Aozora Bank FY2018 Interim Results Analyst Meeting ~ Leveraging Core Competencies ~ November 16, 2018

Transcription

1 Aozora Bank FY Interim Results Analyst Meeting ~ Leveraging Core Competencies ~ November 16,

2 Today s Agenda Mid-Year Progress Report FY Interim Results Q&A Session (Note) Unless otherwise stated, all amounts stated in 1 billion yen have been rounded down to the nearest 0.1 billion yen. 1

3 Mid-Year Progress Report FY Interim Results Q&A Session 2

4 Market/Business Environment (%) Domestic Interest Rates NIKKEI 225 (yen) Jan. 2016: Announcement of negative interest rate policy 3-month TIBOR 10-year yield on JGBs (%) U.S. Interest Rates 10-year yield on U.S. government bonds 3-month US$ LIBOR Business Environment Low interest rate environment over an extended period in Japan Global markets adjusting to the movement away from central bank accommodative monetary policies while facing new uncertainties arising from the potential for increasing trade disputes Rising U.S. interest rates in response to the Fed s policy rate changes Source: Bloomberg 3

5 FY Interim Results Overview Execution of business strategy in line with the Mid-term Plan under challenging business conditions in domestic and overseas markets New internet banking operations through our consolidated subsidiary GMO Aozora Net Bank Profit attributable to owners of parent representing progress of 50% towards the FY earnings forecast Breakdown of Net Revenue Changes KPI Results Increase Decrease Mid-term Plan (FY-2020) FY interim results Net interest margin (NIM) Non-interest income ratio Overhead ratio (OHR) 1.20% 1.36% * 45-55% 39.6% 50% 52.7% ROE 9% 9.7% * ROA 0.8% 0.9%* * Annualized basis 4

6 FY Mid-Year Progress (1) Retail Business Promotion of customer-first business practices Provision of specialized consulting services Aozora was ranked as the no.1 provider of branch counter services in the Annual Nikkei Veritas Retail Banking Survey which included 116 Japanese banks Expanded business hours at branches and call center Branch consultation will be available until 8 p.m. on weekdays beginning Feb AUM balance for retail-related investment products Financial Institution Business Provided solutions leveraging Aozora s regional financial institution network Derivative-embedded products, loan assignments, syndicated loans, and private placement investment trusts Enhanced partnership between Aozora s M&A advisory company ABN Advisors (established in May 2017) and regional financial institutions with the aim of providing solutions to the business succession needs of SMEs Regional financial institutions investment in business succession fund established by Aozora M&A partnership agreements between ABN Advisors and regional financial institutions (Number of FI s) Other Shinkin bank Regional banks and second-tier regional banks

7 FY Mid-Year Progress (2) Corporate / Specialty Finance Business Provision of high value-added solutions to customers Joint establishment of industry-specific fund to vitalize the food and liquor industry with the SKY Group Investment in a fund organized by Mercuria Investment for a Chinese fintech company International Business / Financial Markets Business Selective origination of overseas loans with attractive risk-return profiles, mainly in North America Ratio of overseas loans as of September 30, : 39.5% Strengthened sourcing ability in Europe while maintaining a focus on North America Aozora group companies providing private equity investment services Overseas loans AZ-Star: Support business development in Asia Shareholder composition Aozora Bank 40% Tokyo Star Bank 40% Kanematsu 10% ES Networks 10% Fund name AZ-Star Ichi-go Investment L.P. AZ-Star Ni-go Investment L.P. AZ-Star San-go Investment L.P. AJ Capital: Support SMEs business succession Shareholder composition Aozora Bank Japan Asia Investment Fund name Venture Secondary Fund 50% 50% Business succession fund "Succession Investment L.P., I" Aozora Corporate Investment: Support equity financing Shareholder composition Aozora Bank Fund name 100% Food & Liquor Investment L.P. 0 6

8 FY Mid-Year Progress (3) Building for the Future July 17, : Aozora launched new internet banking operations through GMO Aozora Net Bank (the Net Bank ) Oct. 1, : The Net Bank formed a partnership with a tax-deductible donation website operator who will use Net Bank s virtual account services Oct. 16, : The Net Bank offered Japan s first virtual account targeting freelancers which featured account servicing and same day payment services All for our customers 50.0% in future 50.0% in future Strive to be the No.1 Tech Bank Main products (examples) Virtual accounts Transfer Receipt Account to reduce the burden of billing and payment reconciliation for corporate customers Multi-purpose Account service to manage cash for retail customers Foreign currency deposits GMO Click Securities price competitiveness Securities connect accounts GMO Click Securities customer base, seamless trading Net Bank s strengths Expertise in system development Significant online customer base (retail and corporate) Delivery of new financial services by utilizing advanced technology solutions Net Bank s differentiated features Cost competitiveness Accelerated deployment of new products/services Innovative products/services 7

9 FY Mid-Year Progress (4) Highlights Replacement of own ATMs with Japan Post Bank ATMs More efficient operations through flexible redeployment of resources Aozora has begun the phase-out of its 20 ATMs with Japan Post Bank ATMs (through the existing alliance, Aozora s customers have access to Japan Post Bank s 28,000 ATMs) ESG / Work style reforms MSCI Japan Empowering Woman Index (WIN) Aozora was added to this index which GPIF (Japan s Government Pension Investment Fund) employs in its passive management of ESG (Environmental, Social, Governance) investments to evaluate the Social aspect Aozora Telework Days Approximately 10% of Aozora s workforce participated in our Work form Home and Mobile Work program Student Loan Repayment Assistance Program for New Employees New benefit program created to support younger employees, including recent graduates, and provide a comfortable and diverse workplace for all employees Copyright Aozora Bank, Ltd All Rights Reserved. 8

10 Shareholder Composition Shareholder Composition (as of September 30, ) Domestic financial institutions 28% Corporate, etc. 5% 34% Individuals 33% Overseas investors Retail investor presentations: FY2016: 24 sessions held nationwide FY2017: 24 sessions held nationwide FY: At least 20 sessions in more cities nationwide (plan) Number of Individual Shareholders (thousand people) Dividend per common share* Full-year forecast (yen) Interim 80 Dividend payout ratio: 40% Dividend payout ratio: 50% 0 * Figures are presented as if the October 1, 2017 share consolidation (every ten common shares into one common share) was effective from FY2011 9

11 [Reference] Key Performance Indicators (KPI s) ROA * ROE * 1.0% Aozora 0.9% 10.0% Aozora 9.7% 0.5% Major domestic banks 0.3% 5.0% Major domestic banks 6.0% 0.0% FY2015 FY2016 FY2017 FY 1H 0.0% FY2015 FY2016 FY2017 FY 1H NIM * 1.40% Aozora 1.36% OHR 60.0% Major domestic banks Aozora 67% 53% Major domestic banks 1.00% 0.97% 40.0% 0.60% 0.0% FY2015 FY2016 FY2017 FY 1H 20.0% FY2015 FY2016 FY2017 FY 1H Source: Consolidated results on the websites of major domestic banks Note: Major domestic banks are MUFG, Mizuho, SMBC, Resona, SMTB and Shinsei * Annualized basis 10

12 [Reference] Virtual Account Services Virtual Account for Corporate Customers Transfer Receipt Account Retail Banking Virtual Account Multi-purpose Account Features: 1. Reduction of operating time and costs such as billing and payment reconciliation 2. Enhancement of receivables collection management 3. Quicker dispatch and delivery of products Features: 1. Up to 10 sub-accounts within an ordinary deposit account 2. Transfer from and to yen time deposits and foreign currency ordinary accounts 3. Transfer to the Securities Connect Account 4. Automatic transfer of specified money on a designated day 11

13 Mid-Year Progress Report FY Interim Results Q&A Session 12

14 I. Financial highlights Earnings results Profit attributable to owners of parent was 21.3 billion yen, representing progress of 50% towards the full-year forecast Consolidated net revenue was 44.8 billion yen and business profit was 21.2 billion yen, representing progress of 49% and 53%, respectively, towards the full-year forecasts Net interest income was 27.0 billion yen, an increase of 2.1 billion yen year on year. The net interest margin also expanded, by 2 bps. Non-interest income was 17.7 billion yen, a decrease of 1.3 billion yen Financial condition Financial Reconstruction Law (FRL) ratio (non-consolidated basis) remained low at 0.33% The ratio of loan loss reserves to total loans was 1.53% The capital adequacy ratio (domestic standard) was 10.14% (preliminary basis) Quarterly dividends FY second quarter dividend payment: 40 yen per common share 13

15 II. PL: Summary Profit attributable to owners of parent was 21.3 billion yen, representing progress of 50% of the 43.0 billion yen full-year forecast Consolidated net revenue was 44.8 billion yen, an increase of 0.7 billion yen, or 1.8% year on year, and business profit was 21.2 billion yen, a decrease of 0.1 billion yen, or 0.5%, representing progress of 49% and 53%, respectively, towards the full-year forecasts Profit attributable to owners of parent decreased by 1.8 billion yen, or 7.8% compared to the previous year. This was mainly due to an increased tax burden and the previous year s reversal of specific loan loss reserves resulting from the collection of large-lot non-performing claims 3 months Jul.-Sep. FY2017 Interim A FY Change B-A FY 3 months Interim full-year Amount % Jul.-Sep. B forecast Progress Net revenue % % General & administrative expenses % % Business profit % % Credit-related expenses Gains/losses on stock transactions Other gains/losses Ordinary profit % % Extraordinary profit Profit before income taxes % - - Taxes Effective tax rate 24.5% 30.4% +5.9% Gains/losses attributable to non-controlling interests Profit attributable to owners of parent % % 14

16 II. PL: Net revenue Net revenue was 44.8 billion yen, an increase of 0.7 billion yen, or 1.8% year on year Net interest income was 27.0 billion yen, an increase of 2.1 billion yen, or 8.5% Non-interest income was 17.7 billion yen, a decrease of 1.3 billion yen, or 6.9% FY2017 FY Change B-A 3 months Jul. - Sep. Interim A 3 months Jul. - Sep. Interim B Amount % Net revenue % Net interest income % Non-interest income % Net fees & commissions % Net trading revenues % Gains/losses on bond transactions % Net other ordinary income excl. gains/losses on bond transactions % 15

17 II. PL: Net revenue Net interest income Net interest income was 27.0 billion yen, an increase of 2.1 billion yen, or 8.5% year on year Net interest margin increased by 2 bps from the prior year to 1.36%. Average asset balances also increased The Bank maintained its focus on risk and return. The yield on loans increased 31 bps compared to the previous year, reflecting an increase in U.S. dollar interest rates. The yield on securities also increased, mainly due to an increase in dividends on ETFs Funding costs increased by 31 bps over the prior year. Foreign currency funding costs increased due to an increase in U.S. dollar interest rates 3 months Jul. - Sep. A FY2017 FY Change Interim B 3 months Jul. - Sep. C Interim D Net interest income Interest income Interest on loans and discounts Interest and dividends on securities Other interest income Interest on swaps Interest expenses Interest on deposits and NCDs Interest on debentures and bonds Interest on borrowings and rediscount Other interest expenses Interest on swaps Decreases in expenses are shown as positive Net interest margin Yield on total investments (A) 2.00% 2.04% 2.34% 2.37% +0.34% +0.33% Yield on loans 1.84% 1.81% 2.17% 2.12% +0.33% +0.31% Yield on securities 2.65% 2.87% 3.05% 3.29% +0.40% +0.42% Yield on funding (B) 0.73% 0.70% 1.05% 1.01% +0.32% +0.31% Net interest margin (A)-(B) 1.27% 1.34% 1.29% 1.36% +0.02% +0.02% C - A D - B <Net interest margin> 16

18 II. PL: Net revenue Net fees and commissions Net trading revenues Net fees and commissions were 4.6 billion yen, a decrease of 1.1 billion yen, or 19.1% year on year Loan related fees and commissions for the second quarter (July-Sep.) increased significantly from the first quarter (Apr.-Jun.), mainly driven by increased financing activity Net trading revenues were 5.4 billion yen, a decrease of 2.2 billion yen, or 29.2% Earnings from the sale of derivative-related products to our financial institution customers decreased as domestic interest rates remained low with limited volatility <Earnings from Financial Product Sales to Retail Customers> 3 months Jul. - Sep. A FY2017 FY Change Interim B 3 months Jul. - Sep. C Interim D Net fees and commissions Fees and commissions received Loan business-related and deposits Securities-related and agency Other Fees and commissions payments C - A D - B Net trading revenues Earnings from Financial Product Sales to Retail Customers (included in the two items above) Earnings from the sale of investment trusts, insurance and structured bonds

19 II. PL: Net revenue Net other ordinary income Gains/losses on bond transactions were a gain of 2.1 billion yen, compared with a gain of 1.5 billion yen in the first half of FY2017 Net other ordinary income, excluding gains/losses on bond transactions, was 5.5 billion yen, an increase of 1.4 billion yen, or 34.1% year on year Gains from limited partnerships were 4.9 billion yen, an increase of 0.8 billion yen, or 20.6%. Gains associated with buyout related limited partnerships were strong due to the public listing of investments 3 months Jul. - Sep. A FY2017 FY Change Interim B 3 months Jul. - Sep. C Gains/losses on bond transactions Japanese government bonds (JGBs) Foreign government bonds & mortgage-backed securities Others Interim D C - A D - B Net other ordinary income excl. gains/losses on bond transactions Incl. Gains from limited partnerships Real estate-related Distressed loan-related Others (Buyout, etc.)

20 II. PL: G&A expenses G&A expenses were 23.6 billion yen, an increase of 0.9 billion yen, or 4.0%, year on year This result was mainly due to incremental expenses associated with the Bank s business areas of focus and new internet banking operations G&A expenses were represented progress of only 45.4% of the full-year budget of 52.0 billion yen as the Bank continued its focus on cost control The Overhead Ratio (OHR) was 52.7% G&A expenses breakdown <G&A expenses transition> 3 months Jul. - Sep. A FY2017 FY Change Interim B 3 months Jul. - Sep. C Interim D C-A D-B G&A expenses (A) Personnel Non-Personnel Tax Net revenue (B) OHR (A)/(B) 51.6% 52.7% 19

21 II. PL: Credit-related expenses Credit-related expenses were a net reversal of 3.0 billion yen This result was mainly due to the reversal of general loan loss reserves due to an overall improvement in credit conditions and the risk profile of our borrowers, while new non-performing loans were limited The previous year saw a reversal of specific loan loss reserves resulting from the collection of large-lot non-performing claims The Financial Reconstruction Law (FRL) ratio was 0.33%, compared with 0.26% as of March 31, The ratio of loan loss reserves to total loans remained high at 1.53% Credit-related expenses 3 months Jul. - Sep. A FY2017 FY Change Interim B 3 months Jul. - Sep. C Interim D Credit-related expenses Write-off of loans Reserves for loan losses Specific reserve for loan losses C - A D - B < FRL claims (Non-consolidated)> 15 Bankrupt Special attention 0.50% % Doubtful FRL ratio * 0.33% General reserve for loan losses Gains/losses on disposition of loans Recoveries of written-off claims Reserve for credit losses on off-balance-sheet instruments End - Mar. End - Jun. End - Sep. Reserves for loan losses (A) Total loans (B) (A) / (B) Ratio of loan loss reserves to total loans 2, , , % 1.62% 1.53% Coverage Reserves Collateral & guarantees Coverage ratio 100.0% 83.6% 89.5% *Ratio of FRL claims to total claims End-Mar. 17 End-Mar. 18 End-Sep

22 III. Balance Sheet: Summary Total assets were 4,996.0 billion yen, an increase of 83.2 billion yen from March 31, Total net assets were billion yen, an increase of 0.3 billion yen, or 0.1%, from March 31, Change B - A Loans and bills discounted 2, , , Domestic loans 1, , , Overseas loans * , Securities 1, , , Incl. JGBs Incl. Foreign government bonds Cash and due from banks Trading assets End - Mar. A End - Jun. End - Sep. B Others Total assets 4, , , Deposits / Negotiable certificates of deposit Change B - A 2, , , Debentures,Bonds Borrowed money Payables under securities lending transactions Trading liabilities Others Total liabilities 4, , , Capital stock Capital surplus Retained earnings Treasury Stock Valuation difference on available-for-sale securities End - Mar. A End - Jun. End - Sep. B Others Total net assets Total liabilities and net assets 4, , , * Overseas loans refer to those with no final risk residing in Japan 21

23 III. Balance Sheet: Funding The Bank flexibly managed its funding position in light of its asset requirements. Total core funding was 3,383.6 billion yen, an increase of billion yen, or 4.8%, from March 31, The percentage of retail funding to total core funding was 53% Funding sources Total core funding End-Mar. A End-Jun. End-Sep. B Change B-A 3, , , <Funding by customer segment> Financial Institutions Corporate and Public Institutions Retail <Funding sources by product> Deposits/ NCDs End-Mar. A End-Jun. End-Sep. B Change B-A 2, , , ,000 3, , , Debentures/ Bonds Liquidity reserves , Liquidity reserves End-Mar. End-Jun. End-Sep ,000 1, , ,802.7 Retail funding ratio * Stable funding ratio * 56% 54% 53% 71% 69% 69% End-Mar. 18 End-Jun. 18 End-Sep. 18 Loan-to-deposit ratio incl. NCDs 88% 85% 86% * Aozora Bank index; defined as follows Retail funding ratio = Retail deposits/ Total core funding Stable funding ratio = (Retail deposits + Corporate long-term derivative-embedded deposits and borrowings) / (Total core funding + Corporate long-term derivative-embedded borrowings) 22

24 III. Balance Sheet: Loans Balance by industry Loans were 2,654.4 billion yen, an increase of 43.1 billion yen from March 31, Domestic loans decreased by 31.9 billion yen. Overseas loans increased by 75.1 billion yen End - Mar. A End - Jun. End - Sep. B Change Total loans (A) 2, , , B-A <Loan portfolio by industry> Domestic loans 1, , , Overseas loans * (B) , * With no final risk residing in Japan (B) / (A) 37.3% 37.5% 39.5% - Loans by domestic offices (excluding Japan offshore market accounts) 2, , , Manufacturing Information and communications Transport, postal services Wholesale and retail sale Financial and insurance Real estate Incl. Non-recourse loans Leasing Other services Others Incl. Overseas (Headquarters booked) Loans by overseas offices incl. Japan offshore market accounts Total 2, , ,

25 III. Balance Sheet: Loans Overseas Overseas loans* were 1,048.2 billion yen, an increase of 75.1 billion yen from March 31,. The percentage of overseas loans to total loans was 39.5% The Bank continued its selective origination of corporate loans and real estate non-recourse loans, mainly in North America where risk-return profiles remain relatively attractive Overseas loans on a U.S. dollar basis increased by $72 million. In the second quarter, overseas loans increased, as compared to a decline in the first quarter due to the prepayment of several larger loans <By industry> End - Mar. A Change B - A Total loans (A) 2, , , Overseas loans * (B) , (B) / (A) 37.3% 37.5% 39.5% - U.S. dollar basis ($ million) 9,157 8,929 9, * With no final risk residing in Japan End - Jun. <By region> End - Sep. B U.S. real estate non-recourse loans <U.S. real estate NRL by area> City % New York 40% Washington, D.C. Chicago Miami Los Angeles San Francisco Atlanta San Jose Boston Cupertino 39% Others 21% 24

26 III. Balance Sheet: Loans Domestic real estate 98% of the non-recourse real estate loans remained at an LTV of 70% or below Tokyo-metro focused. Most non-recourse loans were office or residential Change B-A Total loans 2, , , Real estate sector Non-recourse loans End - Mar. A End - Jun. End - Sep. B Cumulative % of portfolio 70% or below 80% or below LTV Status 98.1% 99.4% Non-recourse loan breakdown <By area> <By sector> 25

27 III. Balance Sheet: Securities Securities were 1,281.6 billion yen, an increase of billion yen, or 12.4%, compared to March 31, The higher level was mainly the result of incremental ETF and foreign government bond investments as well as effects of a weaker yen Total unrealized gains were 61.3 billion yen, compared with 58.4 billion yen as of March 31, Total unrealized gains, including unrealized gains/losses on hedging instruments, were 10.5 billion yen Book value Unrealized gains / losses End - Mar. End - Jun. End - Sep. Change End - Mar. End - Jun. End - Sep. Change A B B - A C D D - C JGBs Municipal bonds / Corporate bonds Equities Foreign bonds Foreign government bonds MBS Others Others ETFs Domestic equities Foreign currency ETFs Investments in limited partnerships REIT Investment trusts Others Total 1, , , Unrealized gains, incl. gains/losses on hedging instruments

28 V. Reference: Capital adequacy ratio (preliminary basis) The capital adequacy ratio (domestic standard) was 10.14% (preliminary basis) The CET1 ratio (Common Equity Tier 1 Ratio) was approximately 8.8% Domestic standard End-Mar. End-Jun. End-Sep. Change A B B - A Capital adequacy ratio 10.39% 10.22% 10.14% -0.25% Regulatory capital (A-B) Instruments and reserve (A) Shareholders' equity Others Regulatory adjustment (B) Risk-weighted assets 4, , , Credit risk assets 3, , , Market risk assets Operational risk assets

29 IV. Dividends FY second quarter dividend: 40 yen per common share The Bank intends to continue quarterly dividend payments Dividend per common share 1st quarter 2nd quarter 3rd quarter Year-end Full-year Current forecast (FY) Dividend payment (FY) Payments in previous term *1 (FY2017) 40 yen 40 yen yen *2 40 yen 40 yen 50 yen 54yen 184 yen * 1 The Bank consolidated every ten common shares into one common share on October 1, Figures in Dividend per common share are presented as if the share consolidation was effective at the beginning of FY2016 * 2 The full-year dividend forecast for FY is based on the total dividend amount, which is 50% of the profit attributable to owners of parent estimated at 43.0 billion yen for the full year, divided by the total number of outstanding common shares (excluding treasury stock) as of March 31, <Dividend transition *1 *2 > 28

30 V. Reference: Results by Business Group FY Interim Results FY2017 Interim Results Retail Banking Group Institutional Banking Group Allied Banking Group Specialty Finance Group International Finance Group Financial Markets Group Company Total Net revenue G&A expenses Business profit FY Interim Results Retail Banking Group Institutional Banking Group Allied Banking Group Specialty Finance Group International Finance Group Financial Markets Group Company Total Net revenue G&A expenses Business profit

31 V. Reference: Consolidated, Non-consolidated Difference Difference between consolidated and non-consolidated earnings Non-consolidated profit attributable to owners of parent 21.9 Subsidiaries Company name Shareholding, etc. Net Earnings GMO Aozora Net Bank, Ltd. 50.0% * -1.4 Aozora Securities Co., Ltd % 0.5 Aozora Loan Services Co., Ltd. 67.6% -0.0 Aozora Regional Consulting Co., Ltd % 0.0 Aozora Investment Management Co., Ltd % -0.0 Aozora Real Estate Investment Advisors Co., Ltd % -0.0 ABN Advisors Co., Ltd % -0.0 Aozora Corporate Investment Co., Ltd % -0.0 Aozora Asia Pacific Finance Limited (AAPF) 100.0% 0.2 Aozora Europe Limited 100.0% 0.1 AZB Funding 100.0% -0.2 Aozora Investment, Inc. etc % -0.0 Total -0.9 Consolidation adjustments 0.3 Profit attributable to owners of parent 21.3 Difference -0.5 Reference: Loss attributable to non-controlling interests -0.7 * Voting rights ratio is 85.1% 30

32 V. Reference: Mid-term KPIs Net interest margin Non-interest income ratio Overhead ratio (OHR) FY2016 Results FY2017 Results FY Interim Results Mid-term targets (FY-2020) 1.28% 1.30% 1.36% * 1.20% 46% 44% 39.6% 45-55% 52.8% 53.6% 52.7% 50% ROE 10.6% 10.0% 9.7% * 9.0% ROA 1.0% 0.9% 0.9% * 0.8% * Annualized basis 31

33 V. Reference: Performance Indicator Comparison Return on assets (ROA) Overhead ratio (OHR) * FY2017 FY FY2017 FY2017 Full-Year FY Interim FY2017 Full-Year Full-Year Interim Full-Year Aozora NPL ratio (FRL ratio, non-consolidated) Major domestic bank average *Annualized basis 0% Aozora Loan loss reserve ratio (Loan loss reserves/total loans) Major domestic bank average Mar. 31, Sep. 30, Mar. 31, Mar. 31, Sep. 30, Mar. 31, Aozora Major domestic bank average Source: Domestic bank websites Major domestic banks are MUFG, Mizuho, SMBC, Resona, SMTB and Shinsei Aozora Major domestic bank average 32

34 Appendix 33

35 Aozora at a Glance Franchise History Headquarters: Kojimachi, Chiyoda-ku, Tokyo 1957: Established as The Nippon Fudosan Bank, Limited Total Assets: Credit Ratings: Office Network: JPY 4,996.0 billion yen A- / A- / A (S&P / R&I / JCR) - Domestic: 21 offices nationwide - Overseas: New York, London, Shanghai, Singapore, Hong Kong Major Subsidiaries: GMO Aozora Net Bank, Ltd. Aozora Loan Services Co., Ltd. Aozora Securities Co., Ltd. Aozora Regional Consulting Co., Ltd. Aozora Investment Management Co., Ltd. Aozora Real Estate Investment Advisors Co., Ltd. ABN Advisors Co., Ltd. Aozora Corporate Investment Co., Ltd. Aozora Europe Limited Aozora Asia Pacific Finance Limited 1977: Changed name to The Nippon Credit Bank, Ltd. 1998: Temporarily nationalized 2000: Re-privatized 2001: Changed name to Aozora Bank, Ltd. 2006: Listed on the First Section of the Tokyo Stock Exchange 2012: Announced the Comprehensive Recapitalization Plan 2015: Early and full repayment of public funds 2017: Moved headquarters to Chiyoda-ku, Kojimachi Full-time Employees: 2,153 (consolidated basis, as of September 30, ) 34

36 Corporate Governance / Management Oversight 4 of the 8 board members are outside directors; 2 of 3 members of the Audit and Supervisory Board are outside members Audit and Supervisory Board Shareholders Board of Directors Management Committee Supplementary supervision Oversight function Audit and Compliance Committee Nomination and Remuneration Committee Board of Directors Director and Chairman Makoto Fukuda Former Deputy Chairman and Senior Managing Director of the Regional Banks Association of Japan Representative Director, President and CEO Shinsuke Baba Appointed Representative Director and Deputy President in 2009 and Representative Director, President and CEO in 2012 Representative Director and Deputy President Kei Tanikawa Appointed Senior Managing Executive Officer, Head of Business Banking Group, Head of Corporate Banking Group in 2017 and Representative Director and Deputy President in Director, Senior Managing Executive Officer, and CFO Yukio Sekizawa Appointed MEO, Head of Compliance & Governance, Head of Operations Group in 2016 and Director, Senior Managing Executive Officer and CFO in 2017 Director* Former Director, Deputy Chairman and CEO, Orix Corporation Director* Shunsuke Takeda Hiroyuki Mizuta Former President and Representative Director, Resona Bank, Ltd. Director* Former President, Nisshin Seifun Group Director* Professor, Hitotsubashi University * Outside Directors Ippei Murakami Tomonori Ito 35

37 Management Team Makoto Fukuda Shinsuke Baba Kei Tanikawa Yukio Sekizawa Director and Chairman Representative Director, President and CEO Representative Director, Deputy President Director, Senior Managing Executive Officer, and CFO Hideaki Kuraishi Koji Yamakoshi MEO, Head of International Finance Group MEO, Head of Business Banking Group, and Head of Corporate Banking Group Tomomi Akutagawa Masayoshi Ohara MEO, Head of Corporate Strategy Unit, and Office of Corporate Secretary MEO, CRO and CCRO Fumihiko Hirose Masato Mano MEO, Head of Specialty Finance Group MEO, Head of Allied Banking Group Takayoshi Nomura MEO, Head of Retail Banking Group Takeshi Ito Takashi Kato MEO, Head of Advisory & Investment Group EO, Head of Financial Markets Group Yutaka Aoyama Hideto Omi Tomoyuki Yamada Takeshi Yamane EO, Head of Human Resources Unit EO, Special Assignment EO, CTO EO, Head of Compliance & Governance Unit, and Head of Operations Group Masaki Onuma Kazuhiro Yasuda EO, Deputy Head of International Finance Group EO, General Manager of Kansai Branch Akira Sakai Jun Shinozaki EO, Deputy CFO EO, Deputy CCRO 36

38 Aozora Network Domestic Network: Sapporo Head Office, Domestic Branches and Offices (as of September 30, ) Nagoya Kanazawa Kyoto Kansai, Osaka and Umeda Hiroshima Fukuoka Sendai Chiba Offices in Tokyo Shinjuku Ikebukuro Ueno Takamatsu Population Yokohama > 6mn 2mn 6mn < 2mn Source: MIS Statistics Bureau (as of Oct. 1, 2017) Shibuya Nihonbashi Jiyugaoka Head Office 37

39 Aozora Network Overseas Network Aozora Europe (London) Shanghai Rep. Office AAPF (Hong Kong) Ho Chi Minh City Securities (Vietnam) Kasikorn Bank (Thailand) Singapore Rep. Office Aozora Bank CTBC Financial Holding (Taiwan) BDO Unibank (Philippines) Vietnam International Leasing (Vietnam) New York Rep. Office OCBC Bank (Singapore) Bank Central Asia (Indonesia) Business base of Aozora Bank Business alliance partner 38

40 <Contact> AOZORA BANK, LTD. Corporate Communication Division TEL: FAX: URL: Mr. Hiroyuki Kajitani Mr. Takashi Sakama Ms. Junko Matsumoto Mr. Kenji Nakanishi Mr. Sohei Ito This presentation contains forward-looking statements regarding the Bank s financial condition and results of operations. These forward-looking statements, which include the Bank s views and assumptions with respect to future events, involve certain risks and uncertainties. Actual results may differ from forecasts due to changes in economic conditions and other factors including the effects of changes in general economic conditions, changes in interest rates, stock markets and foreign currency, and any ensuing decline in the value of our securities portfolio, incurrence of significant credit-related cost and the effectiveness of our operational, legal and other risk management policies