Kyokuto Securities

Basic Information

Stock Code: 8706
Industry: Securities, Commodity Futures Trading
Category Detail: Securities
Prefecture: Tokyo
Establishment Year: March 1947
Listing Year: April 2005
Official Website: http://www.kyokuto-sec.co.jp/
TSE Information: TSE Information
Yahoo! Finance: Yahoo! Finance
Other Companies: Daiwa Securities Group, Nomura Holdings, Okasan Securities Group, Marusan, Toyo, Tokai Tokyo Financial Holdings, Mito Securities, Traders Holdings, Iwai Cosmo Holdings, Aizawa Securities G

Overview

Kyokuto Securities is an independent securities firm founded in 1947. Although part of the Mitsui Group, it specializes in face-to-face sales targeting conservative affluent clients, with strengths in diverse bond products and investment banking operations, establishing it as a mid-tier securities company.

Current Situation

Kyokuto Securities recorded consolidated net sales of approximately 3.754 billion yen for the fiscal year ended March 2020, but posted operating, ordinary, and net losses, resulting in a challenging financial position. Centered in Chuo-ku, Tokyo, it operates a total of 12 branches including in Kanagawa, Osaka, and Aichi, strengthening face-to-face sales for conservative affluent clients. It specializes in distinctive corporate bonds and foreign bonds, differentiating itself with niche products not handled by major firms. It has a dedicated department for investment banking, proposing real estate securitization products and more. In recent years, it has responded to mutual fund and asset management needs while maintaining the strengths of branch sales to pursue stable revenue. Management is led by the founding Kikuchi family, ensuring continuity and contributing to capital stability. It explores collaborations and differentiation with peer mid-tier securities firms, advancing business alliances and product strategy reviews. Moving forward, it aims for customer base expansion, sales force strengthening, long-term revenue recovery, and growth.

Trivia

Interesting Facts

Founded as Fuji Securities in 1947, renamed Kyokuto Securities in 1949
Mitsui Group affiliate but maintains strong independence and unique path
Securities firm strong in niche corporate bonds not handled by majors
Operates 9 stores in Tokyo with thorough regional-focused sales
Founding family remains deeply involved in management
Proprietary trading accounted for much of revenue before the Great East Japan Earthquake
Unique bond lineup highly regarded in the industry
Early adoption of real estate securitization in investment banking
One of the major mid-tier securities firms belonging to Japan Securities Dealers Association
Notable competition with small-scale online securities in the industry
Aggressively differentiates services from majors
TSE Prime listing ensures capital market transparency
Provides meticulous face-to-face service to many affluent clients
Financial instruments business registration completed in 2007
Kikuchi Kazuhiro from founding family appointed president in 2012

Hidden Connections

Strong Mitsui Group ties through alliance with Mitsui Bank (now Sumitomo Mitsui Banking Corporation)
Major shareholders include major regional banks like Seventy-Seven Bank and Sumitomo Mitsui Banking
Owns diverse group companies such as Kyokuto Development Industry and Economic Research Institute
Actively involved in regional financial support post-Great East Japan Earthquake
Services for conservative affluent clients inherit traditional sales style
Specialization in niche markets avoided by majors is a key feature
Strong proprietary product planning capabilities adapting to financial product diversification
High recognition in real estate securitization within investment banking despite mid-tier size

Future Outlook

Growth Drivers

Steady expansion of asset management needs among conservative affluent clients
Development and strengthened proposals for diversifying corporate and foreign bonds
Revenue diversification through expansion of investment banking
Operational efficiency gains from digital technology adoption
Stable customer base building via regionally focused sales
Increasing demand for sustainable investment products
Enhanced trust through strengthened regulatory compliance
Store expansion and customer acquisition in growing economic regions
Service enhancement through fintech collaborations
Brand maintenance via stable founding family management
Flexible response to financial product diversification
Maximization of synergies with group companies

Strategic Goals

Expand share in niche product markets and broaden customer base
Raise investment banking revenue to over 30% of total
Complete DX across all stores to enhance customer convenience
Strengthen environmental efforts targeting 30% CO2 reduction
Expand regional contribution activities to 10+ per year to fulfill social responsibility
Maintain customer satisfaction above 90% and improve repeat rate
Strengthen management by integrating founding family and external talent
Accelerate development of financial products addressing diverse needs
Foster diverse workforce and create supportive work environment
Stabilize financial base by strengthening capital and net assets

Business Segments

Investment Banking

Overview

Provides comprehensive investment banking services for corporate funding and organizational restructuring.

Competitiveness

Possesses dedicated department capable of handling diverse niche products

Customers

Corporations
Real estate companies
Public institutions
Financial institutions
Asset management firms
M&A advisors
SME owners

Products

M&A Advisory
Asset Securitization Consulting
Corporate Restructuring Support
Capital Raising Support
Real Estate Securitization Products

Bond Sales and Brokerage

Overview

Leverages distinctive bond lineup to provide specialized proposals to a wide range of clients.

Competitiveness

Strong in niche corporate bonds not handled by majors

Customers

Institutional investors
Affluent investors
Fund managers
Insurance companies
Pension funds
Corporate pension operations

Products

Domestic and foreign corporate bonds
Real estate-backed bonds
Niche bond products
Asset management advice

Asset Management Support

Overview

Provides diverse financial products and services for clients' asset formation and management needs.

Competitiveness

Fine-tuned services centered on face-to-face sales

Customers

Securities firms
Financial planners
SME corporations
Local governments
Educational institutions

Products

Mutual fund sales
Asset formation consulting
Investment guidance
Risk management tools

Financial Product Handling

Overview

Handles a wide range of financial products including securities trading, underwriting, offerings, and sales.

Competitiveness

Leverages extensive experience in securities product handling

Customers

Individual investors
SMEs
Investment advisory firms
Various fund management companies

Products

Stock trading brokerage
Futures and options
Financial derivatives
Securities underwriting

Competitive Advantage

Strengths

Specialization in face-to-face sales for conservative affluent clients
Rich lineup of distinctive niche bond products
Dedicated investment banking department
Robust branch network centered in Tokyo
Reliability from Mitsui Group affiliation
Strong proposal capabilities for diverse bonds
Long-term customer base and ongoing transactions
Management stability and founding family involvement
Transparency as a listed company
High-quality customer service through face-to-face interactions
Strong brand image as an independent securities firm
Expertise in asset securitization and M&A
Handling of multifaceted financial products
Regionally focused sales expansion
Risk management capabilities based on extensive experience

Competitive Advantages

Differentiates customer base by handling unique niche products not offered by majors
Possesses dedicated departments for investment banking and real estate securitization, providing mid- to long-term value
Firm branch network including 9 stores in Tokyo, deeply rooted in the region
Continuity and trust building from long-term founding family management
Financial stability and risk resilience from high capital base
Specialized face-to-face sales organization capable of addressing detailed customer needs
Achieves stable revenue base through diverse bonds and securitized products
Established brand power and market recognition in the mid-tier securities market
Able to expand product lineup through collaborations and alliances with industry leaders
Swift decision-making supported by management's specialized knowledge
Supports customer asset formation centered on regions, building long-term relationships
Ensures reliability through thorough compliance and internal controls
Addresses wide-ranging customer needs with diverse financial products and services
Maintains stable dividend policy with focus on shareholder returns
Has rigorous audit system by certified public accountants

Threats

Potential revenue pressure from low interest rate environment in financial markets
Intensifying competition with major securities firms leading to market share erosion
Risk of reduced investment appetite among affluent clients during economic downturns
Increasing operational constraints from regulatory tightening and legal changes
Concerns over customer loss due to spread of non-face-to-face and online securities
Risks to branch operations from natural disasters and external environmental changes
Heightened credit risk accompanying capital market fluctuations
Customer base contraction from population decline and aging
Intensified competition for new customers due to competitors' delayed digital shifts
Decline in investment sentiment from global economic uncertainty
Risks of internal control and compliance violations
Concerns over management succession and talent outflow

Innovations

2023: Introduction of Digital Sales Management System

Overview: Unified management of customer information and sales activities to improve operational efficiency and service quality.
Impact: 20% improvement in sales efficiency, enhanced customer satisfaction

2022: Expansion of Distinctive Bond Lineup

Overview: Began handling emerging market and alternative bonds not offered by majors to differentiate.
Impact: Customer base expansion, 10% increase in new contracts

2021: Establishment of Dedicated Department to Strengthen Investment Banking

Overview: New department specialized in real estate securitization and M&A support to enhance expertise.
Impact: Approx. 15% increase in related project acceptances

2020: Introduction of Customer Analysis Tool Using Fintech

Overview: Strengthened proposal capabilities and risk management through AI-based customer behavior analysis.
Impact: Increased proposals, reduced customer churn rate

Sustainability

CO2 emissions reduction through energy-efficient stores
Promotion of social contribution activities in collaboration with local companies
Strengthened compliance and internal control systems
Ongoing financial literacy education for employees
Enhanced proposals for sustainable investment products
Environmental burden reduction through paperless operations
Promotion of diverse talent utilization and work-style reforms
Active participation in regional communities
Strengthened security for customer data protection
Handling of fund products considering social responsibility