Mizuho Financial Group Inc (MFG) 2022 Q4 法說會逐字稿

At this time, let me start the Mizuho Financial Holdings investor presentation for fiscal year 2021. Thank you very much for taking time out of your busy schedule today to attend the session. I am Chisaka of the IR department, and I'll be serving as the moderator.

Before we begin, let me introduce the speakers who are presenting and taking questions. From here left is Mr. Kihara, President and Group CEO; and Deputy President, Group CIO and Group CFO, Mr. Umemiya. Explanation is given about the (inaudible) line.

In today's discussion, we may state forward-looking statements based on our current expectations, which are subject to risks and uncertainties. These statements are subject to risks and uncertainties. Please be aware that actual results may differ from those discussed in the forward-looking statements.

Today, we will start with a presentation from Group CEO, Mr. Kihara based on the presentation material titled Investor Presentation for Fiscal year 2021 for about 30 minutes covering financial results and strategy, followed by Q&A, during which Mr. Kihara, and the Group CFO, Mr. Umemiya, will take your questions. We have about 1 hour for Q&A to end around 3:00 p.m. Thank you in advance for your cooperation.

Mr. Kihara, the floor is yours.

Kihara speaking. Thank you very much for taking time. Allow me to make your presentation at this moment.

So I would like to provide an overview of the financial results on Page 4. Our consolidated net business profit increased JPY 53.4 billion year-on-year to JPY 852.1 billion (sic) [JPY 853.1 billion]. Customer groups, all the four in-house companies' revenues grew, and JPY 127.9 billion was achieved record high. And deposits, on forward-looking basis, we provisioned credit-related expenses of JPY 30.2 billion and net gains and losses on stock transactions, we canceled their funds ahead of time. There was impairment from stockholding, so JPY 45.7 billion. And because of special factors, including tax and so forth, we achieved net income attributable to FG of JPY 530 billion, up by JPY 59.4 billion. Year-end dividend, JPY 40 (sic) [JPY 80] per share, JPY 5 increase from the previous year.

Page 5. I said that we achieved a record high ever since we established in-house companies in FY 2016, we've seen steady progress.

If you could please go on Page 7. There was improvement -- business improvement plan that was implemented in order to respond to systems failure. So we have shared our progress up until [March] and there are 3 important points.

In order to prevent system failures, we have checked our systems, and we're capturing signs of problems ahead of time, and we also verify the functions of the system. We're trying to minimize the impact on customers when something happens. So [DCPSP], we need to have a good collaboration in terms of those. Now we have verified that. And so we have proceeded on number three, we need to focus on personnel and organization. We had to change the culture. And we have also worked on governance.

Page 8. So in terms of the impact on systems, in the upper half, this is the cost about stable business and in the lower half, other initiatives. We have included enough buffer to allocate a budget to strengthen the business base. As is on the left-hand side in the middle, as you can see, if we look at the actual, the expenditure rate was 25% to 52%, not very high for FY 2022. As is on the right-hand side, we're not going to have a provisional budget specifically for this, but we will make sure to allocate a budget in a methodical and flexible manner, if needed in order to achieve stable operation. And in terms of revenue, the impact from this is minimal.

Next, on Page 10, fiscal year 2022, business operations. Here's the summary of what I would like to convey, financial management, business strategy, personnel and organization. With respect to financial management, we would like to prioritize our fiscal structural reform. We need to focus on quality of earnings and improvement of ROE, and make steady progress and respond to uncertainties because there are uncertainties abound in the external environment. So we have to take damages against that.

In terms of the business strategy, in the first half of the 5-year plan, in the last 3 years, we had quite a bit of progress by expanding the domain where we see progress. We would like to translate this into further growth.

And the third point, which is about DX, we are going to create new value by utilizing FX and DX. And for all of these to be achieved, we would like to increase the job satisfaction for the employees and create a favorable cycle where our firm can grow as well as our employees. And the last bullet, ITBS must be pursued continuously.

If you could please take a look on Page 12, which is about fiscal management or financial management. Depending on the category of revenues, the plan for FY 2022 and FY '21 are compared. The blue graph shows -- blue part of the graph shows a stable revenue. For FY 2022, we're going to increase stable revenue. We're going to invest into personnel and other initiatives, increase at another initiative. Therefore, a JPY 24 billion reduction in stable revenue, but upside revenues, trading and so forth, we would like to achieve the number that net banking, JPY 61 billion.

For (inaudible) we have to continue to be conservative. But on [AUM], we will achieve a secure income. But not everything is going to grow linearly. So we have to be cautious. We will take flexible position to look to achieve income. For the fee combined, JPY 860 billion. On the right-hand side, there's a bar graph. JPY 900 billion, which was set under the 3-year plan.

For areas of focus, of course, we have to once again redouble our efforts and expand the scope. So we have to drive consolidated net business profit.

If you please go on to Page 14. So risk return, cost return. You can see comparison from 2018 and 2022. We've been putting a lot of emphasis on the quality of revenue, and we have been working on it. And either the companies, as you can see, are seeing or demonstrating improvements year-over-year. We will insist on improving our ROE, so 7% to 8%, as you see on the slide. But we believe that we would need to aim for exceeding the ROE of 8%.

If you could please turn to Page 15. Fiscal year 2022 expenses comparison with fiscal '21. In fiscal '21, as you see on the left, JPY 1,421.3 billion. On an actual basis, JPY 1,432 billion was the situation, and we will continue with the structural reform to improve productivity, this is very important, minus JPY 26 billion will improve from that. But this drop will be offset with the improved stable revenue and gross income -- gross investment. This is an investment that we'll be making in our talent and growth areas.

Investing in new areas, and a total of JPY 35 billion is planned in total. And lastly but not least, the impact of inflation and the impact of foreign exchange of plus of JPY 33 billion. So for this fiscal year, JPY 1.5 trillion is our expense forecast for this year. So for the existing and new business areas combined, JPY 20 billion will be invested in this area. And if you could see, sales and trading, digital marketing, plus of JPY 8 billion for the fiscal year. And next fiscal year, a same level is expected and the impact on gross profit of plus of JPY 64 billion is expected.

So if you could please turn to Page 16, credit-related costs. JPY 235 billion for fiscal 2021. There is some outstanding impact of COVID-19 and so forth.

And next is Page 17, where you'll find shares -- reduction of shares. In the center, where you see the bar graph, JPY 300 billion is the target of reduction. And in the 3 years, to 2021, we have reached JPY 315.8 billion in reduction. Recycling of our risk assets is extremely critical for our business. So if you see it at the top right, the 3-year plan will be extended over a period of 5-year business plan in order to reduce JPY 450 billion worth of across shareholdings over the period of 5 years. JPY 170 billion in reduction is our outlook from March '22 to March '24, as you see at the bottom right.

So that concludes my earnings forecast, which can be found on the next slide, you can see JPY 860 billion; consolidated net business profit, JPY 100 billion; and credit-related costs and net gains related to stocks, the JPY 20 billion; ordinary profit, JPY 770 billion; and JPY 540 billion in net income attributable to FG.

If you could go to the next slide, Page 19, shareholder returns. Our basic capital policy and shareholder return policy remain unchanged. But maybe I caused some misunderstanding in the press conference the other day, but we have not changed our thinking towards repurchasing of our shares. We'll be taking our policies into consideration in operating our capital policy.

And our thinking towards 2022 -- our approach towards fiscal year 2022 is described at the bottom of the slide. It is very difficult to foresee going forward, and Shanghai lockdown is still continuing. So it's very difficult to see going forward. And therefore, we do not have a dividend forecast. But we will expand our gross profit and cost control put in place. So we will make sure that it is done in a disciplined manner. We have been working in that way in the past, but that approach will continue in order to enhance the possibility of achieving our target. So this is -- this concludes the earnings and now over to business strategy.

Please turn to Page 21. What we have focused on for the past 3 years, we've seen the fruits of our efforts. And we would like to further deepen them and expand them, so that is what our business strategy is.

Page 21 and 22. These areas of synergies, areas of focus that we've been concentrating on in the last couple of years and initiatives are going forward.

If you could take a look at Page 21 for individual retail, top left. So individual asset management, global equity strategy, bank and securities collaboration was perceived. We have reorganized the branch networks separated between retail customers and corporate customers. As a result, we have equity investment trust balance of JPY 6.6 trillion and equity investment trust holding period, which used to be 3.9 years is now 4.9 years. We've seen these results. And government is trying to commit additional investments and leveraging our portfolio, we would like to improve our proposal-making capabilities and increase equity investment trust balance to JPY 10 trillion. And we enhanced efforts for acquiring fund accounts. And so securities fund balance to increase to JPY 1 trillion going forward.

If you could please go to Page 22. Let me explain the lower part of the page CIB model combining efforts between banking and securities. That's what we've been doing. As you know, in the United States, U.S. IG/DCM ranking for Mizuho is 8. And so we are making continuous efforts to improve this. And Americas S&T, the gross profit is now 2.1x.

And moving on to the right-hand side. So with CIB business in place and products, the size of the balance sheet is quite large here, and we would like to turn into asset light, and we would like to make actual use of our balance sheet. So as a result, Americas gross profits are to be increased by 25% in FY '23 compared to FY '20, and U.S. CIB fee growth, they reached 1%.

Moving on to global retail strategy, Page 23. As you know, in Vietnam, we have a MoMo app [Asia], and in the Philippines, the first [digital] bank in the Philippines, Tonik. With them, we have an alliance. And our strategy is to continue to -- increasing in emerging markets in Asia so that we can capture part of their growth. So capital-light businesses is what we're investing in. And for MoMo with Vietcombank, we have an equity asset. So collaboration with Vietcombank for MoMo is what we envision in the future as well.

Moving on to Page 24, which is about DX ecosystem for Mizuho. In a nutshell, in terms of DX, we may be delayed in terms of our organizational approach. As you can see on the left-hand side, data analysis, AI technology, IT implementation, financial technology, we do have such technology. We have quite sophisticated high levels of such technology. But we have yet to fully leverage the technologies that we have.

On top right, we have external resources and alliances companies at DX resources, know-how, and we have aligned this with them. The [sugar] opportunities to capture and utilize them, but we have yet to do so fully. So internal and external DX-related initiatives and assets, we need to consolidate them so that we can connect what is internal as to what is external, and so that we can have an overall approach to DX.

So SVP Umemiya is tasked with this, the CDIO. And so group CDIO will have a gatekeeping function so that we can increase connection. And Blue Lab, and we also have digital innovation business.

At inception, we wanted to do something new. And we try to adopt new concepts. So we need to come back to the basics where we started so that we can have innovation once again. So from that perspective, we need to try new initiatives. And as a result, we shall be able to help our customers solve their pain points and create new value as well.

Moving on, Page 25. I think you are already aware of this. We have alliance with Google. We made an announcement on that. And as is described on the lower half of the page, the point is just on the left-hand side, but we will see from customer information and transaction information that Mizuho has -- by combining the two, we would like to have optimized marketing for each individual customer. So hyper personalized marketing is what we would like to implement. And of course, investments for this is necessary.

Page 26, this is about sustainability. In the area of sustainability, we have been embarking on new efforts and new initiatives. So publicly offered bonds and SEC bonds were #1. Sustainable finance organization -- as an organization, we're #1 among Japanese banks. And this may have been reported -- providing finance for renewable projects. We are providing a number of services, lease finance and so forth, to EON MALL, this supports low carbon solutions. And for TOKYO GAS, this is the first deal-in-energy company in Japan that we have been a part of. So as strength is that we can provide finance and connect it to other areas to produce solutions. So expertise that we have in each respective sector and technological expertise that IT has. RT has 130 environmental consultants. Internal carbon pricing, for example, can be assessed and business consulting is provided by RT.

So let's move on to Page 26. This is about risk management. If you could take a look at the right-hand side of the page, we have classified sectors. And with regard to our clients, we are identifying the risk areas. And for high-risk areas, we have identified by sustain risk and the high-risk exposure was JPY 1.8 trillion end of '21. But March 2022, this has extended -- this has changed to JPY 1.6 trillion.

The next page describes our road map towards net zero. The section that is highlighted in blue in the center, 1.5 degrees, we must make effort to limit the temperature rise to not 2 degrees, but 1.5 degrees and also establishing a net-zero transition plan. This was published the other day and Scope 3 toward 2030. There is also a reduction plan, and we'll be pushing forward across the industry.

And the next set of slides will include our ideas on personnel and organization. We're living in a time that is rapidly changing. And it's very important for our employees to be able to come up with constructive ideas and creating a culture where people are able to contribute. So that each and every employee have a sense of fulfillment and rewarded in working for the organization. So at the top of this stage, you will see satisfaction for work. And so we will be making investments into our talent. Mid-3% wage increase has been announced.

And on the right-hand side, I have covered HR system and management. SC & RT, we will make sure that we have a cross-group HR framework. The HR framework is still separate, but we're going to remove those barriers so that we can come up with a unified cross-group HR framework so that people are able to move around in a very broad framework -- field, where they're able to build their careers.

And in the middle is building an employee-friendly working environment. Improving productivity is very important by eliminating unreasonable, wasteful and excessive quality. And also, we want to enhance communication in order to improve well-being. So fulfilling workplace and employee-friendly workplace is what we would like to achieve.

Next page, Page 31. Cultural reform will be leading the way forward. And since the day of me assuming the position of Global Group CEO, I have been adopting various measures, approximately 620 employee opinions have been taken into account. And number two is about the communication. And number three is holding a working groups where our employees are taking part under three different topics. So these are some initiatives that I'm embarking on in order to share the vision of Mizuho and to ensure that our vision is in line with the needs of the time and also make sure that the purpose of the organization penetrates through the organization.

And lastly, I might be repeating myself, but before closing, I want to share with you my message. The environment is very difficult to foresee. It's very uncertain, but we will continue stable business operations while heightening sensitivity to risk. And we will proactively invest in management resources and invest into talent as well as IT and digital domain and create a culture where we are able to take on new challenges that will lead to innovation and incubation. And we will ask as a value co-creation catalyst for a wide range of stakeholders in the age of DX and SX. And we will listen attentively to our stakeholders to execute open and accountable management.

Lastly, but not least, what I would say about this fiscal year, IT investment and the management policy will be implemented, that would increase in expenses, but we should be able to increase the gross profit. JPY 860 billion and revenue will be achieved. And at the same time, things have changed quite dramatically from the time we compile the 5-year business plan approach with the CPs was completely different. And now we have many platformers and geopolitical risk is completely different. And therefore, we need to look at our own business portfolio, visualize it, verify it and think about where we should focus on management resources. That is what we and I hope to achieve throughout this year.

So that concludes my presentation, and thank you very much for your kind attention.

Now let us move on to questions and answers, Q&A. (Operator Instructions) So let us take questions. Takamiya-san please?

Takamiya from Nomura Securities. I have two questions. So what is the outlook going forward and the results and the challenges for the current medium-term plan?

Ever since you become president, what is it that you're seeing now that you're in the position of leadership? So if you could please share that.

And under the current 5-year plan, what are the results and challenges? By business line, you did explain that, but from a more group-wide perspective over perspective, a comprehensive perspective, what do you see as results or achievements of the 5-year plan? What is it that lacking? Or what are the challenges? And so if you could just summarize the results of the 5-year plan so far.

Thank you for the question. So what is it that I'm seeing now that I'm in this position? What's my outlook? I've had a number of dialogues with a number of employees and there were lots of tough remarks made as well. And of course, there are a diversity of use and I think that's important for making improvement. And I think our employees are hungry for something new. Under the 5-year plan, we did [try to make] a lot of achievements. That's fine. But last year, we hit a problem of systems failures. We were not able to embark on new initiatives. So our employees, our staff are hungry for new initiatives, new ideas. So culture and DX is something that we have to focus on.

Beginning of February, I think it was mid February without -- what the need was in terms of DX. And so we started relevant initiatives. And in terms of the results and challenges of the [MPNP], business-wise, there were a number of achievements, as I said. And it's been translated into revenue. So last year was difficult because of the systems problem. But by overcoming them, I think we will be able to gain the trust of our employees. And I think now the spirit that we can do it if we work hard.

Of course, depending on the business line, there are still challenges that need to be overcome. For example, retail versus corporate. Last year, we reorganized the branches. We separated into 2 customer segments. And we're accumulating know-how for each. So improvement is seen, but there's a lot more that we can do. So we need to reformulate our strategy on that front. So that is one of the challenges.

And in terms of personnel, we have to seriously make investments into human resources development. It's not just about compensation schemes, ease of working, diversity in the workplace and promotion of women, I think there are remaining challenges that continue to be -- that need to continue to be addressed.

Next question, Nakamura-san from Bank of America Securities.

This is Nakamura speaking. On Page 19, capital policies, I have two questions. My first question is about dividend. Yes, I think I believe I understand that, but growth investment and share buyback, what is the balance? And what is the priority? What is your current thinking on that? And if possible, what are the conditions that you want to see in order to consider a share buyback? That is my first question.

And my second question is within the growth investment, Orico -- your relationship with Orico, for example, is your idea to maintain your relationship? Or are you thinking of any reconsolidation of the leasing companies? What is your idea? You have transferred in kind to a leasing company, but if you could take those two questions.

Thank you very much. So that was about share buyback and growth investment. First of all, for this fiscal year, JPY 540 billion. This, I hope to achieve. And at the same time, I hope to invest in growth.

Do we have any funds for organic growth, I guess, is part of your question. That will be taken into account. And at the end of the day, we may conduct share buyback. So that would be my answer to that part of the question.

And Orico and leasing companies, the relationship. Can you please ask your question once again?

Yes. Investment interest ratio, do you tend to maintain the current situation?

Well, yes, I think ordinary income of JPY 20 billion over the midterm. We want to bring that to JPY 40 billion. And whether that is possible on that or not is a yardstick that we have. And in the meantime, we may reconsider and you also had to give a question about leasing. Trade companies and banking companies we want to make use of these functionalities for us to grow by placing that business in the center, we believe that leasing and banking business could grow together. But I do not have an answer to your question again because we are dealing with a business partner.

I think Nakamura-san was also asking about more quantitative aspect. So if I could respond to you, the CET1 ratio, 43%, as I said, and we've covered this during the online conference. Provisions have been set aside. And therefore, CET1 ratio has gone slightly down. CET1 ratio is in the first half of 9%. So there is no discrepancy, but JPY 540 billion, and there will be a reversal of provisions made in the past. So 9%, the first half or 9.7%, 9.8%. Going forward, if the CET1 ratio goes higher than that, when we face such a situation, is it going to be share buyback or aggressive investment. We would definitely move into a different phase where we will consider those aspects. And we expect that we will move in that direction in near future.

As what mister by group CEO, we need to also think about balance. I think about the pipeline, potential businesses that we may have. We need to be looking at the balance we have no particular ideas of spending the profit. We could think of increasing the shareholder return.

Next question?

Nagasaka from Morgan Stanley, MUFG Securities. I have two questions. CEO Kihara had interviews with the media, I had a chance to read them. Among what you said in the interviews in the core business Mizuho is not behind any other banks. So when you say core business, bank securities, [SoftBank] collaboration related business, but with a changing environment -- that your core business may change. And what would be the value driver type of businesses in the sub areas? So how do you delineate between the core and the sub areas?

And my second question has to do with digital. You have a number of strategic alliances with other companies. What are the KPIs that you have set? What are the frameworks you're using in order to monitor progress and not just research and investment, but for your core business, how are you going to incorporate new technology? What kind of initiatives or efforts are you making at that? If you could please share that with us.

Thank you for the questions. First of all, yes, I did respond to media interviews and the expression used was somewhat different. What we view as our strength, are they really strengths in Mizuho. We need to verify that all the time. For example, in Americas and capital markets, we do have business. That is our strength, and we can look to grow, I'm confident. But we used to say that real estate is a strength. But is it true? Can we really maintain our strength going forward? We always have to look to areas where improvements can be made.

And in terms of weaknesses, can we overcome them? That's an important point. There was mention about Orico, credit card business, for example. Well, it's part of the core business, but profitability is not all that high. [Of course in terms of core] we have to verify whether part of the sub business can be turned into core business. So how can we improve the Orico business? And what can we do for that? We're always looking.

And in terms of digital, as you can see, [SoftBank], LINE, and we have a number of alliances. As part of our plan, we look at ROE. In what year are we going to turn profitable? And whether or not we can proceed according to when we have to look, and second point, so return from the business. I think it's both ways. So where we work with Google, there may be a very good technology that we can capture and utilize and LINE has 90 million user platform. Line credit, for example, we work with them. And that business is expanding. So using LINE technology, new customers can be developed and acquired, which is wonderful. And so within Mizuho, we're trying to set direct digital approach. And so that can be brought to what LINE is doing. And so I think it's both ways. It's interactive. That's the nature of our relationship with these alliance partners.

Do we have another question? If there are no questions from those who are physically present. [Ms. Tsujino, Mitsubishi UFJ Securities].

Impact of system failure, fiscal 2022 and beyond, as you say. Does this mean that most of it will be seen in fiscal year 2022? How do you expect this to transition beyond 2022?

Just one question?

Yes.

Thank you for your question. So basically, what you see on this slide is in fiscal year 2022. In fiscal '23, we're still verifying as there could be some impact that would emerge in fiscal '23. But as far as we know, at this moment, there is none.

Thank you very much for the question. Are there any other questions? We have questions, SMBC Nikko, Sato-san please.

This is Sato from Nikko Securities. I have two questions. Can you hear my voice?

Yes, I can.

Thank you. My first question with respect to foreign bonds, JPY 280 billion of valuation losses, including hedges. Right now, the rate is 3%. So I think valuation losses are increasing given the current rate. But early on, large losses from foreign bonds are not necessarily going to be dealt with going forward. So given the extent of valuation losses that we see in the foreign bonds, do you think that these losses are manageable going forward? So is that your answer? That's my first question.

Second is about dividend. JPY 540 billion but since there are uncertainties, annual dividend is set at JPY 80, that's why you explained, given the uncertainty. And do you think that uncertainties are going to continue? Well, that's at least my take. So if you're going to talk about uncertainties, will you may be able to raise JPY 80 -- from JPY 80 to JPY 85? So when you say you're looking to achieve JPY 540 billion and because of uncertainties, you're going to pay JPY 80 million. And so given JPY 540 billion, perhaps, JPY 85 could be paid. And so if I may clarify that.

So first, regarding foreign bonds on Page 46. Can everyone see Page 46? Page 46. I can't say the specifics, but we have reduced the position considerably. Now that rates are up, I don't think we're going to be mentioning the impact. And so the current position is manageable, I think.

And the second point, uncertainties. It is true that there are major changes happening in the market. Russia invaded in Ukraine. No one could predict that. And prolonged inflation continues, rates are up, and this is unprecedented. So this could affect liquidity in the future market, and we wanted to wait and see how that evolves. But what you have pointed out is as something that we should take into consideration. So that's my answer. And JPY 540 billion that's, of course, we continue to look to achieve. I'm sorry if I was rude.

Not at all.

Next question from Takai-san from Daiwa Securities.

This is Takai from Daiwa Securities. I have two questions. My first question is the variance in profit among the three mega from this last fiscal year to this year, MSG JPY 1 trillion level; SMFG, JPY 700 billion; and the JPY 500 billion for Mizuho. So it seems that there is like a 70% role among the three mega. And my question about this level. MSG or SMFG, you who are ahead of you, do you plan to catch up? Or do you want to stably achieve JPY 500 billion level? And if your answer is to be able to catch up, that would mean that you have to expand your business. And in the case of MSG, they are expanding their business globally. It's a regional geographic expansion. SMFG, they're increasing their assets and so the direction seems to be quite different in order to catch up in terms of budget, in terms of profit, which is the direction that you intend to expand in terms of your business outside of the traditional banking business? That's my first question.

And my second question is about sustainability, sustainable business, or sustainable finance. There'll be huge demand for sustainable finance. This is expected, but it could be patchy like energy or power in those areas, high-risk areas tend to have a high and stronger need for sustainable finance and I don't think this will necessarily connect to profit. How do you intend to counter such demand? Will it be a business opportunity for Mizuho? Are you planning to leverage such opportunities? So those are my two questions.

Thank you very much for your question. The audio is very poor. So we will be aiming to overachieve JPY 500 billion. So instead of insisting on achieving JPY 500 billion, we want to overachieve it, exceed that and also aim to exceed our ROE target. Extremely poor audio.

In the United States, we're feeling that we're quite confident in how we're doing in the Americas. In Europe, there are challenges in the economy in Europe. But once again, I'm going back to what I mentioned earlier. What we believe that our asset is really truly, a strength for us. This is something that we need to double check.

And on sustainability, I think you are right. There are about 7 sectors, I think, that will require to sustainable finance. [METE] has come up with a road map where there's strong demand for finance, and I think you're exactly right on that. And these sectors do require huge amount of sustainable finance. But in the meantime, demand for capital will not be covered by indirect financing. We will need to bring investors from abroad to support that.

So I think there are a number of business opportunities. We will offer consultation services to these clients, which I think is quite critical for us. And I think that would lead to us gaining more capabilities. I hope that answers your question.

Yes.

Thank you. May I invite the next question?

My name is Niwa from Citi Group. I have two questions about expenses and global retail strategy. The first question has to do with Page 15. G&A expense ratio target for FY '23 under the 5-year plan was 60% from what I remember. So toward the next fiscal year -- well, you commented that you will do whatever is needed. And of course, the assumption is that top line has to grow. But in terms of cost control, if you could share your comments.

And next, Page 23, global retail strategy, that was the phrase that you use. So you have made investments into Asia. And it seems that your stage has been elevated. So the necessary functions for global retail strategy, what are the functions do you think you need to pursue a global retail strategy? And what will be the areas of large investments?

With respect to costs or expenses, well, you have just said it right. So stable business operations and growth investment into expenses will have to rise. But how can we reduce the bulk of the cost by having productivity enhancement, for example, personnel. We can shift personnel to growth areas. And by so doing, we can enhance productivity. So the large booking costs, can we bring that down? Or where can we bring that down and where productivity can be enhanced, those are the areas that we need to focus on.

And by the way, in the retail area, we conducted sales reform, retail versus corporate, the back office functions and personnel. Well -- and there's the middle area between the front and the back having contact with customers. We're trying to shift back office people to the area that's in the middle of front and back. And there are problems with productivity. And so by reassigning personnel, we would like to raise productivity as well as gross profits. And so that is what we would like to do going forward.

And Asia's retail business, we're not looking at this as one segment. As far as Asia is concerned, Hong Kong, Singapore, we have headquarters there. We cover corporate customers, large corporates as well as SMEs. And so by getting into the payment business, we can drive business. And there are such collaborations that's possible.

And technology, as I said earlier, we may be able to bring overseas technology to Japan from Asia. And there's much advancement as seen in Asia. And when it comes to global retail, we may be able to utilize that in Japan in collaboration with the corporates in Asia. So that's what we're doing.

Are there any other questions? [Niwa] Please.

I hope you can hear me?

Yes, we can hear you.

This is kind of a related question. Page 24, 25, ecosystem and Mizuho Group. You have various alliances. And what you talked about. And there were questions about KPI. But looking at your ecosystem from the outside, short-term, midterm and long-term outcomes, what are you expecting in terms of outcome? For example, what kind of outcome do you think you could appeal to the outside in the next 1 year? What are the areas, or partners, or quantitative target that you may have for digital marketing? Anything that could rapidly be deployed and rolled out? Any quick wins that you might be able to gain? If there are any expectations that you may have in a particular area? This is the first question.

So expenses increasing this fiscal year. So in customer groups, markets and banking, what are your expectations on top line? And any upsides or downsides? If you could give some supplementary comments on that, I appreciate it.

Thank you for that. I wasn't able to hear the second part of your question very clearly, my apologies.

But -- so top line is going to be flat growth and upside to top line how much will be coming from customer groups, markets and banking? If you could give me a breakdown, maybe you will not be able to give specific numbers, but give me a range perhaps, your forecast or outlook for top line growth?

Okay. So the first part of your question, which is quite difficult, improving productivity inside Mizuho is one thing, and we want to use digital transformation in order to improve productivity. We're currently looking into this, what we can do, and by leveraging capabilities and technologies from the outside.

And in terms of our relationship with the external resources, business partners that are willing to work with us, whether we are able to find such business partners is very important, whether that is going to be directly related to -- reflected in our profit, maybe not so in the short term. In the next year or 2, we'll be working on those aspects. So it's not going to be quick wins. But which page was it in expense -- is the slide on expense? Is it Page 15? Yes, Page 15, bottom right, or the bar graph on the right-hand side, if you look at the bottom of it, JPY 64 billion gross profit increase. Digital marketing is included in this. So whether that will bear fruit towards fiscal 2024 is a key.

And gross profit, '21 and '22 comparison, or the page before that. Yes, this is the slide. I didn't go into great lens on this. Between JPY 860 billion and JPY 900 billion, you can see increase and decrease. Based on this year's environment, these are factors where we will see increase and also decrease.

In the stable revenue, overseas transactions, in loans and deposits outside of Japan will have a positive impact, if there are cash demands and also, there could be some upsides in loans and deposits outside of Japan. But in the meantime, if there is a downturn in the economy, this part will drop and there could be some impact in capital markets. So it's very difficult to say in value terms, how much the impact will be.

And talking about some upsides, for this fiscal year, we're expecting somewhat of a decrease but I hope that answers your question.

Yes, indeed.

Thank you. Any other questions, please?

(inaudible) from SEI Securities. I have two questions. One is the corporate culture reform that you're feeling traction that you're seeing progress you said. Conversely, what are your challenges or difficulties in implementing corporate culture reform?

And my second question is about cross shareholdings. Is it possible to bring it down to zero? That's the question. External Directors, what are they saying inclusive of that? What's their stance?

So with respect to culture, well, we're trying to embark on new attempt, new trials, new concepts and ideas, constructive opinions, individual employees, we are welcoming of such new views. That's the point. We have 70,000 staff members. Can everyone be turned into someone who can proactively air their views? I think we have to point out what -- where there are problems, and we also have to grow.

Well, we still seem to stick to a top-down approach. And so we have to change that in our culture, which is difficult. Diverse human resources must be hired, and I think that's also important. We are inviting new people from the outside. And by hiring those people, develop an enabling environment where people feel free to express their views.

And so the most difficult part is whether we can change each individual employees. And cross shareholdings, we've made substantial progress. Page 17, I did not say this in the presentation, but as a -- several years ago, the number of issues, the shares we held, 13,019, it's down to 882 as of end of 2022, and we have slashed that into half in terms of book price. And it requires very meticulous and careful communication with the issuers. And so we have to continue to do that in order to reduce the balance of holdings. And of course, it's important to have a plan for that. So we will continue to make the effort at that, but we need to have close communication. Without close communication, we will not be able to bring this down and to have a plan for that, and that's what we're going to do.

Understood.

I hope that answers your question?

Yes.

Nishihara-san in the room.

JPMorgan, Nishihara. Some people have already asked this question, but I would like to ask a question, which is that your earnings have been very conservative compared to other mega players. Guidance is very conservative, and especially the customers group decrease in profit, according to your guidance. I guess your strength has been in the customer groups where it has been growing year-over-year. And Page 13, I think described figure for fiscal year '23. This, I think, is a figure from the midterm business plan. But on Page 13, customer groups, it seems it's going to decrease from here. A year before, you said that this is an area that's very challenging, but increase in profit, guidance was offered and you were able to achieve that. So taking that into account, why would you expect a decrease year-over-year where other mega is increasing?

And also dividend and CET1 ratio, you again have a very conservative assumption. I do understand that the business environment is very uncertain, but the business environment is the same for all banking institutions, or are you -- why is that? And the impact of rate increase, is that going to become very significant in our business? And is there other concerns from Russia and Ukraine? Are there any other issues that is unique to Mizuho that is different from other players leading to such a conservative guidance? This is my question.

And about dividend, in the first half, will you increase to JPY 85? So if there's anything that you can share with us on that? I would certainly appreciate.

Thank you very much for your questions. Which page was it? Page 13? This is the figure for '23. This is based on the midterm plan. We have no intentions to stick to this number. This is Page 14. I'm referring to Page 14, my apology. JPY 653 billion, we don't intend to stick to this. JPY 720 billion, we will continue to aim for a higher level.

Page 13. And for fiscal 2022, stable operations of our business and the growth investment, these are things that we want to deliver on and especially the customer group business. Audio was extremely poor. Fiscal year '23, the fact that we have JPY 653 billion, the midterm business plan figure here might have been misleading. Our plan is to continue to grow. That remains unchanged.

And about dividend, I understand there are criticisms and I understand. But I feel that the business environment is changing quite rapidly. And we have some concerns. Although I do understand where you're coming from, and I understand criticisms. JPY 540 billion is our current target. And so therefore, it could be changed -- if we are able to achieve JPY 540 billion, we will change to JPY 85.

Any other questions? Takamiya-san, go ahead.

Takamiya-san Nomura. I have one question, which is about expenses. Other people have asked, but I would like to understand the idea behind expense management going forward. So this year, we're going to focus on making growth investment for growth. But that is going to be done while you're going to continue with the cost reduction efforts. There must be cost that you need on a continuous basis. And if we're making investment for growth, the expenses are likely to increase. But is that going to have any material impact next year and onward?

Well, of course, gross profits are going to go up and perhaps expense ratio as a result may go down. But the cost control initiatives to continue, and how are you going to manage expenses? And how are you going to allocate them as a concept going forward? So if you could share that with us.

In order to respond to structural issues, we have to spend expenses, impairment from branch consolidation, expenses for software, we've had to spend last year. But then we resigned to structure issues and that's JPY 26 billion. And so we will continue to enhance productivity, and we will continue to gain at a 60% expense ratio.

And on the other hand, investment for growth is something that requires solid discussion. While spending cost on investment for growth, we don't have to eliminate such costs. So strengthening existing businesses and creating new businesses for that by hiring people overseas, for example, I think we can do more in terms of DCM, for example. So the cost and the return on cost, that is something that we need to watch closely. And overall, we would like to hit 60% expense ratio. So that's we're thinking.

So you've been sending expenses in the face of increasing top line. But in the latter half of 2020, your expense ratio has deteriorated. And so you're aware of that and that's working on cost reduction.

We have to look at the process of cost spending closely.

I understand your thoughts.

Mr. [Graeme Knowd] Morgan Stanley please continue.

Just one question. About the revenues from markets, I tend to look at the accounting figures. Page 13. How is it -- how can I reconcile these numbers and other business related, the JPY 66.2 billion, and there is also JPY 49 billion in other businesses. So if we were not for that, it would have been JPY 115 billion. So looking at Page 13, compared to fiscal year '23, there's an improvement by about JPY 20 billion compared to JPY 21 billion. If we're not for this, it would have been JPY 66.2 billion, but you are anticipating an upside of JPY 20 billion or so. I was playing with numbers, and it seems that there could be a greater upside accounting base, the total of these two items. It could be more than JPY 100 billion.

If you could take us through these numbers once again, what is expected where in fiscal year '21, government bonds and minus and the overseas bonds, I think, were seen under ForEx. So what are you expecting this fiscal year? And foreign bonds, you are reducing your positions from JPY 12 trillion to JPY 9 trillion -- or actually less than JPY 9 trillion, and duration is getting shorter and you are cashing it out. So in this fiscal year, you will be building new positions and seek to gain from sales of those bonds. It's kind of difficult to say where you are, but what is your policy? What is your approach? If you could elaborate a little bit, that would be extremely helpful.

So this is Umemiya speaking, allow me to respond to your questions. Market-related, from 2020, growth is not significant, especially for accounting, finance, the growth doesn't seem to be very significant. That I think is your question.

What are we selling on a management accounting basis and converting it to a financial categories, we're not converting it completely. So I am not able to give you a very sharp answer comparing apple-to-apple. But if I could share with you what we're thinking, as you mentioned earlier -- carry gains of foreign bonds, so we are reducing our position. So fiscal '21 carry over gains cannot be expected in fiscal year '22. This is the situation. But in the meantime, during fiscal year '21, capital loss, should I say, or loss from sales have been incurred. Will we be incurring same level of loss in fiscal year '22? Likely not -- not need to do that. And therefore, there will be an offset between the two.

And within markets, it doesn't only include banking, there is also sales and trading, which is a very volatile environment. And the situation is very volatile and uncertain that offers the business opportunity. So sales and trading compared to '21, we believe that we can see some more of an upside and increase year-over-year. That may not directly answer your question because we do not have a breakdown by item, but that's the image that we have, more than JPY 20 billion increase in business, the net profit from fiscal '21. That is what we think.

So there are some -- they are coming from the customer groups. So there is an increase in customer groups as you see on Page 13. So instead of just looking at markets, the departments, we will naturally expect an increase in accounting.

I think we have time for one more question. If there are no further questions, it's a little earlier than scheduled, but we would like to conclude the meeting. Part of the slides will be additionally posted on the 20th of May.

Hanaoka-san from JPMorgan Asset Management. We have one other question.

Hanaoka speaking. I have a question. You think that you have to aim at over 8% ROE? So specifically, in order to achieve ROE of over 8%, what are the ideas? Do you have a specific target over 8% that you're aiming at?

Well, we don't have a specific target over 8%. But we have to at least aim at over 8%. That's the vision that we have. We don't have a specific number at this moment in terms of ROE.

Thank you. Any other questions? If not, we would like to conclude this presentation session. If there are any questions that you are not able to ask today, please feel free to contact the IR department.

I would like to ask Mr. Kihara, Group CEO, to say a few words.

Thank you very much, everyone, for taking time out of your busy schedules. Thank you very much for all the frank and candid opinions. We would like to take them fully where we need to reflect on and learn lessons from, we will do so.

At any rate, changes in society are becoming very rapid and substantial. We have put together a 5-year plan. And of course, we have to achieve the numbers there. But we need to once again look at the portfolio, which areas to focus on. Given the changes in the environment, we need to review that and think about that seriously. And while taking good communication with other players of the market, the analysts, we have to be open and accountable. That's what we wish to be. So we continue to welcome your candid opinions. Thank you once again for your participation today.

Thank you very much for taking time and participating. With that, we would like to close this conference call. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]