Rakuten Group (RAKUTN): A vote of confidence in synergies: the fintech reorganization

Research evidence excerpt

Rakuten Group (RAKUTN): A vote of confidence in synergies: the fintech reorganization

Per Rakuten’s disclosure materials, if group synergies materialize—such as (i) lowering

funding costs through an improved funding structure across the financial subsidiaries,

and (ii) expanding the customer base through deeper service integration—Rakuten

expects annual recurring profit uplift of ¥85bn+ in the fintech segment over the medium

term. For Rakuten, the potential benefit is not only crystallization of fintech asset value,

but also the prospect of higher upstream cash generation over time. We will continue to

monitor whether the Reorganisation delivers the intended synergy expansion. While we

do not expect rating agencies to take immediate rating action on the announcement, we

do expect more constructive commentary on Rakuten.

Unlocking fintech asset value and implications for cash

flow

Using Rakuten Bank’s share price as of the day before the announcement, Rakuten’s

post-Reorganisation equity value in Rakuten Bank would be ¥1.9847tn. Before the

announcement, a mechanical sum-of-parts based on (i) Rakuten’s stake in Rakuten Bank

(¥557.0bn), (ii) implied valuation of Rakuten Card derived from the announced

investment terms of the capital and business alliance between Mizuho Financial Group

and Rakuten Card in November 2024 (¥935.7bn), and (iii) implied valuation of Rakuten

Securities derived from the announced investment terms of the capital and business

alliance between Mizuho Securities and Rakuten Securities in November 2023

(¥153.0bn) suggests that the combined value of Rakuten’s major fintech holdings was

¥1.6457tn. This indicates a meaningful increase in the implied value of Rakuten’s fintech

assets alongside the businesses’ growth to date.