EarningsEarnings ReleaseRelease SixSix MonthsMonths EndedEnded August,August, 20082008 (March,(March, 20082008--August,August, 2008)2008)
October 15, 2008 OMCOMC Card,Card, Inc.Inc.
Note about the description about the future:
The above projection, representing our best estimate based on information currently available to us, incorporates uncertain factors. Actual results may differ from the above projections depending on various conditions. ‐1‐ OMC Card，Inc． ResultsResults OverviewOverview
‐2‐ OMC Card，Inc． P/L(Consolidated)
Unit : billions of Yen
Change vs. Change vs. Achievement Achievement Aug, 2008 Aug, 2007 Aug, 2007 rate rate (amount) (base:100%) （08/3～09/3） （08/3～09/2）
Transaction Volume 850.6 +27.1 +3.3% 43.8% 47.2%
Operating revenues 68.0 ▲9.8 ▲12.6% 47.6% 51.7%
Operating expenses 63.8 ▲12.4 ▲16.3% - -
Operating income 4.2 +2.6 +160.7% - -
Ordinary income 4.4 +2.7 +162.2% 50.0% 54.4%
Net income 4.0 +31.3 - 66.0% 70.6%
‐3‐ OMC Card，Inc． Transaction Volume(Consolidated)
Unit : billions of Yen Change vs. Change vs. % of Aug, 2008 Aug, 2007 Aug, 2007 Total (amount) (base:100%)
Credit card contracts 539.1 63.4% +38.2 +7.6%
Acquiring service 75.8 8.9% +8.5 +12.6%
Cash advances 202.0 23.7% ▲21.8 ▲9.7%
Insurance 6.8 0.8% +0.1 +0.9%
Other 26.9 3.2% +2.1 +8.5%
Total 850.6 100.0% +27.1 +3.3%
‐4‐ OMC Card，Inc． Operating receivable(Consolidated)
Unit : billions of Yen Change vs. % of % of Feb, 2008 Aug, 2008 Feb, 2008 Total Total (amount)
Credit card contracts 152.2 28.7% 164.9 31.2% +12.7 （incl. Securitization） (171.0) (185.9) (+14.9)
Cash advances 353.4 66.7% 337.5 63.7% ▲16.0 （incl. Securitization） (437.7) (417.2) (▲20.5)
Other 24.1 4.6% 27.1 5.1% +3.0
Total 529.8 100.0% 529.5 100.0% ▲0.3 （incl. Securitization） (632.8) (630.2) (▲2.6)
‐5‐ OMC Card，Inc． Operating revenues(Consolidated)
Unit : billions of Yen Change vs. Change vs. % of Aug, 2008 Aug, 2007 Aug, 2007 Total (amount) (base:100%)
Credit card contracts 15.0 22.0% +1.1 +8.1% （incl. Securitization） (15.2) (+1.2) (+8.4%)
Cash advances 45.0 66.1% ▲11.5 ▲20.3% （incl. Securitization） (46.5) (▲11.6) (▲20.0%)
Insurance 1.1 1.6% +0.0 +1.6%
Other 6.9 10.2% +0.5 +7.2%
Financial transactions 0.0 0.1% ▲0.0 ▲21.8%
Total 68.0 100.0% ▲9.8 ▲12.6%
‐6‐ OMC Card，Inc． Operating Expenses(Consolidated)
Unit : billions of Yen Change vs. Change vs. Aug, 2008 Aug, 2007 Aug, 2007 (amount) (base:100%)
SG&A Total 35.3 +0.1 +0.3% Selling expenses 12.2 ▲0.6 ▲4.5% Salaries and fringe benefits 8.7 +0.0 +0.5% General and administrative expenses 13.0 +0.3 +2.2% Equipment expenses 1.5 +0.3 +30.6%
Provision for doubtful accounts 1.4 ▲15.6 ▲91.7%
Provision for losses on interest refunds 21.6 +3.7 +20.8%
Financial expenses 5.5 ▲0.6 ▲10.5%
Total 63.8 ▲12.4 ▲16.3%
‐7‐ OMC Card，Inc． Extraordinary Income/Losses(Consolidated)
Unit : billions of Yen
Aug, 2008
Extraordinary Income
Gain on Redemption of Investment Securities ３.６
Other ０.1
Extraordinary Losses
Loss on Devaluation of Investment Securities １.３
Other ０.1
‐8‐ OMC Card，Inc． The financing relation(Consolidated)
■ Interest-bearing debt Unit : billions of Yen Change vs. % of % of Feb, 2008 Aug, 2008 Feb, 2008 Total Total (amount) Long-term debt 302.0 70.6% 277.7 63.7% ▲24.3 Short-term borrowings 103.4 24.2% 118.7 27.2% +15.3 CP 22.5 5.2% 39.5 9.1% +17.0 Total 427.9 100.0% 435.9 100.0% +8.0
■ Main financial indicators (incl. Securitization) Change vs. Feb, 2008 Aug, 2008 Feb, 2008 (amount) Direct financing ratio 27.4% 26.5% ▲0.9% Fixed-interest debt ratio 48.6% 47.0% ▲1.5% Long-term debt ratio 72.7% 70.3% ▲2.3%
‐9‐ OMC Card，Inc． Strengthening financial position
■ The enhancement of the corporate value by improving our credit standing and strengthening financial position
15% ＜Trend in Equity Ratio＞
Capital increase through third-party allotment
・ ： 11.0% Date of issue October 14, 2008 ・Funds to be procured：JPY 15,999,984,000 (issue price: JPY 240) ・Subscriber：Sumitomo Mitsui Financial Group, Inc.
10% 8.9% 8.2% Convertible Bond-Type Bonds with Stock Acquisition Rights
・Date of issue：October 14, 2008 ・Funds to be procured ：JPY 13,000,000,000 ・Subscriber：Sumitomo Mitsui Financial Group, Inc.
5% Feb, 2008 Aug, 2008 Oct, 2008 （After capital increase）
‐10‐ OMC Card，Inc． RiskRisk ManagementManagement
‐11‐ OMC Card，Inc． Compliance with Regulatory Revisions
Regulation Measures Launched in Revision ofMoney-Lending Industry Law
Article 17.1 Regarding delivery of pressure-sealed postcards December 2007
Article 17.1 Move to electronic document delivery: OMC Plus June 2008
Regulations on Consent for electronic delivery of monthly statements: OMC Plus March 2008 delivery of documents Consent for electronic notification of monthly billing statements: new applications June 2008
Delivery of monthly billing statements in printed document form: September 2008 regarding enclosures sent with monthly statements
Electronic delivery of monthly billing statements: OMC Plus December 2008
Lower interest rates on new loans September 2007 Regulations on Interest Rate Caps Change in the details included in monthly billing statements： balances detailed per cash-advance interest rate October 2007
Law for Prevention of Transfer Post office launches restrictions which limit addressees for mailings September 2008 of Criminal Proceeds to only the cardholders in question
‐12‐ OMC Card，Inc． Rebuilding Risk Management System
■ Reinforcing counseling services → Strengthening counseling infrastructure → Building a system for close counseling ■ Strengthening measures against doubtful loans → Stricter credit controls → Reining in unit risk cost ■ Taking measures to respond to changes in the Money-Lending Industry Law
【Improvin【体制整備】g systems】 May, 2007 Jun, 2007 Dec, 2007 Mar, 2008 Counseling reinforced
Building up counseling Adopting Creating database Improving structure infrastructure facilitation method for counseling for managing counseling Building up facilities Structure altered by Sharing know-how Stricter monitoring Increasing manpower for implementing management Optimizing resource system: raising with active on-site management Reviewing head count by 1.4x involvement educational systems
Credit controls Renewing credit Renewing Establishment of Annual income certificate assessment management credit management credit control center database construction Renewal of credit Newly set up with staff of 24 Appropriate credit Scoring through BSS Dramatic improvement in controls employed in assessment model (Behavior Scoring Face-to-face assessment monitoring levels preparation for Article System) and segmental 4 revision model management Timely action to give warnings Remote assessment model Getting annual income certificate
‐13‐ OMC Card，Inc． Progress in Stricter Credit Policies ①
■ Exercising stricter credit assessments based on a new interest rate model ■ Restraining average credit balance for cash advances by linking credit assessment and credit management
（billions of Yen） （thousand of Yen） ＜Trend in cash advance balance ＞ ＜Trend in card issuance rate＞＜Trend in average cash advance balance ＞
※before Securitization
86.0% 83.7% 83.6%83.4% +5％
83.2% 80.9%80.3% ▲3％ 81.3%
100%
450 437.7 380 +6％
43.5% 417.2 80% 40.1% ▲4％ 360 （ ） 33.5% yoy 400 60% 32.0%
Total 340 40% Credit Card ※Trend in card issuance rate Loan Card ＝Issuance／Applications 350 20% 320
‐14‐ OMC Card，Inc．
Feb, 2006 Feb, 2007 Feb, 2008 Aug, 2008
Feb, 2008 Aug, 2008 Feb, 2006 Feb, 2007 Feb, 2008 Aug, 2008 Progress in Stricter Credit Policies ②
■ The on-time settlement ratio (the total actually deducted from customers' bank accounts/the total charged to customers' accounts) has improved due to a structural shift in the loan balance portfolio ■ The average amount of new delinquent loans (the total amount of new delinquent loans/the number of new delinquencies) has fallen following the adoption of more flexible credit controls
＜On-time settlement ratio & Amount of initial delinquencies ＞＜Average amount of new delinquent loans＞
102% 102% 102% 101% 101% 100% 100% 100%
105% 105% 100% 97% 96% 96% 100% 100% 94% 95% 96% 93% 95% 95% 94% 95% 95% 92%
90% On-time settlement ratio 90% 90% Average amount of new delinquent loans Amount of Initial Delinquencies ※rebased at 100% as of 1H FY 2007 ※rebased at 100% as of 1H FY 2007 85% 85% 2007 2008 2007 2008
‐15‐ OMC Card，Inc．
1H Mar. Apr. May. Jun. Jul.1H Aug Mar. Apr. May. Jun. Jul. Aug Provisions for Doubtful Accounts
■ Loans made under old credit controls steadily reduced by tightening credit management. ■ Doubtful account provisions reduced because a reduction in such loans lowers the provisions made for the loans.
（billions of Yen） ＜Trend in Provisions for Doubtful Accounts＞ 100 In the 1H to August 2007 provisions for doubtful accounts were front- loaded to conservatively account for future risk 80 ▲16.7
60 Adoption of stricter credit limits
89.6 Steady reduction of loans made 40 72.9 under old credit controls
20 40.1 Change vs. Aug. 2008 Aug. 2007 Provisions for 0 Doubtful Accounts ¥1.4 billion ▲¥15.6 billion Feb, 2007 Feb, 2008 Aug, 2008
‐16‐ OMC Card，Inc． Risk Indicators
■ The reserve ratio went down due to a reduction in loans made under old credit controls, but the level of the ratio has remained relatively high. ■ The reduction achieved in loans under old controls and the promotion of new risk 20% management brought a fall in the delinquency ratio.
＜Trends in Risk Indicators＞ Reserve Ratio 15% Deliquency Ratio 15.4% Write-Off Ratio 12.9%
10%
7.5% 6.5% 7.6% 5% 5.8% 5.1% 6.2% 4.5% 5.8% 3.7% Feb,3.1% 2006 Feb, 2007 Feb, 2008※The annualized Aug, figure 2008 is adopted for the write-off 0% ratio in the six months period to Aug. 2008.
‐17‐ OMC Card，Inc． Losses on Interest Refunds ①
■ The trend in the number of transaction history calculation records produced for reference when checking for interest refunds turned from November 2007. 120% ＜Trend in the number of transaction history calculation records produced＞
100%
80%
60%
40%
20% ※rebased at 100% as of Nov 2007 ※3-months moving average adopted 0% Mar. May. Jul. Sep. Nov. Jan. Mar. May. Jul. Year to Feb 2008 Year to Mar 2009
‐18‐ OMC Card，Inc． Losses on Interest Refunds ②
■ Have made appropriate provisions to reflect changes in industry environment
（billions of Yen） （billions of Yen） ＜Trends in Sums refunds and Principal Portion＞ ＜Allowance for losses on interest refunds＞
50.0
8 40.0
6 30.0 6.0 40.1 5.7 5.6 5.4 20.0 4 4.3 29.8 10.0 2 2.4 1.7 1.9 1.3 1.3
0 0.0
'06_1Q 2Q 3Q 4Q '07_1Q 2Q 3Q 4Q '08_1Q 2Q
‐19‐ OMC Card，Inc．
Feb, 2008 Aug, 2008 OperatingOperating ReviewReview
‐20‐ OMC Card，Inc． Main Operating Indicators
Unit : in thousand Change vs. Change vs. Aug, 2008 Aug, 2007 Aug, 2007 (amount) (base:100%)
Applications 864 ▲196 ▲18.5% Credit card 824 ▲164 ▲16.6% Loan card 41 ▲32 ▲43.8%
Issuance 703 ▲150 ▲17.6% Credit card 689 ▲137 ▲16.6% Loan card 13 ▲12 ▲48.2%
Cardholders 9,927 +647 +7.0% Credit card 9,792 +649 +7.1% Loan card 135 ▲2 ▲1.2%
Card user rate 62.8% ▲0.7% -
‐21‐ OMC Card，Inc． Growth cardholders ～Number of cardholders & Card cancellation rate～
■ Expanding the number of cardholders by building strong relationships of trust with customers12% ■ Cultivating customer-centric management emphasizing listening to the “customer’s voice” 12 （in million） ＜ Number of cardholders & Card cancellation rate ＞
Cardholders Card cancellation rate 8% 9.5% 9.2%
10 7.6%
4% 8 9.93 9.28 8.46
※Card cancellation rate ＝ Number of cards cancelled／（cardholders at the beginning of the year + Number of cards issued） 0% ※Cancellation rate is translated into annual rate. 6 Aug, 2006 Aug, 2007 Aug, 2008
‐22‐ OMC Card，Inc． Increasing The Number of Cardholders ～Trends in Solicitations～
■ Progress achieved in increasing effective solicitations by focusing management resources in frequently used channels ■ Aiming to achieve 2.3 million solicitations in FY2008 by offering new co-branded cards and expanding the channels for solicitation ＜Trends in Number of Solicitations＞
（Units: million ） 【Factors for increase vs 2H FY07】 【Factors for decrease vs. 1H FY07】 Stronger ties with Daiei/Maruetsu FY2008 Target: 2.5 Making effective solicitations Expanding “Edion” channel to achieve ・Reviewing unprofitable channels Increasing new co-branded cards ・Management resources Launched system to respond to 2.3 million solicitations 2.0 concentrated in highly-used channels the Law for Prevention of Transfer Terminated new issuance of Postal of Criminal Proceeds Savings Joint Cards + Impact of the Law for Prevention of Expanding high-quality 1.5 Transfer of Criminal Proceeds customer base
＜Trends in card-user rate＞ 1.0 80% 1.44 63%
（+0.50） 70% 0.5 1.06 0.86 0.94 （▲0.20） Industry-best rate 60% maintained 0.0 50% 1H FY2007 1H FY2008 2H FY2007 2H（Estimate FY2008）
‐23‐ OMC Card，Inc．
Aug, 2006 Aug, 2007 Aug, 2008 Growth cardholders ～Strengthen our alliance with Daiei Inc.～
■ Taking measures to strengthen our alliance with The Daiei Inc. ■ Strengthening cooperation with Daiei to expand its sales through various sales campaigns
＜various sales campaigns＞
＜The point exchage＞ 120% ＜ YOY trends by Daiei channel＞
101% 98% 100%
＜Thans Fair＞＜Hello Kitty fair＞ 95%
80%
68% Credit Card Contracts ＜The offer with OMC member special price＞ ＜“100% cash-back shopping” campaigns＞ Aplications 60%
Aug, 2007 Aug, 2008
‐24‐ OMC Card，Inc． Increasing The Number of Cardholders ～MSP Model～
■ Expanding high-quality customer base by implementing MSP Model ■ Launched “Nishizawa Card” which features integrated points program
Major cards in the MSP model New co-branded card in the MSP model
ee Card & Edion Card NISHIZAWA CARD from July 2008 ・Applications c.124,000 ・Cardholders c.193,000 ＜Summary of the affiliate＞
・1,077 outlets （as of March 2008） Nishizawa Co., Ltd. ・92 outlets with permanent solicitation ・Business: General retailing counters （as of August 2008） ・Annual sales: ¥21.9billion ・Number of outlets: 53 （as of Apr ‘07） Solicitations started in Sep. 2008 at 78 outlets of Midori Denka Co., Ltd.
HIMARAYA Card
・Applications c. 70,000 GMS：4 outlets ・Cardholders c.602,000
Mr. Max Card ・ Applications c. 67,000 SM：9 outlets ・Cardholders c. 574,000
‐25‐ OMC Card，Inc． Credit Card Contract Business ①
■ Dramatic increase in profits from credit card contracts, bringing a reconstruction of the earnings portfolio ■ Promoting customer portfolio management as a way to raise the number of accounts in active use
（billions of Yen） ＜Transaction Volume of Credit Card Contracts＞ ＜Rising major KPI’s for Credit Card Contracts＞
¥1,256.9bn Transaction Volume 2H 116% 1,500 （Estimate） Accounts In Use 1H Average Account Balance
¥1,019.8bn 120% ¥940.3bn 1,000 114% 717.8 115% 108% 518.9 477.2 110%
106% 500 105% 100% 539.1 100% 102% 102% 463.1 500.9
※rebased at 100% as of Aug, 2006 0 95%
Feb, 2007 Feb, 2008 Mar, 2009 ‐26‐ OMC Card，Inc．
Aug, 2006 Aug, 2007 Aug, 2008 Credit Card Contract Business ②
■ Activation of store employees to achieve more effective promotion of products & services ■ Growth in fees from customers from a build-up of revolving credit & installment repayment balances
（billions of Yen） ＜Revolving credit and installment repayment balances＞ ＜YOY trends in Revenue of card shopping＞
Total revenue of card shopping
Fee from customers +12% 100 Fee from affiliated stores 15% +11%
n .1b +8% ¥+4 10% +8% n .7b ¥+6 +5% bn 80 .3 ¥+4 +6% +6%
5% +4%
+3% ※before Securitization 60 0%
‐27‐ OMC Card，Inc． Feb, 2007 Aug, 2007 Feb, 2008 Aug, 2008 Aug, 2006 Aug, 2007 Aug, 2008 Web-based Communications
■ By strengthening drive in Internet-based businesses, achieving change in the business structure and more competitive sales operations
Speedy issuance possible via the Internet
Web sites dedicated to gold card members Complete renewal available from Oct. 2008 in June 2008
New cards mainly targeting women launched in Aug. 2008
‐28‐ OMC Card，Inc． Web-based Communications ～OMC-Plus （Website for Members）～
■ Reducing operational costs through higher utilization of digital communications
Total renewal of OMC-Plus in June 2008 （Units: million） ＜Trend in OMC-Plus members＞ 1.29
1.4
1.2 0.72
1.0
0.8
0.6
0.4
（Estimate）
Feb, Aug, Feb, Aug, Feb, Aug, Mar, 2006 2006 2007 2007 2008 2008 2009
‐29‐ OMC Card，Inc． Web-based Communications ～Gold Cards～
■ More fulfilling gold card services and improved customer satisfaction for gold card members ■ Increase in the number of gold card members contributing to higher transaction volumes
＜OMC Gold Card＞ ＜OMC Gold Card （Hello Kitty）＞
Main service features ・Offering up to double usage points ・¥50mn domestic/overseas travel accident insurance coverage By opening ・Offering “Premium Club Off” services dedicated website: ・Pre-booking for members for tickets to charter performances ・no. of new members ・Exclusive road service for OMC Gold Card members, etc. increased ・card usage by existing
200,000＜Trends in average purchases using gold cards＞ customers increased
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000 About 1.5 times OMC gold card 20,000 industry average Industry average gold card 0 Aug, Feb, Aug, Feb, Aug, Feb, 2005 2006 2006 2007 2007 2008
‐30‐ OMC Card，Inc． Web-based Communications ～Cultivating New Customers～
■ Launched “MasterCard N-Value” targeting fun-loving adults ■ Introduced a new card targeting women in the “Jiyu!da!” range of free-style payment cards
＜Card positioning ＞ “MasterCard N-Value” from June 2008 Premium Stage Concept card for Classic Gold fun-loving adults New Card First Premium Stage 「Master Card N-Value」 Strategic cards positioned between proper cards and gold cards
【Card features】 「Pleasure Value」 Offering “Premium Club Off” total lifestyle support Carrier Stage Classic & Kitty membership services 「Security Value」 Full insurance and peace-of-mind support 「Price Value」 High-level services offered for a reasonable fee miberry Jiyu!da! Entry Stage New ”Jiyu!da!” card from August 2008
Primary Stage Mainly targeted at fashion conscious women
‐31‐ OMC Card，Inc． E-Money
■ Expansion in the growing E-money market segment driving growth in card shopping transaction volume
＜Trends in transaction volumes via E-money＞ 20 Higher transaction volume due to growth in E-money payments
15
10 Possibility of introducing “iD”
Full-scale launch of “QUICPay” in Jul. 2007 5 “Visa Touch” service introduced in Mar. 2007 ※rebased at 1 as of 2H FY2006
”QUICPay” service introduced to OMC/JCB cardmembers in Oct. 2006 0 2H FY2006 1H FY2007 2H FY2007 1H FY2008
‐32‐ OMC Card，Inc． New Measures within the SMFG group
■ Enriching card member services by offering a wide range of cross-border preferential services
2008.10.1 Establishment of the “Globe Pass Promotion Committee”
Preferential service program Participating countries： offered to cardmembers Thailand Sumitomo Mitsui Card （scheduled for Dec 2008） Indonesia OMC Card China Central Finance Hong Kong QUOQ Korea The Philippines VJA Group Singapore Strategic move Malaysia towards expanding ※Offering wide-ranged, cross-border preferential business volume services for members, while establishing international alliances in order that affiliate partners can mutually arrange the handling of guest tourists
Visitors to Japan Japanese traveling abroad Increasing 2,500 2,500 20 million 20 million tourist population 2,000 people in 2020 2,000 people in 2010 ¾The Japan Tourism 1,500 1,500
Agency established 1,000 1,000 （2008.10.1） 500 500
0 0 2007 2008 2020 2006 2007 2010
‐33‐ OMC Card，Inc． Third-Party Card Processing Business①
■ Solidifying operating base as a card processing company by boosting business volume ■ Increases Business Competitiveness by Cost sharing ＜Increasing operating revenues in third-party card processing business ＞ 300% 267%
200% 118% “Central Finance Co., Ltd..” 100% 100%
“Sony Finance International, Inc.” ※ 0% rebased at 100% as of Aug, 2006 Aug, 2006 Aug, 2007 Aug, 2008 “COSMO THE CARD” Towards
“IY Card Service” “M&C realization of SYSTEMS 大手 Major Shopping Centers SC Co., Ltd.” processing “UCS Co., Ltd.” 16 million 30 million 13 million cardholders Outsourced Scale entrusted cardholders cardholders Cardholders Feb, 2007 Feb, 2008 Apr, 2009
‐34‐ OMC Card，Inc． Third-Party Card Processing Business②
■ Planning to further expand third-party card processing business by pursuing higher quality and lower costs
＜Security gate＞＜Staff training＞ ＜Communication space＞
Kikukawa Office ＜Assessment center＞＜Call center＞＜Office center＞ ■Card Center （Tokyo） ■Credit Management Center ■Service Center ■Office Management Center Nakano Office ■Customer Center
■Tokyo Management Center ■Legal Affairs Management Center Hakata Office ■Counseling Center ■Loan Customer Center ■Card Center （Fukuoka） Tokyo
■Osaka Management Center ■Fukuoka Management Center ■ Credit Management Center MCS Servicer Co., Ltd. Fukuoka （Western Japan)
‐35‐ OMC Card，Inc． Structural shift of portfolio
■ Expanding high-quality operating receivable through high accuracy risk control ■ Bringing a reconstruction of the earnings portfolio by expanding card shopping and feebusiness
（billions of Yen）（＜Operating receivable balance portfolio＞ billions of Yen） ＜Operating revenues portfolio＞
Other ※before Securitization BPO etc.
Cash Advance Cash Advances Card Contracts(Fees from Affiliated Merchant) Card Contracts(Credit Sales,Payment by Bonus) Card Contarcts(Fees from Custmers) Card Contracts(Revolving, Installment) BPO expansion （4％） 100 800 （3％） （9％） （% of total） （% of total） （12％）
600 80 （72％） （74％） （66％） 60 400 （66％） 40
200 （14％） 20 （12％） （10％） （13％） （16％） （13％） （7％） （9％） 0 0
‐36‐ OMC Card，Inc．
Aug, 2006 Aug, 2008 Aug, 2006 Aug, 2008 Cost Structure Reforms
■ Streamlining the business structure with strong emphasis on profit margins to counter structural changes in the industry ■ Promoting BPR by considering optimization on a company-wide basis
（billions of Yen） ＜YoY comparison of SG&A costs＞
50 Selling Expenses Greater efficiency in solicitation Salaries and Fringe Benefits General & Administrative ・Reviewing unprofitable channels Equipment Expensen ¥35.3bn ・Adopting joint sales promotions +¥0.1bn over 1H FY06 to achieve solicitation efficiencies 40 ¥35.2bn 【Cost pressure elements】 Cost of solicitations Rising business volumes ▲30% vs 1H FY06 ・Cardholders +17% 30 12.9 ・Card shopping transaction volume 12.2 +16% Cost reductions through BPR ・Third-party card processing business +167% ・Optimizing promotion costs ・ 20 ・Total assets +8% Reviewing contracts, operational flows 8.6 Measures responding to regulatory 8.7 ・Lowering postal costs through revisions in the industry electronic notification ・system-related measures ・credit scoring costs 10 Moving costs for Tandem Center Cost reduction through Procent 12.6 13.0 Cost reduction through Procent ・Control costs by setting tariffs ・Reductions in fixed costs 0 1.0 1.5 ・Reductions in system costs Aug, 2006 Aug, 2008
‐37‐ OMC Card，Inc． FinancialFinancial ForecastForecast for the Year ending March, 2009
‐38‐ OMC Card，Inc． Financial Forecast(Consolidated)
■ Cardholders Unit : in thousand Change vs. Change vs. Estimate Achivement Feb, 2008 Feb, 2008 （08/3～09/3） rate (amount) (base:100%)
Applications 2,300 +305 +15.3% 37.6%
Cardholders 10,350 +733 +7.6% -
■ P/L Unit : billions of Yen Change vs. Change vs. Achivement Achivement Estimate Feb, 2008 Feb, 2008 rate rate （08/3～09/3） (amount) (base:100%) （08/3～09/3） （08/3～09/2）
Transaction Volum 1,942.3 +275.6 +16.5% 43.8% 47.2%
Operating revenues 143.0 ▲8.6 ▲5.7% 47.6% 51.7%
Ordinary income 8.8 +0.9 +11.4% 50.0% 54.4%
Net income 6.1 +28.6 - 66.0% 70.6%
（注） As we will change our fiscal year end from the end of February to the end of March this term, the full-year earnings forecasts cover 13 months period.
‐39‐ OMC Card，Inc． TheThe MergedMerged CompanyCompany
‐40‐ OMC Card，Inc． Outline of the Merged Company
Trading Name Cedyna Financial Corporation
Surviving OMC Card, Inc Company
Head Office Nagoya City, Aichi Prefecture Location
New Tatsuo Tsuchikawa (Representative Director & Chairman), Hiromichi Funahashi, (Representative Director & President), Shinpei Nihei (Representative Director & Vice President), Shinji Ebata Management (Representative Director & Vice President), Yoshiki Hama (Representative Director & Vice President)
Description of Credit card business, installment credit business, financing business and other businesses Business
Merger Ratio OMC Card ： Central Finance ： QUOQ ＝ 1 ： 0.85 ： 20
Outstanding 488.331 million shares （planned） Shares
Listed Tokyo Stock Exchange (First Section） Nagoya Stock Exchange （First Section） Exchanges
‐41‐ OMC Card，Inc． Management Principles of the Merged Company
To create and consistently provide for the dreams and satisfaction of each and every customer in their lives ahead
Management Principles To aim to be the No.1 company for originality based in safety and confidence
To create an open work environment where employees share common objectives and can fully exercise their abilities
A name created using the initial letters of the words Credit Excellence & Dynamics The name invokes the goal for our new company to bring a dynamic breath of new air to its trusted Derivation of and secure consumer finance business and create sophisticated and outstanding value for customers. the name All employees of Cedyna, through the development, fusion and innovation of advanced financing “Cedyna” technologies, will continue to dynamically rise to the challenge of improving our products and services in order to make them more sophisticated and differentiated compared to our competitors, so that our customers may enjoy them with total peace of mind.
【Symbology】 Watching over our customers’ new lifestyles
Derivation of The sphere inside the letter C of Cedyna symbolizes an eye, which represents the customer’s viewpoint. It epitomizes our desire to the Logo dynamically support each and every customer in their pursuit of dreams and satisfaction in their lives ahead. The sphere also represents the Globe, expressing our new company’s global perspectives.
‐42‐ OMC Card，Inc． Positioning of the Merged Company
◆The birth of one of the largest credit card companies in the industry after the merger
Transaction volume Cardholders Operating revenues (Credit Card Contracts and Cash Advances)
Credit Saison Mitsubishi UFJ Mitsubishi UFJ Nicos Nicos Mitsubishi UFJ Nicos Credit Saison Sumitomomitsui Card
セディナ セディナ Credit Saison
Sumitomomitsui Sumitomomitsui Card Aeon Credit Card
Aeon Credit Aeon Credit セディナ
Life Orient Corp. JAL Card
Orient Corp. Jaccs Toyota Finance
Jaccs Life Orient Corp.
Aplus Toyota Finance Jaccs
NTT Docomo Unit : million Rakuten KC Unit : billions of Yen Life Unit : billions of Yen
0102030 0 100 200 300 400 500 0 2,000 4,000 6,000 8,000 Source：“Credit Card Market: Current Status and Perspectives” by Yano Research Institute Ltd. ※Non-consolidated company data （except for JCB which does not release non-consolidated data) ※Figures are for FY2007
‐43‐ OMC Card，Inc． Strengths of the Merged Company
The birth of a “hybrid consumer finance company”
Card Credit sales Solution
◇Solid base in the Chubu area（Nagoya） ◇Sales network with nationwide coverage ◇Strong affiliated companies ◇Credit assessment enabling credit card ◇Strategic alliance with Mitsui & Co. issuance within 15 minutes ◇Industry-best card utilization rate ◇Unique solicitation know-how and marketing ◇Industry-best installment credit turnover ability ◇Corporate settlement solutions ◇Promotional strength utilizing database marketing
OMC Card Central Finance QUOQ Total Business size (FY2007） Number of Cardholders at year-end (Note 1) 9.62mn 9.06mn 3.61mn 22.29mn Card shopping turnover (Note 2) ¥1,157.2bn ¥475.1bn ¥93.3bn ¥1,725.6bn Installment credit turnover ¥0.4bn ¥445.9bn ¥340.8bn ¥787.1bn Operating revenues ¥151.6bn ¥97.2bn ¥55.1bn ¥303.9bn
Note 1: Cardholders at the end of FY07 （based on disclosures） Note 2: including acquiring services
‐44‐ OMC Card，Inc． Medium-term Plans for the Merged Company
Unit : billions of Yen
FY 2009 FY 2010 FY 2011
Planned Planned YoY Planned YoY
Transaction Volume 7,412.0 7,866.0 +6.1% 8,395.0 +6.7% Operating Revenues 261.0 263.0 +0.8% 276.0 +4.9% Operating Income 10.5 19.0 +81.0% 30.0 +57.9%
Operating income margin (in operating revenue) Growth in FY2007 – FY2011 12% 10.9% 10%
7.2% Total turnover： +27% 8%
6% 4.0% 4% Operating income: +¥48.5bn 2% FY 2009 FY 2010 FY 2011
‐45‐ OMC Card，Inc． Synergies Materializing from the Merger ～Top-line Synergies～
◆Maximizing top-line synergies through the fusion of strengths in credit cards and credit sales
CreditCredit salessales businessbusiness ・Intensive use of management resources in growth areas ¾Customer base ・Reviewing transactions to respond to revisions in the Installment Sales Law & Specific Commercial Transactions Law ¾Nationwide sales network ¾Sales force ・Increasing SolutionsSolutions businessbusiness cardholders ・Adding higher-value services to service menus ・Building up in growth markets （Web/public money） Fusion ・Expanding transaction volume
Credit card business Credit card business ¾Strength in solicitation ・Expansion in channels geared to instant card issuance ・Raising ・Strengthening promotion capacity through the ¾Strong promotions profitability implementation of the MSP model ¾Database marketing strength
‐46‐ OMC Card，Inc． Synergies Materializing from the Merger ～Bottom-line Synergies～
◆Materialize bottom-line synergies by pursuing scale merits, reforming cost structures and integrating systems from an early stage
EconomiesEconomies ofof scalescale
・Reducing purchase costs through volume expansion ・Promoting ・Lowering outsourcing costs through scale merits operational efficiency
CostCost-structure-structure reformsreforms ・ ・Strengthening BPR Improving ・Proceeding with consolidation of hub offices cost performance ・Cutting personnel costs by streamlining overlapping business and optimizing staff assignments
SSyystemsstems integrationintegration ・Lowering ・Lowering investment and running costs by integrating systems system costs ・Cutting operational costs by consolidating business processing ・Improving efficiency by applying load balancing to centers
‐47‐ OMC Card，Inc． Changes in Earnings Portfolio and Cost-Structure Reforms
Operating Revenues Operating Expenses
（billions of Yen） Earnings （billions of Yen） Cost reduction through portfolio has been dramatic improvement 400 ※ Subsidiaries etc. in operational % of total revenues changing ※% of total expenses Solution efficiencies: ¥75.7bn Credit Sales Personnel costs Cash Advances SGA (excl. personnel costs)
Card Shopping Risk costs 4.3％ ％ 300 Other 400 15.6 Financial expenses 5.3％ 7.2％ Solutions 21.9％ 7.2％ 300 16.9％ 19.7％ Credit sales 200 38.5％
200
47.8％ 29.4％ 54.3％
100 100 Credit cards 38.0％ 27.2％ 14.5％ 17.3％ 6.2％ 9.3％ 7.9％ 11.5％ 0 0 FY 2007 FY 2011 (Estimate) (Estimate)
‐48‐ OMC Card，Inc．
FY 2007 FY 2011 Credit Sales Business Strategies ①
Credit Sales Auto Loans Utilize strong regionally-based sales networks ・Cultivate business relationships with leading players in the Strengthen ties with manufacturers’ financing arms industry ・Promote transactions with manufacturers’ finance companies ・Acquiring new customers through product line-ups that meet (Company A, Company B,,,,) the needs of affiliated partners ・Make a capital tie-up with PRIMUS Financial Services, Inc. Strengthen the links between credit cards & solutions ・Enhancing sales strength by offering a range of payment solutions ・Promoting sales capabilities by offering integrated solutions that provide payment and collection functions to match needs Develop overseas business Promote sales in growth segments ・Strengthen sales activities that take advantage of the sales ・Expand business in areas such as mail-order, digital electronic bases of the SMFG Group and Mitsui & CO appliances, financial aid for students etc. ・Build up Internet-based business Develop overseas business ・Strengthen sales activities which take advantage of the sales bases of the SMFG Group and Mitsui & CO Credit Sales turnover & operating revenues Auto loan transaction volume & operating revenues
Transaction Volume Transaction Volume Operating Revenues Operating Revenues
FY 2009 FY 2010 FY 2011 FY 2009 FY 2010 FY 2011
‐49‐ OMC Card，Inc． Credit Sales Business Strategies ②
Plans for sales offices Compliance with the Specified Commercial Transactions Law
Promoting operational efficiency Soundly review affiliated partners by consolidating outlets regulated by the law or altering outlet formats
FY2007 FY2011E Minimize loan risks and Sales offices Sales offices reputation risks in the future
Outstanding transaction balance at affiliated partners regulated by the law 139 outlets 79 outlets Forecast to fall to a quarter vs. FY2007
・ Refurbishing sales offices focusing on sales force and efficiencies so that they each fit the sales strategies in place in their respective regions or metropolitan areas
FY 2007 FY 2011
‐50‐ OMC Card，Inc． Medium-term Plans for Credit Sales Business
Unit : billions of Yen
FY 2009 FY 2010 FY 2011 Planned Planned YoY Planned YoY Transaction Volume 760.0 776.0 +2.1% 794.0 +2.3% Credit Sales 336.0 337.0 +0.4% 339.0 +0.7% Auto Loans 368.0 381.0 +3.5% 395.0 +3.6% Operating Revenues 57.0 55.2 ▲ 3.1% 54.5 ▲ 1.3% Credit Sales 34.0 32.0 ▲ 4.8% 30.0 ▲ 7.4% Auto Loans 16.5 16.1 ▲ 2.4% 17.6 +9.3% Operating Income 3.2 3.9 +19.3% 5.1 +31.9%
‐51‐ OMC Card，Inc． Solutions Business Strategies
Solutions
Solutions Business total turnover： Approx. ¥3.7 trillion 【Sales strategies】
・Strengthen sales promotion activities at sales offices nationwide ・Add higher value to solution products ・Leverage businesses in growth markets Collection agency business Business credit ・Increase channels through alliances with Turnover & operating revenues Turnover & operating revenues companies in different industries
Size of the solutions business （Actual combined figures of 3 companies）※FY2007
Collection Number of agency business transactions： c.1.54 mln
Collection agency business turnover： c. ¥2,600 bln Transaction Volu,e Transaction Volu,e Business credit c.¥300 bln Operating Revenues Operating Revenues turnover： FY 2009 FY 2010 FY 2011 FY 2009 FY 2010 FY 2011
‐52‐ OMC Card，Inc． Medium-term Plans for Solutions Business
Unit : billions of Yen FY 2009 FY 2010 FY 2011 P lanned P lanned YoY P lanned YoY Transaction Volume 3,338.0 3,505.0 +5.0% 3,679.0 +5.0% Collection Agency 2,932.0 3,079.0 +5.0% 3,233.0 +5.0% Business Credit 383.0 403.0 +5.2% 423.0 +5.0% Operating Revenues 18.0 18.6 +3.3% 19.8 +6.5% Collection Agency 11.8 12.1 +2.5% 12.9 +6.6% Business Credit 5.8 6.1 +5.2% 6.5 +6.6% Operating Income 2.1 2.9 +38.1% 3.3 +17.2%
‐53‐ OMC Card，Inc． Credit Card Business Strategies ①
Increasing the number of cardholders Unit : in thousand FY 2009 FY 2010 FY 2011
Planned Planned YoY Planned YoY Issuance 2,710 2,920 +7.7% 3,050 +4.5% Cardholders 21,430 22,750 +6.1% 24,150 +6.2%
Hybrid fusion of strengths in credit cards and credit sales Targeting 4.3 million growth Credit cards Credit sales in cardholder accounts ※Target increase of FY2011 over FY2007 ¾Solicitation system ¾15-minute ¾Strong affiliated partners instant issuance Increase new cardholders ¾MSP Model Fusion
¾Nationwide ¾Promotion strength by utilizing sales network Cultivate new co-branded cards database marketing strength
‐54‐ OMC Card，Inc． Credit Card Business Strategies ②
Expanding Card Usage ◆TaTargetingrgeting an increase in card shopping turnover to ¥2.9 trillion in FY2011 through synergies from the merger and the alliance with SMFG CardCard shoppingshopping turnoverturnover ¥2.9trillion ・Synergies from the merger & the alliance with SMFG ¥¥2.9trillion2.9trillion ＋¥120 billion impact
・Market cultivation Credit cards Credit sales FY2011 versus FY2007 ・More co-branded cards ・Card shopping market ¾Strong affiliated partners 8-9% growth ¾MSP Model Card shopping ¾Auto loan business utilization rate： UP 5% （overseas development） ・increasing usage Average balance ： ¾Promoting capacity・rising balance per account per account： UP10% through PM, CVC ¾Strong affiliated Number of partners Cardholders： UP20% ¾Industry-best card ¾Nationwide utilization rate sales network
‐55‐ OMC Card，Inc． Medium-term Plans for Credit Card Business
Unit : billions of Yen FY 2009 FY 2010 FY 2011 Planned Planned YoY Planned YoY Transaction Volume 3,234.0 3,502.0 +8.3% 3,835.0 +9.5% Credit Card Contracts 2,207.0 2,524.0 +14.4% 2,851.0 +12.9% Cash Advances 621.0 613.0 ▲ 1.3% 631.0 +3.0% Operating Revenues 172.0 171.0 ▲ 0.4% 182.0 +5.9% Credit Card Contracts 59.0 67.0 +13.3% 75.0 +11.8% Cash Advances 88.0 79.0 ▲ 9.5% 81.0 +1.8% Operating Income 9.6 14.8 +55.1% 22.5 +51.5%
‐56‐ OMC Card，Inc． Aiming to be Japan’s Premier Credit Card Business Group
April 1, 2009(Planned)
100%
・Linkage between credit Establishment of Intermediate ・Full line card and credit sales SMFG Card & Credit ・Affiliation based on ・Affiliation based on the utilization of existing MSP Model 48.6% ※After merger, the 66% infrastructure conversion(Planned) ・Consumers-oriented marketing ・High technology Maximization of Top-line Synergy Cedyna Financial Corp. Sumitomo Mitsui Card Company, Limited ①Complex partnership ②Expansion of contracting business ③Mutual complementation of functions and sharing of know-how
Pursuit of Economies of Scale
・Integration of systems ・Integration and centralization of processing and acquiring operations
‐57‐ OMC Card，Inc． WeWe willwill furtherfurther cultivatecultivate OMC’sOMC’s superioritysuperiority andand corporatecorporate cultureculture throughthrough thethe mergermerger
Environmental clean-up & protection activities Internal Cordial Greeting policy
¾¾HealthyHealthy businessbusiness activitiesactivities inin harmonyharmony withwith thethe environmentenvironment && societysociety ¾¾LiberalLiberal andand open-mindedopen-minded corporatecorporate cultureculture
Staff-Empowerment & CS Management Donations
【Earth friendly cards 】【【Waku Waku Points】 Team Minus 6%】
‐58‐ OMC Card，Inc．