Meeting the Challenge. Presentation to investors on fiscal year ended September 30, 2009

Transcription

1 Meeting the Challenge of New Banking Presentation to investors on fiscal year ended September 30, 2009

2 A Paradigm Shift in the Economic Society Tangible Capitalism Under the framework of a Monetary Economy, evaluate all value by first converting into currency. Spiral progression: Evolve into future and return to origins Intangible Capitalism Instead of relying on a single measure of value (currency), place import on intangible values and capital. A Paradigm Shift in the Economic Society Operationalism Knowledgism Monetary Economy Enjoyment of of benefits benefits Unlimited growth growth Capitalism in evolution Complexity Sympathy Initiative Initiative Participation Global Global environment A Paradigm Shift at SURUGA Differentiate via product development Maximize customer value with CRM Achieve high earnings and growth Continue to leverage products, knowledge, system infrastructure and high profitability RETAIL BANKING Revival alongside the birth of new values Strengthen customer relationships Enhance value exchange, customer value Answer long-tail financing needs Enhance customer loyalty. Make great strides considering social contributions. CREATE VALUE (Innovation challenge) SURUGA bank, Ltd. All rights reserved. 1

3 SURUGA s Business Design Delivers Unique Value Incorporate Market Characteristics to Deliver SURUGA s Unique Value Leverage know-how developed through SURUGA s retail-focused strategy Network Business Direct channels via call centers and the Internet Mortgage loan business in Tokyo, Osaka, Nagoya, Sapporo, Sendai, Fukuoka and other major cities Geographic Expansion Major Markets Community Bank Community Bank Traditional full banking services in Shizuoka and Kanagawa Japan Post Group s 24,000-strong branch network nationwide Distributor Model Effective/Efficient Use of Management Resources Core Businesses Personal loans/ credit card Insurance Mortgage loans Support for asset management Business with SMEs SURUGA s intangibles enable a comprehensive area strategy Values Our Philosophy Retail Culture Direct Banking Operations System Infrastructure Platform Customer Base Rooted in Community Overwhelming Speed and Flexibility 2009 SURUGA bank, Ltd. All rights reserved. 2

4 SURUGA Innovations to Create Value Achieve high earnings by maximizing Life Time Value Achieve high earnings with product superiority Strategy focused on retail Retail Banking From a Product Perspective Risk and earnings management Alliances with other industries Data base marketing CRM, Automated credit screening system Bankasurance (Bank Insurance Model) 515 customer sub-segments Business tie-up with Japan Post Bank Enhance loyalty Mass market Affluent Creating Value From a Customer Perspective Finance that creates or harmonizes with other elements. Cross-selling Up-selling Value exchange that exposes unmet needs Persona marketing Closely Tied to Customer Needs AUM 預金ローン Loans Insurance 決済 Develop matrix through segment- specific business models Supporting value creation is SURUGA s DNA Tangible Capitalism Intangible Capitalism 2009 SURUGA bank, Ltd. All rights reserved. 3

5 SURUGA s Mission in Financial Services Personal consumption expenditures (household end-use) just under 60% of Japan s s GDP CONSUMERS Support sales BUSINESSES Financing to draw out needs and consumption Support purchasing Personal Loans SURUGA スルガbank Repay Lend Repay Lend Repay General financial スルガinstitutions Lend Small lots dispersed across large customer base: Low risk, high return Create consumer demand Finance that creates demand for consumption Large-lot business. But fierce competition eats away profits. Continue to support supply with focus on SMEs Finance that supports corporations Support economic activity through finance for consumers by stimulating and creating healthy demand across a broad consumer base SURUGA bank, Ltd. All rights reserved. 4

6 Personal Consumption and Retail Loan Market Personal Consumption Supporting Japan s Economy (Trillion Yen) (%) GDP and Personal Consumption as a Percentage of GDP Personal consumption (right-hand scale %) GDP (left-hand scale trillion) (Year) Source: Based on data from the Cabinet Office Personal consumption accounts for just under 60% of Japan s GDP In addition to government support of domestic demand, financial services are essential to support personal consumption Retail Loan Market Size Mortgage loans trillion (70.11%) Retail loan total trillion (2007) Personal loans 75.9 trillion (29.89%) Total sales on credit trillion (62.95%) Personal loan total 75.9 trillion (2007) Total consumer loans 19.7 trillion (25.93%) Total collateralized loans including fixed-term and Japan Post deposits 8.4 trillion (11.11%) Source: Based on data from Japan Housing Finance Agency and the Japan Consumer Credit Association Total consumer finance 28.1 trillion (37.05%) Regulatory changes expand business opportunities Demand for flexible response to sound needs for funds SURUGA bank, Ltd. All rights reserved. 5

7 Environment for Mortgage and Small Loans and our Strategy Deploy SURUGA s unique business model to answer diversifying needs for retail finance and achieve both profitability and customer satisfaction. Environment for Mortgage Loans and SURUGA s Strategy Environment for Small Loans and SURUGA s Strategy Housing policy important as the Government seeks to expand domestic demand. Junior baby boomer generation approaching home-buying age Price adjustment phase has stimulated real estate transactions Lineup of more than 34 types of highly unique products Appropriate pricing by avoiding price competition Comprehensive credit screening model leveraging quantitative and qualitative info Environment Strategy Expectations for banks increase with revisions to Moneylending Law Reorganization of players driven by changes in operating environment Loan needs arising from changes in forms of employment and economic sentiment Extensive database. Superb mining skills. Credit-screening and credit-limit development system based on CRM Low-cost operational structure 2009 SURUGA bank, Ltd. All rights reserved. 6

8 Structural Differences in Consumer Finance ( Japan & US ) Household Assets in Japan and US (June 2009) Household Debt in Japan and US (as percentage of disposable income) Japan households sound relative to US Other (4.0%) 1,441 trillion $42.4 trillion Insurance and pension fund reserves (27.2%) Insurance and pension fund reserves (28.0%) Other (3.7%) Multiple SURUGA is focused on domestic consumers, who are not burdened by overconsumption Stocks and investments (7.1%) Mutual funds (3.5%) Cash and deposits (55.2%) Japan Fixed income securities (3.0%) Stocks and investments (31.3%) Mutual funds (12.4%) Fixed income securities (9.9%) Cash and deposits (14.8%) US Source: Based on data from Bank of Japan SURUGA bank End Sept 09 Average for regional banks End 地銀平均 Mar US Japan Source: Based on data from the Ministry of Economy, Trade and Industry Comparison of Consumer Loan Ratios SURUGA is focused on consumer loans. Little impact from economic fluctuations. スルガ consumer loan ratio (79.9%) (30.0%) Year 2009 SURUGA bank, Ltd. All rights reserved. 7

9 Mortgage Loan Markets in Japan and US Balance of Mortgage Loans as a Percentage of GDP (2007) US 104% Holland UK Germany 48% 86% 99% Exceeds rational limits Risk of falling real estate prices surfaces France Japan 20% 36% Source: Based on 09 World Retail Banking Report Unrestrained rise in housing prices Real Estate Prices in Japan and the US 192 (1991) Japan Publicly Assessed Values (Residential Land) (1985 = 100) (left-hand scale) 189 (2006 2Q) S&P Case Shiller National Home Price Index (2000 = 100) (right-hand scale) US still only halfway to price normalization Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q Real estate prices in Japan stabilized Source: Based on data from Japan s Ministry of Land, Infrastructure, Transport and Tourism and S&P SURUGA bank, Ltd. All rights reserved. 8

10 Changes in Social Structure Creating New Values Drastic Societal Change from Growth & Expansion to Saturation & Condensing Enormous business opportunities for SURUGA, which is deeply focused on the consumer Social structure of the future Maturity, condensing, surplus Social structure of the past Growth & expansion Population growth Economic growth and expansion Social vitality Smaller families Multigenerational households Peak oil Living longer Diversifying families Food and resources Single mothers Single fathers Compact cities Food self-sufficiency Water resources Airpollution Increased mortality among baby boomers. Longer middle age More adults enjoying youthful activities Environmental issues Changes in residence locations Lower birth rates Global warming Changing residences Living in luxury with one child SURUGA bank, Ltd. All rights reserved. 9

11 SURUGA s Strategic Direction Toward a Paradigm Shift Evolve Business Model Leading into a Paradigm Shift Complement nationwide Financial Eco System SURUGA of the past Create customer value by developing unique products and services + Focus on retail banking mainly in local markets in Shizuoka and Kanagawa SURUGA s proprietary business model in pursuit of All-out Uniqueness SURUGA of the future Maximize Life Time Value through strengthened customer relationships Deploy long-tail finance model across broader geographies and alliances Contribute to Financial Eco System by stimulating sound consumer demand SURUGA bank, Ltd. All rights reserved. 10

12 Positioning Insurance as New Business Pillar Uniqueness of SURUGA Mortgage loan customers Database from retail focus Customer base rooted in community Our Philosophy as value system Systems infrastructure platform Core competence ability to offer ideas Life planning services Create a life schedule customized to each of our customers Life Planning Services Share a life plan Share dreams and goals. Clarify challenges. Prepare against risks of life plan Clarify risks accompanying life plan. Design optimal assurance. Cultivate life plan Propose insurance and other products offering high degree of satisfaction Support achieving life plan Regularly review life plan Realizing dreams Life schedule Peace of mind Appropriate products Deposits Loans Insurance Trusts Credit cards Mutual funds Educational expenses Medical expenses Nursing care expenses Inheritance Indemnity insurance Retired life expenses Lump-sum amounts for surviving family Cost of living expenses for surviving family SURUGA bank, Ltd. All rights reserved. 11

13 Business Alliance with Japan Post Bank Results from May, /9 09/3 09/9 total Mortgage Loans 17.5billion 38.7billion 39.0billoin 95.3billon drop less than 100 million yen Personal Loans 5,100loans 6,900loans 5,600loans 17,600loans drop less than 100 loans 2009 SURUGA bank, Ltd. All rights reserved. 12

14 Interest Margins (Overall) 1.01% 0.45% 2, % SURUGA Net interest margin Average All Regional Banks 1.05% 0.44% 2, % 1.19% 0.42% 1.09% 0.39% 2, , % 3.64% 1.01% (09/3) 0.40% Average balance and yield of outstanding loans Average balance of outstanding loans 2,350.0 Yield on outstanding loans 3.33% 1.86% Loan-deposit margin (after deduction from expense ratio) SURUGA Average All Regional Banks 1.89% 1.92% 1.75% 0.73% 0.65% 0.65% 0.62% 1.66% (09/3) 0.63% 3.23% 1.93% 2, , % Loan-deposit margin (Yield on outstanding loans - Yield on deposits) SURUGA Average All Regional Banks 3.29% 1.85% 0.13% 3.36% 1.85% 2, , % 3.26% 1.82% 0.38% 3.09% (09/3) 1.82% Average balance and yield on deposits Average balance of deposits 2,930.0 Yield on deposits 0.24% 2009 SURUGA bank, Ltd. All rights reserved. 13

15 Yield / Margins (Domestic) ( after deduction from expense ratio) Yield Expense ratio Loan-deposit margin (after deduction from expense ratio) Yield on outstanding loans Expense ratio Yield on deposits 3.20% 3.25% 3.60% 3.65% 3.40% SURUGA Average All Regional Banks 1.83% 1.81% 1.92% 1.83% 1.75% (09/3) 0.77% 0.70% 0.71% 0.66% 0.67% 1.32% 1.35% 1.40% 1.48% 1.40% Loan-deposit margin (Yield on outstanding loans - Yield on deposits) SURUGA Average All Regional Banks 3.15% 3.17% 3.32% 3.31% 3.15% 0.04% 0.08% 0.27% 0.33% 0.24% 1.96% 1.88% 1.90% 1.85% (09/3) 1.84% 2009 SURUGA bank, Ltd. All rights reserved. 14

16 Gross Operating and Yen loan-deposit income Net interest income/gross Operating Income Yen loan-deposit income Net interest income Gross operating income Record income highs SURUGA bank, Ltd. All rights reserved. 15

17 Net Operating and Net Income Net operating income Net income Second half First half 41.6 Second half First half /3 07/3 08/3 09/3 10/3 06/3 07/3 08/3 09/3 10/ SURUGA bank, Ltd. All rights reserved. 16

18 Strong Focus on Retail 1, % Consumer loan balance and ratio Personal loans Mortgage loans Consumer loan ratio 1, , , , , % , % , % , , % New consumer loans second half New consumer loans first half New loan contracts /3 07/3 08/3 09/3 10/ SURUGA bank, Ltd. All rights reserved. 17

19 Focus on More Profitable Products Consumer loans Super home loan 809.5(3.4%) Mortgage loans Personal loans 253.8(7.3%) As As of of the the end end of of September,, Units Units :: billion billion yen yen (average rate) rate) 100%=253.8 billion yen (7.3%) Secured personal loans 178.9(4.6%) Personal loans Cash advance cards 71.8(13.9%) Unsecured loans on deed 3.0(5.3%) 853.4(3.2%) 100%=1,916.7 billion yen (3.8%) Unsecured loans on deed Cash advance cards Secured personal loans /9 07/9 08/9 09/ SURUGA bank, Ltd. All rights reserved. 18

20 Mortgage Loans Distribution of practical rates for mortgage loans (cumulative) Mortgage loan balance by geographical area under3% 3%level 4%level 5% or higher mortgage loans average placement rate(%) 0.4% 0.4% 0.4% 0.5% 0.5% Greater Tokyo area Shizuoka Kanagawa Other 20.0% 22.1% 25.5% 28.5% 3.93% 3.91% 27.9% 32.0% 36.2% 40.1% 43.1% 45.5% 3.65% 3.68% 3.53% 36.0% 35.4% 34.0% 33.6% 36.9% 29.0% 27.2% 25.6% 23.8% 21.2% 43.7% 42.1% 40.0% 37.4% 34.7% 36.4% 34.2% 31.9% 29.3% 25.9% 2.4% 2.2% 2.4% 3.8% 7.4% SURUGA bank, Ltd. All rights reserved. 19

21 Delinquency and Loss Rates on Consumer Loans Mortgage Loans Personal loans Yield Delinquency rate Loss rate Yield Delinquency rate Loss rate 7.89% 7.87% 7.73% 7.80% 7.32% 3.11% 3.19% 3.61% 3.62% 3.34% 0.41% 0.37% 0.20% 0.26% 0.23% 0.25% 0.19% 0.24% 0.45% 0.43% 0.88% 0.59% 0.65% 0.45% 0.57% 0.32% 0.44% 0.33% 0.65% 0.36% Delinquency rate = amount 3 months or more overdue / average amount of loan Loss rate = default ratio (1 - recovery rate) SURUGA bank, Ltd. All rights reserved. 20

22 Fees Income Mutual funds Insurance Other(JGBs in custody & Foreign currency deposits) Ratio of investment products % 75.2 Balance breakdown of investment products Balance of investment products Balance of personal assets under management (Including personal deposits) % % 14.3% % Commission from mutual funds and insurance products Mutual fund sales commissions (million yen) Mutual fund fees Personal pension plans Other Insurance (Fire insurance & Single premium life insurance & protection insurance) 1,356 1, , , SURUGA bank, Ltd. All rights reserved. 21

23 Expenses and OHR 41.1 Gross operating income Personnel expenses Expenses for equipment and consumables Taxes OHR % % 48.7% % % OHR = Noninterest expense Gross operating income SURUGA bank, Ltd. All rights reserved. 22

24 Breakdown of Problem Assets based on the Financial Rehabilitation Law Debtor classification Sep. 09 Credit balance Proportion Consumer / Corporate Proportion Total collateral and guarantees Collateral Guarantees NOTE Coverage ratio Reserve Reserved ratio Total coverage ratio Claims against bankrupt and substantially bankrupt obligors % Consumer Corporate % 0.89% % 85.45% % 100% 100% 100% Claims with collection risk % Consumer Corporate % 3.75% % 85.61% % 79.82% 86.77% 97.09% Claims for special attention % Consumer Corporate % 2.91% % 47.42% % 15.04% 87.23% 55.33% Sub-total % Consumer Corporate % 7.56% % 70.86% % 35.92% 94.35% 81.33% Normal assets Total 2, , % 100% Consumer Corporate Consumer Corporate 1, , % 92.43% 100% 100% Coverage ratio Reserved ratio Total coverage ratio Total coverage ratio : Covered by collateral and guarantees : Reserved for unsecured portion 86.57% : Covered by collateral, guarantees and reserves NOTE: The guarantee is not provided by us. We do not extend the guarantee by paying fee to external entity, but the third party, who serves as the joint guarantor to the borrower, extends the guarantee SURUGA bank, Ltd. All rights reserved. 23

25 Bad - loan ratio/credit costs status Ratio of disclosed assets Bad - loan Ratio Ratio of disclosed assets after deduction from reserves Ratio of disclosed assets after deduction from reserves, collateral and guarantees Credit costs status Core net operating income Actual credit costs(credit costs-collection of claims written off) Actual credit costs ratio (Actual credit costs / loan average balance annual basis) 5.44% 4.57% 3.62% 4.10% 3.37% 3.41% 2.58% 2.62% 2.42% 2.13% 1.01% 0.67% 0.52% 0.49% 0.34% % 0.46% % 0.24% % SURUGA bank, Ltd. All rights reserved. 24

26 Bond Portfolio Regional government bonds Corporate bond Foreign bonds JGBs Average remaining maturity (Year) JGBs Composition JGBs Composition JGBs Composition JGBs Composition JGBs Composition Short 51.3% Short 56.8% Short 57.1% Short 55.6% Short 44.4% Variable 46.1% Variable 40.8% Variable 40.7% Variable 41.9% Variable 49.8% Mid-Long 2.4% Mid-Long 2.3% Mid-Long 2.1% Mid-Long 2.3% Mid-Long 5.6% 2009 SURUGA bank, Ltd. All rights reserved. 25

27 Status of Risk Amount Tier Ⅰ Integrated Risk Management Outlier Ratio Buffer (Unallocated Capital) Confidence level 99% (common) 2. Holding period (business days) Credit risk 240 days Deposits and loans, bonds, etc. Interest & price fluctuation risk 60 days (Trading assets is 10 days) Price fluctuation risk for equities 120 days 3. Operational risk Basic methods As of the end of September, 2009 Interest Rate Shock range ±200bps Credit Risk Interest Rate Risk Amount 4.1 billion yen 39.5 Market Risk Operational Risk Outlier Ratio 2.0% As of the end of March, 2009 Sources for Allocation First Half, 2009 Allocated Capital As of the end of September, 2009 Risk Amount 2009 SURUGA bank, Ltd. All rights reserved. 26

28 Capital Levels Tier I Capital & Deferred Tax Assets Capital adequacy ratio Deferred tax assets / Tier I ratio Deferred tax assets Tier Ⅰ International standard capital adequacy ratio (consolidated) Domestic standard capital adequacy ratio (non-consolidated) Domestic Tier I ratio (non-consolidated) 11.07% 10.32% 9.70% % 11.60% 11.61% 11.61% 10.99% 10.37% % 10.55% % 11.36% 10.70% 10.78% Domestic capital amount (non-consolidated) 18.1% 11.3% 9.8% 12.8% 11.3% SURUGA bank, Ltd. All rights reserved. 27

29 2009 First half Results and FY 2009 Forecast Sep 2009 Forecasted (A) Results Sep 2009 (B) Increase or Decrease (B-A) FY 2009 Forecast Net operating income Ordinary profit Net income Actual credit cost Dividends(Yen Yen) SURUGA bank, Ltd. All rights reserved. 28

30 Social Responsibility as SURUGA Sees It CSR of of the Future SURUGA s s philosophy is to help our customers make their dreams come true e on a timeline that works for them. By providing value to our customers we meet t our stakeholders expectations and fulfill social responsibilities. Toward a CSR that creates value Value-based communication Environment Education Welfare Green Mortgage d-labo (dream laboratory) I DREAM (Supporting soccer dreams) Carbon-offset housing loans Eco-finance project Green branches Collaboration with the Ministry of the Environment and WWF Japan Dream, Life Style and Environment seminars Special sponsor of the Emperor s Cup. Sponsor of the SURUGA CUP Shizuoka Soccer Museum CSR start line Communities creating value Fuji-Hakone-Izu National Park Cleaning up Mount Fuji. Donations to the Fujisan Network. Support of culture such as art and literature museums Functional communication Bare Minimum of Needs from society Reduce negative risks Explicit contributions to to sustainable growth Coexistence Fairness Balance 2009 SURUGA bank, Ltd. All rights reserved. 29

31 Growth Within Our Corporate Philosophy Growth as as a Value Exchange System Define growth as greater exchange of value with all stakeholders. Shareholders Effective system for managing capital Growth as as a Company with a mission Define growth as making our mission more achievable. As a Life & Business Concierge, help make our customers dreams come true on a timeline that works for them. Employees Direct participation system for playing a role in society and realizing oneself SURUGA Group Other Stakeholders Customers Support system for achieving happiness SURUGA Group Growth Mission Management C P S Management C P S Culture-oriented Supporting culture nationally and regionally People-based Focusing on human capital Social-perspective Aiming to enhance social contributions Respect culture. Leverage the strengths of that culture to realize growth for SURUGA. Achieve growth through management centered not on corporate theory but on the logic of its people. Always mindful of its role as a social institution. Achieves ends by means above the social code SURUGA bank, Ltd. All rights reserved. 30

32 For further details regarding the above, please contact IR & PR Office, Suruga Bank Ltd. Tel: mail: The foregoing material contains statements regarding future business performance. These statements are not intended as guarantees of any specific future performance, which is subject to a variety of risks and uncertainties. Actual future business results may differ from the targets contained in the present material, due to changes in the external l business environment.