Sumitomo Sumitomo Trust Trust & Banking Banking Sumitomo Trust Sumitomo Trust & Banking Banking Co., Co., Ltd. Ltd. Co., Co., Ltd. Ltd. Information Meeting on Financial Results for 1HFY2004 December 1, 2004
The quality trust bank 1
Aiming to become the quality trust bank Quality of asset The quality trust bank � Low non-performing loan ratio Trust bank along with real estate business High RAROA having strength in efficient capital control Highly diversified investment and having high quality in capital, asset, profit, as well as customer franchise Quality of profit Quality of customer franchise The Quality Trust Sustainable growth of bottom line Number of customers Bank � � High fee income ratio Depth of customer relation � Low overhead ratio � Critical mass of trust business � Quality of capital � Potential dilution of capital � Low deferred tax assets � High Tier 1 ratio 2
Capital Tier 1 as of Sep. 2004 Tier 1 as of Mar. 2003 Deferred tax assets Public fund 15.5% 14.2% 706.1 billion yen 839.7 billion yen Deferred tax assets 39.6% Tier 1 ratio 6.09% Tier 1 ratio 7.38% BIS capital ratio 10.48% BIS capital ratio 13.24% 3
Strategic capital allocation with agility High quality and excess capital + Free hand for management Ensure growth in ROE & EPS by reallocating and efficiently using freed up capital Strategic investment Profit sharing with shareholders Total profit sharing (Dividend + Share buy back) Sustainable growth in top line Stable dividend Proprietary investment to increase Dividend payout ratio: over 20% leverage for profitability Forecast dividend for FY2004:10 yen (amended from 6 yen forecast) 4
For efficient capital allocation ～ Equity capital is the most expensive source of funding ～ Establishment of “Capital Allocation Committee” ＜ Mission ＞ Maximize shareholders’ value through efficient capital allocation ＜ Function ＞ Verify capital adequacy in terms of economic capital Promote diversified investment strategy to avoid concentration of risk Review business model through optimization of capital allocation and shareholders’ value added (SVA) based performance analysis Ⅰ Measurement of total risk amount Ⅱ Ⅳ Measurement of risk and return Performance evaluation using SVA for each business group Ⅲ Equity allocation to Business business groups environment analysis & Comparison with expected return 5
Improving asset and profit quality: Investment as well as trust services Market-based loans Securitization services Deep knowledge Risk taking and expertise Investment as well as trust services Trust function -Origination -Arrangement -Placement -Management and custody + Proprietary investment as on the same boat Establish new profit Expand and enhance both opportunity Banking and Trust business 6
Enhancing customer franchise base Trust and banking with real estate business Customer Strength of the Cross-selling customer franchise Consulting capability relationship Proprietary investment (On the same boat) Number of customers Alliance with various companies Critical mass SMBC, etc. Daiwa Securities Group Aiful Loan business to Trust agency Securities intermediary Japan Trustee Services Bank business small business owners Real estate asset Mitsui Trust HD, Resona HD management Real estate Businext Japan TA Solution Trust agency Japan Securities Agents Japan Pension Operation Service New market Mizuho Trust Bank New area China Securitization of Establishment of pension consulting company intellectual property First trust bank’s branch in Shanghai Investment advisory for PE fund management in alliance with CITIC* Hong Kong off shore fund * China International Trust and Investment Corporation 7
Financial results for 1HFY2004 8
1HFY2004 financial outlook Previous <Non-consolidated> 1HFY2004 Change 1HFY2003 Change forecast (A) (B) (A) - (B) (C) (A) - (C) (in billions of Yen) 61.4 65.0 -3.6 77.3 -15.9 Net business profit before credit costs 56.5 - - 55.5 1.0 General & administrative expenses 22.2 - - 23.0 -0.7 Personnal expenses 30.9 - - 30.0 0.8 Non-personnal expenses -13.1 15.0 -28.1 9.9 -23.1 Credit costs 7.8 8.9 -1.1 Net gains on stocks △ 5.0 6.2 -6.6 -11.1 4.5 Other non-recurring profit 58.8 45.0 13.8 62.3 -3.5 Net operating profit 16.6 - - 5.7 10.8 Extraordinary items 46.3 27.0 19.3 40.3 5.9 Net income <Consolidated> (in billions of Yen) 65.9 - - 79.6 -13.6 Net business profit before credit costs 64.3 50.0 14.3 66.6 -2.2 Net operating profit 16.4 - - 5.6 10.7 Extraordinary items 48.7 29.0 19.7 40.9 7.8 Net income 29.3 yen - - 24.9 yen 4.4 yen EPS (Fully diluted basis) 7.4% - - 6.7% +0.7 point Tier 1 ratio 9
Net fees and commissions and other trust fees Full fiscal year basis (Consolidated) Net fees and commissions (in billions of Yen) Syndicated loan, Non recourse loan 120 40% Net fees and Individual annuity, Mutual fund 35% commissions 100 Stock transfer agency services 30% Other trust fees Real estate brokerage, Real estate administration 80 25% 53 Outsourcing fee (paid), Brokerage fee (paid) 36 36 34 32 Fee ratio 60 20% 15% 40 10% 50 52 51 50 47 20 5% Half fiscal year basis (Consolidated) (in billions of Yen) 0 0% 60 45% 2000/3 2001/3 2002/3 2003/3 2004/3 40% 50 35% 40 30% 29 Other trust fees 25% 30 Pension tokkin 25 20% 19 16 18 16 Securities processing services （ Tokkin, Mutual fund, Security trust ） 20 15% Corporate pension, public pension 10% 25 10 Real estate securitization, land trust 18 18 18 17 17 5% Asset securitization 0 0% 1999/9 2000/9 2001/9 2002/9 2003/9 2004/9 10
Breakdown of profit by business group Non-consolidated Consolidated Gross business profit before credit costs Net business profit before credit costs Net business profit before credit costs Change Change (in billions of Yen) 1HFY2004 from 1HFY2003 from 1HFY2004 1HFY2003 Change 1HFY2004 1HFY2003 Change forecast 1HFY2003 Wholesale financial services 42.4 3.1 43.9 -1.4 32.0 33.2 -1.2 34.1 35.9 -1.8 Stock transfer agency services 2.9 0.1 2.6 0.2 1.6 1.2 0.4 2.9 3.4 -0.5 Retail financial services 30.7 1.7 25.9 4.9 5.6 0.2 5.3 6.3 1.0 5.3 Treasury and financial products 14.7 -19.8 42.4 -27.6 10.3 37.7 -27.5 10.3 37.7 -27.5 Fiduciary services (*1) 15.6 4.5 12.0 3.7 8.2 5.5 2.7 9.4 4.0 5.4 Pension asset management 12.9 3.3 10.5 2.4 6.3 4.9 1.4 6.7 3.6 3.1 Securities processing services 2.8 1.2 1.5 1.3 1.9 0.6 1.3 2.7 0.4 2.3 Real estate 10.3 3.3 7.4 2.9 6.6 3.9 2.7 6.8 4.2 2.7 Others (*2) 4.2 1.2 1.5 2.7 -1.2 -3.2 2.0 -1.0 -3.2 2.2 Total 118.0 -6.0 132.9 -14.8 61.4 77.3 -15.9 65.9 79.6 -13.6 *1 Effect of change in trust fee accounting from cash basis to accrual basis is 4.2 billion yen. *2 Changed management accounting grouping. Net of dividend income, cost of capital sourcing and head office expense is included. Net fees and commissions (Consolidated, Banking a/c) 1HFY2004 1HFY2003 Change % Change (in billions of Yen) 29.3 25.0 4.3 17% Net fees and commissions (Consolidated) 27.0 24.0 3.0 Domestic net fees and commissions 7.6 7.9 -0.4 -5% Non-recourse loans Wholesale financial services 5.6 3.4 2.2 65% Mutual fund and annuity sales Retail financial services 8.8 7.4 1.4 19% Increase of transfer registration Stock transfer agency services 10.8 8.8 2.0 22% Brokerage and securitization Real estate -5.8 -3.6 -2.2 Effect of change to accrual basis -12 Fees paid to JTSB 2.2 0.9 1.3 CLO arrangement International net fees and commissions 11
Loan business/ Loan deposit margin <Loan deposit margin> Large corporation Small and medium size corporation Individual Market-based loan (%) Entrusted assets for securitization Small and medium size + large corporation 2.0 (excluding real estate) (in trillions of Yen) 12 2.1 1.0 1.9 10 1.9 2.2 1.2 1.3 1.3 8 1.4 0.0 2.8 2.5 2.0 6 02/3 02/9 03/3 03/9 04/3 04/9 4 8.1 Long term prim e rate 3.9 5.3 5.2 5.2 4.1 4.0 3.8 2 Av erage loan interes t rate 0 Av erage loan-depos it m argin 2003/3 2003/9 2004/3 2004/9 Av erage depos it interes t rate （ % ） Amount of market-based loans 1HFY2004 2004/9 2004/3 (in billions of Yen) Change 575.8 510.2 Non recourse loan/ Project finance 1.05 0.17 Gross margin 901.3 760.4 Synadicated loan/ Loan purchase in secondary mkt, ABS 1.24 0.09 Average interest yield earned 758.3 629.5 Overseas branches 0.19 -0.08 Average interest yield paid 2,235.4 1,900.1 1.14 0.02 Total Loan-deposit margin 1.31 0.02 Average loan interest rate 0.17 0.00 Average deposit interest rate 12
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