Resona Holdings, Inc. · TSE:8308
Resona — Investor Presentation (May 2021)
67 slides from Resona's investor presentation, May 27, 2021
Slide 1: President's opening remarks
• I am Masahiro Minami, the president of Resona Holdings. We sincerely thank you for your participation in our IR presentation in the busy schedule today. • As in the previous year, this time we make it a form of teleconference. • As for the COVID-19, the situation is still fluctuating. • We continu
Slide 2: Abbreviations and forward-looking statements
Abbreviations and definitions of the figures presented in this material are as follows: [HD] Resona Holdings, [RB] Resona Bank, [SR] Saitama Resona Bank, [KMFG] Kansai Mirai Financial Group, [KMB] Kansai Mirai Bank’, [MB] Minato Bank * [KU] Kansai Urban Banking Corporation and [KO] Kinki Osaka Bank
Slide 3: Table of Contents
Table of Contents Outline of Business Results for FY2020 p27 Life Design Support and Updates on Major Businesses p28 Asset frees evi Damess p4 Outline of Financial Results for FY2020 ra os = (cam pena p5 Updates on Businesses under the COVID-19 Pandemic (1) pat SME Loans Business p6 Updates on Busin
Slide 4: Outline of Business Results for FY2020 and Updates on Major Businesses
Outline of Business Results for FY2020 and Updates on Major Businesses @ Resona Holdings, Inc. Ki
Slide 5: Outline of Financial Results for FY2020
• Net income was JPY124.4 bn, a decrease of JPY27.9 bn (-18.3%, YoY), and surpassed the full-year target of JPY120.0 bn by 3.7%. • Actual net operating profit totaled JPY224.0 bn, an decrease of JPY17.9 bn , -7.4%, YoY. • Income from domestic loans and deposits decreased by JPY2.2 bn, YoY. Excluding
Slide 6: Updates on Businesses under the COVID-19 Pandemic
• Pages 5 and 6 are slides for COVID-19 impacts. • While the fight against COVID-19 continues, we are working to expand our business support and digital channels, including customer funding support, by continuing to conduct a full line of operations at all domestic locations while taking appropriate
Slide 7: Trends in fee business
• About trends in fee business. I think you can confirm the situation that has gradually recovered over time. • On a full-year basis, fund wrap, corporate solutions, and settlements increased steadily, while insurance and real estate declined. • I will touch upon some points that were not mentioned
Slide 8: Breakdown of Financial Results
Breakdown of Financial Results PY bn) “comtated — Resora wy ver Bark « seo) asl 3] — ms] INet interest income 2) (3. 4102 (16.5) 218 #32] 108.5) cal Nu tom someste loans are oepases e 303 22] 738 7.1 2 (Garei(osses) on cancelation d rvesimet fusts «) 18 fe] 10 24) val po} 28 os ee ncome 5 wets +12 a
Slide 9: Factors for the Changes in Net Income Attributable to Owners of Parent
Factors for the Changes in Net Income Attributable to Owners of Parent (YoY Comparison) Consolidated Actual net operating profit (17.9) iN (PY bn) f 1 Gross operating profit (19.5) rn ‘ Nil from ' Net gains domesticloans and deposits (22) Feesand a — met ee (27.9) net gan _Yor Volume factor +21.2 Pe
Slide 10: Average balance and yield of deposits and loans
• Regarding the average balance and yield of deposits and loans, we would like you to see the graph at the lower right. • The yields of decline has been slowing overall, and the yields for corporate sector in particular turned positive in 4Q. • This is partly due to an increase in loans with Credit
Slide 11: Term-end Balance of Loans and Deposits
: Total of Term-end Balance of Loans and Deposits Term-end loan balance Term-end deposit balance (JPY tn, % represents YoY change } (JPY tn, % represents YoY change } ™ Corporate (Large companies and other) = Corporate (SMEs) Of which, excluding s o = Corporate (Apartment loans) lloans tothe Japanes
Slide 12: Housing Loan Business
P . Total of Housing Loan Business New housing loan origination Composition of newly originated residential housing loans by interest rate type (JPY tn, % represents YoY change } = Share of fixed rate residential housing loans ® Share of variable rate residential housing loans « Apartment loan = Fla
Slide 13: Fee Income
HD menace ® Consolidated fee income ratio” : 29.9% ® Income from fund wrap (+15.9%, YoY), corporate solution (+7.1%, YOY) and settlement related (+3.5%, YoY) have increased. Income from Insurance and real estate have decreased by 17.8% and 15.4%, res; (" bn. % oe YoY change Hi 30.0% 29.9% : Fee inco
Slide 14: Major Fee Businesses (1) (Asset Formation Support Business)
. . HD Major Fee Businesses (1) (Asset Formation Support Business) to individuals Balance of asset formation support products sol “ ™ Balance of fund wrap": '21/3 JPY490.9 bn bt 13.1% 13.7% . gees a nensng corperaton) vst ange in lance of investment wrap: ® Foreign currency deposits, Publicbonds etc
Slide 15: Major Fee Businesses (2) (Trust, Corporate Solution, Real Estate Business)
: : HD Major Fee Businesses (2) (Trust, Corporate Solution, Real Estate Business) Trust-related business income (JPY bn) *Resona Asset Management ‘= Trust solution offered forasset and business succession ™ Asset and business succession Pension Seaurites tust Number of new asset succession-related c
Slide 16: Credit Costs and NPL
• Regarding credit costs. HD consolidated credit costs were JPY57.4bn, up from the previous fiscal year and from the forecast. One reason for this is the preemptive provisioning and I will explain the outline of this at the top right of the slides. • We provisioned loan loss reserves from a preempti
Slide 17: Securities Portfolio and policy-oriented stocks
• On the right, for policy-oriented stocks. • We reduced policy-oriented stocks by JPY11.6 bn on an acquisition cost basis last year, and posted a gain of sale of JPY29.3 bn on a consolidated basis. • This time, the policy on strategic stockholdings has been partially revised. • In addition to expli
Slide 18: Capital Adequacy Ratio
• Lower right. The medium-term management plan targets10% of CET1 ratio excluding unrealized gains on available-for-sale securities on a Basel-3 finalized basis, and the estimate of it at the end of March 2021 was approx. 9.0%. • Go to page 18, please. 17
Slide 19: Earnings Targets for FY2021
• HD consolidated net income target for this fiscal year is JPY145.0 bn, up by JPY20.6 bn, YoY. Within this amount, consolidated KMFG net income is JPY15.0 bn, which is a 100% contribution to HD income from this fiscal year, and therefore an increase of JPY9.2 bn is expected. • We plan to pay an ann
Slide 20: (Reference) Outline of Financial Results of Each Segment
(Reference) Outline of Financial Results of Each Segment HD solidated (JPY bn) Banking, [O>sing errs @] ass6) |Actual net operating prof (6) 28.4 |Gross operating profi: iu) 250.8 sing opeaingesserse (@) | (145.8) Actual net operating proft (9) 113.9 [Gross operatng profe (10) EX mae nt operating ex
Slide 21: (Reference) Outline of Financial Results of Customer Divisions
(Reference) Outline of Financial Results of Customer Divisions ee Personal Banking Segment Corporate Banking Segment = Actual net operating profit : Down JPY15.6 bn, YoY (JPY bn) Gross operating profit (14.0) n t a] Segment Asset yoy Real saiate Actual net = operating = Loans (27) fauen® 9a" Profit
Slide 22: Efforts for Sustainable Growth
Efforts for Sustainable Growth @ Resona Holdings, Inc. 21 21
Slide 23: Long-term Outlook: Becoming the Retail No. 1
• This time, I will talk a little bit at first from the perspectives of “long-term”, “medium-term”, and “short-term”. First of all from the long-term. • “Resona’s SDGs Management” is described. Our starting point is to think about businesses from issues customers and society confronting. • Resona wi
Slide 24: Medium-term Outlook: Establish Resonance Model (1)
• Next, medium-term outlook. Under the current medium-term plan, we aim to "establish Resonance Model" through "Further Development," "New Challenges," and "Rebuilding our Foundations." From "Rebuilding our foundation." • Amid changes in the world and major changes in customers' financial behavior,
Slide 25: Medium-term Outlook: Establish Resonance Model (2)
• About "Further Development" and "New Challenges." • Resona Group is a commercial banking group with a full line of trust functions, including trusts, real estate, and asset management for pension, based on the solid customer base it has cultivated over its more than 100-year history of specializin
Slide 26: Review of FY2020 and Outlook for FY2021 (1)
• I would like to comment on last year's review and the outlook for the current fiscal year. I think last year was a historical year, which is said to be a turning point later. Previous common sense and values were also shaken. • We believe that new social issues are not a crisis, but rather a great
Slide 27: Review of FY2020 and Outlook for FY2021 (2)
• Here, the idea and KPI for this fiscal year are shown. • It is necessary to conduct business operations on the assumption that the situation will continue to fluctuate for the time being, and the targets for the current fiscal year were also planned on this assumption. • On the other hand, in Japa
Slide 28: Life Design Support
• This initiative focuses on individual customers. • Leveraging the strengths of being a retail commercial bank with trust banking capabilities, we will provide seamless support for customers' life designs in the 100-year life era. • See page 28, please. 27
Slide 29: Asset Formation Business
• We will expand asset management know-how for professionals cultivated in corporate pension to individual customers. We perceive Resona Asset Management as a strategic subsidiary. We think it will grow even more significantly in the future. • The fund wrap is making steady progress with the balance
Slide 30: Housing Loan Business
• Resona's housing loans outstanding balance is the largest among all banks nationwide, and we have a historical strength in this field. • Maintaining a high level of loans origination even in the Covid pandemic, we recognize that customers using housing loans are an important customer base as a sta
Slide 31: Asset and Business Succession Business
• Regarding asset and business succession business. • Data are shown at the top left in terms of heightened awareness of preparedness for the future. In both M&A, real estate, the number of information on hand and projects in process has greatly increased compared to the previous year. • The graph o
Slide 32: SME Loans Business
• I mentioned that the customer base is expanding, and the number of corporate borrowers on the top left has grown by nearly 5%. • The number of customers whose main bank is our group has progressed to the point where it goes beyond one of the megabanks. • The lower left column shows the results of
Slide 33: DX Strategy
• I have prepared three slides regarding DX strategy, but I will make a few comments here. • Please see the upper right section here. Only in the banking industry, Resona was selected for the DX Stock 2020. We recognize that the provision of new value through the integration of face-to-face and digi
Slide 34: Omni-channel strategy
• About the omni-channel strategy. • The left side is about the digital channel. Group app, which reached about 3.6 mn downloads in Mar. '21, has already become the contact point most used by customers, and we recognize that they have been firmly nurtured as the core of digital channels. • In additi
Slide 35: Cashless settlements and digitalization
• The cashless settlements and the digitalization of the public and private sectors are accelerating in the Covid crisis. • On the left, the number of debit card issued increased by 420 thousands from the previous year and income increased by 45%. It is becoming the basis for recurring fee income. •
Slide 36: KMFG integration and group synergies
• On Apr. 1, '21, it was completed to make KMFG a wholly-owned subsidiary of Resona Holdings. • In light of the fact that we have been able to reallocate management resources more rapidly without constraints, we have rearranged the Group synergies. • The major difference from the former disclosure i
Slide 37: Breaking Free of the Banking Model (1)
• From here, regarding efforts toward "New Challenges" and "Breaking Free of the Banking Model". • The creation of "new businesses" is being promoted mainly by Cross Functional Team , which was launched last year. • In addition to accelerating business process reforms, we hope to accelerate the crea
Slide 38: Breaking Free of the Banking Model (2)
• Another pillar of "Breaking Free of the Banking Model" is an open platform strategy that provides Resona's differentiated products and services to regional financial institutions and other institutions as a platform while upgrading and expanding functions through co-creation with FinTech companies
Slide 39: HR strategy
• From here, regarding rebuilding our foundation. In the HR strategy, I will add a little on the number of staff at the lower level. • Number of employees is planned to be around 28.3 thousands employees in the final year of the medium-term management plan, which is lower than the 29 thousands befor
Slide 40: Channel network
• About channel network. While reducing the number of employees per branch, we will reduce the number of locations, particularly in BinB of overlapping locations of the former Kinki Osaka Bank and Kansai Urban Banking Corporation, thereby ensuring both improved customer convenience and cost-cutting.
Slide 41: New Branch System
• Using tablet devices, we intend to introduce the same types of usability as the Group app in branches as well. • Resona Bank and Saitama Resona Bank are switching to and introducing a new branch system from Apr. '21 in order to establish a new sales style that make it possible to provide consultat
Slide 42: System strategy
• About systems. Through low code development and agile, we will accelerate the speed of development while expanding investment in strategic areas without significantly changing overall system costs. • We aim to promote general-purpose, open architecture, and downsizing while utilizing APIs. • Go to
Slide 43: Capital Management
Capital Management @ Resona Holdings, Inc. 42 42
Slide 44: Capital Management
• Regarding capital policy. • The upper shows share repurchases conducted to neutralize the dilutive effect of EPS arising from making KMFG a wholly-owned subsidiary. • EPS calculated from the results target for the current fiscal year is JPY57.8. • On the other hand, EPS calculated from the shares
Slide 45: ESG Initiatives
• Finally, I would like to comment on ESG initiatives. • To page 45, please 44
Slide 46: Environment
• E, about the environment. We recognize that the stage has changed dramatically in this area. • We identify responses to global warming and climate change as environmental and social issues to be prioritized by the Group as a whole. • We will continue our efforts to realize a low-carbon, recycling-
Slide 47: E (Environment): Step-up Approach to Support Customer Initiatives
E (Environment): Step-up Approach to Support Customer Initiatives Help customers expand their knowledge of climate change and other social issues Encourage customers to join Help customers identify and efforts to address resolve latent issues social issues Private placement An introductory booklet o
Slide 48: S (Society): Business & Social Contribution Activities
S (Society): Realize “Retail No. 1” through Business & Social Contribution Activities everaging our strengths and managementresources to contribute to the sustainable growth oflocal communities [Relationship between business strategy and social contribution activities] Priority social issues SDGs st
Slide 49: Society: Diversity & Inclusion
• S, regarding society, I would like to comment on the new personnel system launched this fiscal year as Diversity & Inclusion initiatives. • The personnel system with multi-path has 19 courses in place so that all employees can become expert professionals. Another characteristic is that it is opera
Slide 50: Governance
• G, regarding governance. • As you may know, in 2003 we became the first Japanese banking group to adopt a committee- based corporate governance structure. • The majority of the Board of Directors is composed of outside directors, and the chairs of the 3 committees are all outside directors. • We c
Slide 51: G (Corporate Governance): Roles, Skills, and Expertise Required to Directors
G (Corporate Governance): Roles, Skills, and Expertise Required to Directors Strengthening supervisory and decision-making functions through active discussions at Board of Directors meetings, which are rich in diversity Outside directors*1 Company Legal/ Public Finance General affairs Finance/ ESG
Slide 52: ESG-Based Recognitions and Initiatives
ESG-Based Recognitions and Initiatives Status of inclusion into ESG-based stock indices [ESG indexes selected by GPIF Aim to be included in all of four indices during the current MMP period (domestic stock)] FTSE Blossom Japan Index S&P/JPX Carbon Efficient Index MSCI Japan ESG Select Leaders Index
Slide 53: Resona's Challenges Attracting Attentions from Outside (2)
Resona’s Challenges Attracting Attentions from Outside (2) Resona’s challenges towards “Retail No. 1” are highly evaluated by various institutions Winning awards to commend leading companies of diversity Leading companies where women shine 2020 Winning the Minister of State for Gender Equality Awa
Slide 54: Resona Group at a Glance
Resona Group at a Glance Resona focuses management resources on Tokyo and Kansai metropolitan areas and retail banking business Resona Group is the largest retail-focused bank with full-line trust capabilities in Japan with a well-established customer base especially in Kansai Region due to crea
Slide 55: Establish Resonance Model
Establish “Resonance Model” We will provide new value to customers, starting from the issues confronting customers and society, by moving beyond conventional banking frameworks through diverse resonance generated by new ideas and wide-ranging connections Drivers for Innovation Next-Generation Retail
Slide 56: Points of Focus in the New Medium-term Management Plan
Points of Focus in the New Medium-term Management Plan toward the 2030 Realization of SDGs Expected issues customers will face Key policies under the new medium- Theme in the next 10 years term management plan Local Communities Adapt to a digitalized and global society Widespread use of cashless
Slide 57: Outline of Resona Cashless Platform
Outline of Resona Cashless Platform Settlement infrastructure capable of resolving management issues confronting corporate customers and providing individual customers with more convenient services with smaller fees (2) Providing incentives outweighing others Increase sales Acquire Good value Redu
Slide 58: Policy-Oriented Stocks: Verification Process & Reduction Plan
Policy-Oriented Stocks：Verification Process & Reduction Plan Verification process for value of holding of policy-oriented stocks ※Policy for holding policy-oriented stocks ⇒P16 Quantitative Discussing Measures (Qualitative Judgment) Measures Judgment Consideration from Risks/Returns Perspective Co
Slide 59: Upgrade Segments
Measures to Build Multifaceted Business Relationships Total of Two Banks with Customers (RB, SR) Visible progress has been made through the increase in the number of “Resona Loyal Customers” Number of Customers Top-line Avg. # of Customer segments based on (thousands) Income Products Increase life-t
Slide 60: Consolidated Subsidiaries and Affiliated Companies
Consolidated Subsidiaries and Affiliated Companies (1) Major consolidated domestic subsidiaries (excluding group banks) (JPY bn） Net YoY Name Line of business Capital contribution ratio Fiscal year income change FY'20 Resona Guarantee (1) Resona Holdings 100% 11.3 +0.5 (Mar.31 2021) FY'20 Kansai Mir
Slide 61: Stocks Held by Industry
RB Stocks Held by Industry (March 31, 2021) 25% Resona Bank TOPIX 20% 15% 10% 5% 0% Air transport Retail Pulp and paper Marine transport Textile product Other manufacturing Iron and steel Utilities Warehouse, transportation Pharmaceutical product Transport equipments Information, telecommunication N
Slide 62: Composition of Loan Portfolio and Deposits
Composition of Loan Portfolio and Deposits Total of (March 31, 2021) Group Banks Loans*1 Deposits*3 Fixed Rate Liquid 2% Fixed Rate deposits 19% Personal 27% Banking Corporate Corporation Prime Bussiness Banking Liquid (JPY18.9 tn) Unit deposits 34% Rate (JPY14.0 tn) Bussiness 33% Unit*1 47% Individ
Slide 63: Migrations of Borrowers (1H of FY2020)
RB Migrations of Borrowers (1H of FY2020) Exposure amount basis*1 End of September 2020 Upward Downward Other Special Effectively Migration Migration Normal Doubtful Bankrupt Other Collection, Assignments, Watch Attention Bankrupt Repayments Sale Normal 97.3% 1.3% 0.1% 0.0% 0.0% 0.0% 1.3% 1.3% 0.0
Slide 64: List of Subordinated Bonds
RB List of Subordinated Bonds (March 31, 2021) RB Amount Issue date Maturity Dividend rate outstanding JPY25.0 bn June 1, 2011 June 1, 2021 1.878% JPY20.0 bn December 22, 2011 December 22, 2026 2.442% JPY35.0 bn March 14, 2012 March 15, 2022 1.78% JPY16.0 bn March 14, 2012 March 15, 2027 2.464% 76 R
Slide 65: Outline of Eligible Capital under the Japanese Domestic Std.
Outline of Eligible Capital under the Japanese Domestic Std. Subordinated debts, preferred securities and non-convertible preferred shares Subordinated debts and preferred securities issued under the Basel 2 can be fully included in Core Capital as of the end of March 2014. These grandfathering
Slide 66: Long Term Business Results
Long Term Business Results 3 banks (RB,SR,KO) After KMFG integration (JPY bn) FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2017 FY2018 FY2019 FY2020 Gross operating profit 655.2 637.1 608.5 632.4 619.5 563.1 552.5 661.3 644.1 658.6 639.1 Net interest income 463.9 443.0 430.0 425.9 401.3 377.9
Slide 67: Composition of Resona HD's Common Shareholders
Composition of Resona HD’s Common Shareholders 2.26% 5.03% 3.96% 3.93% 4.89% 8.96% 6.86% 6.65% 7.03% Other 6.08% 6.09% 5.80% 5.88% 20.01% 20.01% 20.01% 5.89% 5.69% 5.98% Corporations 6.35% 13.51% 13.44% 15.68% 15.48% 13.47% 14.19% 15.39% Individuals, 41.95% DIC 5.83% 4.34% 4.58% 16.51% etc. 50.11% 6