Solid Start to FY2011 Shinsei Bank, Limited September 2011 - PowerPoint PPT Presentation

Solid Start to FY2011 Shinsei Bank, Limited September 2011

Overview Management 1. Medium-Term Management Plan and Management Commitment Commitment 2. Off to a Good Start Highlights 3. Loan Balance Shows Signs of Bottoming-out Business 4. Stronger Earnings Power Profitability 5. Improved Asset Quality Asset Quality Stable Financial 6. Stronger Capital and Liquidity Base 2

Management Management Vision Commitment Establishing Solid Industry Position by Capitalizing on Strengths and Addressing Weaknesses Management Principles: A banking group that …  has stable earnings power, is depended upon by customers and contributes to the development of both domestic and international industrial economies  has built on its past experience and history, values diverse talents and cultures and takes on new challenges  strives for transparent management and is valued and trusted by all stakeholders, including customers, investors and employees Institutional Group, Goals of Medium-Term Management Plan (MTMP) Individual Group Global Markets Group “Rebuilding the customer franchise in Japan”  Utilize our strengths to stabilize “Establishing a stabilized earnings base”  Achieve stable, low funding costs revenue Product Offerings Innovative Medium-Term  Focus on areas that will contribute to  Providing unique housing loan Management Plan sustainable development of society products Non- Japanese Shinsei Banks  Strengthen role as incubator and Bank Current  Investment Consultant cross-industrial coordinator Shinsei Bank Japanese Large Small Megabanks  Reduce divestible non-core business  Further strengthen consumer Traditional assets by 50% Customer Base Japanese finance business (Shinsei Bank Banks Card Loan – Lake) Plain Vanilla Strengths Opportunities  High customer satisfaction  Niche businesses  Diversity  New customers  Swift decision making, agile  Ever-changing lending and  Tailor-made solutions  “Responsible consumer lending” execution investment needs of customers Weaknesses Threats  Political, legislative and economic  Smaller customer base  Fierce competition uncertainties 3

Management FY2010 Highlights Commitment Implementing Reform: Firm Management Commitment to Strengthening Corporate Structure  Announcement of Revised Medium-Term Management Plan “Rebuilding the Customer Franchise in Japan”  Intensive Group-wide expense review “Establishing a Stabilized Earnings Base”  Revision of consumer finance asset projections and credit  JPY 71.8 billion of cost control Back on the capital raising through  Establishment of healthcare finance, corporate restructuring Offensive international common and other new businesses share offering  Targeting a capital policy aligned with Basel III  APLUS FINANCIAL  Launch Shinsei Bank Card Loan became a subsidiary of - Lake Shinsei Financial Management reform aimed at strengthening our financial base March 2011  Repurchased USD  Business Collaboration with 1,072 million of Tier I Taiwan affiliate Jih Sun  Joint ATM installation with preferred securities Seven Bank December 2010  Exchange offers for Tier II subordinated  Established subsidiary to provide capital to support notes corporate restructuring  Alliance with India’s YES Bank  New Management September 2010  Alliance with Vietnam's Baoviet Holdings  Announcement of Medium-Term  Established Corporate Support Division for SMEs Management Plan  Partnership with APLUS FINANCIAL in personal loan business  Shinsei Financial forged alliances with regional banks June 2010 in unsecured personal loan guarantee business March 2010 Organizational reform aimed at expanding client base  Established Healthcare Finance Division and strengthening core businesses Consolidated JPY -140.1 billion (FY2009) JPY 42.6 billion (FY2010) Net Income Tier 1 Capital 6.35% （ 2010.3 ） 7.76% （ 2011.3 ） Ratio 4

Management Top-line Initiatives, Expense and Credit Cost Control to Commitment MTMP Ensure Achievement of MTMP 1 Target  Operating environment remains challenging, due to economic impact of Earthquake Operating Environment  Climate could improve due to reconstruction demand and improvements in supply chain (from 2H FY2011)  Decline in Shinsei Financial loans due to implementation of MLBL 2 , while maintaining market share and remaining number 1 for new applications Shinsei-specific Challenges  Continued divestiture of non-core business assets, renewal of asset composition and quality  Real estate portfolio under renewal and focus on securing profitability Improvement of Total Revenue Ongoing Reduction of Expenses Achieve MTMP Target Focus on accumulating quality assets  Original target almost achieved in FY2010 well in advance of MTMP 1  Unsecured personal loans (Shinsei Bank Card Loan - Lake)  Continued focus on more efficient cost management while considering  Housing loans further cost reduction program  Real estate finance  Corporate finance Strict Credit Costs Control Increase non-interest income  Further improve risk management  Investment consulting activities  Conservative reserves  Strengthen asset management products 1 Medium-Term Management Plan 2 Money Lending Business Control and Regulation Law 5

Financial Highlights Summary (JPY billion) 1Q Earnings FY2009 FY2010 Assets and Liabilities 2010.3 2011.3 2011.6 FY2011 [Consolidated] Total Assets 11,376 10,231 9,473 Revenue 285.5 292.1 57.4 Loans and Bills Discounted 5,163 4,291 4,214 Expenses 168.3 142.8 31.1 Securities 3,233 3,286 2,703 Ordinary Business Profit 117.1 149.2 26.2 Deposits and Negotiable (OBP) 6,475 5,610 5,777 Certificates of Deposit Net Credit Costs 112.2 68.3 2.1 Debentures 483 348 329 Non-performing Loans / Total OBP after Net Credit Costs 4.8 80.8 24.0 Claims (%) (non-consolidated 6.70% 6.78% 6.04% basis) Net Income -140.1 42.6 18.1 Coverage Ratio 1 (%) 97.6% 96.8% 96.6% Cash Basis Net Income 53.7 53.8 20.8 [Non-Consolidated] Capital 2010.3 2011.3 2011.6 OBP 20.9 54.6 0.5 Basic Items (Tier I) 490.7 516.7 533.2 Net Income -47.6 11.1 6.6 Risk Weighted Assets (“RWA”) 7,722 6,653 6,559 1Q FY2009 FY2010 Profitability Total Capital 645.4 649.9 651.7 FY2011 Total Capital Adequacy Ratio 8.35% 9.76% 9.93% 2.47% 2.19% 2.00% Net Interest Margin (NIM) Tier I Capital Ratio 6.35% 7.76% 8.12% 59.0% 48.9% 54.3% Expense-to-Revenue Ratio -27.6% 8.5% 13.2% ROE (annualized) Diluted Equity Per Share (yen) 232.72 205.83 212.70 -10.6% 10.7% 15.1% Cash Basis ROE (annualized) Liquidity 2010.3 2011.3 2011.6 -1.2% 0.4% 0.7% ROA (annualized) Liquidity Reserves 2 1,292 1,130 1,290 Cash Basis ROA (annualized) -0.5% 0.5% 0.9% 1 (Reserve for loan losses + collateral + guarantees) / Amount of claims (Non-consolidated basis) 2 Cash, unencumbered JGBs and other assets pledged to Bank of Japan 6

Financial Highlights Non-Recurring Items Summary (Consolidated, JPY billion) 1Q FY2009 FY2010 FY2011 Gains included in revenue 42.7 40.9 6.3 Gain from buy back of preferred securities and subordinated debt 20.9 29.4 - Gain from the sale of collateralized loan obligations (CLOs) 17.7 4.3 - Gain from corporate bonds and equities 4.0 - - Gain from the sales and revaluation of asset-backed securities and asset-backed investments - 7.0 - Gain from the sale of foreign equity (net of withholding tax) - - 6.3 Positive Items (1) 42.7 40.9 6.3 Mark-downs/impairments included in revenue -38.4 -6.8 -1.0 Domestic real estate principal investments -35.1 -1.1 - Asset-backed securities, asset-backed investments and European investments -3.3 -1.9 - Domestic real estate non-recourse finance (bonds) - -3.7 -1.0 Items included in net credit costs -42.0 -41.7 -0.2 Domestic real estate non-recourse finance -32.8 -19.5 -1.8 Asset-backed investments -15.6 3.7 - Specialty finance - -19.9 - Provisions related to the Great East Japan Earthquake - -6.1 - Credit recovery at Shinki 6.4 - - Others - - 1.6 Other gains/losses -106.7 -18.0 -0.8 Impairment of goodwill and intangible assets, net of tax (APLUS FINANCIAL) -66.0 - - Impairment of intangible assets, net of tax (Shinki) -2.5 - - Domestic real estate principal investments -1.9 - - Restructuring costs at subsidiaries -6.5 -4.4 - Losses on application of new accounting standard for asset retirement obligations - -3.5 - Grey zone related provisions -29.6 -10.1 -0.8 Deferred income tax (Shinsei Bank non-consolidated basis) -8.3 -1.5 -0.0 Negative Items (2) -195.5 -68.2 -2.1 (1) + (2) -152.8 -27.3 4.1 (*) Previously disclosed items and figures are not reclassified to the current format 7