Corporate Revitalization - A Project Approach to Investment Banking

Transcription

1 CLSA Japan Forum 25 March 25

2 Financial Group, Inc. (MHFG) Bank Holdings Corporate Bank Advisory Trust & Banking Trust & Custody Services Bank (TCSB) Asset Management Companies Other Group Companies Investors Securities Definitions Shinko Securities * Securities Financial Subsidiaries which Specialize in Corporate Revitalization 3 Banks: Aggregated figures for Bank, Corporate Bank, Trust & Banking and their financial subsidiaries for corporate revitalization on a non-consolidated basis. 2 Banks: Aggregated figures for Bank, Corporate Bank and their financial subsidiaries for corporate revitalization on a non-consolidated basis. 1 * An affiliate under equity method

3 Major Financial Data of the Financial Group As of the end of Sep. 24 (JPY Tn) Total Assets Loans Deposits and Debentures BIS Capital Risk-adjusted Assets BIS Capital Ratios (JPY Bn) Net Business Profits Estimates for FY24 Net Income Estimates for FY24 Financial Group, Inc % 72 *3 Bank Corporate Bank Trust & Banking (Trust Assets *1 41.4) 3.3 * * % * % 13.72% *3 25 Financial data are on a consolidated basis except estimates for Net Business Profits and Net Income of Bank, Corporate Bank, and Trust & Banking which are on a non-consolidated basis and include the estimates for their financial subsidiaries for corporate revitalization (JPY Tn) Investors Securities 2 Securities Total Assets (JPY Bn) Ordinary Profits Actual for FY23 Net Income Actual for FY23 Assets under Management ( 4.6) ( 14.2) Assets under Management *1 Including re-entrusted assets to TCSB, a subsidiary of MHFG *2 Domestic standard *3 Including recording of approx. JPY 28 billion of net extraordinary gains due to the Supreme Court judgment on Dec. 24, 24 regarding a corporate tax correction with respect to the write-off of credits against Japan Housing Loan, Inc.

4 Agenda I. A New Phase in Management Strategies II. Strategic Focus in the New Phase III. In Closing 3

5 I. A New Phase in Management Strategies 4

6 A New Phase in Management Strategies Based on Steady Progress in Management Reforms Completed Various Management Reforms within a Short Period by Leveraging July 23 a Sense of Crisis March 23 Resolution of Financial Issues A New Phase in Management Strategies Management Focus Shifting from Reestablishment of Business Infrastructure to Enhancement of Top-Line Growth Repayment of Public Funds Acceleration of Cost-Cutting Cutting Efforts Reformation of Group Management Structure ( Business Reorganization ) Measures to Enhance Top-Line Growth Launch of Corporate Revitalization Project (95 corporate customers / JPY 4.5Tn of financial claims) Completion of IT Systems Integration * Stock Price Feb. 28, 25 JPY 51, Mar. 31, 24 JPY 448, Sep. 3, 23 JPY 25, Apr. 28, 23 JPY 58,3 (record low since listed) Mar. 31, 23 JPY 96,8 February March 23 November 22 April 22 Execution of Drastic Financial Actions and Capital Raising of JPY 1.1Tn Announcement of Change & Speed-Up Program Start of Operations under a Corporate Structure Legally Separated According to Customer Segmentation and Business Function 5 Sep. 3, 22 JPY 285, Mar. 29, 22 JPY 32, *The stock price of Holdings, Inc. before Mar. 5, 23

7 (JPY Tn) Sep. 22 Mar. 23 Mar. 24 Sep. 24 Dec. 24 Mar. 25 NPL Lower Ratios 6.4% 6.2% 4.4% 3.1% 2.7% 2%Range Reduced by Half (Plan) (JPY Bn) 3, 2, 1, Percentage of Consolidated BIS Capital NPL Balance <Disclosed Claims under the Financial Reconstruction Law> Claims for Special Attention Claims with Collection Risk Achieved target 6 months ahead of original plan Repayment of Public Funds Subordinated Bonds To repay over Preferred Shares 5% of total public funds (Approx. JPY1.5Tn) 1, ,949 1,949 1,716 Claims against Bankrupt and Substantially Bankrupt Obligors (3 Banks) *Released on Mar. 3, 25: By the end of March 24, we plan to redeem JPY 1 billion of subordinated bonds of public funds, and, on March 7, 25, we plan to repurchase approximately JPY 249 billion of preferred shares of public funds. Sep. 22 Mar. 24 Sep. 24 Mar % 29.3% 22.8% (Plan) * 1,466 (JPY Bn) Cost Cutting Efforts Actual (1H) 385 (2 Banks) Approx. -19Bn 75 FY22 FY23 FY24 FY26 (Actual) (Actual) (Plan) (Revitalization Plan) No. of Employees * 27,9 26,575 24, * Revitalization Plan basis 24 Progress in Four Challenges ~ Completion of Bank s IT Systems Integration Project No. of Branches whose IT Systems were Integrated: 282 Jul. Aug. Sept. Oct. Nov. Dec. 5 branches 4 branches 3 branches IT Systems Integration Completed in Dec branches 17 branches 76 branches Total sum of branches (5) (9) (39) (99) (26) (282) Completed 6

8 New Major Issues and a New Phase in Management Strategies Resolution of NPL Issue = Pursuit of Credit Quality in Loans Rapid improvement of asset quality (JPY Tn) Establishment of sustainable earning base Major Issues: Further Enhancement of Profits by Increasing Loans with Higher Risk-adjusted Returns, Further Increasing Non-Interest Income, and Reducing Costs 84.9 Loan Balance (3 Banks) <Details of - JPY5Tn> - NPLs - JPY2.5Tn - Loans for Other Watch Obligors - JPY2.2Tn 1.6% 1.4% 1.2% 1.%.8% 5.6% 4 ~ ~.4%.% Mar. 22 Mar. 23 Mar. 24 Sep % 1H of FY22 Interest Margin (2 Banks excluding financial subsidiaries for corporate revitalization) 1.45% 2H of FY22 1.5% 1H of FY % 2H of FY % Decrease due to improvement in average Credit Ratings 1H of FY24 (JPY Bn) ~ 6 Non-Interest Income 1H of FY22 2H of FY22 1H of FY23 2H of FY23 (2 Banks) 1H of FY24 A New Phase in Management Strategies 7

9 Management Vision in the New Phase Enhance Top-Line Growth -Increase Profits from Customer Groups-! Already established corporate customer base - s corporate customers: 7% of listed companies is main bank for 4% of them - No. 1 market share in domestic syndicated loan market Domestic Syndicated Loan Bookrunner League Table C 6% Wholesale Market <1H of FY24 actual> Others 42% Keeping 4% B 15% of market share in the growing A 27% market (Resource) Thomson Financial! Further leverage current customer base to enhance profitability " Focus on securities and investment banking business Retail & SME Market! Establish a business model to enhance profitability - Retail: Retain existing customers and attain new customers through various alliances - SMEs: Enhance market share for loans to Middle Credit Risk Corporations and Small Corporations Comparison of profit structure with a foreign peer Breakdown of Gross Profits Expense Ratio of retail business Others 17% Corporate Bank & Securities 36% Retail 14% SMEs Others 58.8% ( Bank) (FY23) Others 18% Bank 47% Wholesale 26% Citigroup 45.9% (Retail) Retail 56% Consumer Finance Further Reduce Costs through Business Process Reengineering Effect of IT Systems Integration! Realize cost-cutting effect after the completion of IT systems integration in Bank Business Process Reengineering! Improve customer service and reduce costs through promotion of business process reengineering after the completion of IT systems integration 8

10 II. Strategic Focus in the New Phase 9

11 Strategic Focus and Measures Retail Market Enhance Profitability of Mass-Retail Transactions Strengthen Loan Business for Individuals Strengthen Housing Loan Business Promote Business with Enhanced Consulting Functions Small and Medium-sized Enterprise (SME) Market Increase Loans to Middle Credit Risk Corporations and Small Corporations Securities and Investment Banking (IB) Business Strengthen Group Synergy and Alliances with Other Companies Trust Business Expand Trust and Asset Management Business 1

12 Retail Market Enhance Profitability of Mass-Retail Transactions ( Mileage Club) Introduce A New Membership Service Platform - ATM Card with Credit Card Function without Annual Fee Upgrade Services and Functions of MMC Mileage Club (MMC) Encourage mass-retail customers to upgrade their status to targeted customers Retention of Customers ATM Card with Credit Card Function (Revolving Credit Function) Mileage Function MMC Profits from Credit Card Business Improve profitability of mass-retail customers Cross-Sell Credit Card Purchase Records Increase sales of investment products and loans to individuals! Offer mileage points that can be accumulated for an indefinite period, which can be used to obtain preferential pricing on deposits and loans, by banking transactions and credit card usage! Enhance data-based marketing by sharing customer s credit card purchase records! Share profits fifty-fifty from credit card business with credit card companies! Introduction of new revolving credit function * (Nov. 24) * Customers may choose the upper limit of monthly payments! Internet services exclusive to MMC members - Account Aggregation ** (Nov. 24) ** Customers are able to check their deposits, investment trusts and credit-card accounts on one screen on the internet! Introduction of services from corporate partners (Feb. 25) - Increase membership and facilitate credit card usage by providing high quality services Mileage Club Members Exchange points/ Preferential Services Notice of New Alliances Bank Alliances Airline Partners (Expanding) Appliance Outlets Gas Stations Department Store Car Dealer Florist 11

13 Retail Market Enhance Profitability of Mass-Retail Transactions (Business Alliance with Credit Saison) Further Expand Credit Card Business through Enhancing Brand Power and Opening Each Other s Customer Base Increase Number of Members and Profits * of MMC through the Alliance with Saison Plan to market products to over 16 million Credit Saison (Saison) customers (JPY Bn) 2 (Millions of people) 1 8 Incremental profits from alliance w ith Saison (include cross-sell to Saison customers) Saison s 16million Customers Expand Customer Base s 26million Accounts MMC (Saison Card)/New Products and Services through this Alliance 1 FY24 FY25 FY26 FY27 FY28 (Plan) (Plan) (Plan) (Plan) (Plan) Profits from alliance only w ith UC # of MMC members (Alliance w ith UC & Saison) * Bank s Gross Profits from credit card business (Including profits from cross-selling of s products) Reorganize Credit Card Business through Comprehensive Strategic Business Alliance with Saison Promote Alliances with Other Credit Card Companies Issue MMC Comprehensive Strategic Business Alliance between UC and Saison (Dec. 24) Bank Issue MMC Equity Participation Other Credit Card Companies Outsourcing Aggregation (New) UC Card Card Issuing Business (UC Card) Member Store Management Business Processing Operation Integration Aggregation Outsourcing Credit Saison Card Issuing Business (UC/Saison Card) Member Store Management Business Processing Operation Next-Generation Computer System* Scheduled for FY25 * Plan to commence studies from 25 12

14 Retail Market Strengthen Loan Business for Individuals (Business Alliance with Orient Corporation) Strengthen Loan Business for Individuals through Orico s Affiliated Merchant Network 5 Major Consumer Credit Companies Market Share in the Installment Shopping Credit Market Mar. 23 Aplus 9% Central Finance 11% JACCS 19% Top 5 CFCs NICOS 11% Orico 44% <Product Mix Orico> Auto 61.2% House Reforming 5.8% Kimono 5.8% Jewelry 5.7% Education 3.% etc. Consumer Credit Market Overview Mar. 23 Credit Card (Cashing) JPY3.2Tn Others JPY13.9Tn CFC Loans JPY1.2Tn Installment Shopping Credit JPY11.3Tn Total JPY6.8Tn Bank Loans JPY18.6Tn Credit Card (Shopping) JPY3.6Tn (* Consumer Finance Company) (Source: Gekkan Shouhisha Shinyou) Strengthen Captive Loans * Guaranteed by Orico (Announced in July 24) Loan Increase Profitability by Strengthening Loan Business for Individuals Customers Convenient Financing Sources Market Expansion Guarantee Orico s Affiliated Merchant Network (6, Retailers) Captive Loans* +JPY 5 Bn s Corporate Customer Base # Expand Affiliated Merchant Network Captive Loans* +JPY 1 Bn Orico (FY27 Target) Increase Profitability through Guarantee Business without Funding (JPY Bn) Balance of Captive Loans * ~ ~~~ Sep. 24 Jan. 25 Mar. 28 (Plan) *Installment loans for shopping originated through affiliated merchant network Utilize Orico s Underwriting, Loan Collection and Marketing Capabilities New loan card for individuals Orico Loan Card to be released in FY25 Transfer unsecured loan guarantee business from UC Card to Orico Leverage Alliance between Orico and ITOCHU Corp. ITOCHU Corp. plans to acquire 21% of Orico s ordinary shares (JPY 24.3 Bn of 3 rd party allotment and approx. JPY 24 Bn of existing shares) and preferred shares (face value of JPY 2 Bn) Strengthening of retail business by providing Orico s affiliated merchants and individual customers with more products and services by ITOCHU Corp. 13

15 Retail Market Strengthen Housing Loan Business Further Strengthen Housing Loan Business by Revision of Underwriting Process and Distribution Network and Reinforcement of Housing Loan Products Flexible Response to Customers Needs Revision of Underwriting Process and Distribution Network - Target: same day response for 8% of applications - Introduce scoring model - Increase Housing Loan Centers to 1 by FY25 Introduction of Competitive Products and Pricing Special Pricing Campaign! Offer special pricing with limited period and amount to maintain certain market share in the housing loan market! Offer special pricing for loans whose interest rate risks can be covered in the financial market For ultra-long term housing loans, offer securitization type housing loans (see below) (JPY Tn) 1 5 Balance of Housing Loans for Owner s Residential Housing Tn ~ Mar. 2 Mar. 3 Mar. 4 Mar. 7 (Plan) Securitization-type Housing Loans Loans in in alliance with with Government Housing Loan Loan Corp. Corp. (For maturity longer than 2years) Promote Securitization-type Housing Loans in Alliance with Government Housing Loan Corp. Government Housing Loan Corp. will be transformed into an independent agency supporting securitization of housing loans " Further contraction of market share! Increase s share by strengthening business for securitization-type loans! Develop the securitization market and establish business model for fee businesses! Long-term (over 2 years) fixed interest rate: 2% range! promotes securitization-type housing loans while other banks focus on promoting their own booked loans Origination " Originations are increasing steadily 1Q of FY24 2Q of FY24 3Q of FY24 From Jan. to Feb. 25 Applications under review (as of the end of Feb. 5) Amount (JPY Bn)

16 Retail Market Promote Business with Enhanced Consulting Functions Thousand Targeted Customers 8 AUM * : JPY 1M or more "PB staff AUM * : JPY 3M or more " 1 st Class FCs AUM * : JPY 1M or more " 2 nd /3 rd Class FCs Increase Sales of Investment Products through Enhancement of Consulting Functions to Targeted Customers * Assets under Management Reassembling of Private Banking (PB) Strategies Reinforce Customer Relationship through Total Wealth Management (lifetime asset management)! Clarify target customers and increase the number of PB staff $ Focus on owners and executives of companies, and landlords in Tokyo, Kanagawa, and Osaka! Enhance group approach to meet customers increasingly sophisticated needs e.g. Real estate consulting services for landlords through alliance with Trust & Banking! Provide direct brokerage services upon deregulation of securities brokerage e.g. Alliance with Investors Securities Early Establishment of Consulting Services! Consulting Counters $ Install consulting counters in 25 branches by FY 25! Financial Consultants (FCs): 2, FCs in FY25 $ Current Number of FCs: 684 (Dec. 24) $ Recruiting 5 consultants through FY24 and FY25 $ Fostering FCs speedily! Plan to open branches specializing in consulting services Plan for Balance of Investment Products (JPY Tn) FY23 Individual Annuities FY26(Plan) Investment Trusts (excluding MMF & Medium-term Gov. Bond Funds) Foreign Currency Deposits Tn 15

17 SME Market Increase Loans to Middle Credit Risk Corporations and Small Corporations Focus on Middle Credit Risk Corporations with Improved Profitability and Small Corporations with High Potentiality of Business Establish a Framework for Increasing Loans in Addition to Low Cost Operations Customer Segments of Small and Medium-sized Enterprises (SMEs) Credit Rating Shift Focus from Lower Credit Risk Corporations to Profitable Middle Credit Risk Corporations Small Corporations High Lower Credit Risk Corporations Middle Credit Risk Corporations Risk Adjusted Returns Estimated Market Size No. of companies (') (A) Debt JPY Tn business relation w ith No. of companies (') (B) Debt JPY Tn (B) / (A) Small Corporations Middle Credit Risk Corporations 1.% Sep. 23 Dec %.% Lower Credit Risk Middle Credit Risk High potential loan market Low JPY 1Bn Other Watch Obligors Size (Annual Sales) Profitability improved by decrease in losses related to credit quality Further Promote Solution Business (Also as a Measure to Increase Loans) 16

18 SME Market Increase Loans to Middle Credit Risk Corporations and Small Corporations Strategies for Middle Credit Risk Corporations Introduction of Preauthorized Business Direction to Each Customer and increase share of loans for each customer 1, Launch of new loan product Super-Wide (JPY Bn) Speeding up of approval process and enhancement of screening skills specialized for SME-specific industries Focusing on creating business with new customers Accumulated Origination Amount of Unsecured Loan Products (including Super Wide ) (Excluding loan products for small corporations) Strategies for Small Corporations Establishment of low-cost sales channels designed for the high potential market of small corporations Plan of Number of Centers and Staff of Business Finance Centers (BFCs) Mar. 26 Mar. 24 Dec. 24 (Plan) No. of Centers BFC Branches BFC Sales Offices 11 Representaive Ofiices located at Bank 49 No. of Staff Retirees: 17 Retirees from Credit Associations (Shinkin Banks) and Credit Unions: 29 Part-timers, etc: Super Wide Promotion of Solution Business Establish Solution Business Support Team with 3 Staff in HQs (JPY Bn) Profit Plan of Fee Income from Solution Business Corporate Bonds Syndicated Loans/Comittment Lines M&A/MBO Real Estate Finance Securitizaion Others Sep. 23 Mar. 24 Sep. 24 Dec. 24 Mar. 25 (Plan) 1H of FY22 2H of FY22 1H of FY23 2H of FY23 1H of FY24 2H of FY24(Plan) 17

19 Securities & IB Business Current Status of Securities and IB Business Need to Strengthen Equity Business (Fixed Income) Domestic Straight Bonds League Table (From April to December 24) (IB) M&A Advisory Ranking (From January to December 24) (IB) ABS Bookrunner League Table (From April to December 24) 1 Nomura Amount (JPY Bn) 1,213 Share (%) * Deals 18 Amount (USD Mn) 9,166 1 Shinsei Amount (JPY Bn) 312 Share (%) Sec. Daiwa SMBC 1,2 1, (Equity) Domestic Equity League Table (Total of IPO/PO/CB/REIT, From April to December 24) Nikko Citigroup Mitsubishi Sec (Except for subsidiary debt issue, self issue and retail targeted, launch date basis) 4 Nomura Daiwa SMBC Sec Nikko Citigroup Shinko Nomura Daiwa SMBC (Equity) IPO League Table (From April to December 24) 18 25,31 18,35 Mitsubishi Tokyo 6,424 Nomura Nikko Citigroup Daiwa SMBC Shinko Sec Nikko Cordial Share (%) Amount (JPY Bn) Share (%) Amount (JPY Bn) Mitsubishi Sec (Resource) IN Information Center, Thomson Deal Watch, etc. *Including Securities, Corporate Bank, Bank, Investors Securities, and Corporate Advisory (Deals completed, Japanese target, any acquirer) (Equity) Stock Trading Volume Share (%) Sec. 1H of FY22 Merrill Lynch Share in Off-exchange Trading Volume TSE Market Share (Trading Hours) 2H of FY22 1H of FY H of FY Nomura Lehman Domestic public offering bonds, Domestic private placement bonds, and Euro bonds 9.2% 3.3% (Trading Volume of Sec.) 1H of FY24

20 Securities & IB Business Strengthen Group Synergy and Alliances with Other Companies Wholesale Market ( Securities) Pursuit of Group Synergy! Further Strengthen Cooperation with Corporate Bank! Further Promote Cooperation with Shinko Securities focusing on equity underwriting Alliances with Other Companies! Business Alliance with Nikko Cordial Corporation and Nikko Cordial Securities (Jan. 25) $ Promotion of cooperation in equity underwriting! Enhancement of Alliance with Norinchukin Group $ Business transfer of Norinchukin Securities and establishment of JA Sales Department in Securities to strengthen product sales to Japan Agricultural Co-operatives (Mar. 24) $ Third party allotment of capital of JPY 74.9Bn to Norinchukin (Sep. 24)! Business Alliance with Monex Beans Group (Aug. 24) $ Expansion of sales channel to retail customers utilizing on-line trading $ Sales commission for IPO-related equity products! Aggressive Approach toward Securities Brokerage Business $ Expansion of sales channels through alliances with regional banks e.g. Hiroshima Bank, Chugoku Bank 19 Retail Market ( Investors Securities)!Further Strengthen Cooperation with Bank $ Accelerate deployment of joint branches - Accelerate deployment of securities consulting booths in lobby of Bank s branches ( Planet Booth ), targeting 1 branches within FY25 $ Increase the number of IPO bookrunner deals through cooperation with Bank $ Promote business cooperation in securities brokerage business for targeted customers for private banking $ Offer preferential commission fee for Mileage Club members $ Promote personnel exchange program (Branches) Pursuit of Group Synergy Joint Branches with Bank Sep. 23 Mar. 24 Sep. 24 Mar. 25 Mar. 26 (Plan) (Plan) 41 1

21 Trust Business Expand Trust and Asset Management Business Focus on Growing Business Areas Pursue Group Synergy Real Estate Business Enhance marketing capabilities by increasing headcount and by utilizing affiliated real estate companies (JPY Tn) Real Estate Securitization No. 1 Mar. 22 Mar. 23 Mar. 24 Sep. 24! Utilize trust banking agent functions/ Deploy joint branches with Bank! Promote cooperation with group companies (Personnel exchange program, etc.) Results of Group Synergy in 1H of FY24 Gross Profits from Real Estate Business (Excluding Housing Sales) Amount of Monetary Claim Trust Securitization Business (JPY Tn) 5 4 Monetary Claim Trust Top Tier 52% 33% 3% 53% Develop new products and deploy new businesses 3 2 Business related to Inheritance and Testament Strengthen life-long services from asset management to settlement of inheritance assets 1 (Transactions) 1, 5, Mar. 22 Mar. 23 Mar. 24 Sep. 24 Testamentary Trust No. 1 Mar. 22 Mar. 23 Mar. 24 Sep [# of Testamentary Trust and Processing] 36% 37% % shows the ratio of transactions obtained through Bank and Corporate Bank to entire transactions

22 III. In Closing 21

23 At present, already has a sufficient business base and full financial service functions within the Group Huge domestic customer base <Our challenge is to take full advantage of this base> Capabilities to provide comprehensive financial services of the Group (e.g. securities, trust, credit card) In Closing Toward a new stage: competition on the speed at which profitability is enhanced - Lead by leveraging a sense of crisis for new competition - Carry out measures to enhance top-line growth promptly and steadily Establish business models in focused business areas (e.g. retail,, SMEs) in preparation for a change of the zero-interest rate policy Pursue synergy utilizing s s huge domestic customer base Form and utilize flexible business alliances with companies outside the banking business (e.g. consumer credit, credit card, securities) Realize more benefits of the consolidation through further streamlining of operations 22

24 Pursue Group Synergy and Flexible Alliances Pursuit of Group Synergy Utilizing Huge Customer Base in Japan and Comprehensive Financial Service Functions within the Group Flexible and Speedy Alliances with Companies Outside the Banking Business Credit Saison Orient Corporation Flexible Alliances Retail/ SMEs Bank Investors Securities Banks Securities Companies Shinko Securities Comprehensive Financial Services Large Corporations/ International Business Corporate Bank Securities Flexible Alliances Nikko Cordial Norinchukin Bank Monex Beans Credit Cards UC Card Venture Capital Capital Asset Management DKA FIMCO DIAM Trust Trust & Banking Trust &Custody Services Bank Corporate Revitalization Advisory Research Research Institute IT System Information & Research Institute 23

25 s statements contained in this material of the current expectations are forward-looking statements subject to significant risks and uncertainties, and actual results may differ materially. Factors that could cause actual results to differ materially include, but are not limited to, changes in overall economic conditions, changes in market rates of interest, further declines in the value of equity securities or real estate, further deterioration of the quality of loans to certain industry sectors and the effect of new legislation or government directives. 24