Shinsei IR Day

Retail Banking Business

Shinsei Bank, Limited February 2017 Number of Individual Customer Accounts

 Total number of retail accounts surpassed 3 million in August 2016  Achieving high customer satisfaction ratings in outside surveys

3.2 1.7 1st place in the “Internet Banking” # of Customers (left axis, million) category of the 2016 Oricon Japan Assets excluding yen deposits and bank bonds (right axis, JPY trillion) Customer Satisfaction Survey

3.0 1.5

2.8 1.3

2.6 1.1

1st place in the “Banking Service” category of the 2016 Customer Satisfaction Index Survey conducted 2.4 0.9 by the Service Productivity & Innovation for Growth

2.2 0.7

2.0 0.5 2008/3 2011/3 2013/3 2014/3 2015/3 2016/3 2016/6 2016/9 2016/12

1 Market Share: Balance of Individual Customer Deposits 9.0% 8.0% 7.7%  Deposits from individual customers serve 7.2% 7.0% 7.0% as the core of the Shinsei Group’s low cost, stable funding. 6.0% Market share of individual customers’ FCY deposit 5.0% balance among banks operating in Japan 4.0%  Balance of yen deposits remains stable 4.2% 3.0% at approx. JPY 4.8 trillion. Market share of individual customers’ JPY deposit No significant changes in market share. 2.0% balance among banks operating in Japan 1.2% 1.1% 1.0% 1.1% 1.1%  0.0% Foreign currency (FCY) deposit balance 2008/3 2011/3 2013/3 2014/3 2015/3 2016/3 2016/6 2016/9 2016/12 of USD-equivalent 3.2 billion (approx.

FCY deposit balance (USD equivalent, left axis, USD billion) JPY 380.0 billion) as of Dec 2016. 4.5 450 FCY deposit balance (JPY equivalent, right axis, JPY billion) 4.0 400  3.5 350 Significantly larger market share of FCY 3.0 300 deposits compared to JPY deposit 2.5 250 market share. 2.0 200 Realizing stable funding from retail 1.5 150 banking customers. 1.0 100 0.5 50 0.0 0 Source: Deposits: Statistics of the Bank of Japan, Domestic banks Individual deposits 2008/3 2011/3 2013/3 2014/3 2015/3 2016/3 2016/6 2016/9 2016/12 2 Market Share: Investment Trusts 【Investment Trust Balance Market Share】 【Investment Trusts】 500 2.5% Balance (left axis, JPY billion)  A remarkable reduction in customers’ 450 Share (right axis, %) investment appetite has resulted from the Bank 400 2.0% of Japan’s negative interest rate policy. 350  Despite fund redemptions and the shelving of 300 1.5% the establishment of new funds, resulting in a 250 reduced deal-basis balance, market share

200 1.0% maintained.

150 【Asset Management Product Sales】  100 0.5% Shifted focus of operations to supporting the medium to long-term asset building and 50 management of current customers. 0 0.0% 2008/3 2009/3 2010/3 2012/3 2014/3 2016/3 2016/6 2016/9 2016/12  Expanded services and product offerings, Source: Japan Investment Trust Association particularly mutual funds and insurance, in 【Asset Management Product Balance Trend】 order to meet a diverse range of investment (JPY billion) 1,200 objectives and management needs 1,000  Provide novice investors and the asset- Structured accumulation generation with an approachable 800 Bonds investment environment. 600 Insurance  Expanded target customer base through the 400 Investment offering of fixed premium insurance products in Trusts 200 addition to providing product features suited for inheritance purposes which facilitate a multi- 0 2008/3 2009/3 2010/3 2012/3 2014/3 2016/3 2016/6 2016/9 2016/12 generation transaction relationship. 3 Market Share: Housing Loans

1.4 1.40% Balance (left axis, JPY trillion)  Recently saw strong sales results by 1.2 1.20% Share (right axis, %) capturing refinancing needs after the Bank 1.0 1.00% of Japan introduced the negative interest rate policy (NIRP). 0.8 0.80%  Customer focus has shifted to costs other 0.6 0.60% than interest rates due to low interest rate environment, and in regard to social issues 0.4 0.40% such as the social advancement of women and becoming unable to work as before Our 0.2 0.20% unique housing loan features (sick child 0.0 0.00% care services, etc.) are well received by 2004/3 2006/3 2008/3 2011/3 2014/3 2016/3 2016/12 customers and differentiates Shinsei Bank (Customer interest rates as of Dec. 31, 2016, bps) from other banks. Initial Initial Initial Initial  Maintained a certain level of profitability 10 20 35 Year Variable 3 Years 5 Years Years Years Fixed even after the NIRP was introduced. Fixed Fixed Fixed Fixed Shinsei 60.0 85.0 85.0 105.0 120.0 185.0 Bank

Maximum 72.5 120.0 125.0 105.0 240.0 212.0 Sources: Balances – Statistics of the Bank of Japan, Domestic banks and Shinkin banks housing loans for individual customers Interest rates – Data surveyed by Shinsei Bank Minimum 49.7 35.0 38.0 45.0 90.0 110.0 Three mega banks, Resona, Sumitomo-Mitsui Trust Bank, Mitsubishi-UFJ Trust Bank, Yokohama Bank, Chiba Bank, Sony Bank, Sumishin SBI, Jibun Bank, ARUHI

4 Awareness of Retail Banking Business Issues

Recognized Issues  Lack of new customers and the aging of existing customers in the sale of asset management products  Investing opportunity needs increasing in the asset-accumulation generation and younger demographics  Changes in product profitability influenced by economic and financial markets conditions

Countermeasures

Need to maximize customer base in terms of both quality and quantity  Activation of existing customers (wide range of age groups and geographic areas)  Utilization of the Group customer base  Utilization of ex-Shinsei membership bases

Work on deepening relationship and expanding customer base by optimizing communication, touch points and messages

5 Initiatives Implemented

 Channel  Facilities  New branches (Shibuya, Nagoya, and Tama plaza) ⇒ Touch points and consulting opportunities increased  Partner ATM network expanded ⇒ Touch points increased  Creation of the customer service space “Beans” ⇒ Floor space for serving customers enlarged in branches  Operations  Revision of over-the-counter operations ⇒ More time to interact with customers Operations centralized and outsourced  Tablet based document entry ⇒ More time to interact with customers Operations centralized and outsourced  Outbound calling consolidated in the ⇒ More time to interact with customers “Direct Banking Team”  Customer service  Omotenashi project ⇒ Improving customer service skills and morale  Product; Service  Low minimum investment products, reduction of minimum investment on existing products ⇒ Message optimized and consulting opportunity increased  Expanded offerings of fixed premium insurance products  Minimum investment amounts reduced for investing in investment trusts  Minimum investment amounts reduced for structured bonds  Attracting Customers ⇒ Message optimization and consulting opportunities increased  Birthday JPY time deposit  Offering of higher interest rates on time deposits in branch locations

Further develop relationships with customers through the use of a new CRM system going forward and expand the customer base by introducing new online banking services equipped with communication functions

6 Connecting Customers, Channels, Staff and Systems Through CRM

 Seeking to expand the business base by strengthening the relationships between customers and the Bank through the optimization of customer touch points by appropriately compiling and using customer information and maximizing the number of customer contacts through the integration of business functions • Interaction/Transaction history • Website/Online access by customers Identify products in which a Customer • Customer analysis score customer will be interested Information • Customer’s portfolio CRM system • Customer’s life event Compile and utilize customers’ • Good use of AI investment preferences, info. from other institutions, etc.

Customers Staff More tools to directly connect • PC, Smartphone, email, and SNS with customers • Online banking Channels • Housing loan staff More channels for transactions • Operation staff and procedures

Provision of customer-interaction data with other divisions

• Interlinking of all systems • Tablet connectivity Complete transaction/procedures Operations • Paperless in collaboration with other divisions • List, Pipeline • Report Aggregation Use of indexes which are automatically aggregated in real time

7 High-level Use of Customer Information Through the Application of AI (1)  Use AI to analyze customer information in order to deepen relationships with customers  Commenced test marketing based upon “Pin Point Cross Selling” model  Develop the above-mentioned marketing to establish a higher-level marketing model in the future in order to offer products to customers via the most appropriate channel and at the best timing  Outsourced to SecondXight Inc. to analyze a large amount of data & info using scientific & statistical techniques and to develop a highly accurate forecasting model in a shorter period of time Current Pinpoint Type Cross Selling Customer Enlightenment Type Event Based Type Cross Selling Cross Selling Customer segment “Upper DINKS, 30s Product D SNS： Went to Housing Loan Customer segment “Family, 30s” see a condo♪ Preferential Rate 70% Campaign Customer segment “Urban area, Single, 20s” Product E 60% Info fed Customer Events found and into EBM recommended Purchase rate Product Profitability Product B Product F 50% automatically 80% B Purchase 30% rate 50% EBM Product A Product C Product C Product G 60% 50% Analysis model developed Product A 55% 40% Customer Excellent Product D Customer Attribute Purchase sales rep.’s …

… Time expertise

• Identify purchase pattern/history of profitable customers • Event detection model & Appropriate product advice • Segment customers by attribute - Profitable customers: Product A→B→D model to be developed based on attribute, - “Urban area, Single, 20s”, Unprofitable customers: Product A→C→G account/transaction info, and excellent sales rep’s “Family, 30s”, etc. know-how. (Event Based Marketing) • Follow the identified flow to make cross-selling • Purchase rate to be calculated for each segment to - Purchase rate of Product B is lower than Product C, • Various big data to be automatically fed into EBM to make cross-selling but a purchaser of Product B ended up being a cross sell most suitable products for life events, etc. ： ： - Product B 80%, Product C 60% profitable customer. Therefore, Product B should be - SNS message, etc. to be fed and analyzed to offer offered as a cross-selling product. housing loan preferential interest rates, etc.

8 High-level Use of Customer Information Through the Application of AI (2)

Current Operation Objectives of Collaboration with SecondXight Inc. • Measures implemented according to A. Increase Utilized Data Forecasting Model in response to a • Analysis using data across multiple products, business which is promoted at the time e.g. loans, investment products, various financial • Analysis conducted by mainly classical cards, etc. statistics “White Box” method (logistic • Broader usage of web behavioral data regression analysis, decision tree) such as blogs • Data to use: Attribute, Transaction, Month-end balance B. One-To-One Basis by product, Withdrawal/Deposit history, • Accurate forecasting of suitable products & Interaction over the counter, by phone, etc. channels based upon individual customer characteristics → Clearly identify “which product” should be recommended to “whom” “at which time” and in “what manner” Matters Currently Not Being Addressed C. Analytical Technique Enhancement • Financial advice for customers about suitable • Establishment of Forecasting Model with higher- products via suitable channel level machine learning methods (Black Box model such as Deep learning, Ensemble • Proposals for the Bank to draw up customer- learning, etc.) activation measures • Continual improvement/adjustment of the Model by learning from feedback about implemented 9 measures High-level Use of Customer Information Through the Application of AI (3)  Expected Effectiveness A) Increase in data utilization B) Forecasting Model enhancement Expected effectiveness approx. 2 to 6 times for all products C) Analytical technique enhancement

Structured bond – Product A Structured deposit – Product B (approx. twice that of the previous method) (approx. 3-fold that of the previous method) 25% 6% 20% 5% 4% 15% 3% 10% 2% 5% 1% 0% 0% Existing method New method Existing method New method

Insurance – Product C Mutual fund – Product D (approx. 4-fold that of the previous method) (approx. 5-fold that of the previous method)

2% 7% Provide approx. 3 million customers 6% with score, pick up 2% 5% top 5,000 customers ranked in “probability of forecasting”, and 4% 1% compare their response results 3% in 2 months

1% 2% 1% Existing method: White box model New method: Black box model 0% 0% Existing method New method Existing method New method

10 Next Generation Online Banking

Concept of New PowerDirect  Conversion to a communication tool from a transaction tool (with a next generation CRM)

 Customer-friendly online banking, easy to view and easy to use

 High-level security to protect customers’ assets (prevent customers’ assets from being stolen by crime groups)

 Excellent maintainability and extendibility system

11 Next Generation Online Banking – Website Screen Image

Product ・Services ｜ Campaign ｜ Interest rates｜ FAQ Logout

Structured 登録情報 Account info Fund transfer JPY deposit FCY deposit Mutual Funds FX Card loan Housing loan My Page Important info deposits 各種設定 Withdrawal retrieved from A/C info Top ｜ Deposit ｜ Step Up Program ｜ T Point program｜ Notice box ｜ お取り引きレポートOnline seminars ｜ 入金方法 CRM to display through CRM or Email address is not Online seminar starts soon here Please update your 時Login Time： yyyy/m/d address. yet registered with us. another system Event notice ＜Today’s Seminarど ＜Seminar which interest you scheduled> What happens to for individual US employment data. ～ customer 【Urgent Seminar】 Brexit influence → Seminar Sing up Face-to-face communication → Enter (Recommend) with the Bank rep Status retrieved Incomplete procedures: from SF to Mutual fund a/c opening Please return documents by post. → Material request Individualized message display here, NISA A/C opening My Number registration is not completed. → Doc. upload entered by the Bank rep and induce to & after a sales session at coordinate with ＜Message from the Bank rep Ms. --- -- branch (Branch code 123) A/C # 1234567 the Bank branch the next action Thank you for your visiting our branch. Account balance（JPY（ ? ）equivalent ） mm dd, yyyy hh:mm Feel free to contact me if you have any Total 999,999,999,999 yen question. Kudo JPY savings 999,999,999,999 yen → Trx history → Fund transfer JPY time deposit 999,999,999,999 yen → Trx Phone: → XXX- XXXX- XXXX FCY savings 999,999,999,999 yen → Buy → Sell New communication Chat: → Ask now FCY time deposit 999,999,999,999 yen → Trx beyond time and space Videophone: → Connect now Account details Structured deposit 999,999,999,999 yen → Balance inquiry → Trx retrieved from Mutual fund 999,999,999,999 yen → Trx （Mutual fund Top) ※ It may take time to connect core system to → A/C info TOP display here Request for Recent 5 transactions JPY savings Application forms or Date Code Credit Debit Product brochures Seamless m/d 123456789012345 123,456,789,123円 123,456,789,123円 collaboration with m/d 123456789012345 123,456,789,123円 123,456,789,123円 Reservation for sales-force workflow m/d 123456789012345 123,456,789,123円 123,456,789,123円 Consultation at branch m/d 123456789012345 123,456,789,123円 123,456,789,123円 m/d 123456789012345 123,456,789,123円 123,456,789,123円 12 Smartphone Banking

Timeline Establishing Smartphone-banking Environment & Functions  Nov 2013 Homepage smartphone compatibility upgraded  Feb 2014 Smartphone specific banking website launched  Mar 2014 Account opening application software provided for Smartphone users  May 2014 Application software provided for Smartphones (support app)

Timeline of Improving Smartphone-banking Functions

 Aug 2015 Foreign currency transaction application software provided for Smartphones 【A/C opening app】 【Support app】  Apr 2016 Mutual fund transaction via Smartphones started  Sep 2016 FX transaction application software provided for Smartphones

Number of PowerDirect Logins via Smartphone (monthly total)

【FCY deposit app】 【FX app】 2014/7 2014/9 2015/3 2015/9 2016/3 13 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.

14