SBI Holdings,Inc. Q2 FY2027 earnings call

• Financial Performance & Dividends: Record-high profitability driven by strong demand; annual dividend raised to 110 yen per share with interim dividends introduced at subsidiary levels.
• Banking Growth: SBI Shinsei Bank achieved record gross operating profits; retail accounts and deposits exceeded previous annual totals in just six months, totaling 1.5 trillion yen in deposits and 710,000 accounts.
• Securities Expansion: Total securities accounts surpassed 17 million in Japan; Assets Under Custody (AUC) grew 39% to 79 trillion yen, targeting 100 trillion yen.
• Revenue Diversification: Strong performance in FX trading, investment trust fees (record high of 7 billion yen), and foreign stock sales (revenue doubled to 10 billion yen).
• Strategic Alliances: Launched 'Open Alliance' with SMBC Group generating 281,000 accounts quickly; partnered with JR Kyushu for a comprehensive financial super app.
• Insurance & Asset Management: Insurance inforce policies topped 3.31 million; AUM targeted at 20 trillion yen by FY26 and 50 trillion by FY29 via integration of asset management and insurance businesses.
• AI & Security Transformation: Implementing 'AX' (AI Transformation) across 71 group companies to reduce costs by 48.2 billion yen within three years; enhancing cybersecurity with AI-driven vulnerability diagnosis and dynamic defense systems.
• On-Chain Infrastructure: Developing an APAC Digital Economic Zone with on-chain exchanges, tokenized real-world assets, and stablecoin settlement capabilities.
• Neo-Media Strategy: Expanding IP creation through collaborations with Yoshimoto Kogyo and LiveDoor, leveraging a 100 billion yen Neo Contents Fund.

The Financial Services business was the primary growth driver, with revenue reaching 829.7 billion yen (up 17.3% year-on-year) and pre-tax profit exceeding 200 billion yen (up 69.7%), marking record highs for both metrics. Within this segment, Banking profits surged 45.8% to over 100 billion yen, Securities profits jumped 90% to 64.8 billion yen, and Insurance profits grew significantly by 227.1% to 18.6 billion yen, despite its smaller base. Overall consolidated revenue for the first half was 1,057.5 billion yen (up 17.2%), while pre-tax profit rose 52.9% to 324.3 billion yen.

• Dividend Policy: Raised year-end dividend to 80 yen per share, resulting in a total annual dividend of 110 yen per share, reflecting strong shareholder return efforts.
• Asset Under Management Targets: Targeting approximately 20 trillion yen AUM for SBI Global Asset Management Group by FY26, with a long-term goal of 50 trillion yen by FY29.
• Cost Reduction: Projected cost savings of 48.2 billion yen over three years driven by the AI transformation initiative.
• Operational Goals: Aim to reach 100 trillion yen in Securities Assets Under Custody; expand minor account penetration via Kodomo NISA starting January 2027.

• Cryptocurrency Volatility: Exposure to significant drawdowns in crypto asset markets, specifically noting instability in XRP holdings and broader market fluctuations.
• Regulatory Uncertainty: Potential impacts from U.S. presidential election outcomes on cryptocurrency regulation (Clarity Act) and Japanese government delays in approving public distribution of JPY-denominated stablecoins.
• Cybersecurity Threats: Ongoing risk of high-frequency AI-driven cyber attacks, necessitating continuous investment in dynamic defense and vulnerability detection.
• Geopolitical & Legal Risks: Complex regulatory environments in Southeast Asia (e.g., Vietnam’s strict exchange laws) and potential penalties for trading outside private exchanges.

Q: How does the company plan to handle the inheritance issues arising from its young customer base aging into senior demographics?

A: Management highlighted that as younger customers age, inheritance becomes critical, creating opportunities to engage their children who are already part of the customer base. The company is launching 'Kodomo NISA' in January 2027 to capture minor accounts early, aiming to lock in families by combining parent and child assets. This strategy leverages the 'Zero Revolution' to build long-term loyalty across generations, transitioning users from junior NISA to full NISA products as they mature.

Q: What is the strategic rationale behind integrating insurance and asset management under SBI Global Asset Management?

A: The merger aims to replicate the 'Berkshire Hathaway model,' where insurance premiums are invested to generate returns, thereby lowering costs for policyholders. Management criticized traditional Japanese insurance models for high loading premiums and face-to-face agency costs. By merging operations, the group seeks to disclose true cost structures, eliminate commissions, and drive a shift from cash deposits to investments, using insurance assets as a core engine for AUM growth toward the 50 trillion yen target.

Q: Can you elaborate on the progress and future plans for the on-chain exchange and digital economic zone in APAC?

A: SBI is developing on-chain exchanges to enable 24/7 trading, instant settlement, and micro-trading of tokenized real-world assets like stocks. They are partnering with entities like Nasdaq and NYSE to bring stocks on-chain within existing frameworks. In APAC, SBI CoinHackle serves as a compliant hub, expanding into Singapore, Dubai, and Indonesia. The strategy includes cross-border settlement using stablecoins like JPYSC and USD-based tokens, aiming to dominate the tokenization market despite regulatory hurdles in countries like Vietnam.

Q: How is the company addressing cybersecurity challenges with its new AI infrastructure?

A: SBI has implemented a fully AI-driven security operation center, utilizing Anthropic’s Claude for vulnerability diagnosis and dynamic defense systems acquired from Everspin. These tools automate threat detection and patching, reducing response times significantly. The AX initiative integrates AI across all 71 group companies to enhance security posture while simultaneously driving operational efficiency and cost reductions, ensuring resilience against sophisticated, AI-powered cyber attacks.

Q: What is the outlook for the Neo-Media strategy and IP creation initiatives?

A: The company is aggressively expanding its IP portfolio through the 100 billion yen Neo Contents Fund and partnerships with key players like Yoshimoto Kogyo and LiveDoor. Yasushi Akimoto is leading content innovation to discover global IPs. The strategy focuses on co-creating visual content, such as drone shows and fashion events, to build a fair, impartial information platform. This ecosystem aims to monetize intellectual property globally, diversifying revenue sources beyond traditional financial services.