Credit Saison Co., Ltd. · TSE:8253
Credit Saison — H1 FY2007 Earnings Presentation
47 slides from Credit Saison's earnings presentation, Nov 16, 2007
Slide 1: Management Interim Report FY2007
Management Interim Report FY2007 November 16，2007 Credit Saison Co., Ltd.
Slide 2: Agenda
AGENDA ◆ Interim FY2007 Highlights 2 ◆ Financial Overview of Interim FY2007 4 Funding and Interest Return Requests ◆ Management Strategy 27 Progress in the First Half of FY2007 ◆ Reference Materials 43 Changes to the Domestic Credit Card Market and Other Items 1
Slide 3: Interim FY2007 Highlights
Interim FY2007 Highlights ◆ Non-consolidated ★ Consolidated April–September ★ April: Shizugin Saison Card Co., Ltd. commenced business and issued the ALL-S card. ◆ Commenced a new CI promotion with the theme of "A contest of abilities," using a racehorse as the motif. ◆ May: Announced the new medium
Slide 4: Business Highlights October–present
Business Highlights ◆ Non-consolidated ★ Consolidated October–present ★ October: The total value of assets managed by Saison Asset Management Co., Ltd. surpassed ¥10.0 billion for the first time ◆ October: Combined the 《SAISON》 and UC points—UC Niko–Niko gift points can now be added to SAISON Perman
Slide 5: Financial Overview of Interim FY2007
Financial Overview of Interim FY2007 ◆ Operating Results ◆ Credit Risks （delinquency, credit costs and interest return requests） ◆ Financial Position ◆ Overview of Credit Card Business 4
Slide 6: Operating Results
Operating Results Figures in parentheses are year-on-year comparisons Consolidated Non-consolidated First half 165.6 billion (130%) 131.8 billion (131%) Operating of FY2006 revenues First half 177.3 billion (107%) 140.8 billion (107%) of FY2007 First half 29.3 billion (118%) 43.1 billion (123%) Ordi
Slide 7: Results by Business Segment
Results by Business Segment (Unit: ¥1 billion) Operating revenues Operating income First Half First Half Growth First Half First Half （百万円） Growth of FY2006 of FY2007 rate of FY2006 of FY2007 rate Credit Services 125.6 130.3 3.8% 25.9 17.9 △31.0% Finance 17.2 22.0 27.7% 5.7 4.8 △16.2% Real Estate-re
Slide 8: (Reference) Segment Modification
(Reference) Segment Modification The non card-related credit and finance business and the leasing business are relabeled “finance business.” The real estate business (excluding Atrium guarantees) becomes the “real estate-related business” (including Atrium guarantees) Applicable consolidated Before
Slide 9: Contribution to Consolidated Results-I
Contribution to Consolidated Results-I Group trends (Unit: ¥1 billion) First Half First Half FY2007 YoY YoY of FY2006 of FY2007 (projected) Operating revenues 165.6 177.3 107.1% 345.0 103.4% Ordinary income 43.1 32.9 76.4% 56.0 69.9% Net income △5.8 12.2 － 23.0 155.2% Per-share income(¥) △32.90 68.0
Slide 10: Contribution to Consolidated Results (ii)
Contribution to Consolidated Results (ii) Ordinary Ordinary income: income: Difference Difference between between Non-consolidated Consolidated Difference consolidated consolidated and and non- non-consolidated figures non-consolidated figures Ordinary ¥20.7 billion ¥32.9 billion ¥12.2 billion incom
Slide 11: Operating Revenues (Consolidated/Non-consolidated)
Operating Revenues (Consolidated/Non-consolidated) Operating revenues were up on both consolidated and non-consolidated basis due to an expansion of the real-estate business. ¥1 billion 【Consolidated】 ¥1 billion 【Non-consolidated】 400 400 First Half Second Half Revised 345.0 First Half Second Half R
Slide 12: Ordinary Income (Consolidated/Non-consolidated)
Ordinary Income (Consolidated/Non-consolidated) Down due to increase of credit cost over contribution from steady real estate related businesses. Expected impact from lowering interest rate of cash advances below 18% in FY2007 estimate. ¥1 billion 【Consolidated】 ¥1 billion 【Non-consolidated】 90 90 F
Slide 13: Net Income (Consolidated/Non-consolidated)
Net Income (Consolidated/Non-consolidated) Accomplish growth in net income on both consolidated and non-consolidated basis ¥1 billion 【Consolidated】 【Non-consolidated】 ¥1 billion 50 50 First Half Second Half Revised 42.2 First Half Second Half Revised 40 40 31.8 30 21.5 23.0 30 27.1 △3.0 24.3 25.8 2
Slide 14: Credit Risk Trends-I
Credit Risk Trends-Ⅰ Delinquency rate stay at high level on both consolidated and non-consolidated basis due to increase in delinquency associated with interest return request ■ Delinquency of 90 days or more *Delinquency rate: Percentage of total receivables past due 90 days or more 【Consolidated】
Slide 15: Credit Risk Trends-II
Credit Risk Trends-Ⅱ Additional allowance conservatively to meet an increase trend of interest return request ■Credit costs ※Consolidated figures are aggregated delinquency costs ¥1 billion 【Consolidated】 ¥1 billion 【Non-consolidated】 80 80 Credit costs Revised 76.0 Write-off Net increase in allowan
Slide 16: Allowance for Interest Repayment Losses: Calculation Method and Trends
Allowance for Interest Repayment Losses: Calculation Method and Trends Record a reasonable allowance that appropriately reflects the guidelines Number of Rate of occurrence of Average unit cost users of cash interest repayment claims of interest advances (assuming for five years) repayment claims Co
Slide 17: Trends in Costs of Interest Repayment Claims
Trends in Costs of Interest Repayment Claims Although the number of interest repayment claims continues to increase, the rate of increase is slowing down and there are signs that the peak will be reached in the near future. 12.0 12 2.0 10 8 3.0 (2.0) 5.9 6 1.8 3.7 (0.7) 4 2.4 0.6 7.0 2 0.2 4.1 (3.1)
Slide 18: Shareholders' Equity Ratio & Return on Equity
Shareholders’ Equity Ratio & Return on Equity ■Shareholders’ Equity Ratio & Return Rating on Equity R&I A+ S&P A‾ Fitch A 【Consolidated】 【Non-consolidated】 30% 30% Shareholders’ equity ratio 22.7% 25% 25% 19.1% 17.5% 23.1% 20% 20% 16.2% 19.9% 15.8% 19.4% 15% Shareholders’ 17.8% 17.5% 12.8% 15% equit
Slide 19: Fund Structure-I
Fund Structure-Ⅰ ■Makeup of interest-bearing debt 【Consolidated】 【Non-consolidated】 Bond CP Securitization Borrowings Bond CP Securitization Borrowings 100% 100% 80% 80% 57% 60% 63% 61% 59% 64% 66% 68% 66% 64% 60% 60% 40% 40% 15% 15% 16% 10% 13% 12% 11% 12% 13% 9% 9% 9% 7% 7% 20% 7% 7% 6% 6% 20% 6%
Slide 20: Fund Structure-II
Fund Structure-Ⅱ ■Long-term ratio & fixed ratio 【Consolidated】 【Non-consolidated】 80% 80% Long-term ratio Fixed ration Long-term ratio 71% 72% 70% 70% 73% 70% 62% 61% 61% 68% 60% 65% 60% 56% 63% 62% 57% 58% 50% 50% 51% 40% 40% 30% 30% '03 '04 '05 '06 '07.9 '03 '04 '05 '06 '07.9 CORPORATE STRATEGY ２０
Slide 21: Funding Strategy
Funding Strategy Implementation of funding adjusted for asset structure, profit structure and financial market environment ◆ Diversification of funding sources ◆ Increase of number of lenders (regional banks, Shinren etc.) Handling of liquidity risk ◆ Getting investors (including overseas investors
Slide 22: Main indicators (Non-consolidated)
Figures in parentheses are Main indicators (Non-consolidated) year-on-year comparison FY2007 interim results FY2007 targets ① New applications 1.75 million (71%) 3.25 million (76%) ② New cards issued 1.43 million (67%) 2.70 million (75%) ③ Total cardholders 25.63 million (106%,+0.72mil 26.20 million
Slide 23: New Card Applications & New Cards Issued
①New Card Applications & ②New Cards Issued Emphasis on quality rather than quantity by acquiring new application of profitable cards Unit : Million 【New applications】 Unit : Million 【New cards issued】 5 5 First Half Second Half Revised First Half Second Half 4.5 4.5 4.28 4 4 3.6 3.5 3.5 3.22 1.83 3.
Slide 24: Total cardholders & Active cardholders
③Total cardholders & ④Active cardholders Increasing total cardholders and active cardholders by acquiring prime customers Unit : Million Total cardholders Active cardholders Revised 30 25.63 26.2 24.91 0.3 25 22.79 20 on milli 16.9 .7 2 15.87 +0 15 12.49 12.85 13.1 11.68 0.15 10 8.41 8.83 n i llio 5
Slide 25: Transaction Volume
⑤Transaction Volume Shopping: 10% increase due to growth of Travel & Entertainment and public utility bills settlement (+50% YoY) Cash advances : 4% decrease with risk sensitive screening Shopping Cash advances Unit : 1 billion 5,000 4,637.0 4,305.4 857.0 4,000 96%Y (427.9) 871.5 oY (444.2) 3,146.7
Slide 26: Credit Loans Outstanding
⑥Credit Loans Outstanding Shopping (revolving) : 5% increase in conjunction with volume transactions Cash advances : 2% increase focusing on good quality customers Unit : 1 billion Cash advances ABS(cash advances) Shopping ABS(cash advances) 1,000 825.3 878.3 900 850.8 10.0 800 771.7 250.7 263.3 40.
Slide 27: (Reference (i)) Share of Cards
(Reference (i)) Share of Cards The unit transaction cost of premium cards and the UC Card is high. The department store cards and MMC have increased their share of transactions. (Postal cards will be converted to SAISON NEXT Cards from the second half of the year.) [Share of volume of [Share of card
Slide 28: Management Strategy
Management Strategy CORPORATE STRATEGY 2007 CREDIT SAISON CO., LTD. 27
Slide 29: Approach to Achieving the Medium-term Targets
Approach to Achieving the Medium-term Targets Creation of a non-bank financial institution with a powerful market presence 1. Create the No. 1 credit card group 2. Challenge ourselves to go beyond the card business into non-bank financial services 3. Consolidated ordinary income target for 2010 → ¥7
Slide 30: Compliance with the Amended Money Lending Business Control and Regulation Law
Compliance with the Amended Money Lending Business Control and Regulation Law Lowering of interest rates for cash advances 18% or less for new and existing loans ・Credit Saison Co., Ltd. lowered interest rates for all loans to 18% or less from June–July. ・SAISON Fundex Corp. lowered interest rates f
Slide 31: (Reference (i)) Specific Compliance Measures
(Reference (i)) Specific Compliance Measures Schedule Major enforcement content Compliance measures 2nd enforcement (i) Launch of New Moneylenders Associations ・Obtain proof of income phase (self-regulation) →Obtain from people who wish to ・Obtain written proof of income for loans over borrow over ¥
Slide 32: Policies for Achieving the Medium-term Management Plan
Policies for Achieving the Medium-term Management Plan 1. Revision of the Profit Structure of the Credit Card Business 2. Promotion of Strategic Alliances 3. Restructuring of Processing Systems 4. Increased Utilization of the Web 5. Newly Issued Cards 6. UC CARD Merger Progress 7. New Revenue Source
Slide 33: Revision of the Profit Structure of the Credit Card Business
1. Revision of the Profit Structure of the Credit Card Business Shift to ”volume + quality" by raising sales efficiency Sales network restructuring (i) Accept applications for highly profitable cards, raise the operational efficiency of offices and counters ・In June, we closed 25 Satellite Offices (
Slide 34: Expansion of revolving loans
Shift to ”volume + quality" by raising sales efficiency Expansion of revolving loans (i) Forecast the trends of target clients ・Utilize analyses of the industry environment and the results of data mining of clients who have a history of using revolving payment (ii) Tie-ups with large member stores a
Slide 35: Promotion of Strategic Alliances
2. Promotion of Strategic Alliances Promotion of strategic alliances in flexible forms, such as the establishment of joint venture companies through joint equity participation with alliance partners, issuing of affinity cards, investment in the finance companies held by our alliance partners, M&A, e
Slide 36: FY2007 first half results of capital alliance partners
FY2007 first half results of capital alliance partners (Unit: Billions of yen) Total Card transaction Operating Applications Ordinary income cardholders volume revenue Credit Saison Co., Ltd. 1,750,000 25,630,000 2,248.1 148.7 20.7 Non-consolidated LAWSON CS Card, Inc. 70,000 1,710,000 41.9 4.5 0.04
Slide 37: Restructuring of Processing Systems
3. Restructuring of Processing Systems Low-cost operations lead to improved quality Promotion of cost-cutting policies through cooperation with Qubitous (established October 1, 2007) (i) Streamline UC operations (Qubitous’ top priority) ・Make UC operations low-cost operations by revising employee co
Slide 38: Increased Utilization of the Web
4. Increased Utilization of the Web Improved service and profitability through Web utilization Eikyu Fumetsu.com (online shopping mall) SAISON Permanent Points can now be multiplied by up to 19 times at any time! No. of member stores Approx. 200 (on November 20, 2007 Rakuten became a member) * Make
Slide 39: Newly Issued Cards
5. Newly Issued Cards Systematization of premium cardholders (high-level clients) (1) New AMEX affinity cards Target Client Type Two new types of AMEX! 60% are males in Annual fee: ¥10,500 Platinum their 30s and 40s Gold AMEX Annual fee: who both work and play globally Annual fee: ¥0 ¥21,000 New! Wh
Slide 40: The SAISON NEXT Card
(2) The SAISON NEXT Card: The strongest card in the industry ・Offered as successor cards to postal cards ・Issued to 1,600,000 active card members since the end of October ・Major features: (i) Family perks (ii) Shopping (iii) Annual fee: a perk It is possible to add the insurance The annual fee for t
Slide 41: UC CARD Merger Progress
6. UC CARD Merger Progress UC Points to become SAISON Permanent Points Integration of card usage points Beginning with points used in August, UC Niko–Niko gift points will be SAISON Permanent Points! Points (i) Increased range of cardholder benefits ・Points will no longer expire at a set deadline. ・
Slide 42: New Revenue Sources
7. New Revenue Sources New types of loan products and corporate products New types of loans ・Begin issuing a loan card with fluctuating interest rates (planned for January) ・Begin offering affinity card loans ・ Joint efforts with the company with which the affinity card is issued (to begin during th
Slide 43: Measures for Handling Rising Credit Costs
8. Measures for Handling Rising Credit Costs Ensure sound loans by implementing thorough risk management Initial credit: Stricter management standards Thorough elimination of clients that tend toward excessive indebtedness and fraudulent applications ・Utilize information about the number of Tera Net
Slide 44: (Reference) Branding Strategy
(Reference) Branding Strategy Credit Saison Co., Ltd. considers credit cards to be a Increasing consumer powerful brand communication tool and is aiming to increase card brand value by developing unique and recognition of the impactful corporate identity promotions. SAISON brand The FY2007 theme is
Slide 45: Performance and Evaluation of Saison Asset Management Co., Ltd.
(Reference ) Performance and Evaluation of Saison Asset Management Co., Ltd. Saison Asset Management Co., Ltd. commenced business Total value of net assets and number of accounts on March 15 this year. Since then, it has achieved: Total value of net assets Number of accounts (Billions of yen) 14 200
Slide 46: Changes to the Domestic Credit Market
(Reference) Changes to the Domestic Credit Market Credit Saison Resona HD Sumitomo Mizuho FG Mitsui FG みずほ ＦＧ Central Finance At loan Risona card Orico Mitsui Sumitomo Postal Bank Lawson Idemitsu Takashimaya Card Credit Credit Quark Purpmise CS Card Aeon Yamada Shizugin Daiwahouse YM Credit Financia
Slide 47: Domestic Credit Card Industry Share of Shopping Transactions
(Reference ) Domestic Credit Card Industry Share of Shopping Transactions Mitsubishi UFJ Credit Saison G FY2000 JCB G FY2006 14.0 NICOS G 19.9 10.1 CreditSaison 6.5 Mitsui Sumitomo G JCB Cre d i t Sai son Co . int ima cy 6.6 9.9 9.5 wit h U C C o. intimacy JV with JC B 0.5 Card Co. 3.5 4.0 Othe rs M