Shinsei IR Day Unsecured Loan Business February 2017 Todays - - PowerPoint PPT Presentation

Shinsei IR Day Unsecured Loan Business

February 2017

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Today’s Talking Points  Size and growth potential of our target market  The Shinsei Bank Group’s position within the market  Our performance in the acquisition of customers  Credit risk management  Challenges to be overcome going forward

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Market Overview

Combined Bank and Nonbank balance approximately JPY 10 trillion; Expecting a market size of ~JPY 8.5 trillion market in the mid-term excluding credit card cash advances.

Size of the card loan market

The bank loan market has grown rapidly since 2011

6.06 4.56 2.95 2.47 2.16 2.13 2.16 2.23 2.27

5.41 4.84 3.69 2.87 2.53 2.02 1.86 1.79 1.78

3.91 3.88 3.82 3.85 4.08 4.65 5.18 5.71 5.98 75% 40% 25% 60%

0% 10% 20% 30% 40% 50% 60% 70% 80% 2 4 6 8 10 12 14 16 2009.3 2010.3 2011.3 2012.3 2013.3 2014.3 2015.3 2016.3 2016.9 Domestic Bank Balance C.C. Cash Advance Balance Nonbank Balance Marketshare (Nonbank) Marketshare (Domestic Bank)

11.47 9.40 6.64 5.34 4.69 4.15 4.03 4.02 4.05

(trillion yen)

(Data Source) Bank of Japan, Japan Financial Service Association

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500 1,000 1,500 2,000 2,500

2015.3 2016.3 2017.3

500 1,000 1,500 2,000 2,500

2014.3 2015.3 2016.3 2016.12

Will banks also be subject to the total lending volume control? Existing personal loan companies to shift back to the offensive The survival/elimination of emerging players will become apparent As the grey zone repayment issue approaches its conclusion, re- borrowing by previous customers will gradually increase

The Shinsei Bank Group’s Position

Lake’s on-going compliance with the “spirit” of the “Money Lending Business Law” will be an advantage

Balance Trend of Consumer Loan Brands Balance Trend of Bank Brands

Future Market trend

(billions of yen) (billions of yen)

Aiful Shinsei Bank Group Acom Promise

（source）Company Disclosure Materials

Mitsubishi Tokyo UFJ Banquic Orix Bank Card Loan Sumitomo SBI Bank Net Loan Shinsei Bank Card Loan Lake SMBC Card Loan Rakuten Bank Super Loan

（source）Company Disclosure Materials

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Customer Acquisitions of the Shinsei Bank Group

The number of applications received has been similar to other consumer loan companies but customer acquisitions flat due to conservative credit control.

Consumer Loan Company Applications Received Consumer Loan Company Approval Rates Consumer Loan Company New Customer Acquisitions

40,000 60,000 80,000 100,000 120,000 140,000 160,000 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16

0% 20% 40% 60%

1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 20,000 40,000 60,000 80,000 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16

Aiful Lake Acom Promise NOLOAN Shinsei Bank Group

（source）Company Disclosure Materials （source）Company Disclosure Materials （source）Company Disclosure Materials

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0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4%

Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%

Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16

Credit Risk Management

• Achieving growth while engaging in relatively conservative credit control
• Looking to further enhance our credit screening ability through analytics and
• n-the-ground efforts

Comparison of % of Loans in Arrears

• vs. Company A

Comparison of % of Loans in Arrears

• vs. Company P

Company A Company P Lake (Shinsei Financial + Lake) Lake (Shinsei Financial + Lake )

Numerators : Company A : Loans in arrears for less than 3 months (excluding balance held by headquarters’ collection department) Lake : Loans under legal intervention are excluded (Shinsei Financial + Lake) Denominators : Total loans for both company A and Lake Numerators : Company P : Of total NPLs, loans past due for more than 91 days Lake : Loans past due for 91-180 days, loans past due for more than 31 days and under mutually agreed repayment plan (Shinsei Financial + Lake ) Denominators : Total loans for both Company P and Lake

% of Loans in Arrears (past due for 11-90 days) % of Loans in Arrears (past due for more than 91 days)

（source）Company Disclosure Materials （source）Company Disclosure Materials

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M-Finance (MF)

Financial JV company

Shinsei Bank Shinsei Financial Military Bank (MB)

March 2016: Established as a wholly-

• wned subsidiary of MB

Viettel

(major partner) Investment Investment Partnership

Total assets: more than JPY1 trillion, and ranked No.5 (largest private bank) in Vietnam Offerings:

 Capital (initially 100% → 50% after JV establishment)  Business license (obtained)  Loan funding  Branches as business infrastructure  Cross-selling to MB customers  Sales support from client companies and cross-sell to employees

The largest mobile phone carrier in Vietnam, with greater than 40% share of the country’s mobile telecommunication market Offerings:

 Installment loans for mobile phone purchases  Cash loans for mobile phone users  Sales support at branches, application acceptance agent service by employees, and application acceptance at agencies

Offerings:

 Capital (49%)  Governance support as an effectively equal partner

Offerings:

 IT systems  Risk models and operational expertise  Operation development and business

• peration know-how

Investment

Viettel is the largest shareholder of MB, owning 15% of their shares.

Overview of Our JV in Vietnam

Thai Group*

*Local mid-sized companies mainly in the construction sector

Offering:

 Capital (1%)

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SecondXight

Ex-Group initiatives:

 Nonbank financial institutions

 Credit model

 Life insurance companies

 Talent performance model  Retention rate model

 Real estate companies

 Price forecasting model  Rent forecasting model

 Settlement companies

 New settlements method

introduction support

 Banks

 DM application forecasting model

Group activities:

 Improve credit accuracy  Pre-credit model  Cross-selling model  Branch opening optimization  Adopt AI for administrative

• perations

 Identification of prospective

housing loan customers

・ ・ ・ ・ ・ ・ ・ ・

Utilize non-Group activities to increase our Group’s knowledge

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Summary: Strengths of the Shinsei Bank Group + Credit control capability originating from a nonbank financial institution + Processes and compliance cultures based on the Money Lending Business Law + Proprietary IT systems and a low expense to revenue ratio due to lean operation practices originating from GE + High level of service + Ample preparedness on the grey zone issue + Analytical capability (traditional scoring model + AI)

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Disclaimer

• The preceding description of Shinsei Bank Group’s Medium-Term Management Plan contains

forward-looking statements regarding the intent, belief and current expectations of our management with respect to our financial condition and future results of operations. These statements reflect our current views with respect to future events that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may vary materially from those we currently anticipate. Potential risks include those described in our annual securities report filed with the Kanto Local Finance Bureau, and you are cautioned not to place undue reliance on forward-looking statements.

• 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.

• 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.