Interim FY2006 Business Results Presentation. December 1, 2006 (Friday)

Transcription

1 FY2006 Business Results Presentation December 1, 2006 (Friday)

2 Table of Contents Aozora Bank Business Strategy Outline of FY2006 Results 1

3 1. Aozora Bank at a Glance History Founded in April 1957(The Nippon Fudosan Bank, ltd.) Temporarily nationalized in December 1998 (state control under Financial Revitalization Law) Re-privatized in September 2000 Changed name from Nippon Credit Bank to Aozora Bank in January 2001 Changed status from a Long-Term Credit Bank to an ordinary commercial bank on April 1, 2006 Listed on TSE on November 14 th Overview (as of September 2006) Headquarter in Chiyoda-ku, Tokyo Headquarters and domestic branches: 19(Nov. 30 th ) Overseas offices: 4 FY06 Net Income: JPY 53.4 billion Net Assets: JPY billion; ROE: 14.0% Total Assets: JPY 6,438.8 billion; ROA: 1.6% Credit Rating: Baa1 (Moody s); BBB+ (S&P); A- (Fitch); A- (R&I); A (JCR) (Nov. 30 th ) Shareholders Common Prior to IPO Fully-Diluted Cerberus NCB Acquisition, L.P. 62% 41% 35% 28% ORIX Corporation 15% 10% 9% 7% Tokio Marine & Nichido Fire Insurance Co., Ltd. 15% 10% 9% 7% Other 88 financial institutions 8% 5% 7% 5% Deposit Insurance Corporation of Japan / The Resolution and Collection Corporation (3) - 33% - 22% (1) Net Income / Term-end Net Asset (Annual Basis) (2) Net Income / Term-end Total Net Asset (Annual Basis) (3) Assumes conversion rate of 1 to 5 for Series 4 Preferreds and conversion price of JPY450 for Series 5 Preferreds (4) Post Greenshoe option exercised Common Post IPO (4) Fully-Diluted 2

4 2. Growth in Corporate Business Refocus on Loan Growth (1) Impact in Six Months (4/2006 9/2006) 4,000 Refocus 63 new client relationships 3,489.3 JPY 1.75 billion of fees and 3,000 2, , , ,136.3 commissions from new customers Approx. 120bil. Increase in total assets Increase of JPY billion in loans 2,000 Loan growth of 11.3% (1) vs. 0.8% average for key major City and Trust banks (2) 1,000 Focusing on MEs 0 3/04 3/05 9/05 3/06 9/06 Loans Outstanding Sales for MEs and financial consulting of its owner Advisory on capital policy, Utilization of PE fund (1) Consolidated basis (1) Consolidated basis (2) Based on publicly available information published by MUFG, Mizuho, SMFG, Resona, Mitsui Trust, and Sumitomo Trust and Banking 3

5 3. Major Player in High-Margin Specialty Finance Market (JPY in billions) 50 Investment Banking (1) Real Estate Finance S - Non-recourse real estate finance, mezzanine, equity and J-REITs CAGR 51.5% FY3/04 FY3/05 FY3/06 FY9/06 (1) Consolidated Managerial Accounting Basis Leveraged Finance (Japan and Asia) Global Finance (Europe) Structured Credit Real Estate Finance Structured Credit - Asset Finance, Special Situations, Recovery Finance, Credit Trading and Hospital Finance Global Finance - Syndicated loans in European and U.S. Markets Leveraged Finance - - One of leading players in emerging leveraged finance market in Japan Recently expanded in non-japan Asia with opening of subsidiary in Hong Kong 4

6 4. Leveraging Existing Relationships with Financial Institutions (JPY in trillions) Total Universe (1) Number Total (2) Deposits Total Loans Aozora Coverage Ratio (3) City and Trust % Banks (4) Regional Banks 111 Cooperative Banks Financial Institutions Coverage As of March Credit 172 Cooperatives Others (5) % 93% 55% 53% Non-performing loan investment Ship finance Hospital-related finance Key Opportunities Sourcing Distribution Advisory Asset-backed securities Asset-backed commercial paper Collateralized loan obligations Privately placed fund products Structured debt instruments Arranger of syndicated loans Loan portfolios for securitization Other Assetbacked securitizations Total % Financial Institution Relationship Managers 60 (1) Source: Bank of Japan (2) Including CDs (3) % of financial institutions that have completed transactions with Aozora (4) Bank of Tokyo-Mitsubishi UFJ, Mizuho Bank, SMBC, Resona Bank, Mizuho Corporate Bank, Saitama Resona Bank, Mitsubishi UFJ Trust & Banking, Mizuho Trust & Banking, Chuo Mitsui Trust & Banking, Sumitomo Trust & Banking (5) Governmental financial institutions, insurance companies, other banks, etc. 5

7 5. Targeted Expansion of Retail Banking Important source of funding Affluent customer base Almost doubled retail deposits to JPY 1,271.7 billion in 5 years (19.2% CAGR); funds over 20% of the total liabilities Over 200,000 customers with average deposits of over JPY 6.5 million High potential cross-selling of investment products Growth in fee and commission income Demonstrated growth in sales of investment trusts and variable annuities Strategy for growth 19 branches, in Tokyo and 10 other major cities in Japan New flagship branch in Nihonbashi in central Tokyo in November 2006 National account access through Japan Post s ATM network Centralized loan center and back office functions for efficiency Plans to provide 24/7 access through call center, ATMs and internet Selective expansion of branch network Relocation of some branches and branch refurbishment based on the new Nihonbashi flagship branch 6

8 6. Experienced Management Team Diverse Blend of Skills and Experience Office of Chief Executive Senior Managing Executive Officer Michael E. Rossi (1) William Chute Carlos A. Erchuck David Hackett Chairman Former Vice Chairman of Bank of America Corporation CTO Technology & Operations Former Managing Director and Chief Information Officer of Nikko Citigroup CRO Risk Former Executive Director and Senior Credit Risk Officer for the Asia Pacific of UBS AG Tokyo CFO Finance Former Managing Director at Nikko Citigroup Hirokazu Mizukami (1) Yuji Inagaki Katsutoshi Ishida Hiroshi Jinno President Former Managing Executive Officer of The Sumitomo Trust & Banking Co., Ltd. CMO Marketing CCO Credit Financial Institutions Former Managing Director at J.P. Morgan Partners Asia Pte., Ltd Kimikazu Noumi (1) Lee Millstein (1) Takeyoshi Morikawa Izumi Ogura Vice Chairman Former President of Nourinchukin Zenkyoren Asset Management Co., Ltd. Corporate & Investment Banking Former Managing Director of Morgan Stanley Japan Retail Banking Financial Markets Former Branch Manager of Dresdner Bank AG Tokyo (1) Denotes a Board member 7

9 7. Global Standard Corporate Governance 9 out of 13 Board Members are Outside Directors Frank W. Bruno Yoichiro Iwama Marius J.L. Jonkhart Pieter Korteweg Lawrence B. Lindsey Yoshihiko Miyauchi James Danforth Quayle John L. Steffens Kiyoshi Tsugawa President of Cerberus Global Investment Advisors, LLC Director & President of Tokio Marine Asset Management Former Director of the Domestic Monetary Affairs of the Netherlands Ministry of Finance Senior Advisor of Cerberus Global Investment Advisors, LLC Former Chairman of the Supervisory Board of the Netherlands Pensions and Insurance Supervisory Authority and Chairman of the Supervisory Board to the Dutch Central Bureau of Statistics Former Assistant to President Bush for Economic Policy and Director of National Economic Council of United States Chairman & CEO of ORIX Corporation Former Vice President of the United States ( ) Former Vice Chairman of Merrill Lynch Former Chairman of Lehman Brothers Japan The Audit and Compliance Committee is comprised solely of non-executive directors 8

10 8. Management Targets Low double digit % growth in Net Revenue High single digit % growth in costs Loan book growth to exceed industry average Ultimately capital adequacy Tier 1 8~10% 9

11 9. Delivering Corporate Value Track Record of Success in Delivering Corporate Value Consolidated Shareholder s Equity Capital Utilization 800 (Bil. yen) M & A Provision for BaselⅡ Repayment of Public Fund 400 Return to Shareholders End Mar End Mar End Mar End Mar End Mar End Mar End Sep

12 10. Recent Achievement GMAC Deal Investment amount : USD 500 million Ownership of GMAC : over 3% 3 types of benefit Capital gain on exit Annual earnings accretion based on holding Synergistic business opportunities 11

13 11. Aozora Spirit Keep Challenging Every Possibility in Financial Market Multi - Cultural Partnership with our counter-parts for mutually beneficial solutions Pursuit of Targeted Markets Increasing Corporate Value Flexibility and Responsiveness Corporate Governance, Control and Risk Management global best practices Challenge the conventional Entrepreneurship Mistakes are acceptable Sophisticated and Strict Risk Management Hard Financial Ground 12

14 Aozora Bank Business Strategy Outline of FY2006 Results 13

15 1. FY2006 Financial Highlights Record consolidated Net Income of JPY53.4 bil. with 18.8% increase from the previous year: Consolidated Net revenue increased by 8.3% Consolidated Operating profit increased by 29.5% Consolidated Overhead ratio (OHR) lowered to 45.3% from 45.9% Continued loan growth and further improvement in asset quality: Consolidated loan balance increased by JPY353.0 bil. at end Sep Non-consolidated NPL ratio at 0.69% as at end Sep Non-consolidated coverage ratio of reserve and collateral etc. stood at 91.1%, remaining at a very high level High capital adequacy ratio: Consolidated Tier 1 ratio decreased by 0.60 point to 18.52% Consolidated capital adequacy ratio decreased by 0.73 point to 18.74% 14

16 2. Profitability : Overview Record Consolidated Net Income from substantial increase in Net Revenue Strong non-interest income growth drive 8.3% growth in Net revenue, 29.5% growth in Operating Profit, and 18.8% growth in Net income (100 mil. Yen) Consolidated Net Revenue (100 mil. Yen) Consolidated Operating Profit (100 mil. Yen) Consolidated Net income FY2002 FY2003 FY2004 FY2005 FY FY FY2003 FY2004 FY2005 FY FY FY2003 FY2004 FY2005 FY

17 2. Profitability : Earnings Review Positive Developments in Revenue Growth and Diversification Support Gains in Earnings (100 million yen) Net revenue of 58.1 bil. yen 8.3% increase year-on-year General and administrative expenses increased but tight cost controls led to low Overhead Ratio Consolidated Overhead Ratio down to 45.3%, notwithstanding robust investments in people and technology for future growth FY 2006 Change FY 2005 Consolidated net revenue (*1) Net interest income Non-interest income Net fees and commissions Net trading revenues Net other operating income Gains (losses) on bond transactions General and administrative expenses Business profit (*2) Write-off/loss on disposition of loans Write-off of loans Provision for General loan-loss reserve etc. (*3) Loss on disposition of loans Gains (losses) on stock transactions Other Operating profits Extraordinary profits (losses) Reversal of reserve for possible loan losses Reversal of general reserve for possible loan losses Reversal of specific reserve for possible loan losses Reversal of reserve for loans to restructuring countries Recoveries of written-off claims Reversal of reserve for credit losses on off-balance sheet instruments Other extraordinary profits (losses) Income before income taxes and others Current and deferred taxes Minority interest in net income Net income Credit-related expenses (*4) (*1) Consolidated net revenue:(interest income - Interest expenses)+(fees and commisssions income - fees and commissions expenses)+ (trading revenue - trading expenses)+(other operating income - other operating expenses) (*2) Business profit = Consolidated net revenue - General and administrative expenses (*3) Provision for General loan-loss reserve includes reserve for credit losses on off-balance sheet instruments. (*4) Credit related expenses =Expenses on problem loan disposals + Provision for general loan losses, including reversal amount posted as Extraordinary profits. 16

18 2. Profitability : Overhead Ratio Overhead Ratio at a stable, Low Level Overhead Ratio excluding deferred profit from macro-hedging decreased by 5% Average yield on loans improved to 2.05% (consolidated) Average yield spread (margin) rose to 1.59% (consolidated) 100 mil. yen Operating Efficiency (OHR) 280 G&A (Consolidated) 65% OHR OHR (excluding deferred profit from macro-hedging) % 2.20% 2.05% % 1.92% % 50.4% % 55% 50% 1.80% 1.60% 1.40% 1.54% 1.59% 1.20% Average yield on loans (consolidated) % 45.3% 45% 1.00% Average yield spread (margin)*1 (consolidated) Second Half of FY2005 First Half of FY2006 (*1) "Yield on loans" minus "Yield on debentures, deposits & certificates of deposit" % FY2004 FY2005 FY

19 2. Profitability : Breakdown of Net Revenue Continued Execution of Strategy to Enhance Earnings Quality and Diversity Consolidated Non-interest income as percentage of total Net Revenue up 12.9 points year-on-year (to 62.6% from 49.7%) Consolidated Net Fees and Commissions up 18.6% Consolidated Net Other Operating Income up 49.0% Largely from gains on bond transactions and gains on limited partnership investments 100 mil. yen Breakdown of Consolidated Net Revenue Net interest income (excluding def erred hedge gains re prior macro-hedging) Def erred hedge gains re prior macro-hedging (accounted as Net interest income) Net other operating income Net trading rev enues Net f ees and commissions FY2002 FY2003 FY FY2005 FY

20 2. Profitability : Breakdown of Net Revenue by Business Group Consolidated Net Revenue* by Business Group (Bil. yen) Others (unallocated) RBG FIG FMG CIBG FY2005 FY2006 **Consolidated net revenue by managerial accounting basis + Gains(Losses) on stock transactions* 19

21 2. Profitability : Breakdown of Non-interest Income Not Overly Reliant on Any Single Source of Non-Interest Income (Consolidated, 100 mil. yen) Syndicated loan related fees Securitization related fees Fees on issuing private placement bonds Sales of private investment trust products Fees related to sales of investment trust products and annuity insuranace to retail customers Trading revenue, including derivatives trading FX transactions, including currency options Hedge funds Loan related fees (Commitment line, loan securitization etc.) M&A fee Total non-interest income: 364 Investment banking business related revenues Real estate finance Recovery finance Ship finance Leveraged finance etc. Investment related revenues REIT investment Investment partnerships related to recovery finance Investment partnerships related to real estate Investment partnerships related to venture capital Financial Institutions Corporate Banking Investment Banking Corporate & Investment Banking Retail Banking Financial Markets 20

22 3. Balance Sheet : Overview Maintains Superior Capital Strength while Rebalancing Asset Base Total increased through accumulation of high quality assets Consolidated loans and bills discounted up 11.3% from end Mar % increase in investment securities, mainly JGBs Increased both deposits and certificates of deposits, with steady increase in retail deposits (Bil. yen) 3,500 3,000 2,500 2,000 1,500 1, Outstanding balance of deposits (by type of depsitor) Negotiable certificate of deposits Other deposits Retail deposits , , ,005 1,101 1,144 1,272 1,355 Mar Mar Mar Mar Mar Mar Sep <Consolidated> (100 million yen) End Sept Change End Mar Assets Cash and due from banks 1,059-2,601 3,659 Call loans and bills bought 2, ,162 Trading assts Securities 18,185 1,903 16,282 Loans and bills discounted 34,893 3,530 31,363 Deferred tax assets Reserve for possible loan losses Other 7,542 1,446 6,096 Total assets 64,388 4,428 59,959 Liabilities Deposits and Certificates of deposit 33,213 1,250 31,963 Debentures 12,325 1,722 10,603 Call money and bills sold 3, ,845 Trading liabilities ,049 Other 7,164 1,905 5,258 Total liabilities 56,760 4,041 52,719 Minority interest in consolidated subsidiaries Net assets Capital stock 4,198-4,198 Capital surplus Retained earnings 3, ,709 Treasury stock Net unrealized losses on available-for-sale securities, net of taxes Net deferred losses on hedging instruments, net of taxes Minority interests Total net assets 7, ,234 Total liabilities and net assets 64,388 4,428 59,959 (Note) Figure of "Total liabilities and net assets" as of end Mar is equivalent amount of "Total liabilities, minority interests and shareholders' equity" on the respective dates. (Non-consolidated basis) 21

23 3. Balance Sheet : Quality of Capital1 Increase in Profits and Risk-weighted Assets has kept Consolidated Capital Adequacy Ratio to over 18% Consolidated Capital Adequacy Ratio: 18.74% at end Sep. 2006, down from 19.47% at end Mar Consolidated Tier 1 Ratio: 18.52% at end Sep. 2006, up from 19.12% at end Mar Negligible usage of deferred tax assets Government ownership of common stock reduced to approx. 22% from 33% Risk-weighted assets Regulatory capital Tier1 capital (100 million yen) 25% <Consolidated> (100 million yen) End Sep Change End Mar ,000 30,000 20,000 34,672 Capital adequacy ratio Tier 1 ratio 33, % 18.70% 18.31% 37, % 19.12% 41, % 18.52% 20% Capital adequacy ratio 18.74% -0.73% 19.47% Tier 1 ratio 18.52% -0.60% 19.12% Risk-weighted assets 41,293 3,744 37,550 (1) Tier 1 7, ,180 (2) Tier 2 (qualifying as capital) (3) Deducted items , % 5,431 5,205 6,172 6,045 7,313 7,180 7,741 7,652 15% Capital (1) + (2) + (3) 7, ,313 (4) Deferred tax assets Deferred tax assets/tier 1 (4) / (1) 3.66% -0.18% 3.85% 0 End Mar End Mar End Mar End Sep % (Note) Figures at end September 2006 are preliminary. 22

24 3. Balance Sheet : Quality of Capital2 Current Public Funds Book Value Number of shares Per stock Conversion Ratio Current number of common stocks equivalent 4 th preferred stock 24,072,000 JPY 24,072,000,000 5 per stock 1,000 5 th preferred stock JPY 155,279,700, / 450 per stock 345,066,000 Total JPY 179,351,700, ,426,000 Net proceed required by government Prior to IPO: JPY bil. Proceed at IPO: JPY bil. Post IPO: JPY bil. at minimum 23

25 3. Balance Sheet : Quality of Asset Ratio of FRL Credit to Total Credit Maintained at Low Level of 0.69% * High collateral and reserve coverage maintained at 91.1% * * non-consolidated basis (At end Sep. 2006) Aozora 6 major Japanese banks (*) FRL Credit to total credit 0.69% 0.83~2.52% Ratio of coverage by reserves, collateral and guarantees to FRL credit 91.1% 73.1~87.5% *(*) Quoted from publicly disclosed figures on bank subsidiary basis for Mizuho FG, Sumitomo Mitsui FG, Mitsubishi-UFJ, Resona, Sumitomo Trust and Mitsui Trust. 24

26 4. Outlook : Current & Projection Operating Profit and Net Income Trends and Forecast JPY 100 mil. 1,200 1,201 2nd Half Net Income 1st Half Net Income 2nd Half Operating Profit 1st Half Operating Profit 1, (Forecast) (Forecast) Operating Profit FY2005 Net Income Operating Profit FY2006 Net Income 25

27 < Inquiries > AOZORA BANK, LTD. Corporate Communication Group TEL: FAX: URL: Harada: Sengoku: This presentation material contains information that constitutes forward-looking statements. The statements are not guarantees of future performances and involve risks and uncertainties. The actual results may differ from the forward-looking statements due to factors including changes in economic conditions and market interest rates etc.