Mizuho Financial Group Inc (MFG) 2018 Q2 法說會逐字稿

Thank you for your introduction.

I'm Sato.

Thank you all for coming, despite your busy schedules.

I'm glad to see so many of you.

I also take this opportunity to express our gratitude for all the support you've extended to Mizuho Financial Group.

Thank you so much.

Today, I'm here to explain our interim results.

I shall spend somewhat less time on our results but instead spend more time on the recently announced structural reform, and on how we plan to utilize technologies going forward.

I will be using the handout.

But let me start with Page 4, which is the summary of FY '17 first half results.

Net income attributable to FG was JPY 316.6 billion, 57% progress against the earnings plan.

The numbers look quite good in fact.

Meanwhile, consolidated net business profits dropped by JPY 161.5 billion compared to the same period last year in both trading segment and in customer groups.

Noninterest income, which used to be our strength, was somewhat overshadowed.

We believe net business profit remains a challenge.

As I will discuss later on, given the somewhat vulnerable earnings and in view of the structural changes that financial institutions and the financial industry are going through, we have discussed within the group since April what measures we need to take.

And as a result of much debate within the group, we decided to execute this fundamental structural reform, the details of which I will discuss later.

But first, please skip to Page 6. Again, looking at the interim results.

Apart from what I've touched upon already, there was a major reversal of credit cost, which resulted in the increase of gain on reversal by more than JPY 100 billion year-on-year.

Also, you'll find significant net gains related to stocks, thanks to steady progress in our efforts to sell down cross-shareholdings.

And as a result, our CET1 ratio stands at 11.85%.

It is 9.56% if we were to deduct net annualized gains on other securities.

We are aiming to achieve CET1 ratio of around 10% in our mid-term business plan, and we are getting close to achieving the target.

Let me turn to Page 7 to cover some of the topics related to the interim results.

Please look at top left.

Balance of domestic lending grew slightly.

But as you all know, spread continues to tighten in Japan.

So net interest income, I have to say, remains challenging.

Outside Japan, the balance of lending remained mostly flat, but the spread, on the other hand, seems to have bottomed out.

So outside Japan, profit was positive just like the year before.

By region, we continued to see strong demand in Asia, while at least in the first half demand was not that strong in Europe and the Americas.

Secondly, noninterest income on the right.

We had seen steady growth in noninterest income.

But it declined by JPY 35 billion from the first half of the last fiscal year.

There is an exchange rate factor there of JPY 4 billion.

So without that, it shrank by JPY 31 billion.

This decline came mainly from Mizuho Bank in Japan and abroad.

So this decline came from Mizuho Bank.

Another way to look at this is that noninterest income on the trust banking against security side has not decreased in a major way.

Mizuho Bank in Japan and abroad had different reasons for the setbacks.

For Mizuho Bank outside Japan, initial weakness in the U.S. economy was a factor.

For Mizuho Bank in Japan, absence of the major solutions-related business they had last year and the slowdown in individual annuity sales were major reasons.

Turning to G&A expenses.

Expenses grew by JPY 15.1 billion of which JPY 7.8 billion was FX related.

Expense ratio exceeded 70% due to lack of growth in gross profits.

G&A expenses remained a major issue for us.

Turning to the next page.

Top left #4.

Fixed income portfolio, JGBs on the left and non-Japanese bonds on the right.

For the JGBs, we have further reduced our JGB holdings and duration was 2.5 years.

We kept duration shorter than 3 years.

So we have kept our operations intact.

The duration for non-Japanese bonds was 3.7 years.

The balance remains flat, while we remain flexible.

Bottom left, with regards to cross-shareholdings.

We started with a plan to reduce JPY 550 billion in terms of book value against that plan, and the progress at the end of the first half was just below 61%.

Since fiscal 2015, a cumulative JPY 333.4 billion reduction in terms of book value has been achieved.

This fiscal year, our plan is to reduce by another JPY 141.8 billion.

So far this fiscal year, we have so far reduced by JPY 58.1 billion, 41% was the progress in the first half against FY '17 target.

Once this fiscal year ends, we need to reduce another JPY 132.9 billion in fiscal '18.

We are making a steady progress in terms of reducing the book value of our cross-shareholdings by JPY 550 billion.

Moving on to the right-hand side and please look at number six.

As I have said earlier, we had a major reversal of credit cost.

And disclosed claims under the Financial Reconstruction Act stood at all-time low.

Bottom right.

As I said, we are making a steady progress towards achieving 10% CET1 ratio.

Page 9 shows our progress towards achieving our mid-term business plan.

There are 4 major targets on the right.

I've already discussed the CET1 ratio and cross-holding of shares.

Bottom left is on noninterest income.

We have committed to achieve around 60% noninterest income contribution in FY '18.

It grew by 1% between FY '15 to the first half of FY '17.

So we will continue our efforts to achieve our target during the second half of FY '17 through FY '18.

The biggest challenge is at the bottom right i.e., expense ratio, which stands at 72.4%.

We have had the operational excellence campaign in the first half of this fiscal year, which resulted in reduction in expenses.

But the problem is that the gross profit is not growing, resulting in a high expense ratio.

We realized this is indeed an issue for us.

Page 10 is on KPIs.

Let me just focus on those that remain challenging.

First, third from the left, ECM.

We are currently ranked #5.

We are aiming to become #2 in FY '18.

We have major deals in the pipeline.

So we will continue to strive to achieve our goal.

Bottom left, noninterest income abroad.

The target for the KPI is to grow by 30%.

But we haven't seen much progress due to the factors that I've already discussed.

But the trend in the first half, particularly, the trend in United States in the second quarter, suggests some recovery.

Second from the right at the bottom.

Publicly offered investment trusts.

It is much weaker than what we planned for in our budget.

This has to do with fiduciary duty.

Based on our sales policy, we have moved our retail investors to foreign equity fund and to asset building-type balanced fund.

And the balance of monthly dividend type has declined.

In any case, we are committed to continue our endeavors to achieve these KPIs in the next 18 months.

Next page, please.

FY '17 revised plan.

JPY 550 billion net income attributable to FG remains unchanged because the progress made in the first half was in excess of 50%.

Interim dividend, therefore, will be paid as planned.

And full year dividend forecast of JPY 7.5 remains intact.

The positive JPY 100 billion, you see on the left, is just due to accounting treatment.

It was just moved to above the net business profit line from below the net business profit line.

So basically, there is no major difference between the initial full year plan and the revised plan.

Moving on to the next page.

We have received a lot of requests from you to show this.

This is net business profit and net income by in-house company.

As you can see, in terms of the net business profit, RBC at the top end, GCC, which is third from the top are struggling.

GMC or markets have remained conservative this year.

So RBC and GCC are areas where we see issues.

In terms of net income.

All companies are likely to achieve or almost achieve their targets.

But it is true that again, RBC and GCC are faced with some challenges.

Since the introduction of the in-house company system, we have been managing companies on the ROE basis.

I'm sure that each company will execute additional measures as necessary to achieve ROE and net business profit and net income numbers.

We will start to implement the fundamental structural reform, looking at the next 10 years.

But for some of the items that can be frontloaded, we will start implementing them as a part of our action plan already in the second half of FY '17.

And those frontloaded items will also be contributing to us achieving the plan for this fiscal year.

Next page is on capital management.

We will continue to aim at around 30% consolidated dividend payout ratio.

We will be aiming at stable dividend payments that doesn't change.

Therefore, our full year dividend forecast of JPY 7.5 remains unchanged.

So far, I have covered the basic points of our interim results.

Let me now turn to Page 15 to discuss our fundamental structural reform.

First of all, I have to apologize that the information on our structural reform was leaked prematurely through some news media.

We will do a better job in handling information.

Now, why are we to execute the structural reform?

What is the thinking behind this?

As you can see on the slide, there are 2 major reasons.

First is the changes that are taking place in the environment surrounding us or the financial industry as a whole.

In Japan, negative rates continue, market volatility has come down significantly and there is increasing competition in lending.

But I believe it is not just Japanese financial institutions that are not seeing top line growth, but it is a common challenge for everyone.

For example, both in Japan and abroad, high-grade companies with high ratings, which we tend to deal with, have reduced their borrowings to almost 0 in substance.

And this has become a norm.

This is a major structural change from what it used to be say 10-or-so years ago.

This will accelerate in the coming years.

And growth industries nowadays are comprised of so-called platformers, and they are extremely cash-rich.

And they do not need traditional lending.

And these are the companies which will drive the economy in the coming years.

That is a major structural change.

It is unrealistic to expect that lending will continue to be the engine of gross profit growth for a financial institution.

So the lending business, which has been the main dish to generate core revenue, so to speak, will diminish and lending business will continue to be eroded.

Against this backdrop, to be sustainable, first of all, we need to cut costs to secure the bottom line.

So that's the priority.

I mean, that alone is not enough.

But that is one of the priorities.

Technology is another big factor.

Technologies are changing financial services and our clients beyond our imagination and in such a speed.

We need to harness the advancement in technologies.

And we need to start now, otherwise, it will be too late.

I believe financial services 10 years from now may be completely different from financial services that we know today.

That is one of the reasons behind our decision to execute our structural reform.

Our current mid-term business plan continues through FY '18.

So we could have waited until the end of the current mid-term plan before we started these new initiatives.

But we decided to go ahead with our structural reform at this odd timing because of the speed we have to keep up with.

Given the ongoing changes in the external environment, we took a step back and looked back on the measures Mizuho has taken.

We have executed One MIZUHO strategy, integrated strategy of banking trust and securities functions, and we have focused on the fourth and the fifth pillars out of which have been to transform our revenue structure.

But we realized, we need something more fundamental to adjust the decline in basic earning power.

Especially on this, we become more serious about controlling expenses, we may face difficulty in securing solid bottom line in 10 years.

Securing solid bottom line 10 years from now.

That is why we announced this new initiative.

The next page shows the process in more detail.

The key message here is that we are not talking about this fundamental reform just because our performance in the first half or in the first quarter was weak.

That's not the reason.

As you can see on the slide, I chaired the taskforce, which was launched in April this year, with the participation of the CSO, CFO and the CHRO.

After much discussion, the taskforce produced a draft as early as in July, which was discussed further a number of times with the board, including its independent members.

Heads of companies, units and entities have also joined the process.

And we now have the basic principles in place as we see it now.

And the strategy is underpinned by detailed analysis.

And it covers the next 5 to 10 years with, of course, annual targets.

But we do not foretell -- we cannot foretell what the environment will be in 10 years' time.

Therefore, all the board strategy or the basic principles will be the basis for our FY '18 plan and for the next mid-term plan.

That is how we position our structural reform initiative or the basic principles.

Turning to the next page.

This shows you the overview of the structural reform.

There are 3 basic themes.

One is technology utilization.

We have a sense of crisis that financial services may become completely different in the next 10 years.

There are 2 ways in which we plan to utilize technologies.

One is to use technologies to reduce expenses and to boost productivity.

The other is to use technologies to grow our top line or gross profits, both are important.

For the former, we will perhaps use RPA, robotic process automation and blockchain technologies to raise productivity.

For the later, we will introduce core lending.

For example, to expand our business into new domains to grow our gross profits.

Obviously, there is a limit to expand into new areas organically.

So we are serious about exploring partnerships with ventures on equal footing and we'll promote open innovation.

On the productivity side, as you may already have learned from news media, there are some areas on which we will be focusing a bit less.

But in those areas, we will collaborate with regional banks for example.

There again, we will incorporate into our management the notion of partnerships and collaboration to address both the upside and the downside.

This will not only be applicable in Japan, but we will do this globally.

That is the basic direction of our structural reform.

There are 4 points there on the slide.

Optimization of organization and staffing, structurally reform IT systems, restructure branch strategies, and strengthen earning power.

Those are the 4 points.

Let me go one by one.

With regards to the optimization of organization and staffing.

Basically, we will make our organization slim, strengthen front offices and to realize that we will transform our business operations and business processes using technologies.

With regards to IT systems, in addition to the next-generation IT systems, which I'll discuss later, I believe there still is room to further centralize and consolidate our existing systems in the group.

Once the development of -- and transition to the next IT, next-generation IT system is complete, additional investment into newer systems will be much less.

And we will have more room to spend on further solidifying our IT systems.

With regards to restructuring of branch strategies, we will continue to pursue hub-and-spoke strategy and increase joint offices, which will entail mergers and closures of some of our offices.

We will have a clear distinction between face-to-face channel and digital channel, which will lead to reconfiguration of our channels.

With regards to earning power.

In order to boost our top line, in addition to utilizing technologies, we want to do more of such businesses like principled investment, where our earnings are expressed in percentages rather than basis points because it will be increasingly challenging to make money by lending.

Asset finance, as I have said in the past, is another area we want to expand.

In markets, we will thoroughly strengthen algorithm trading to be able to earn efficiently and in a sustainable fashion.

That's on the trading side.

That is what this number four means.

This page shows the technologies that are to support the 4 areas of reform I have just discussed.

There are 4 of them.

First is robotics.

RPA, robotic process automation, which we already have implemented within our group.

In FY '17 alone, RPA will enhance efficiency by 300,000 hours in 100 operations.

300,000 hours is equivalent to the workload of 150 people.

I know other banks have also started this, but Mizuho is making significant progress in implementing RPA.

Blockchain, obviously, is a technology for virtual currencies.

We are using this technology to reduce transaction cost in a major way.

For trade transactions, we have already implemented the blockchain technology, working with a trading company in Japan.

Other promising areas for blockchain technology are supply chain management, where we are working with Hitachi, syndication operations partnering with foreign and financial institutions or cross-border settlement of securities.

We can significantly bring down operations cost by using this technology.

With regards to Big Data.

We have some initiatives underway to utilize settlement information.

Although it is rather premature for me to mention the specifics, basically, we will do this in partnerships with players in other sectors.

So we will go beyond the boundaries of financial services to create new businesses.

And we already have concrete ideas, which are being flushed out.

Turning to Artificial Intelligence.

I already know some of our concrete initiatives concerning the score lending and algorithmic trading.

The plan is to unleash these 4 element technologies to jump start and push ahead with our structural reform.

The next-generation system is essential for us to harness the technologies I've mentioned.

With the completion of the next-generation system, we will be in the position to leverage the new technologies with ease and agility.

Next is on the quantitative image of the structural reform.

I think the numbers are already familiar to you.

We are going to reduce our staffing by 19,000 by the year 2026.

This is not about transferring staff internally between different businesses, but to cut the staff size itself, reducing it at a pace of 8,000 members by fiscal year 2021 and 14,000 by fiscal year 2024.

Fiscal year 2021 is the last year of the next mid-term business plan and 10 years from that would be fiscal year 2026.

Fiscal 2021 is the midpoint in between and the numbers set in the intervening is as well.

And at this rate, we will be achieving the goal.

As I will elaborate later, our network, which is comprised of 500 locations, will be cut by 50 by fiscal year '21 and 100 by fiscal year '24, which is a 20% decrease in the number of locations.

For this as well, we have set a pace of reduction that we will be applying in the intervening years.

Although this is something that we have not mentioned in press conferences, the amount of cost reduction, excluding depreciation related to the next-generation IT systems, is to be in the mid- JPY 100 billion, which will be realized through several of the measures that I referred to earlier.

The red arrow represents the cost of depreciation for the next-generation IT systems, which will be sizable in fiscal year '21.

In light of this, I think it will not be until around fiscal year '24 before the JPY 100 billion cost reduction starts to have impact.

Next on this slide.

I would like to show you how we think about staffing optimization.

Regarding human resources, in fiscal year '16, we set out to conduct a fundamental HR management reform and introduced innovative initiatives with the objective of enhancing the capabilities of our people.

Going forward, we would like to implement a structural reform to optimize, streamline and shift our human resources.

The slide describes the specifics of the optimization plan comparing the target with the number as of the end of fiscal year '16.

The staff size is to be slashed by 19,000 and the total workforce for the group, overall, will be down from 80,000 to 60,000 as a result.

As is shown here, this is not just to curtail the number of employees.

We are thinking of increasing by 7% the weight of the front office employees, who can earn profits by shifting people from the back and the middle offices to the front line of our businesses.

When we talk about this major staff cut, we are often asked that these people who are going to be reduced substantially must be temporary staff, hired at very low labor cost.

But rather as is written here, this is about driving the solid cut in the number of generalist managerial track employees.

Not in the front office, but those in the head office as well as in the back office set us to achieve an overall labor cost reduction.

What invariably entails in a structural reform like this is the issue of our colleague's moral and motivation.

The increasing adoption of robotics and technologies such as blockchain will necessarily result in excess staff.

The pace at which this may happen could be even faster than we anticipate today.

If that is going to be the case, then our employee's way of working and the businesses and operations they perform will have to change.

Therefore, although not described here, some kind of recurring education or retraining of our staff is going to be very crucial.

We plan to provide such new training programs to our staff so that in a sense, they can grow themselves while engaging in the structural reform and spread such positive sentiment throughout our organization, which I believe will be of paramount importance.

Our structural reform plan is already widely publicly reported, so at the moment, the Managing Directors in charge are visiting the branches, explaining to our staff the overall objective of the plan, the staff reeducation issue and potentially new ways of working.

These initiatives should lead to per capita productivity enhancements.

Our calculations indicate that we could attain close to an 80% improvement on net business profits per employee.

So we would like to set that as the goal for the final fiscal year of the plan.

As is laid out here, the major point in this is to correct the high cost structure by streamlining it by 30% or so.

Next is on the IT systems.

IT systems roughly account for about 20% of the total expenses.

During the part of the plan, cost burden for the next-generation IT systems will have to be borne, but in the final year of fiscal year '26, no longer burdened by the next-generation systems cost, approximately 10% cost cut in IT systems should be achieved.

The basic thinking is to reallocate the cost savings to new investments.

As I said, earlier, aside from the next-generation IT systems, there's still a lot that can be done to integrate our IT systems.

We also believe that it is very much possible to use the RPA to bring about further productivity enhancements.

All of these initiatives will be included in the structural reform plan as we implement it going forward.

As the slide shows, once the next-generation IT systems are completed, the cost of new developments will be brought down by about 30% compared to what we have now.

On top of that, the new systems structures will be such that it will be much easier to introduce and apply new technologies and services as they emerge in the future.

We, therefore, are looking to successfully complete the next-generation IT systems and harness their benefits.

Next is on the discussion regarding our branch strategy.

I think you already know about our Area One MIZUHO strategy.

The number of physical branch locations we have within the group, including those for the bank, trust and security services, is approximately 500.

They are currently grouped into 120 areas and ROE is managed area by area.

We have very detailed information as to the profit structure and the customer attributes of each of these areas.

By analyzing this information, we examined each area's future potential and the ideal state that each area should aspire to achieve according to their customer characteristics.

The findings suggested that we should clearly distinguish the locations between the hub and the spokes within each area as they conduct business.

And at the same time, to connect the hub and the spokes by digital channels so that the customers at the spokes location will be able to have access to the same 4 service offerings, including banking, trust and securities, that the customers at the hub locations receive.

We are doing this not because spoke locations are smaller and cheaper, but for the nonface-to-face business connected by digital channels, the same set of full services can be provided to the spoke location customers as well.

As is explained here, for a part of what we do, centering around mainly general financial services business, we will be partnering with regional banks.

As we do so, we do hope to incorporate the regional banks' overseas trust, banking and securities business opportunities into our own as part of this channel strategy.

The framework for the hub-and-spoke model is illustrated on this slide.

The number of locations to be reduced is 100, the breakdown of which is 30 for the hubs and 70 for the spokes.

100 in total.

The reason the number of hubs is also going to be cut is because they are to be consolidated into joint offices shared by the bank, trust and security services so that trust, bank-only or securities-only locations will be decreased in numbers.

On branch digitalization.

We plan to digitize all the bank's locations.

Of course, this specific definition of digitization may somewhat differ from one bank to another.

But for us, it means deploying digital corners in all the locations, including having video conferencing systems installed on all of our ATMs and providing end-to-end complete digital operation for customer transactions at the branches, for instance.

This is an example of Mizuho's digital corner.

There is a TV counter, a tablet the customer can operate and a digital consultant, who's always present at the digital consulting area, so that the consultant can operate the machines or provide consulting to the customer.

We want to reeducate and retrain our operations staff to fulfill the role of consultants of this site and deploy them in a massive way, which is one of the components of the HR structural reform plan that I discussed earlier.

Lastly, on improving our earning power.

We are now thoroughly reviewing the head office functions and business processes to promote more delegation of authority.

Credit assessment is currently conducted relatively conservatively, but what can be reviewed and streamline should be done so.

Not only will the number of staff at the front office be increased substantially, human resources with the skill sets will be pooled and tracked by the HR group so that the quality of the resources can be monitored.

There will also be a drastic review of how business operations are conducted and meetings organized.

In terms of gross profits, we will work to grow noninterest income by fiscal year 2024, change the structure of our business so that we can generate roughly 30% of our revenue from overseas.

We want to achieve all of these initiatives by capturing opportunities in growth areas and through the utilization of technology.

The next page discusses the individual gross profit initiatives for each of the in-house companies.

In the interest of time, I will skip the details.

But I would just like to say that for the structural reform that we are implementing this time, each in-house company has meticulously hammered out measures for cost reduction and gross profit improvement and set out the time schedules, defining which measures are to be undertaken in what timing or fiscal year.

That will be all for the structural reform.

Next, briefly on our technologies.

As you know, as Mizuho's initiative, we created a position for CDIO or Chief Digital Innovation Officer, for the group dedicated to technology.

We staffed the Digital Innovation Department with about 30 people, who were mostly recruited from outside the group and tasked them with technology-related matters.

Now the resources at the department are a part of this company called Blue Lab, an incubator company with WiL holding 55% of its stake, our business partners, 30% and Mizuho, 14.9%.

This company is intentionally not consolidated into our group because we want the company to retain its venture business literacy.

At this moment, we have 20 (inaudible) specific projects ongoing not just in the financial services sector, but also in other sectors as well.

Further, we are partnering with these companies here on the slide to work on specific financial service initiatives, and are deploying new businesses in a variety of ways.

We have earmarked a budget to fund these initiatives and have already made investments into these companies in this section of the page.

One of such initiatives is J.Score that we have been talking about for some time.

It launched its service on September 25 and is acquiring business at a far greater speed than we initially anticipated.

As of yesterday, November 19, the number of customers acquired through prescoring and registration was 16,000 in total, which is 3.5x larger than our initial assumption.

On the lending side, around JPY 500 million of loans has been dispersed, progressing at a speed roughly 4x faster than our projection.

The amount of loan per customer initially projected was about JPY 100,000 to JPY 150,000, but at present, it is much larger at around JPY 1 million per customer.

You may wonder about the profile of these customers, who use this AI-based score lending service.

Although we have yet to start a full-fledged promotion and have only advertised this service on the web, our preliminary findings reveal that the vast majority of these customers are young employees in their 30s and 40s, who work for listed companies that access the service not only from within the Tokyo metropolitan area but also from Kansai and Chugoku, the western and central regions of Japan.

These customers do not necessarily appear to be switching over to us from consumer-financing firms, rather what is likely happening is cannibalization of bank's car loan business, including our own.

But our basic strategy is to accept that.

The interest rate charged for this product is extremely low.

So as I did before, I will like to ask the members of the audience to try the product.

The full score is 1,000 points.

If the score is 1,000, the interest rate charged up to JPY 10 million is 0.9%.

There's no other financial service in Japan that charges a rate of only 0.9% if you want to borrow JPY 10 million.

Naturally, there's this question of what the money is used for?

But in any event, the hits we are receiving on the web are very vigorous and the speed at which the lending balance is growing is much faster than we first thought.

A greater value of J.Score is actually this.

Based on the data collected by J.Score, we can form business alliances and partnerships with companies from other sectors.

Although we cannot disclose the names of the companies, there are several potential partners we are talking to right now.

By partnering with us, the company will be able to combine their own service with J.Score, have their points program linked to interest rates for example and turn J.Score into a platform offering a range of privileges that only J.Score member customers are allowed to access.

Next, regarding J-Coin, I will be brief because I think you know about this.

But our basic direction is to turn Japan into a cashless settlement society.

As you are aware, over 60% of payments in this country are still done in cash, making Japan rare as a developed economy to be so dependent on cash.

Promoting cashless settlements will create an economic ripple effect worth about JPY 10 trillion.

As you can easily understand, today, outlets such as convenience stores and gas stations must have cash ready on-hand because their customers use cash to pay.

That means that they must also have a cash security system in place and arrange for cash transportation and delivery, the cost of which is huge.

All these costs can be brought down by cashless payment.

As is described on the page, a J-Coin operating company will be created, and it will have accounts opened by our customers, our bank's customers to deposit money to be transferred to their smartphones, which can be used for payment purposes, much like the Suica card.

With the money pooled or deposited on one's smartphone, the rest is simple.

Just scan the QR code on the product with the smartphone and cashless payment is completed.

The implication of using QR codes is that the shops who receive payments from their customers no longer will have to pay merchant fees to credit card companies to accommodate the customers' use of credit cards.

The merchants currently are paying fees that amount to quite a large expense, but by introducing QR codes, they will be free from such charges.

Because QR codes require no payment machines, they can be introduced at a very low cost to you.

So this is the kind of initiatives that we are looking to implement.

Would a mechanism like this require a tremendous amount of IT systems cost?

Not at all.

In fact, according to an estimate we received from a certain IT systems company, it can be built at under JPY 10 billion.

The largest issue with this mechanism is that our settlement fee business as a bank could shrink too.

But actually, JPY 1 trillion out of the JPY 10 trillion estimated economic impact belongs to banks.

That means that the huge costs that the banks themselves are paying, at present, can be eliminated.

Another important aspect of the initiative is that J-Coin operating company will be accumulating business and transaction data that it processes.

By leveraging the data, an array of different businesses would be developed and the person who holds the data will be the one to win.

So far, I have explained a number of items, but last but not least, I would like very briefly discuss our ESG initiatives.

Our ESG lending balance is maintained at a fairly high level.

Most of our lending and financing for environmental projects is based on the equator principles.

We issued a green bond for the first time a while ago.

On measures for employee satisfaction and contribution to society, Mizuho employees' satisfaction levels are gradually rising.

The proportion of employees leaving the group voluntarily because of their personal reasons is on the decline and inclusion is improving on the home.

For these items on the page, we have set numerical targets as commitments.

The rate of male employees taking parental leave, for example, until a while ago, was less than 1%, but now stands at 23%.

We will like to continue to produce solid results like this in line with our commitments.

The next topic talks about how Mizuho has incorporated into social responsibility-related indices and how we are taken up as an example of commendation and awards.

We intend to continue with these ESG activities moving forward.

On the issue of governance.

In June, this year, we appointed an independent outside Director to be the Chair of our Audit Committee.

And with that, all 3 statutory committees are now chaired by independent outside Directors, which was the first, as a bank in Japan.

And probably, also still rare in Japan's business community as a whole.

We were the first to promote fiduciary duty initiatives among the Japanese megabanks.

On komons or advisers as well, we were the first as a Japanese financial institution to disclose and publish our system of komons or advisers.

We have not had a system of sodanyakus, but we do have komons.

Their role is now clarified and governance over them is established with outside directors engaging in the selection and remuneration of these advisers.

My presentation perhaps was a little longer than planned, but I covered the financial performance of the first half of this fiscal year, concrete substance of a structural reform, our response to technology and lastly, ESG.

Thank you very much for your attention.