Resona Holdings, Inc. · TSE:8308
Resona — FY2019 Earnings Presentation
74 slides from Resona's earnings presentation, May 18, 2020
Slide 1: Business Results for FY2019 and Medium-term Management Plan
Business Results for FY2019 and Medium-term Management Plan May 18, 2020
Slide 2: Abbreviations and definitions
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 Ban
Slide 3: Table of Contents
Table of Contents Outline of Business Results for FY2019 Medium-term Management Plan and Updates on Major Businesses p4 Outline of Financial Results for FY2019 p22 For Becoming the “Retail No. 1” p5 Breakdown of Financial Results p23 Establish “Resonance Model” p6 Factors for the Changes in Net Inco
Slide 4: Outline of Business Results for FY2019 and Updates on Major Businesses
Outline of Business Results for FY2019 and Updates on Major Businesses Medium-term Management Plan Direction of Capital Management ESG Initiatives Reference Material 3
Slide 5: Outline of Financial Results for FY2019
Outline of Financial Results for FY2019 Net income attributable to owners of parent: JPY152.4 bn HD consolidated FY2019 YoY change Target for Down JPY22.7 bn, or 12.9%, YoY FY2020 (JPY bn) Up JPY17.1 bn, or 12.6%, YoY, excluding one-off gain*1 posted in FY’18 % (a) (b) (c) (d) Progress rate ag
Slide 6: Breakdown of Financial Results
Breakdown of Financial Results Resona Holdings Total of group banks Total of Difference (Consolidated) Saitama (JPY bn) Resona group Resona YoY YoY Bank banks under Bank KMFG (a) (b) (c) (d) (e) (f) (g) (a)-(c) Gross operating profit (1) 658.6 +14.5 605.3 +12.3 355.2 114.5 135.5 53.3 Net interest in
Slide 7: Factors for the Changes in Net Income Attributable to Owners of Parent
Factors for the Changes in Net Income Attributable to HD Consolidated Owners of Parent (YoY Comparison) (JPY bn) Actual net operating profit +16.3 175.1 Net gains One-off gain Gross operating profit +14.5 on stocks (22.7), YoY Equity in (including regarding gains equity Excluding KMFG Operating of a
Slide 8: Trend of Loans and Deposits (Domestic Account)
Total of Trend of Loans and Deposits (Domestic Account) Group Banks Average loan / deposit balance, rates and spread Trend of average loan balance, loan rate change FY2019 FY2020 [ Average loan balance (JPY tn)] % represents YoY change Avg. bal : Trillion Yen Income/Cost : Billion Yen Act. YoY *3
Slide 9: 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 YoY change JPY tn, % represents YoY change Corporate (Large companies and other) Corporate (SMEs) Corporate (Apartment loans) Other Personal（Consumer loans) Corporate Per
Slide 10: Housing Loan Business
Total of Housing Loan Business Group Banks Composition of newly originated residential New housing loan origination housing loans by interest rate type JPY tn, % represents YoY change Apartment loan Flat 35 Residential housing loan 1.57 1.50 (4.5)% 1.41 0.24 0.18 (25.1)% 0.29 0.10 0.09 (15.8)% After
Slide 11: Fee Income
HD Fee Income Consolidated Consolidated fee income ratio*1 for FY2019 : 28.8% While sales of insurance and investment trust have slowed down, fund wrap (+16.8% YoY), settlement related (+5.1%, YoY), corporate solution (+4.0%,YoY) have grown steadily. JPY bn, % represents [ Plans] YoY change 30.0
Slide 12: Major Fee Businesses(1) (Asset Formation Support Business)
HD Major Fee Businesses(1) (Asset Formation Support Business) Consolidated Balance of asset formation support products sold to individuals (JPY tn) 14.0% 13.9% Balance of fund wrap*1:’20/3 JPY352.1 bn 13.1% Foreign currency deposits, (JPY390.4 bn including corporation) 1 % 5 Public bonds etc. Ch
Slide 13: Major Fee Businesses(2) (Trust, Corporate Solution, Real Estate Business)
HD Major Fee Businesses(2) (Trust, Corporate Solution, Real Estate Business) Consolidated Trust-related business income (JPY bn) Resona Asset Management Expand business opportunities through providing group Trust solution offered for asset and business succession banks’ customers with trust functi
Slide 14: Credit Costs and NPL
HD Consolidated Credit Costs and NPL Total of Group Banks NPL balance and ratio Credit costs (Total of Group Banks) FY2017 FY2018 FY2019 FY2020 (Financial Reconstruction Act criteria)) 2% (JPY bn) (Ref erence*1) Plan (a) (b) (c) (d) 1,000 Unrecoverable or valueless claims Net credit cost Risk claims
Slide 15: Securities Portfolio
Total of Securities Portfolio Group Banks Securities Portfolio*1 Status of policy-oriented stocks held 2018/3 2019/3 2020/3 Results of FY2019 (JPY bn) (reference*2) Unrealized Balance of listed stocks disposed in FY2019 gains/(losses) (acquisition cost basis): JPY16.9 bn, (a) (b) (c) (d) Net gain
Slide 16: Capital Adequacy Ratio
HD Capital Adequacy Ratio Consolidated CAR (Domestic std.) and CET1 ratio* (International std.) as of March 31, 2020 were 11.17% and 10.54%, respectively, maintaining sound capital adequacy level * Excluding unrealized gain on available for sale securities Domestic standard (Reference) Internation
Slide 17: Earnings Targets for FY2020
HD Consolidated Earnings Targets for FY2020 Total of Group Banks HD consolidated Common DPS YoY （JPY bn） Full-year YoY DPS change change Net income attributable to owners of (1) 120.0 (32.4) Common stock (annual) (4) 21.0 yen - the parent KMFG *1 (2) 3.0 Interim dividend (5) 10.5 yen - Difference (3
Slide 18: Impact from COVID-19(1)
Impact from COVID-19(1) Immediate impact of the COVID-19 on our operating results and business activities FY2019 (Act.) Some effect in connection with operations handled by the market and other divisions Saw growth in profit arising from the provision of lending-related solutions, such as those
Slide 19: Impact from COVID-19(2) (Credit Cost)
Impact from COVID-19(2) (Credit Cost) Credit cost guidance assumes 1) COVID-19 impacts to spread across broad industries, and 2) possibility of forward-looking provisions of loan loss reserves in case of prolongation Consolidated credit cost plan for FY’20： JPY(50.0) bn, increase by JPY27.0 bn, Yo
Slide 20: (Reference) Outline of Financial Results of Each Segment
HD (Reference) Outline of Financial Results of Each Segment Consolidated YoY (JPY bn) FY2019 Change (JPY bn) Gross operating profit (1) 455.6 (13.4) Customer Divisions Operating expense (2) (298.3) +0.3 Actual net operating profit (3) 157.3 (13.1) KMFG Gross operating profit (4) 196.1 (9.8) (1.1) Pe
Slide 21: (Reference) Outline of Financial Results of Customer Divisions
HD Consolidated (Reference) Outline of Financial Results of Customer Divisions (exclude KMFG) Personal Banking Segment Corporate Banking Segment Actual net operating profit : Down JPY8.8 bn, YoY Actual net operating profit : Down JPY4.2 bn, YoY (JPY bn) (JPY bn) Gross operating profit (9.8) Gros
Slide 22: Medium-term Management Plan
Outline of Business Results for FY2019 and Updates on Major Businesses Medium-term Management Plan Direction of Capital Management ESG Initiatives Reference Material 21
Slide 23: For Becoming the "Retail No. 1"
For Becoming the “Retail No. 1” Issues confronting customers and Create customers value by the Resona Group’s strength Retail No. 1 society Priority Themes Previous MMP in RSC2030*1 Strengths • Omni-Channel • Omni-Regional • Omni-Advisor Local Approx. 840 Sustainable society Communities manned branc
Slide 24: 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 Next-Generation Drivers for Innovation Retail
Slide 25: Business Strategy and Rebuild Foundations (Overview)
Business Strategy and Rebuild Foundations (Overview) Business Strategies The Plan Retail × Trust Differentiation using our accumulated retail base and sophisticated trust functions • Provide trust, real estate and asset Further Asset and Business Succession management services in response to Develop
Slide 26: Reflection on the Previous Medium-term Management Plan
Reflection on the Previous Medium-term Management Plan Previous MMP FY2019 Income and cost structure reforms targets*1 progressed steadily Net income attributable to owners of parent JPY152.4 bn JPY170 bn NII from • Quality-focused operations progressed loans and Consolidated Lower half of the 2
Slide 27: KPIs
KPIs FY2022 Net income attributable to owners of parent JPY 160 bn Consolidated fee income ratio Over 35% Realize medium- to long-term Consolidated cost income ratio 60% level income structure reform ROE*1 8％ level CET1 ratio*2 10％ level Realize a Aim to be adopted sustainable ESG index selected by
Slide 28: Roadmap for Securing Profit
Roadmap for Securing Profit Sustainable society Establish “Resonance Model” and x medium-to long-term income structure reform Resona’s sustainable growth (Billion yen) Consolidated Consolidated fee income ratio cost income ratio Loan yield decline Over 35% 60% level (3) bps /year Personnel and Furth
Slide 29: Business Strategy Development Asset and Business Succession
Further Business Strategy Development Asset and Business Succession Local Need for the smooth succession of [Aging of SMEs owners：Estimates as of 2025*1] Communities businesses and assets Under 70 Worries about becoming victims of fraud years old Of which, Issues and other concerns associated with n
Slide 30: Business Strategy Development Asset Formation Support Business
Further Business Strategy Development Asset Formation Support Business Local [Proportion of financial assets*1] Communities Asset formation in the “Era of 100-year-life expectancy” Japan 日本 53% 3% 28% 1%10%3% Issues Don’t know anyone who can give reliable ユーロ Euro area 34% 8% 34% 2% 18% 2% confronti
Slide 31: Business Strategy Development SME Loans and International Businesses
Further Business Strategy Development SME Loans and International Businesses Local [Awareness about SDGs*1] Communities Respond to structural changes in society and unforeseen circumstances SMEs 中小企業 57% 19% Issues Expand sales channel and overseas Others 中堅・大企業 confronting businesses customers Envi
Slide 32: Business Strategy Development Loans for Individuals
Further Business Strategy Development Loans for Individuals Local [Rate of household increase in Japan] Communities Anxiety about borrowing money Rate of household increase*1 (2015-2020) 5% Issues Unable to take a day off to complete loan Saitama procedures Shiga Tokyo 3% Kanagawa confronting Hyogo
Slide 33: Business Strategy Development x Challenges Omni-Channel
Further New Business Strategy Development X Challenges Omni-Channel Local [Number of users by channel*1] Communities User-unfriendly bank apps ATM Group App 100 Issues No time to visit a bank branch confronting Internet 50 customers Environment Don’t know any financial specialist who can give person
Slide 34: Business Strategy Development x Challenges Settlement Business
Further New Business Strategy Development X Challenges Settlement Business Local [Cashless market to expand*1] Communities Quite confused by many of the cashless payment methods 2025 Target Issues Dislike higher settlement costs and longer Amount 2016 confronting cash recipient cycles handled JPY cu
Slide 35: KMFG the MMP and Pursue Group synergies (1)
KMFG the MMP and Pursue Group synergies (1) Realize “New Retail Financial Service Model” advancing together with the future of Kansai region Inauguration of KMFG - New medium-term management plan (FY2020-FY2022) Stage 1 organizational development Stage 2 -Establish the KMFG brand and realize Its ful
Slide 36: KMFG the MMP and Pursue Group synergies (2)
KMFG the MMP and Pursue Group synergies (2) Pursue maximum synergies by optimizing group assets [Group synergies] Sales synergies +11.0 bn Utilize function of Trust and Real estate FW, asset succession, real estate brokerage, etc. Gross operating Develop Omni-channel strategy and differentiate
Slide 37: Business Strategy Challenges Breaking Free of the Banking Model
New Business Strategy Challenges Breaking Free of the Banking Model Open innovation Employ a broad range of external relationships to pursue co-creation [Alliance partner candidates] Provide Resona’s functions and services to alliance Expand our partners’ customers customer base IT system, Group
Slide 38: Rebuilding Our Foundations (1) Human Resources
Rebuilding Our Foundations (1) Human Resources Reform the human resource portfolio with an emphasis on diversity and specialization Multi-path personnel system Nursing Omni-Advisor Transfer existing HR system to a multi-path HR system Building on the results of the previous medium-term with
Slide 39: Rebuilding Our Foundations (2) Business Processes, Sales Approach, Channel Network
Rebuilding Our Foundations (2) Business Processes, Sales Approach, Channel Network Enhance customer contact points × Low-cost operations ⇒ a system in which all employees are involved in sales and consulting [Image of a branch after introduction of Reconstruct them by shifting mindsets and the new
Slide 40: Rebuilding Our Foundations (3) Systems
Rebuilding Our Foundations (3) Systems Shrink existing systems with an eye to technological advancement and build next-generation systems Structural system reforms [Image of system related cost] Significantly reduce system-related costs for the entire Group Present Existing fields 80% ⇒ Shift mo
Slide 41: Direction of Capital Management
Outline of Business Results for FY2019 and Updates on Major Businesses Medium-term Management Plan Direction of Capital Management ESG Initiatives Reference Material 40
Slide 42: Direction of Capital Management
Direction of Capital Management Financial soundness Profitability Secure sufficient equity capital under the current Japanese standard Continuously engage in financial management conscious of capital efficiency, risk, cost and Aim for CET1 ratio*1of 10% as of Mar. ’23 return, and aim to secure
Slide 43: ESG Initiatives
Outline of Business Results for FY2019 and Updates on Major Businesses Medium-term Management Plan Direction of Capital Management ESG Initiatives Reference Material 42
Slide 44: E (Environment)
E (Environment) Board of directors proactively pursue Resona Sustainability Challenge 2030 and step up climate change countermeasures Board of Directors Group SDGs Promotion Committee Oct. ’18 Integrated management of response to climate Declared the support of Report Supervise TCFD change-related r
Slide 45: S (Social)
S (Social) Focus on helping resolve social issues through business and innovation Local Low Birthrate and Communities Aging Society Asset and Business Succession: p28 Asset Formation: p29 SME Loans, International Business: p30 Loans for Individuals: p31 Omni-Channel: p32 Settlement: p33 Initiatives
Slide 46: G (Corporate Governance)
G (Corporate Governance) The first Japanese banking group which adopted a committee-based corporate governance structure in 2003 for management transparency and objectivity Majority of the Board members are Outside directors only Nominating independent outside directors Introduced succession p
Slide 47: Initiatives for Corporate Governance Evolution
Initiatives for Corporate Governance Evolution Our Initiatives to Improve the Effectiveness of the Board of Directors’ Operations Remuneration for directors and executive officers Compensation system for executive officers Outside directors’ meetings Position-based Annual incentive Medium- to long
Slide 48: 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 49: Reference Material
Outline of Business Results for FY2019 and Updates on Major Businesses Medium-term Management Plan Direction of Capital Management ESG Initiatives Reference Material 48
Slide 50: 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 51: Resona Group's Brand Identity
Resona Group’s Brand Identity The Resona Group's corporate name is derived from the Latin word (resonus) meaning "resonate" or "resound" in English We attach great importance to customers' voice. By adopting the corporate name Resona, we want to express our desire to build stronger ties with communi
Slide 52: Points of Focus in the New Medium-term Management Plan toward the 2030 Realization of SDGs
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 53: 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 Highly evaluated for our initiatives to Won the Most Excellent Award under develop and popularize products Resona Group App facilitating SDGs and to strengthe
Slide 54: Outline of Resona Cashless Platform
Outline of Resona Cashless Platform Promote cashless = Reduce social cost and improve corporate customers’ productivity (2) Providing incentives outweighing others Increase sales Acquire Good value Reduce settlement costs royal customer points Individual Royal customer Corporate Enhance IT and coupo
Slide 55: Outline of Resona Fund Wrap
Outline of Resona Fund Wrap Core products meeting customer needs for long-term asset formation Feb. ’17~: Balance as of Mar. 31, ’20 Approx. JPY390.0 bn Cost competitive ⇒ Lowest level of investment advisory fees in the industry Operation course according to customer's request Standard course
Slide 56: Resona's Overseas network
Resona’s Overseas network Covering the Asia and US via overseas bases and partner banks Station Japanese-speaking Resona staff in 15 locations to provide Strengthen the customer support by meticulous services Expanding overseas network Dispatch Resona staff to BIDV (Hanoi) (Oct. ’19~) Conclu
Slide 57: Sound Balance Sheet
HD Sound Balance Sheet Consolidated Structure that is relatively resilient against the negative impact of COVID-19 (As of March 31, 2020) Total assets JPY60.5 tn Large Sound loan portfolio Loans Deposits Stable funding structure companies JPY and other*1 JPY Consists mostly of housing 52.9 tn St
Slide 58: 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 59: Business Results by Major Group Business Segments
Business Results by Major Group Business Segments Management accounting by major group business lines (FY2019) (JPY bn, %) Profitability Soundness Net operating profit after a deduction of credit cost Net profit after a Risk-adjusted Cost to Resona Group deduction return income Actual net operating
Slide 60: Consolidated Subsidiaries and Affiliated Companies
Consolidated Subsidiaries and Affiliated Companies Major consolidated domestic subsidiaries (excluding group banks) (JPY bn） Net YoY Name Line of business Capital contribution ratio Fiscal year income change Credit guarantee Japan's highest class of residential housing FY'19 Resona Guarantee Co., Lt
Slide 61: Stocks Held by Industry (March 31, 2020)
10% 15% 20% 25% 0% 5% Fishery, agriculture and… Mining (Balance sheet amount) Construction 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 Machinery El
Slide 62: Swap Positions by Remaining Periods
HD Swap Positions by Remaining Periods Consolidated Notional amounts of interest rate swaps (deferred hedge accounting applicable) by remaining period (JPY bn) Mar. 31, 2020 Mar. 31, 2019 Within 1 to 5 Over Within 1 to 5 Over Total Total 1 year years 5 years 1 year years 5 years Receive fixed rate
Slide 63: Composition of Loan Portfolio and Deposits
Composition of Loan Portfolio and Deposits Total of (March 31, 2020) Group Banks Loans*1 Deposits*3 Fixed Rate Liquid Fixed Rate 2% deposits 17% 24% Personal Banking Corporate Corporation Liquid Prime Bussiness Banking (JPY16.2 tn) Unit deposits Rate (JPY13.6 tn) Bussiness 32% Unit*1 46% Individual
Slide 64: Maturity Ladder of Loan and Deposit (Domestic Operation)
Total of Two Banks Maturity Ladder of Loan and Deposit (Domestic Operation) (RB, SR) Loans and bills discounted Deposits [End of March 2019] [End of March 2019] 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) 1.0% 1.0% 6.1% 15.2% 23.5% Liquid deposits
Slide 65: Migrations of Borrowers (1H of FY2019)
RB Migrations of Borrowers (1H of FY2019) Exposure amount basis (Migrations of borrowers for 1H of FY2019*1 ) End of September 2019 Upward Downward Other Special Effectively Migration Migration Normal Doubtful Bankrupt Other Collection, Assignments, Watch Attention Bankrupt Repayments Sale Normal
Slide 66: Migrations of Borrowers (2H of FY2019)
RB Migrations of Borrowers (2H of FY2019) Exposure amount basis (Migrations of borrowers for 2H of FY2019*1 ) End of March 2020 Upward Downward Other Special Effectively Migration Migration Normal Doubtful Bankrupt Other Collection, Assignments, Watch Attention Bankrupt Repayments Sale Normal 98.4
Slide 67: List of Subordinated Bonds (March 31, 2020)
RB List of Subordinated Bonds (March 31, 2020) RB Amount Issue date Maturity Dividend rate outstanding JPY40.0 bn September 28, 2010 September 28, 2020 1.606% 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.
Slide 68: 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 / Impact on Resona With Basel 3 finalized, local authorities are currently formulating the domestic rules. At present there is no
Slide 69: 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 70: BOJ Current Account Balances
BOJ Current Account Balances Monthly average balance of BOJ current account (16 March -15 April) Total of institutions subject to the complementary City banks including deposit facility Resona Bank and Saitama Resona Bank JPY376.4 tn JPY141.4 tn The outstanding balance of current account at the Bank
Slide 71: Long Term Business Results
Long Term Business Results 3 banks (RB,SR,KO) After KMFG integration (JPY bn) FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2017 FY2018 FY2019 Gross operating profit 667.0 655.2 637.1 608.5 632.4 619.5 563.1 552.5 661.3 644.1 658.6 Net interest income 484.0 463.9 443.0 430.0 425.9 401.3
Slide 72: Credit Rating Information (Long Term)
Credit Rating Information (Long Term) Moody’s S&P R&I JCR Resona Holdings - - A - Resona Bank A2 A A+ AA- Saitama Resona Bank A2 - A+ AA- Kansai Mirai - - - A+ Financial Group Kansai Mirai Bank - - - A+ Minato Bank - - - A+ 71
Slide 73: 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% Other 6.08% 6.09% 5.80% 5.88% 20.01% 20.01% 20.01% 5.89% 5.69% Corporations 6.35% 13.51% 13.44% Individuals, 15.68% 15.48% 13.47% 14.19% etc. 41.95% DIC 5.83% 4.34% 4.58% 16.51% 50.11% 6.84% 6.50% 7.39% 34
Slide 74: Proactively Communicating with Our Shareholders and Investors
Proactively Communicating with Our Shareholders and Investors Resona Group HP Integrated Report of Resona Group https://www.resona-gr.co.jp/holdings/english/index.html Integrated Report explains in a simple manner to all View IR presentation material from here stakeholders the Resona Group’s streng