunately, had generated some losses. And -- but it -- and also, former Hartford security -- sorry, Life insurance, so we are hedging in the marketplace. And in terms of the reserves for the solvency, there was quite a large amount of profit that we managed to generate in the former year -- the prior year. So the decline in the sales, of course, that had, of course, resulted in the downsizing of the profit. But it's all kind of bits and pieces that piles up to almost the plus or minus 0. So in other words, flat, all in all. So I hope this answers to your question. Which means that ORIX Life Insurance -- SG&A. With regards to ORIX Life, we have a very long tail end policy, and that we did manage to increase the numbers of policies for sure. And ORIX, we have advertisement expenses, and we have some expectations as to winning a certain numbers of policies, which, in fact was true, we did bear some fruit. But of course, these are long-spanned insurance policies, so therefore, it may take some time before we can get the return. So this is what has been reflected to the result.

[Koki Sato, analyst]

So excuse me, in the last year, in the fourth quarter, I think you've explained that you have front-loaded some of the expenses, and the promotional cost had the decline in the first quarter?

[Makoto Inoue, executive]

No. Not as a result of the front-loading. ORIX Life, in fact, they are continuing to -- remain to be aggressive in acquiring new policies. And so ORIX Life Insurance advertisement would have to be posted in a one-off manner, and which we will slightly hesitant of. But at the end of the prior year, we thought that it was a great timing, and this was why we have spent more than we used to. And of course, we would have to, of course, collect this bag over the years.

[Koki Sato, analyst]

And the second, is a very simple question. So 25% has been the progress that was achieved in the first quarter you have been explaining. And you've not come up with the guidance quite naturally so, but the net profit on a annual basis -- so on a year-over-year basis, we will be -- so you'll be happy if you can achieve 4% of growth, is your expectation as of now, may I take it. Although you have not come out with an annual guidance as of now.

[Makoto Inoue, executive]

Oh well, I mean, I think, we feel the need to achieve these 4% of growth, but it doesn't mean to say that we are limiting our growth to 4%. And I don't think we will be achieving 4% growth dot on. That is not going to be the case either. Because we do not think that there is a limitation as to our company achieving only 4% of growth. Although, we can -- I cannot say anything more than what I have just shared with you but we will like to continue to grow our business for sure.

[Operator]

Next from Citigroup Securities, Mr. Niwa.

[Koichi Niwa, analyst]

I have 2 questions. First question, in your presentation material. In the aircraft and the shipped assets compared to the end of March in the -- it looks like those assets have declined. In terms of what is the pros and cons of -- what is the increase and decrease of what you have acquired with your board?

[Makoto Inoue, executive]

Yes, let me explain. Actually, it has been -- declined a little bit, but mainly because we have just, from the outside, we have both the ship loan, the ship loan that we have been able to repay in the balance, which we have bought, how about this year? And that is thing of compulsion. For the aircraft, airplane, we want to do that more. But because of the domestic investors, we began to sell the -- so it is going -- selling very well of those aircraft, so you don't have enough to purchase or buy at this moment. And -- but the main reason is because of the -- you can see it -- say that it's because due to the ship assets. The second question, that is maybe the overlapping question in the performance, and you're thinking in the shareholder. Let me describe the concepts and if that -- to confirm that it's correct. As Sato-san has mentioned, in the -- about the JPY 320 billion profit this year and the growth rate is 3% -- about 3% growth. But still, in the midterm plan outlook, that is the first half is this unique factors, it seems to be less. And also, EPS in the about JPY 25 billion. And from thinking of these then -- if you are thinking of the dividend to increase, that is my question. And also, in the EPS, in the ROE, if you have the basis for this, then you may exceed the target, so as you mentioned, in your own company equity buyback, you are currently not thinking of or you're thinking of doing that? And I'm sorry, this is a very detailed questions, but I want to know your answer?

[Makoto Inoue, executive]

Well, I -- at the last part, I may not be able to say much. But in this plan, in this year, obviously, it is if you just multiply it by 4, then that means we may not be able to reach 4% growth. But for us, in the midterm plan, 4% to 8% growth rate of the midterm plan, we not -- don't say that it's for every year but it is possible. We'd like to do that, achieve the growth rate. So therefore, even if the -- it doesn't mean that we're going to have the lower growth rate this year. And in terms of dividend, and buying our own stock then our returns to the shareholders, we often receive that type of questions and we're considering that. At this moment, just like before, in the financial closing, as I explained before, is the 27% dividend, ROE is the -- if it goes below 11% then we will also do our own company's equity share buyback. But basically, I was constantly thinking if did that change and looking at the profits, then in the second quarter, that we had sort of the baseline, we'd like to determine how we will actually achieve that. And in that sense in the current situation, there's no change from the previous occasion we talked. And that is what they were thinking.

[Operator]

[Operator Instructions]

[Makoto Inoue, executive]

So I would like to thank all the participants for your participation into this teleconference. And this was the result of our first quarter. And thank you very much for your questions. And also, your feedback as well. We would like to continue on with our communication. Thank you all very much, indeed.

[Operator]

Thank you. That concludes today's conference. Thank you for your participation. And you may now disconnect.