Aozora Bank, Ltd. · TSE:8304
Aozora Bank — Investor Presentation (February 2007)
27 slides from Aozora Bank's investor presentation, February 2007
Slide 1: Japanese Identity, Global Standards; Diversified Risk, Superior Returns
Japanese Identity, Global Standards Diversified Risk, Superior Returns February, 2007
Slide 2: Aozora Bank: Longstanding Pillar of Japanese Banking Sector
AOZORA BANK: Longstanding Pillar of Japanese Banking Sector Serving Japan and Revitalized and our customers for 50 Years stronger than ever Founded as 1 of 3 long-term credit banks in 2,500 mid- to large-sized corporate clients April 1957 across sectors and regions Nippon Credit Bank nationali
Slide 3: Strategic Overview: Build a Unique Banking Franchise
Strategic Overview: Build a Unique Banking Franchise Invest in building new skill sets – Risk Management Expertise Use structure to mitigate risk Global best-practice “Expert Judgment System” Average credit review “time to market” cut by nearly two thirds – Sales Culture Dedicated marketin
Slide 4: Strategic Overview: Focus on Core Business
Strategic Overview: Focus on Core Business First and foremost: profitable “Wholesale” Bank – Traditional corporate lending franchise (share of wallet) is now driven by a “profitable relationship” approach (share of mind) Ability to regularly touch each of our clients Anticipate their needs by
Slide 5: Strategic Overview: Outperform the Japanese Banking Sector
Strategic Overview: Outperform the Japanese Banking Sector Differentiate competitive strengths – High margin specialty finance products Strong legacy business in Real Estate Finance (Fudosan) Leadership position in Leveraged Finance – Broad domestic distribution network through regional banks
Slide 6: Strategic Overview: Maximize Shareholder Value
Strategic Overview: Maximize Shareholder Value Improve Operating Leverage – Cost to revenue ratio of 44% Low double digit growth in top line revenue and loans Single digit expense growth Optimize Capital Structure – IPO has diversified shareholders – Highest Tier 1 Capital Ratio (18.52%) pro
Slide 7: Strategic Focus: Credible Risk Management Platform
1 Strategic Focus: Credible Risk Management Platform Establish a Risk Culture Throughout the Organization – Reformed credit underwriting and risk management structures under new Chief Risk Officer and Chief Credit Officer positions Moved to more flexible and comprehensive “Expert Judgment System
Slide 8: Strategic Focus: Improve Revenue Mix and Profitability
2 Strategic Focus: Improve Revenue Mix and Profitability ■ Non-Interest Revenue as ■ ROA(2) % of Total Net Revenue(1) 2 .0 % % of Net Revenue 80% 1 .6 % 60% 62% 40% 54% 1 .0 % 20% 39% 23% 27% 11% 0% 0 .3 % 02 03 04 05 06 6 /0 3/ 3/ 3/ 3/ 3/ 0 .0 % 12 FY FY FY FY FY 3Q F Y3 / 0 2 3Q 12/06 (1)Because
Slide 9: Strategic Focus: Consistent Annual Top-line Growth
3 Strategic Focus: Consistent Annual Top-line Growth Combination of Steady to Achieve Consistent, Top- Portfolio Expansion, Earning line Growth, while Enjoying a Diversification, Margin Multiplying Effect to the Enhancement and Strict Bottom Line Control of Costs (JPY in billions) 90.0 Breakdown
Slide 10: The Business Model: Create a Corporate Banking Sales Culture
The Business Model: Create a Corporate Banking Sales Culture Dedicated Marketing Force – Share of wallet: comprehensive product suite – 21 officers focused on new core client acquisition broad customer-calling efforts in 1st half of FY2006 – 63 new client relationships – JPY 120 billion increase
Slide 11: The Business Model: Sustain Corporate Lending
The Business Model: Sustain Corporate Lending Clear Competitive Advantages – Focused target market of mid- to large-sized corporates – Risk management expertise delivers better, faster credit decisions Average credit review period cut by nearly two thirds Financial strength and cultural flexib
Slide 12: The Business Model: Sustain Corporate Lending
The Business Model: Sustain Corporate Lending Consistent double digit loan growth vs. flat industry growth (1% average for Japanese banks(1)) over the same period (JPY in billions) Loans Outstanding (Consolidated basis) 4,000 3,552.0 3,136.3 3,000 2,776.6 2,000 1,000 0 12/05 3/06 12/06 (1) Based o
Slide 13: The Business Model: Grow High Margin Specialty Products
The Business Model: Grow High Margin Specialty Products Clear Competitive Advantages - Diverse range of proprietary and customer flow business - Competitive advantage results from skills and culture, not from size - No direct competitor across the full suite of products & services - Typically high
Slide 14: The Business Model: Grow High Margin Specialty Finance Products
The Business Model: Grow High Margin Specialty Finance Products Applying risk management discipline to pursue profit enhancing opportunities in Japan and abroad 50 (JPY in billions) 45 41.1 41.6 Leveraged 40 Finance (Japan .5 % 6.4 and Asia) 51 8.7 35 R C AG Global 6.3 Finance 30 6.3 (Europe) 25 2
Slide 15: The Business Model: Specialty Finance Product Set
The Business Model: Specialty Finance Product Set Group Division Department Product Comment P&L category Retail Banking Retail Bank Investment product Investment Trusts and Variable Agency agreement for third Fees and Commissions sales Annuity Insurance party products Corporate and Corporate Private
Slide 16: The Business Model: Leverage Regional Financial Institutions
The Business Model: Leverage Regional Financial Institutions Broad Existing Network – 79% coverage of the nearly 700 regional Key Opportunities financial institutions Source Deal Flow Sourcing Distribution Advisory – NPL investment, ship finance, hospital- related finance, etc. Non-performing
Slide 17: The Business Model: Build Low-cost Retail Presence
The Business Model: Build Low-cost Retail Presence Measured Approach – 18 retail branches, plans for 20 total – Become lowest-cost provider of retail banking modest ongoing capital investment for relocation/remodeling expansion of popular call center establishment of Internet Banking Attra
Slide 18: The Business Model: Build Low-cost Retail Presence
The Business Model: Build Low-cost Retail Presence Steady growth of retail deposits, the highest priority source of funding (Bil. yen) Outstanding balance of deposits (by type of depositor) 3,500 Negotiable certificate of deposits 3,000 Other deposits Retail deposits 871 2,500 688 418 548 2,000 51
Slide 19: The Numbers: 3Q 12/06 Results on Track for the Full Year
The Numbers: 3Q 9/06 Results on Track for the Full Year Non-interest Income now Non-interest Income up 21.5%; Represents 62.1% of Net Fees and Commissions up Net Revenue 7.9%(1) (JP Y in b illio n s) 140 <Net income> <Net revenue> O f w hic h deferred gains on previous m ac ro- 1 2 0 .1 120 hedging
Slide 20: The Numbers: Financial Strength to Deliver Shareholder Value
The Numbers: Financial Strength to Deliver Shareholder Value Equity Comparison of BIS Capital Ratio(2) ＊consolidated total net asset (consolidated basis) 900 18.7%* （ Bil. yen） 20% As of December 31, 2006 800 785 723 15% 700 13.5% * 12.2% 612 * 11.0% 11.0% * 10.5% 600 10.5% 10% 527 500 477 498 8.0%
Slide 21: Aozora Bank: Building a Unique Banking Franchise
AOZORA BANK: Building a Unique Banking Franchise With our Global Standard Risk Management Platform and Rigorous Approach to Sales… – We are driving the growth and profitability of our Core Corporate Client Relationships while keeping tight control of costs – We are Investing in People and Technolo
Slide 22: Appendix: Frequently Asked Questions (FAQ)
Appendix Frequently Asked Questions (FAQ)
Slide 23: FAQ: Aozora's Investment in GMAC
FAQ AOZORA’s Investment in GMAC Investment of USD 500 million from 30 November, 2006, represents a 3.24% stake in GMAC, as part of the consortium that controls 51% No, Cerberus did not tell Aozora to invest. Cerberus gave Aozora the opportunity to invest, and Aozora made it’s own decision to inv
Slide 24: Experienced Management Team
Experienced Management Team Diverse Blend of Skills and Experience Office of Chief Executive Senior Managing Executive Officers Kimikazu Noumi(1) Carlos A. Erchuck David Hackett Hiroshi Jinno Chairman CRO CFO Risk Finance Financial Institutions Former President of Former Executive Director Former Ma
Slide 25: FAQ: Independent Board of Directors
FAQ Independent Board of Directors 9 out of 13 Board Members are Outside Directors Frank W. Bruno President of Cerberus Global Investment Advisors, LLC Yoichiro Iwama Director & President of Tokio Marine Asset Management Marius J.L. Jonkhart Former Director of the Domestic Monetary Affairs of the Ne
Slide 26: FAQ: High Asset Quality / NPL Coverage
FAQ High Asset Quality / NPL Coverage NPL Trend(1)(2)(3) Comparison of NPL Coverage Ratio (JPY in billions) 800 NPLs Outstanding 30% 100% NPL Ratio 700 679.8 * 91.0% 25% 90% 87.5% 600 21.7% 20% 489.5 500 79.0% 80% 75.7% 400 15% 73.1% 71.1% 14.2% 70% 300 202.5 10% 200 61.3% 60% 98.4 5% 6.0% 88.6 100
Slide 27: Forward-looking statements disclaimer
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 co