Aozora Bank, Ltd. · TSE:8304
Aozora Bank — Morgan Stanley Japan Equity Conference 2009
27 slides from Aozora Bank's conference presentation, Oct 1, 2009
Slide 1: Aozora Bank, Ltd. - Morgan Stanley Japan Equity Conference
Aozora Bank, Ltd. Morgan Stanley Japan Equity Conference New York September 30 - October 1, 2009 Copyright © 2009 Aozora Bank, Ltd．All Rights Reserved.
Slide 2: Who We Are
Who We Are (as of June 30, 2009) Overview Headquarters: Tokyo, Japan Offices: 22 (Headquarters, 19 domestic branches, 2 overseas rep offices) Full-time Employees: 1,642 Apr-Jun ‘09 Consolidated Net Income: ¥5.4 billion ($56.5 million) Consolidated Stockholders’ Equity: ¥536.1 billion ($5.6 billion)
Slide 3: What We Are Today
What We Are Today Attractive relative value turnaround situation Focusing core competencies on market opportunities in Japan Focus supplemented with selective international opportunities Filling a void in Japan created by the departure of foreign lenders Building businesses while others shrink due t
Slide 4: Share Price History
Share Price History 10% ¥212 / share 0% as of Sept. 9, 2008 Aozora Topix Bank Index -10% -20% ¥134 / share as of Sept. 18, 2009 -30% -40% -50% -60% -70% ¥66 / share as of Oct. 27, 2008 -80% Data source: Bloomberg / Closing price 3 Copyright © 2009 Aozora Bank, Ltd．All Rights Reserved.
Slide 5: Relative Value Opportunity (1/2): Market Value / Book Value
Relative Value Opportunity (1/2) Market Value to Book Value (*) 120% BV=¥238/share 0.97 X 100% 0.91 X Market Value / Book Value 80% 60% 0.56 X 40% 20% 0% Aozora Large Banks 3 Mega Banks ¥134 / share (*) Market Value to Net Asset Book Value based upon closing stock prices as of September 18, 2009 and
Slide 6: Relative Value Opportunity (2/2): Price / Earnings Ratio
Relative Value Opportunity (2/2) Price / Earnings Ratio (*) 14 12.1 X 12 11.7 X Price / Earnings Ratio 10 9.2 X 8 6 4 2 - Aozora Large Banks 3 Mega Banks (*) Price / Earnings Ratio based upon closing stock prices as of September 18, 2009, annualized earnings per share based upon results for the firs
Slide 7: What Happened - The 2008-09 Financial Crisis
What Happened - The 2008-09 Financial Crisis Sub-prime crisis, Lehman bankruptcy, Merrill acquired, RBS and AIG partly nationalized Markets stopped functioning, values across asset classes dropped sharply and credit markets froze Bank debenture market in Japan closed Aozora entered the crisis positi
Slide 8: Response to the Financial Crisis
Response to the Financial Crisis New management team Brian Prince as President and CEO, Kunimi Tokuoka and Shinsuke Baba as Deputy Presidents, and Masaki Tanabe as CFO Three-year plan Year 1: Recognize and fix the problems Year 2: Establish new business model; gain traction Year 3: Execute the plan
Slide 9: What We Said We Would Do
What We Said We Would Do Reduce balance sheet risk; reduce/exit legacy and non-core assets Refocus on the domestic lending market Diversify funding base Reduce expenses Return to profitability in FY2009 Pursue strategic alliances 8 Copyright © 2009 Aozora Bank, Ltd．All Rights Reserved.
Slide 10: What We Have Done - Address Legacy and Non-core Assets
What We Have Done - Address Legacy and Non-core Assets Gained an early start on dramatically addressing legacy and non-core assets GMAC Cumulative losses equivalent to 97% of original $500 million investment have been recorded. The book value was $15 million at June 30, 2009 CDOs Through write-downs
Slide 11: What We Have Done - Refocus on the Domestic Market
What We Have Done - Refocus on the Domestic Market Leveraging specialized lending skills in markets with the most opportunity Real estate, domestic leveraged finance, specialized finance, etc. Credit and investment approvals centralized Addressed legacy and non-core assets such as overseas investmen
Slide 12: What We Have Done - Funding and Expenses
What We Have Done - Funding and Expenses Funding: Early achievement of mid-term Retail funding target Retail funding increased 34% yoy as of June 30, 2009 and reached 50% of total core finding as of June 30, 2009, an increase from 30% as of June 30, 2008 Launched new retail Internet banking service
Slide 13: What We Have Done - Returning to Profitability
What We Have Done - Returning to Profitability Net income for Q1 of ¥5.4 billion ($56.5 million), 108% of the full year forecast Net revenue (core business basis) increased 23.1% vs. the prior year Margins improved. Net interest margin improved by 3 bps vs. the prior year Net fees and commissions in
Slide 14: Going Forward Strategy
Going Forward Strategy Primary focus on the domestic Japanese market, targeting specialized lending segments, regional financial institutions and retail banking Continue to diversify funding profile Exploit niche lending opportunities that fit our size and skills Managing towards a more stable, more
Slide 15: Merger with Shinsei Bank (1/3)
Merger with Shinsei Bank (1/3) Combined bank to focus on customers’ needs Organizational Stability Ranked 6th domestically in terms of total assets at March 31, 2009, the combined bank will secure organizational stability through its robust capital base and enhanced funding capabilities Financial an
Slide 16: Merger with Shinsei Bank (2/3)
Merger with Shinsei Bank (2/3) Anticipated Closing in October 2010 Jul. 1, 2009 : Entered into Alliance Agreement Jul. 7, 2009 : Norito Ikeda appointed as Senior Advisor to both banks Jul. 7, 2009 : Established Integration Committee, Integration Advisory Group and Sub-Committees Jun. 2010 (TBD) : Ap
Slide 17: Merger with Shinsei Bank (3/3)
Merger with Shinsei Bank (3/3) Focusing operations in Japan on the customer Organizational Domestic Stability Corporate Finance Individual Customers Alliances with Regional a domestically in terms of total assets Ranked sixth a at March 31, 2009, the Combined Bank will Financialfunding secure organi
Slide 18: Summary
Summary Substantial progress made on balance sheet de-risking process Executing on all key “market promises”, e.g. reduction of legacy and non-core assets, domestic market focus, retail funding mix, expense reduction and a return to profitability Industry leading capital position; low risk of diluti
Slide 19: Appendix
Appendix Copyright © 2009 Aozora Bank, Ltd．All Rights Reserved.
Slide 20: Historical Financials
Historical Financials Financial Highlights (Consolidated) (Billions of yen) FY2006 FY2007 FY2008 FY2009 (End Mar. 07) (End Mar. 08) (End Mar. 09) Apr - Jun Net revenue 114.4 39.8 -5.0 21.5 Net income (loss) 81.5 5.9 -242.6 5.4 Total equity 792.5 768.1 529.6 536.1 Total assets 6,544.0 7,259.1 6,077.3
Slide 21: Historical Financials - Loan Portfolio
Historical Financials Loan Portfolio (Consolidated) （100 million yen) End-Jun. 09 Balance of loans % Loans by domestic offices Corporate Banking (excluding Japan offshore market accounts) 30,302 88.99% Manufacturing 2,632 7.73% Investment Banking & Global Agriculture, forestry and fisheries 39 0.11%
Slide 22: Historical Financials - Funding and Liquidity
Historical Financials Funding and Liquidity Non-consolidated funding sources Liquidity buffer * (Non-consolidated) (100 million yen) 55,299 (100 million yen) 72,773 50,000 48,066 11,490 45,325 49.6% 65,589 60,913 3,780 42,101 11,916 60,000 56,806 40,000 4,607 21,293 15,563 30,000 12,427 15,067 40,00
Slide 23: Historical Financials - Capital
Historical Financials Capital Risk-weighted assets Regulatory capital ( 100 million yen) Tier 1 capital Total capital adequacy ratio Tier 1 capital ratio Core Tier 1 capital ratio 50,000 17.29% 16.65% 15.23% 40,000 15% 15.64% 13.61% 14.27% 14.29% 12.57% 30,000 12.65% 12.59% 11.59% 11.60% 49,714 10%
Slide 24: Japanese Economic Overview
Japanese Economic Overview Previous fiscal year: Serious downward phase triggered by global financial crisis Export driven economy hard hit by global recession and sharp reduction in import demand Oct-Dec GDP declined 13.1% (annualized rate) from previous year Avoided a real estate bubble (this time
Slide 25: Japanese Banking Sector
Japanese Banking Sector Market dominated by the three Mega Banks - Mitsubishi UFJ Financial Group (MUFG), Mizuho and Sumitomo Mitsui Financial Group (SMFG). Combined assets of ¥469 trillion ($4.9 trillion) and approximately 1,800 retail banking offices throughout Japan Japan Post Bank, with ¥201 tri
Slide 26: Japanese Real Estate Market
Japanese Real Estate Market Overview The environment remains difficult, with continuing bankruptcies of real estate developers as a result of a decline in financing from financial institutions and a deterioration in real estate liquidity There are early signs that the market has bottomed out, such a
Slide 27: Aozora Bank Corporate Communication Group
AOZORA BANK, LTD. Corporate Communication Group TEL: +81 3 5212 9253 FAX: +81 3 3239 8065 URL: http://www.aozorabank.co.jp/english/index.html Mr. Jorge Leon j2.leon@aozorabank.co.jp Mr. Masaaki Harada m1.harada@aozorabank.co.jp Mr. Richard Roylance r.roylance@aozorabank.co.jp Ms. Junko Matsumoto j.m
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