Financial Results for the Six Months Ended September 30, ZENKOKU HOSHO Co., Ltd. November 2018

Transcription

1 Financial Results for the Six Months Ended September 30, 2018 ZENKOKU HOSHO Co., Ltd. November 2018

2 Table of Contents I. Overview of Financial Results P 3 II. Future Prospects P 10 1

3 Summary of Business Results for the Six Months Ended September 30, 2018 The number of new housing was at a lower level than the same period of the previous fiscal year amid the continued Negative Interest Rate Policy adopted by the Bank of Japan and government policies designed to support housing acquisitions. We made progress in creating new partnerships, and signed new contracts with 3 banks, 1 credit union, and 2 JA cooperatives during the six months ended September 30, Operating revenue and income were on a favorable trend as outstanding guarantee exposure increased steadily. Operating expenses (expenses related to credit services) were lower than the forecast, primarily due to payment for subrogation performing at a low level. 2

4 3 I. Overview of Financial Results

5 Economic Environment While there is uncertainty in the outlook for overseas economies, the Japanese economy continued on a moderate recovery trend due to sustained steady improvements in corporate earnings, employment and income conditions, as well as a recovery in consumer spending. In the housing market, the number of new housing was at a lower level than the same period of the previous fiscal year amid the continued Negative Interest Rate Policy adopted by the Bank of Japan and government policies designed to support housing acquisitions. In the housing loan market, as refinancing demand remained weak, financial institutions continued various promotional activities to acquire housing loans for new and secondhand housing. Unemployment Rate (seasonally adjusted figures) (April, 2017-September, 2018) (unit: %) Number of new housing starts (April, 2017-September, 2018) (seasonally adjusted annual rate) (unit: Number of houses) 3.2 1,100, ,050, ,000, , , , /4 2017/7 2017/ /1 2018/4 2018/7 Source: Labor Force Survey, Ministry of Internal Affairs and Communications 800, /4 2017/7 2017/ /1 2018/4 2018/7 Source: Statistics of Housing Starts, Ministry of Land, Infrastructure, Transport and Tourism 4

6 Increase in Number of Partnering Financial Institutions Trend in Number of Partnering Financial Institutions by Category (Unit: Number of Institutions) Banks Shinkin Banks Credit Unions JA JF Labour Bank Others Partnership Market Share by Category /3 2017/3 2018/3 2018/9 As a result of our efforts to increase new partners, we concluded new contracts with 3 banks, 1 credit union and 2 JA cooperatives during the six months ended September 30, (Unit: Number of Institutions) Partnership Rate 85.3% 95.8% 94.4% 43.5% Non-Partners Banks* Shinkin Banks Credit Unions JA Partners * The amount of banks is the sum of Regional Banks, 2nd Tier Regional Banks, MUFG Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited., Resona Bank, Limited, Saitama Resona Bank, Limited and AEON Bank, Ltd.

7 Increase in Loan Guarantee Business The number of new guarantees granted during the six months ended September 30, 2018 decreased as refinancing demand remained at a low level. Number of New Guarantees Received (Unit: Number of Guarantees) Number and Amount of New Guarantees Granted (Unit: Number, 100 million yen) 300, , , , ,000 50, , , ,758 Annual 125,089 *Number of guarantees of housing loans extended by private financial institutions to individual borrowers 2Q 260, , , /3 2017/3 2018/3 2019/3 2Q *Number of guarantees of housing loans extended by private financial institutions to individual borrowers. Outstanding Guarantee Exposure (Unit: 100 million yen) Amount Repaid in Subrogation (Unit: 100 million yen) 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, ,018 7,135 64,228 30,889 Number (Annual) (left scale) Amount (Annual) (right scale) 16,897 16,663 71,777 68,073 8,422 8,280 36,477 34,327 Number (2Q) (left scale) Amount (2Q) (right scale) 32,825 8, /3 2017/3 2018/3 2019/3 2Q 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, , , , , , , Annual 2Q , , , /3 2017/3 2018/3 2018/ /3 2017/3 2018/3 2019/3 2Q

8 Summary of Business Results for the Six Months Ended September 30, 2018 (P/L) FY2018/3 2Q FY2019/3 2Q Change (Unit: Million yen) FY2019/3 2Q (Forecast) Operating revenue 15,264 16, % 16,270 Operating expenses 4,067 4, % 4,860 Expenses related to credit services 1,165 1, % 1,720 Provision for loss on guarantees 1,537 1, % 2,070 Provision of allowance for doubtful accounts % 350 Other expenses 2,902 3, % 3,140 Operating income 11,196 11, % 11,410 Points Operating revenue Operating revenue amounted to 16,246 million yen as outstanding guarantee exposure remained steady. Operating expenses Operating expenses amounted to 4,257 million yen as a result of expenses related to credit services being lower than the forecast at 1,204 million yen due to payment for subrogation performing at a low level. Net income As a result of above situations, net income amounted to 8,662 million yen. 7 Ordinary income 11,592 12, % 11,800 Extraordinary income and loss Net income 8,036 8, % 8,140

9 Summary of Business Results for the Six Months Ended September 30, 2018 (B/S) Assets (Unit: Million yen) Liabilities (Unit: Million yen) FY2018/3 FY2019/3 2Q Change FY2018/3 FY2019/3 2Q Change Current assets 202, , % Cash and deposits 184, , % Right to reimbursement 11,536 11, % Securities 6,921 6, % Money held in trust 5,023 5, % Allowance for doubtful accounts 5,737 5, % Noncurrent assets 91, , % Investments and other assets 90, , % Investment securities 70, , % Total assets 294, , % Points Assets Investment securities increased due to the purchase of corporate bonds as well as the establishment and implementation of a scheme to purchase Residential Mortgage-Backed Securities (RMBS) issued by financial institutions. We intend to continue purchases of RMBS, leveraging our know-how in guarantees of housing loans. 8 Current liabilities 29,351 27, % Unearned revenue 15,578 15, % Provision for loss on guarantees 6,691 6, % Noncurrent liabilities 156, , % Long-term unearned revenue 156, , % Total liabilities 186, , % Net assets Shareholders' equity 107, , % Valuation and translation adjustments % Total net assets 108, , % Total liabilities and net assets 294, , %

10 Provision for Loss on Guarantees The percentage of the provision for loss on outstanding guarantee exposure declined. The amount for provision for loss on guarantees posted during the six months ended September 30, 2018 was lower than the forecast primarily due to payment for subrogation performing at a low level, and amounted to 1.4 billion yen (down 29.6% compared to the forecast). Trends of provision for loss on guarantees and outstanding guarantee exposure (Unit: 100 million yen) 債務保証損失引当金 Provision for loss on ( guarantees 左目盛 ) Outstanding 保証債務残高 guarantee ( 右目盛 exposure ) (left scale) (right scale) Percentage of provision , , , , , , % 80, % 60, % 80 40,000 Trends of provision for loss on guarantees Year-start provision Year-end provision Amount reversed during the period 34 (Unit: 100 million yen) Provided amount /3 2018/3 2019/3(2Q) 20, Year-start During 2017/3 Year-end Year-start 2018/3 Year-end During Year-start2019/3(2Q) the period During the period the period FY2017/3 2015/3 FY2018/3 2016/3 FY2019/3 (2Q) End of the period 9 *Percentages of provision are rounded off to the second decimal place. *Since figures less than 100 million yen are rounded down, numbers may not add up precisely.

11 10 II. Future Prospects

12 Progress in the First Half / Initiatives for the Second Half First half Second half Conclude new contracts with prospective partnering financial institutions Partnered with 3 banks, 1 credit union and 2 JA cooperatives Continue promoting partnering Expansion of the business scale Increase added value Implemented proposal activities to introduce a data linkage system and an application scheme using the internet Established a new scheme to purchase Residential Mortgage- Backed Securities (RMBS) Continue proposal activities to introduce the schemes to the left Provide services using IT Expand the business scale, using our know-how in guarantees of housing loans Enhancement of the corporate value Improve operational efficiency Ongoing initiatives Shifted to paperless operations for screening Introduced centralization and RPA * of acceptance operations Introduced a workflow system Permeation of new personnel system and new evaluation system Continue to increase profitability and corporate value by improving operational efficiency Reinforce, enhance internal control system Expansion of business domains Respond to long-term issues Researched / considered expanding new business domains that will utilize our business foundation Continue considering for the expansion 11 * RPA (Robotic Process Automation) is a mechanism whereby routine office work such as data entry and information gathering is performed by a software robot to automate operations and improve operational efficiency.

13 Forecast of Earnings FY2018/3 FY2019/3 2Q FY2019/3 (Forecast) Change Operating revenue 39,599 16,246 41, % Operating expenses 8,419 4,257 9, % Expenses related to credit services Provision for loss on guarantees Provision of allowance for doubtful accounts (Unit: Million yen) 2,374 1,204 3, % 3,090 1,458 3, % % Other expenses 6,045 3,053 6, % Operating income 31,179 11,988 32, % Assumptions of earnings forecast Outstanding guarantee exposure (unit: 100 million) Number of new guarantees granted (unit: number) Amount repaid in subrogation (unit: million) Collected right to reimbursement (unit: million) Other 127,000 72,000 11,900 8,300 ROE 18.1% Dividend per share 82 Ordinary income 31,974 12,437 32, % Net income 22,052 8,662 22, % 12

14 13 APPENDIX

15 Corporate History Mar Apr Aug Oct Apr Apr May 2002 Jan Apr May 2005 Apr Apr Opening of Business Office (Branch) Osaka Office Yokohama Office Sapporo Office Fukuoka Office Nagoya Branch Sendai Branch Niigata Office Hiroshima Branch Kanazawa Office Miyazaki Office Partial operations in Head Office Sales Department and Head Office Credit Analysis Department were unified and Head Office established. Takamatsu Office April 2002, Zenkoku Hosho commenced Smile Ichiban January 2001, Zenkoku Hosho started guarantee services for educational loans extended by private financial institutions July 1997, Zenkoku Hosho started credit guarantee services for housing loans extended by private financial institutions December 1994, Zenkoku Hosho started guarantee services for prefectural housing corporations September 1988, Zenkoku Hosho commenced guarantee service for insurance premium loans April 1987, Zenkoku Hosho started group credit life insurance services October 2010, Smile Refinancing Wide launched May 2007, Smile Assist launched March 2006, Smile Support launched January 2005, Zenkoku Hosho started credit guarantee services for apartment loans extended by private financial institutions April 1981, Zenkoku Hosho started guarantee services for employee pension-funded housing loans February 1981, Zenkoku Hosho was established for the purpose of serving credit guarantee business in Chiyoda-ku, Tokyo October 2015, Zenkoku Hosho commenced Smile Ichiban Select September 2014, Smile Ichiban Next V launched April 2014, Zenkoku Hosho started card loan guarantee business extended by private financial institutions Trend in Outstanding Guarantee Exposure May 1998 Mar Sep Sep Mar Sep Mar Mar Mar Mar Jun Sep trillion 2 trillion 3 trillion 4 trillion 5 trillion 6 trillion 7 trillion 8 trillion 9 trillion 10 trillion 11 trillion 12 trillion

16 Relationship Diagram of Credit Guarantee Services for Housing Loans Since a housing loan is generally large with a longer repayment period, a joint and several guarantor is required. However, as a joint and several guarantor shall be onerous in the event of the insolvency of the principal loan holder, Zenkoku Hosho can offer effective services for borrowers of housing loans. 2 Loan Contract 1 Master Guarantee Agreement Customers (housing loan borrowers) Loan Payment of Principal and Interest Partnering Financial Institutions Claim for Subrogation (in case of insolvency) Subrogation Zenkoku Hosho 3 Guarantee Entrustment Agreement Payment of Guarantee Fees 1 Master Guarantee Agreement Collection of Claims after Subrogation Master guarantee agreements shall be concluded by and between Zenkoku Hosho and each financial institution. This agreement defines an acceptance of guarantee and subrogation. 2 L o a n C o n t r a c t Loan contract shall be concluded by and between each borrower and the lending financial institutions. This contract defines a loan amount, interest rate, lending period and other conditions of each loan. 3 Guarantee Entrustment Agreement Guarantee Entrustment Agreements shall be concluded by and between each borrower and Zenkoku Hosho. Pursuant to the agreement, Zenkoku Hosho will act as joint and several guarantor for the housing loan. 15

17 Disclaimer and Notes Regarding Future Prospects Disclaimer This material is prepared by ZENKOKU HOSHO Co., Ltd. (hereinafter, Zenkoku Hosho ) with the aim of helping investors understand Zenkoku Hosho and is provided purely for reference. The information contained in the material is prepared based on generally accepted economic and social conditions as of November 5, 2018, and on certain assumptions that Zenkoku Hosho believes to be reasonable as well as on Zenkoku Hosho s sole judgment. However, the information may change without notice subject to fluctuations in the business environment. Notes Regarding Future Prospects Data and information provided in this announcement include so-called forward-looking statements. These are based on assumptions associated with current estimations, predictions, and risks, and include uncertainties that could cause results to be substantially different from the description. The risks and uncertainties include general economic conditions both in Japan and overseas, such as general industrial and market situations, interest rates, and currency exchange fluctuations. Even in the case where there is new information or are related events in the future, etc., Zenkoku Hosho shall not be obliged to update and correct any forward-looking statements contained in this announcement. 16

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