Credit Saison Co., Ltd. · TSE:8253
Credit Saison — FY2006 Earnings Presentation
65 slides from Credit Saison's earnings presentation, May 21, 2007
Slide 1: Management Report FY2006
Management Report FY2006 May 21，2007 CORPORATE STRATEGY ２００７ Credit Saison Co., Ltd． CREDIT SAISON CO., LTD.
Slide 2: Agenda
AGENDA ◆ FY2006 Highlights 1 ◆ FY2006 Initiatives 3 ◆ FY2006 Financial Report 8 ◆ Management Strategy 28 Medium-term Management Plan and FY2007 Management Initiatives ◆ Reference Materials 46 The figures contained in this document, which describes the Company’s business outlook and other information
Slide 3: FY2006 Highlights (First half)
FY2006 Highlights ◇Non-consolidated ☆Consolidated First half ◇ Aired new TV commercials featuring Brazilian soccer player Ronaldinho (April) ◇ Started issuing the” Kawatoku Card” under alliance with Kawatoku Co., Ltd, a department store operator (April) ◆ Started issuing the “Prince Card”, the “KDDI
Slide 4: FY2006 Highlights (Second half)
FY2006 Highlights ◇Non-consolidated ☆Consolidated Second half ◆ Established a joint venture and formed shareholder’s agreement with Daiwa House Industry Co., Ltd (November) Established “Daiwa Financial” (November) ◇ Established joint venture, Shizugin Saison Co., Ltd., with Shizuoka Bank, Ltd. (Octo
Slide 5: FY2006 Initiatives
FY2006 Initiatives 1．Progress of Saison–UC CARD Integration 2．Progress of Strategic Capital Alliances 3．New Business Initiatives CORPORATE STRATEGY ２００７ CREDIT SAISON CO., LTD.
Slide 6: Progress of Saison-UC CARD Integration
１．Progress of Saison–UC CARD Integration (1) Organization and personnel integration ① Credit organization integration ・Integrated screening/credit issuance/credit management divisions (September) ② Corporate/operational integration ・Integrated marketing/product development divisions and sales headqu
Slide 7: Progress of Saison-UC CARD Integration: Major Affinity Cards
１．Progress of SAISON–UC CARD Integration (3) Performance of major affinity cards ① MMC Card ◆ FY2006 results ･･･ No. of cards (cumulative): 1.9 million Annual transaction volume: ¥150.0 billion ◆ FY2007 ･･･ Change to point award rate (April); QUICPay compatibility (July); aiming for annual profitabi
Slide 8: Progress of Strategic Capital Alliances-I
２． Progress of Strategic Capital Alliances–I Lower row Lawson CS Card Resona Card Idemitsu Credit shows new alliances for FY2006 Network of 8,600 Network of 620 Bank Network of 6,000 Convenience Stores Branches Gas Stations 30％ share 22.4％ share 50％ share Takashimaya Yamada Shizugin Daiwa House YM S
Slide 9: Progress of Strategic Capital Alliances-II
2． Progress of Strategic Capital Alliances-II ◆ FY2006 performance of capital alliance partners (10,000 cards; 10,000 people; ¥1bil) Total Transaction Operating Ordinary Applications cardholders volume revenue income Non-consolidated 428 2,491 4,299.0 270.2 56.6 Lawson CS Card 30.0％ (established Feb
Slide 10: New Business Initiatives
3．New Business Initiatives (1) Online Shopping Mall Eikyu Fumetsu.com ◆ Launched in October for Net Answer members ◆ Customers can earn up to 19 times the normal SAISON Permanent Points ◆ 200 internet stores from various categories of retailers ◆ The daily amount handled averages ¥20.0 million (as o
Slide 11: FY2006 Financial Report
FY2006 Financial Report 1．Operating Results 2．Credit Risk Trends 3．Financial Indices 4．Main Indicators (Non-consolidated) CORPORATE STRATEGY ２００７ CREDIT SAISON CO., LTD. 8
Slide 12: Operating Results
Operating Results Figures in parentheses are year-on-year comparisons Consolidated Non-consolidated FY’06 Result ¥333.6 billion (121.5%) ¥270.2 billion (124.9%) Operating revenues FY’07 Target ¥340.0 billion (101.9%) ¥273.5 billion (101.2%) FY’06 ¥80.1 billion (112.7%) ¥55.6 billion (111.6%) Ordinar
Slide 13: Results by Business Segment
Results by Business Segment (Unit: ¥1 billion) Operating revenues Operating income Growth Growth FY‘05 FY‘06 FY‘05 FY‘06 （百万円） rate rate Credit & Finance 226.5 284.1 25.4% 54.6 61.4 12.4% Entertainment 17.9 16.9 △5.6% 2.6 2.0 △23.9% Real Estate 19.2 20.5 6.6% 9.5 9.4 △0.1% Lease 7.1 6.7 △5.4% 3.3 2.
Slide 14: Contribution to Consolidated Results-I
Contribution to Consolidated Results–I Group trends (Unit: ¥1 billion) FY’07 FY’05 FY’06 YoY YoY (projected) Operating revenues 274.6 333.6 121.5% 340.0 101.9% Ordinary income 71.1 80.1 112.7% 56.0 69.9% Net income 42.2 14.8 35.1% 26.0 175.4% Per-share income (¥) 237.29 82.79 34.9% 144.76 174.9% Rat
Slide 15: Contribution to Consolidated Results-II
Contribution to Consolidated Results–II Ordinary Ordinary income income (Consolidated/non (Consolidated/non-- Non- Consolidated Difference consolidated consolidated difference) difference) consolidated Ordinary ¥56.6 billion ¥80.1 billion ¥23.5 billion Contribution Contribution to to consolidated co
Slide 16: Operating Revenues (Consolidated/Non-consolidated)
Operating Revenues (Consolidated/Non-consolidated) Operating revenues were up 20% on both consolidated and non-consolidated basis due an expansion of the credit card business following the integration with UC CARD, and strong performance in the Real Estate business. Consolidated Non-consolidated ¥1
Slide 17: Ordinary Income & Net Income
Ordinary Income & Net Income (Consolidated/Non-consolidated) Double-digit growth in ordinary income on both consolidated and non-consolidated basis; lower ordinary income forecast for fiscal 2007 due to reduced interest rates, but net income is expected to increase Consolidated Non-consolidated ¥1 b
Slide 18: Credit Risk Trends-I
Credit Risk Trends–I Increase in third party-mediated credit amount associated with interest return request (205% YoY) ■ Delinquency of 90 days or more *Delinquency rate: Percentage of total receivables past due 90 days or more Consolidated Non-consolidated 4.0% 4.0% 3.42% 3.5% 3.5% Cash advances de
Slide 19: Credit Risk Trends-II
Credit Risk Trends–II Increase in cash advance write-off rate due to increase in interest return requests ■ Write-off trends *Write-off rate: Percentage of total receivables written off during the term 5.5% Consolidated 5.5% Non-consolidated Cash advances write-off rate 5.0% 5.0% 4.66% 4.37% 4.5% 4.
Slide 20: Credit Risk Trends-I (Credit costs)
Credit Risk Trends–I Allowance substantially increased to meet increase in credit loss write-offs ■ Credit costs *Consolidated figures are aggregate delinquency costs ¥1 billion Consolidated ¥1 billion Non-consolidated 70 70 Write-off Net increase in allowance for bad debt 57.0 60 60 51.5 5.8 50 50
Slide 21: Trends in Interest Return Requests
Trends in Interest Return Requests Requests to return past interest paid are increasing, but within expectations. Adequate reserves have been set aside (five years’ worth) to meet future return requests. Return requests are projected to peak in FY2007 and start declining in FY2008 (Unit: ¥1 billion)
Slide 22: Shareholders' Equity Ratio & Return on Equity
Shareholders’ Equity Ratio & Return on Equity ■ Shareholders’ equity ratio & Rating return on equity R&I A+ S&P A‾ Fitch A Consolidated Non-consolidated 30% 30% Shareholders’ equity ratio 25% 25% 19.9% 21.9% 18.4% 17.5% 22.7% 23.1% 20% 20% 16.2% 19.1% Shareholders’ equity ratio 19.4% 17.8% 15% 15% 1
Slide 23: Fund Structure-I
Fund Structure–I Makeup of interest-bearing debt Consolidated Non-consolidated Corporate CP Securitization Debt (Unit: ¥100 million) Corporate CP Securitization Debt bond bond 100% 100% 80% 80% 50% 57% 58% 60% 61% 59% 64% 66% 66% 63% 68% 60% 60% 13% 40% 40% 11% 15% 14% 12% 11% 16% 10% 13% 13% 9% 15%
Slide 24: Fund Structure-II
Fund Structure–II ■ Long-term ratio & fixed ratio Consolidated Non-consolidated Fixed ratio Long-term ratio 80% ¥1,080.8 billion 80% ¥973.8 billion Long-term ratio ¥646.7 billion 70% 74% 70% ¥772.2 billion 70% ¥511.2 billion 72% 68% 61% 62% 60% 60% 428.9 billion 63% 60% 56% 62% 61% 57% 58% 49% 55% 5
Slide 25: Dividends
Dividends Dividends FY’05 FY’06 FY’07 (projected) Dividend per share ¥26 ¥28 ¥28 Total cash dividend ¥4.6 billion ¥5.0 billion － Payout ratio 11.0％ 33.8％ 19.3％ CORPORATE STRATEGY ２００７ CREDIT SAISON CO., LTD. 22
Slide 26: Credit Saison Main Indicators (Non-consolidated)
Credit Saison Main Indicators (Non-consolidated) CORPORATE STRATEGY ２００７ CREDIT SAISON CO., LTD.
Slide 27: Main Indicators (Non-consolidated)
Figures in parentheses are Main Indicators (Non-consolidated) year-on-year comparisons FY2006 results FY2007 targets ① New applications 4.28 million (132.9%) 3.20 million (74.8%) ② New cards issued 3.60 million (132.8%) 2.70 million (75.0%) ③ Total cardholders 24.91 million (+2.12 million) 25.90 mil
Slide 28: New Card Applications & New Cards Issued
New Card Applications & New Cards Issued Emphasis on profitability and new applications for cards with high ratios of active cardholders Unit: Million New cards issued New applications 4.28 4 3.6 3.22 △ 3.2 ¥1 2.71 75 .08 m 3 n % i llio Yo illio 2.7 2.5 .06 m oY Y n 2.41 ¥1 Y 2.3 2.11 ＋ 33% 2.09 1 1
Slide 29: Total Cardholders & Active Cardholders
③ Total Cardholders & Active cardholders Increasing total cardholders and active cardholders through efficient marketing Unit: Million Total cardholders Active cardholders 30 25.9 24.91 25 22.79 0 0 ,00 Y 20 llio n +9 9 Yo i m .12 YoY 4% 15.87 16.9 2 + 9% 10 14.9 10 15 12.95 11.68 12.49 8.41 8.83 10
Slide 30: Transaction Volume
⑤ Transaction Volume Targeting a double-digit increase by continuing to expand scale of business Unit: ¥1 billion Shopping Cash advance 5,000 4,691.5 4,299 911.5 4,000 865.1 3,146.7 Y Yo 3,000 618.9 05% 2,596.2 1 2,342.8 2,408.6 518.1 496.4 Y 2,000 534.2 Yo 40% 3,780 1 2,078.1 3,433.8 1,808.6 1,912.
Slide 31: Credit Loans Outstanding
⑥ Credit Loans Outstanding Steady increase in revolving credit card balances by acquiring prime customers Cash advance ABS (Cash advance) Shopping ABS (Shopping) ¥1 billion 10,000 9,000 889 771 819 10 8,000 256 40 Shopping 7,000 229 Y Y Yo 178 Yo 7% 6,000 591 0% 10 25 ABS 40 11 30 (Cash 517 542 30 a
Slide 32: Reference: Credit Card Shares
Reference: Credit Card Shares Strong performance by Gold cards and other cards with membership fees, including UC, AMEX and affinity cards. Share of total cardholders Share of shopping transaction volume MMC MMC 7.7% 4.0% UC SAISON UC SAISON 15.9% 22.2% 22.2% 22.0% Seibu Seibu SAISON SOGO SOGO AFFIN
Slide 33: Management Strategy: Medium-term Management Plan and FY2007 Initiatives
Management Strategy Medium-term Management Plan and FY2007 Management Initiatives Creating a Non-bank Financial Service Business with Strong Market Presence CORPORATE STRATEGY ２００７ CREDIT SAISON CO., LTD.
Slide 34: Contents
Contents Ⅰ．Changes in the management environment （１） Details of changes in the business environment （２） How changes in the business environment impacts our company and the industry Ⅱ．Medium-term management vision and goals （１） Creating the No. 1 Credit Card Group （２） Becoming a non-bank business off
Slide 35: Changes in the Management Environment
Ⅰ．Changes in the Management Environment CORPORATE STRATEGY ２００７ CREDIT SAISON CO., LTD.
Slide 36: Changes in the Management Environment
Ⅰ. Changes in the Management Environment Our shining record of 24 fiscal years of continuous growth in sales and profits was intermitted (1) Downsides of the current (2) Positive aspects of the current environment environment ① Capped interest rates & total-volume ① Steady economic expansion regulat
Slide 37: Details of Changes in the Environment
1．Details of Changes in the Environment （1） Revisions of laws regulating money-lending ① Non-bank financial companies conducting credit cards business are facing restructuring due to the current business environment ② Banks will have an advantage over non-banks due to the implementation of total vol
Slide 38: Impact of Changes in the Business Environment
2．Impact of Changes in the Business Environment （1） The impact of revisions to laws regulating money-lending ① Capped interest rates will reduce our company's revenue by ¥25–30 billion ② Tightened regulations, including total volume regulations, will add restrictions to the operations of credit card
Slide 39: Effect of Interest Rate Cuts on Cash Advances
Effect of Interest Rate Cuts on Cash Advances (Non-consolidated) Q1 Q2 Q3 Q4 FY2007 Effect of interest rate cuts ▲ ¥18 billion Deferment of interest Effects of interest rate cuts （▲ ¥18 billion） Q1 Q2 Q3 Q4 FY2008 Effect of interest rate cuts ▲ ¥7 billion Effect of interest rate cuts Deferment of in
Slide 40: Medium-term Management Vision and Goals
Ⅱ．Medium-term Management Vision and Goals CORPORATE STRATEGY ２００７ CREDIT SAISON CO., LTD.
Slide 41: Medium-Term Management Vision and Goals
Ⅱ．Medium-Term Management Vision and Goals Creating a non-bank financial service business with strong market presence (1) Creating the No. 1 Credit Card Group ① Market share goals; card shopping 30%, cash advances/loans 5% ② Promote flexible and aggressive strategies, such as expansion of active card
Slide 42: Medium-term Target Figures
(For Reference) Medium-term Target Figures FY2006 Medium-term Plan FY2007 New Medium-term Plan Period 5 years 3 years Ordinary Income in FY2010 Ordinary Income in FY2009 Consolidated： ¥100 billion Consolidated： ¥70 billion Targets Non-consolidated： ¥80 billion Non-consolidated： ¥40–50 billion Target
Slide 43: Outline of the Medium-term Management Plan
Ⅲ．Outline of the Medium-term Management Plan CORPORATE STRATEGY ２００７ CREDIT SAISON CO., LTD.
Slide 44: Outline of the Medium-term Management Plan
Ⅲ．Outline of the Medium-term Management Plan Taking up the Challenge of Innovation Effects of the capped interest rate regulations Recouping: △¥30 billion consolidated △¥25 billion non-consolidated (1) Improving sales efficiency and restructuring the sales network ① Shifting know-how and spending to
Slide 45: Outline of the Medium-term Management Plan (cont.)
Ⅲ. Outline of the Medium-term Management Plan (2) Rearranging the business portfolio Moving from a credit card company to a comprehensive financial services company ④ Strengthen non-card operations in addition to card operations ・Real estate & business loans for corporations (sole proprietorships) ⑤
Slide 46: Cutting costs and human resource development
(4) Cutting costs by using the Web ⑨ Renovating our business process using the Web ・Web statements, a Web customer service center, Web news ⑩ Partnership with an IT company (mutual customer attraction scheme) (5) Human resource development that makes use of each individual’s unique capabilities ⑪ Mo
Slide 47: Reforming the Operating Structure to Achieve the Medium-term Plan
Reforming the Operating Structure to Achieve the Medium-term Plan By reforming our operation structure, in addition to implementing the measures outlined in the original Medium-term Plan, we will recover ▲¥10–15 billion over a short period (estimated 3 years) Strengthen the fee business by increasin
Slide 48: Increased Revenues Needed to Achieve New Goals
Increased Revenues Needed to Achieve New Goals In order to compensate for a in cut interest rates effecting two fiscal years (¥18 billion in FY2007 and ¥7 billion in FY2008＝ ¥25 billion), additional revenues of ¥10 to 15.5 billion are needed up to FY2009. Increasing revenues ① The negative ② 108 % ③
Slide 49: Outlook for the World Credit Card Industry
(For Reference) Outlook for the World Credit Card Industry (1) VISA dominates the world market (2) AMEX has room to grow its share of the U.S. market (3) The U.S. check market is changing to electronic money (4) As it is, JCB will lose its market presence (5) VISA and MASTERCARD are listed (6) Most
Slide 50: Priority Initiatives for FY2007
Ⅳ．Priority Initiatives for FY2007 CORPORATE STRATEGY ２００７ CREDIT SAISON CO., LTD.
Slide 51: Priority Initiatives for FY2007
Ⅳ．Priority Initiatives for FY2007 The Key Word is . . . Web Usage Restructuring the Business Model Ongoing Implementation of Strategic Alliances (1) Placing Group credit card companies on track to success ① Joint venture companies started last year that will start full sales operations from this fis
Slide 52: Reinforcing credit business profitability through Web use
(2) Reinforcing credit business profitability through Web use ① Make the most of high-activity customers/expand net membership through the Web ・Membership promotion through Eikyu Fumetsu.com and strengthened mobile phone compatibility Income ② Low-cost operation through Web use contribution from thi
Slide 53: Expand highly active customers and renovate sales network
(4) Promote the expansion of highly active customers ① Increase cards for highly active customers and wealthy Income contribution ・Aggressive Shift to annual rate cards from this fiscal year (GOLD / AMEX . . . current share: 4.1% ⇒ goal: 20%) ・Expand the Affinity Premium Cards ② Asset Management and
Slide 54: Strengthen cash advance and loan services; joint processing company
(6) Strengthen cash advance and loan services ① Lower cash advance interest rates, reduce all real interest rates to below 18% ・SAISON . . . from July 17; UC . . . from June 11 ② Market-rate interest loan products beginning from the 2nd half of this term ・Provide a product that is reasonable from th
Slide 55: Implementing a Multi-Financial Business
(8) Implementing a Multi-Financial Business ① Strengthen the investment business ・Develop, handle and create businesses that handle investment products suitable for a society characterized an aging population and fewer children, more women in the workforce and retirement of the Baby Boom generation
Slide 56: Changes to the Revenue Structure
(Reference) Changes to the Revenue Structure ■ Changes to the revenue structure Cash advance business share to change from 41% to 36% FY2006 Shopping (37%) Cash advance loans (41%) Credit guarantees, leases etc. FY2007 Shopping (38%) Cash advance loans (36%) ¥1billion 0 100 200 300 ■ Changes to the
Slide 57: Credit Card Market Outlook
Ⅴ．(Reference) Credit Card Market Outlook ･Outlook for the world credit card industry ・Changes to the global market ・Changes to the U.S. market share ・Japan’s credit card industry outlook ・Changes to the domestic credit card market ・Domestic credit card industry’s share of shopping transaction volume
Slide 58: Changes to the Global Market
(Reference) Changes to the Global Market ■ Transaction Volume Share Trends by International Brands Global Volume Transaction Shares for 2005 70 ％ JC B DINER S 1.3% 60 VISA 0.5% AM EX 11.0% 50 40 30 M AS T ER MASTER 26.9% VIS A 60.3% 20 10 AMEX JCB 0 DINERS 1999 2000 2001 2002 2003 2004 2005 1999 200
Slide 59: Changes to the US Market Share
(Reference) Changes to the US Market Share As a result of a wave of M&A (joint ventures and sale of credits), the top three companies control a majority (at the end of 1995, nine companies controlled the majority). ■Credit Balances by Issuers Ranking Issuer Number Issued US Bancorp 1.6% 1 Bank of Am
Slide 60: Japan's Credit Card Industry
(Reference) Japan’s Credit Card Industry (1) Predicted to be comprised of the three mega-bank groups (2) The difference between the three mega-bank groups (3) JCB’s functionality and affiliations is a key point for consideration (4) 30% will be the market share goal (5) The capped interest rates wil
Slide 61: Changes to the Domestic Credit Card Market
(Reference) Changes to the Domestic Credit Card Market Mizuho FG Credit Saison Sumitomo Resona HD Mitsui FG Central Finance At loan みずほ ＦＧ Postal Bank Orico Risona Mitui Sumitomo Lowson Card Idemitsu Takashimaya Quoq Promise CS JCB Yamada Shizugin Daiwahouse Aeon Credit Snayo Shinpan Pocket Car Mits
Slide 62: Domestic Credit Card Industry Share of Transaction Volume
(Reference) Domestic Credit Card Industry Share of Shopping &Cashing Transaction Volume Credit Saison G FY2000 JCB G FY2005 14.5 Mitsubishi UFJ NICOS G 10.9 15.0 Mitsui Sumitomo G UC 当社 当社 10.2 親密先 6.4 JCB 10.0 出資 0.7 提携先 6.4 3.8 JCB親 密 先 4.5 その他 29.5 UFJニコス 三井住友 その他 5.7 8.9 41.9 三井住友 DC 2.3 親密先4.5
Slide 63: Consumer Credit Lending Balance (unsecured) for FY2005
(Reference) Consumer Credit Lending Balance (unsecured) for FY2005 Credit Saison: 2.8% Credit card companies and credit loan companies (other than our company) Consumer credit (top companies) ◆ Decrease in the number of companies specializing in consumer credit from the ２４．１％ 2nd half of FY2006 ４４．６
Slide 64: Trends in the Most Recent Stock Value of Our Company
(Reference) Trends in the Most Recent Stock Value of Our Company Among surfacing industry risks, we must ascertain whether we will be able to continue to achieve the mark necessary to be seen as a growing company Trends of stock price of Nikkei 225 and our company after 2003 month-end price 2006/3＝1
Slide 65: SAISON Cardholders Exclusive Racehorse Joint Capital Investment Program
(Reference) SAISON Cardholders Exclusive Racehorse Lovers’Joint Capital Investment Program Get a taste of being a racehorse owner! Your dream can come true with the SAISON Card! The Racehorse Lovers’ Joint Capital Investment Program is where the investment rights to own one racehorse will be divided