Muraki

Muraki from SMBC Nikko Securities inquired about potential cost incurrence in the fourth quarter, referencing past losses from ORIX Bank and ORIX Life's fixed income sales, and a JPY 4 billion credit cost in the United States. He also asked for clarification on the cautious stance regarding Erawan and whether any goodwill would be carried over.

Answer

Kazuki Yamamoto, Operating Officer, addressed cost incurrence, noting a mixed outlook with robust AI/data centers but uncertainty in tariffs/trade. He mentioned potential real estate credit costs due to rising long-term interest rates and increasing short-term mortgage loans, along with provisioning for legacy asset risks, which are incorporated regularly. For Erawan, he stated that a cautious stance is maintained due to project delays, but signs of improvement are emerging. The plan will be reviewed, and if P&L aggravates, actions will be taken earlier to avoid carrying negative legacies. Yamamoto also clarified that bond/fixed income losses are not sizable, and while life insurance unrealized loss is enlarging, it is matched against policy assets, so no operational accounting loss is currently expected.

Muraki asked about potential cost incurrence in the fourth quarter, referencing past losses from ORIX Bank, ORIX Life, and U.S. credit costs. Muraki also inquired about ORIX's cautious stance on Elawan, specifically asking if goodwill for Elawan would be carried over.

Answer

Kazuki Yamamoto, Operating Officer, ORIX, explained that potential Q4 costs could arise from tariff-related uncertainties, rising long-term interest rates impacting real estate, increasing mortgage loan rates, and legacy asset risks, with regular credit cost reviews. Regarding Elawan, Yamamoto stated that while there have been project delays, signs of improvement are emerging, and the plan will be reviewed to avoid carrying over negative legacies. He noted that bond/fixed income losses incorporated by Q3 were not sizable, and while life insurance unrealized losses are enlarging, they are matched against policy assets, so no operational accounting loss is expected at this time.

Inquired about the outlook for capital recycling, specifically potential capital losses from impairments or credit losses, and whether the company is considering realigning ORIX Life's bond portfolio to offset gains and improve future profitability.

Answer

The company is currently reviewing its full-year forecast, which includes assessing the optimal timing for capital gains and potential losses. While some impairments occurred, the credit loss outlook is conservative. Regarding ORIX Life, the unrealized bond losses are linked to long-term liabilities with low surrender risk, so no major portfolio realignment for capital loss harvesting is currently planned. The overall profit direction is positive due to the Greenco gain, but a full review is underway.

Muraki of SMBC Nikko Securities asked new CFO Moriuchi about his capital policy priorities, his view on the pro forma 12.5% CET1 ratio post-Macquarie acquisition, and any updates on the deal's closing timeline. He also inquired about the trend in risk-weighted assets (RWA).

Answer

CFO Hiroyuki Moriuchi explained that capital policy prioritizes business strategy investments over shareholder returns, though the company remains committed to a payout ratio over 50%. He described the 12.5% CET1 ratio as potentially "thinning" but not prohibitive for shareholder returns. He confirmed the Macquarie deal is proceeding smoothly for a December closing and noted that RWA is increasing as the firm captures visible business opportunities in Global Markets.

Muraki of SMBC Nikko Securities asked about the new CFO's capital policy priorities and his view on the pro-forma CET1 ratio post-Macquarie acquisition. He also requested updates on the Macquarie deal's timeline and the reasons for the increase in risk-weighted assets (RWA).

Answer

CFO Hiroyuki Moriuchi prioritized strategic business investments over shareholder returns, while maintaining a payout commitment of over 50%. He described the pro-forma 12.5% CET1 ratio as potentially 'thinning the capital'. He confirmed the Macquarie deal is proceeding smoothly and attributed the RWA increase to growing business exposure and a strong pipeline in Global Markets.