Institutional Banking Group Disclaimer The following materials may - - PDF document

Institutional Banking Group

Clark Graninger Institutional Banking Group Head October 6, 2005

1

Disclaimer

The following materials may contain statements that constitute forward-looking statements, plans for the future, management targets, etc. relating to the Company and its subsidiaries. Forward-looking statements are based on current assumptions

• f future events and trends, which may be incorrect. Actual results may differ

materially from those in forward-looking 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

• r 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. These materials do not constitute an invitation or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.

2

Outline

I.

IBG Introduction

II.

FY2004 Performance

III.

Strategy

IV.

Conclusion

3

IBG Within Shinsei Bank

(¥B) ’03 ‘04 Rev 89.1 97.0 OBP 51.4 59.1

RBG CCF IBG

Shinsei Bank

(¥B) ’03 ‘04 Rev 5.5 43.2 OBP 2.5 17.1

Currently, IBG includes both the core IBG and the Consumer and Commercial Finance (CCF) businesses

Total (¥B) ’03 ‘04 Rev 94.7 140.3 OBP 54.0 76.3

4

IBG Organization

Acquisition Management Real Estate, Hotel, Construction Real Estate Finance Restructuring Portfolio Corporations Corporate Advisory Asset Management JV Wealth Management JV Public Sector Capital Markets Financial Institutions

Organization Aligns Relationships and Products

Consumer & Commercial Finance (CCF) Real Estate Finance Sub-Group Corporate Business Solutions Sub-Group Corporate Banking Business Sub-Group Public Sector Finance Sub-Group Financial Institutions and Capital Markets Sub-Group Corporate Revitalization International Principle Finance Real Estate Principal Investment Specialty Finance Private Equity Credit Trading

Products Relationships

(214) (12) (168) (256) (26) (57) 2,291 186 134 68 508 N.A.**

* As of 2005/03, excluding zaikei, home loan, and customers with a deposit balance less than JPY 1M ** CCF subsidiaries’ customers (No. of Staff)

5

IBG Strategy

IBG’s strategy consists of three simple components:

1.

Organize Around the Customer

2.

Expand Product Offering

3.

Provide Clear Incentives to Increase Number of Products Per Customer

• 100

200 300 400 500 600 700 1 2 3 4 # of Products Rev (JPY Millions) Revenue (Top 200) OBP (Top 200)

FY2004 Revenue and OBP

• f Top 200 Customers by

Number of Products

6

Relationships and Products

Corporates

(includes restructuring portfolio)

Financial Institutions Real Estate, Hotel, Const. Public Sector

Universe of Relationships

“Segment the customer base and ensure that each relationship receives the appropriate level of service and time.” “Finite number of Financial Institutions so we cover them ALL, but with a particular focus on the regional banks, our historical strength.” “Unique needs of this sector require a completely integrated coverage approach.” “Over the next 10 years we will see more innovation in this sector than anywhere else in

• Japan. We have a

great brand and are positioning to capitalize

• n it.”

7

Relationships and Products

Corporates

(includes restructuring portfolio)

Financial Institutions Real Estate, Hotel, Const. Public Sector

Universe of Relationships Universe of Products

Securitization NRL NRL Credit Trdng Credit Trdng

“Segment the customer base and ensure that each relationship receives the appropriate level of service and time.” “Finite number of Financial Institutions so we cover them ALL, but with a particular focus on the regional banks, our historical strength.” “Unique needs of this sector require a completely integrated coverage approach.” “Over the next 10 years we will see more innovation in this sector than anywhere else in

• Japan. We have a

great brand and are positioning to capitalize

• n it.”

8

Relationships and Products

Corporates

(includes restructuring portfolio)

Financial Institutions Real Estate, Hotel, Const. Public Sector

Universe of Relationships

Credit Trading Non-recourse Lending Securitization Asset Management Wealth Management Capital Markets Distribution Loan Syndication New Securitization Asset Classes

Stable Base Growth Areas

9

Outline

I.

IBG Introduction

II.

FY2004 Performance

A)

Overview and Highlights

B)

Cross-sales Statistics

C)

Lending Statistics

D)

BAU Highlights

III.

Strategy

IV.

Conclusion

10

A) Overview : Revenue, Expense, OBP

2003 2004 Change 2003 2004 Change 2003 2004 Change Sub-Groups Corporate Banking Business 15.4 9.6 (5.8) 8.7 6.3 (2.4) 6.7 3.3 (3.4) Public Sector Finance 4.5 3.5 (1.0) 3.2 1.6 (1.7) 1.3 1.9 0.7 Real Estate Finance 15.3 19.9 4.6 5.3 5.0 (0.3) 10.0 14.9 4.9 Corporate Business Solutions 15.4 25.7 10.2 7.8 10.9 3.1 7.7 14.8 7.1 Financial Institutions & Capital Markets 39.1 38.6 (0.5) 12.8 14.1 1.3 26.4 24.5 (1.9) Other (0.7) (0.3) 0.4 0.0 0.0 0.0 (0.6) (0.3) 0.3 Total IBG 89.1 97.0 7.9 37.7 37.8 0.1 51.4 59.1 7.7 Consumer & Commercial Finance (CCF) 5.5 43.2 37.7 2.9 26.1 23.2 2.5 17.1 14.6 Total IBG + CCF 94.7 140.3 45.6 40.7 63.9 23.2 54.0 76.3 22.3

(JPY billions)

Revenue Expense OBP

1

Distressed Business and International Principal Finance are strong (JPY 17B Rev)

2

Securitization (JPY 12.8B Rev), top 3 in Japan

3

Real Estate still growing, profit-taking opportunities (JPY 800B Assets)

Note: Numbers as of FY2004

11

A) Overview : YoY Revenue Change by Product

Revenue Breakdown – IBG Products

FY2003 vs FY2004

14.3 18.9 15.5 16.7 8.7 15.8 20.0 14.6 16.6 12.6

20 40 60 80 100 FY2003 FY2004

89.1 97.0

Non-recourse loans Credit Trading Corporate Loans Principal Investment Other Capital Markets Securitization

*1: Include balance sheet loans and specialty finance *2: Significant portion of this growth relates to business activities in Shinsei Securities and Shinsei Trust

Note: Management accounting basis Credit Trading above includes international business

FY2003 FY2004 Non recourse loans 14.3 18.9 Forex, Derivatives, Equity related 15.5 16.7 Credit Trading 8.7 15.8 Corporate Loans *1 20.0 14.6 Securitization 16.6 12.6 Principal Investment 5.2 7.8 Other Capital Markets *2 5.5 7.7 Others 3.0 2.6 Total Revenue 89.1 97.0

JPY Billions Forex, Derivatives, Equity related

Revenue Streams are less concentrated in any one area

12

B) Cross-sales Statistics

FY2003 FY2004

• No. of Products per Customer

1.21 1.28 Total Revenue 73,003 81,612 Average Revenue per Product 19.3 22.6

Revenue in JPY millions, Customer Revenue only

Number of products per customer increased Our focus on profitable customers led to an increase in Customer Revenue

• 50

100 150 200 250 300 350 400 450 1 2 3 # of Products Average Revenue (JPY millions) FY03 FY04

• Avg. Revenue per Customer has

increased in FY2004, especially for those customers with 3 products

13

C) Lending Statistics

• The Corporates (CBBS) Loan

Balance shrinkage has stopped

• No change in credit quality
• Avg. corporate spread is 52bps

(for CBBS), 156 bps for Restructuring (CBSS)

• NPL ratio was 1.43%

5 1 , 1 , 5 2 , 2 , 5 3 , F Y 2 2 F Y 2 3 F Y 2 4 1 2 3 4 5 6 F Y 2 2 F Y 2 3 F Y 2 4

Corporate (Balance Sheet)

JPY Billions

Restructuring (Balance Sheet)

JPY Billions

FY2002 FY2003 FY2004 FY2002 FY2003 FY2004 Corporate

2,596 1,937 2,123 13,628 13,517 10,925

Restructuring

494 209 53 19,513 5,641 2,083

Financial Institutions

206 298 142 4 369 389

Basic Lending Total 3,297 2,445 2,320 33,145 19,527 13,397

(JPY billions) (JPY millions) Revenue Balance Sheet Note: Figures on this page represent only Basic Lending.

14

D) BAU Highlights

• The Credit Trading, Non-Recourse Lending, and Securitization franchises at

Shinsei have entered their 5th year of operation. All three businesses continue to make a stable and significant contribution to overall profitability in IBG

• We look at each as a mature and permanent part of the franchise – part of BAU

(“Business as Usual”)

• We expect a leveling off in all three businesses at some point in the next 2-3 years,

which we will complement with a portfolio of new business introductions beginning this fiscal year

Our 5-year history and current outlook show stability in these three businesses

15

D) BAU Highlights: Non-recourse Lending

Non-recourse Lending

JPY mil.

2 , 4 , 6 , 8 , 1 , , F Y 2 2 F Y 2 3 F Y 2 4 5 , 1 , 1 5 , 2 , N

• n
• r

e c

• u

r s e L

• a

n B S N

• n
• r

e c

• u

r s e L

• a

n R e v e n u e

BS Revenue

Competitive Proposition:

• Commanding lead in the business (over 5 years, JPY 1.7 trillion in originations)
• Experienced team (41 professionals)
• Established relationships with key market players
• Ability to flexibly respond to clients’ needs

16

D) BAU Highlights: Credit Trading

Credit Trading

JPY mil.

2 , 4 , 6 , 8 , 1 , 1 2 , 1 4 , 1 6 , F Y 2 2 F Y 2 3 F Y 2 4 5 , 1 , 1 5 , 2 , C r e d i t T r a d i n g B S C r e d i t T r a d i n g R e v e n u e

Revenue BS

Competitive Proposition:

• Leveraging an experienced team, the Shinsei Group network (including highly rated,

in-group servicing company), and our possession of various sourcing routes to expand the scope of the business

17

D) BAU Highlights: Securitization

Securitization

JPY mil.

3 2 , 3 3 , 3 4 , 3 5 , 3 6 , 3 7 , 3 8 , 3 9 , F Y 2 2 F Y 2 3 F Y 2 4 5 , 1 , 1 5 , 2 , S e c u r i t i z a t i

• n

B S S e c u r i t i z a t i

• n

R e v e n u e

BS Revenue

Competitive Proposition:

• Continue to create steady deal flow through Shinsei's strong relationship network
• Combine innovative solutions for our customers while exploiting the opportunities in new

asset classes

18

2004 Recognition

Industry Recognition of Excellence:

Asiamoney Securitization Deal of the Year, Japan IFR Japanese Securitization of the Year ISR Deal of the Year, Japan FinanceAsia Most Innovative Deal Thomson DealWatch Commercial Mortgage-backed Securities Deal of the Year

19

Outline

I.

IBG Introduction

II.

FY2004 Performance

III.

Strategy

A)

Relationships – Organizing Around the Customer

i. Corporates ii. Financial Institutions iii. Real Estate Finance

• iv. Public Sector Finance

v. Expanding Relationships: Health Care

B)

Products – Expand IBG’s Offering

i. New Solutions

C)

International Strategy

IV.

Conclusion

20

IBG Strategy

IBG’s strategy consists of three simple components:

1.

Organize Around the Customer

2.

Expand Product Offering

3.

Provide Clear Incentives to Increase Number of Products Per Customer

• 100

200 300 400 500 600 700 1 2 3 4 # of Products Rev (JPY Millions) Revenue (Top 200) OBP (Top 200)

FY2004 Revenue and OBP

• f Top 200 Customers by

Number of Products

21

IBG Strategy – Our Challenge

It is very difficult to make money on loans alone. Most clients get

some kind of subsidy.

Cost of Funds + Credit Cost + Cost of Capital = OUR HURDLE RATE

When we don’t hit the hurdle rate, we are subsidizing the client. Our

challenge, on a strategic level, is to use that subsidy wisely and increase the number of products per customer.

22

Relationships

Corporates

(includes restructuring portfolio)

Financial Institutions Real Estate, Hotel, Const. Public Sector

Universe of Relationships

“Segment the customer base and ensure that each relationship receives the appropriate level of service and time.” “Finite number of Financial Institutions so we cover them ALL, but with a particular focus on the regional banks, our historical strength.” “Unique needs of this sector require a completely integrated coverage approach.” “Over the next 10 years we will see more innovation in this sector than anywhere else in

• Japan. We have a

great brand and are positioning to capitalize

• n it.”

23

A-i) Relationships – Corporates: Organize Around the Customer

“Segment the customer base and ensure that each relationship receives the appropriate level of service and time.”

S T E P 1

Segment Customer Base

Becoming a Client-focused Organization

Change Organization

S T E P 2

Implement CRM

S T E P 3

Measure & Monitor Results

S T E P 4

24

A-i) Relationships – Corporates: New Organization

“Segment the customer base and ensure that each relationship receives the appropriate level of service and time.”

Key Priority Corporate

Account Segmentation

Custom Tailored, Per Client Perspective Short list of Core Clients Industry and needs focused organization developing the rest

• f the business

Principles of the New Organization # of Customers Previously

• 4,000+ customers

covered by 200 RMs

Currently

• 2,000 customers

covered by 164 RMs (Spend 90% of Time Here) and the remaining 2,000 + customers are covered, but not as closely (Spend 10% of Time Here)

Previously Industry Segmentation Only Strategy

Industry 1 Industry 2 Industry 3 Industry 4 Industry 5 Industry 6

• No differentiation in terms
• f time spent on

customers by RMs

25

A-i) Relationships – Corporates: Organizing Around the Customer (CRM)

“Segment the customer base and ensure that each relationship receives the appropriate level of service and time.”

Customers Customers Customers Deals Our Customer Relationship

Management System (CRM) allows us to track:

Both general and

specific activities and issues

Both results-oriented

key performance indicators as well as behavioral key performance indicators

26

Relationships

Corporates

(includes restructuring portfolio)

Financial Institutions Real Estate, Hotel, Const. Public Sector

Universe of Relationships

“Segment the customer base and ensure that each relationship receives the appropriate level of service and time.” “Finite number of Financial Institutions so we cover them ALL, but with a particular focus on the regional banks, our historical strength.” “Unique needs of this sector require a completely integrated coverage approach.” “Over the next 10 years we will see more innovation in this sector than anywhere else in

• Japan. We have a

great brand and are positioning to capitalize

• n it.”

27

A-ii) Relationships – Financial Institutions

“Finite number of Financial Institutions so we cover them ALL, but with a particular focus on the regional banks, our historical strength.”

Customer Needs City & Trust Banks Insurance Regional Banks Keito-Jobu Shinkin & Shinkumi Others Customer Segments & Coverage Shinsei Solutions 100% Structured Products Securitized Products Asset Management Investment Product 78% 100% Securitization Credit Trading Non-recourse Loans 100% Asset Restructuring 50% Product-based Alliances (Structured Deposit, Non-recourse Loans, etc) Alliance

28

Relationships

Corporates

(includes restructuring portfolio)

Financial Institutions Real Estate, Hotel, Const. Public Sector

Universe of Relationships

“Segment the customer base and ensure that each relationship receives the appropriate level of service and time.” “Finite number of Financial Institutions so we cover them ALL, but with a particular focus on the regional banks, our historical strength.” “Unique needs of this sector require a completely integrated coverage approach.” “Over the next 10 years we will see more innovation in this sector than anywhere else in

• Japan. We have a

great brand and are positioning to capitalize

• n it.”

29

A-iii) Relationships – Real Estate Finance

“Unique needs of this sector require a completely integrated coverage approach.” Coverage Shinsei Solutions Customer Needs Real Estate Hotel Construction

Corporate Loan Syndicated Loan NRL AMD & Wealth Management Derivatives REIT Finance M&A Securitization (CMBS/RMBS)

Credit Product Team Structured Product Team Other Product Unit Stable and flexible funding Improve Balance Sheet Expand Business Domain

• Real Estate Finance Division integrated with the real estate, construction, and hotel-related Corporate

Banking Business Divisions, to form comprehensive Real Estate Finance Sub-Group (REFS).

• We can now increase product penetration into existing accounts and increase new accounts through

development of innovative schemes (e.g. nursing home finance, apartment loan financing, MBS, etc.)

30

Relationships

Corporates

(includes restructuring portfolio)

Financial Institutions Real Estate, Hotel, Const. Public Sector

Universe of Relationships

“Segment the customer base and ensure that each relationship receives the appropriate level of service and time.” “Finite number of Financial Institutions so we cover them ALL, but with a particular focus on the regional banks, our historical strength.” “Unique needs of this sector require a completely integrated coverage approach.” “Over the next 10 years we will see more innovation in this sector than anywhere else in

• Japan. We have a

great brand and are positioning to capitalize

• n it.”

31

A-iv) Relationships – Public Sector Finance

“Over the next 10 years we will see more innovation in this sector than anywhere else in Japan. We have a great brand and are positioning to capitalize on it.” Customer Segments Customer Needs Shinsei Solutions

Constant raising of cheap funds Diversify fund-raising sources Efficient balance sheet Bilateral Loans Syndicated Loans Non-Recourse Loans Bond Issuance Securitization Ｐ Ｆ Ｉ Ultra-long term Funds

Current Solutions Growth Areas

Government Agencies Municipalities Affiliated Corporations

• Created Public Sector Finance Sub-Group (PSF) in May 2005
• PSF oversees, and centrally coordinates, the activities of all Public Sector RMs,

both in the Headquarters and in the various branches

32

A-iv) Relationships – Public Sector Finance

“Over the next 10 years we will see more innovation in this sector than anywhere else in Japan. We have a great brand and are positioning to capitalize on it.”

Financial Surplus/Deficit vs GDP by Economic Sector

• 1

5 .

• 1

.

• 5

. . 5 . 1 . 1 5 . 2 . 1 9 8 1 9 8 1 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3

( % )

C

• r

p

• r

a t e F i n a n c i a l G

• v

e r n m e n t a l H

• u

s e h

• l

d N

• n
• P

r

• f

i t O v e r s e a s

Source: Cabinet Office

• Within Japan’s economic sectors, only the public sector has had a constant demand for funds
• Japan Public Sector Fund-raising has been mainly controlled by the Government through the

Financial Investment and Loan Program (FILP). Reforms, including of FILP, Japan Post, and

• thers, will force the Japan Public Sector to diversify its fund-raising sources by borrowing

more and more from the private sector

• Shinsei has organized around these Public Sector customers and is actively working on

meeting their product needs in anticipation for the changes

33

A-v) Expanding Relationships – Health Care

Healthcare Market Market Background Limited competition

Funding Needs

・ Needed to Reconstruct the aging hospital facility. ・ Needed to Change the equipment for new bed standard

Improving the credibility of

Hospital accounting ・ Implement of Hospital accounting standard ・ Tendency to accept a external auditing.

Changing the banking

standard of hospital valuation ・ From only secured by real estate to the validity of the business planning.

Nursing Care Corps

• No. of Firms

Healthcare corps with nursing facilities Healthcare Corporations Clinics Dental Clinics

3 3 1 6 9 9 2 6 3

Total 164,490 Total (¥T) 35

Aozora:

Alliance with consulting firm Mediva

Tokyo Star Bank:

• NRL to nursing care corp.

RBS:

Whole Business Securitization

Orix:

Wide range of businesses but with small transaction sizes

City/Regional Banks:

Bank Loans

Still a wide-open battlefield

Hospitals

34

Products

Universe of Relationships Corporates

including restructuring portfolio

Financial Institutions Real Estate, Hotel, Const. Public Sector

Universe of Products

Universe of Relationships

“Segment the customer base and ensure that each relationship receives the appropriate level of service and time.” “Finite number of Financial Institutions so we cover them ALL, but with a particular focus on the regional banks, our historical strength.” “Unique needs of this sector require a completely integrated coverage approach.” “Over the next 10 years we will see more innovation in this sector than anywhere else in

• Japan. We have a

great brand and are positioning to capitalize

• n it.”

Securitization Credit Trading Non-recourse Lending Wealth Management Asset Management Loan Syndication Cap Mkts Distribution

35

B) New Solutions: Asset Management

Shinsei Bank’s unique Asset Management business model

【 What we don’t do】 Unlike most competitors, we do NOT manage client assets ourselves, because… 1.We do not believe that we,

• r any other asset

management operation is able to generate superior performance in every asset class.

• 2. We do not have internal

pressure to sell what we produce – so, there is no conflict of interest. 【 What we do】

Carefully analyze the investment needs of a client to find the optimal solution for the clients’ risk/return requirements

STEP 1

Identify “best-in-class” portfolio managers among the global universe of managers to solve the investment problems of our client

STEP 2

Package the product in an investor-friendly format in compliance with legal/tax/regulatory requirements

STEP 3 【 Advantages for Shinsei Bank】 By focusing on distribution, we… 1.Avoid cost of maintaining a portfolio management

• peration

2.Reduce operational risk 3.Reduce management complexity 4.Can fire poor managers and replace them with better ones

36

B) New Solutions: Wealth Management

Institutional Banking Group Retail Banking Group

Wealth Management JV A JV with our Retail Banking Group (RBG) yields a number of synergies:

Full access to all of the bank’s products and clients RM/Sales teams: Provides natural linkage between retail sales and corporate RMs Infrastructure: Provides ability to leverage existing infrastructure (i.e., risk

management, IT, compliance, securities and operations)

Physical Branch Network: Maximizes use of regional presence Internet Capability: Leverages RBG’s internet services to serve JV customers and

corporate customers

37

B) New Solutions: Capital Markets Distribution

Shinsei Bank Client

MBS Deposits

Previously Currently

Deposits Structured MTNs MBS Loan Syndication Structured Credit Products

Only one solution (MBS) consistently provided through the Securities Firm channel We were in the top 3 – but not satisfied that this alone would be good enough for the future We can deliver multiple solutions:

• MBS
• Structured Credit Products
• Loan Syndication
• Structured MTNs

Shinsei Securities Shinsei Bank Shinsei Securities Shinsei International Client

38

B) New Solutions: Loan Syndication

Market Market Volume

2 4 6 8 1 1 2 1 4 1 6 1 8 ' 1 ' 2 ' 3 ' 4 ' 5 J a n

• J

u n J a n

• D

e c

JPY trillions

Source: Thomson Financial

• Expanding market
• Already common among blue-chip

companies

• Increasing in the SME market
• Steadily expanding into R/E loans,

leveraged financing, acquisition financing and corporate revitalization financing

• Public Sector is also expected to

contribute to the expansion of the market.

• Intensifying competition
• Various financial institutions, such

as regional banks and shinkin banks, have begun entering the market

39

B) New Solutions: Loan Syndication (cont.)

Expertise in areas such as Distribution backed by

• Real Estate Loans
• Leveraged Financing
• Acquisition Financing
• Corporate Revitalization Financing
• Public Sector Financing
• Strong relationships with

institutional investors

• Unique sales force

distributing not only syndicated loans but also

• ther products

Shinsei’s competitive advantages Focused on specific areas where Shinsei excels

Opportunities for Growth

40

B) New Solutions: New Securitization Asset Classes

Achievements New Activities

Established a presence in the market

as one of the top players

Asset Class: RMBS, CMBS, CLO,

Consumer Loan, Credit Cards, NPL Lease etc.

FY 2000 – 2004

Total arrangement volume exceeded JPY 1.7 trillion (72 transactions)

ABS Market will grow accompanied with

WBS.

We will continue to be the top player in the

new market.

Market is shifting from ‘traditional

securitization’ to ‘new frontier.’

Currently working on transactions: Whole

Business Securitization (WBS)

• Hospitals
• Pachinko Parlors
• Nursing House
• Broad Band Telecom

Financial Instrument repackage is a

boost

New Securitization (WBS) Traditional Securitization

41

C) International Strategy

• I. Earnings Quality and

Diversification

• Broaden the Shinsei franchise
• Generate opportunistic P&L
• II. Capital Deployment
• Deploy a disciplined amount of

Risk Capital, and diversify earnings stream

• Monetize Country Risk

capacity (unused resource)

• III. Ongoing Development
• Maintain a continuing “window”
• n financial technology.
• Build affiliations with “like-

minded” institutions, for synergy, including for Japan

• pportunities.

Rationale Investments Advisory Acquisitions Partnerships International Opportunities Filter / Trigger

Core Competencies

Japanese Client and Market Knowledge Risk Assessment and Asset Valuation Financial and Portfolio Investments Business Transformation Technology and Process Management We feel the right screens to consider / accept new deals, investments, and initiatives are: The underlying deal / business

• is clearly based one or more of our five core competencies
• is in a geography and environment we understand well or is inherently a global business – e.g. Insurance, Hedge

Funds, Diversified Investments

• meets return criteria based on the nature of the underlying business – i.e. franchise vs. pure investment vs.
• pportunistic

The overall International business fits within established portfolio criteria and parameters.

42

Outline

I.

IBG Introduction

II.

FY2004 Performance

III.

Strategy

IV.

Conclusion

43

IBG Strategy

IBG’s strategy consists of three simple components:

1.

Organize Around the Customer

2.

Expand Product Offering

3.

Provide Clear Incentives to Increase Number of Products Per Customer

• 100

200 300 400 500 600 700 1 2 3 4 # of Products Rev (JPY Millions) Revenue (Top 200) OBP (Top 200)

FY2004 Revenue and OBP

• f Top 200 Customers by

Number of Products

44

Relationships and Products

Corporates

(includes restructuring portfolio)

Financial Institutions Real Estate, Hotel, Const. Public Sector

Universe of Relationships

Credit Trading Non-recourse Lending Securitization Asset Management Wealth Management Capital Markets Distribution Loan Syndication New Securitization Asset Classes

Stable Base Growth Areas

45

Shinsei’s Competitive Proposition

Completely clean Asset side of Balance Sheet…and controls in

place to ensure it stays that way

High quality capital Strong relationships as a Japanese Financial Institution Products on par with the best in Japan Philosophy that “Lending is one of many products”

Advantages derived from the 3 components of the IBG strategy

We bring the best of both worlds – the functionality of a corporate bank and the innovation of an investment bank

46

Current Position Creating Future Grow th

Shinsei is now uniquely positioned in Japan as a hybrid commercial and

investment bank.

We have the relationships and lending capabilities of a traditional

Japanese commercial bank AND a line of products on par with those of investment banks.

Number of Customers Variety of Products

Mega Banks

Hybrid Commodity Small Large

Regional Banks Foreign Banks Old LTCB

Shinsei

Old LTCB

Going Forward…