better banking – better value - shinsei bank
TRANSCRIPT
Better Banking Better Banking –– Better ValueBetter Value
June, 2004
BUILDING A JAPANESE BANKING LEADER
(TSE : 8303)
Investors Meeting FY2003
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The following materials contain statements that constitute forward-looking statements, plans for the future, management targets, etc. relating to the Company and its subsidiaries. These forward-looking statements are based on current assumptions of future events andtrends, which may be incorrect. Actual results may differ materially from those in the statements as a result of various factors.
Unless otherwise noted, the financial data contained in these materials are presented under Japanese GAAP. The Company disclaims any obligation to update or to announce any revision to forward-looking statements to reflect future events or developments. Unless otherwise specified, all the financials are shown on a consolidated basis.
Information concerning financial institutions other than the Company and its subsidiaries are based on publicly available information.
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FY2003: Full Year Operational Highlights
• Net profit rose 25.2% to JPY 66.4 billion
• Non-interest revenue was JPY 66.3 billion
• NPL’s fall to 2.8% of total claims or JPY 97.3 billion- an overall decline of JPY 135.9 billion during FY2003
• 56% of total customer funding from retail customers- up 6% over last year
• Credit rating upgrades
Significant Progress in All Key Areas
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Financial OverviewJPY Bn
FY’01 FY’02 FY’03Total Revenue 120 108 124Total Expenses 70 70 70Net Income 61 53 66
ROA 0.7% 0.7% 1.0%ROE (2) 10.1% 8.1% 9.4%Adjusted ROE (3) 9.9% 10.2% 14.6%
FY2003 Full Year: Stronger Returns
1. Reflects JPY 20Bn of realized losses from Shinsei’s US bond portfolio2. Based on total shareholders’ equity3. Adjusted ROE=Net income / Average adjusted total shareholders’ equity
(Adjusted total shareholders’ equity=Risk weighted assets x 10% (assuming 10% Tier 1 ratio))
(1)
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Total Revenue and Net Income
Total RevenueJPY Bn
Total RevenueJPY Bn
120108
124
0
20
40
60
80
100
120
140
FY2001 FY2002 FY2003
Total Revenue
Net IncomeJPY Bn
Net IncomeJPY Bn
61 5366
0
20
40
60
80
100
120
140
FY2001 FY2002 FY2003
Net Income
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ROA and ROE
ROA and Total Assets% JPY Bn
ROA and Total Assets% JPY Bn
0.7% 0.7%
1.0%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
FY2001 FY2002 FY20033,000
4,000
5,000
6,000
7,000
8,000
9,000
ROA Total Assets
ROE and Equity% JPY Bn
ROE and Equity% JPY Bn
10.1%8.1%
9.4%
0.0%
4.0%
8.0%
12.0%
16.0%
FY2001 FY2002 FY2003400
500
600
700
800
ROE Equity
(Total Assets and Equity are as at March 31 of each fiscal year)
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Driving Profitability and Returns
Institutional BankingIntegrated teams of product specialists and relationship managersDeliver solutions and grow quality assetsCross selling of diversified services to broaden customer relationships
Retail BankingLow cost direct banking model to build customer baseProvide innovative products and customer centric servicesSegmentation and initiative aimed at affluent customers
Strong Balance Sheet / Better Funding
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Institutional Banking:Distinctive Features and Focus
Traditional Products: - Loans- Debentures- Forex/Derivative
New Products, Services: - Credit Trading- Securitization (ABS、MBS)- Non Recourse Financing- Corporate Revitalization, Private Equity- M&A Advisory- Non-Bank
Real Estate Secured LoansUnsecured LoansHousing LoansInstallment Loans
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Retail Banking:Innovative Products and Quality Services
Traditional Products: - Savings- Time Deposits- Debentures
New Products: - PowerFlex – Integrated Account- Foreign Currency Savings / Deposits- Mutual Funds- Variable Annuity Insurance- High Net-Worth Special Products- PowerSmart Housing Loan
New Services: - 24x7(ATM, Call center, Internet Banking)
- ATM networks- International Cash Card
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Growth in PowerSmart Housing LoansJPY Bn Customers (Thousands)
Growth in PowerSmart Housing LoansJPY Bn Customers (Thousands)Growth in PowerFlex Deposits and Accounts
JPY Tn Accounts (Thousands)
Growth in PowerFlex Deposits and AccountsJPY Tn Accounts (Thousands)
Retail Banking:Rapid Retail Deposit and Loan Growth
• “PowerFlex” growth in 2003: 15%• “PowerSmart” reached JPY 140 billion
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
6/01 9/01 3/02 9/02 3/03 9/03 3/040
100
200
300
400
500
600
700
Deposits Outstanding Accounts
0
20
40
60
80
100
120
140
160
3/02 9/02 3/03 9/03 3/040
1
2
3
4
5
6
7
Loans Outstanding Customers
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Revenue Mix Continues to Diversify
Revenue CompositionJPY Bn %
Revenue CompositionJPY Bn %
16.031.3 41.6
66.3
85.8
88.4 66.1
57.2
54%
15%
27%39%
46%
85%
73%
61%
0
30
60
90
120
150
3/2001 3/2002 3/2003 3/20040%
20%
40%
60%
80%
100%
Net Interest Income/RevenueNon Interest Income/Revenue
Net Interest IncomeNon Interest Income
• Further progress in revenue diversification
• Non-interest income growth more than offsetting interest income decrease
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Better Asset / Loan Composition in FY2003
1. Internal Facility Rating Basis (Transformed to corresponding ratings of R&I)
Improving Loan Portfolio Quality (1)
%
Improving Loan Portfolio Quality (1)
%
8678
54
79
14
713
33
0
20
40
60
80
100
3/2002 3/2003 3/2004BBB- or above B- to BB+ below B-
1. Internal category, differ from financial balance sheet
Major Risk Asset Categories (1)
%
Major Risk Asset Categories (1)
%
1322 16
231312
13
95
48
5670
0
20
40
60
80
100
3/2002 3/2003 3/2004JGBs Loans Structured Loans Other
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Funding CompositionFunding Composition
Better Mix of Funding• Dramatic change in liability composition:
low-cost and varied sources of funding
72%61%
50% 44%
20%21%
17%17%
8%18%
33% 39%
0%
20%
40%
60%
80%
100%
3/2001 3/2002 3/2003 3/2004
Institutional Deposits/Debentures Retail Debentures Retail Deposits
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Reduction of NPLs (1)
JPY Bn %
Reduction of NPLs (1)
JPY Bn %NPL Coverage Ratio (1)
As of 3/2004, %
NPL Coverage Ratio (1)
As of 3/2004, %
Balance Sheet Gets Even Stronger• Decreased NPLs by JPY 1.8 trillion (or 94%) over 4 years• The best NPL coverage ratio compared to the Japanese mega banks• Remains conservatively reserved
1. Non-consolidated basis
74%78%80%
70%
99%
Shinsei MTFG SMFG Mizuho UFJ
1. Non-consolidated basis
1,865
1,2961,114
23397
20.0%
22.0%
2.8%
5.7%
19.0%
0
500
1,000
1,500
2,000
2,500
3/2000 3/2001 3/2002 3/2003 3/20040%
5%
10%
15%
20%
25%
NPL Amount NPL Ratio
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Further Capital Base Improvement
• Industry leading regulatory capital levels• High quality of capital
Regulatory Capital RatioAs of 3/2004, %
Regulatory Capital RatioAs of 3/2004, %
4.7%5.8%6.0%7.1%
16.2%
9.2%11.4%11.4%
13.0%
21.1%
Shinsei MTFG SMFG Mizuho UFJ
Tier 1 Ratio BIS Ratio
Tier 1 Capital QualityAs of 3/2004, %
Tier 1 Capital QualityAs of 3/2004, %
36%
66%53%
83%97%
64%
34%47%
17%3%
-15%
5%
25%
45%
65%
85%
105%
Shinsei MTFG SMFG Mizuho UFJ
Core Capital Net DTAs
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Significant Accomplishments in FY2003
• Achieved financial targets
• Proof of strength of Shinsei business model
• Successful IPO / Tokyo Stock Exchange Listing
• Change of charter to “ordinary” bank
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Shinsei Bank: Clear Priorities
• Uniquely positioned to leverage product expertise and customer knowledge in institutional banking
• Innovative, customer centric approach to retail banking in Japan
• Strength in asset quality, funding mix and capital
• Management focused on long-term growth of corporate value– Strategy– Action Plan– Budget
Generating Value and Superior Returns
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• Shinsei Bank is a Japanese banking institution founded on global standards of governance and management. With over $60 billion in assets and 29 branches throughout Japan, Shinsei provides a broad range of value-added financial solutions to institutional and individual customers under the banner of “Better Banking.” Our PowerFlex account, free ATM network and internet banking service, and customer friendly financial centers have redefined the Japanese retail banking experience. Shinsei is committed to long-term growth and profitability by expanding its customer-focused business model.