Resona Holdings, Inc. · TSE:8308
Resona — FY2007 Earnings Presentation
63 slides from Resona's earnings presentation, September 2008
Slide 1: Business Results of FY2007 and Future Management Direction
Business Results of FY2007 and Future Management Direction — Maximizing Corporate Value through Sustained Growth - RESONA September 2008 @ Resona Holdings, Inc.
Slide 2: Contents
Note: In some pages of this material, names of Resona Group companies are shown in the CONTENTS following abbreviated form: RHD: Resona Holdings, RB: Resona Bank, SR: Saitama Resona Bank, KO: Kinki Osaka Bank, and RT: Resona Trust & Banking Resona Group at a Glance Update on Recent Business Results
Slide 3: Resona Group at a Glance
Resona Group at a Glance Update on Recent Business Results Pathway to Early Repayment of Public Funds <Reference> Macro Trends of Japan <Reference> Business Trend 2
Slide 4: Overview of Resona Group
Overview of Resona Group Corporate structure Total assets comparison *1 Mitsubishi UFJ FG Mizuho FG Resona Holdings Sumitomo Mitsui FG Resona HD Sumitomo Trust & Banking Chuo Mitsui Trust HD Bank of Yokohama Shinsei Bank 100% 100% 100% 100% Chiba Bank Aozora Bank Resona Saitama Kinki 0 50 100 150
Slide 5: Strong Franchise Value
Strong Franchise Value Franchise value GDP comparison (2005*1) Solid presence in the Tokyo Metropolitan Area and the Tokyo*² 795 Kansai region where economic activities, industries, and Korea 791 Australia 739 population are highly concentrated Netherlands 633 Switzerland 372 Sweden 366 Osaka*²
Slide 6: Economies of Scale
Economies of Scale Total Assets (Mar. ’08) Cost to Income Ratio (FY2007) 4th largest banking group in Japan, with ¥40 trillion assets Operational efficiency comparable to megabanks Assets and operations sizeable enough to pursue economies of scale (Y trillion) 133.17 （％） 140 80 120 70 56.68 51
Slide 7: Focus on SMEs and Retail Banking Business
Focus on SMEs and Retail Banking Business Comparison of Loan Portfolio Comparison of Loan-to-Deposit Spread (Loans in the domestic account, as of Mar. ’08) Lending to SMEs and individuals accounts for more Credit risk control and favorable loan-to-deposit spread than 80% of the entire loan por
Slide 8: Resona Group's Management Direction
Resona Group’s Management Direction Community bank group most supported by regional communities and customers Repayment of public funds through JUMP sustained growth ・Clear differentiation strategy Partial repayment of the DIC June 2008 ・Quality-oriented growth strategy common shares (¥14.4bn.) Regi
Slide 9: Trend of Resona Group Consolidated Business Results
Trend of Resona Group Consolidated Business Results Top-line income Operating expenses Net income Despite severe business environment, Expense ratio controlled at around 50% Returned to and sustained profitability income from core business remains stable (Ybn) (Ybn) (Ybn) 900 40% 700 70% 65.
Slide 10: What We Have Achieved (1): Sustainable Profitability
What We Have Achieved (1): Sustainable Profitability （Total of Group Banks） FY2002 FY2007 Actual Actual net net 337.8bn Profitability Improved Improved core core business Profitability 307.3bn business operating operating profit profit (+9.9%) profitability profitability driven by driven by grow
Slide 11: What We Have Achieved (2): Growth of Five Core Businesses
What We Have Achieved (2): Growth of Five Core Businesses Sustained Growth of Five Core Businesses （Total of Group Banks） FY2002 FY2007 Emphasis Emphasis on on accumulating accumulating Transaction Transaction Loans Loans to to 10.3tn *1 11.3tn high high quality quality loan loan assets assets i
Slide 12: Competitive Advantage in Retail Banking Business
Competitive Advantage in Retail Banking Business Enhance competitiveness through upgrading of business infrastructure and low-cost operations Lineup of Open alliance strategy leveraging on non-affiliation with any Zaibatsu groups Products Procure competitive products based on well-established ma
Slide 13: Update on Recent Business Results
Resona Group at a Glance Update on Recent Business Results Pathway to Early Repayment of Public Funds <Reference> Macro Trends of Japan <Reference> Business Trend 12
Slide 14: Operating Results for the 1Q
Operating Results for the 1Q (3 Months from April 1 to June 30) (Total of Group Banks, Non-consolidated Basis) 1Q 1Q YoY Rate of Financial Results FY2007 FY2008 Change Progress*4 Comments Gross Operating Profit 178.9 bn 161.2 bn (17.7) bn 45.4% Improvement in loan to deposit spread has led to an I
Slide 15: Trend of Loan Business
Trend of Loan Business (Total of Group Banks) Trend of loan and deposit rates and spread Loan rate caught up with regional banks average 2.2% 2.3% Resona Group (3 banks) 2.23% Loan rate (left scale 2.1% City Banks 1.0% 2.2% Loan-to-deposit spread (left scale) Regional Banks Deposit rate (right sca
Slide 16: Loan Plan for FY2008
Loan Plan for FY2008 Loans to Corporations Housing Loans Prioritized loan quality rather than volume Balance at the end of March 2008: Y11.5 tn. under severe market environment (Housing loan ratio: 44.1%) Flat 35 12 Proper housing loans 0.28 [Average balance of lending to corporate borrowers] Ho
Slide 17: Sale of Financial Products
Sale of Financial Products Investment Trusts Personal annuity Income for FY2007 : Y37.2bn ( -Y4.0bn YoY） Income for FY2007: Y9.7bn ( - Y0.6bn YoY) Amount sold: Y858.0bn, Term-end Bal.: Y2,396.9bn Amount sold: Y197.0bn Trust fees Sale commission Amount sold (right scale) 16 50 Related income
Slide 18: Real Estate, Pension and Securities Trust Businesses
Real Estate, Pension and Securities Trust Businesses Real estate business (RB) Pension and securities trust business (RT) Income for FY2007: Y15.7bn (-Y4.2bn YoY) Gross operating profits for FY2007: Y31.0bn Commission income: Y14.5bn (- Y0.5bn YoY) Pension trust business: Y22.4bn (+Y0.9bn Y
Slide 19: Measures to Enhance Financial Soundness: Loan Asset
Measures to Enhance Financial Soundness: Loan Asset NPL balance and NPL ratio (Total of Group Banks) Top 10 Borrowers Concentration (RB) Credit exposure to top 10 largest borrowers / Total claims (Y bn) Unrecoverable or valueless claims 6.74% 7% Risk claims 6.2% Special attention loans 6% 2,000 1,
Slide 20: Measures to Enhance Financial Soundness: Securities Portfolio
Measures to Enhance Financial Soundness: Securities Portfolio Maintained soundness of securities portfolio [Non-trading marketable securities available for sale] Securitized products [End of March 2007] Total Y6.8 tn (Balance of direct investments: Y323.9bn） Corporate Underlying assets for all pr
Slide 21: Capital Adequacy Ratio (RHD Consolidated Basis)
Capital Adequacy Ratio (RHD Consolidated Basis) RHD’s consolidated CAR [Mar. 31, 2007] 10.56% (Basel II SA) ⇒ [Mar. 31, 2008] 14.28% (Basel II F-IRB) 億円20/3末3FIRB増減自己資本比率TierⅠ比率自己資本額+31,965 YoY Change based on SA Change due to shift from SA to F-IRB (Mar. 31, 2008) (Ybn, %） (Ybn, %） Mar. 31,2007（
Slide 22: Earnings Forecasts for Fiscal Year 2008
Earnings Forecasts for Fiscal Year 2008 Resona Holdings (Consolidated) Resona Holdings (Non-consolidated) Change from Change from 1H FY 2008 Full year 1H FY 2008 Full year (Billions of Yen) the previous (Billions of Yen) the previous forecasts forecasts forecasts forecasts year year Consolidated ord
Slide 23: Pathway to Early Repayment of Public Funds
Resona Group at a Glance Update on Recent Business Results Pathway to Early Repayment of Public Funds <Reference> Macro Trends of Japan <Reference> Business Trend 22
Slide 24: List of Public Funds Still Outstanding and Approaches for Repayments
List of Public Funds Still Outstanding and Approaches for Repayments List of remaining public funds and approaches for repayments Mandatory Amount Amount Time of Issue Conversion Sep. 30, '03 June 30, '08 Amount repaid Subordinated Loans (Billions of Yen) (First Call) (1) (2) (2) - (1) Total public
Slide 25: Capital Policy Directed toward Early Repayment of Public Funds
Capital Policy Directed toward Early Repayment of Public Funds Basic Policy toward Repayment of Public Funds Response to Possible Dilution (Announced in May 2006) (Preferred Shares issued under the Early Strengthening Law) (1) Secure a source of funds for repayment as soon as possible [Partial Amend
Slide 26: Two Drivers that Raise Common Shareholder Value
Two Drivers that Raise Common Shareholder Value Repayments of public funds and organic profit growth will both drive up diluted EPS Diluted Organic growth of profit through implementation of mid-term plan EPS Reduction of potential shares via repurchase of public fund preferred shares Higher d
Slide 27: Reference: Macro Trends of Japan
Resona Group at a Glance Update on Recent Business Results Pathway to Early Repayment of Public Funds <Reference> Macro Trends of Japan <Reference> Business Trend 26
Slide 28: Overall Economy in Japan (1)
Overall Economy in Japan (1) GDP Growth Rate*1 GDP Components （％） 2.4 2.4 Priv ate Consumption Priv ate Real GDP Growth Non-Resi. Inv estment Domestic Demand Gov ernment Consumption Net Exports (Y trillion) 23.9 24.8 27.2 29.1 31.5 31.1 500 19.3 21.2 21.9 15.2 15.6 18.4 19.0 1.4 94.5 94.8 95.0 95.1
Slide 29: Overall Economy in Japan (2)
Overall Economy in Japan (2) Enterprise Bankruptcy (Number of Cases) （¥ billion） 1,600 1,000 1,400 900 800 1,200 700 1,000 600 800 500 600 400 300 400 200 200 100 0 0 8/06 9/06 10/06 11/06 12/06 1/07 2/07 3/07 4/07 5/07 6/07 7/07 8/07 9/07 10/07 11/07 12/07 1/08 2/08 3/08 4/08 5/08 6/08 7/08 Number
Slide 30: Overall Economy in Japan (3)
Overall Economy in Japan (3) Break-Even Point of Japanese Corporations 100% 95% 91.6% 90.5% 90.3% 88.4% 89.5% 88.0% 86.8% 90% 86.1% 85.8% 83.0% 83.7% 83.7% 82.8% 85% 80.5% 80% 75% 70% 65% 60% 55% 50% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1Q 2007 2Q 2007 3Q 2007 4Q 2008 1Q Source: Financi
Slide 31: Japan-US Comparison of Housing Trends (1)
Japan-US Comparison of Housing Trends(1) Housing Starts Japan US (1,000s) (1,000s) Collapse of housing bubble 2,500 200 180 160 2,000 140 120 1,500 100 80 60 New s on condos bult w ith false quake-resistance data 1,000 40 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 500 80 82 84 86 88 90 92 94 96 98
Slide 32: Japan-US Comparison of Housing Trend (2)
Japan-US Comparison of Housing Trend (2) Housing Demand Japan US （¥ trillion） 5.5 Newly Contracted Housing Loan for Individuals 550 Weekly Mortgage Applications Index (4 week moving average, March 1990=100) (4 quarter moving average) 5.0 500 4.5 450 4.0 400 3.5 350 3.0 300 2.5 250 00 01 02 03 04 05
Slide 33: Macro Trend for Real Estate Business
Macro Trend for Real Estate Business Recovery of land prices Number of land transactions New housing loan trend 2004 2005 2006 2007 (10 thousands) Total of new lending to housing loan Land for Land for 15% 50 residential use commercial use Of which from private sector 45 (¥tn) Share of private secto
Slide 34: Macro trends for Real Estate Business
Macro trends for Real Estate Business Number of households Population and housing ownership rate Population*1 Owning site of present dwelling and/or 35 80% 50 present dwelling 30 48 60% 25 46 20 40% 15 44 10 20% 42 5 40 0 0% - 1995 2000 2005 2010 2015 24 29 34 39 44 49 54 59 64 69 70 0- 25 - 30 - 35
Slide 35: Macro Trends for Sales of Financial Products
Macro Trends for Sales of Financial Products Total net assets of investment trusts*1 Individual’s financial assets (Dec. 2007) 50 45% Securities 45 Banks 40% Cash & In ve st m e n t In su r an c e & Direct De po si t s, 5 0 .8 % t r u st s, 4 . 7 % Pe n si o n , 2 6 . 2 % 40 Share of Banks 35% Japan
Slide 36: Japan-US-EU Comparison of Economic Trend (cont'd)
Japan-US-EU Comparison of Economic Trend (cont’d) Unemployment Rate % 9 8 7 6 5 4 3 05/06 05/09 05/12 06/03 06/06 06/09 06/12 07/03 07/06 07/09 07/12 08/03 08/06 Japan US EU (15countries) Source: Datastream Economic Inequality (2007) Share of Income or Expenditure Inequality Measures Poorest 10% Poo
Slide 37: Reference: Business Trend
Resona Group at a Glance Update on Recent Business Results Pathway to Early Repayment of Public Funds <Reference> Macro Trends of Japan <Reference> Business Trend 36
Slide 38: Outline of P&L for FY2007
Outline of P&L for FY2007 Resona Holdings Total of four banks Factors accounting (Consolidated) (Non-consolidated) Saitama Kinki Resona for the difference (A) - (B) (Approx. figures) Resona Difference Resona Osaka Trust & Bank (Billions of yen) Bank Bank Banking RC: Resona Card, RG: Resona Guarantee
Slide 39: Analysis on YoY Change in Top Line Income
Analysis on YoY Change in Top Line Income (Total of Group banks) Top line income declined Y35.9bn primarily due to loss on sale of unlisted investment trust funds Income from loans and deposits increased Y14.8bn YoY driven by spread improvements Loss on sale of unlisted investment trust funds, s
Slide 40: Analysis on YoY Change in Net Income
Analysis on YoY Change in Net Income (Total of Group Banks) Net income declined by Y354.4bn YoY mainly due to losses on stocks and increase in income taxes Operating expenses increased YoY, but were lower than the forecast Net credit expenses decreased by Y8.1bn YoY, and Y11.2bn lower than the f
Slide 41: Management Accounting by Business Lines
Management Accounting by Business Lines Management Accounting by Group Business Lines (Provisional Calculation for FY2007) “RAROC” and “RVA”*1 as management indicators to measure profitability to allocated capital （Y bn., ％） Net Operating Profit afer a Deduction of Credit Cost *2 Management Indice
Slide 42: Capital Adequacy Ratio (RHD and Subsidiary Banks)
Capital Adequacy Ratio (RHD and Subsidiary Banks) Mar. 31, 2008 [Preliminary] 億円20/3末3FIRB増減自己資本比率TierⅠ比率自己資本額+31,965 RHD (Consolidated) RB (Consolidated) Japanese domestic standard Mar. 31, 2007 Mar. 31, 2008 Mar. 31, 2007 Mar. 31, 2008 SA SA F-IRB SA SA F-IRB (Billions of Yen) Act Act YoY Act Act
Slide 43: Analysis on Consolidated Net Income Forecast for FY2008
Analysis on Consolidated Net Income Forecast for FY2008 Consolidated net income forecast for FY2008 : Y250.0 bn. Recovering from the loss registered in the previous fiscal year relating to the net investment position Estimated future taxable income in more conservative manner, taking into consid
Slide 44: Realignment of Area Management (Resona Bank)
Realignment of Area Management (Resona Bank): 7 Areas and 3 RUs Top-line Branch Loan Deposit [Before] [After] Offices (¥ tn) (¥tn) Income Objectives of the Alignment (¥ bn) Capital [Capital Central] Tokyo Central 15 3.39 4.02 83.4 Branches mostly transacting with Central large corporates are gathe
Slide 45: Introduction of New Branch Office Management Structure
Introduction of New Branch Office Management Structure Redefined roles for “business promotion” and “administration & internal control” divisions Old Management Structure New Management Structure Division of labor for accumulation of expertise Branch Customer BranchGM GM Business Business Customer
Slide 46: Pursuit of Group Synergies
Pursuit of Group Synergies Realizing group synergies making the most use of the trust functions Corporate Pension Business Real Estate Business Huge unexplored market （4,000 target companies) Increase in division staffs: +18 during FY2007 # of new entrustments： FY2006: 54 → FY2007: 169 Mar. ‘0
Slide 47: Consumer Banking Business to Become Genuine Retail Bank
Consumer Banking Business to Become Genuine Retail Bank Approach to mass retail customers Approach to private banking customers Distribution network satisfying both “low-cost” Begin to actively promote PB business after introduction and “high touch” of new branch management system “Lifestyle s
Slide 48: Brand Restoration: Efforts to Improve Customer Services
Brand Restoration: Efforts to Improve Customer Services Primary Measures Rankings in Nikkei Financial Institutions Survey [Nikkei Shimbun (Dec 12, 2007), Nikkei Kinyu Shimbun (Dec. 13, 2007) ] Improvements in rankings in the Nikkei Survey (Dec. 2007) Zero Zero Waiting Waiting Time Time Campaign Ca
Slide 49: Operational Reform: Achievements and Outlook for the Future
Operational Reform: Achievements and Outlook for the Future Resona’s Operational Reform Business Process Reengineering Quick Navi (New Teller Terminals) Three Pillars of Operational Reform Back to the basic of services industry Business Collaborations between tellers and customers ＝ Redefined
Slide 50: Other Initiatives
Other Initiatives Relocation of Tokyo Head Office Renovation of Kinki Osaka Bank’s System [Assignment and Relocation of Tokyo Head Office] [Outline of Systems Renovation at Kinki Osaka Bank] Sold Tokyo Head Office at a price of ¥162.6bn Schedule: July 2008 Plan to relocate Tokyo Head Office to
Slide 51: Securities Portfolio
Securities Portfolio Net unrealized gains on available-for-sale securities (RHD consolidated basis) as of the end of March 2008 amounted to Y171.6bn. Stock Portfolio Bond Portfolio (Available-for-sale securities, RHD Consolidated) [Balance of Securities Held (Non-consolidated Basis) ] (Ybn) (Ybn)
Slide 52: Maturity Ladder of Deposit and Loans (Resona Bank)
Maturity Ladder of Deposit and Loans (Resona Bank, Domestic Operations) Loans and Bills Discounted Deposits [End of March 2007] [End of March 2007] Within 6M 6 to 12M 1 to 3Y Over 3Y Total Within 6M 6 to 12M 1 to 3Y Over 3Y Total Fixed rate 4.5% 4.5% 10.1% 6.5% 25.6% Liquid deposits 45.9% 2.4% 8.1%
Slide 53: Composition of Loan Portfolio by Corporate/Individual Customers
Composition of Loan Portfolio by Corporate/Individual Customers (Resona Bank) Loans to corporations *Market rate-linked loans (corporate) include the fixed-rate (spread) loans maturing in less than one year. [End March 2007] [End September 2007] [End March 2008] Fixed Fixed rate rate Fixed 13% 14%
Slide 54: Composition of Deposits by Corporate/Individual Customers
Composition of Deposits by Corporate/Individual Customers (Resona Bank) Corporate Deposits [End March 2007] [End September 2007] [End March 2008] Time Deposits Time Time 24% Deposits Deposits 28% 27% Liquidity Liquidity Liquidity Deposits Deposits Deposits 72% 68% 68% Individual Deposits [End Marc
Slide 55: Swap Positions by Remaining Periods (Resona Bank)
Swap Positions by Remaining Periods (Resona Bank) Notional amounts of interest rate swaps by remaining period * (Billions of Yen) End of March 2008 End of March 2007 Within 1 year 1 to 5 years Over 5 years Total Within 1 year 1 to 5 years Over 5 years Total Receive fixed rate/Pay floating rate 372
Slide 56: Policy on Provision of Loan Loss Reserves and Trend of Credit Costs
Policy on Provision of Loan Loss Reserves and Trend of Credit Costs Credit costs for 1Q FY2008 (Total of group banks) High reserve ratio against uncovered NPLs (Billions of Yen) 1Q 1Q Collateral and guarantees (A) Loan loss reserve (B) Remarks FY2007 FY2008 Uncovered portion (C) (B)/{(B)+(C)} The DC
Slide 57: Trend of Long-term Senior Debt Rating of Resona Bank
Trend of Long-term Senior Debt Rating of Resona Bank 2003 2004 2005 2006 2007 JCR 2/28 5/19 9/22 1/20 12/17 1/31 6/8 4/10 6/9 3/30 5/5 9/18 MDY S&P 2/3 1/24 R&I 2/4 A1 A+ A2 A A3 A- Baa1BBB+ Baa2 BBB R&I S&P Baa3 BBB- Moody's JCR Ba1 BB+ 56
Slide 58: List of RHD's Preferred Shares (1)
List of RHD’s Preferred Shares (1) [As of August 1, 2008] Class B Preferred Shares Class C Preferred Shares Class E Preferred Shares Class F Preferred Shares Distinction between public and private funds Public Fund Public Fund Public Fund Public Fund Original issuer and name of securities Daiwa Bank
Slide 59: List of RHD's Preferred Shares (2)
List of RHD’s Preferred Shares (2) [As of August 1, 2008] Class 1 Preferred Shares Class 2 Preferred Shares Class 3 Preferred Shares Class 4 Preferred Shares Class 5 Preferred Shares Class 9 Preferred Shares Distinction between public and private fund Public Fund Public Fund Public Fund Private Fund
Slide 60: Class 9 Preferred Shares: Structure Embodying Basic Policies toward Repayments
Class 9 Preferred Shares: Structure that Embodies “Basic Policies toward Repayments” Designed in such a way to ensure high capital eligibility and to avoid dilution All shares will be allotted and subscribed to by Merrill Lynch Limitation on exercise of Acquisition Rights Japan Finance Acquisitio
Slide 61: Class 9 Preferred Shares: Acquisition Right and Acquisition Clause
Class 9 Preferred Shares: “Acquisition Right” and “Acquisition Clause” 1Y 5Y 8Y Acquisition Right Not Conditionally exercisable* (Preferred Shareholders) Exercisable* (If MV of ordinary shares exceeds the Acquisition Exercisable Rights Threshold Price for a certain period) Acquisition Clause Conditi
Slide 62: Business Revitalization Plan: Earnings Plan
Business Revitalization Plan: Earnings Plan (Total of Four Banks) FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 (Billions of Yen) (Actual) (Actual) (Actual) (Plan) (Plan) (Billions of Yen) (Actual) (Actual) (Actual) (Plan) (Plan) Gross operating profit 693.6 735.9 7
Slide 63: Forward-looking statements
The forward-looking statements contained in this presentation may be subject to material change due to the following factors. These factors may include changes in the level of stock price in Japan, any development and change related to the government’s policies, laws, business practices and their in