Resona Group

NEWS RELEASE

Dec 24, 2020

R&I Affirms Ratings: Resona Group

Rating and Investment Information, Inc. (R&I) has announced the following:

SEC. COMPANY NAME CODE 8308 Resona Holdings, Inc. ---- Resona Bank, Ltd. ---- Saitama Resona Bank, Ltd. * Please refer below for rated bonds, etc.

RATIONALE: In the wake of the novel coronavirus pandemic, the corporate sector's performance, as well as individuals' employment and income environments have deteriorated. Coupled with an increasing amount of credit extended to offer extensive funding support and provision of hybrid financing, which is expected to grow going forward, the Resona Group's asset quality and risk resilience are under downward pressure. So far, a package of fiscal, credit and monetary policies aimed at offering special assistance to companies and individuals has helped significantly to prevent the negative impact of the pandemic from materializing. Given the slow economic recovery, a return to the pre-pandemic level is becoming increasingly likely to take considerable time. Against such a backdrop, asset quality and risk resilience might worsen significantly due to (1) a further turmoil caused by the pandemic, or (2) the so-called "cliff effect", where accumulated negative effects abruptly surface upon termination or a major rollback of fiscal measures and credit policies. Even in light of these circumstances, R&I believes that the group will be able to ride out the pandemic woes and maintain high creditworthiness, given the robust franchise and high stress resilience, among other factors. The Resona Group is a leading banking group comprised primarily of Resona Bank, Ltd., Saitama Resona Bank, Ltd. and Kansai Mirai Financial Group, Inc. (KMFG). With a "Retail No.1" goal, the group focuses on the domestic retail banking and established a broad franchise mainly in the greater Tokyo area and the Kansai area. Its market share for deposits and loans is the fourth largest after Japan's three major financial groups and its competitiveness lies in trust and real estate services, among other areas. The group has strengthened customer contacts by staying ahead of rivals in implementing reforms in the retail area, such as low cost management and an "Omni-channel" strategy. Efforts are also underway to increase the ability to provide solutions, enabling the group to steadily expand multifaceted transactions. In its new medium-term management plan starting in FY2020 (the year ending March 2021), the group sets out a plan to accelerate open innovation for the development of the next-generation retail services. It intends to turn KMFG, a listed subsidiary, into a wholly owned subsidiary in April 2021 with an aim to generate synergies as early as possible. The group's earning capacity is slightly low for the rating. While low cost management gives it a relative edge, the domestic retail banking which accounts for most of its earnings has been in a severe earnings environment and the coronavirus pandemic adds to this pressure. In the first half of FY2020, the group saw lower profits due to reductions of fund spread and stagnant customer transactions resulting from sluggish business for supporting individual asset formation and real estate services. Risk resilience is fully adequate for the A rating category. A huge increase in credit risk due to the deepening of the coronavirus crisis could weigh on risk resilience. Thanks partly to its stable risk profile, however, R&I believes that the group can roughly maintain the current level of the resilience over the medium term if the stress environment does not intensify. The market risk is not large and the group is least susceptible to the impact of the financial and capital market among major lenders.

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NEWS RELEASE

Asset quality is sound, but it is under downward pressure amid the coronavirus pandemic. Lending to small and medium-sized enterprises as well as housing and apartment loans and those to real estate leasing/asset management companies make up the bulk of the group's credit portfolio. Although diversified borrowers and the low concentration of large borrowers is the portfolio's strength, many companies are heavily affected by the pandemic. Japanese companies are largely resilient to the stress environment, in R&I's view, but attention has been paid to a scenario where the coronavirus crisis deepens further, among other possibilities. As each bank in the group is strengthening its corporate turnaround support through reforms of finances and business structure, R&I keeps an eye on to what extent the banks can mitigate the deterioration of their asset quality. The group has sufficient liquidity. The group's foreign currency-denominated assets primarily consist of highly liquid marketable securities, and the size of low liquidity assets, such as loans and securitized products, is limited. Accordingly, there are no worries about foreign currency liquidity.

Resona Holdings, Inc. Resona Holdings, Inc. is the holding company of the Resona Group. The rating reflects the entire group creditworthiness. However, it is one notch lower than those of the group's core companies because of the structural subordination inherent in a holding company, among other reasons.

Resona Bank, Ltd. Resona Bank, Ltd. is a core bank of the Resona Group. The rating directly reflects the entire group creditworthiness. The bank has an extensive franchise in the greater Tokyo area, excluding Saitama Prefecture, and Osaka Prefecture, where its market position is particularly high. With trust services as well as banking services in its business lines, the bank has retail trust functions such as will trust, real estate and pension functions, which is its strength.

Saitama Resona Bank, Ltd. Saitama Resona Bank, Ltd. is a core bank of the Resona Group, along with Resona Bank. The rating directly reflects the entire group creditworthiness. Saitama Resona Bank is the leading bank in Saitama Prefecture, which has a large economy compared to other prefectures and is characterized as a commuter town for Tokyo. Despite intense competition especially with regional banks based in neighboring prefectures and operating in Saitama Prefecture, Saitama Resona Bank will likely maintain its high competitiveness by differentiating itself through solid relationships with customers and the group's trust, real estate and pension functions, among others. In an effort to expand its franchise across the prefectural border, the bank opened offices for corporate customers in the cities of Ota and Takasaki in Gunma Prefecture.

The primary rating methodologies applied to this rating are provided at "R&I's Basic Methodology for Corporate Credit Ratings", "Shared Rating Approach for Financial Institutions, etc.", "Depository Financial Institutions", "R&I's Analytical Approach to Financial Groups" and "R&I's Analytical Approach to Regulatory Capital Instruments and Financial Institutions". The methodologies are available at the web site listed below, together with other rating methodologies that are taken into consideration when assigning the rating. https://www.r-i.co.jp/en/rating/about/rating_method.html

R&I RATINGS: ISSUER: Resona Holdings, Inc. (Sec. Code: 8308) Issuer Rating RATING: A, Affirmed RATING OUTLOOK: Stable

Unsec. Str. Bonds No.11 Issue Date Maturity Date Issue Amount (mn)

NEWS RELEASE

Jul 27, 2016 Jul 27, 2021 JPY 30,000 RATING: A, Affirmed

Unsec. Str. Bonds No.12 Issue Date Maturity Date Issue Amount (mn) Jan 24, 2017 Jan 24, 2022 JPY 25,000 RATING: A, Affirmed

Unsec. Str. Bonds No.14 Issue Date Maturity Date Issue Amount (mn) Jun 02, 2017 Jun 02, 2022 JPY 30,000 RATING: A, Affirmed

Unsec. Str. Bonds No.15 Issue Date Maturity Date Issue Amount (mn) Jun 02, 2017 May 31, 2024 JPY 10,000 RATING: A, Affirmed

Unsec. Str. Bonds No.17 Issue Date Maturity Date Issue Amount (mn) Dec 20, 2017 Dec 20, 2022 JPY 20,000 RATING: A, Affirmed

Unsec. Str. Bonds No.18 Issue Date Maturity Date Issue Amount (mn) Jul 23, 2018 Jul 23, 2021 JPY 10,000 RATING: A, Affirmed

Unsec. Str. Bonds No.19 Issue Date Maturity Date Issue Amount (mn) Jul 23, 2018 Jul 21, 2023 JPY 30,000 RATING: A, Affirmed

Unsec. Str. Bonds No.20 Issue Date Maturity Date Issue Amount (mn) Jul 23, 2018 Jul 23, 2025 JPY 10,000 RATING: A, Affirmed

Unsec. Str. Bonds No.21 Issue Date Maturity Date Issue Amount (mn) Dec 14, 2018 Dec 14, 2023 JPY 25,000 RATING: A, Affirmed

Unsec. Str. Bonds No.22 Issue Date Maturity Date Issue Amount (mn) Jul 19, 2019 Jul 19, 2024 JPY 30,000 RATING: A, Affirmed

Unsec. Str. Bonds No.23 Issue Date Maturity Date Issue Amount (mn) Dec 13, 2019 Dec 13, 2022 JPY 10,000 RATING: A, Affirmed

ISSUER: Resona Bank, Ltd.

NEWS RELEASE

Issuer Rating RATING: A+, Affirmed RATING OUTLOOK: Stable

Unsec. Sub. Bonds No.8 Issue Date Maturity Date Issue Amount (mn) Jun 01, 2011 Jun 01, 2021 JPY 25,000 RATING: A, Affirmed

Unsec. Sub. Bonds No.9 Issue Date Maturity Date Issue Amount (mn) Dec 22, 2011 Dec 22, 2026 JPY 20,000 RATING: A, Affirmed

Unsec. Sub. Bonds No.11 Issue Date Maturity Date Issue Amount (mn) Mar 14, 2012 Mar 15, 2022 JPY 35,000 RATING: A, Affirmed

Unsec. Sub. Bonds No.12 Issue Date Maturity Date Issue Amount (mn) Mar 14, 2012 Mar 15, 2027 JPY 16,000 RATING: A, Affirmed

Short-term Debts RATING: a-1, Affirmed

ISSUER: Saitama Resona Bank, Ltd. Issuer Rating RATING: A+, Affirmed RATING OUTLOOK: Stable

Short-term Debts RATING: a-1, Affirmed