Resona Holdings, Inc. · TSE:8308
Resona — FY2017 Earnings Presentation
71 slides from Resona's earnings presentation, May 21, 2018
Slide 1: Business Results for FY2017 and Future Management Direction
Business Results for FY2017 and Future Management Direction May 21, 2018
Slide 2: Table of Contents
Table of Contents Outline of Business Results for FY2017 Efforts to Business Challenges and Updates on Major Businesses for Sustainable Growth p21 For Becoming the "Retail No.1" Financial Services Group p3 Opening Remarks p22 Progress of RHD's MMP and Prospect of KMFG's Profit Contribution p4 Outlin
Slide 3: Outline of Business Results for FY2017 and Updates on Major Businesses
Outline of Business Results for FY2017 and Updates on Major Businesses Efforts to Business Challenges for Sustainable Growth Direction of Capital Management Reference Material 2
Slide 4: Opening Remarks
Opening Remarks 1. Steadily implemented the income and cost structure reforms Net income attributable to owners of the parent excluding one-off gain: JPY150.5 bn Achieved the initial full year target Average loan balance continued to increase steadily while the speed of loan-to-deposit spread co
Slide 5: Outline of Financial Results for FY2017
Outline of Financial Results for FY2017 FY2017 FY2018 Posted JPY236.2 bn of net income attributable to owners of Resona HD consolodated v s. Target the parent (JPY bn) YoY change Jan. Target % 2018 Up JPY74.7 bn, or +46.2%, YoY, exceeding the full-year Net income attributable to target (JPY235.0 b
Slide 6: Breakdown of Financial Results
Breakdown of Financial Results Total of three group Difference (A)-(B) Resona Holdings banks (Excluding the effect of (Consolidated) (Non-consolidated) Realignment realignm ent of loan (JPY bn) (A) Saitama Kinki guarantee subsidiaries) (B) Resona of loan Resona Osaka YoY YoY Bank guarantee YoY Bank
Slide 7: Factors for the YoY Change in Periodic Profits
RHD Factors for the YoY Change in Periodic Profits Consolidated (JPY bn) Actual net operating profit (6.6) Management integration among 3 regional banks in the Gross operating profit (10.5) Kansai region +71.5 Realignment of loan guarantee subsidiaries +14.1 Net interest income (9.5) Credit- Net g
Slide 8: Trend of Loans and Deposits
Total of Trend of Loans and Deposits Group Banks Trend of average loan balance, loan to deposit Average loan / deposit balance, rates and spread spread (Domestic account) (JPY tn) Personal Corporate Initial plan Total of Total of 27.63 for FY2017 Avg. bal : Trillion Yen 3 banks 5 banks 26.73 27.11
Slide 9: Term-end Balance of Loans and Deposits
Total of Term-end Balance of Loans and Deposits Three 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 42.84 Corporate (SMEs) Corporate +5.2% Corporate (apartment loans) Individual 40
Slide 10: Housing Loan Business
Total of Housing Loan Business Three Banks Composition of newly originated residential New loan origination housing loans by interest rate type (JPY tn) Share of fixed rate residential housing loans Share of variable rate residential housing loans Apartment loan 3% 1% 2% 4% 7% 8% 11% 17% 12% Flat 35
Slide 11: Fee Income
RHD Fee Income Consolidated Consolidated fee income ratio at 30.4% for FY2017 JPY bn, % represents YoY change 250.0 30.4% 30％ RHD 2,500 28.5% 30.0% consolidated fee income ratio*1 27.2% 30.0% 200.0 Total of 5 Banks*3 205.0 187.7 25.0% Insurance RHD 2,000 14.0 consolidated 168.7 168.0 (+4.6%) 25.0%tr
Slide 12: Asset Formation Support Business
RHD Asset Formation Support Business Consolidated Balance of asset formation support products sold to individuals (JPY tn) Asset formation Balance of fund wrap: support product 16.0% 16.2% Mar. 2018 Approx. JPY220.0 bn 6 15.4% ratio*1 14.3% 13.7% FX deposits and Net inflow of funds (investment tru
Slide 13: Major Fee Businesses
Total of Major Fee Businesses Three Banks Trust-related business (JPY bn) (Reference) Number of new asset succession-related contracts Income from trust solutions offered for asset and business succession Income from Pension/Securities trust Will trust Asset succession Trust for transfer of +Estate
Slide 14: Credit Costs and NPL
Credit Costs and NPL Trend of NPL balance and ratio Trend of credit costs (Total of Three Group Banks) Total of 3 banks 5 banks (Financial Reconstruction Act criteria)) (JPY bn) FY2015 FY 2016 FY 2017 FY 2018 Plan 1,000 Net credit cost (RHD consolidated) (1) (25.8) 17.4 14.7 (18.5) Unrecoverable or
Slide 15: Securities Portfolio
Total of Securities Portfolio Three Banks Securities Portfolio *1. Status of policy-oriented stocks held Breakeven Nikkei average: Approx. 5,500 yen (JPY bn) 2016/3 2017/3 2018/3 Unrealized Balance of listed stocks disposed in FY2017 gain/(loss) (acquisition cost basis): JPY4.5 bn, Available-for
Slide 16: Capital Adequacy Ratio
RHD Capital Adequacy Ratio Consolidated CAR (Domestic std.) and CET1 ratio* (International std.) as of Mar. 31, 2018 were 10.65% and 9.50%, respectively, maintaining sound capital adequacy level * Excluding unrealized gain on available for sale securities Domestic standard (Reference) Internationa
Slide 17: Earnings Target for FY2018
RHD Consolidated Earnings Target for FY2018 Total of Group Banks RHD consolidated Common DPS （JPY bn） 1H Full-year YoY change Change from DPS Net (interim) income attributable previous year (1) 113.0 200.0 (36.2) to owners of the parent Common stock (annual) (4) 21.0 yen +1.0 yen KMFG *1 (2) 4.0 10.
Slide 18: Gap Analysis: FY2018 Target vs FY2017 Result
RHD Gap Analysis: FY2018 Target vs FY2017 Result Consolidated Net income attributable to owners of the parent (RHD consolidated) <Approximate figures> Tax loss recognized (JPY bn) 236.2 Sold KO to KMFG 71.5 Realignment of loan guarantee subsidiaries 14.1 KO 200.0 One-off gain KMFG’s Ownership
Slide 19: Outline of Financial Results of Each Segment (1)
RHD Outline of Financial Results of Each Segment (1) Consolidated Actual net operating profit of customer division increased, driven by improved performance of the Corporate Banking segment YoY (JPY bn) (JPY bn) FY2017 Change Gross operating profit (1) 492.5 +3.8 Personal Corporate Markets Customer
Slide 20: Outline of Financial Results of Each Segment (2)
RHD Outline of Financial Results of Each Segment (2) Consolidated Personal Banking Segment Corporate Banking Segment Actual net operating profit : Up JPY0.8 bn, YoY Actual net operating profit : Up JPY7.0 bn, YoY Spread income from deposits declined, more than Corporate solution and trust re
Slide 21: Efforts to Business Challenges for Sustainable Growth
Outline of Business Results for FY2017 and Updates on Major Businesses Efforts to Business Challenges for Sustainable Growth Direction of Capital Management Reference Material 20
Slide 22: For Becoming the "Retail No.1" Financial Services Group
For Becoming the “Retail No.1” Financial Services Group Social Strengths of Resona Group Create changes Customers’ Retail No.1 and Omni Omni Regional Omni Advisors Value issues Channel Progress of the mid-term management plan and final year’s KPIs based on the new 5 banks group structure KMFG KPIs
Slide 23: Progress of RHD's MMP and Prospect of KMFG's Profit Contribution
Progress of RHD’s MMP and Prospect of KMFG’s Profit Contribution RHD’s MMP Period (Till March 2020) KMFG 1st MMP Period 2nd MMP Period RHD RHD KMFG （RB・SR・KO） （RB・SR） ＋ （KU・KO・MB） ×51％ Further growth (JPY bn) 236.2 200.0 One-off gain 170.0 KMFG 85.6 One-off gain Contribution 168.4 10.0 15.0 23.0 158
Slide 24: Omni-Regional Strategy (1)
Omni-Regional Strategy (1) Broader alliances with regional financial institutions with or without capital ties Create Realize • Resona’s sophisticated functions and customers’ Broader and closer services “Retail No.1” × relationships value with customers • Create new values out of “win-win” collabor
Slide 25: Omni-Regional Strategy (2): Largest Operating Base in Kansai
Omni-Regional Strategy (2) ~Obtaining the Largest Operating Base in the Kansai Region~ Strengthened presence as Japan’s largest retail-focused financial services group 1st section Branch Network (As of April 1, 2018) of TSE 51% Number of Branches (within the Kansai region) Kansai Mirai Financial Gro
Slide 26: Omni-Regional Strategy (3): KMFG Mid-term Management Plan
Omni-Regional Strategy (3) ~Overview of the KMFG’s Mid-term Management Plan~ New retail financial services model advancing together with the future of Kansai region Goal Banking group considered “absolutely essential” by customers Position of the first Build strong corporation among 3 banks throug
Slide 27: Omni-Channel Strategy (1) ~Digital~
Omni-Channel Strategy (1) ~Digital~ Provide added value to the daily lives of a wide range of customers develop a wide-ranging and long-term stock-type fee business 16 million+α New smartphone-driven business model Customers Release new Smart Accounts (from Feb. 2018) Inform all customers about
Slide 28: Omni-Channel Strategy (2) ~Face-to-face~
Omni-Channel Strategy (2) ~Face-to-face~ Make branches places for consultation promote deeper transactions with customers that have a strong level of need for consultations 16 million+α Reshuffle of branch network Customers Expand the number of “customers we can contact” Branch designs optimiz
Slide 29: Omni-Advisors Strategy
Omni-Advisors Strategy Develop personnel who can stand in the customer’s Offer value-added solutions shoes and see things from their perspective Customers to deliver “Customers’ Diversifying happiness is our pleasure” concerns/expectations 5 Attitudes of Omni-advisors “Customers' happiness is our
Slide 30: Outlook for Key Business Strategies: FY2017 Progress and FY2019 Target
Outlook for Key Business Strategies: Progress of FY2017 and FY2019 Target under the 5 Banks Group Structure Asset formation support business Settlement business Succession business Balance of asset formation Income from asset formation Settlement-Related Income Succession-related income support prod
Slide 31: Asset Formation Support Business
Asset Formation Support Business Customers’ Needs Asset management and formation in the aging society and low interest environment Offer products that meet the customers’ needs Fund Wrap: Increasing steadily (began offering in Feb.’17) iDeCo: Offer actively as an entry product Balance in ’18/3： JP
Slide 32: Settlement Business
Settlement Business Customers’ Needs Offer a variety of payment methods via digitalization Initiatives to cashless payments Debit Card (Renewal in Oct. 2017) <Steady expansion in use due to raised profile> Increase set rate Expanded use Total no. of cards issued ： More than 1 million Include as stan
Slide 33: Succession Business
Succession Business Customers’ Needs Smooth asset succession from elderly people to the next generation 27% of Japanese are over 65*1 37% of SME owners are over 65*2 One-stop support through familiar channels Assign consultants to branches permanently No. 1 in Japan Solutions provided Boost
Slide 34: SME Business
SME Business Provide financial/non-financial support that reflects environmental changes Customers’ Needs and the companies’ stage Utilize expanding foundation Help companies that are just starting out 67,000 companies*1 have chosen us as the “main bank” The number of new corporations being esta
Slide 35: International Business
International Business Customers’ Needs Provide support/advice for overseas expansion Overseas Network Assist customers with their overseas operations Covering the Asia and US through overseas offices and Utilize overseas subsidiaries to provide sophisticated solutions partner banks Provide a
Slide 36: Individual Loan Business
Individual Loan Business Customers’ Needs Utilize diverse products/services to design lifestyles Further increase balances Maintain/improve profitability Outside sales areas Multifaceted Transactions with Use of residential housing loans Use the Internet to approach new customers Residential hou
Slide 37: Improve Customers' Convenience and Productivity Through Digitalization
Improve Customers’ Convenience and Resona’s Productivity Through Digitalization Clerical work volume FY2004 FY2015 Halve FY2021 Halve again （RB+SR+KO） Operational reform Halve the clerical work by promoting “Paperless”, “Cashless”, “Backless” Roll out to KMFG Digitalization Halve administration
Slide 38: Efforts to Digitalize Operations
Efforts to Digitalize Operations Digitalizing Branches General reception Require no seals Utilize at branches Provide to all client relations staff Biometrics Shortened waiting time Reduced burden Paperless of filling in forms No back office Digitalizing Head Office and Clerical Center
Slide 39: 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 (After AGM in Jun. 2018) Tadamitsu Matsui Mitsudo Urano Yoko Sanuki Chairperson, Nominating Committee Chai
Slide 40: Direction of Capital Management
Outline of Business Results for FY2017 and Updates on Major Businesses Efforts to Business Challenges for Sustainable Growth Direction of Capital Management Reference Material 39
Slide 41: 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 Class 5 PS repurchased and cancelled in FY2017, realizing shareholders’ equity comprised solely of common shares CAR T
Slide 42: Reference Material
Outline of Business Results for FY2017 and Updates on Major Businesses Efforts to Business Challenges for Sustainable Growth Direction of Capital Management Reference Material 41
Slide 43: 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 FY2017 Osaka City Female Came top in every category in 2017 30th Nikkei Achievement Leading Company the 2017 Pension Customer New Office Awards Mayor Award Sa
Slide 44: 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 21th Resona Brand Awards Presented in Jan. 2018 (Selected by vote of all employees from among monthly awards in first half of FY
Slide 45: Initiatives for Corporate Governance Evolution
Initiatives for Corporate Governance Evolution Self-evaluation of the board Performance share unit plan (PSU) 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 consolidate
Slide 46: CSR
CSR To raise corporate value through contributing to the creation of a sustainable society, Resona Group aims to resolve social issues as expressed in sustainable development goals (SDGs) “Re: Heart Club” (Employee volunteer group) joined various community activities Community [“Re: Heart Club” me
Slide 47: Sound Balance Sheet
Sound Balance Sheet Resona’s consolidated balance sheet (Reference) Balance sheet (simple sum of RHD, (as of March 31, 2018) KU, MB consolidated BS) Fixed-rate Fixed-rate Loans Deposits Loans Deposits loans*1,2 loans*1,2 JPY JPY7.6 tn and JPY and 35.2 tn JPY6.6 tn NCDs 28.7 tn NCDs JPY JPY Short-ter
Slide 48: 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 Per
Slide 49: 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 (FY2017) (JPY bn, %) Profitability Soundness Net operating profit after a deduction of credit cost Net pr
Slide 50: PL Summary and Factors for Consolidated and Group Banks Difference
PL Summary and Factors for “Consolidated” and “Total of Group Banks” Difference PL Summary RHD consolidated / (RHD consolidated / Total of three banks) Total of three banks difference (Major consolidated subsidiaries) Total of group RHD Difference HL guarantee Resona Resona P. T. Bank banks effect o
Slide 51: 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 ended Resona Guarantee Co.,
Slide 52: Capital Adequacy Ratio (RB, SR, KMFG)
Capital Adequacy Ratio (RB, SR, KMFG) Resona Bank Saitama Resona Bank KMFG (Consolidated) (Non-consolidated) (Consolidated) [A-IRB] [A-IRB] [F-IRB] Japanese Domestic Standard (JPY bn) Mar. 31, Mar. 31, Mar. 31, Mar. 31, Mar. 31, Mar. 31, 2017 2018 2017 2018 2017 2018 Change Change Change Capital ade
Slide 53: Stocks Held by Industry (March 2018)
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 54: 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) Mar. 31, 2018 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 55: Maturity Ladder of Loan and Deposit (Domestic Operation)
Total of Maturity Ladder of Loan and Deposit (Domestic Operation) Three 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 56: Composition of Loan Portfolio and Deposits
Composition of Loan Portfolio and Deposits Total of (March 31, 2018) Three Banks Loans*1 Deposits*4 Fixed Rate Liquid 4% Fixed Rate 19% deposits Personal 26% Banking Corporate Corporation Bussiness Banking Liquid (JPY13.4 tn) Prime Unit Bussiness deposits 34% Rate (JPY10.6 tn) Unit*2 46% Indivisual
Slide 57: Composition of Loan Portfolio by Base Rates
Total of Composition of Loan Portfolio by Base Rates Three Banks Corporate Banking Business Unit*1,2 Prime Prime Prime Fixed Rate Fixed Rate Fixed Rate Rate 27% Rate 26% Rate 25% 30% 31% 30% [March 31, [September 30, [March 31, 2017] 2017] 2018] Market Rate*3 Market Rate*3 Market Rate*3 43% 43% 45%
Slide 58: Composition of Deposits by Types
Total of Composition of Deposits by Types Three Banks Corporate Deposits Time Time Time deposits deposits deposits 21% 20% 20% [March 31, [September 30, [March 31, 2017] 2017] 2018] Liquid deposits Liquid deposits Liquid deposits 75% 77% 77% Individual Deposits Time Time Time deposits deposits depos
Slide 59: 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 60: Migrations of Borrowers (2H of FY2017)
RB Migrations of Borrowers (2H of FY2017) Exposure amount basis *1 End of March 2018 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% 0.0% -
Slide 61: List of Subordinated Bonds (March 31, 2018)
List of Subordinated Bonds (March 31, 2018) Amount Issuer Issue date Maturity Dividend rate outstanding JPY50.0 bn July 17, 2009 June 20, 2019 2.766% JPY50.0 bn March 4, 2010 March 4, 2020 2.084% JPY40.0 bn September 28, 2010 September 28, 2020 1.606% Resona Bank JPY25.0 bn June 1, 2011 June 1, 2021
Slide 62: Responses to Tightening of Financial Regulation
Responses to the Ongoing International Discussion over Further Tightening of Financial Regulation (No serious impact on Resona) Major items of financial regulation being discussed internationally For many items, international rules will be finalized hereafter and local authorities will start worki
Slide 63: 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 64: 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 JPY358.6 tn JPY131.3 tn The outstanding balance of current account at the Bank
Slide 65: 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 FY2017 Gross operating profit 901.8 775.0 763.1 768.6 805.2 769.3 739.5 678.3 667.0 655.2 637.1 608.5 632.4 619.5 563.1 552.5 Net interest income 599.1 561.2 5
Slide 66: 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 2018 JCR A1 A+ A2 A A3 A- Baa1 BBB+ Baa2 BBB S&P Moody's R&I Baa3 BBB- JCR Ba1 BB+ 65
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% Other 8.96% 6.08% 6.09% 5.80% 5.88% Corporations 20.01% 20.01% 20.01% 6.35% 13.51% 13.44% Individuals, etc. 15.68% 15.48% 41.95% DIC 5.83% 4.34% 4.58% 16.51% 50.11% 6.84% 6.50% 7.39% 34.17% 34.00% Financial 22.23% 19.72% 21
Slide 68: Trend of Interest rate and financial market
Trend of Interest rate and financial market Trend of long-term interest rate and Nikkei 225 3.5% Scale(1) Scale(2) (JPY) Yield on 10Y JGB Yield on 10Y US tresury Nikkei 225 ¥24,000 0.8% 3.0% [Left scale (1)] [Left scale (2)] [Right scale] Jan. 2016 Nov. 2016 Introduction of negative ¥22,000 0.6% 2.5
Slide 69: 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 70: 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 71: Forward-looking statements
The forward-looking statements contained in this material 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 practic