First section of TSE Security Code: 8545 FY2015 Performance Investors Meeting Presentation June 8, 2016 Image characters from left: Kansai, Urban and Ginko
Contents I. Bank Summary P4 II. FY2015 Performance Summary 1 Non-Consolidated Performance Summary P6 2 Deposits, Loan Balance and Interest Yield P7 3 Loan Composition by Region and by Industry P8 4 Loan-Deposit Ratio and Yield Difference P10 5 Credit costs, Assets under Financial Reconstruction Act P11 6 Sales of Financial Asset Products P12 7 Expenses and OHR (Overhead Ratio) P13 8 Securities Management P14 III. FY2016 Earnings Plan & Performance Forecast IV. Business strategy P17 1 Corporate Strategy P19 2 Individual Customers Strategy P21 3 Channel Strategy P23 4 Provision of Advanced Financial Services as SMBC Group 5 Efforts toward Promotion of Diversity and Regional Contribution P24 P25 6 Efforts to Strengthen Governance P26 V. Capital and Dividend Policy P28 9 Progress of Medium-Term Management Plan P15 Note: Monetary amounts indicated in tables, etc. of this document are presented by omitting figures below the unit as a general rule.
I. Bank Summary 3
Merger Shiga Mujin Merger March 2010 Kansai Urban Banking Corporation Merger/change in name Kansai Urban Banking Corporation (KUBC) Bank Summary Date of Foundation Head Office Location Capital Stock Number of Employees Number of Branches Term-end Balance of Major Account (nonconsolidated) Capital Ratio History July 1, 1922 2-4, Nishi-Shinsaibashi 1-chome, Chuo-ku, Osaka 47.0 billion yen 2,429 July 1922 Yamashiro Mujin Founded August 1925 Kajitsu Mujin Founded November 1925 Kogyo Mujin Founded Profile Domestic: 138 branches (including Head Office), 18 sub-branches Deposits (including NCDs): 3.9 trillion yen Loans : 3.7 trillion yen Securities: 298.9 billion yen Non-consolidated: 7.13% (Consolidated: 7.25%) October 1942 October 1951 Kansai Sogo Bank Change in name September 2000 Kansai Sawayaka Founded Shiga Sogo Bank January 2001 Kansai Sawayaka Bank Business transferred from Kofuku Bank October 1951 February 1989 Change in name Hyogo 9 Third-party allocation of new shares (allocated to The Sumitomo Bank, Limited, etc.) January 1999 February 1989 Kansai Bank Change to commercial bank Change in name Biwako Bank Change to commercial bank Branch network Kyoto 11 Osaka 76 Nara 3 Wakayama 2 February 2001 Shiga 52 February 2004 Aichi 1 Tokyo 2 Issuance of priority shares through thirdparty allocation (allocated to Sumitomo Mitsui Banking Corporation, etc.) September 2004, March 2005 Shareholder Composition Shareholder Number of shares held (1000 shares) Shareholding ratio* Sumitomo Mitsui Banking Corporation 36,109 48.9% Ginsen Co., Ltd. 3,625 4.9% Cedyna Financial Corporation 2,762 3.7% Japan Trustee Services Bank, Ltd (Held in trust account) 1,953 2.6% Sumitomo Mitsui Card Co., Ltd. 1,781 2.4% Sumitomo Mitsui Finance and Leasing Co., Ltd 1,586 2.1% The Japan Research Institute, Limited 1,289 1.7% The Master Trust Bank of Japan, Ltd. (Held in trust account) 1,038 1.4% Japan Trustee Services Bank, Ltd (Held in trust account 9) 971 1.3% Kansai Urban Banking Corporation Treasury Stock Investment Fund 952 1.2% Total 73,791 Sumitomo Mitsui Financial Group Total 44,016 59.6% * Number of shares held /Total number of ordinary shares issued April 2005 Listed in first section of TSE March 2009 Third-party allocation of new shares (allocated to Sumitomo Mitsui Banking Corporation) Issuance of priority shares through third-party allocation (allocated to Sumitomo Mitsui Banking Corporation) July 2013 (as of March 31, 2016) 4
II. FY2015 Performance Summary 5
1. Non-Consolidated Performance Summary FY2014 FY2015 YOY Change Gross banking profit 666 638-28 Net interest income 593 575-17 Net fees and commissions 57 45-11 Net other operating income 16 17 1 Expenses (excluding non-recurring losses/ amortization of goodwill) -433-421 11 Net operating income (loss) 233 216-16 Net core banking profit 233 216-16 Amortization of goodwill -7-7 - Provision for general reserve for possible loan losses (1) - - - Net banking profit 225 209-16 Credit costs (2) -6-5 0 Gains on reversal of reserve for possible loan losses (3) 2 8 5 Ordinary profit (loss) 222 204-18 Income taxes-deferred -49-42 7 Net income (loss) 170 151-18 Total credit costs ((1)+(2)+(3)) -4 2 6 Earnings Forecast (May 2015) 230 230 220 185 150-30 FY2015 Performance Overview 1. In terms of business, loans increased by 160.0 billion yen (+4.4% year on year), the highest increase since the merger in March 2010. 2. In terms of the top line, profits decreased mainly due to lower interest rates on loans and lower investment trust sales. 3. The bottom line generally turned out to be as forecasted as a result of recognizing a gain on reversal of reserve for possible loan losses (decrease in credit costs) and other factors. (Major year on year source of changes in net interest income) Year on Year Average balance factor Yield factor Interest on loans -27 13-40 Interest on deposits (including NCD) 9-0 9 Interest on securities -2 0-2 Interest on subordinate loans 3 - - Total -17 - - (Major components of net fees and commissions) Of which investment trust commissions and trust fees Year on Year FY2015 Actual -11 52 Of which corporate loan related fees -4 17 Commissions received (Total) -11 127 Commissions paid (Total) 0 81 Net fees and commissions -11 45 6
2. Deposits, Loan Balance and Interest yield Deposit balance increased by 69.1 billion yen (+1.8% year on year). Interest yield improved by 0.03% from the previous fiscal year to 0.13%. Loan balance expanded by 160.0 billion yen (+4.4% year on year) primarily for small and medium-sized enterprises (which was the highest increase since the merger in March 2010). Deposits Loans 37,244 36,817 37,528 38,219 35,619 35,630 36,031 3,715 3,726 3,755 37,631 3,741 26,458 25,810 26,128 26,014 14,483 14,476 14,341 14,309 0.20% 0.18% 0.16% 0.13% 10,786 11,006 11,399 12,205 2,799 2,743 2,612 2.07% 1.95% 1.82% 14,620 14,684 15,322 2,636 1.71% 16,943 Liquid deposits Fixed-term deposits, Foreign currency deposits Yield on deposits Other loans Housing loans Medium and large enterprises / local public entities Small and medium-sized enterprises Yield on loans Note: Loan balance after deducting a change in market value occurring from the merger. 7
3. Loan Composition by Region and by Industry (1) In terms of region, the loan balance increased in all regions. Particularly in the Hanshin area, the balance increased by 100.8 billion yen year on year mainly for business-related loans. In terms of industry, loans increased in a wide range of sectors, especially in the real estate sector (up 95.7 billion yen year on year). Loan composition by region 35,619 35,630 36,031 965 983 1,031 3,914 4,001 4,114 9,589 9,428 9,336 37,631 1,085 4,529 9,458 Loan composition by industry 35,619 35,630 36,031 3,095 2,940 2,881 5,986 6,138 6,364 6,990 6,753 6,893 37,631 2,937 6,726 7,850 21,149 21,217 21,549 22,557 19,546 19,799 19,892 20,117 Hanshin(Osaka, Hyogo) Keiji(Kyoto, Shiga) Outside Kansai district (Tokyo, Aichi) Kansai district(others) Individuals Real estate Manufacturing + Wholesale/Retail + Service, etc. Others 8
3. Loan Composition by Region and by Industry (2) 100% 80% 60% 40% 20% [Loan composition by segment in the real estate industry] No significant change in loan composition by segment. There was a slight recent increase in loans for sales of local single-family houses. 30% 26% 27% 26% 47% 52% 50% 50% 23% 22% 23% 24% 0% Other (excluding sales and rental) Rental Sales of single-family houses [Loan composition by region in the real estate industry] 100% 80% 60% 40% 20% 0% In terms of loan composition by region, loans in the Hanshin area increased. 18% 15% 15% 16% 17% 17% 16% 15% 63% 66% 67% 68% Kansai district (others) Keiji (Kyoto, Shiga) Outside Kansai district (Tokyo, Aichi) Hanshin (Osaka, Hyogo) [Loan composition by rating in the real estate industry] In terms of loan composition by rating, the percentage of loans for high rating borrowers increased 100% 80% 60% 40% 20% 0% 51% 48% 49% 52% 2015/3 2016/3 General rating borrowers High rating borrowers [Loan balance per borrower in other segment (other than sales of single-family houses and rental)] 2015/3 2016/3 YOY Change Real estate 2.9 3.0 +0.1 Other (excl. sales of single-family houses and rental) High rating borrower General rating borrower 3.9 3.9 ±0.0 5.2 5.8 +0.6 3.0 2.2-0.8 Loans for the real estate industry are provided under the policy of valuing local business entities, high rating borrowers & prime properties and concentrated risk aversion. Particularly in the other segment (other than sales of single-family houses and rental), the balance per general rating borrower is restrained in consideration of past experience. In regard to loans for rental properties, KUBC is in the process of building a structure for enhancing sophistication of loan credit reviews and on-going management with the use of market analysis based on demographic trends, rent projections, etc. Note: All figures in graphs/tables are on managerial accounting basis. 9
Kansai district listed regional bank average (not including KUBC) Loan-deposit interest margin KUBC Loan-deposit ratio 4. Loan-Deposit Ratio and Yield Difference Given the risk-taking policy from loans in place, the loan-deposit ratio maintained a level higher than the average of neighboring banks. Maintained a level higher than the average of neighboring banks by focusing on retail loans, although the yield difference is diminishing. [Trend of loan composition by borrower] Trend of loan-deposit ratio and interest margin 100% 7.9% 7.7% 7.3% 7.0% 89.8% 94.6% 93.2% 94.5% 75% 41.0% 41.2% 42.5% 45.0% 50% 92.1% 93.0% 68.8% 68.4% 68.7% 71.2% 25% 51.1% 51.1% 50.2% 48.0% 0% Consumer loans Small and medium-sized enterprises Medium and large enterprises / local public entities 1.87% 1.77% 1.66% 1.58% 100% 75% 50% 25% 0% 73.0% 27.0% 27.7% 28.6% 29.3% 36.7% 36.3% 36.2% 36.6% 36.3% 36.0% 35.2% 34.1% 70.7% * Prepared by KUBC based on disclosed materials 1.47% 1.37% 1.28% 1.18% Loan-deposit ratio (KUBC consolidated) Loan-deposit ratio (Kansai district listed regional bank average (not including KUBC)) Loan-deposit interest margin (KUBC) Loan-deposit interest margin (Kansai district listed regional bank average (not including KUBC)) * loan-deposit ratio (consolidated) = loans (consolidated)/deposits (consolidated) 10
5. Credit Costs, Assets under Financial Reconstruction Act As for credit costs, a gain on reversal of reserve for possible losses of 0.2 billion yen was posted mainly as a result of a decline in bankruptcies and an increase in collections caused by higher land prices. NPL under the Financial Reconstruction Act was reduced by 6.2 billion yen (NPL ratio down to 1.77%) mainly as a result of an improvement in category and collection. 0.69% Trend of credit costs Trend of Assets under Financial Reconstruction Act 1,729 295 243 0.07% 0.01% - 0.00% 25 4-2 FY2012 FY2013 FY2014 FY2015 Credit costs Credit cost ratio * Credit cost ratio = credit costs / average loan balance 4.82% 1,137 1,040 239 544 296 257 2.90% 733 55 533 2.02% No. 2 among 7 regional banks listed in the Kansai district in FY2015 671 91 468 145 111 1.77% Bankrupt assets Doubtful assets Substandard loans NPL ratio 11
Investment trust balance 6. Sales of Financial Asset Products Sales of investment trusts recovered in the second half of the fiscal year although sales were down 25.5% year on year due partly to the influence of market conditions. The asset balance of investment trusts in regional banks with an equivalent asset size continue to show a high level of maintenance. [Trend of investment trusts and insurance sales] [FY2015 Trend of quarterly investment trusts and insurance sales] 2,017 2,083 469 395 2,162 335 1,839 479 475 466 95 129 408 117 487 136 1,548 1,687 1,827 1,359 380 337 291 351 FY2012 FY2013 FY2014 FY2015 Sales of investment trusts Sales of insurance 1Q 2Q 3Q 4Q Sales of investment trusts Sales of insurance [Trend of investment trusts and insurance sales fees] 7,319 (million yen) 6,353 6,550 902 6,469 1,505 1,176 1,236 700 600 500 [Investment trusts balance of upper ranked banks] KUBC s investment trust balance-asset ratio is No.1 among the investment trust balance of upper ranked banks. (billion yen) 400 Kansai Urban 4,848 5,374 6,416 5,233 300 200 Average line of upper ranked 30 banks 100 FY2012 FY2013 FY2014 FY2015 Sales fees of investment trusts(including trust fees) Sales fees of insurance 0 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Deposits * Prepared by KUBC based on disclosed materials and Nikkin Investment Trust Information (May 16, 2016 edition) for listed regional banks and subsidiary banks 12
7. Expenses and OHR (Overhead Ratio) Expenses decreased by 1.1 billion yen year on year primarily due to decreases in rent and deposit insurance as a result of purchasing the head office building. Core OHR was 66.0%, remaining in the mid-60% level which is the target line under the Medium-Term Management Plan. Reinforcing the BPR promotion structure from FY2015 in an aim to strengthen business skills by further enhancing expense controls and carving out extra business capacity. 411 415 19 17 60.0% 176 181 [Expense and OHR trends] 62.1% 433 421 21 22 65.0% 66.0% 189 175 Personnel expenses [Key factors of year-on-year change] FY2015 YOY Change 224 +1 Key Factors Rise in bonuses (5%) Rise in social insurance rates 215 216 222 224 Non- Personnel expenses 175-14 Decrease in rent as a result of purchasing the head office building Decrease in insurance premiums due to lower deposit insurance rates FY2012 FY2013 FY2014 FY2015 Personnel expenses Non-Personnel expenses Taxes Core OHR Core OHR: Expenses (excluding non-recurring losses/amortization of goodwill) / Gross banking profit (excluding gains (losses) on bonds) Taxes 22 +0 Total 421-11 Increase in pro forma standard taxation 13
8. Securities Management Security-deposit ratio and duration are both maintained at a low level. The management stance was partially revised with the aim of increasing interest on securities while mitigating interest rate fluctuation risk. (Duration) Trend of securities balance 5.31 yrs 2.79 yrs 2.28 yrs 1.97 yrs Trend of unrealized profit (loss) 35.1% 35.3% 4,315 33.4% 31.0% 157 164 306 364 994 10.3% 3,267 3,009 234 201 380 435 1,224 1,243 7.4% 7.9% 2,989 280 431 1,107 6.9% 113 37 72 19 57 19 42 45 19 21 95 97 2,649 1,202 1,354 1,169 18 34 Other securities Shares Municipality bonds JGBs Shares Bonds Others Total unrealized gains(loss) of securities Security-deposit ratio (KUBC) Security-deposit ratio (Kansai district listed regional bank average) * Security-deposit ratio (consolidated) = securities (consolidated) / deposits (consolidated) * Prepared by KUBC based on disclosed material 14
Medium-Term Management Plan Targets Business (Year-end balance) Profit/Loss 9. Progress of Medium-Term Management Plan Generally maintained target levels for the three key indicators under the Medium-Term Management Plan. Net income increased significantly due to a drastic reduction of credit costs and the bank achieved the target set at the time of extending the period of Medium-Term Management Plan for one year. FY2012 Actual Gross banking profit 702 Net interest income 643 Net fees and commissions 20 Expenses -411 Net operating income (loss) 290 Net core banking profit 274 Credit costs -243 Ordinary profit (loss) 23 Net income (loss) -62 Core OHR 60.0% Ratio of credit costs 0.69% Loans (Balance after deducting a change in market value) 35,619 Of which, that for small and mediumsized enterprises 14,620 Deposits (excluding NCDs) 37,244 Net core banking profit Net income FY2013 Actual FY2014 Actual FY2015 Actual Change from FY2012 673 666 638-63 618 593 575-67 30 57 45 24-415 -433-421 -10 257 233 216-74 252 233 216-57 -25-4 2 245 231 222 204 181 165 170 151 212 62.1% 65.0% 66.0% 6.0%pt 0.07% 0.01% -0.00% -0.69%pt 35,630 36,031 37,631 2,012 14,684 15,322 16,943 2,323 36,817 37,528 38,219 975 25.0 billion yen or more 23.0 billion yen or more 10.0 billion yen or more 15.0 billion yen or more Core OHR First half of 60% range Middle of 60% range 15
III. FY2016 Earnings Plan & Performance Forecast 16
FY2016 Earnings Plan & Performance Forecast Non-consolidated FY2015 Actual FY2016 Forecast YOY Change Gross banking profit 638 636-2 Net interest income 575 566-9 Net fees and commissions 45 49 3 Net other operating income 17 21 4 Expenses (excluding non-recurring losses/ amortization of goodwill) -421-436 -15 Net operating income (loss) 216 200-16 Net banking profit 209 190-19 Extraordinary profit (loss) -5-30 -25 Ordinary profit (loss) 204 160-44 Net income (loss) 151 140-11 Net interest income Plan to increase the loan volume by a level comparable to that of FY2015 (i.e., up 165.0 billion yen from the average balance in FY2015). Forecasting a decrease in profit of 0.9 billion yen due to a smaller loan-deposit interest margin, higher interest on securities and lower interest on subordinated loans in consideration of the financial environment in the last few years. Net fees and commissions Increase of 0.3 billion yen resulting from efforts to achieve investment trusts and insurance sales comparable to the actual results of FY2014. Net other operating income Increase of 0.4 billion yen mainly on the assumption that the gain/loss on valuation of derivatives which deteriorated in FY2015 would stay flat in FY2016. Though we are intending to continuously pursue strict expense control, expenses are expected to increase by 1.5 billion yen due to the following primary factors: Personnel expenses: Increase in salaries and social insurance expenses (0.2 billion yen each) in conjunction with an increase in headcount. Non-Personnel expenses: Increase in advertising expenses of 0.2 billion yen; increase in deposit insurance expenses of 0.1 billion yen Taxes: Increase in pro forma standard taxation of 0.5 billion yen; increase in property tax of 0.2 billion yen Credit costs 2-20 -22 Consolidated Consolidated ordinary profit (loss) Profit (loss) attributable to owners of the parent 222 175-47 160 150-10 Ordinary profit (loss) is expected to decline by 4.4 billion yen year on year mainly in connection with expenses and credit costs. However, net income is projected to be 14.0 billion yen, down 1.1 billion yen year on year due to an improvement in extraordinary losses of 0.8 billion yen and lower tax expense burden of 2.5 billion yen. Taking into account the uncertainty of domestic and overseas economic conditions, KUBC projects credit costs to be 2.0 billion yen, up 2.2 billion yen based on a conservative estimate. 17
IV. Business Strategy 18
1. Corporate Strategy (1) Increase transaction share with thorough community-based business - Continue to increase business volume while maintaining a certain level of quality via branches focusing on corporate business Deployment of essential relationship banking based on business feasibility assessment (1) Increase shares of existing corporate customers Make management issues of corporate customers apparent through business feasibility assessment (identifying the actual status of firms). Share them among the head office and branches for use in providing customers with optimal solutions and promoting a boost in transaction shares. [New business related loan transactions ] 1,351 945 (accounts) 1,585 1,544 1,520 1,062 1,123 1,094 [Major corporate customers ] (accounts) 2,620 2,666 2,807 2,952 (2) Unearth new corporate customers Actively unearth prime companies in the local communities by deploying the top sales force (senior officers responsible for local communities + division & branch managers). Promote a boost in transaction shares within local communities. FY2012 FY2013 FY2014 FY2015 New transactions Of which from corporate strengthening branch * Number of major corporate customers with loan balance of 100 million yen or more at end of FY - Proactive handling of real estate loans which is KUBC s forte Maximize the high transaction share with local real estate operators and actively respond to project financing while promoting provision of small-scale loans. Differentiate from other banks by leveraging the know-how of the specialized department in the head office and the agility of local community-oriented branches and demonstrating speedy and high-level skills to handle deals. [Balance of loans for small and medium-sized enterprises] 14,620 14,684 Up 162.1 billion yen (+10.6%) No. 1 Kansai district listed regional bank in terms of the amount & percentage of increase 15,322 16,943 * Balance of loans for small and medium-sized enterprises = Balance of loans to small and medium-sized enterprises Balance of consumer loans 19
1. Corporate Strategy (2) Further Enhancement of Total Solutions - Provision of essential solutions through business feasibility assessment [Business Succession Related Transactions] (million yen) 11,714 [M&A Related Fees] 23 (1) Reinforcement of the ability to make proposals in line with the business stage Position business succession, M&A, foreign exchange and business matching businesses as core income sources in the corporate business segment. The head office and branches make concerted efforts in providing optimal solutions in line with the business stages of corporate customers to further strengthen the earnings capacity of the corporate business division. 2,550 1,391 5,986 2,092 2,307 14 11 84 91 168 16 123 (2) Initiatives toward new industry development and regional revitalization Strongly support on a mid-to-long-term basis new operators of regional industries through industrial-academic-government cooperation centered on Kansai Urban Joint Research Grant and Osaka Top Runner Development Project. FY2013 FY2014 FY2015 Amount of financial assets gained Outstanding loan amount [Trade Transactions by Year] (million dollars) FY2012 FY2013 FY2014 FY2015 [Business Matching Deals] (3) Initiatives toward management improvement and business revitalization The specialized department in the head office provides finetuned 1,143 1,220 84 support for management improvement and business revitalization of corporate customers in coordination with 779 863 outside institutions. (April 2016: The Business Consulting Department which drives 31 34 48 business revitalization and the Loan Department which handles bad debt collection were integrated Further reinforcement of revitalization function.) FY2012 FY2013 FY2014 FY2015 FY2012 FY2013 FY2014 FY2015 Business matching commission (million yen) Number of business matching intermediary deals 20 285 M&A related fees (million yen) Number of contracted M&A deals 337 370 466
2. Individual Customers Strategy (1) Provision of added value and pushing forward to become the main bank 1. Housing loans Keeping balance between securing a certain level of profitability and maintaining volume (1) Enhancement of strengths in both loan centers and branches Revise loan center operations (optimize business skills and efficiency) Enhance education to improve skills of branch personnel and expand points of contact with customers in the trading zone. (2) Securing customer interest rates by utilizing the strengths of KUBC Capture middle-risk groups base on consulting-focused credit reviews. Continue promoting KUBC s proprietary products with added value. (3) Promoting compounding of transactions Promote and sell loans by purpose in line with life events, deposit CP, etc. Increase earning opportunities by offering products and services to customers who have fully repaid loans. 2. Housing related loans (1) Apartment loans Focus on improving profitability by pushing forward with efforts to become the main bank mainly for local affluent individuals and landlords. (2) Apartment owners loans Continue to promote loans on the premise of capturing prime deals. [Year-end balance of housing loans for business owners] [Trend of end of FY balance of housing loans and housing related loans] 1,224 1,409 1,572 1,693 3,012 3,089 3,115 3,244 14,504 14,491 14,352 14,318 Apartment loan (interest rate) Housing loan (interest rate) 21 * Loan balance before direct reduction is stated. Managerial accounting basis. 395 2.92% 428 455 18,740 18,990 2.04% 1.82% 1.83% 1.75% 2.83% 2.78% 2.73% 1.67% 1.67% 1.58% 1.50% FY2012 FY2013 FY2014 FY2015 Apartment owners loan (balance) Housing loan (balance) 480 [Examples of KUBC s unique housing loans] First in Japan Patented First in financial institution with head office in Kansai Housing loan with special agreement on full coverage insurance for cancer Housing loan with special agreement on insurance for three major disease 19,040 19,255 Housing loan with insurance for hospitalization support Housing loan with home renovation Housing loan with insurance for three new types of major insurance coverage Apartment loan (balance) Apartment owners loan (interest rate)
2. Individual Customers Strategy (2) Strengthening of financial consulting skills - Increasing earning opportunities by leveraging the firm customer base and building relations 1. Expansion of customer base and reinforcement of sales of financial asset products (1) Expansion of customer base Increase the number of base customers (e.g., pension receiving account holders and payroll account holders) serving as starting points of individual transactions. (2) Reinforcement of business skills at branch counters Expand points of contact with customers by emphasizing solicitation for branch visits. (Start of trial operation on holidays) Promote increased efficiency of administrative work at branches and reinforce OTC business skills. (3) Enhancement of sales skills and provision of fine-tuned follow-up Enhance the overall business skills of staff members responsible for public relations and OTC sales including toplevel sales by division and branch managers as well as reinforcing the overall follow-up skills. 2. Reinforcement of personal loans *1 Proactively implement promotional activities that contribute to boosting sales of purpose-oriented loans and launch new products. Pursue product revisions to strongly boost sales of free loans. 2,307 2,354 1,145 130,053 131,653 134,416 138,155 126,729 126,518 1,248 127,889 129,248 Pension (accounts) Payroll (accounts) 7,008 2,869 1,627 7,106 7,280 2,742 1,774 FY2012 FY2013 FY2014 FY2015 Balance of assets received as investment trusts [Origination amount per year and end of FY balance of personal loans *2 ] 463 422 *1 Consumer loans not including housing and housing related loans [Trend of balance of investment trust assets (FY end) and trust fees ] [Trend of pension and payroll accounts] 436 118 119 Trust fees (million yen) 7,440 135 496 FY2012 FY2013 FY2014 FY2015 Loan balance [Trend of individual liquid deposit balance ] Origination amount *2 Origination amount and loan balance under current product handling basis 145 22
3. Channel Strategy Kyoto Prefecture Shiga Prefecture Yamashina Branch: Branch renewed as a new office equipped with training facilities (July 13, 2015) 1. Branch (face-to-face) strategy Aim to increase the quality of the branch network by transferring existing branches rather than expanding the network by opening new branches. Start branch operation on holidays on a trial basis at some branches in Osaka and Shiga Prefectures in an aim to expand points of contact with customers. (Consider increasing the number of openon-holidays branches going forward.) Hyogo Prefecture Osaka Prefecture Nara Prefecture Umeda Branch: Integrated with Osaka Ekimae Branch and relocated to Grand Front Osaka, a landmark of Osaka Kita area. (February 8, 2016) Nishinomiya Branch: Relocated and optimized Nishinomiya Branch positioned in a major terminal between Osaka and Kobe. (May 16, 2016) 2. Non personal strategy Serve to complement the communitybased business. In an aim to expand points of contact with customers in worker and asset formation groups and in younger age groups and enhance services, consider on a mid-tolong-term basis launching strategic products going forward. Wakayama Prefecture 23
SMFG Companies SMFG SMBC Kansai Urban Banking Corporation 4. Provision of Advanced Financial Services as SMBC Group 1. Accumulation of advanced business know-how (1) Personnel exchange Send trainees: 7 trainees in FY2014 (of whom 1 was sent overseas), 10 trainees in FY2015 (of whom 1 was sent overseas) * Start sending trainees to SMFG companies from FY2014 (Three trainees in FY2015) Overseas visit training for management class (Thailand, Vietnam; 2013-2015 aggregate total of 76 trainees) Acceptance of seconded employees from SMBC and SMFG companies (mainly in IT/administration departments) (2) Strengthening of risk management structure Establishment of a periodic information exchange structure in compliance risk management 2. Business cooperation (1) Interaction of ATMs (2) Business tie-up in overseas business support Cedyna, SMBC Consumer Finance Coordination in guarantee business for personal unsecured loans Japan Research Institute Development and operation of core systems Handling of Environmental Assessment Loan/private placement bonds SMBC Consulting Provision of high level information consulting service with same standard level as Sumitomo Mitsui Banking Corporation. Service provided through a membership system. SMBC Nikko Securities Perform securities introduction business for corporate customers Sumitomo Mitsui Finance and Leasing Business tie-up in overseas leasing 24
5. Efforts toward Promotion of Diversity and Regional Contribution 1. Creation of a working environment where diverse human resources actively participate Appointment of female playing active roles 16.0% (1) Proactive response to the Act for Promotion of Women s Participation and Advancement in the Workplace Efforts to realize a ratio of 20% of women in managerial positions Support for female staff members to continue with their careers and reinforced efforts to widen job categories for female workers Reinforced efforts toward promoting male employees to take child-rearing leave, etc. (2) Promotion of employing diversified human resources Promoting hiring of persons with disabilities by Biwako Business Service, a special subsidiary 2. Regional contribution (1) Environmental preservation activities Cleanup of Lake Biwa shores as part of educational training for new employees Annual donations to environmental preservation groups made every year since 2003 based on balance of environment related deposits (aggregate donation amount: 63.74 million yen) (2) Contribution to next generation human resources development Held regional tournament of All Japan High School Economic Quiz Tournament (Economics Koshien) in Shiga for the first time (December 2015) Sponsorship for various sports events for children in local communities 14.6% 7 FY2013 Year joined 103 15.8% 13.4% 9 31.2% 29 29.2% 31 FY2014 FY2015 FY2016 Number of recently graduated new female employees on managerial track (sogoshoku) 15.0% Ratio of recently graduated new female employees on managerial track 118 118 15.3% 124 Number of females in managerial positions Ratio of recently graduated new female employees on managerial track Ratio of females in managerial positions Efforts made to regional contribution Donation to environmental preservation groups Economics Koshien in Shiga 25
6. Efforts to Strengthen Governance 1. Further enhancement of speed, transparency and reliability of management decision-making In addition to increasing the weight of outside directors among all senior officers and establishing a system to better reflect external, objective opinions in management decision-making, built a structure for improving the effectiveness of the monitoring board and realizing agile decision-making. Structure of corporate officers from June 2016 (general meeting of shareholders) 2016/3 After the general meeting of shareholders Diff. Directors 15 11-4 Of whom are external 4 4 - Auditors 6 6 - Of whom are external 3 3 - Total 21 17-4 Of whom are external 7 7 - Reduction of the number of directors to 11 from 15 Ratio of outside directors to directors total: over one-third Ratio of outside executives to total officers (directors and auditors): over 40% 2. Active dialogue with shareholders, institutional investors, etc. Continuing active dialogue with shareholders, institutional investors, etc. in performance presentations and individual meetings. 3. Measurements of strategic shareholdings Monitoring related to purpose and rationalities of shareholdings performed periodically Sold issues that we cannot rationally hold in FY2015. [Strategic shareholdings (listed)] Number of stock names 2010/3 (Time of merger) 2015/3 2016/3 (book value: 100 million yen) Change from 2010/3 YOY 69 57 50-19 -7 Book value 151 105 98-53 -7 26
V. Capital and Dividend Policy 27
Capital and Dividend Policy Planning redemption by call maturity in subordinated debt financing while steadily accumulating internal reserves. (To complete full redemption in FY2019, the final year of the next Medium-Term Management Plan) Aiming to secure a level of retained earnings comparable to the level of source of redemption of preferred shares in FY2019. The dividend policy is to distribute stable dividends while maintaining a balance with solid net worth. Net income (nonconsolidated) [Trends of dividend and payout ratio] 165 170 19.4% 19.5% 22.2% 151 24.1% 140 [Trends of capital ratio and net worth (consolidated)] 8.74% 8.32% 7.25% Lower 6% 122 121 103 93 2,359 2,285 2,128 Approx. 330 245 1,900 204 180 754 652 410 140 13 19 19 18 1,274 1,387 1,513 1,600 29 29 29 29 2014/3 2015/3 2016/3 2017/3 (Plan) Deferred tax assets (excluding related loss (gain) on valuation of securities, deferred gains or losses on hedges) Subordinated debt financing Common shares, class I preferred stocks, retained earnings, etc. Capital ratio Note: FY2013 (35 yen) Ordinary dividend FY2014 (40 yen) Retained earnings FY2015 (40 yen) Preferred dividend Payout ratio FY2016 Plan (40 yen) Figures in parentheses represent the amount of dividend per share of common stock (excluding commemorative dividend) after adjusting for consolidation of stocks. 28
Contact Information For inquiries, please contact the following: Kansai Urban Banking Corporation, Corporate Planning Dept. Tel. : 06-6281-7000 E-mail : kikaku@kansaiurban.co.jp Kansai Urban Banking Corporation website (Japanese): http://www.kansaiurban.co.jp/ About Kansai Urban Banking Corporation (Japanese): http://www.kansaiurban.co.jp/company/index.html This document contains forward-looking statements such as expectations, forecasts, targets and plans. These statements are based on expectations as of the date of this document is prepared with information currently made available to us. In addition, certain conditions (assumptions) are used for the statements. The statements and conditions (assumptions) are subjective, and may prove to be inaccurate and not realized in the future. Please refer to our disclosed documents such as financial reports, summary of accounts, and press releases for additional information relating to risks and uncertainties which may be causes for such situations. Information stated in this document relating to us or companies other than our Group companies are quoted from disclosed information. Accuracy and appropriateness of the information have not been verified by us whatsoever, and are not guaranteed by us. 29