Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| Line 20, expense ratio was 64.5%, a significant improvement of 4.7 percentage points year-on-year, thanks to expense controls and a significant increase in gross profits |
| In terms of profit at the top, net operating profits in the customer segments increased significantly by ¥443.1 billion as a result of our efforts in line with our growth strategy showing that the earning power is steadily improving |
| However, we have been able to build a strong business model both in Japan and overseas through the structural reforms we have undertaken to date |
| The lending spread has been steadily improving as a result of our efforts to improve profitability |
| So the foreign exchange assumption is set at low 120s, but if it does not appreciate by that much, it will have a favorable effect on the ROE |
| As shown in line 17 on the left table, profits attributable to owners of parent was ¥1.1164 trillion, roughly flat year-on-year, achieving the performance target of ¥1 trillion and the second highest after FY '21, which was the highest profit ever |
| Profits attributable to owners of parent also remained steady, exceeding ¥1 trillion 2 years in a row |
| In customer segments, profits in AM/IS decreased slightly due to the absence of large performance fees we had in FY '21, but other business groups enjoyed a profit increase, including higher net interest income from loans and deposits and foreign exchange-related income, resulting in a significant increase of ¥443.1 billion in total customer segments |
| In February '23, the final year of our medium-term business plan, we have set a target of ¥1.3 trillion, the highest ever for profits attributable to owners of parent |
| Although ROE for fiscal year '22 was 7.03% down from the previous year, we are making steady progress toward achieving the target of 7.5% for the final year of the medium-term business plan |
| The red-dotted line shows the lending spread of large corporates, which is continuing to show trends of improvement |
| This is the progress of the 3 drivers for achieving ROE target, namely profits, expenses and risk-weighted assets |
| Lastly, regarding the initiatives to enhance shareholder value in the lower part of the slide, through initiatives, including pursuance of growth strategies, structural reforms and capital management, as outlined in the medium-term business plan, achieving medium- and long-term increases in ROE, we will link this to increasing shareholder value continuously |
| While the other business groups, DS, R&C, JCIB and GCIB recorded an increase in net income, thanks to higher NOP and customer segments as a whole reported an increase of ¥120.1 billion |
| Therefore, profits attributable to owners of parent was on par with the record-high income in FY '21 while achieving for the second straight year the goal of stable profit of ¥1 trillion or more set forth in the medium-term business plan |
| The orange line shows a lending spread of small- and medium-sized enterprises, showing a gradual improvement with the bottoming out, except for the effect of the timing of recording of interest income on interest subsidy system |
| Operating net income will be increased by ¥110 billion, including higher profit from KS |
| Regarding the breakdown of the financial results, Line 1, gross profit was an increase of ¥539 billion year-on-year |
| Although it is difficult to see the actual increase or decrease due to these factors, the drivers of the increase in gross profits are an increase of overseas interest income of loans and deposits due to global interest rate hikes and improvement of lending spread, an increase in foreign exchange and trading income by capturing market fluctuations, and an increase in foreign loan-related fees |
| In FY '23, in order to realize a dividend payout ratio of 40% set forth in our medium-term business plan, we forecast an annual dividend of ¥41 per share, an increase of ¥9 share, the largest increase in our history |
| We will surely achieve the planned ROE |
| Based on this policy, in FY '22, we increased the annual dividend per share by ¥4 in addition to a share buyback of ¥450 billion, the largest ever |
| As a result, Line 7, NOP was ¥1.5942 trillion, up by ¥377.5 billion, recovering to the level prior to the introduction of negative interest rates |
| But as shown in the upper-right graph, the valuation loss on the actual basis, taking into account valuation gains from hedging positions, was approximately ¥0.7 trillion, improving from the peak at the end of September 2022 |
| We believe that we can meet the needs of various customers on a group-wide basis, including our partner banks in Asia and Morgan Stanley |
| And within this increase of ¥20 billion, profit contribution from inorganic strategies of KS, such as Home Credit, Capital Nomura Securities and [nonbank] in Vietnam, SHB Finance, may be realized |
| But on the other hand, sales and trading revenues from foreign exchange and interest rates grew substantially, which curbed the decline in profit |
| We are also able to confirm that control of expenses was done and RWA shown in the lower section, and we are feeling a certain level of responses in the respect |
| The CET1 ratio excluding unrealized gains on a finalized Basel III reform basis was 10.3%, which exceeded the upper limit of the target range of 10% in the medium-term business plan with the ratio continuing to be adequate from the viewpoint of soundness |
| Its significance, its involvement of subsidiaries and which subsidiaries should be targeted and feasibility impact, these are all considered and we have continued to improve resolving this accounting date impact |
| Statement |
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| and Europe and concern that the bankruptcies of some overseas financial institutions will have a ripple effect on the real economy |
| If I may elaborate a little, our NOP target is forecasted to decline by ¥140 billion year-on-year, which includes a total negative impact of ¥250 billion, comprising ¥120 billion from the sale of MUB and ¥130 billion from the appreciation of the yen |
| First, in the area of overseas credit quality, concerns about CRE, commercial real estate, have been spreading, especially in the U.S |
| In addition to AM/IS and Global Markets with lower NOP, GCB business group posted a decrease in net income due to the absence of reversal of credit costs in MUAH we had in FY '21 |
| The business environment will continue to be difficult due to rising interest rates in the U.S |
| So if we take in 15 months of Morgan Stanley's earnings as a special case, 3 months of that is outside of the normalized portion and will decline by that amount in FY '24 and beyond |
| Therefore, while we recognize that investors' expectations for share buybacks were high for the financial results briefing this time and while we believe that the uncertainty we talked about back then is gradually clearing up, the financial instability that began in March, including the bankruptcy or bailout of overseas financial institutions, has become apparent at this moment |
| And if we see swings toward yen depreciation, say, by ¥1, the ROE will be flat or slightly increased by maybe plus 2 when we look at the denominator and the numerator with ROE turning negative with the yen appreciation |
| At that point, we decided to forgo the regular portion of the repurchase, taking into account the uncertainty of the environment and the volatility of the financial markets |
| As a result, Line 17, profits attributable to owners of parent was ¥1.1164 trillion, a decrease of ¥14.3 billion |
| You mentioned bankruptcies of overseas financial institutions, et cetera |
| This was also due to the approximately ¥12 trillion decrease in deposits resulting from the sale of MUB |
| CRE is not large, and the impact on credit costs and other expenses is extremely limited |
| Next, Line 8, total credit costs increased by ¥343.4 billion year-on-year mainly due to ¥393.9 billion valuation losses on loans held by MUB, resulting from the accounting treatment associated with the decision to sell MUB |
| But on the other hand, the profit of the numerator, as explained earlier, will show the negative effect coming from yen appreciation, as I answered towards Takamiya's question earlier |
| Are you incorporating that the environment will deteriorate? I mean to be agile; I believe consideration may be made more earlier |
| Looking back over the past several years, there was hardly any moment when the environment surrounding banks was clear |
| FY '22 financial results are difficult to understand because of the shifts between accounts due to the sale of MUB, but in a nutshell, NOP, which is a profit from the core business, increased significantly while we pursued the disposal of valuation losses on foreign bonds |
| Regarding overseas credit, especially U.S |
| Overseas loan decreased due to a ¥7.5 trillion decrease from the sale of MUB, but was an increase excluding this factor |
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