Resona Holdings, Inc. · TSE:8308
Resona — 1H FY2021 Earnings Presentation
70 slides from Resona's earnings presentation, Dec 3, 2021
Slide 1: President's opening remarks
• I am Masahiro Minami, the president of Resona Holdings. We sincerely thank you for your participation in our IR presentation today. • In terms of COVID-19, the conditions have recently been somewhat stabilized. We continue to focus and prepare for the future including the sixth wave of the spread
Slide 2: Abbreviations and forward-looking statements
@ 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 ine of Business Results for ie) and Updates on Major Businesses Outline of Financial Results for the 1H of FY2021 Breakdown of Financial Results Factors for the Changes in Net Income Attributable to Owners of Parent (YoY Comparison) Trend of Loans and Deposits (Domestic Account) Te
Slide 4: Outline of Business Results for 1H of FY2021
Outline of Business Results for 1H of FY2021 and Updates on Major Businesses @ Resona Holdings, Inc. 3
Slide 5: Overview of the interim financial results
• Overview of the interim financial results. • Net income was JPY80.8 bn, up JPY24.4 bn (+43.3%) YoY. • Progress rate of 55.7% against the full-year target of JPY145.0 bn. “Core income”, which is the sum of income from loans and deposits, fee income and operating expenses, was +JPY12.2 bn, YoY. • On
Slide 6: Breakdown of Financial Results
Breakdown of Financial Results "1, Losses on cancelistion of investment trusts are posted in the net gains on bonds since net of the losses and dividends from investment trusts become negative a on fi trusts: JPY(S.1) bn, trusts: +JPY2.3 bn — net amount: JPY(2.8)bn) "2. Exclude goodwill amortization
Slide 7: Factors for the Changes in Net Income
Factors for the Changes in Net Income Attributable to Owners of Parent (YoY Comparison) Consolidated (PY bn) Actual net operating profit + 8.7 f ) Credit- Gross operating profit + 5.8 related n enses, Other ' ' +24.4, YoY Operating Nil from expenses domesticloan: (0.2) and deposits Volume factor +5.
Slide 8: Average balance and rates of loans and deposits
• Average balance and rates of loans and deposits. • We will supplementary explain the loan rate with the graph at the lower right. • As the pace of decline of the loan rate slowed overall, the corporate banking business unit (blue line) turned positive from the previous year’s 4Q, and improved by 1
Slide 9: Term-end Balance of Loans and Deposits
2 Total of Term-end Balance of Loans and Deposits eee EEE Term-end loan balance Term-end deposit balance (JPY tn, % represents YoY change } (JPY tn. % nts YoY J Of which, excluding «= Corporate (Large companies and other) Fein) by -_ = Corporate (SMEs) others = Corporate (Apartment loans) [1.41] +1.
Slide 10: Housing Loan Business
Housing Loan Business Total of Group Banks New hous loan originatio Composition of newly originated residential housing loans by interest rate typ (JPY tn, % represents YoY change } ® Apartment loan ‘= Share of fixed rate residential housing loans «Flat 35 = Share of variable rate residential housin
Slide 11: Fee Income
HD Fee Income = Consolidated fee income ratio" : 32.6%, progress rate against the full year plan : 50.2% ® Increased driven by growth in investment trust (+3.6 bn, +38.5%, YoY), corporate solution (+2.1 bn, +17.0%, YoY) and Fund wrap (+1.3 bn, +61.2%, YoY). JPY bn, % represents YoY change a 29.4% '
Slide 12: Major Fee Businesses (1) Asset Formation Support Business
2 2 HD Major Fee Businesses(1 ) (Asset Formation Support Business) Balance of asset formation support products sold to individuals (PY tn) 128% ® Balance of fund wrap": 13.1% 13.7% "21/9 JPY671.7 bn (including corporation") = Foreign o— ® Change in balance of investment trust a 5.68 eee and fund wra
Slide 13: Major Fee Businesses (2) Trust, Corporate Solution, Real Estate
2 2 HD Major Fee Businesses(2) (Trust, Corporate Solution, Real Estate cusiness Ree Trust-related business income (PY bn) = Resona Asset Management Trust sdluton offered for asset and business succession *PensiowSecurties trust = Asset and business succession Number of new asset succession-related c
Slide 14: Credit costs
• Regarding credit costs. • HD consolidated credit costs were JPY17.0 bn, down JPY6.1 bn, YoY. The consumption rate against the annual plan of JPY44.0 bn is only 38.6%. • However, while the recovery in economic activity after the termination of the emergency declaration is expected to improve corpor
Slide 15: Policy-oriented stocks reduction
• On the right, for policy-oriented stocks. We reduced policy-oriented stocks by JPY14.3 bn on an acquisition cost basis, and posted a gain of sale of JPY20.0 bn on a consolidated basis. • From 1Q to 2Q, the pace of reduction is accelerating. • The current reduction plan calls for "JPY30.0 bn over t
Slide 16: Capital Adequacy Ratio
Capital Adequacy Ratio H nsolidated ® CAR (Domestic std.) and CET1 ratio (International std.) as of Sep. 30, 2021 were 11.78% and 13.91%, respectively, maintaining sound capital adequacy level Domestic standard (Reference) International standard (JPY bn) 2023 229 (FY) w2v3 azo Change Total capital 2
Slide 17: Earnings targets for FY2021
• Targets for consolidated income of JPY145.0 bn and annual DPS forecast of JPY21 remain unchanged. • The targets for the total of group banks at the bottom have been partially revised in light of the progress made in the 1H of the fiscal year. However, there has been no change in overall sentiment.
Slide 18: (Reference) Financial Results of Each Segment
(Reference) Outline of Financial Results of Each Segment Consolidated +10.9 PY in) Prams YoY (PY bn) lactainet operating prot (6) 16.0 26) aoe Gross operating proftt m 136.0 +10.3 Actual (26) ‘tenes Operating expense © (73.5) (1.5) De Customer fActuainet operating prott (9) e25{ +88] operating §— vi
Slide 19: (Reference) Financial Results of Customer Divisions
(Reference) Outline of Financial Results of Customer Divisions eeeEeEeEEE—E—EeeEEeEeEEEEeeEeEEEE—— Personal banking segment Corporate banking segment = Actual net operating profit : Down JPY2.6 bn, YoY = Actual net operating profit : Up JPY8.8 bn, YoY (JPY bn) (PY bn) Gross operating profit (2.2) Gr
Slide 20: KPIs under the Medium-term Management Plan
• The KPIs of the medium-term management plan are shown. • Net income of JPY80.8 bn for the interim period includes a significant contribution from KMFG through the solid evolution of them. • KMFG's consolidated interim income doubled from JPY5.3 bn in the previous year to JPY10.6 bn. On a contribut
Slide 21: Efforts for Sustainable Growth
Efforts for Sustainable Growth @ Resona Holdings, Inc. 20 20
Slide 22: Growth strategy: Efforts for Sustainable Growth
• Let me now talk about our growth strategy. • We have been talking about "Resona's SDGs management", which is the business based on the customer and social issues as a starting point. • The customer's issues are changing day by day. However, we aim to grow together with social and our customers by
Slide 23: Resona's SDGs-Oriented Management / To Be a Good Company
• Resona received JPY1.96 tn of public funds in 2003. Subsequently, we worked on "Resona Reform" aimed at becoming a truly retail bank. • This reform started under the leadership of Mr. Hosoya, who has been transferred from the Executive Vice President of JR East to the Chairman of Resona HD. The wo
Slide 24: SX strategy overview
• This is an overview of the SX strategy of our group. I would like you to confirm the details later, but I will first explain our views on SX. • Regarding SX, I think that "some people still have some doubts," but I told all employees that I would "seriously committed to it 120%." • Sustainability
Slide 25: SX Long-term Sustainability Targets
• As a specific initiative of SX, the Long-Term Sustainability Targets were formulated and announced in Jun. 2021. • The 3 specific targets for the FY2030 are listed here. • The first is "Retail Transition Finance." • The second is "carbon neutrality." • Third, “empowerment and promotion of women.”
Slide 26: SX Retail Transition Finance
• As "Retail Transition Finance," we aim to handle a cumulative total of JPY10 tn by FY2030. • SX's efforts have accelerated, particularly among large enterprises. We want to be closer to our retail customers and support steady progress from each current location while enhancing our own organization
Slide 27: Carbon Neutrality
• About the second "carbon neutrality." • The goal is to virtually eliminate CO2 emissions from Resona Group-wide energy-use by FY2030. As a member of the local community, Resona hopes to contribute to the promotion of carbon neutrality and renewable energy in the local communities where Resona is b
Slide 28: Diversity & Inclusion
• Third "empowerment and promotion of women.” • The left-hand side shows the efforts in the past and the right-hand side shows the current situation and the targets for FY2030. • This is an area that is already one of our strengths, as evidenced by the fact that the ratio of female line managers is
Slide 29: Resona's DX Strategy
• From here on, about DX. First, I will explain the overall picture. • On the top left, our goal is to change the customer experience, provide new value to the customer, and change our cost structure itself, by leveraging DX. • As shown in the upper right, we are the only company in the banking indu
Slide 30: Digital Channel
• About digital channels. • As shown in the upper left, group apps are already the most used channel, and usage continues to trend upward. This is the reality that has already happened. • By Sep. 2021, the number of downloads within the group is 4.31 million. In addition to expanding outside the Gro
Slide 31: System
• About the system that supports DX. • While keeping an eye on the evolution of technology, we are carrying on system structural reforms for the next generation. • While accelerating development speed through low code development and agile system on the left side, we will expand investment in strate
Slide 32: Financial Digital Platform
• About the financial digital platform. • Through API and digital infrastructure, we are aiming to provide open platforms that can be used by various companies without being limited by conventional frameworks. • The upper part concerns the provider of the function. It will be possible to expand the
Slide 33: Rolling out Resona Products at Regional Financial Institutions
• The progress in the 1H is mainly shown on this slide. • We believe that the solid track record of win-win in Mebuki FG's app and Bank of Yokohama's fund wrap will give momentum to future developments. • Keiyo Bank and Hyakujushi Bank have entered into a new partnership. • Through API linkage, Reso
Slide 34: Face-to-face Channel
• Initiatives in the Real Channel. • We will shift branches from clerical work to a place to provide solutions, thereby providing added value that only face-to-face can. This is the mission of the next generation of manned branches. • The bottom of the slides is the image of "sales style" in the fut
Slide 35: KMFG: Pursue More Group Synergies
• At the beginning of presentation about our growth strategy, I mentioned "solid evolution of KMFG," and I will explain the group synergy here. • KMFG has shifted from the stage of system development to a new stage of producing results. There is room for further synergies to be realized both on the
Slide 36: Group Synergies: Channel Reform
• Status of channel reforms. By reducing the number of locations, mainly through the conversion to joint branches, while reducing the number of personnel per branch and downsizing, we aim to simultaneously maintain customer contact points and low-cost operations. • The number of Group branch locatio
Slide 37: Asset Formation in the 100-Year Life Era
• The third theme of our growth strategy. • With the changing mindsets and lifestyles of customers following COVID-19, we have identified 3 businesses as more apparent needs. All of these areas have potentially large needs amid the trend of an aging and cashless society, and are priority businesses
Slide 38: Supporting Smooth Succession to the Next Generation
• Regarding asset and business succession business. • I think you can confirm the strong growth in M&A, and real estate incomes in the upper right of the slides. • At the bottom left of the slides, we show the status of advisory deals signed for M&A, the number of leads for real estate-related deals
Slide 39: Widespread Use of Cashless Payment
• About cashless. • Data at the top right are debit card incomes. This is also showing a large increase of 30%, YoY. • At the bottom left, the number of debit cards issued increased by 0.42 million in a year, or +18%, YoY. • In the middle row on the right, the amount of transaction using debit cards
Slide 40: Capital Management
Capital Management @ Resona Holdings, Inc. 39 39
Slide 41: Capital Management
• Lastly, capital management policy. • Our direction of capital management policy shown above, which have been presented in the past. • There is no change in our approach of aiming to further expand shareholder returns while maintaining a balance between "financial soundness," "profitability," and "
Slide 42: ESG Initiatives
ESG Initiatives @ Resona Holdings, Inc. 4 MM
Slide 43: E: Our Response to Global Warming & Climate Change
E (Environment): Our Response to Global Warming & Climate Change Board of Directors proactively pursue Resona Sustainability Challenge 2030 Board of Directors i Re J sevice tive and step up climate change countermeasures Group SDGs Promotion Committee Integrated management of response to climate cha
Slide 44: E: Step-up Approach to Support Customer Initiatives
E (Environment): Step-up Approach to Support Customer Initiatives Help customers expand their Encourage customers to join Help customers identify and resolve latent issues knowledge of climate change efforts to address and other social issues social issues An introductory booklet on SDGs epee EE “SD
Slide 45: S: Business & Social Contribution Activities
S (Society): Realize “Retail No. 1” through Business & Social Contribution Activities everaging our strengths and managementresources _ to contribute to the sustainable growth oflocal communities [Relationship between business strategy and social contribution activities] Priority social issues Reali
Slide 46: S: Initiatives to Help Resolve Region-Specific Issues
S (Society): Initiatives to Help Resolve Region-Specific Issues Facilitate an autonomous, virtuous cycle in regional economies and thereby realize a sustainable regional society and the co-creation of value in tandem with communities = Establishment of “Regional Design Laboratory of Saitama” (SR: Oc
Slide 47: G: Sophisticated Corporate Governance System
G (Corporate Governance): Sophisticated Corporate Governance System 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 Nominating ® Outside directors only independent
Slide 48: G: Roles, Skills, and Expertise Required to Directors
G (Corporate Governance): Roles, Skills, and Expertise Required to Directors Strengthening supervisory and decision-making functions through active discussions at Board of Directors meetings = Outside directors which are rich in diversity = = S eeees e 47 47
Slide 49: G: Initiatives for Corporate Governance Evolution
G (Corporate Governance): Initiatives for Corporate Governance Evolution effectiveness of the Board of Directors’ operations | Outside directors’ meetings _) = Compensation system for executive officers ¥ Outside directors conducted meetings on evaluation of the Board of Directors utilizing a third-
Slide 50: ESG-Based Recognitions and Initiatives
ESG-Based Recognitions and Initiatives a NR nnn ——— ee ——t Status of inclusioninto ESG-based stock indices external evaluations [ESG indexes selected by GPIF (domestic stock)] MSCI Aim to be included in all of four indices during the current MMP period ee ERI ERG AA S&P/IPX (3) Bee MSCI(WIN) Jan (Fu
Slide 51: Resona's Challenges Attracting Attentions from Outside (1)
Resona’s Challenges Attracting Attentions from Outside (1) re highly evaluated by various instituti Highly evaluated for our initiatives to proactively facilitating DX (digital transformation) | ® Digital Transformation Stock Selection (DX Stock) 2021 (HD) “Only in the banking * © Providing an open
Slide 52: Resona's Challenges Attracting Attentions from Outside (2)
Resona’s Challenges Attracting Attentions from Outside (2) Winning awards to commendleading companies of diversity | = Leading companies where = Awarded the highest gold = Obtained Platinum = Ranked #3 in 100 women shine 2020 Winning rating in the PRIDE Index Kurumin Best Companies the Minister of S
Slide 53: Integrated Report introduction
• I would like to give you a quick introduction about a Resona Group's Integrated Report. • The QR code on the slide also gives you the access to the page on our website. • I recommend you to see this report to help understand the content of Resona's SDGs Management from the financial and non-financ
Slide 54: 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 55: Establish Resonance Model Business Strategy
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 Drivers for Innovation Next-Generation Retail
Slide 56: Points of Focus in the Medium-term Management Plan
Points of Focus in the Medium-term Management Plan toward the 2030 Realization of SDGs Expected issues customers will face Key policies under the medium-term Theme in the next 10 years management plan Local Communities Adapt to a digitalized and global society Widespread use of cashless settleme
Slide 57: Breaking Free of the Bank Model
Breaking Free of the Bank Model (1) ~Deliver New Value Employing New Ideas~ Reforms securing its agility and effectiveness employing CFT Thoroughgoing use of a business approach Adapt to changes that starts with customer needs Create new businesses An open innovation facility for supporting co-cre
Slide 58: Human Resources Management
Human Resources Management Downsizing and reallocating human resources to focus areas Group total personnel headcount will decrease to below the level prior to KMFG integration due to natural attrition Accelerate downsizing and reallocation of human resources on a group-wide basis by making KMFG
Slide 59: Outline of Resona Fund Wrap
Outline of Resona Fund Wrap Core products meeting customer needs for long-term asset formation Operation course according to customer's request Cost competitive ⇒ Lowest level of investment advisory fees for Standard course JPY3 million~, index fund investment the face-to-face offering products
Slide 60: International Businesses / Resona Cashless Platform
International Businesses Overall support for customers’ overseas expansion with a focus on Asia via overseas bases and partner banks Continue to provide meticulous services utilizing non-face-to-face Provide solutions via local subsidiaries tools even under the COVID-19 pandemic Bank Resona Pe
Slide 61: Policy-Oriented Stocks: Verification Process & Reduction Plan
Policy-Oriented Stocks：Verification Process & Reduction Plan Verification process for value of holding of policy-oriented stocks ※Policy for holding policy-oriented stocks ⇒P14 Quantitative Discussing Measures (Qualitative Judgment) Measures Judgment Consideration from Risks/Returns Perspective Co
Slide 62: 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 63: Consolidated Subsidiaries and Affiliated Companies
Consolidated Subsidiaries and Affiliated Companies (1) Major consolidated domestic subsidiaries (excluding group banks) (JPY bn） Net YoY Name Line of business Capital contribution ratio Fiscal year income change FY'21 Resona Guarantee (1) Resona Holdings 100% 5.9 +1.0 (Sep.30 2021) FY'21 Kansai Mira
Slide 64: Stocks Held by Industry / Swap Positions
RB Stocks Held by Industry (September 30, 2021) 25% Resona Bank TOPIX 20% 15% 10% 5% 0% Air transport Retail Pulp and paper Marine transport Textile product Other manufacturing Iron and steel Warehouse, transportation Pharmaceutical product Utilities Transport equipments Information, telecommunicati
Slide 65: Composition of Loan Portfolio and Deposits
Composition of Loan Portfolio and Deposits Total of (September 30, 2021) Group Banks Loans*1 Deposits*3 Fixed Rate Liquid 2% Fixed Rate 19% deposits Personal 27% Banking Corporate Corporation Prime Bussiness Banking Liquid (JPY19.0 tn) Rate Unit Bussiness deposits 34% (JPY14.1 tn) Unit*1 33% 36% (JP
Slide 66: Migrations of Borrowers (1H of FY2021)
RB Migrations of Borrowers (1H of FY2021) Exposure amount basis*1 End of September 2021 Upward Downward Other Special Potentially Effectively Migration Migration Normal Bankrupt Other Collection, Assignments, Watch Attention Bankrupt Bankrupt Repayments Sale Normal 98.3% 1.2% 0.0% 0.0% 0.0% 0.0% 0
Slide 67: Responses to 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 The implementation date of finalization of Basel 3 is scheduled for March 31, 2023. At present there is no regu
Slide 68: BOJ Current Account Balances / Long Term Business Results
BOJ Current Account Balances Monthly average balance of BOJ current account (16 September -15 October) Total of institutions subject to the complementary City banks including deposit facility Resona Bank and Saitama Resona Bank JPY515.2 tn JPY187.1 tn The outstanding balance of current account at th
Slide 69: Credit Rating Information / Composition of Common Shareholders
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 Bank - - - AA- Minato Bank - - - AA- 84 Composition of Resona HD’s Common Shareholders 2.26% 5.03% 3.96% 3.93% 4.89% 8.96% 6.86% 6.65% 7.03% 7.17% Ot
Slide 70: Proactively Communicating with Our Shareholders and Investors
Proactively Communicating with Our Shareholders and Investors Resona Group Website [For Shareholders/Investors] View IR presentation materials from here https://www.resona-gr.co.jp/holdings/english/ 86