Financial Summary for the 1st Half of Fiscal Year 2018 November 21, 2018
Financial Highlights for the 1st Half of FY2018 ~ Maintained steady profits though declined due to increased foreign currencies funding expenses ~ ~ Capital adequacy ratios remained at a high level ~ Profits Consolidated (in JPY bn) 1H of FY2017 1H of FY2018 Ordinary Profits 142.6 117.2 (25.3) Net Income 106.5 85.8 (20.7) 142.6 117.2 106.5 85.8 1H of FY2017 1H of FY2018 (in JPY bn) Ordinary Profits (consolidated) Net income (consolidated) Capital Position (under Basel III) Consolidated Mar 2018 Sep 2018 23.50% 19.02% 20.60% 16.63% Total Capital Ratio Tier 1 Ratio Common Equity Tier 1 Ratio 19.02% 16.62% (2.40%) Tier 1 Ratio 19.02% 16.63% (2.39%) Total Capital Ratio 23.50% 20.60% (2.90%) 19.02% 16.62% Common Equity Tier 1 Ratio (Consolidated) Mar 2018 Sep 2018 2
Income Statement Summary Consolidated (in JPY bn) 1H of FY2017 1H of FY2018 1 Ordinary Income 756.0 911.0 154.9 2 Interest Income 589.0 682.2 93.1 3 <Interests on/dividends from Securities> 541.4 617.8 76.4 (in JPY bn) 60 514.5 50 Ordinary Profits over Time (Consolidated) 4 <Interests on Loans> 37.6 51.9 14.3 5 Ordinary Expenses 613.4 793.7 180.3 6 Interest Expenses 490.9 606.1 115.2 7 <Expenses on Funding from Members> 168.0 173.5 5.4 8 General and Administrative Expenses 80.8 80.4 (0.4) 9 Ordinary Profits 142.6 117.2 (25.3) 10 Income before Income Taxes 141.8 117.1 (24.7) 11 Net Income 106.5 85.8 (20.7) 40 30 20 10 324.9 214.0 171.0 117.2 FY2014 FY2015 FY2016 FY2017 1H of FY2018 Net Income over Time (Consolidated) Non-consolidated (in JPY bn) 1H of FY2017 1H of FY2018 12 Ordinary Profits 138.2 115.8 (22.4) (in JPY bn) 50 40 411.3 13 Net Income 104.5 86.5 (17.9) 30 271.2 Reference (Non-consolidated) 14 Gains on Sale of Securities 35.4 97.5 62.0 15 Losses on Sale of Securities 1.9 71.3 69.4 20 10 206.1 147.6 85.8 16 Credit-related Expenses (Note) 3.3 (0.1) (3.5) 17 Disposal of Securities 1.1 0.2 (0.8) (Note) Negative numbers for credit-related expenses indicate reversals 3 FY2014 FY2015 FY2016 FY2017 1H of FY2018
Balance Sheet Summary Consolidated (in JPY bn) Mar 2018 Sep 2018 1 Loans and Bills Discounted 11,858.9 13,943.4 2,084.4 2 Securities 52,321.8 53,987.4 1,665.6 3 Money Held in Trust 7,439.7 8,736.9 1,297.2 4 Cash and Due from Banks 28,756.3 26,322.9 (2,433.4) 5 Others 4,550.8 5,050.3 499.4 6 Total Assets 104,927.7 108,041.1 3,113.4 7 Deposits (Note) 67,204.7 69,398.4 2,193.6 8 Debentures 1,766.4 1,507.5 (258.9) 9 Payables under Repurchase Agreements 15,080.6 15,025.1 (55.4) 10 Others 14,129.7 15,443.4 1,313.6 11 Total Liabilities 98,181.6 101,374.5 3,192.8 12 Total Net Assets 6,746.0 6,666.6 (79.4) (Note) Deposits include deposits and entrusted funds (the majority are short-term funds received from members) for accounting purpose. Non-consolidated (in JPY bn) Mar 2018 Sep 2018 13 Total Assets 103,417.6 106,408.0 2,990.4 14 Total Liabilities 96,763.5 99,831.4 3,067.8 15 Total Net Assets 6,654.0 6,576.6 (77.4) Gains/Losses on Revaluation of 16 1,584.7 1,447.8 (136.8) Securities (in JPY trn) 12 11 10 9 8 7 6 (in JPY trn) 8.0 6.0 4.0 2.0 Total Assets over Time (Consolidated) 107.1 104.9 108.0 101.2 94.5 Mar 2015 Mar 2016 Mar 2017 Mar 2018 Sep 2018 Net Assets over Time (Consolidated) 7.3 7.2 7.0 6.7 6.7 Mar 2015 Mar 2016 Mar 2017 Mar 2018 Sep 2018 4
Loan and Bills Discounted (Non-consolidated) Loans and Bills Discounted over Time Risk-managed Loans over Time (in JPY trn) 2 19.9 0.9 (in JPY bn) 25 3.0% 17.9 1.0 20 15.0 19.0 16.9 11.9 11.7 13.8 1.3 15 148.9 2.0% 1 1.0 1.1 121.6 12.6 10.9 10.7 12.6 10 1.0% 5.0 9.9 5 0.7% 0.7% 51.1 38.1 38.0 3.2 2.0 3.5 0.4% 0.3% 0.3% Mar 2015 Mar 2016 Mar 2017 Mar 2018 Sep 2018 Japan Outside Japan For Japanese Government Mar 2015 Mar 2016 Mar 2017 Mar 2018 Sep 2018 Risk-managed Loans Risk-managed Loan Ratio % 5
Market Investment Portfolio (Non-consolidated) (in JPY trn) 7 6 5 4 3 2 1 Market Investment Portfolio over Time Market Investment Portfolio (Sep 2018) 65.1 64.2 18.2 19.2 3.4 3.4 43.4 41.5 69.4 19.8 3.7 45.9 60.5 63.5 19.0 22.2 3.5 3.8 38.1 37.6 Mar 2015 Mar 2016 Mar 2017 Mar 2018 Sep 2018 Bonds Stocks Credit and others 1% 2% 4% Market Investment Portfolio by Risk 34% Credit and others 35% Japan Stocks 6% Bonds 59% 40% 19% Outside Japan Others 5% Market Investment Portfolio by Currency EUR 15% USD 54% JPY 26% Net Unrealized Gains and Losses over Time (in JPY bn) 3,50 3,00 3,225.6 271.6 2,923.0 233.4 2,50 2,182.0 1,332.6 1,084.1 2,00 157.6 1,584.7 1,447.8 1,50 41.8 1,176.0 1,00 1,621.3 1,605.3 1,307.9 1,362.6 50 848.4 234.8 92.8 (7.6) (50) Mar 2015 Mar 2016 Mar 2017 Mar 2018 Sep 2018 Bonds Stocks Credit and others 6 Bond and Credit Portfolio by Rate Reset Maturity Longer than 5 years and up to 10 years Longer than 1 year and up to 5 years 21% Longer than 10 years 5% No Ratings 1% Below BB 3% Market Investment Portfolio by Rating Up to 1 year A 24% 50% AAA, AA BBB 22% 67% 5%
Funding (Non-consolidated) Breakdown of Funding Deposits and Debentures over Time Other Liabilities 7.1 7.1% Non-secured Funding in short-term market 2.0 2.0% (in JPY trn) 7 6 59.7 3.6 63.4 3.1 60.2 65.6 2.4 63.2 69.0 1.8 67.2 70.9 1.5 69.4 Other Funding 19.9 19.9% 5 56.1 Debentures 1.5 1.5% Non-members 6.6 6.6% Members 62.8 62.9% Deposits 69.4 69.5% 4 3 50.6 54.9 57.9 60.8 62.8 2 (JPY trn) Total Liabilities: JPY 99.8 trn 1 (Note) Deposits include deposits and entrusted funds (the majority are short-term funds received from members) for accounting purpose. Other funding includes borrowed money (secured and subordinated loans) such as payables under repurchase agreements and payables under securities lending transactions. Other liabilities include acceptance & guarantees and reserves. Short-term unsecured funding from markets include trading liabilities, negotiable certificates of deposits, and unsecured call money. Mar 2015 Mar 2016 Mar 2017 Mar 2018 Sep 2018 Deposits Debentures Deposits from Members 7
Earning Yields (Non-consolidated) Investment Average (in JPY trn) Earnings (in JPY bn) Yield 1H of FY2018 YOY 1H of FY2018 YOY 1H of FY2018 YOY 1 Loans and Bills Discounted 12.3 0.9 5 14.1 0.81% 0.18% (Reference) US Dollar Interest Rates over Time 10YR US Treasury Bond, 3M USD LIBOR and 2YR USD-JPY Currency Swap 10YR US Treasury Bond 3M USD LIBOR 2YR USD-JPY Currency Swap 1 (%) 4.0 3.0 1 3M USD LIBOR and 2YR USD-JPY Currency Swap (%) 3.0 2.5 2 Securities 55.5 (5.5) 737.2 72.1 2.65% 0.48% 2.0 2.0 1.5 3 4 Yen-denominated Securities (including Net Gains/Losses on Sales) 15.9 (1.4) 138.6 113.7 1.74% 1.45% Foreign Currencydenominated Securities (including Net Gains/Losses on Sales) 39.6 (4.0) 598.5 (41.5) 3.01% 9% Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 1.0 1.0 3M USD LIBOR 0.5 2YR USD-JPY Currency Swap Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 5 Short-term Investment Assets 3.3 (2.4) 4.6 2.2 0.27% 0.19% Funding (Reference) Yen Interest Rates over Time 6 From Member Banks 61.6 2.3 173.5 5.4 0.56% (0%) 7 Debentures 1.6 (0.6) 2.0 (1.1) 0.24% (3%) 10YR Japanese Government Bond and 3M JPY LIBOR 10YR JGB (%) 1.5 2 10YR JGB and 3M JPY LIBOR (%) 0.2 8 Funding from Markets 25.9 (6.2) 150.3 38.0 1.16% 0.46% 3M JPY LIBOR 1.0 9 From the Yen Market 2.9 0.2 () () (0%) (0%) 10 From Foreign Currencies Markets 22.9 (6.5) 150.3 38.0 1.31% 0.55% 2 0.5 10YR JGB 3M JPY LIBOR -0.2 (Reference) Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18-0.5-0.4 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 11 42.6 (4.0) 379.8 135.6 1.79% 0.74% Foreign Currencies Funding (Including Currency Swaps, etc.) 8
Capital Position Consolidated (in JPY bn) Mar 2018 Sep 2018 Capital Ratios over Time (Consolidated) 1 Tier 1 Capital 6,432.6 6,348.6 (84.0) 30% 2 Common Equity Tier 1 Capital (CET1) 6,430.8 6,345.7 (85.0) 3 Capital Stock and Capital Surplus 3,455.5 3,455.5-25% 24.19% 25.07% 24.39% 23.50% 4 Earned Surplus 1,917.8 2,003.6 85.8 5 Unrealized Gains on Other Securities 1,152.8 1,053.7 (99.1) 20% 18.99% 19.34% 19.02% 20.60% 6 Additional Tier 1 Capital 1.7 2.8 1.0 7 Tier 2 Capital 1,513.4 1,513.5 8 Subordinated Bonds and Loans 1,513.2 1,513.2-15% 17.24% 17.17% 18.94% 19.31% 19.02% 16.63% 16.62% 9 Total Capital 7,946.1 7,862.1 (83.9) 10% 10 Risk-weighted Assets 33,810.3 38,164.5 4,354.1 11 Common Equity Tier 1 Ratio 19.02% 16.62% (2.40%) 5% 12 Tier 1 Ratio 19.02% 16.63% (2.39%) 13 Total Capital Ratio 23.50% 20.60% (2.90%) 14 Total Capital Ratio on Fully Loaded Basis (Note 1) 23.21% 20.34% (2.87%) (Note1) Item 14: based on a Basel III fully loaded basis 0% Mar 2015 Mar 2016 Mar 2017 Mar 2018 Sep 2018 Total Capital Ratio (Basel III) Tier 1 Ratio Common Equity Tier 1 Ratio Leverage Ratio (Consolidated) Consolidated Mar 2018 Sep 2018 15 Leverage Ratio 6.03% 5.79% 9 Liquidity Coverage Ratio (Consolidated) Consolidated FY2018 1Q 2Q 16 Liquidity Coverage Ratio (Note 2) 450% 443% (Note2) Item 16: simple averages of observations over the previous quarter
Appendices 10
Structure of the Cooperative System Individual Members Municipal Level Prefectural Level National Level Guidance JA Chuokai (Prefectural Unions of Agricultural Cooperatives) JA Zenchu (Central Union of Agricultural Cooperatives) Farmers JA (Japan Agricultural Cooperatives) Marketing & Supplying Mutual Insurance JA Keizairen (Prefectural Marketing and Supplying Federations of Agricultural Cooperatives) JA Zen-Noh (National Federation of Agricultural Cooperative Associations) JA Zenkyoren (National Mutual Insurance Federation of Agricultural Cooperatives) Banking JA Shinnoren (Prefectural Banking Federations of Agricultural Cooperatives) The Norinchukin Bank Banking JF Shingyoren (Prefectural Banking Federations of Fishery Cooperatives) Fishermen JF (Japan Fishery Cooperatives) Marketing & Supplying JF Gyoren (Prefectural Federations of Fishery Cooperatives) JF Zengyoren (National Federation of Fishery Cooperative Associations) Mutual Insurance JF Kyosuiren (National Mutual Insurance Federation of Fishery Cooperative Associations) Foresters JForest (Japan Forest Cooperatives) Guidance / Marketing & Supplying JForest Moriren (Prefectural Federations of Forestry Cooperatives) JForest Zenmoriren (National Federation of Forest Owners Cooperative Associations) 11
Business Base of JA Bank JA Bank = JA + JA Shinnoren + The Norinchukin Bank Municipal level Prefectural level National level Flow of Funds in JA Bank (As of Sep. 30, 2018) J A JA Shinnoren The Norinchukin Bank Farmers and others Funds under management JPY 104 trn JPY 64 trn Funds under management JPY 72 trn JPY 45 trn JPY 103 trn JPY 15 trn Funds under management JPY 106 trn Total funds under management of JA Bank* JPY 160 trn * Total funds under management (JPY trn) = Funds under management Deposits JA Bank accounts for 10% of the total amount of retail deposits and savings in the Japan. Retail Deposits and Savings in Japan (As of Mar. 31, 2018) Others Japan Post 3.0% Bank 20.8% Shinkin Banks 12.7% Other Domestic Banks 34.2% JA Bank 10.4% MUFG 8.7% Mizuho FG 5.0% SMFG 5.2% Total: JPY 865trn Prepared by The Norinchukin Bank based on materials of the Bank of Japan and financial summaries of other financial institutions. Retail deposit and saving balances for JA Bank, domestic banks and Shinkin Banks and only saving balance for Japan Post Bank. Increasing amount of deposits and savings of JA Bank (in JPY trn) 104 102 100 98 96 94 92 90 JA Bank Deposits and Savings (JPY trillion) 95.3 95.9 97.7 98.4 100.8 101.3 103.5 2015/9 2016/3 2016/9 2017/3 2017/9 2018/3 2018/9 (Preliminary Figure) 12
Assessment of Capital and Liquidity Adequacy The Bank establishes risk appetite and implements Internal Capital Adequacy Assessment Process (ICAAP) and Individual Liquidity Adequacy Assessment (ILAA) as a board-level management framework of the two most important elements for financial institutions so that it can manage profits, capital and risk in a consistent and efficient manner, securing adequate level of liquidity. Risk Appetite - In implementing the Bank s strategies, risk appetite reflects specific views on risk-taking, and defines what types of risks and magnitude of risk the Bank is willing to accept - Risk appetite is established to manage the Banks' business strategies, risk and capital in a consistent framework, and to clarify the tolerable level of liquidity which enables the Bank s strategic risk-taking ICAAP - A process for demonstrating the appropriate management of risks that a company is facing so that it can achieve its business objectives, and for the appropriate maintenance and control of a sufficient level of internal capital to cover these risks ICAAP: Internal Capital Adequacy Assessment Process Profit ILAA - A framework for assessing the sufficiency of liquidity and appropriateness of liquidity risk management to support strategic risk-taking for profits ILAA: Individual Liquidity Adequacy Assessment Profit Business objectives Business strategies Budget plan Risk appetite Regulatory capital management Economic capital management Capital Liquidity Asset allocation policies Risk Capital Risk 13
Risk System The Bank has employed an integrated risk management system with a central focus on economic capital management. Board of Directors Committees Risk Committee Portfolio Committee Food and Agri Finance Committee 1. Board of Directors The Board of Directors sets business objectives in the form of medium-term management plans, risk appetite, management plans and budgets based on them. It also determines a risk management framework for their implementation. Based on feedbacks from internal and external audits, the board keeps track of the risk management regimes. 2. Committees Market Risk Risk Risk Credit Risk Integrated Risk Liquidity Risk Operational Risk Credit Committee Operational Risk Committee Financial Budget Control ALM Market Portfolio Credit Portfolio The Risk Committee discusses and determines important issues associated with the management of economic and regulatory capital and the handling of respective risks. Based on the determination, each relevant committee, such as the Portfolio Committee, sets concrete portfolio management policies. 3. Risk As part of its integrated risk management efforts, the Bank has established individual units to watch over market risk, credit risk, liquidity risk and operational risk as well as a unit to supervise such units. Their roles and responsibilities have been clearly defined. Through its integrated risk management efforts, the Bank, under its risk management framework, has established its financial management practices flexible enough to ensure that it maintains sound and profitable business performance and, at the same time, to strike an optimal balance among risk, profit, and capital in volatile markets and in constantly changing economic and financial environments. 14
Corporate Brand Brand Statement Logo Our interpretation of life 15
Investments in Securitized Products (Non-consolidated) 1 Investment in Securitized Products (Notes 1 & 2) Exposures by Currency Unrealized Unrealized AAA AA A BBB Below Total from Gains from from Gains from BBB Mar 2018 /Losses Mar 2018 Mar 2018 /Losses Mar 2018 1 ABS 976.5 - - - - 976.5 11.9 - - 1 USD 5,351.1 1,433.8 11.4 0.3 2 RMBS 2,355.8 24.9 3.3 1.1-2,385.2 5.9 2.7 0.7 2 EUR 1,923.3 470.3 3.1 0.8 3 CMBS 68.1 - - - - 68.1 4.7 11.4 0.3 3 GBP 654.6 74.4 - - 4 CDO (Note 3) 5,737.8 - - - 5,737.8 1,924.4 - - 4 AUD 971.4 98.3 - - 5 Total 9,138.4 24.9 3.3 1.1 9,167.8 1,935.1 8.6 1.1 5 JPY 267.4 7.0 0.4 6 Total 9,167.8 1,935.1 8.6 1.1 (JPY in bn) (JPY in bn) 2 Investment in Bonds Issued by US Housing-related GSEs (Note 4) Exposures from Mar 2018 Unrealized Gains /Losses (JPY in bn) from Mar 2018 1 Agency Mortgage Bonds 1,488.7 4.8 35.7 27.0 2 Agency Bonds - - - - 3 Total 1,488.7 4.8 35.7 27.0 3 Others The Bank does not own any products related to ABCP, SIV, nor leveraged loans in its trading account and is not involved in any unconsolidated off-balance sheet transactions related to them as well as it has not originated, underwritten nor traded those products. In addition, the Bank does not have a balance on loans internally defined as those used mainly for LBOs nor a balance on monoline wrapped financial instruments. (Note 1) Securitized products are internally defined based on the definition under the Basel capital framework. Does not include mortgage-backed securities related to US government sponsored entities. (Note 2) The Bank does not have any exposure to sub-prime related RMBS or CDO in its investments in securitized products. (Note 3) The Bank has little exposure (less than JPY0.1bn) to re-securitized products such as ABS-CDO, and CDO of CDO's. The Bank does not have any exposure to re-securitized products (i.e. products containing at least one securitized product as an underlying asset) under the Basel capital framework. (Note 4) The Bank has JPY6,097.7bn of mortgage-backed security bonds issued and guaranteed by Government National Mortgage Association and has JPY58.0bn of counterparty exposure of securities financing transactions with Federal Home Loan Mortgage Corporation. As of Sep 30, 2018, non-consolidated basis 16
Disclaimer The information contained herein is quoted from public sources etc., and accuracy and reliability of such information is neither guaranteed nor warranted. We do not assume any responsibility for losses incurred directly or indirectly from the use of this information. This presentation material contains forward-looking statements regarding the Bank s forecasts, plans, and objectives. Such forward-looking statements inherently involve risks and uncertainties, because they are related to events and circumstances that may or may not arise in the future. The future performance, results of operations, and financial condition of the Bank may be materially different from the information expressed or implied by such forward-looking statements. This presentation does not constitute an offer or solicitation of an offer, an invitation to subscribe for or purchase any securities. 17