Shinsei IR Day Unsecured Loan Business February 2017
Today’s Talking Points Size and growth potential of our target market The Shinsei Bank Group’s position within the market Our performance in the acquisition of customers Credit risk management Challenges to be overcome going forward 1
Market Overview Size of the card loan market (trillion yen) 16 80% 75% 14 70% 3.91 Domestic Bank 60% Balance 12 60% 3.88 C.C. Cash Advance 10 50% Balance 5.41 3.82 40% Nonbank Balance 8 40% 3.85 5.98 4.84 5.71 4.08 5.18 4.65 11.47 Marketshare 6 30% (Nonbank) 3.69 25% 9.40 4 20% 2.87 Marketshare 2.53 1.78 2.02 1.86 1.79 6.06 (Domestic Bank) 6.64 4.56 5.34 2 10% 4.69 4.15 4.03 4.02 4.05 2.95 2.47 2.16 2.16 2.27 2.13 2.23 0% 0 2009.3 2010.3 2011.3 2012.3 2013.3 2014.3 2015.3 2016.3 2016.9 (Data Source) Bank of Japan, Japan Financial Service Association The bank loan market has grown rapidly since 2011 Combined Bank and Nonbank balance approximately JPY 10 trillion; Expecting a market size of ~JPY 8.5 trillion market in the mid-term excluding credit card cash advances. 2
The Shinsei Bank Group’s Position Balance Trend of Consumer Loan Brands Future Market trend (billions of yen) 2,500 Aiful Will banks also be subject to the total 2,000 lending volume control? Promise 1,500 Existing personal loan companies to 1,000 shift back to the offensive Acom 500 The survival/elimination of emerging Shinsei Bank Group players will become apparent 0 2014.3 2015.3 2016.3 2016.12 （ source ） Company Disclosure Materials As the grey zone repayment issue Balance Trend of Bank Brands approaches its conclusion, re- (billions of yen) 2,500 borrowing by previous customers will gradually increase 2,000 SMBC Card Loan Rakuten Bank 1,500 Lake’s on-going compliance with Super Loan Mitsubishi Tokyo the “spirit” of the “Money UFJ Banquic 1,000 Shinsei Bank Card Lending Business Law” will be Loan Lake 500 Sumitomo SBI an advantage Bank Net Loan Orix Bank 0 Card Loan 2015.3 2016.3 2017.3 3 （ source ） Company Disclosure Materials
Customer Acquisitions of the Shinsei Bank Group Consumer Loan Company Applications Received Consumer Loan Company Approval Rates 60% 160,000 140,000 40% 120,000 100,000 20% 80,000 60,000 0% 40,000 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 （ source ） Company Disclosure Materials （ source ） Company Disclosure Materials Consumer Loan Company New Customer Acquisitions Acom Promise Aiful 80,000 Shinsei Bank Lake NOLOAN Group 60,000 The number of applications received 40,000 has been similar to other consumer loan companies but customer 20,000 acquisitions flat due to conservative credit control. 0 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4 （ source ） Company Disclosure Materials
Credit Risk Management Comparison of % of Loans in Arrears Comparison of % of Loans in Arrears vs. Company P vs. Company A % of Loans in Arrears (past due for more than 91 days) % of Loans in Arrears (past due for 11-90 days) Company P Lake (Shinsei Financial + Lake) Company A Lake (Shinsei Financial + Lake ) 3.0% 1.4% 1.2% 2.5% 1.0% 2.0% 0.8% 1.5% 0.6% 1.0% Numerators : Numerators : 0.4% Company A : Loans in arrears for less than 3 months Company P : Of total NPLs, loans past due for more than 91 days Lake : Loans past due for 91-180 days, loans past due for more than 31 (excluding balance held by headquarters’ collection department) 0.5% days and under mutually agreed repayment plan Lake : Loans under legal intervention are excluded 0.2% (Shinsei Financial + Lake) (Shinsei Financial + Lake ) Denominators : Total loans for both company A and Lake Denominators : Total loans for both Company P and Lake 0.0% 0.0% Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 （ source ） Company Disclosure Materials （ source ） Company Disclosure Materials • Achieving growth while engaging in relatively conservative credit control • Looking to further enhance our credit screening ability through analytics and on-the-ground efforts 5
Overview of Our JV in Vietnam Shinsei Bank Military Bank (MB) Total assets: more than JPY1 Offerings: trillion, and ranked No.5 (largest Capital (49%) Governance support as an effectively private bank) in Vietnam Offerings: equal partner Capital (initially 100% → 50% after JV establishment) Business license (obtained) Loan funding Branches as business infrastructure Shinsei Financial Cross-selling to MB customers Investment Investment Sales support from client companies and cross-sell to employees Offerings: Viettel is the largest IT systems shareholder of MB, owning Risk models and operational expertise Investment 15% of their shares. Operation development and business operation know-how M-Finance (MF) Viettel Partnership Financial JV company (major partner) March 2016: Established as a wholly- The largest mobile phone carrier owned subsidiary of MB in Vietnam, with greater than 40% share of the country’s mobile telecommunication market Thai Group* Offerings: Installment loans for mobile phone purchases Offering: Cash loans for mobile phone users Sales support at branches, application Capital (1%) *Local mid-sized companies mainly in the construction sector acceptance agent service by employees, 6 and application acceptance at agencies
SecondXight Ex-Group initiatives: Group activities: Nonbank financial institutions Improve credit accuracy Credit model Pre-credit model Life insurance companies Cross-selling model Talent performance model Branch opening optimization Retention rate model Adopt AI for administrative Real estate companies operations Price forecasting model Rent forecasting model Identification of prospective Settlement companies housing loan customers New settlements method introduction support ・ ・ Banks ・ ・ DM application forecasting model ・ ・ ・ ・ Utilize non-Group activities to increase our Group’s knowledge 7
Summary: Strengths of the Shinsei Bank Group + Credit control capability originating from a nonbank financial institution + Processes and compliance cultures based on the Money Lending Business Law + Proprietary IT systems and a low expense to revenue ratio due to lean operation practices originating from GE + High level of service + Ample preparedness on the grey zone issue + Analytical capability (traditional scoring model + AI) 8
Disclaimer • The preceding description of Shinsei Bank Group’s Medium-Term Management Plan contains forward-looking statements regarding the intent, belief and current expectations of our management with respect to our financial condition and future results of operations. These statements reflect our current views with respect to future events that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may vary materially from those we currently anticipate. Potential risks include those described in our annual securities report filed with the Kanto Local Finance Bureau, and you are cautioned not to place undue reliance on forward-looking statements. • Unless otherwise noted, the financial data contained in these materials are presented under Japanese GAAP. The Company disclaims any obligation to update or to announce any revision to forward-looking statements to reflect future events or developments. Unless otherwise specified, all the financials are shown on a consolidated basis. • Information concerning financial institutions other than the Company and its subsidiaries are based on publicly available information. • These materials do not constitute an invitation or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever. 9
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