The Asian Strategy July, 2012 This document contains forward - - - PowerPoint PPT Presentation

July, 2012

The Asian Strategy

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This document contains forward-looking statements in regard to forecasts, targets and plans of Mitsubishi UFJ Financial Group, Inc. (“MUFG”) and its group companies (collectively, “the group”). These forward-looking statements are based on information currently available to the group and are stated here on the basis of the outlook at the time that this document was produced. In addition, in producing these statements certain assumptions (premises) have been utilized. These statements and assumptions (premises) are subjective and may prove to be incorrect and may not be realized in the future. Underlying such circumstances are a large number of risks and uncertainties. Please see

• ther disclosure and public filings made or will be made by MUFG and the other

companies comprising the group, including the latest kessantanshin, financial reports, Japanese securities reports and annual reports, for additional information regarding such risks and uncertainties. The group has no obligation or intent to update any forward- looking statements contained in this document. In addition, information on companies and other entities outside the group that is recorded in this document has been obtained from publicly available information and other sources. The accuracy and appropriateness of that information has not been verified by the group and cannot be guaranteed. The financial information used in this document was prepared in accordance with accounting standards generally accepted in Japan, or Japanese GAAP.

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Contents

The Outline of Asia (1) Millenary Changes in GDP (AD1~2050) 5 (2) Changes from Asian Financial Crisis 6 (3) Shift in Demographics 7 (4) Overview of Japan’s Financial History 8 (5) Financial Markets in Major Countries in Asia 9 The Asian Strategy (1) Commitment to Asia Spanning Two Centuries 11 (2) Mid-Term Business Plan in Asia 12 (3) Targeted Countries / Region and Key Strategies 13 (4) Asian Strategy (i)~(iii) 14~16 Appendix (1) Global Network (China, Hong Kong, Taiwan, Korea) 18 (2) Global Network (South East Asia, India, Oceania) 19 (3) Overview of Recent Investments and Alliances in Asia 20

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The Outline of Asia

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63% 61% 61% 62% 59% 57% 37% 29% 18% 27% 29% 33% 52% 4% 4% 12% 20% 37% 40% 33% 31% 23% 17% 14% 24% 26% 29% 32% 45% 47% 39% 29% 31% 30% 18% 17% 22% 12% 11% 10% 7% 6% 6% 5% 7% 7% 2% 3% 1% 2% 7% 3% 0% 25% 50% 75% 100% 1 1000 1500 1600 1700 1820 1870 1900 1950 2000 2010 2015 2050 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Asia Americas Europe Middle East & Africa

Changes of Regional GDP Share （AD1~2050）

• Asia was the economic center with more than half of the world GDP until the middle of the 19th century.
• The center has moved to Europe and the US since then, however, it is widely expected to return to Asia by

the middle of the 21st century.

(Source) AD1~1950：Angus Maddison、2000~2015：IMF、2050：Asian Development Bank Asia Era US Era Asia Era Europe Era (Note) 1. Asia includes 5 Central Asia, 3 Caucasian countries and Iran only for 2050.

Millenary Changes in GDP (AD1~2050)

1

1841: Opium War 1858: Indian Revolt 1945: WWII 2008: Financial Crisis

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1997 2010

• 15%

0% 15% 30% 45% 60% 75% 90%

• 7%

0% 7% 14% 1997 2010

• 15%

0% 15% 30% 45% 60% 75% 90%

• 7%

0% 7% 14%

External debt to GDP ratio Current-account to GDP ratio

Philippines India Korea China

External debt to GDP ratio Current-account to GDP ratio

Malaysia Vietnam Indonesia Thailand

Current-account to GDP ratio and Foreign Exchange Reserves of major countries in Asia

• Current-account to GDP ratio and foreign exchange reserves of major countries in Asia have improved

and increased while the external debt to GDP ratio has declined since the Asian financial crisis.

• The economic situation has improved significantly with higher resistance to economic crisis.

(Source) BTMU Economic Research Office Foreign exchange reserves / Imports

Changes from Asian Financial Crisis

1997 2010

• 15%

0% 15% 30% 45% 60% 75% 90%

• 7%

0% 7% 14% 1997 2010

• 15%

0% 15% 30% 45% 60% 75% 90%

• 7%

0% 7% 14% 1997 2010

• 15%

0% 15% 30% 45% 60% 75% 90%

• 7%

0% 7% 14% 2010 1997

• 15%

0% 15% 30% 45% 60% 75% 90%

• 7%

0% 7% 14% 1997 2010

• 15%

0% 15% 30% 45% 60% 75% 90%

• 7%

0% 7% 14% 1997 2010

• 15%

0% 15% 30% 45% 60% 75% 90%

• 7%

0% 7% 14%

7 Europe North America East Asia Southeast Asia South Asia Japan 1.2 1.4 1.6 1.8 2 2.2 2.4 2.6 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Ratio of Working Age to Dependent Population1

(Source) UN

• One of the factors of Asia’s economic growth is its demographic bonus where the working age population

shows increase over the dependent population.

• Asia is expected to constantly have countries with demographic bonus and to maintain high growth.

(Note) 1.Working age: between 15 and 64, Dependent population: up to 14 and 65 or over

Shift in Demographics

Demographic onus Demographic bonus Declining Rising Chart

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History of Japanese banks, GDP growth rate, and GDP per capita (2010)

Asia consists of various countries which vary in economic fundamentals, regulations, and financial development. It is essential to consider what and how each country is in making the strategies and business plans.

Overview of Japan’s Financial History

10,000 20,000 30,000 40,000 0% 5% 10% 15% 20% Demographic Bonus Demographic Onus

Eco- nomy

High Growth Low growth Stable growth

Oil Shock

Bubble 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Financial System Reform Act Deregulation of domestic investments from foreign investors Report released by Japan-US Yen-Dollar Full liberalization of deposit interest rate Lifting of a ban on mutual entry into bank, trust bank and securities Big Bang Full revision of Foreign Exchange and Foreign Trade Full liberalization of foreign exchange Lift a ban on financial holding companies Liberalization of overseas capital transactions Plaza Accord Tokyo Olympics Osaka Expo Opening of Tomei and Meishin Expressway

<$3K $3K < <$10 K $10K < $30K <

*Shanghai in 2009 (National Bureau of Statistics of China) (Source) IMF and Cabinet Office Indonesia China (avg.) China's coastal areas Thailand Malaysia Korea Taiwan Singapore Vietnam Philippines Myanmar India Hong Kong Cambodia

GDP per capita (Japan/USD) Real GDP growth rate

GDP per capita

• 5%

$742 $814 $1,173 $1,370 $8,423 $4,992 $4,382 $2,974 $2,123 $12,800 $18,500 $20,700 $31,500 $43,100

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Financial Markets in Major Countries in Asia

Figure 1: Classification of Major Asian Countries (2010)

(Note)

• 1. Japan’s cumulative ODA to the country divided by GDP of the country (2009)
• 2. Volume of trade with Japan divided by total trade of the country (2010)
• 3. Cumulative direct investment by Japan divided by the total direct investments to the country (2009)

Diverse Asian countries are classified into three categories. As the degree of economic / financial development differs, expected financial needs and banking business also vary.

Trade with Japan2 Vietnam, 23% Pakistan, 4% Korea, 23% Taiwan, 23% Australia, 12% Thailand, 35% Indonesia, 10% Singapore, 10% Philippines, 29% Malaysia, 12% Myanmar, 1% China, 7% Hong Kong, 2% India, 12% 0% 3% 6% 9% 12% 15%

• 3%

3% 8% 13% 18% 23% Japan’s ODA1 Self-sustaining economies Japan-dependent economies Peripheral countries

Degree of Japanese companies’ entry into the market3

(Source) IMF and Ministry of Foreign Affairs of Japan

Figure 2: Stages of Financial Development by Economy Type Self-sustaining economies Japan-dependent economies Peripheral countries GDP per capita USD 13,000 or more Under USD 8,000 Under USD 1,000 Stage Growth - Maturity Development Dawn Banking business Advanced Advancement started Mainly deposits and loans

The Asian Strategy

11 A long-term relationship with Asia.

BTMU's presence in Asian stretches back to the 19th century (as Yokohama Shokin Bank). Despite interruptions due to war and internal conflicts our commitment has continued through two centuries.

1980 2000 2010 1940 1960 1920 1930 1950 1970 1990 1900 1910 1890 1953 1941 1894 India 1900 1954 1941 1916 Singapore 1957 1919 1945 1936 Thailand 1940 1956 Cambodia 1967 1956 1945 1920 Vietnam 1942 19931996 1945 1953 1918 Philippines 1919 1977 1945 1980 1893 China 1900 1995 2007 1957 Indonesia 1959 19181919 1975 1954 1945 1918 Myanmar 1919 1995 1984 1962 2012 Representative office Branch Subsidiary

Commitment to Asia Spanning Two Centuries

1962 1952

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Next stage in Asia business – to become a financial group with an increasing global presence

Build a solid industry position as a No.1 foreign bank in Asia (outside Japan) by constantly upgrading the business model from the perspectives of business expansion and internal controls.

Mid-Term Business Plan in Asia

Strategies Content

A Unified Approach Strengthen cooperation within and beyond Asia to support companies expanding business globally. B Enhanced Office Functions Build a strong organization to address the accelerated business expansion of clients into Asia and tightening local regulations. C Strengthening of Asian HQ Functions Support office administration, assisting expansion of businesses in Asia.

Americas EMEA Regionally Unified Approach HQ Support Enhanced Office Functions

HQ Strengthening

Cross- Regional Cross- Regional B A C ASIA

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Targeted Countries / Region and Key Strategies

1.3% 3.3% 1.6% Taiwan 0.7% - China 1.6% RORA (=pretax income / risk assets) Support collaboration between client companies focusing on domestic sales and local companies. Promote trade finance business, capturing company’s trade flow. Consider moving into SMEs, retail business. USD 0.01billion 15 years USD 61.0 billion USD 0.7 trillion 0.24 billion (fourth in the world) USD 3,000 Japan-dependent economies (Stage of development)

Indonesia

Targeted Countries / Region (Figures in 2010)

Greater China

(China, Taiwan and Hong Kong)

India Korea

Type Self-sustaining economies (Stage of growth – maturity) Peripheral countries (Stage of dawn) Self-sustaining economies (Stage of growth) GDP per capita USD 4,000 (China) – USD 31,000 (HK) USD 1,000 USD 20,000 Population 1.37 billion (top in the world) 1.21 billion (second in the world) 0.05 billion (twenty-fifth in the world) GDP USD 6.6 trillion USD 1.6 trillion USD 1 trillion Revenue pool (2015E) USD 1,021.0 billion USD 135.0 billion USD 71.0 billion The remaining years of population bonus 5 years 30 years 0 years Outstanding of securitization (2009) USD 5.0billion USD 20.0billion USD 30.0billion Key strategies Promote trade finance business by capturing trade flow of client companies. Capture RMB settlement business associated with trading / investments. Participation in primary and secondary bond markets business. Expand settlement business for client companies focusing

• n domestic sales.

Capture large infrastructure development deals and investment deals. Opening branches in areas favored by Japanese companies. Strengthen marketing to global companies in Korea. Providing support for diverse financing needs including securitizations and overseas projects. (Source) UN, IMF etc.

14 Gross profits1

23.4 25.2 28.7 34.7 4.2 6.2 8.2 9.0 12.0 11.9 12.8 13.4 10.9 12.6 12.2 14.0 11.0 14.1 16.2 17.8 20 40 60 80 100 FY10 H1 FY10 H2 FY11 H1 FY11 H2

Loans Deposits Fees and commissions Forex CIB

By product (¥bn) By segment (¥bn)

(Note) Exchange rates: Those adopted in business plan ($/¥=95, others)

• 1. Figures for gross profits are those from customer business

Solid increase in gross profits with both Japanese and non-Japanese. Growing in CIB and forex income in addition to loans income. Ensuring a good revenue balance in each region.

• Aiming to increase gross profits for FY14 by 50% from FY11.

Asian Strategy (i)

Gross profits by regions

Greater China 37% ASEAN 38% India 10% Korea 8% Oceania 7%

32.7 39.0 44.6 50.7 28.8 31.0 33.4 38.1 20 40 60 80 100 FY10 H1 FY10 H2 FY11 H1 FY11 H2 Non-Japanese Japanese

15 Korea Indonesia Thailand India

4.3 6.0 6.7 7.0 0.0 5.0 10.0 15.0 End Sep 10 End Mar 11 End Sep 11 End Mar 12 Non-Japanese Japanese

Singapore Australia Hong Kong

10.3 11.3 12.7 14.5 0.0 5.0 10.0 15.0 End Sep 10 End Mar 11 End Sep 11 End Mar 12 Non-Japanese Japanese

China

(Note) Loans outstanding on consolidated basis, counted by the nationality of each borrower for internal management purpose. Excl. financial institution.

• Increased lending balance in each country through adopting strategy to the characteristics of each market.

Asian Strategy (ii)

(US$bn) (US$bn) (US$bn) (US$bn) (US$bn) (US$bn) (US$bn) (US$bn) 6.5 6.8 6.9 7.6 0.0 5.0 10.0 15.0 End Sep 10 End Mar 11 End Sep 11 End Mar 12 Non-Japanese Japanese 7.2 8.0 8.5 9.1 0.0 5.0 10.0 15.0 End Sep 10 End Mar 11 End Sep 11 End Mar 12 Non-Japanese Japanese 6.2 6.5 7.5 7.8 0.0 5.0 10.0 15.0 End Sep 10 End Mar 11 End Sep 11 End Mar 12 Non-Japanese Japanese 4.8 5.5 5.9 6.8 0.0 5.0 10.0 15.0 End Sep 10 End Mar 11 End Sep 11 End Mar 12 Non-Japanese Japanese 2.6 2.9 3.3 3.6 0.0 5.0 10.0 15.0 End Sep 10 End Mar 11 End Sep 11 End Mar 12 Non-Japanese Japanese 3.6 4.0 4.7 5.1 0.0 5.0 10.0 15.0 End Sep 10 End Mar 11 End Sep 11 End Mar 12 Non-Japanese Japanese

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• Upgrade the Asian business model and become established as the leading foreign bank.
• Improve products and services while strengthening marketing within and beyond the region through

commercial bank/trust bank/securities cooperation; improve regional governance by bringing Head Office functions to the Asian front line.

Comparison with foreign banks’ subsidiaries in China (2011)

• Through steps such as obtaining a first foreign

bank certification for each of new operations, such as issuing RMB bonds in China mainland, establish position as a first class foreign bank

• Strengthen loan and settlement business, etc. by

cooperating with branches (20 locations) within the region. Upgrade RMB-related business

• Aim to expand network centered on China

Greater China (China/HK/Taiwan)

• No.2 in net business profits after HSBC among local

branches of foreign banks1, as a result of close relationships with Korean corporations

• Strengthen marketing and aim for core bank status,

assisting Korean corporations with globalization. (Set up Global Korean Business Office)

• Strengthen securitization, ECA finance, project

finance and capital market business

Korea

• Strengthen project finance and resource/

infrastructure-related loans to large non-Japanese

• rganizations (Setting up the Perth branch to make 3

branches in Australia and Australian Structured Finance Office)

• Alliance with AMP, one of the Australian “big 5”

financial institutions

Australia

• Having opened the branch more than 40 years ago,

solid business base centered on Japanese

• corporations. Top lender among foreign banks
• Capture more infrastructure/resource finance and

M&A projects. Strengthen business with financial institutions and syndicated loans

• Strengthen local group synergies (CIMB, etc)

Indonesia

• Strengthen loan and cross-selling business to

major non-Japanese corporations

• Achieve critical mass in S&T business by

bringing it under joint control with Global Markets

• Further strengthening largest network of any

Japanese bank by opening new branches (now 3 branches)

India

(Note) 1.Japanese banks: Apr 10 - Mar 11, other foreign banks: Jan 10 - Dec 10

Asian Strategy (iii)

(Source) Company disclosures Exchange rates: RMB/¥=14.03

43.0 114.1 61.5 23.5 57.7 19.2 40 80 120 BTMU HSBC Citi Gross profit Net business profits (¥bn)

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Appendix

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Dalian Shenyang Chengdu Beijing Tianjin Guangzhou Shenzhen Wuxi Shanghai Taipei Seoul Hong Kong Kowloon Qingdao Wuhan

China, Hong Kong, Taiwan, Korea

Shanghai

• Rep. office opened in 1982, upgraded to branch status in

1991, first among foreign banks. Sub-branch opened in Hongqiao (Western Shanghai) in 2011, a concentrated area for Japanese companies. Covers East China excluding Jiangsu Province. Wuxi First Japanese bank rep. office opened in 1997, upgraded to branch status in 2006. Covers Jiangsu Province. Taiwan

• Rep. office opened in 1990, became Taipei Branch in 1993.

Supports business connections between Japanese and local companies. Guangzhou

• Rep. office opened in 1984, upgraded to branch status in 2008.

First Japanese bank sub-branch opened in Guangzhou Nansha Development Zone (2010), a concentrated area for leading international companies (automobile, petrochemical, steel, IT). Hong Kong Over fifty years history with rep. office opened in 1952, becoming Hong Kong Branch in 1953. Three offices: Hong Kong and Kowloon branches, East Tsim Sha Tsui sub-branch. Supports business connections between Japanese and non- Japanese companies. The Hong Kong, Shenzhen and Guangzhou branches jointly support customers in the South China region. Korea

• Rep. office opened in 1966, a year after the restoration of

diplomatic ties. First Japanese bank to open a branch in 1967. Dalian

• Rep. office opened in 1984, upgraded to branch status in

1992. First foreign bank sub-branch opened in Dalian Economic & Technological Development Area in 2007, a concentrated area for Japanese companies. Beijing First foreign bank rep. office opened in 1980; BTMU was the first foreign bank to upgrade Beijing rep. office to branch status (1995). First Japanese bank to open sub-branch in Beijing Economic- Technological Development Area, a concentrated area for Western companies (2011). Covers North China, excluding Tianjin. Tianjin First Japanese bank rep. office opened in 1987, upgraded to branch status in 1995. Tianjin Binhai Sub-branch opened in Binhai Finance Zone (2007) with a high concentration of Japanese companies. Chengdu

• Rep. office opened in 1995, upgraded to branch status in 2010

(sole Japanese bank branch in Western China). Qingdao Branch opened in 2011. Covers Shandong Province. China Bank of Tokyo-Mitsubishi UFJ (China) established in 2007. BTMU (China) operates a total of sixteen offices, eleven branches and five sub-branches. Headquartered in Shanghai, each BTMU (China) branch provides full bank- ing services including foreign currency and RMB deposits, loans, remitt- ances, trade settlement, and exchange. In addition, derivative transactions, internet banking, and information services are provided. Shenzhen Branch opened in 1986 (first Japanese bank to establish a branch in China). Shenyang First Japanese bank rep. office opened in 2005, upgraded to branch status in 2012. Collects and analyses information on Liaoning (excl. Dalian), Jilin, and Heilongjiang provinces. Wuhan Branch opened in 2012. Covers Hubei and Hunan provinces.

Global Network (China, Hong Kong, Taiwan, Korea)

Subsidiary (incl. subsidiary’s branch, sub-branch) Branch, Sub-branch Representative Office

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Auckland Sydney Melbourne

South East Asia, India, Oceania

Surabaya Bandung Singapore Kuala Lumpur Labuan Manila Ho Chi Minh City Bangkok Yangon Dhaka New Delhi Mumbai Chennai Hanoi Jakarta Karachi

Malaysia

• Rep. office opened in 1957, upgraded to Kuala

Lumpur Branch in 1959, became BTMU (Malaysia) in 1994. Handles Ringgit as a commercial bank (local subsidiary). Offers offshore financial services at Labuan Branch. Offers financial services including investment banking and Islamic finance. Penang Sub-branch opened in 2012. Indonesia Over fifty years history with rep. office opened in 1957, becoming Jakarta Branch in 1968. Nine offices: Jakarta Branch, Surabaya and Bandung sub-branches, six service points in industrial towns near Jakarta. Through alliance with local bank, offers cash collection service using local bank networks. Business alliance with the Indonesia Investment Coordinating Board (BKPM). Thailand Over fifty years history with rep. office opened in 1952, becoming Bangkok Branch in 1962. Retains BTMU Leasing（Thailand）Co., Ltd. which

• ffers equipment and other leasing services.

Business alliance with the Board of Investment

• f Thailand (BOI).

Bangladesh Dhaka Rep. Office opened in 1990 (only Japanese bank office). Focusing on collection of information related to Japan’s ODA. Vietnam Ho Chi Minh City Branch opened in 1996, Hanoi Branch in 1998; has a long business history (including temporary closure) through the 1920 establishment of the former Yokohama Shokin Bank’s Saigon Branch. Through alliance with local bank, offers cash collection service using local bank networks. Philippines

• Rep. office opened in 1953, became Manila

Branch in 1977; has an over ninety year history through the former Yokohama Shokin Bank. Business alliance with the Board of Investments, Philippine Economic Zone Authority (PEZA). New Zealand

• Rep. office opened in Wellington in 1972, moved

to Auckland (only Japanese bank office) and acquired branch status in 1996. Australia Subsidiary opened in 1985. Covering entire country through a three office network in Sydney, Melbourne and Perth. Engages in investment banking business including Japan Bank for International Cooperation (JBIC) syndicated loans and securitization. Business alliance with investment promotion agency for Victoria state, Invest Victoria. India Presence in India for more than fifty years: Mumbai Branch opened in 1953, New Delhi Branch in 1963, Chennai Branch in 1996. Covering all India through three branches; BTMU is the only Japanese bank with an

• ffice in South India.

Japanese staff provide Indian market information from Mumbai Branch Sales & Trading Department. Myanmar Yangon Rep. Office opened in 1995. Maintains a nearly uninterrupted business history since the opening of the former Rangoon Rep. Office in 1954. Pakistan Karachi Branch opened in 1953 (only Japanese bank office); has an over eighty year history through the former Yokohama Shokin Bank. Focusing on collection of information related to Japan’s ODA.

Phnom Penh Perth

Global Network (South East Asia, India, Oceania)

Subsidiary (incl. subsidiary’s branch, sub-branch) Branch, Sub-branch Representative office Singapore Over fifty years history with rep. office opened in 1954, becoming Singapore Branch in 1957. Retains head office functions for Asian Business Division, Asian Investment Banking Division, eBusiness and IT Initiatives Division, Corporate Research Division, and more. Cambodia Opened rep. office in Phnom Penh in 2012.

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Pursued investments and alliances, focusing on high-quality Asian companies.

Overview of Recent Investments and Alliances in Asia

(Note) 1. As of End Mar 12

Investments and alliances1 Additional investment in Dah Sing Financial Holdings to make an equity method affiliate (BTMU, Jun 08), business alliance with Dah Sing Financial Holdings (BTMU, Sep 08) Hong Kong Capital and business alliance with AMP Capital Holdings to make an equity method affiliate (MUTB, Mar 12) Australia Business alliance with Daewoo Securities (MUSHD, Jan 07) Korea Business alliance with CIMB (BTMU, Oct 06), additional investment in CIMB (BTMU, Aug 11) Malaysia Business alliance with Vietcombank (BTMU, Nov 06) Vietnam Investment in Bank Nusantara Parahyangan (BTMU, Dec 07) Indonesia Business alliance with ICICI (MUSHD, Aug 06), Tata Capital (MUSHD, Aug 08) India Invest in asset management subsidiary of Shenyin & Wanguo Securities to make an equity method affiliate (MUTB, Apr 11) China Investment in and business alliance with Bank of China (BTMU, Jun 06) China