UFJ Holdings, Inc. Financial Results for Interim Period ended September 30, November 28, 2002

Transcription

1 UFJ Holdings, Inc. Financial Results for Interim Period ended September 30, 2002 November 28, 2002

2 - Table of Contents - Actions toward Program for Financial Revival Stepping ahead for Reform of UFJ Group Management Issues in the 1st half of FY Financial Highlights Improvement of Financial Positions Resolution of Problem Loan Issues - Credit Related Expenses Final Disposal Problem Loan Outstanding Coverage and Reserves for Problem Loans Actions for Corporate Revitalization & Reorganization Reduction of Cross Shareholders Interest Rate Risk Management Maintaining Adequate BIS Capital Ratio - BIS Capital Ratio Plan for Risk Weighted Assets

3 - Table of Contents - Commitment to Improve Profitability Strategic Allocation of Management Resources Strengthening Lending Business - Strengthening of Lending Business Corporate Lending Business Retail Lending Business Increasing Non-Interest Income Improving Efficiency and Reaping Integration Effects Direction of Trust Business - Integration of Lending & Deposit Taking Business to UFJ Bank Trust Business Strategy Improving Group Profitability - Securities Business Credit Card Business Forecasts for Fiscal Year Ending March Business Profit Forecast for FY

4 - Table of Appendixes - Income - Combined for 2 banks Appendix UFJ Holdings, Inc Appendix 3 Assets & Liabilities Appendix 4 BIS Capital Ratio Appendix 5 Statement of Source and Application of Funds Appendix 6 Preferred Shares Appendix 7 Overseas Exposure Appendix 8 Consolidated Earnings by Business Line Appendix 9 - UFJ Bank / Retail Banking (Consolidated) Appendix 10 - UFJ Bank / Corporate Banking (Consolidated) Appendix 11 - UFJ Bank / Global Banking & Trading (Consolidated) Appendix 12 - UFJ Trust Bank (Consolidated) Appendix 13 - Asset Management (Consolidated) Appendix 14 - Securities & Investment Banking (Consolidated) Appendix 15 Loans under Financial Revitalization Law Appendix 16 Change in Problem Loans Appendix 18 Financial Support to Big Troubled Borrowers Appendix 19 Outline of Rules on Provision and Write-off (Loans) Appendix 20 Outline of Rules on Realizing Revaluation Loss Appendix 21 Distribution of Listed Stock Holdings Appendix 22 Group Strategy - Integration and Reorganization of Group Companies Appendix 23

5 Actions toward Program for Financial Revival UFJ Holdings Financial Results for Interim Period ended Sept

6 Actions toward Program for Financial Revival (1) Problem loan ratio to be around 5% on Mar. 31, 2005 through corporate revitalization and final disposal 10.4% of problem loan ratio as of Sept. 30, % decline from Mar Financial support to large troubled borrowers implemented >> Underpinning restructuring plans Progress in final disposal, collection, and upgrading etc. Planning to spin out Yen 1 tril. of problem loans to mid- and small-sized companies, to a newly created subsidiary. (Subject to regulatory approval) Recovers or finally disposes problem loans within a limited period, pursuing maximum collection through revitalization of borrowers Invites additional investment by third-party investors Third-party capital and expertise leads to a rational corporate revitalization based on the capital market principles. Envisages use of public scheme for revitalization UFJ Holdings Financial Results for Interim Period ended Sept

7 Actions toward Program for Financial Revival (2) Outline of the Scheme Bank s B/S Problem Loans (Yen 1 tril.) with Staff Bank Common Stock 100% Capital Consolidated Injection Subsidiary Know-how Third-party Investors Subsidiary's Common Stock Problem Loan Minority Interest Subsidiary s B/S Problem Loan Preferred Stock Common Stock Consolidated Thirdparty Investors Subject: Loans to Mid- and Small-sized corporations (Mainly loans classified as possible non-performing) Amount: approximately Yen 1 tril. Timing: by March 2003 Scheme: Corporate split (New company is a consolidated subsidiary.) Transfer problem loan with book value less provisions Capital: Yen 100 bil. preferred stock to third-party investors (Counted as Tier I capital for consolidated BIS ratio) UFJ Holdings Financial Results for Interim Period ended Sept

8 Actions toward Program for Financial Revival (3) Conducting stringent self-assessment, in view of severe business environment Posted Yen 2 tril. credit cost in FY2001 Prepared enough provisions to support large troubled borrowers Result of FSA inspection fully incorporated in financial results for FY2001 Small difference between our self-assessment and the FSA s view at the latest inspection Expected Special Inspection by FSA Unified classification of large borrowers Appropriate actions taken already UFJ Holdings Financial Results for Interim Period ended Sept

9 Actions toward Program for Financial Revival (4) Calculation periods for provisions are in line with US standard Adopts 3 year period for both loans to other special mention borrowers and loans to sub-standard borrowers Current FSA s inspection manual allows banks to apply 1 year period on loans to other special mention borrowers Adopts 1 year period for loans to normal borrowers US standard also applies 1 year period for loans to borrowers better than sub-standard UFJ s current rule already incorporates stringent standard UFJ Holdings Financial Results for Interim Period ended Sept

10 Actions toward Program for Financial Revival (5) Conservative evaluation applied to collaterals - Actual sales prices surpass evaluation Voluntary sales Actual sales price assuming evaluation is 100 <FY2001> Valuation method at latest self-assessment Collaterals sold Valuation Sales Price Valuation by UFJ Trust Others including valuation by subsidiaries Foreclosure sales Valuation method at latest self-assessment Collaterals sold Evaluation Sales Price Valuation by UFJ Trust Others including valuation by subsidiaries UFJ Holdings Financial Results for Interim Period ended Sept

11 Actions toward Program for Financial Revival (6) Properly respond to DCF type methods when its details are announced <Trial Calculation 1> If reserve ratio for the uncovered portion of sub-standard loans increases to 35% (+ 9%) Additional Reserve: Yen 150 bil. (App. Yen 1.7 tril. X 9%) <Trial Calculation 2> If reserve ratio for loans to Sub-standard borrowers with exposure of Yen 10 bil. or more increases by 10% (Include portions which are not classified as sub-standard loans) Additional Reserve: Yen 200 bil. (App. Yen 2.0 tril. X 10%) UFJ Holdings Financial Results for Interim Period ended Sept

12 Actions toward Program for Financial Revival (7) Adequate BIS Capital Ratio maintained as of Sept. 30, 2002 BIS Capital Ratio of UFJ Holdings: 11.2% Preferred securities : Yen 111 bil. (Sept. 2002) Reduction of risk weighted assets: Yen 2.7 tril. (1st half of FY2002) Adequacy of future taxable income for realizing deferred tax assets has been strictly verified Amount denied for accounting deferred tax assets : - FY2001 Yen 225 bil. (UFJ Bank: Yen 200 bil. UFJ Trust: Yen 25 bil.) - FY2002 Yen 269 bil. (1st half) (UFJ Bank: Yen 230 bil. UFJ Trust: Yen 39 bil.) UFJ Holdings Financial Results for Interim Period ended Sept

13 Actions toward Program for Financial Revival (8) High level of capital ratio to be maintained by various measures Capital level of UFJ Group (Current) Approximately 9% of BIS Capital Ratio to be maintained even if the credit cost doubled from Yen 480 bil. as a result of Program for Financial Revival, etc. <Assumption> Risk weighted assets: Yen -1.0 tril. (For 2 nd half FY2002) Stock price (Nikkei Ave.): Yen 8,500 Earnings : In line with current plan Level of BIS Capital Ratio to be further enhanced through various measures Capital raising Increasing earnings, cost reduction Utilizing Yen 1 tril. of synthetic CDO UFJ Holdings Financial Results for Interim Period ended Sept

14 Actions toward Program for Financial Revival (9) <Scheme for synthetic CDO> Credit Derivatives Super Senior Payment of premium Purchase of protection Swap deal counter party (Financial institution) Bank Loans Mezzanine Subordinate Payment of premium Purchase of protection Credit Derivatives SPC JGB etc. Investment Credit-linked note Proceeds Investors Subject: Amount: Timing: Aim: Loans to Mid & small-sized corporations (Normal borrowers) Approximately Yen 1 tril. (One of the largest deal for mid & small-sized corp. in Japan) FY2002 Hedging credit risk through credit derivatives and securitization scheme >> Risk weighted assets for BIS Ratio to be decreased UFJ Holdings Financial Results for Interim Period ended Sept

15 Stepping Ahead for Reform of UFJ Group UFJ Holdings Financial Results for Interim Period ended Sept

16 Stepping ahead for Reform of UFJ Group (1) To restore market confidence by solving asset quality issues Copes with the problem loan issue properly according to the Program for Financial Revival Eliminates concentration risk thoroughly Implementing financial support plans for large troubled borrowers Preventing large borrowers from suffering financial problems preemptively When a problem occurred, judging the viability considering market evaluation ever more - Concentrates resources and know-how of UFJ group for revitalization Restructuring loan portfolio aiming stringent application of Credit Limit Lending to large scale corporations to be shifted to syndicated loans and securitization products Building well-diversified (amount / industry) loan portfolio Minimizes risks on stock volatility Propelling sales of stocks well beyond the restriction to be imposed UFJ Holdings Financial Results for Interim Period ended Sept

17 Stepping ahead for Reform of UFJ Group (2) Provides comprehensive financial services to retail and mid-sized corporate customer base Establishment of competitive business model distinguishing UFJ from other financial groups Getting out of existing businesses may be an option for optimum allocation of resources Asset allocation focusing on core markets Stress investment banking functions to meet funding needs of large corporations Increase highly profitable assets on retail and mid-sized corporate market Utilization of customer base and net-work infrastructure of UFJ Bank Establish clear strategies by customer segments Prompt realization of profitability through comprehensive financial strategy Credit card, Consumer Finance, Insurance and leasing Drastic reform of cost structure Implement restructuring plan leading to scrap and build UFJ Holdings Financial Results for Interim Period ended Sept

18 Stepping Ahead for the Reform of UFJ Group (3) Management team reinforces its commitment to the market Commitment to the market Make promises to the market and report the progress on a timely manner Set more opportunities to communicate with the market Consider the introduction of stock-price-based incentive system on managements and employees Secure transparency of our management and recover confidence of the market through improvement of our disclosure Accountability is at the top of our priority. Disclose more managerial information to show our confidence in our strategy UFJ Holdings Financial Results for Interim Period ended Sept

19 Management Issues In the 1 st half of FY2002 UFJ Holdings Financial Results for Interim Period ended Sept

20 Financial Highlights Net Income of Yen 72.5 bil. Business Profit of Yen bil. : bil. from initial forecast UFJ Holdings (consolidated) Combined for subsidiary banks (Non-consolidated) (Yen bil.) Sept. 30, 2002 Sept. 30, 2002 (Change from forecast) Sept. 30, 2001 Change Gross Operating Profit ( - ) (139.4) Business Profit (before net transfer to gen. reserve) * (+88.4) (113.4) Credit Related Expenses (219.0) (189.1) (+50.9) (247.5) 58.3 Gains/Losses on Stocks (149.8) (148.3) ( - ) (206.2) 57.9 Net Income (+31.6) *Managerial figure, based on internal managerial accounting, calculated by adding non-consolidated Business Profit (before net transfer to General Reserve) of Banking Subsidiaries to profits/ losses of UFJ Holdings, subsidiaries and affiliates, taking into account the parent company's ownerships ratios on each company and adjusting for internal transactions. UFJ Holdings Financial Results for Interim Period ended Sept

21 Improvement of Financial Positions Resolution of Problem Loan Issues Reduction of Cross Shareholdings Interest Rate Risk Management Maintaining Adequate BIS Capital Ratio UFJ Holdings Financial Results for Interim Period ended Sept

22 Credit Related Expenses (Combined for subsidiary banks) (Non-consolidated) Credit related expenses well covered by business profit of Yen bil. Breakdown of credit related expenses (Yen bil.) Net transfer to general reserve (a) (26.5) Loans written-off Net transfer to specific reserve 51.5 Losses on sales of loans to CCPC 3.5 Net transfer to reserve for continget liabilities related to loans sold 8.5 Net losses on loans sold 5.2 Losses on supporting specific borrowers 13.8 Transfer to reserve for possible losses on support of specific borrowers 9.9 Transfer to reserve for possible loans to refinancing countries (0.7) Credit Costs (b) Transfer from Reserve (c) 9.3 Transfer from Reserve for Possible Losses on Support of Specific Borrowers (d) 10.3 (Yen bil.) Business deterioration of borrowers Losses on off-balancing and delcine in collateral value Costs for large borrwers and transfer from reserve Sept.02 app. Forecast for FY Total app Cedit related expenses (a) +(b) - (c) - (d) Yen bil. * Net transfer back from reserve of UFJ Trust is recorded as extraordinary gains. UFJ Holdings Financial Results for Interim Period ended Sept

23 Final Disposal (1) (Combined for subsidiary banks) (Non-consolidated) Doubtful loans or below decreased drastically mainly due to the implementation of the support to large troubled borrowers Change of loan outstanding classified as Doubtful or Bankrupt and Quasi-bankrupt in the 1 st half of FY2002 Inflow Outflow Mar. 31, 2002 Yen 3,496.4 bil. + Yen bil. Yen 1,376.3 bil. - = Liquidation Breakdown 23.4 Sept. 30, 2002 Yen 2,373.6 bil. Reorganization Sell-offs Write-offs 46.1 Collection / Repayment etc Upgrading UFJ Holdings Financial Results for Interim Period ended Sept

24 Final Disposal (2) (Combined for subsidiary banks) (Non-consolidated) Doubtful loans or below decreasing * on schedule *Amount excluding under the process of measures to remove loans from balance sheet. (Yen bil.) Classified before 1 st st half of FY00 Classified in 2 nd half of FY00 Classified in 1 st st half of FY01 Mar.01 Mar.02 Mar.03 Mar.04 Mar.05 Sept.02 1, (82% Off-Balanced) (67% Off-Balanced) (69% Off-Balanced) Amount required to be off-balanced by Mar (2-Year/3-Year Rule) (50%/80% Rule) app. Yen 580 bil. Classified in 2 nd half of FY01 2, ,188.8 (45% Off-Balanced) Classified in 1 st st half of FY UFJ Holdings Financial Results for Interim Period ended Sept

25 Problem Loan Outstanding (Combined for subsidiary banks) (Non-consolidated) Large decrease to Yen 5 tril. (Yen 1.4 tril. decrease from Mar. 2002) - Problem loan ratio fell down to 10.4% (- 2.3% from Mar. 2002) (Yen tril.) Sept including (a) 0.3 (b) 7.0 Mar.02 Sept including (a) 1.1 (b) Problem Loans under Financial Revitalization Law including (a) 1.0 (b) 4.6 Main factors for decrease Support of large borrowers Write-offs Collection etc. Bankrupt & Quasi-bankrupt Doubtful Sub-standard Normal (a) Claims which are not classified as Sub-standard claims on Substandard borrowers (b) Other Special mention borrowers app. Yen 780 bil. Yen 260 bil. Yen 420 bil. Collection etc. includes increase/ decrease due to upgrading/downgrading UFJ Holdings Financial Results for Interim Period ended Sept

26 Coverage and Reserves for Problem Loans (Combined for subsidiary banks) (Non-consolidated) Coverage ratio for problem loans :* 56.0% (Under Financial Revitalization Law) Bankrupt & Quasi-bankrupt * Problem loans here includes ALL claims to sub-standard borrowers. Sub-standard borrowers may have loan outstanding not classified as problem loans. Sept % 8.6% (100.0%) Mar. 02 Sept % 90.0% 11.1% 10.0% (100.0%) (100.0%) Reserve ratio for Doubtful loans Total Reserved with historical default rate Reserved individually Sept % Doubtful 30.9% 14.1% (86.0%) Reserve ratio for amount of loans uncovered by collateral/guarantee 62.33% 70.39% 51.19% Amount of loans (Yen tril.) Mar % Sept % Sept % Mar % Sept % 40.4% 27.7% (72.3%) 39.0% 23.6% (76.4%) Sub-standard 11.6% 60.5% (39.6%) 12.9% 54.8% (45.2%) 13.1% 60.3% (39.8%) 0% 20% 40% 60% 80% 100% Reserve ratio for Sub-standard borrowers Reserve ratio for amount of loans uncovered by collateral/guarantee Total loans for Sub-standard borrowers Sun-standard loans Reserve ratio for Special mention borrowers excluding Sub-standard borrowers : 17.92% : 26.17% : 3.16% Collateral/Guarantee Reserves Uncovered Reserve ratio for Normal borrowers : 0.24% UFJ Holdings Financial Results for Interim Period ended Sept

27 Actions for Corporate Revitalization & Reorganization Setting up of Corporate Advisory Group in July 2002 Mission Supports customers to revitalize or reorganize themselves through assembling know-how's accumulated in UFJ group. In charge of app. 8,000 companies, exposure of Yen 10 tril. - Working with troubled borrowers and borrowers to whom UFJ has large exposure - From October, directly controls Work-out Offices with customer contacts It will accelerate revitalization process because the group manages each revitalization plan from its making to execution. Both Corporate Advisory Department (CAD) and UFJ Solution Consulting (USC) provides advices to Credit Administration Departments. - Corporate Advisory Dept. and USC mainly engages in advisory business. Corporate Advisory Department for Borrowers whose core-bank is UFJ Provides Fairness Opinions to revitalization plans for CAD Borrowers USC for Borrowers with smaller exposure than CAD borrowers (Exp. more than Yen 2 bil.) Making and following-up of revitalization scheme Provides necessary services for smooth execution of plans Credit Administration Departments Assess feasibility of revitalization plans Work-out Offices (33 offices) Customer relations UFJ Holdings Financial Results for Interim Period ended Sept

28 Reduction of Cross Shareholdings Sold Yen 330 bil. of stocks in the 1 st half of FY No change for annual plan of Yen 1.46 tril. sales Stock Book Value (Yen tril.) Net Unrealized Loss: Yen bil. Breakdown of Yen 0.6 tril. Decrease Sold Yen (332.7) bil. Acquired Yen bil. Revaluation losses Yen (147.8) bil. Decrease in Market Value Yen (466.3) bil. Sept. 02 Tier I Equity Portfolio Marketable Securities Yen 3.5 tril. 2.8 Transportation 26% Mar. 02 Sept. 02 Principle for Recognition of Revaluation Losses Normal borrowers: 50% decrease from book value Special mention: 40% decrease from book value Doubtful or below: 30% decrease from book value Others Electronics 12% Banks 7% UFJ Holdings Financial Results for Interim Period ended Sept

29 Bond Investment Bond investment increased taking account of declining interest rates both in the United States and Japan - 1 bp increase in the interest rate decreases the value of bond portfolio by app. Yen 5.4 bil. (Yen tril.) Bond Portfolio (Book Value) (Combined for 2 banks, Non-consolidated, Banking account) Sept. 01 Mar. 02 Sept. 02 Short Term JGBs Foreigh Bonds Medium to Long term JGBs <Change from Mar. 2002> Foreign Bond + Yen 1.4 tril. Increased in anticipation of decreasing market rate Medium to long term JGBs + Yen 3.3 tril. Increased considering stable bond market Short term JGBs + Yen 1.9 tril. Increased to the level as of Sept.2001 to maintain enough liquidity at hand UFJ Holdings Financial Results for Interim Period ended Sept

30 BIS Capital Ratio BIS Capital Ratio for interim period ended Sept : UFJ Holdings 11.2%, UFJ Bank 11.1%, UFJ Trust 10.2% Capital Raising (1 st st Half of FY2002) Issued preferred securities through SPC : Yen 111 bil. (Sept. 2002) Reduction of Risk Weighted Assets1 st st Half of FY2002) Decrease in risk weighted assets : Yen 2.7 tril. (Combined for subsidiary banks) Collection of problem claims, etc : Yen 0.6 tril. decrease Sales of cross shareholdings, devaluation, etc : Yen 0.6 tril. decrease Reduction in oversees assets : Yen 0.4 tril decrease Decrease in value of assets due to Yen s appreciation : Yen 0.4 tril decrease etc UFJ Holdings Financial Results for Interim Period ended Sept

31 Plan for Risk Weighted Assets Small reduction in risk weighted assets to maintain adequate BIS Capital Ratio while maintaining our competitiveness in core market Strategy for reduction of risk weighted assets Will not reduce risk weighted assets if it harms our competitiveness in Mid-sized corp. and Retail market, our core market Plan for Risk Weighted Assets (2 nd nd half of FY2002) Reduction of Risk Weighted Assets (Combined for subsidiary banks) (Yen tril.) App. Yen 1.0 tril. to be reduced (net) (UFJ Bank: Yen 0.7 tril. / UFJ Trust : Yen 0.3 tril.) Plan to reduce Sales of cross shareholdings : Yen 1.1 tril. Collection of problem claims etc. Plan to add Increasing loans to Mid-sized corporations 20 0 Mar 02 Sept 02 Mar 03 (Plan) UFJ Holdings Financial Results for Interim Period ended Sept

32 Commitment to Improved Profitability Strategic Allocation of of Management Resources Strengthening Lending Business Increasing Non-interest Income Improving Efficiency and Reaping Integration Effects Direction of Trust Business Improving Group Profitability UFJ Holdings Financial Results for Interim Period ended Sept

33 Strategic Allocation of Management Resources Management resources will be heavily allocated to retail and mid-sized corporate business Strategic allocation of management resources Shift resources to Retail and Mid-sized corporate business through reduction of unprofitable assets Increasing housing loan portfolio Increasing loans to small and mid-sized corporations Unwinding cross shareholdings Reducing problem claims Shifting loans to large-scale companies to syndicated loans and securitization products Reducing non-core overseas assets Strategic allocation of human resources Allocating human resources to housing loan business, investments products for individual customers, and investment banking business. Staff for cultivating new corporate customers also to be increased. Increasing offices and staff for problem claims Reducing clerks and relationship managers through streamlining branch networks and operations Risk Assets by Business Line (Sept.30, 02) Global Bkg. &Trading 10% Change in Asset Allocation (Sept. 30, 02 = 100) UFJ Holdings Financial Results for Interim Period ended Sept % 150% 100% 50% 0% Trust/Sec/ Asset Mgmt 12% Planning/ Admin. 13% 9% Corp 52% Retail 13% Sept 02 Mar 03 Mar 04 Mar 07 Housing loan Large scale corp. Mid-sized corp. Non core overseas assets Cross shareholdings

34 Strengthening of Lending Business Restructure loan portfolio for higher profitability Securing appropriate return on credit risks Improve spreads on corporate lending Secure loan spread reflecting appropriate risk premium >> Ave. loan spread to be increased by 25bp by FY2003 Improve quality of loan portfolio Support corporate customers to improve their balance sheets based on disclosure of internal credit ratings (Yen tril.) Loan Outstanding by Segment (UFJ Bank) Domestic Corp. Individual Overseas Sept 01 Mar 02 Sept 02 Focusing on core businesses Retail - Boost amount of housing loans - Reinforce profitability on consumer loans on a consolidated basis Domestic Corporate - Increase loans to high quality mid-sized corporations - Shift loans to large scale and upper mid-sized corp. to syndicated loans and securitization products Overseas - Focus on business with Japanese corporations, especially in Asia 100% 80% 60% 40% 20% 0% Breakdown of Retail Lending Sept 02 Others Small Business Consumer Finance Apartment Loan Housing Loan in 5 Years (Consumer finance includes Mobit and UFJ Card) % 80% 60% 40% 20% 0% Breakdown of Corporate Lending Sept 02 Others (Public Sector, etc) Under Close Monitor Mid & Small sized Corp. Large Scale Corp in 5 Years (UFJ Bank, excluding Corporate Advisory Group) 3 UFJ Holdings Financial Results for Interim Period ended Sept

35 Corporate Lending Business (1) Steady improvement in loan spread (Spread for borrowers with below required spread increased by 18bp from Jan ) - Loans decreasing mainly due to customers effort to improve their balance sheet and weak funding demands for new investments - Reinforce measures to improve spread in order to achieve the target for FY 2003 ahead of schedule FY2001 FY2002 FY2003 Jan. 31 Mar. 31 Sept. 30 Year Ave.(Target) Year Ave.(Target) Corporate Borrowers Borrowers with below required spread Spread 122 bp 130 bp 135 bp (+13) 134 bp (+12) 147 bp (+25) Amount 21 tril. 19 tril. 18 tril. (-3) 18 tril. (-3) 16 tril. (-5) (Yen) Spread 101 bp 110 bp 119 bp (+18) 123 bp (+22) 151 bp (+50) Amount 12 tril. 11 tril. 10 tril. (-2) 10 tril. (-2) 9 tril. (-3) (Yen) ( ) refers changes from Jan. 31, 2002 Corporate Borrowers : All corporate borrowers, excluding public sector, large troubled borrowers, etc Borrowers with below required spread : Among corporate borrowers, borrowers with below required spread as of Jan. 31, 2002 App. 22,000 corporations with Yen 12 tril. of loans outstanding (excluding sub-standard borrowers or below) UFJ Holdings Financial Results for Interim Period ended Sept

36 Corporate Lending Business (2) Progress on securing appropriate return on credit risks - Shortfall from required spread has been reduced in each categories (by credit ratings and by scale of borrowers) Change in Loan Spread & Amount Change in Loan Spread & Amount (%) (By Internal Ratings) (Yen tril.) (By Scale of Borrowers) (%) (Yen tril.) <1-3> <4-5> <6> <7> <8A> Amount as of Jan Amount as of Sep.t 02 Required SP SP as of Jan. 02 SP as of Sept Large-Scale Corp. Mid and Small-sized Corp Excluding loans to public sectors, large troubled borrowers, and sub-standard borrowers or below UFJ Holdings Financial Results for Interim Period ended Sept

37 Retail Lending Business - Housing Loan - Aspiring to be the leading bank in the expanding market - In 1 st half of FY2002, the balance grew to Yen 5.9 tril. with new loans of Yen 546 bil. Market expands due to shrinking business of Gov. Housing Loan Corp. (Yen Tril.) New loan extension in FY2003 to be Yen 1.7 tril. Housing Loan (UFJ Bank) Mar 02 Sept 02 Mar 03 Mar 04 (Half Year) (Plan) (Plan) Loan outstanding New loan Strategy for housing loan business Reinforce relationship with housing contractors - 85% of new loans come through housing contractors - No. of housing loan offices to be increase to 140 in FY2002 (+23 in 1 st half, +37 in 2 nd half) - Expand to local area - Allocate human resources to housing loan offices Appropriate return on risks - Maintain profitability by avoiding pricing competition Loan spread: 168bp (+8bp from 2 nd half of FY2001) Pursue customer convenience through speedy credit review - Pre-approval to be granted on the same day of application Acquired housing loans from Citibank - Acquired high quality housing loans in bulk (Sept. 2002) UFJ Holdings Financial Results for Interim Period ended Sept

38 Retail Lending Business - Consumer Loan - Strengthen consumer finance business with Mobit taking the lead Mobit Steady increase in loans & guarantees Sept. 30, 2002 Loan outstanding: Yen 93.1bil. Guarantee: Yen 12.1bil. Turning into black in FY2002 projected Mar. 31, 2003 Loans outstanding: Yen 127bil. Increased applications through ACM - Installed in ATM Branches of UFJ Bank *ACM - Automated Consultation Machine (from May 2002) Reinforce guarantee business - Extend guarantees to consumer loans provided by 12 local banks and UFJ Bank - Seek more contracts with dominant banks in local areas Balance & No. of Accounts on Loan and Guarantee (Yen bil.) (Mobit) (Acct. thou.) Mar 01 Sept 01 Mar 02 Sept 02 Mar 03(Plan) Loan outstanding No. of contracts on loan Guarantee outstanding No. of contracts on guarantee Mobit Joint Venture with Promise and Aplus 50% held by UFJ Bank UFJ Bank UFJ Mobit Cashing - New type of consumer loan guaranteed by Mobit (from Oct. 2002) - Convenient features of Mobit are offered to UFJ Bank s customer base <Reference> UFJ Bank s card loan w/o collaterals balance : Yen 254.5bil. (as of Sept. 30, 2002) Loan outstanding to be Yen 40 bil. in 3 years UFJ Holdings Financial Results for Interim Period ended Sept

39 Increasing Non-Interest Income Making progress in stabilizing revenue through increase in non-interest income Corporate business (UFJ Bank) Yen +6.8 bil. (Yen +0.8 bil.) Fees & Commissions (Domestic) : Yen bil. (0) Fees increased mainly due to developing lineup of Electronic Baking products Syndicated loan & securitization : Yen +3.4 bil. (Yen +1.8 bil) Increased in arrangements of syndicated loans Client derivatives products : Yen bil. (Yen bil.) Increase in sales of foreign exchange-related products offset small decline in sales of loan-related products Retail Business (UFJ Bank) Yen +2.2 bil. (Yen -0.3 bil.) Full use of network and infrastructure for settlement : Yen +2.6 bil. (0) Increased ATM-related commissions, such as fees from cashing service Revising fee schedule to cover cost * Each figure above shows change in 1 st half of FY2002 compared to 1 st half of FY2001. Each figure in parenthesis shows comparison btw. results of 1 st half of FY2002 and its original plans. Non-Interest Income (Corporations) (Yen 100 bil.) (Yen bil.) Mar 02 Sept 02 Mar 03 (Plan) Non-interest income Non-Interest Income (Retail) Mar 02 Sept 02 Mar 03 (Plan) Non-interest income Fees & Commissions (Yen bil.) (Domestic) Mar 02 Sept 02 Mar 03 (Plan) (No. of Arrangement) Business Profit Syndicated Loan Sept 01 Mar 02 Sept 02 No. of Arrangement ATM-Related Commissions (Yen 10 bil.) Mar 02 Sept 02 Mar 03 (Plan) Business Profit UFJ Holdings Financial Results for Interim Period ended Sept

40 Improving Efficiency and Reaping Integration Effects (1) Reduction of expenses, mainly personnel expenses, is proceeding on schedule - Yen 25.9 bil. decrease in total expenses compared with the 1 st half of FY 2001 (Combined for subsidiary banks) Personnel Exp. Nonpersonnel Exp. FY2000 FY2001 FY2002 (Yen bil.) Results Interim Results Interim (Plan) Interim Change Total Exp (Yen bil.) Expenses (Results/Plan) (FY) Personnel Non-personnel 1 st st half of FY2002 Personnel exp. : Yen 17.8 bil. decreased due to reduction of no. of employees and bonus salaries, and introduction of new compensation plan* Non-personnel exp. : Yen 5.9 bil. decreased due to cost cutting through branch integration *Introduced before merger of Sanwa and Tokai to accentuate merit system / To be applied more strictly Progress in expense reduction Personnel exp. : Decreasing more than the target of Plan to Revitalize Management (Exceed target by Yen 5.8bil. in FY2001) / Planning to reduce Yen 105 bil. from FY1997 to FY2004 Non-personnel exp. : Has not decreased because of temporally consolidation-related exp. and IT-related exp.. However, It will decrease thanks to progress of branch consolidation UFJ Holdings Financial Results for Interim Period ended Sept

41 Improving Efficiency and Reaping Integration Effects (2) Aggressive rationalization including accelerated branch consolidation <Current Plan> Domestic Branches No. of Employees (Thou.) /3 02/9 03/3 (Plan) thou thou /3 02/9 05/3 (Plan) Branch Consolidation Complete consolidation of overlapping branches by the end of Mar Taking advantage of the fastest system integration among major Japanese banks Reduction of Employees Backed up by fast integration & effective allocation of human resources UFJ Holdings Financial Results for Interim Period ended Sept

42 Improving Efficiency and Reaping Integration Effects (3) Net integration effects turned to black mainly due to aggressive reduction in personnel expenses - Earnings synergies have been also realized on schedule. Earnings synergies (1 st Half of FY 2002) Synergies between UFJ Bank & UFJ Trust : Yen 3.6 bil. Effective use of trust agency (Pension Trust, Corporate agency service, Asset securitization) Increased real estate related earnings by cultivating the customer base of UFJ Bank Net Integration Effects (1 st Half of FY 2002) Yen bil. mainly due to reductions both in personnel and non-personnel exp. Reduced personnel exp. Reduced general non-personnel exp. Branch consolidation System integration costs Other integration costs Results Net integration Effects Yen 13.6 bil. UFJ Holdings Financial Results for Interim Period ended Sept

43 Trust Business - Integration of Lending & Deposit Taking Business to UFJ Bank Lending & deposit taking business of UFJ Trust Bank to be integrated to UFJ Bank in 2 nd half of FY UFJ Trust Bank focuses on trust-related business to further sharpen its competitive edge. Summary of Integration App. Yen 20 bil. to 30 bil. expense reduction expected by integration (For 5 years since FY2003) < Gross cost reduction : Yen 50 bil. to 60 bil. / Integration cost : Yen 30 bil. > Customer channel strategy : Deploy branches more efficiently - Reducing the number of branches (Consolidation of overlapping branches, etc ) - Utilizing joint branches with UFJ Bank and trust-agency Along with branch integration, reallocate employees from lending and deposit taking business to trust-related business and reduces number of employees aggressively Fully integrates IT system in order to avoid operational risk Corporate split would be most likely scenario for integration UFJ Trust Bank will focus on trust-related business to be one of UFJ Group s stable revenue sources. UFJ Holdings Financial Results for Interim Period ended Sept

44 Trust Business Strategy (1) Gross operating profit on trust business of over Yen 120 bil. in FY2007 Corporate Agency Service IPO market grows modestly (100 to 150 companies / year) Keeps No. 1 position in No. of corporate clients (now 1,812) and increases market share through development of new type of service Asset Securitization Market continues to grow 30% per year, reflecting off-balancing needs of companies Development of new scheme of securitization Pensions Growing needs for revising corporate pension plans Provides high level of consulting and asset management service (No.1 return among Trust Banks for 5 yrs. average) to UFJ group customers Securities-related Private Client Service Together with the aging of society, needs of consulting service for inheritance and property management grows Approaches to new customers through lectures and seminars in cooperation with UFJ Bank Gross Operating Profit of Trust Business Market size of Investment Trust and Public Pension fund grows in the long run Enhances price competitiveness through The Master Trust Bank of Japan and keep No. 1 position of Investment trusts under administration Real Estate Market growth continues thanks to the introduction of new accounting standards, acceleration of corporate revival and growth of REIT Concentrates real estate business to UFJ Trust FY2001 FY2007 Corporate Agency Pensions Securities Related Real Estate Asset Securitization Private Client Service UFJ Holdings Financial Results for Interim Period ended Sept

45 Trust Business Strategy (2) Utilizing client base & branch network of UFJ Bank Trust agency service at branches of UFJ Bank Trust Agency Service Trust Agency Service at 148 Branches of UFJ Bank (Nov. 2002) Corporate Agency Service 130 new corporate clients in 1st half of FY2002 (Market share 34%): 50% from trust agency Pensions Yen 220 bil. of Asset increase (new client and share increase) in 1st half of FY2002: 30% from trust agency Asset Securitization Yen 183 bil. of securitized asset and 21 new customers in 1st half of FY2002: 50% from trust agency Joint business promotion with UFJ Bank Real Estate Centralization of property information to UFJ Trust : from 1st half of FY2001 to 1st half of FY2002, 5 times of information (3,319 to 18,040) and 6 times of brokerage transactions (42 to 260) Private Client Service Strengthen group cooperation: promotion of Joint branch with UFJ Bank (8 joint branches in Nov. 2002) Utilizing client base of UFJ Bank: about 1,000 property information and 3,000 inheritance related information from UUUFJ Bank in 1st half of FY2002 UFJ Holdings Financial Results for Interim Period ended Sept

46 Improving Group Profitability: Securities Business Strengthening UFJ Tsubasa Securities competitiveness through its Structural Reform Plan - Stabilize revenue structure through restructuring and improved profitability UFJ Tsubasa Securities strategy Plays an integral part of our strategy for small to Mid-sized corp. and retail customers - Small to Med-sized corp. : Investment Banking / Services needed for finance in the capital market - Retail Customers : Responding to diverse investment needs <Summary of Plan (Oct Mar. 2003) > Aggressive restructuring Branch consolidation: Over 25 branches Reduction of app. 800 employees through voluntary early retirement Building steady source of income Increase bond sales commission Cultivating customer base of UFJ group / Setting up joint branches with UFJ Bank Concentrating corporate sales persons into 9 business centers to strengthen service to corporate customers Reinforces Investment Banking Business, such as M&A, IPO, and securitization No. of Branches 116 Below 90 Sept 02 Mar 03 5,000 4,000 3,000 2,000 1,000 0 No. of Employees 4,000 3,200 Sept 02 Mar 03 UFJ Holdings Financial Results for Interim Period ended Sept

47 Improving Group Profitability: Credit Card Business Utilizing group resources at its maximum to be the core business in our group strategy in retail market UFJ Card s Strategy FY2005 : 9.6 million cardholders (+1 million compared w/ Mar. 2002) / Operating profit of Yen 12 bil. TOB announced by UFJ Bank in Sept to acquire 100% share Increase no. of cardholders with three international franchises (JCB, VISA, MasterCard) Card issuance of 1 mil. per year (+ 270 thou. compared w/ Mar. 2002) Utilizing customer base of UFJ Bank Promoting the use for shopping Strengthening revolving loans and card loans Utilizing its strength as a bank s card subsidiary Cooperates with companies with close relationship as soon as possible to cut expenses Companies with close relationship UFJ Holdings Financial Results for Interim Period ended Sept

48 Forecasts for Fiscal Year Ending March 2003 These forecasts will be revised as soon as details of Program for Financial Revival are announced. UFJ Holdings Operating Income Ordinary Profit Net Income Non- Consolidated Total Income Ordinary Profit Net Income (Yen bil.) Consolidated 2, Subsidiary Banks (Non consolidate) Business Profit (before net transfer to general reserve) Credit Cost Ordinary Profit Net Income UFJ Bank 630 (430) UFJ Trust 105 (50) (15) 10 Total 735 (480) Dividend Outlook Yen 2,500 per share (Interim: 0) UFJ Holdings Financial Results for Interim Period ended Sept

49 Business Profit Forecast for FY 2002 (Combined for Subsidiary Banks) Expects business profit of Yen 735 bil. (+ Yen 125 bil. from original plan) - Bond related profit (from ALM operation and investment in banking account of Global Banking & Trading unit ) will be far larger than our original forecast. New Forecasts (Results) Mar. 03 Original Forecasts (Yen bil.) (Interim) Mar. 03 UFJ Bank Retail Banking Corporate Banking Global Banking & Trading Other * UFJ Trust Total * Figures of corporate banking unit in our original plan are different from those released at our information meeting in May 2002 (Interim: Yen 135 bil. / Mar. 03 : 282 bil.). This is because a part of figures in corporate banking unit has been moved to Corporate Advisory Group, whose profits are included in Other. UFJ Holdings Financial Results for Interim Period ended Sept

50 Appendix

51 Income : Combined for 2 Banks (non-consolidated) (1) Sept. 30, 2002 Combined for 2 Banks Sept. 30, 2001 Combined for 2 Banks (Yen bil.) Change UFJ Bank UFJ Trust Sanwa+Tokai Toyo Trust Gross Operating Profit (139.4) Interest Income (85.8) Trust Fees (before write-off) (22.8) Fees & Commissions (12.1) Trading Revenue Other Operating Income (40.8) Expenses Personnel expenses (minus) Non personnel expenses (minus) Business Profit (excluding net transfer to general reserve) (113.4) (compared with Sept. 30, 2001) Gross Operating Profit: (-Yen bil.) Interest Income(-Yen 85.8 bil.) Decline in share dividends (stock sale, the number for 1st FY 2001 was boosted by the change in accounting for dividends receivables), interest on loans and deposits, and profit from overseas banking mainly by decline in foreign bond yield Trust Fees: (-Yen 22.8 bil.) Indemnity of losses in trust account from banking account was lower-yen 16.3 bil. Fees & Commissions: (-Yen 12.1 bil.) Increase in settlement fees (exchange, consumer credit service, etc) Increase in payment of guarantee fee reduces net fees. Trading Revenue: (+Yen 22.2 bil.) Due to integration of accounting treatment between Sanwa and Tokai, part of profit from derivative instruments used to be booked as other operating income was recognized as trading revenue. Other Operating Income(-Yen 40.8 bil.) Bond related loss: (-Yen 18.0 bil.), write-off Investment trust: ( Yen 5.0bil.), book change from trading account:(-yen 18.0 bil.) Expenses(-Yen 25.9 bil.) Reduces overhead cost: Personnel Exp.(-Yen 17.8 bil.) No. of Employees: (-2,400) Non-personnel Exp. (- Yen 5.9 bil.) Decrease through restructuring of business UFJ Holdings Financial Results for Interim Period ended Sept Appendix 1

52 Income : Combined for 2 Banks (non-consolidated) (2) Sept. 30, 2002 Sept. 30, 2001 (Yen bil.) Change Combined for 2 Banks Combined for 2 Banks UFJ Bank UFJ Trust Sanwa+Tokai Toyo Trust Business Profit (excl. net transfer to general reserve) (113.4) Net Transfer to General Reserve (minus) (26.5) (26.5) - (14.0) (26.4) Business Profit (before write-off in trust account) (101.0) Other Income & Expenses ('rinji son-eki') (393.5) (312.0) (81.5) (496.8) (382.9) (113.9) Credit costs (235.3) (210.2) (25.1) (261.5) (218.5) (47.0) 26.2 Gains/losses on stocks & other equity securities (148.3) (91.6) (56.6) (206.2) (141.4) (64.7) 57.9 Tokyo & Osaka enterprise tax (11.0) (9.8) (1.1) (11.3) (9.9) (1.3) 0.2 Ordinary Profit (36.1) (56.1) 2.3 Extraordinary Gains/Losses Collection of Written-off Claims Transfer from Reserve Transfer from Reserve for Possible losses on Support of Specific Borrowers Gains/losses on Sales of Premises and Equipment (9.2) (8.5) (0.6) (1.9) (5.8) 3.9 (7.3) Amortization of unrecongnized pension obligation (16.7) (15.4) (1.3) (17.4) (16.1) (1.3) 0.7 Gains on establishment of retirement benefit trust (30.4) Income before Income Taxes (13.2) (50.2) 8.6 Income Taxes (current)(minus) (1.8) 4.2 Income Taxes (deferred)(minus) (20.1) (1.7) (18.3) (19.5) 25.3 Net Income (28.8) 38.1 (compared with Sept. 30, 2001) Other Income & Expenses ( rinji son-eki ) Credit costs(-yen 26.2 bil.) Credit costs related to Trust Account: Yen 12.7 bil. (No trust account loss indemnified) Total credit costs including transfer to general reserve, transfer from reserve and transfer from reserve for possible losses on support of specific borrowers: Yen bil. Gains/losses on stocks & other equity securities: Profit on sale: Yen 39.2 bil. Loss on sale: -Yen 38.6 bil. Write-off: -Yen bil. As regards business taxes, we continue to apply same accounting treatment as before. This treatment does not constitute in any way an admission on the part of the Bank either of the constitutionality or of the legality of the metropolitan ordinance. Extraordinary Gains/Losses: (+Yen 6.3 bil.) Transfer from Reserve for possible losses on support of specific Borrowers: (+Yen 10.3 bil.) by overestimated debt forgiveness and transfer from reserve by category change UFJ Holdings Financial Results for Interim Period ended Sept Appendix 2

53 Income :UFJ Holdings, Inc. (Yen bil.) UFJ Holdings Combined for UFJ Holdings Consolidated Subsidiary Banks Difference Non-consolidated Sept. 30, 2002 Sept. 02/9 Gross Operating Profit Operating Income 14.9 Expenses (-) Operating Expenses (-) 3.0 Business Profit (*1) Operating Profit 11.8 Net transfer to General Reserve (-) (34.8) (26.5) (8.2) Ordinary Profit 11.6 Business Profit (*2) Income before Income Taxes 11.6 Other Income & Expenses (407.8) (393.5) (14.3) Net Income 11.4 Credit related Expenses (254.1) (235.3) (18.8) Gains/Losses on Stocks (149.8) (148.3) (1.5) Ordinary Profit (Loss) Net Income (Loss) (4.0) *1 Before net transfer to general reserve *2 Before write-offs in trust account Difference in net income between UFJ Consolidated figures and combined figures for subsidiary banks: -Yen 4 bil. Net Income from UFJ Holdings (Non-consolidated), subsidiaries and affiliates Write off dividend received Adjustment of reserve for subsidiaries Others (write off goodwill, etc.) Total Yen 49.0 bil. Yen 24.0 bil. Yen 22.0 bil. Yen 9.0 bil. Yen 40 bil. UFJ Holdings Financial Results for Interim Period ended Sept Appendix 3

54 Assets & Liabilities: Combined for 2 Banks (non consolidated) Sept. 30, 2002 Mar. 31, 2002 (Yen bil.) Change Combined for 2 Banks Combined for 2 Banks UFJ Bank UFJ Trust UFJ Bank UFJ Trust Assets 78, , , , , ,225.6 (38.7) Banking account 76, , , , , , Trust account (1) 2, , , ,836.1 (505.3) Loans (2) 43, , , , , ,737.8 (2,511.9) Housing loans 6, , , , Loans to small & mid. Sized companies 28, , , , , ,171.1 (964.0) Securiities (3) 21, , , , , , ,566.9 JGB 12, , , , , , ,309.4 Stocks 4, , , , (649.8) Liabilities 76, , , , , , Banking account 74, , , , , , Trust account (1) 2, , , ,809.9 (497.6) Deposits, Trust principal (2) 51, , , , , ,968.3 (1,215.5) Domestic corporate deposits 15, , , , (865.9) Domestic retail deposits 26, , , , , , (compared with Mar. 31, 2002) Assets Loans: -Yen 2.5 tril. (for small & mid. -Yen 1 tril. Final disposal of problem loans, decline in loans for public institutions, sluggish loan demand Securities: +Yen 5.5 tril. - JGB investment: over Yen 12 tril. -Cross shareholdings: Sold Yen 330 bil. Liabilities Decrease in total deposits & trust principal: Increase in domestic individual deposits Decrease in trust principal Yen 640 bil. Domestic individual deposits: shift from Time Deposits to Demand Deposits Domestic individual deposits +Yen 710 bil. Time individual deposits -Yen 470 bil. UFJ Holdings Financial Results for Interim Period ended Sept Appendix 4