The Tokyo Star Bank, Limited. December 4, 2006

Transcription

1 The Tokyo Star Bank, Limited December 4,

2 The following materials contain statements that constitute forward-looking statements, plans for the future, management targets, etc. relating to the Company and its subsidiaries. These forward-looking statements are based on current assumptions of future events and trends, which may be incorrect. Actual results may differ materially from those in the statements as a result of various factors. Unless otherwise noted, the financial data contained in these materials are presented under Japanese GAAP. The Company disclaims any obligation to update or to announce any revision to forwardlooking statements to reflect future events or developments. Unless otherwise specified, all the financials are shown on a consolidated basis. Information concerning financial institutions other than the Company and its subsidiaries are based on publicly available information. 2

3 Achievements 3

4 Expansion of Branch Network Nagoya Financial Lounge Upgraded from Sub-Branch in July 06 Flagship branches in major cities Sendai Financial Lounge Opened in November 06 4

5 TSB s Nation-wide Network Branches 34 Sub-branches 1 ATMs 1,351 ATMs in 1,301 locations as of Sep 06 ( Operating in 42 prefectures out of 47) Sendai Branch Opened in Nov 06 Nagoya Branch Upgraded in July 06 Fukuoka Sub-branch Opened in Oct 05 Osaka Branch Opened in June 04 Mix of Branches, ATMs, internet & telephone banking 5

6 New Products Star Fit Mortgage Loan - Brand-new Mortgage Loan - Adds payment flexibility for customers - Attracts more customers by counting income of a spouse not working full-time. Principal Interest Index-Linked USD Structured Deposit 1 st Year 2 nd Year 3 rd Year 4 th Year 5 th Year - 5 year Time Deposit CAP 10% - Final payout range based on annual performance of five indexes - Provides funding, generates fees, and adds unique product to line-up Attract New & Existing Customers 0% SP500 Nikkei225 DJ Euro Stoxx50 DJ CBOT Treasury Copper Interest Rate granted 6

7 Retail Outstanding* Retail Loans StarOne Mortgage (JPY in billions) BANK BEST % Sep05 Legacy / Other Sep06 New Products Mar04 Mar05 Mar06 Sep06 Mar04 Mar05 Mar06 Sep06 Strong growth in secured and unsecured products * Excludes loans extended by subsidiaries 7

8 Investment Products Sales (JPY in billions) Fee Income (JPY in millions) +27% % 2, ,440 1, ,040 FY05 1H FY06 1H FY05 1H FY06 1H Mutual Fund Variable Annuity Mutual Fund Variable Annuity Fee income up 44% year on year 8

9 Corporate Finance Corporate Outstanding* (JPY in billions) Fee Income (JPY in millions) % % 1,474 1, Sep05 Sep06 FY05 1H FY06 1H Non-Recourse Growth in SME lending with structured finance solutions * Excludes loans extended by subsidiaries 9

10 Corporate Initiatives New Industries Establishing upstream partnerships to source new customers Mortgage Banking and Conduit Derivative Products Structured Deposits Developing new distribution channels & products to grow business 10

11 FY2006 1H Update 11

12 Growth FY06 First Half Actuals vs. Forecast Stability Earnings ROA ROE Efficiency (JPY in billions) Operating Revenues Operating Profit Net Income % % % 8.2 FY06 1H Forecast FY06 1H Actuals FY06 1H Forecast FY06 1H Actuals FY06 1H Forecast FY06 1H Actuals Top-to-bottom-line performance exceeded expectations 12

13 Stability Growth Earnings ROA ROE Pre-Tax Income - First Half 06 vs. First Half 05 Efficiency (JPY in billions) (0.5) (3.7) (0.2) 9.6 (1.7) +44% FY05 1H Actuals LPR Decline Credit Reversal X-Items FY05 1H Before Gross Operating Operating Profit* Changes G&A Credit Costs Other Income/ Expense* FY06 1H Actuals * Excludes income on loans purchased at a discount. Strong underlying growth 13

14 Growth Loans Stability Earnings ROA ROE Efficiency +18% 1, (8) (JPY in billions) Other Retail % Corporate % Sep 05 Sep 06 Both business segments contributing to loan growth 14

15 Growth Loan Portfolio Diversification Stability Earnings ROA ROE Efficiency September ,088 (JPY in billions) Wholesale Consumer Finance 84 (15%) Other Consumer March Corporate Real Estate 89 (16%) Other Corporate Lending 236 (41%) Other Corporate Lending 253 (23%) Retail 31 (5%) Mortgages 129 (23%) Other Consumer 25 (2%) Wholesale 49 (5%) Consumer Finance 18 (2%) Retail Mortgages (Legacy) 105 (10%) Debt Consolidation (BANK BEST) SBL 21 (2%) Corporate Real Estate 133 (12%) Non-Recourse Real Estate 178 (16%) Non-Recourse Services 81 (7%) Deposit-linked Mortgage (STARONE MORTGAGE) 225 (21%) ---New Business Lines/Products 15

16 Stability Growth Earnings ROA ROE Efficiency Net Other Operating Income Net fees Gross Operating Profit * (JPY in billions) % % % 3.3 Net Interest Income % FY05 1H Actuals FY06 1H Actuals % Non Interest 22.8% 25.1% Consistent growth across all revenue components * Excludes income on loans purchased at a discount. 16

17 Growth Total Net Revenue Stability Earnings ROA ROE Efficiency (JPY in billions) % LPR 7.5-7% 6.9 (0.5) Gross operating profit* % Other Income/Expense* % 1.1 FY05 1H Actuals FY06 1H Actuals +0.2 % non-lpr 72.5% 77.5% Operating revenue growth translating into total revenue growth * Excludes income on loans purchased at a discount. 17

18 Stability Growth Earnings ROA ROE Efficiency Yields Reported Loan Yield (1) 4.01% 3.74% LPR Impact Organic Loan Yield (0.85%) (0.62%) 3.16% 3.12% All-in Yield (2) 2.61% 2.78% FY05 1H Actuals FY06 1H Actuals Average loans/ Interest-Bearing Assets 66.6% 72.7% Increase in Overall Yield (1) Loan Interest Income divided by average loans (2) (Interest income minus LPR & Swap Income) divided by total interest-bearing assets 18

19 Growth Deposits * Stability Earnings ROA ROE Efficiency Corporate 1, % +3% 1, (JPY in billions) 1, Retail 1, % FY05 1H Actuals FY06 1H Actuals Growth supports Retail business and funds loan growth * Excludes Negotiable Certificate of Deposits 19

20 Growth Credit Costs Stability Earnings ROA ROE Efficiency (JPY in billions) Better/ FY05 1H Act FY06 1H Act (Worse) Credit Costs (1) FY05 1H Reversal (3.7) - (3.7) Credit Costs (Adjusted) (2.0) % of Average Loans (2) 0.81% 0.36% 0.45% Excluding last year s reversal, credit costs favorable by 1.7 billion (1) Reserves and Write-Offs minus recoveries (2) Net credit Write-Offs/Average loans (Annualized) 20

21 Growth Non Performing Loans * Stability Earnings ROA ROE Efficiency (JPY in billions) % 1,047-10% 3.68% 1,149 Sep 05 Sep 06 * Based on financial revitalization law Ratio declined by 10% 21

22 Growth Capital Adequacy Stability Earnings ROA ROE Efficiency 9.04% Tier I Ratio Overall Ratio 9.27% (JPY in billions) 8.12% 8.38% 1,047 1,149 Sep 05 Sep 06 Tier I Capital Tier II Capital Risk Adjusted Assets , ,144 Strong and growing capital base; 90% of capital is Tier I 22

23 Stability Growth Earnings ROA ROE Efficiency Efficiency G&A Expense to gross operating profit* G&A Expense to average loans (JPY in billions) 71.2% -7% 66.2% -4% 2.94% 2.50% 2.73% 2.62% 2.68% 2.83% 2.80% 2.77% FY05 1H Actuals FY06 1H Actuals G&A Expenses (+12.6%) Gross Operating Profit* (+21.2%) Gross Operating Profit increasing faster than Expenses * Excludes income on loans purchased at a discount. 23

24 Growth Return on Assets/Return on Equity Stability Earnings ROA ROE Efficiency ROA ROE 20.69% Excluding Credit Reversal 15.22% 17.61% Excluding Credit Reversal 1.14% 1, % 1.06% FY05 1H Actuals FY06 1H Actuals Asset-to-Equity Ratio Excluding prior year credit reversal, ROA and ROE increased 24

25 Appendix 25

26 Growth FY06 Income Progression Earnings ROA ROE (JPY in billions) Stability Efficiency Actual Forecast Operating Revenues Operating Profit Net Income FY06 1Q FY06 1H FY06 FY06 1Q FY06 1H FY06 FY06 1Q FY06 1H FY06 Tracking in Line with Our Forecast 26

27 Composition of Earnings in Management Format Loan Interest Income (1) Securities Interest Income (JPY in millions) FY06 1H Actual FY05 1H Actual Better/(Worse) 16,858 14,350 2,508 2,751 2, Other Interest Income (2) 1, Interest Income (1)(2) 20,679 17,794 2,885 Interest Expense (2) (3,677) (3,340) (337) Net Interest Income (1) 17,002 14,454 2,548 Net Fees and Commissions (1) 4,336 3,251 1,085 Net Other Operating Income 1,362 1, Gross Operating Profit (1) 22,700 18,727 3,973 Net Other Income / (Expense) (1) 1, Loan Purchase Revenue 6,921 7,459 (538) Total Net Revenue 30,746 27,139 3,607 General and Administrative Expense (15,026) (13,342) (1,684) Credit Costs (Adjusted) (1,962) 50 (2,012) Extraordinary Income / (Loss) (196) Pre-tax Profit 13,798 14,083 (285) Taxes (5,635) (5,823) 188 Net Income 8,163 8,260 (97) (1) Excludes income on loans purchased at a discount (2) Swap income adjusted 27

28 Composition of Loan Purchase Revenue (LPR) (JPY in millions) FY06 1H FY05 1H Better/ (Worse) Amortization included in Interest Income 3,323 3,897 (574) Amortization of Unearned Loan Purchase Revenue 3,577 4,761 (1,184) Offset of Provision for General Reserve for Possible Loan Losses (253) (863) 610 Amortization included in Fees and Commissions (11) Revenue included in Other Ordinary Income 3,300 2, Add-back of Offset of Provision for General Reserve for Possible Loan Losses (610) Loan Purchase Revenue (LPR) 6,921 7,459 (538) 28

29 Composition of Credit Costs (JPY in millions) FY06 1H FY05 1H Better/ (Worse) Credit Costs included in Extraordinary Income (939) (3,726) (2,787) Credit Reversal Recoveries of Write-Offs - (3,724) (3,724) (939) (2) 937 Credit Costs included in Other Expenses 2,901 3, Write-Offs 2,297 3,676 1,379 Reserves (604) Credit Costs (Adjusted) 1,962 (50) (2,012) 29

30 Approach to Customers Financial Freedom E Education S Solution P Partnership Help customers acquire financial knowledge Provide customers with personalized solutions Build trusted relationships with customers <Financial Lounge> <In-Branch Seminar> <Financial Coach> 30

31 History of TSB June: Started operation Purchased 600bil assets from Tokyo Sowa Bank for 450bil without public funds injected June: Opened Osaka Branch Feb: Opened Nagoya Sub-Branch Oct: Opened Fukuoka Sub-Branch Oct: Listed on 1 st Section of TSE Jul: Upgraded Nagoya Sub-Branch into Branch Oct: JCR Rating Upgraded to A Nov: 1 st Issuance of public debt ( 20bil) Nov: Opened Sendai Branch Feb: StarOne Mortgage May: BANK BEST Sep: Reverse Mortgage Feb: Callable Time Depo Oct: Star Fit Mortgage Loan Oct: Index-Linked USD Structured Depo 31

32 Key Loan Products StarOne Mortgage - First deposit-linked mortgage in Japan (Feb.03) - Higher interest rate in exchange for convenience As of Oct 06 (campaign rates) Bank A initial 5 years 1.85% fix Bank B initial 5 years 2.60% fix TSB initial 5 years 3.05% fix BANK BEST - Interest rates 13.5% to 14.5% - Maximum 10MM, 7 years - Reduces burden of debt repayment through consolidation Debtor to Investor Principal with interest Consumer Finance A Consumer Finance B BANK BEST Investment products Consumer Finance C <Loan> <Deposit> Maximum 7 years 32

33 Structured Yen Time Deposit Callable JPY time deposit - 10 year Deposit callable at 6 year - 6 year Deposit callable at 4 year - 3 year Deposit callable at 2 year Stable yen funding (Non-cancelable) Premium earned from swaption 1.60% (per year) 1.80% (per year) 2.00% (per year) Attracting new customers 3 years 6 years 10 years 33