Resona Holdings, Inc. · TSE:8308
Resona — 1H FY2017 Earnings Presentation
73 slides from Resona's earnings presentation, Nov 20, 2017
Slide 1: Business Results for 1H of FY2017 and Future Management Direction
Business Results for 1H of FY2017 and Future Management Direction November 20, 2017
Slide 2: Table of Contents
Table of Contents Outline of Business Results for 1H of FY2017 Efforts to Business Challenges and Updates on Major Businesses for Sustainable Growth p3 Outline of Financial Results for 1H of FY2017 p19 Value Creation Model for Becoming the "Retail No.1" Financial Services Group p4 Breakdown of Finan
Slide 3: Outline of Business Results for 1H of FY2017 and Updates on Major Businesses
Outline of Business Results for 1H of FY2017 and Updates on Major Businesses Efforts to Business Challenges for Sustainable Growth Direction of Capital Management Reference Material 2
Slide 4: Outline of Financial Results for 1H of FY2017
Outline of Financial Results for 1H of FY2017 Progress Resona HD consolodated FY2017 YoY change rate v s. Posted JPY94.0 bn of net interim income attributable to (JPY bn) 1H % Prev ious owners of the parent Target Down JPY2.8 bn, or 2.9%, YoY, but exceeding the 1H target by Net interim income at
Slide 5: Breakdown of Financial Results for 1H of FY2017
Breakdown of Financial Results for 1H of FY2017 Difference Resona Holdings Total of group banks (Exclude the effect (Consolidated) (Non-consolidated) of realignment*3) (JPY bn) Difference from the Saitama Kinki effect of Resona YoY YoY company's 1H target Resona Osaka realignment YoY Bank change cha
Slide 6: Analysis on YoY Change in Net Interim Income
RHD Analysis on YoY Change in Net Interim Income Consolidated (JPY bn) Actual net operating profit (17.1) Gross operating profit (19.1) Net interest income (4.2) NII from Fees and domestic loans commission Net gains Credit- and deposits Other income*1 on stocks related (Total of group NII (0.0) (inc
Slide 7: Trend of Loans and Deposits
Total of Trend of Loans and Deposits Group Banks Trend of average loan balance Average loan / deposit balance, rates and spread (Domestic account) (JPY tn) Average loan balance % represents YoY change Avg. bal : Trillion Yen 1H FY2017 28 27.4 Income/Cost : Billion Yen 27.2 Act. YoY 26.9 (+1.90%) R
Slide 8: Term-end Balance of Loans and Deposits
Total of Term-end Balance of Loans and Deposits Group Banks Term-end loan balance Term-end deposit balance JPY tn, % represents JPY tn, % represents YoY change YoY change Corporate (Large companies and other)*1 Other Corporate (SMEs) Corporate deposits Corporate (Apartment loans) Individual depos
Slide 9: Trend of Residential Housing Loans
Total of Trend of Residential Housing Loans Group Banks Composition of newly originated residential New loan origination housing loans by interest rate type (JPY tn) Flat 35 Share of fixed rate residential housing loans Residential housing loan Share of variable rate residential housing loans 3% 1%
Slide 10: Trend of Fee Income
RHD Trend of Fee Income Consolidated Consolidated fee income ratio at 30.3% for 1H of FY2017 JPY bn, % represents YoY change Consolidated 29.6% 30.0% fee income ratio*1 28.5% 27.2% Consolidated 30.3% fee income 28.6% 28.3% 30.0% 190.0 169.0 110.0 25.0% (+5.2% ) Consolidated 168.7 fee income 160.6 In
Slide 11: Asset Formation Support Business
Total of Asset Formation Support Business Group Banks Balance of asset formation support products sold to individuals (JPY tn) Investment trusts and fund wrap Insurance Balance of asset formation support Public bonds Foreign currency deposits and Money trusts with peformance-based dividends product
Slide 12: Major Fee Businesses
Total of Major Fee Businesses Group Banks Trust-related business (JPY bn) (Reference) Number of new asset succession-related contracts Income from trust solution offered for asset and business succession Will trust + Estate division Asset succession Trust for tranfer of own company stocks Income fro
Slide 13: Credit Costs and NPL
RHD Consolidated Credit Costs and NPL Total of Group Banks Trend of NPL balance and ratio Trend of credit costs (Total of group banks) FY 2016 FY 2017 (Financial Reconstruction Act criteria)) FY 2015 (JPY bn) 1H 1H Revised Unrecoverable or valueless claims Act Act Act Act Plan Risk claims Net credit
Slide 14: Securities Portfolio
Total of Securities Portfolio Group Banks Securities portfolio Status of policy-oriented stocks held Breakeven Nikkei average: Approx. 5,900 yen (JPY bn) 2016/3 2017/3 2017/9 Decrease in listed stocks in 1H of FY2017 (acquisition Unrealized gain/(loss)cost) : JPY1.8 bn, *1 Net gain on sale: JPY2
Slide 15: Capital Adequacy Ratio
RHD Capital Adequacy Ratio Consolidated CAR (Domestic std.) and CET1 ratio* (International std.) as of Sep. 30, 2017 were 11.59% and 9.26%, respectively, maintaining sound capital adequacy level * Excluding unrealized gain on available-for-sale securities Domestic standard (Reference) Internationa
Slide 16: Earnings Targets for FY2017 (Released in November 2017)
RHD Consolidated Earnings Targets for FY2017(Released in November 2017) Total of Group Banks RHD consolidated Common DPS 1H FY'17 Revised Change Change from YoY Change from （JPY bn） full-year from original DPS original (Actual) change previous year target target forecast Net (interim) income Common
Slide 17: (Reference) Outline of Financial Results of Each Segment (1)
RHD (Reference) Outline of Financial Results of Each Segment (1) Consolidated Actual net operating profit decreased by JPY12.1 bn YoY due to profit decrease in market segment FY2017 YoY Personal Corporate (JPY bn) (JPY bn) Banking Markets 1H Change Banking (2.5) and +1.1 Other Gross operating profit
Slide 18: (Reference) Outline of Financial Results of Each Segment (2)
RHD (Reference) Outline of Financial Results of Each Segment (2) Consolidated Personal Banking Segment Corporate Banking Segment Actual net operating profit : decreased by JPY2.5 bn Actual net operating profit : increased by JPY1.1 bn YoY YoY Decreased mainly due to decline in profit from Co
Slide 19: Efforts to Business Challenges for Sustainable Growth
Outline of Business Results for 1H of FY2017 and Updates on Major Businesses Efforts to Business Challenges for Sustainable Growth Direction of Capital Management Reference Material 18
Slide 20: Value Creation Model for Becoming the "Retail No.1" Financial Services Group
Value Creation Model for Becoming the “Retail No.1” Financial Services Group Resona Group contributes to regional economies and achieves sustainable growth together with its customers Social changes ACTIVITIES OUTCOMES and issues Ongoing aging of society INPUTS Overwhelming Population Strengths of c
Slide 21: Omni-Channel Strategy
Omni-Channel Strategy Expansion of the Sophistication of Customer Contacts Marketing Expand transactions “One on One” with 13.0 mil. or more Anytime, Anywhere Proposal customers Digital Conversion of remote channels Convenience of Smart into sales bases Accounts for all customers (Non- Joint devel
Slide 22: Omni-Advisors Strategy
Omni-Advisors Strategy Expand Base of Long-Term Stable Customers through Consultants who can understand true latent needs of customers Develop a corporate culture of highly customer-oriented awareness for all corporate and individual customers to provide “Independent Financial Advisor”-type serv
Slide 23: Establishment of Omni-Regional Platform
Establishment of Omni-Regional Platform Create new profit opportunities through providing new value to more customers Tie-ups with regional banks with different commitment levels Mutually “Win-Win” relationships High Level of capital alliance Low Benefits for customers (Broadly) Resona Group Shared
Slide 24: Creation of Kansai Mirai Financial Group (1)
Creation of Kansai Mirai Financial Group (1) As a financial group which will advance together with the future of the Kansai region, Management Grow with its customers, principles Create a prosperous future for communities it serves, Make innovative changes for continuous evolution Overview (April 20
Slide 25: Creation of Kansai Mirai Financial Group (2)
Creation of Kansai Mirai Financial Group (2) Establish largest operating base in Kansai and strengthen foundation of Japan’s largest retail financial group 1st section General SMFG shareholders of TSE Around Around 51% 22.3～26.3% Kansai Mirai Financial Group, Inc.1stofsection TSE 100% 100% 100% 100%
Slide 26: Asset Formation Support Business
Asset Formation Support Business Increase asset formation support products balance based on fiduciary duty [Balance of Asset Formation Support Products for Detailed consulting tailored customers Individuals] +40% [Fund Wrap] Fund Wrap Customer Attributes (JPY tn) Began handling Feb. 2017 custome
Slide 27: Settlement Business
Settlement Business Acquire broad-based and stable revenues by providing progressive, highly convenient settlement services Strengthen Debit Card Strategy [Introduce new product] （Oct. 2017~） Increase Increase Giving all customers convenience and a account set rate convenience great deal For all c
Slide 28: Utilization of FinTech
Utilization of FinTech Utilize advanced technologies to pursue greater customer convenience and higher productivity Deposits Loans Settlement Asset formation R&D and Low-cost real-time Business New services Personal finance app Transaction lending remittance Robo-advisors Use of new Utilization tech
Slide 29: Succession Business
Succession Business Expanding transactions with succession solutions that utilize strength in trusts [Succession-related income] +4.0 bn Expanding succession market (JPY bn) Population estimates by Business succession 14.0 age*1 preparations *2 Real estate brokerage fee from consumers M&A With
Slide 30: SME Business
SME Business Deepening transactions with 400,000 total corporate customers through growth stage-based solutions [Solutions/international business income] (JPY bn) +10.0 bn Conversion Strengthen information linkage with regional International businesses 35.0 financial institutions nationwide throug
Slide 31: International Business
International Business Comprehensive support for customers’ overseas business development, centering on Asia and U.S. Services offered by corporation among domestic branches, JV bank, representative offices and partner banks [Resona Merchant Bank Asia] (Singapore) United South States Korea Provi
Slide 32: Individual Loan Business
Individual Loan Business Achieve multifaceted transactions with more customers starting with financing for living [Balance of Residential Housing Loans] Expand share of loans to individuals and ＋8.8％ increase profitability (JPY tn) Open, Nation-wide service through screening and execution on Smart S
Slide 33: Process Reform: Full-Scale Digitalization
Process Reform: Full-Scale Digitalization Strengthen marketing capabilities and raise cost competitiveness through digitalization Situate optimally sized branches in optimal locations Policy development with emphasis on speed Improve customer Improve Resona’s All branches to have instant card issu
Slide 34: Corporate Governance System
Corporate Governance System The first Japanese banking group which adopted a committee-based corporate governance structure in 2003 for management transparency and objectivity Outside directors Tadamitsu Matsui Mitsudo Urano Yoko Sanuki Chairperson, Nominating Committee Chairperson, Compensation Cha
Slide 35: Direction of Capital Management
Outline of Business Results for 1H of FY2017 and Updates on Major Businesses Efforts to Business Challenges for Sustainable Growth Direction of Capital Management Reference Material 34
Slide 36: Direction of Capital Management
Direction of Capital Management Continue allocation policy of equal weight to 1) investment for future growth, 2) higher capital adequacy, and 3) enlargement of shareholder return Impact of KMFG establishment on capital adequacy ratio is recoverable soon and no change to the equal weight allocatio
Slide 37: Reference Material
Outline of Business Results for 1H of FY2017 and Updates on Major Businesses Efforts to Business Challenges for Sustainable Growth Direction of Capital Management Reference Material 36
Slide 38: Overview of the Mid-term Management Plan "Retail No.1"
Overview of the Mid-term Management Plan “Financial Services Group” that is most supported by Vision “Retail No.1” regional customers as it walks with them into the future Deliver solutions customers really need and reform mid-to-long term income structure by establishing “Next- generation Retail Fi
Slide 39: Income and Cost Structure Reforms
Income and Cost Structure Reforms Higher profitability via perfection Develop tolerance to prolonged ultra-low interest rate of new business model and environment via income and cost structure reforms better operating environment (JPY bn) Income structure reforms Cost structure reforms Further growt
Slide 40: Business Strategies
Business Strategies Solutions for business growth, Total life solutions turnaround and succession Solutions for individual customers’ anxieties and concerns, Supports to SME customers to solve business challenges and for higher conveniences Cultivating “Retail x Trust x AM x Real Estate” further Bus
Slide 41: Schedule for Integration
Schedule for Integration Schedule Contents September 26, 2017 Board resolution by Resona Holdings, SMBC, Minato, Kansai Urban and Kinki Osaka and determination of the executive officer of SMFG, regarding the execution of the Business Integration Agreement Execution of the Business Integration Agreem
Slide 42: Management Integration Process (1)
Management Integration Process (1) Via phase 1 through 3, Kansai Mirai Financial Group (KMFG) will start fully-fledged operation in April 2018. Phase 1 (November - December 2017) RHD RB 100% 100% (a) Loan (a) RHD established an intermediate holding company, KMFG, as its wholly-owned subsidiary. Su
Slide 43: Management Integration Process (2)
Management Integration Process (2) Phase 2 (To be implemented by February 2018) (c) RHD will implement the tender offer up to 6,182,500 (d) (e) RHD shares of common stock of MB (corresponding to 15% of (c) the number of the voting rights of all of the shareholders of MB) (d) RHD will implement the t
Slide 44: Management Integration Process (3)
Management Integration Process (3) Phase 3 (Planned in April 2018) Final Structure General General General Shareholders SMFG Shareholders RHD Shareholders RHD SMFG Around Around (f) 51% 22.3% ~ 26.3% * MB KU KMFG KMFG 100% 100% 100% KO MB KU KO (f) Implement the share exchange with KMFG as a wholly-
Slide 45: KMFG's Strengths (1): Market Potential
KMFG’s Strengths (1) : Market Potential Total population of Osaka, Hyogo and Shiga prefectures exceeds that of Tokyo Metropolitan Area Total GDP of Osaka, Hyogo and Shiga Prefectures amounts to 12% of entire Japan and 79% of the entire Kansai region Loan Number of business Export and Population*
Slide 46: KMFG's Strengths (2): Top-class in Japan and the largest regional financial group in Kansai
KMFG’s Strengths (2) :Top-class in Japan and the largest regional financial group in the Kansai region Retail Focused Banking Model Gross Branch Total Deposits*1,3 operating Loans*1,3 offices*1 assets*1,3 profit*1,2 JPY 148.2 bn JPY 11.6 tn JPY 8.8 tn 10.4 ％ 379 4th 6th 5th 6th 1st Ratio of loans
Slide 47: CSR
CSR To raise corporate value through contributing to the creation of a sustainable society, we have identified and are engaged in four priority areas – Community, Next Generation, Diversity and Environment Community “Re: Heart Club” (Employee volunteer group) joined various community activities [“
Slide 48: Initiatives for Corporate Governance Evolution
Initiatives for Corporate Governance Evolution Self-evaluation of the board Performance share unit plan Improve effectiveness of Board of Directors meetings by Introduced in July 2017 revising operations, etc. through annual board evaluations HD stock will be granted based on consolidated ROE
Slide 49: Resona's Challenges Attracting Attentions from Outside
Resona’s Challenges Attracting Attentions from Outside Resona’s challenges towards “Retail No.1” are highly evaluated by various institutions Resona adopted by all three 2017 30th Nikkei New Nadeshiko Brand ESG stock indices selected by GPIF FY2014, FY2015 and FY2016 Office Awards 66 companies adopt
Slide 50: Example Activities of Omni-Advisors
Example Activities of Omni-Advisors Internal projects and awards programs to strengthen Resona’s overall ability to understand true latent needs of customers Examples of 20th Resona Brand Awards Presented in Sep. 2017 (Selected by vote of all employees from among monthly awards in second half of F
Slide 51: Sound Balance Sheet
Sound Balance Sheet Sound assets backed by very stable deposit funding Resona’s consolidated balance sheet (as of September 30, 2017) Total assets JPY48.7 tn Sound loan portfolio Fixed-rate Stable funding structure Loans loans*1 Deposits Consists mostly of and Strong deposit base JPY JPY6.6 tn
Slide 52: Measures to Build Multifaceted Business Relationships with Customers
Measures to Build Multifaceted Business Relationships with Customers 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-time profits by upgrading the
Slide 53: Business Results by Major Group Business Segments
Business Results by Major Group Business Segments “RVA”*1 and “RAROC” as management indicators to measure profitability to allocated capital Management Accounting by Major Group Business Lines (1H FY2017) (JPY bn, %) Profitability Soundness Net operating profit after a deduction of credit cost Net
Slide 54: PL Summary and Factors for Consolidated and Total of Group Banks Difference
PL Summary and Factors for “Consolidated” and “Total of Group Banks” Difference PL Summary RHD consolidated / (RHD consolidated / Total of group banks) Total of group banks difference (Major consolidated subsidiaries) Total of group RHD Difference HL guarantee Resona Resona P. T. Bank banks effect o
Slide 55: Consolidated Subsidiaries and Affiliated Companies
Consolidated Subsidiaries and Affiliated Companies Consolidated domestic subsidiaries (excluding group banks) (JPY bn） Net income Name Line of business Capital contribution ratio YoY 1H FY2017 change Credit guarantee Japan's highest class of residential housing Resona Holdings *1 Resona Guarantee Co
Slide 56: Capital Adequacy Ratio (Group Banks)
Capital Adequacy Ratio (Group Banks) Resona Bank Saitama Resona Bank Kinki Osaka Bank (Consolidated) (Non-consolidated) (Consolidated) [A-IRB] [A-IRB] [F-IRB] Japanese Domestic Standard (JPY bn) Mar. 31, Sep. 30, Mar. 31, Sep. 30, Mar. 31, Sep. 30, 2017 2017 2017 2017 2017 2017 Change Change Change
Slide 57: Stocks Held by Industry (September 2017)
10% 15% 20% 0% 5% Fishery, agriculture and forestry Mining Construction (Balance sheet amount) Food product Textile product Pulp and paper Chemical product Pharmaceutical product Oil and petrochemical product Rubber products Glass and pottery Iron and steel Non-metal products Metal products Machiner
Slide 58: Swap Positions by Remaining Periods
RHD Swap Positions by Remaining Periods Consolidated Notional amounts of interest rate swaps (deferred hedge accounting applicable) by remaining period (JPY bn) Sep. 30, 2017 Mar. 31, 2017 Within 1 to 5 Over Within 1 to 5 Over Total Total 1 year years 5 years 1 year years 5 years Receive fixed rat
Slide 59: Maturity Ladder of Loan and Deposit (Domestic Operation)
Total of Maturity Ladder of Loan and Deposit (Domestic Operation) Group Banks Loans and Bills Discounted Deposits [End of March 2017] [End of March 2017] Within 6M 6 to 12M 1 to 3Y Over 3Y Total Within 6M 6 to 12M 1 to 3Y Over 3Y Total Fixed rate (1) 1.6% 1.3% 6.4% 14.0% 23.4% Liquid deposits (1) 52
Slide 60: Composition of Loan Portfolio and Deposits (September 30, 2017)
Composition of Loan Portfolio and Deposits Total of (September 30, 2017) Group Banks Loans*1 Deposits*4 Fixed Rate Liquid 5% Fixed Rate 19% deposits Personal 26% Banking Corporate Corporation Bussiness Banking Liquid (JPY13.0 tn) Prime Unit Bussiness deposits 34% Rate (JPY10.5 tn) Unit*2 46% 33% 38%
Slide 61: Composition of Loan Portfolio by Base Rates
Total of Composition of Loan Portfolio by Base Rates Group Banks Corporate Banking Business Unit*1,2 Prime Prime Prime Fixed Fixed Rate Fixed Rate Rate Rate Rate Rate 26% 28% 27% 29% 30% 31% [September 30, [March 31, [September 30, 2016] 2017] 2017] Market Rate*3 Market Rate*3 Market Rate*3 42% 43%
Slide 62: Composition of Deposits by Types
Total of Composition of Deposits by Types Group Banks Corporate Deposits Time Time Time deposits deposits deposits 21% 20% 22% [September 30, [March 31, [September 30, 2016] 2017] 2017] Liquid deposits Liquid deposits Liquid deposits 74% 75% 77% Individual Deposits Time Time Time deposits deposits d
Slide 63: Migrations of Borrowers (1H of FY2017)
RB Migrations of Borrowers (1H of FY2017) Exposure amount basis *1 End of September 2017 Upward Downward Other Special Effectively Migration Migration Normal Doubtful Bankrupt Other Collection, Assignments, Watch Attention Bankrupt Repayments Sale Normal 98.7% 0.5% 0.0% 0.0% 0.0% 0.0% 0.7% 0.7% 0.
Slide 64: List of Preferred Shares and Subordinated Bonds
List of Preferred Shares and Subordinated Bonds (Oct. 30, 2017) Preferred Shares Class 5 Preferred Shares Original issue date (1) 8/28/2007 Current number of shares (2) 4,000,000 shares Issue price per share (3) JPY 25,000 Total issue amount remaining at present (4) JPY 100.0 Billion Original total
Slide 65: Responses to the Ongoing International Discussion over Further Tightening of Financial Regulation
Responses to the Ongoing International Discussion over Further Tightening of Financial Regulation Major items of financial regulation being discussed internationally For many items, international rules will be finalized hereafter and local authorities will start working on domestic rules. Major re
Slide 66: 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*1 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 grandfatherin
Slide 67: BOJ Current Account Balances
BOJ Current Account Balances Monthly average balance of BOJ current account (16 Oct. -15 Nov.) Total of institutions subject to the complementary City banks including deposit facility Resona Bank and Saitama Resona Bank JPY354.2 tn JPY132.4 tn The outstanding balance of current account at the Bank J
Slide 68: Long Term Business Results
Long Term Business Results (JPY bn) FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 Gross operating profit 901.8 775.0 763.1 768.6 805.2 769.3 739.5 678.3 667.0 655.2 637.1 608.5 632.4 619.5 563.1 Net interest income 599.1 561.2 542.3 549.8 56
Slide 69: Trend of Long-term Senior Debt Rating
RB Trend of Long-term Senior Debt Rating S&P Moody's R&I 2003 2004 2005 2006 2007 2011 2017 JCR A1 A+ R&I JCR S&P A2 A Moody's A3 A- Baa1 BBB+ Baa2 BBB Baa3 BBB- Ba1 BB+ 68
Slide 70: Composition of Resona HD's Common Shareholders
Composition of Resona HD’s Common Shareholders 2.26% 8.96% 5.03% 3.96% 3.93% 5.48% Other 6.08% 6.09% 5.80% 5.97% Corporations 20.01% 20.01% 20.01% 6.35% 13.51% 15.68% 15.48% 14.34% Individuals, etc. 41.95% DIC 5.83% 4.34% 4.58% 16.51% 50.11% 7.39% 6.84% 6.50% 22.23% 19.72% 21.56% 27.92% 31.29% 34.17
Slide 71: Our Website Information
Our Website Information http://www.resona-gr.co.jp/holdings/english/ Materials for investors are available from here Official You Tube (in Japanese language) http://www.youtube.com/user/ResonaGroup Official Facebook account Official Twitter account (in Japanese language) (in Japanese language ) ht
Slide 72: Proactively Communicating with Our Shareholders and Investors
Proactively Communicating with Our Shareholders and Investors Publication of Integrated Report 2017 of Resona Group http://www.resona-gr.co.jp/holdings/english/investors/financial/integrated/index.html Integrated Report explains in a simple manner to all stakeholders the Resona Group’s strengths and
Slide 73: 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 and central bank’s policies, laws, business pra