Retail Banking Group
Shinsei Analyst Day 2005 October 6, 2005 Table of Contents
CREATING A UNIQUE BANKING EXPERIENCE ------2
CUSTOMERS ------13
CHANNELS ------18
PRODUCTS ------28
STAFF ------32
IMAGE ------34
KEY MEASURES ------45
CONCLUSION ------53
1 CREATING A UNIQUE BANKING EXPERIENCE March 2000 – Where We Started
Shinsei Bank is formed when the Long Term Credit Bank (LTCB) is privatized.
The Old LTCB Individual Banking was: Funding engine for corporate loan business Sold debentures Not defined as a profit-earning business proposition Had no need to focus on customer service Customer base: Concentration of high net worth individuals 65% of customers over age of 50 Image: upscale bank for wealthy individuals to park retirement money 24 branches across Japan, adjunct to centers of corporate banking, mainly Tokyo and Osaka
3 Retail Banking in Japan
An under-served market
ATM services are inconvenient and expensive Most banks do not offer 24hx7days ATM access Banks may charge up to 210 yen per withdrawal
Cumbersome and difficult – Lots of forms and waiting in queues
The post office still dominates
Very low penetration of investment products
4 Shinsei Style
A set of values that defines Shinsei in customer terms.
Accessible Responsive Always available Always understands and when I need it anticipates my needs [24hx 7days]
Easy & convenient Delivers value Is easy to deal with Offers the best solution for me Banking that ‘wows’
Overall theme: Empowerment (Customers manage and control their banking needs)
5 Accessible – 24hx7days
6 Easy and Convenient - Extended Hours & Saturdays
7 Responsive - Instant Account Opening
8 Delivers Value
NO FEE - ATMS & Funds Transfers*
* Customers with a/c balance of ¥10M or more at the end of the previous month are allowed to make domestic fund transfers through PowerDirect free of charge (refundable) up to 30 times per month. Otherwise, up to 5 domestic fund transfers are free (refundable).
9 The story so far Despite the backdrop of a struggling economy we have successfully established a unique and thriving retail banking business:
9 A great brand franchise – with almost limitless potential
9 A tremendous team of people at all levels
9 A proven and flexible “bricks and clicks” business model
9 Robust and constantly improving business processes
9 Technology advantage – the ability to aggregate risk on a real-time basis
9 A fast growing customer base
9 Strong revenue growth
9 A sustainable profit-growth trajectory
10 We have chosen how we want to position ourselves
A Mega bank? A Niche bank?
A “New kind of bank”
9 Totally customer centric ¾ Informed ¾ Responsive ¾ Accessible ¾ A trusted business partner
9 Big but not mega
9 A leader not a follower
9 Fast and flexible
11 Vision and Mission
OUR VISION We are creating a new type of Bank
OUR MISSION To be the Only One for our Customers
OUR VALUE We Care!
OUR MOTTO Our Customers’ success is our success
12 CUSTOMERS Customers - Key success factors
9 Acquisition momentum - we have a compelling value proposition
9 Efficient acquisition - remote channels to acquire customers more efficiently
9 Targeted acquisition – segmentation/relationship potential based
9 PowerWelcome and Customer Development process - to optimize customer activity
9 Customer Care – to improve customer loyalty and retention
14 Retail Bank Profile as of June 2005 Mass Retail Mass Affluent HNW
100% 0.3% 4.4% 2.6% 0.0% 5.5% 90% 16.5% 23.5%
80%
70% 63.9% 61.8% 60%
50% 95.6% 67.9% 40% 83.2%
30%
20% 33.5% 32.7% 10% 8.5% 0% Customers Assets Liabilities Off B/S Revenue (FY2004)
15 Customer Segmentation
9 Created 7 demographic segments based upon internal analysis of the customer base
9 Split by age bands to improve targeting within the segments
9 74 sub-segments in total
9 Going forward we will add a psychographic dimension to the segments (eg Retirees Baby Boomers)
9 They will be continuously refined as we learn with the benefit of external input
16 Customer Segmentation
Q1 (Y101K+) Maintain Optimize Optimize Optimize Optimize
Q2 (Y51-100K) Maintain Optimize Optimize Optimize Optimize
Q3 (Y21-50K) Maintain Cultivate Cultivate Cultivate Cultivate
Q4 Cost Manage/ (Y11-20K) Exit Cultivate Cultivate Cultivate Cultivate
Q5 Cost Manage/ (Y0-10K) Exit Cultivate Cultivate Cultivate Cultivate Customer Current Value Low/ Medium/ Low Medium High Medium High
Relationship Potential Indicator
17 CHANNELS Channels – Key success factors
9 “Bricks and Clicks” – the Customer chooses
9 Physical channels y Creating a “sales culture” y Strong sales process management y Focus on consultative sales
9 Remote channels y The Internet is “strategic” y Full functionality & capability y Growth in transaction (incl Mutual Funds) y Growth in income
19 Expanding Presence
Financial Centers (SFC) 9 Provide full banking services focusing on consultation to mass affluent customer segment Platinum Center 9 Develop and enhance relationships with wealthy customers ATMs 9 deploy in strategic locations to build brand visibility and minimize off-us transactions BankSpots 9 “mini-branches”, primarily in Tokyo and Osaka, providing both self-service and consultation
Physical Platinum Distribution Center Financial Remote Center Distribution BANKSPOT ATMs PowerCall PowerDirect
20 Current Branch Network
30 Financial Centers provide nationwide coverage of major metropolitan centers Carefully selecting new locations with the highest commercial/business concentration and easy access from terminal stations
Shinjuku South Shinsaibashi Ginza Corridor GinzaKyobashi
Co-located with Starbucks Cafe
21 Sales Productivity – Revenue
(Annual Revenue/Sales Staff : JPY Million) 60
50
40
30
20
10
0 FY2002 FY2003 FY2004
22 Productivity : Share of Door - Mutual Funds
Shinsei Bank sales staff are far more productive than competitors – A common theme across product categories
Efficiency Index The Share of Door Index compares Market share with share of branches 4
3.35 3
2 1.89
1.3 1 0.63 0.49
0 0 100 200 300 400 500 600 700 800
Shinsei Bank BOTM SMBC UFJ Mizuho # of Branch
Source: Institute for Financial Affairs Research Center FY2004
23 Remote Channels
Prior to June 2001, we had no web site, no Internet banking, and a phone center that operated from 9-5 on weekdays only Since then, we have largely surpassed the local competition 9 24x7x365 telephone banking y Product sales y Balance inquiries y Customer service 9 PowerDirect Internet Banking y Real-time balances and transaction data y Ability to transact almost all products y Free funds transfer service (up to 5 or 30/month)—best offer in the market Remote channels—the Internet and phone—are now primary channels for customers to open new accounts and do transactions
24 Customer Contact
Rapid customer growth has been possible essentially through remote channels.
6, 000, 000 Web Call C enter 5, 000, 000 AT M Branches 4, 000, 000
3, 000, 000
2, 000, 000
1, 000, 000
0 M ar-0 2 S ep-02 M ar-03 Sep-03 M ar-04 Sep-04 M ar-0 5 Apr-05 M ay-05 Jun-0 5 Jul-05 6 Month Average Monthly Data
25 Acquisition
450,000
400,000 Remote Channels Branch
350,000
300,000
250,000
200,000
150,000
100,000
50,000
-
FY2001 FY2002 FY2003 FY2004
26 Sales Volumes
(Billion Yen)
1,200
Remote Channels Branch 1,000
800
600
400
200
0
FY2003 FY2004
27 PRODUCTS Products – Key success factors
9 Needs based profiling
9 Solutions based
9 Continuous Innovation – eg Powered One Plus/Powered Teiki Plus
9 Speed to market
29 Philosophy
“IDEA-FULL”
Proposals that say, “Why didn’t someone think of this before?”
Simple and easy to use Customers transact on their own Covers a wide range of risk and tenor preferences, a mix of currencies and instruments (e.g. deposits, mutual funds and annuities) More complex products are available to sophisticated customers (e.g. hedge funds, structured products) A strong sales process backs each offering
30 Product Offerings
- Japan Trend Select
Ri - SPJT - Nissay /Putnam Income - Foreign - Foreign - GS US neutral - Galileo Currency Currency - GS Japan Neutral - Life plan 30 Savings Time Deposite - CITI Australia - Global Sovereign - PowerLink -FX- - Europian Income - Sirius Harmony(5)
- ManuSolution
-New Adagio - Power Pocket Overdraft -Power Life -MMF - Ma ss fre e dom Low -Yen SA -Yen -PowerLink225 -Sonata Savings Time Deposit - Yen - PowerSmart HL Time Deposit - Powered One Plus Short <3Years 3Years< Medium < 7Years 7years< Long
Tenor 31 STAFF “Our People Are The Difference”
Career Excitement Center Branch Training
Winning the Talent War 90 Player/trainers
“We hire customer focused Sales Skills daily people, and train the daylights Innovative Fridays out of them” Internal Communications Shinsei Business School Shinsei Daily Celebration April 2004 Daily Sales Call Sales Management Daily “Why Shinsei?” Management & Leadership Color Your Life e-letter Sales Skills Weekly Power Go Solutions National Monthly & Qtr Sales
33 IMAGE Brand Awareness
In the 4 years since new retail banking business launch, brand awareness on Shinsei Bank has significantly increased as compared with the other competitors, and reached 97% in June 2005.
2001. 11 2002. 06 2003. 06 2004. 07 2004. 12 2005. 06
100 90 80 70 60 50 40 30 20 10 0 Shinsei Ba nk Citibank So ny Ba nk BO TM
Source: Asatsu-DK Survey 35 Brand Image Perception
Findings through Awareness and Image Survey Shinsei Bank is perceived as unique and innovative, and responsive to customer needs.
Shinsei BOTM Tokyo Star Citibank (Score as of June 2005)
Brand Awareness 97% 99% 81% 92%
Stable Business/ Sound Management 2% 48% 1% 7%
Good/Favorable Image 2% 41% 1% 11%
Innovative 29% 3% 16% 10%
Unique 20% 6% 13% 11%
Advanced Internet Service 22% 10% 4% 9%
Will choose even if branch located 8% 3% 2% 3% in the distance Responsive to Customer Needs 8% 5% 3% 3%
Source: Asatsu-DK Survey
36 CUSTOMER AND MEDIA RECOGNITION The Asian Banker The Asian Banker
Best Retail Banks by Country 9 Japan – Shinsei Bank 9 Hong Kong – HSBC (Hong Kong) 9 Indonesia – Bank Central Asia 9 Singapore – DBS Bank 9 Vietnam – ANZ Bank Awards for Excellence in Products and Processes 9 Best Retail Banking Branch Innovation Award – Shinsei Bank
37 CUSTOMER AND MEDIA RECOGNITION Retail Banker International
Retail Banker International Benchmark intelligence on consumer financial services
Recognising the best in the world Published: December 8th, 2004 Issue: Retail Banker International - RBI524 The winners of RBI’s Retail Bank of the Year awards were announced during the Retail Banking Forum in London on 7 December. In this special feature, RBI lists the winners of all the awards and profiles the victors in the major national and sub-regional markets around the world
Country and Sub-Regional Award Winners 。 Retail Bank of the Year – Japan Shinsei Bank A year of strong retail banking growth was capped by Shinsei’s acquisition of Aplus, one of Japan’s leading consumer finance companies. The deal is part of Shinsei’s strategic plan to actively expand its non-bank business and at the same time to generate higher returns and profitability in each of its three key business lines - retail banking, non-bank consumer finance and institutional banking.As a result of the deal, Aplus - which has a nationwide distribution network - has become a leading component of Shinsei’s "non-bank" business. The main task of Aplus has been to enhance the competitiveness of the group’s shopping credit unit - at the same time, the deal will lead to significant cost savings when a common IT platform will be implemented using Shinsei’s technology.Apart from the Aplus acquisition, Shinsei boosted net income by 25.2 percent in fiscal year 2003 (which ended in March 2004) by diversifying its revenue sources and lowering its reliance on interest income - some 56 percent of total customer funding comes from retail customers - up 6 percent on fiscal 2002. Net profits were up 5 percent on the previous financial year.Non-performing loans dropped 58.3 percent, and there was also a corresponding drop in bad debt provisions. Return on equity for fiscal 2003 stood at 9.4 percent, up from 8.1 percent in fiscal 2002.
38 CUSTOMER AND MEDIA RECOGNITION Nikkei Survey on Financial Institutions
Nikkei Survey on Financial Institutions - Consumers in Three Largest Metropolitan areas (Tokyo・Osaka・ Nagoya）
Shinsei bank 「Ranked first by users’ satisfaction for the 2 years running」（2004 / 2005）
The year ２００５
•「Consulting service ・ Teller Counter service・Business hours」（1st）
•「Products・Services」（1st）
•Ranked in the Top 3 in all the items
39 CUSTOMER AND MEDIA RECOGNITION Survey on Financial Institutions
Ranked first by users’ satisfaction survey (Consumers in Three Largest Metropolitan areas)
20’s 30’s 40’s 50’s 60’s
1st 城南信用金庫
2nd イーバンク銀行 Sony Bank イーバンク銀行 城南信用金庫 東京三菱銀行
3rd 東京三菱銀行 ｼﾞｬﾊﾟﾝﾈｯﾄ銀行 東京三菱銀行 東京三菱銀行
4th UFJ銀行 イーバンク銀行 ｼﾞｬﾊﾟﾝﾈｯﾄ銀行 CITIBANK 住友信託銀行
5th 三井住友銀行 東京三菱銀行 城南信用金庫 郵便貯金 郵便貯金
.The Nikkei Kinyu (The Nihon Keizai Shimbun), September 6&7, 2005
40 CUSTOMER AND MEDIA RECOGNITION Next to Disney Land / Disney Sea!
Ranked Second by ’Users’ “Consumer Relation Index” Rank Brand Name Score Rank Brand Name Score 1 Tokyo Disney Land / Sea 87.68 21 Bakery Restaurant Saint-Marc 68.03 2 SHINSEI BANK 83.26 22 Freshness Burger 67.42 3 Tokyu Hands 82.60 23 Wacoal 67.06 4 Mos Burger 81.95 24 SHOP99 67.03 5 Louis Vuitton 77.72 25 Seijo Ishii (Supermarket) 66.70 6 Franc franc (Furniture & sundries) 76.87 26 Burberry 66.61 7 Yokohama Zoological Gardens Zoorasia 76.21 27 one's (Curtain) 66.46 8 Afternoon Tea TEAROOM 75.99 28 Japan Air Lines (JAL) 66.22 9 Seven-Eleven 75.54 29 DUO (Volkswagen dealer) 66.13 10 The Daiso - 100YEN PLAZA 73.07 30 Excel Hotel Tokyu 66.09 11 Singapore Airlines 72.38 31 Beard Papa's (Confectionery) 65.97 12 Japan Post office 72.10 32 Sony Plaza 65.96 13 Henri Charpentier (Confectionery) 71.45 33 All Nippon Airways (ANA) 65.92 14 The Imperial Hotel 71.21 34 a.v.v (Apparel) 65.42 15 Hermes 70.58 35 Kinokuniya (Book store) 65.23 16 Bvlgari 70.28 36 ACTUS (Furniture) 64.74 17 Coach 70.08 37 Create Super Drugstore 64.40 18 Rolex 68.84 38 Subaru Store 64.33 19 Starbucks Coffee 68.54 39 Tiffany 64.19 20 MUJI 68.19 40 Triumph (Lingerie) 64.05
Research on “Store & Service Brand 500” by Nikkei Research
41 Image
42 Color Your Life
SHARE Information, dreams, worries, aspiration, future… with our colleagues, customers, families CARE Respond flexibly, speedily, hospitably, based on others’ needs “IDEA-FULL” Proposals that say, “Why didn’t someone think of this before?” WAKUWAKU Exhilarating at every contact.
43 “When I am feeling sad, or things don’t go my way, I always look up into the sky. The big sky makes my troubles seem so small This encourages me to paint my dreams across the big blue sky”
44 KEY MEASURES Customer Database
We have achieved 1.5 Million customer mark.
(Trillion Yen) # of customers 4.00 1,600,000
3.50 Total AUMs 1,400,000 # of customers 3.00 1,200,000
2.50 1,000,000
2.00 800,000
1.50 600,000
1.00 400,000
0.50 200,000
0.00 0 r r r r e e e e e h h h h e e e e n n n n n rc rc rc rc ber ber ber ber b b b b Ju Ju Ju Ju Ju m m m m Ma Ma Ma Ma e e e e t t t t cem cem cem cem p p p p e e e e D D D D Se Se Se Se FY2001 FY2002 FY2003 FY2004 FY2005
46 AUM Composition
Debentures are being replaced by yen deposits and risk products
Debenture Yen Deposit Structured Depo. + FCY + MF + VA/FA 100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0% Apr-98 Apr-00 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Apr-97 Apr-99 Apr-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05
47 Cross Sell
Through active cross selling we have doubled the number of customers holding risk products in a year # of customers 400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0 Apr-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05
48 PowerSmart Housing Loan
(Billion Yen) 350 14,000 300 Monthly Fundings (Billion Yen) # of customers 12,000 250 10,000
200 8,000
150 6,000
100 4,000
50 2,000
0 0
2 2 3 3 4 4 5 5 0 0 2 0 0 3 3 0 4 4 0 - -02 -0 - - -0 0 - -0 -0 0 -0 r- n p c r n p c- r n p c- r- n a e e u e a u M Ju S De Ma Ju Se D Ma J Se D M J
49 Revenue Growth
(Million Yen)
40,000
30,000
20,000
10,000
0 FY2002 FY2003 FY2004
50 Expense Growth
(Million Yen)
40,000
30,000
20,000
10,000
0 FY2002 FY2003 FY2004
51 OBP (Margin) Growth
(Million Yen)
10,000
5,000
0 FY2002 FY2003 FY2004
(5,000)
(10,000)
52 In Conclusion
In just 4 years we have successfully established a “New Kind of Bank” Looking forward, market conditions are increasingly positive Shinsei Retail is ideally positioned for rapid growth: 9 We have a unique and clearly defined business model which cannot be easily copied by our competition 9 Our brand proposition gives us differentiation and competitive advantage 9 We are centered around the customer in everything we do 9 We will continue to innovate and lead the market We know what we have to do to be successful and we have clear strategies for all key aspects of the business: 9 Customers 9 Brand/Marketing 9 Products 9 Channels 9 People Retail is a key component of the overall Shinsei strategy Our financial results are strong Shareholder returns from Retail will continue to grow rapidly
53