Mizuho IR Day 2020
September 2020 Forward-looking Statements This presentation contains statements that constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, including estimates, forecasts, targets and plans. Such forward-looking statements do not represent any guarantee by management of future performance. In many cases, but not all, we use such words as “aim,” “anticipate,” “believe,” “endeavor,” “estimate,” “expect,” “intend,” “may,” “plan,” “probability,” “project,” “risk,” “seek,” “should,” “strive,” “target” and similar expressions in relation to us or our management to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions. These statements reflect our current views with respect to future events and are subject to risks, uncertainties and assumptions. We may not be successful in implementing our business strategies, and management may fail to achieve its targets, for a wide range of possible reasons, including, without limitation: impact of the corona virus pandemic; incurrence of significant credit-related costs; declines in the value of our securities portfolio; changes in interest rates; foreign currency fluctuations; decrease in the market liquidity of our assets; revised assumptions or other changes related to our pension plans; a decline in our deferred tax assets; impairment of the carrying value of our long-lived assets; problems related to our information technology systems, including as a result of cyber attacks; the effect of financial transactions entered into for hedging and other similar purposes; failure to maintain required capital adequacy ratio levels and meet other financial regulatory requirements; downgrades in our credit ratings; our ability to avoid reputational harm; our ability to implement our 5-Year Business Plan, realize the synergy effects of “One MIZUHO, ” and implement other strategic initiatives and measures effectively; the effectiveness of our operational, legal and other risk management policies; the effect of changes in general economic conditions in Japan and elsewhere; and changes to applicable laws and regulations. Further information regarding factors that could affect our financial condition and results of operations is included in “Item 3. D. Key Information-Risk Factors” and “Item 5. Operating and Financial Review and Prospects” in our most recent Form 20-F filed with the U. S. Securities and Exchange Commission (“SEC”), which is available in the Financial Information section of our web page at www.mizuho-fg.com/index.html and also at the SEC’s web site at www.sec.gov. We do not intend to update our forward-looking statements. We are under no obligation, and disclaim any obligation, to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by the rules of the Tokyo Stock Exchange.
Unless otherwise specified, the financial figures used in this presentation are based on Japanese GAAP This presentation does not constitute a solicitation of an offer for acquisition or an offer for sale of any securities Definitions Foreign exchange rate
FG: Mizuho Financial Group, Inc. RBC: Retail & Business Banking Company Financial Accounting (TTM at the end of the month) BK: Mizuho Bank, Ltd. CIC: Corporate & Institutional Company TB: Mizuho Trust & Banking Co., Ltd. GCC: Global Corporate Company Jun-19 Mar-20 Jun-20 SC: Mizuho Securities Co., Ltd. GMC: Global Markets Company USD/JPY 107.75 108.83 107.74 AM One: Asset Management One Co., Ltd. AMC: Asset Management Company IR: Mizuho Information & Research Institute, Inc. GPU: Global Products Unit EUR/JPY 122.46 119.65 121.05 RI: Mizuho Research Institute Ltd. RCU: Research & Consulting Unit
2 Banks: Aggregate figures for BK and TB on a non-consolidated basis Management accounting (Planned rate) Group aggregate: Aggregate figures for BK, TB, SC, AM and other major subsidiaries on a non-consolidated basis Company management basis: management figure of the respective in-house company FY20 Consolidated Net Business Profits: Consolidated Gross Profits – G&A Expenses (excl. Non-Recurring Losses) + USD/JPY 108.00 Equity in Income from Investments in Affiliates and certain other consolidation adjustments Net Income Attributable to FG: Profit Attributable to Owners of Parent EUR/JPY 118.80
2 Contents
1. Retail & Business Banking Company P. 04
2. Corporate & Institutional Company P. 13
3. Global Corporate Company P. 20
4. Global Markets Company P. 26
5. Asset Management Company P. 32
6. Outside Director Session P. 38
3 Retail & Business Banking Company Current business environment and key strategies
Current business environment Key strategies
Gross business profits declined due to low interest rates Identify changes in customer attitudes and behavior and FY2019 and weaker market conditions, though we secured profits Basic pursue initiatives that transform the challenging business results by reducing expenses via structural reforms policy environment (COVID-19) into an opportunity
Need to further expand out stable revenue base while Expand business through closer relationships with customers and improving capital efficiency (corporate business) and profitability (asset management for individuals & succession, etc.) promote reforms for a digital society, moving away from legacy systems
(JPY B) 3,000 5,000 Direction of initiatives 2,500
4,000 2,000 Promote unified BK/TB/SC strategies in
3,000 124 1,500 asset management for individuals and
2,000 1,000 succession
1,000 25 500 4 9 Implement multilayer transactions 0 -10 Strengthen 0 through utilizing roles,
-1,000 FY2017 FY2018 FY2019 FY2020 FY2023 - 500 consulting (Results) (Results) (Results) (Plan) (Plan) characteristics, and strengths of
-2,000 - 1,000 ・ Stable revenue: Interest, payment income. 1 Asset management each business entity Fixed costs: Personnel expenses, IT system expenses. for individuals and Formulate unified, group-wide Stable revenueincome Fixed costs Stable revenueincome - –fixedfixed costs costs succession business product strategies Corporate business Earnings plan** Strengthen relationships with customers through financing and improve RORA by FY2020 (JPY B) FY2019 FY2023 expanding our corporate solutions Plan Q1 Progress business Gross profits 676.5 642.0 142.6 22% 730.0 Strengthen remote channel financial Expand into new 2 services tailored to different lifestyle Expenses -673.1 -648.0 -161.3 25% - 590.0 business areas scenes through promotion of alliances and other initiatives Net business 12.3 -3.0 -17.5 ― 160.0 Strengthen remote services to address profits Structural reform changes in customer behavior 3 ROE 0.7% ― ― ― 9.2% initiatives Reinforce online channels and build a cutting-edge organizational structure in * Figures for FY2019 and FY2020 are calculated using FY2020 management accounting rules. corporate and personal segments Figures for FY2023 are disclosed in 2019. 5 Strengthen consulting (asset management for individuals and succession business)
Reinforce comprehensive asset consulting capabilities and achieve our mission (shifting household assets in Japan towards growth opportunities) Basic policy: Goals-based Wealth Management Global equity strategy Breakdown of personal consigned Contribute to enhancing the wealth of Japanese households through Percentage of foreign-currency assets assets at Mizuho 4 leveraging the roles, characteristics, and strengths of each business entity in Japanese personal financial assets 3 Other (foreignOther (yen currency Global equities currency) Others ％ 2.2％ Safe asset 4.4 3.6％ 2.9％ Safe asset Comprehensive financial consulting percentage Investment trusts percentage Cash and 2.5％ BK Developing Japan’s future with financial deposits 54％ Non-Japanese 76％ Insurance, pensions stocks 0.6％ Personal 54.2％ strength 28.4％ Non-Japanese financial assets bonds 1.6％ JPY 1,845T Japanese stocks Mizuho FG 9.6％ Personal consigned Advanced asset management consulting Investment trusts Japanese assets ％ bonds SC Background 3.4 Stocks JPY 68T Utilizing Japanese assets globally Bonds 9.6％ 4.2％ 1.4％ Short-term financial assets, other Yen deposits Foreign-currency asset percentage 3.9％ 67.5％ Asset succession and real estate 2.1％ TB consulting Passing on Japanese assets to the future 95 00 05 10 15 20 (Year)
Promotion of global equity strategy with a theme of accumulating SC TB BK success via diversified investment in SC business from FY2016 Installment-type investment Equity investment trusts 2 Will trusts 1 Rapid expansion of outstanding value and unrealized gains trusts (consigned asset value) 株投残高Equity investment trust 積立金額Accumulated value 118 125 value (JPY T) 150 Promotion of an integrated group strategy from FY2020 (JPY B) みずほ 口座数 Mizuho うち金融資産等Financial assets 50 7.5 Accounts 業界残高Industry value (thousand cases) 105 うち不動産Real estate Global equity strategy fund value 5 Newly established fund in July 2020
40 85 – Future World (ESG) 100 102 (JPY trillion) ｸﾞﾛｰﾊﾞﾙ・ｴｸｲﾃｨ戦略ﾌｧﾝﾄﾞ残高 5.0 評価損益＋実現損益 2,723.7 Second largest fund in the industry in 20
65 30 56 5.7 (JPY B) years Value trend with Mar-17 as 100 863.8
45 Group total
20 4.4 3.4
integratedimplementation of business strategy business 25 3.5 Initial value JPY 383.0B 6 10 (Current value Expanded to JPY 516.4B)
5 wide
2.3 1.9 - 1.5 0.7 280.7 Purchase rate from other investment
0 (15) 10.7 trusts 23％
Group
17/9 18/3 18/9 19/3 19/9 20/3
17/3 18/3 19/3 20/3 20/7
19/3 19/6 19/9 20/3
19/12 17/3 18/3 19/3 20/3 20/8 1. Results include installment-type NISA. 2. Industry value prepared by Mizuho Securities based on data from the Japan Investment Trusts Association. 3: As of end-March 2020 (preliminary), prepared by Mizuho Securities based on Bank of Japan data, 4. As of end-July 2020, total consigned assets for BK, SC, and TB personal customers. 6 5. As of August 28, 2020. BK and SC total for 16 funds investing in global stocks and global emerging and US stocks, SC results reflect “valuation income + realized income” with a calculation valuation – net increase. 6. As of August 28, 2020 Strengthen consulting (corporate business (1))
Provide unified, group-wide corporate solutions through smooth financing Enhancing and expanding relationships with clients who use Mizuho as their primary banking institution Steady expansion of the base of clients using Mizuho primarily and providing unified group solutions for Changes in client Increase in financing needs and value of financing business succession and growth strategy assistance needs amid COVID-19 Need for response to risk of changes in asset value
Further reinforce client relationships through financing Solutions income from clients Customer satisfaction survey - Results FY2020 using Mizuho primarily - Results (percentage of satisfied + Enhancing and +11% modestly satisfied) Promote to provide solutions that reflect changes in the expanding business environment with support from stronger relationships relationships with 70% 57% 60% clients who use Implement income Mizuho primarily structure reforms by Improve capital Reinforce stable FY2018 FY2019 Mizuho Rival A Rival B securing suitable efficiency revenue base profit margin Source: Results from our questionnaire survey using Teikoku Data Bank Response reflecting change in needs
Strengthen assistance and support for clients by leveraging group-wide advantages in BK/TB/SC businesses in response to diversified client needs
Specific examples of needs and solutions Loan SP – Results and Deal pipeline results Changes in needs during/after COVID-19 and responses Deal pipeline results Outlook (M&A and real Recovery During/After (Startup assistance/value) estate/value) Disruption phase 1 phase COVID-19 Earnings Real estate sales (obtain funds) downturn 0.9 Strengthen business relationships +28%
0.8 Financing needs Real estate 0.7 2.3x purchases Capital-type Provision of solutions that reflect 0.6
changes in the environment impact 19 funds - Stock transfer 0.5 Stock price among relatives Rebounding recently decline 0.4 Business strategy, Business (Business succession)
0.3
business succession rebalancing COVID MBO/M&A 0.2 Startup assistance Jun-19 Jun-20 Mar-20 Jun-29
7 Liquidity assistance and credit-related costs (corporate business (2))
Client liquidity assistance Recent credit-related costs recorded
Sufficiently respond to clients’ financing needs accompanying the Credit-related costs are within the anticipated range in FY2020 COVID-19 outbreak despite the prospect of credit downgrades mainly in industries Established funds worth more than one trillion yen and made with heavy COVID-19 impact strong progress in new loans Situation in FY2020 Q1 Number of new loan Value of new loan requests requests
16000 13,000 loans25,000 JPY 2.1T
14000
20,000
12000
10000
15,000
8000
10,000 6000
4000 5,000 Plan 2000 Results
0 0 2nd week of March End of May End of July 2nd week of March End of May End of July Initiatives to manage credit-related costs
Fund formation overview Timely understanding of clients’ situations through in-depth knowledge of the business and environment facing clients Total value Fund names (JPY B) Management through proposals to strengthen clients’ financial and business base beyond just financial assistance Mizuho COVID-19 Support Fund (No.1) 300 (Bolster 3,000 corporates through assistance provided via Mizuho COVID-19 Support Fund (No.2) 700 collaboration between Head Office and the frontlines) Mizuho Post-COVID-19 Assist Fund (Growth Strategy) 200 Strengthen ・ Financial consulting for asset sales, clients’ financial lease utilization, etc. Mizuho Private Placement Bond Fund responding to 30 base ・ Reinforce capital using quasi-equity loans COVID-19 Mizuho Post-COVID-19 Assist Fund 10 Strengthen ・ Assist in formulation of a business (Business Succession) clients’ business improvement plan Mizuho Life Science Fund No.1 10 base ・ Consulting for focusing on core competencies
8 Expansion into new business areas (1) Draw on our broad customer base and trustworthy reputation to expand into new business areas through open collaboration internally and externally as smartphones become central to daily life Policy on alliances with tech companies Open & Connected
Current Structural changes in the earnings environment due to negative interest rates situation Inability to cover fixed costs for personnel, branches, and other areas with products that have low profit margins against a backdrop of losing base deposit income due to prolonged negative interest rate policy
(Current) Changes in Digitalization advances Aging population the Increased demand for asset environment Inroads in cashless payments Entry of tech companies into the finance industry formation and management
Business Price competition Tougher competition Competition for customers impact 価格(reduced競争 profit(利鞘縮小 margin))
Low-cost operations Multi-track customer acquisition Pursuing scale
Target direction Remote-focused approach Offer spaces for interaction
Multi-track effort to acquire customers in new demographics for Mizuho through appropriate use of face-to-face and remote channels based on the profitability of each segment in addition to forming alliances with tech companies in remote financial services
9 Expansion into new business areas (2)
Strategic alliance with Softbank Alliance initiatives
Reached an agreement with Softbank in June 2020 on a strategic alliance to develop the next generation of financial Cashless payments services tailored to new lifestyles Roughly 100 Release of J-Coin Biz financial institutions 440,000 affiliated Strength Strength Corporate expense Access to over 80 merchants settlement Solutions that change Wide-ranging portfolio of million people lifestyles financial businesses Cost savings
Integration of financial services with different Online lending scenarios in a smartphone-based lifestyle Jointly develop and strengthen next-generation Number of financial businesses Entry into data customer receiving Collaboration with business an AI-based score: PayPay Alliance summary 1.3 million (in planning stage)
Consider providing J.Score lending services to Lending PayPay’s broad customer base Collaboration with Line Consider providing services through the One Mobile Tap BUY online trading service that are Line Credit Line Bank trading accessible to unexperienced investors through collaboration with PayPay Number of Customer Establishment and customers acquisition utilizing launch of registering their Line’s massive smartphone based Payment Consider provision of online payment services score: bank services offered by SB Payment Services to Mizuho 5 million platform (in planning stage)
10 Structural reform initiatives (1)
Main structural reform measures in the 5-Year Business Plan
Reduce fixed costs aimed at solidifying a stable earnings base
Channel reforms Reduce staffing levels Reduced non-personnel IT system reforms (Branch consolidation, joint branches, (Improve Head Office and expenses next-generation branches, direct channel (Reduce operational costs) operational efficiency, branch reinforcement) consolidation) (Review operations)
Changes in customer attitudes and behavior due to COVID-19 Shift to remote operations and heightened Changes in the interest in trustworthiness/safety environment Future uncertainty (possibility of prolonged COVID-19 impact)
Accelerate structural reform initiatives Aiming for about JPY 25 billion in cost reduction (vs. FY2019) in FY2020
Shift to remote operations Fundamental changes in operation management Remote consulting and transactions Reflecting shift to remote unrestricted by location Expand “…less” operations operations and fundamental changes in operation management Establish online consultations and remote sales Implement STP* for transactions conducted at operations bank windows using MINORI and tablets Branch framework Reinforce highly convenient remote services Shift to bookless, seamless and paperless revisions such as expanding use of e-contracts *Straight-Through Processing (Next page)
Improve customer convenience, significantly reduce theft and loss risk, and provide eco-friendly services
11 Structural reform initiatives (2) (revisions to organizations separately for corporate and retail segments)
Need for sharp corporate and retail strategies aimed at strengthening responsiveness to customer requirements and Issue establishment of branch framework to realize strategy
Revisions to Head Office framework to refine business strategy and to branch framework to realize strategy
Up until FY2019 FY2020 From FY2021
Early implementation of Head Office FG reorganization in FY2020 In-house company head In-house company head and co-head
Office Retail & Business Banking Retail & Business Banking Corporate Business Retail Business
Coordination Department Coordination Department Coordination Department Coordination Department operations
Head Overall in-house company Overall in-house company Corporate business promotion Retail business promotion strategy/corporate and retail strategy business promotion Refine corporate and retail business strategies
BK Branches handling corporate and retail services Review reorganization of branch operations
by corporate and retail segments* retail retail (Majority support both) (Expand sales operations by corporate and retail segments) Branches specialized in corporate services
Build and consolidate an exclusive remote channel for small businesses Exclusive remote channel for small businesses expertise
Branches specialized in retail services Branch operationsBranch Launch and expand branches that specialize in retail services
Leverage corporate and and corporate Leverage * Early implementation from FY2020 H2. Also begin digital shift of reception and administrative work and introduction of reservations
BK/TB/SC Promotion of branch consolidation, joint branches, next-generation branches, and administrative consolidation
12 Corporate & Institutional Company Current business environment and key strategies
Current business environment Key strategies
Need for provision of credit and restoration of capital Absolute No. 1 business finance partner Basic policy clients turn to in the corporate & institutional sector Need for provision of credit has increased sharply stemming from COVID-19 pandemic
Going forward clients are likely to have increased need to restore Providing financial and non-financial solutions for business capital challenges under a changing industrial structure
Accelerate industry transformation
Structural issues are manifesting earlier than expected Aiming to be a partner for the co-creation of value and operating In light of the need to accelerate industry transformation, a flurry of businesses in partnership corporate action such as restructuring business portfolios and supply Contribute to the sustainable growth of Japan’s industries, chains economy and society
Earnings Plan* • Strengthen our ability to solve FY2020 Strengthen our ability the C-suite level issues (JPY B) FY2019 FY2023 Plan Q1 Progress 1 to hold C-Suite level discussions • Contribute to the creation of Gross profits 459.5 437.0 116.8 27% 480.0 financial and non-financial value
Expenses -215.7 -218.0 -53.1 24% -200.0 • Deepen business relationships through the provision of credit Net business Promoting origination 245.6 222.0 65.2 29% 290.0 of deals related to • Provide quasi-equity financing profits 2 for needs related to the restoration of corporate action capital ROE 9.3% 8.1% 6.6% 11.3% during/after COVID-19 • Support for business portfolio restructuring * Figures for FY2019 and FY2020 are calculated using FY2020 management accounting rules. Figures for FY2023 are disclosed in 2019. 14 Key strategy: Strengthen our ability to solve C-suite level issues
Change in C-Suite level issues Mizuho’s strengths + strengthen ability to provide solutions
Changes in the business environment have diversified and complicated April 2020: Established the Corporate Strategy Advisory Department the C-Suite agenda Involvement from the upstream of strategic level decision making and Need to multitask in order to respond immediately to the COVID-19 generate corporate action pandemic External environment Mizuho’s strengths
Low growth in the Japanese Approach business as Customer base Industry insight market a unified group Listed company Industry Research COVID-19 pandemic Top class in Japan “Game changing” factors / coverage Department Sharp drop in demand digital transformation 1 Decline in stock prices DCM 1st Japan's largest SDGs/ESG factors industry analyst group 70% M&A 2 3rd 100 + analysts Syndicated loans3 1st C-Suite level issues
• Business portfolio restructuring Strengthen ability to provide solutions • Handling digital transformation Business • Create financial and non-financial value Established Concurrent Apr 2020 BK-TB • Fundamental business structure reform Understand (response to COVID-19) Corporate Strategy Advisory Department true C-Suite level issues - Enterprise value / financial knowledge- through in-depth dialogue • Optimal funding structure to support business portfolio • Responding to CGC and SSC Finance Understand Survey and Select and • Secure liquidity on-hand and funds for structural C-Suite analysis / Strategy implement reform (response to COVID-19) Client level planning solutions issues discussion
1. FY19 underwriting amount basis (excluding treasury bonds), Source: IN Info Center. 2. FY19 amount of Japanese corporate-related disclosed projects (excluding real estate), Source: Refinitive. 3. FY19 amount on a book runner basis, Source: Refinitive. 15 Key strategy: Contribute to the creation of financial and non-financial value
Strengthen our sustainability initiatives in finance Business promotion through engagement
Target to reduce outstanding credit balance for coal-fired power generation facilities Engagement Set zero-balance targets through engagement with stakeholders
JPY 299.5B Identify ESG and Clients Provide Reduce 50% solutions compared to FY2019 SDG-related challenges and Financial and non-financial solutions needs Provide consulting as a zero balance unified group
Engagement example: Energy industry FY2019FY 19 FY2030FY 30 FY2030FY 50 Climate change Initiatives for Mizuho Eco Finance Opportunity Risk Decarbonization Decline in the value of Support environmentally conscious corporates via financing Expansion of existing assets due to Scoring reflects reliable external environmental certifications renewable energy investor selectiveness Cumulative Scoring index finance amount ・Expanding investment in wind power Client generation S&P/JPX initiatives JPY 176.5 B ・ 1 2 Carbon Promoting CSR activities to investors TCFD SBT Efficient Index 3
Environmental Greenhouse • Business strategy discussion effect, 4 long term Amount of CO • Provide sustainability-linked loans vision 2 emissions SC - Support for external PR implementation 19/6 19/9 19/12 20/3 20/6 BK June-19 Sep-19 Dec-19 Mar-20 June-20 end end end end end
1. Task Force on Climate-related Financial Disclosures. 2. Science Based Targets. 3. S&P Dow Jones Index and indices calculated by the Tokyo Stock Exchange. 4. Financing in which interest rates and other conditions fluctuate due to the performance of the borrower's CSR strategy. 16 Key strategy: Deepen business relationships through the provision of credit
Status of loans affected by COVID-19 Deepen business relationships through the provision of credit
1 Using a COVID-19 related loan to acquire M&A-related transactions with Term-end loan balance a client who does not use Mizuho as their primary financial institution Substantial increase in outstanding loans due to COVID-19 (JPY(¥trillion T)) The pace of increase has now slowed Quick response to client’s need for liquidity on hand
30 Financial strategy discussion in collaboration with the Corporate Strategy Advisory Department (Financial strategy for after COVID-19)
Sole arrangement of financing for a large-scale cross-border M&A 20 16/3Mar-16 Mar17/3-17 Mar18/3-18 Mar19/3-19 Jun20/6-20
2 1 Loan spread Loan-related revenues
(bp) Covering corporate spread decline with high-margin product-related loans (JPY B) 1,000100
Products +25% 65 Syndicated loans, M&A arrangements, Total Non- +38% 50050 interest etc. 50 income Increase loan Interest balance, Corporate +14% income Maintain spread 35 0 FY16 FY16 FY17 FY17 FY18 FY18 FY19 FY19 FY20 19FY19 FY1Q 20FY20 FY1Q H1 H2 H1 H2 H1 H2 H1 H2 Q1 1Q 1Q 1. BK CI Division (In-house company management accounting basis, excluding loans to the government). 2. In-house company management accounting basis. 17 Key strategy: Provide quasi-equity financing for needs related to the restoration of capital
Status of clients
Large corporates have secured liquidity on hand. Likely to see increased movement towards restoring capital and restructuring business portfolios.
Securing liquidity on hand Restoration of capital Business portfolio restructuring
Restoration of capital Business portfolio restructuring
Corporations are likely to increasing move to restore capital, Flurry of corporate action such as redeveloping business particularly in industries where there is great concern about the portfolios and supply chains in response to industry transformation. negative impact from the COVID-19 pandemic Mizuho provides solutions through group-wide integrated efforts.
Investment budget for Cross-border M&A value chain example quasi-equity financing Deal pipelines • Acquiring value chain business through strategy discussions
Business strategy Over discussion Doubled Amount JPY 1T Exit SC M&A FAs (IPO, M&A)
Number in BK PMI About 40 Bridge BK pipeline Real estate loans TB sales/S&L Permanent finance Original After BK SC revision
18 Other priority initiatives: Credit management and cross-shareholding reduction
Credit management Cross-shareholding reduction 2
90% of exposure is investment grade or equivalent As of June 2020, we reduced JPY150B compared to March 2020 Credit costs in Q1 were almost on par with our estimates Shares approved for sale: JPY 58B Reducing future credit costs through more detailed management In view of the COVID-19 pandemic, more careful negotiations were conducted
1 -543.0 (JPY B) Exposure Credit costs
(JPY T) (JPY B) 49 -JPY 300B in 3 years 42 13.7 13.0 -JPY 150B Progress 50%
IG 90% 89% Equivalent
1,962.9
20/3Mar -end20 20/6Jun- 20end FY20Q20/1Q1 FY20Q20/1Q1 1,419.8 PlanPlan AchievementsResult 1,272.0 1,269.8
Thorough forecasting management per portfolio Initiatives Strengthen management and support for large-lot credit clients 15/3 end 19/3Mar -end19 20/3Mar -end20 20/6June end-20 22/3Mar -end22 1. In-house company management accounting basis (IG ratio is based on internal rating). Mar-15 2. Including RBC clients. 19 Global Corporate Company Current business environment and key strategies
Current business environment Key strategies
Rise in the value of credit provision FY2020 GCC Strategy ‒ Surge in funding needs for securing cash on hand ‒ Upturn in loan spreads Maximize profits given the rise in the value of credit provision - Robust capital markets, change in trade flows, Provide emergency support to Global 300 and other blue chip policy rate cuts clients - Leverage deepened business relationships to capture DCM and other ‒ DCM remained active especially in the Americas and Europe – in capital markets business particular the volume of DCM issuance surged in the US during Q1. - Capture new trade flows for transaction banking ‒ Trade volume has dropped due to the pandemic, which may possibly - Enhance risk control: credit costs and non-JPY deposit-loan gaps prompt corporates to rethink their supply chain. ‒ Short-term interest rates are decreasing due to the policy rate cuts implemented by the major central banks. Shift to online/digital channels ‒ Remote working has become a new normal. The 5-Year Business Plan will basically remain unchanged. We will speed up business structure transformation.
* Earnings plan 5-Year Key Strategies Basic direction FY2020 ‒ Emergency support to Global 300 and other (JPY B) FY2019 FY2023 Strengthen existing Plan Q1 Progress 1 clients business ‒ Improve the profitability of each deal Gross profits 410.9 384.0 113.0 29% 460.0 Expand new business ‒ Pursuing the depth of US capital markets 2 fields ‒ Grow transaction banking business in Asia Expenses - 245.3 - 265.0 - 61.0 23% - 290.0 ‒ Achieve current cost-cut measures ahead of Net business 3 Improve cost structure schedule 175.6 128.0 54.7 43% 180.0 profits ‒ Look for additional cost-cut possibilities
Revise asset/business ‒ Rethink asset and business portfolio in light ROE 8.2% 2.5% 8.5% 7.7% 4 portfolio of Basel III and non-JPY currency supply * Figures for FY2019 and FY2020 are calculated using FY2020 management accounting rules. Figures for FY2023 are disclosed in 2019. 21 Key strategy: Providing emergency funding support, improving profitability
Provision of emergency funding support Non-JPY loan-deposit gap
(USD B) Ordinary loans Loans Surge in emergency Although the demand for All loans (ordinary + emergency) Deposits loans from March emergency funding has Emergency loans (from existing commitment facilities) through June 2020. Deposit-to-Loan Ratio quieted down recently, the Emergency loans (new) 278.8 284.7 deposit-to-loan ratio has Managed to deepen 241.1 fallen to 73% as of the end relationships with 208.8 207.3 of June 2020, partially due Global 300 and other 185.8 to the effort to downsize blue-chip clients high-interest rate deposits. thanks to our long-term 77% Global 300 strategy. 75% 73%
Feb-20 Mar-20 Apr-20 May-20 Jun-20 (figures as of the end of each month) Mar-19 Mar-20 Jun-20 (figures as of the end of each month) Improving profitability Credit-related costs
Loan spread Breakdown Breakdown by industry GCC Other credit costs 0.86% JP Non-JP 14% 0.84% (FY20 Q1) Auto- 0.82% 46% 54% Energy mobile 0.80% 0.81% -JPY12.9B 26% 60%
FY18 H1 FY18 H2 FY19 H1 FY19 H2 FY20 Q1 FY20 Q1 credit-related costs were -JPY 12.9 billion, which were mainly Loan spread has been rising since FY2019 thanks to the efforts to revise our allocated to Global 300 and other blue-chip clients. loan portfolio and focus on high-profitability deals. The spread has continued to improve this fiscal year given the rise in the Over half of the costs were from the Non-JPY segment, of which Automobile value of credit provision. and Energy were the largest borrowing sectors.
22 Key strategy: Deep-drill the US capital markets
US capital markets profit trends US IG DCM league tables/share ranking
FY19: achieved +8% Fee revenues annual growth thanks FY2019 FY2020 Q1 (Apr-Jun) +8% annual to the growth in both LCM, DCM, ECM, etc. No. FI Share No. FI Share growth the IG and the Non- IG segments. 1 JPMorgan 12.4% 1 JPMorgan 10.6% FY20 Q1: saw +81% 2 BAML 12.1% 2 BAML 10.3% YoY growth, mainly 3 Citi 9.2% 3 Citi 9.0% +81% YoY attributable to the IG 4 Wells Fargo 7.9% 4 Goldman Sachs 7.8% growth DCM business. Before RBS 5 Morgan Stanley 7.3% asset purchase 5 Morgan Stanley 6.3% 6 Goldman Sachs 6.2% 6 Wells Fargo 6.1% Non-IG 7 Barclays 6.0.% 7 HYBarclays DCM 5.0% IG 8 MUFG 4.7% 8 Deutsche2.0 BankHY LCM 4.9% 9 Deutsche Bank 3.5% 9 Mizuho 9.8 4.5% FY13 FY18 FY19 FY20 Q1 10 Mizuho 3.4% 10 BNP Paribas 4.3%
Source: Dealogic, ranking based on deal values Note: Non-US FIs in italics. Cross-sales based on deepened relationships On-going initiatives
・ Americas: 67 deals Americas: involved Continue the effort to capture DCM deals based on deepened Emergency ・EMEA: 18 deals loan deals in over 80% of the DCM business relationships. DCM issuances by the corporates to which we provided ・Americas: 35 deals Capture the rising need for capital reinforcement (PO, CB, etc.) DCM emergency funding. ・EMEA: 18 deals Americas ECM issuance cross-sell rate Capture new profit opportunities in the S&T segment (SPAC, etc.) 86% EMEA: likewise Europe achieved over 80% cross-sell rate cross-sell rate. Selectively take up non-IG deals, mainly those with financial Mizuho- 83% LBO, other sponsors involved ・Americas: 30 deals DCM deals ・EMEA: 15 deals
23 Key strategy: Expand transaction banking business in Asia
Asia transaction banking – profit trends
Amid the declining interest rates and trade volume, we will look for profit opportunities mainly in the FX and the Trading segments, anticipating the change in our clients’ business strategies and financial needs. Asia trade volume Deposits + FX + Trading, etc. FY20 Q1: - 12% YoY >> FY20 Q1: Source: Calculated by Mizuho based on +7% annual the trade statistics of each country growth vs FY19 Q1 vs Plan
Additional rate Trade volume outlook Deposits - 63% - 4% cuts in Asian Asia Europe North America currencies - 32% YoY (+3% compared to Focus FX - 8% + 3% Profits exceeding the plan) the plan and Focus Trading + 15% + 31% market benchmarks
FY18 FY19 FY20Q1 192019年 202020年 ・・ ・ 202323年 Source: BCG, Trade Finance Model 2020 Our existing strengths + Enhanced capabilities and responsiveness
Existing strengths Enhanced capabilities Anticipating new trends
Global network Increasing client needs Main initiatives Recent examples: Solid client base Improved the e-banking Flexible working Arrangement support for cross-border cash pooling Presence in Asia Products interface for mobile users and to accept more local capital support Currency risk hedging for parent-subsidiary loans currency transactions. across entities Provision of supplier-supporting products Branch IT & OP Improved operational network capacity by centralizing Awards part of trade document operations. Digitalization Provision of host-to-host online channels
Enhanced business Leveraging industry insights and business development Risk taking support and proposal RM knowhow and control making by stationing Supply chain experts in each country. and governance Updating/visualizing the management of subsidiaries and accounts 24 Key strategy: Accelerate cost structure improvement
Cost control in the light of the change in business environment*
Expenses and Expense Ratio trends Cost-cut measures
(JPY B) Achieve ongoing measures Look for new cost-cut 265.0 ahead of schedule possibilities 239.2 240.5 245.3 Consolidate corporate Optimize office space functions planning
74% Improve personnel Reexamine 69% allocation administrative divisions 64% 61.0 59% Consolidate/revise Centralized purchasing 54% back-office operations
FY2017 FY2018 FY2019 FY20 Q1 FY2020 (plan) Revising asset/business portfolio Expenses Expense Ratio
FY2019: managed to improve Expense Ratio to 59% thanks to the cost-cut Need to shift to a high-profitability portfolio in anticipation of the efforts, including consolidating corporate functions, improve personnel allocation, new Basel requirements, by re-examining each asset/business. and shift to centralized purchasing. Downsize assets that do not meet the set global FY2020: Cost increase expected due to the amortization of the global core Under- profitability standards banking system. performing ‒ FY19: reduced exposure by JPY 400B Need to mitigate costs through the following measures in anticipation of the assets ‒ FY20: Raised the profitability bar and expanded the scope changes in the business environment going forward. of downsizing ‒ Downsize office spaces through remote working; centralize back-up and back-office operations. Re-examine each region, product, and business segments, in ‒ Reexamine, centralize, and streamline the administrative divisions Business terms of capital efficiency, cost-return, and sustainability. ‒ Centralize operations on a global basis, minimize inefficiencies, etc. portfolio Develop and implement action plans for profitability improvement. * Group aggregated, based on FY2020 management accounting rules. 25 Global Markets Company Current business environment and key strategies
Current business environment Key strategies
Banking Banking In Q1 of FY20, earnings exceeded our estimates due to higher Strengthening fundamental earnings power by increasing gains on sale of non-JPY bonds, and carry income carry income while focusing on the balance between realized As the market environment remains uncertain, it is important for us to respond appropriately in the event of gains and unrealized gains/losses market movements and to secure stable revenue sources Performing flexible asset allocation leveraging predictive Sales & Trading management and sophisticated analytics when the market Earnings in Q1 of FY20 exceeded our estimates due to an trends change increase in corporate bond issuance in Europe and the US Achieving efficient and stable ALM operations from a Integrated operations across banking and securities business along with strategic focus has driven the growth global perspective to meet the needs of our clients of S&T business in the US Earnings Plan * Sales & Trading Further promoting our strategy to integrate banking and FY2020 (JPY B) FY2019 FY2023 Plan Q1 Progress securities businesses to meet diversifying client needs and to
Gross profits 411.5 432.0 168.6 39% 480.0 respond to changes in the business environment Strengthening our business model to sustain our growth Expenses -202.6 -214.0 -52.7 25% -210.0 by further consolidating and digitizing resources Net business 207.8 218.0 115.6 53% 260.0 profits Enhancing our business model to reflect investor needs,
ROE 9.9% 8.1% 18.5% 10.6% such as O&D and private finance to accommodate the changes
* Figures for FY2019 and FY2020 are calculated using FY2020 management accounting rules. in the market environment due to COVID-19 Figures for FY2023 are disclosed in 2019. 27 Banking: Balancing flexible portfolio management and carry income
Characteristics of Mizuho's portfolio management
Tactical asset allocation to ensure the optimal diversification across fixed income, equities, and credit based on market conditions
Increase profits through operations that take advantage of Increasing carry income to secure stable earnings changes in the market
Began initiatives to increase Operations in response to Appropriate risk management Comparison of changes in carry the market changes due to leveraging advanced income 1 the contribution of carry COVID-19 technologies 150 income in realized gains in FY19, mainly in non-JPY 100 bond portfolios Equity Focusing our operations on Risk Market 139 50 maintaining higher carry Reduction conditions / 81 87 indicators income
Higher Funds, other 0 Scenario Carry income in FY20 Q1 exceeds Operations in FY19 FY20(plan)FY20（計画） FY20(1Q)FY20 Q1 response to simulation that of FY19 for the full year
Return COVID-19 Optimal allocation and risk taking, depending on Benchmark market outlook Investment of comparison Sustainability initiatives: ESG bonds2 Fixed Income In FY19, we significantly increased our investment FY19 Lower in green bonds and other ESG bonds, and FY18 Smaller Larger contributed to building a sustainable society through 68 our banking operations 1 Risk volume
Building a robust portfolio and increasing revenue through the right balance between flexible asset allocation and higher carry income 1. Indexed by FY18 as 100. 2. Indexed by FY18 as 1.
28 Banking: Initiatives for stable and efficient ALM operations
Strengthening our ALM framework Initiatives for accurate ALM control
In Japan, consolidating ALM functions across JPY and We have been able to respond appropriately to changes non-JPY to further strengthen expertise in the market environment affected by COVID-19 Performing proactive and flexible funding based on loan International Treasury ALM Dept. Treasury Dept. projections Dept. Assets Funding ALM ALM ALM planning Investment Investment Establishing a stable funding operations operations base centered on customer Previous deposits as well as making use of short-term funding with New higher flexibility
ALM planning and Investment Investment operations Diversification of non-JPY funding Fixed Income & Equity International Fixed Income Treasury Dept. Investment Dept. & Equity Investment Dept. Issuing TLAC-qualified senior bonds as a stable source of Customer funding deposits Mar.2019 Mar.2020 Loans 19.5 USD 26.2 USD 2.0 EUR 4.5 EUR East Asia & Unit : Bln. Outstanding balance as of Mar-end EMEA Americas Asia Oceania Medium/long Other term Non-JPY funding using JPY (Due from central assets as collateral banks, Short term stocks, etc.) Outside Japan, strengthening integrated global ALM operations Mar-19 Mar-20 100 130 Non-JPY Repo bonds Indexed by 2019 as 100 Calculated using management accounting As a result of organizational restructuring to enhance expertise and the strengthening of integrated global operations, we are able to implement Expanding currency swap ALM operations that can respond more appropriately to client needs, commitment facilities for flexible even in the event of major changes in the market environment non-JPY currency funding
29 Sales & Trading: Implement S&T strategies that leverage our strengths
Revenue growth achieved by integrated operations across banking and securities business Leverage our strengths
S&T gross profits growth by region* (FY18 Q1 vs FY20 Q1) Significant growth in the Americas driven by progress in integrating operations 1. Business growth in the Americas
Established an integrated S&T business model as part of the Corporate and Started integrated S&T operations in Established the CIB model for FICC EMEA Americas Investment Banking (CIB) framework in the rates and derivatives. and Equity business. Americas. Made strategic investments in corporate bonds business, corporate Strategic focus derivatives, and municipal market businesses, which have led to successful profits. Other FY18 Q1 FY20 Q1 FY18 Q1 FY20 Q1 business areas such as mortgage bonds also performed well in FY20 Q1 11 28 Gross profits increased 119% YoY in FY20 26 75 Q1
2. Accelerate integrated S&T operations If FY18 Q1 is set at 100, gross profits on a global basis have increased significantly across banking and securities business to 109 (FY19 Q1), 177 (FY20 Q1).
Our US business that took the lead in the Asia FX business being centralized in Started integrated trading operations Tokyo. Japan in rates and derivatives. integrated business model, greatly improve our ability to respond to client needs and increase risk-return by combining each entity's strengths, such as the bank’s client FY20 base and balance sheets of with securities’ FY18 Q1 FY18 Q1 FY20 Q1 products expertise and investor flows Q1 We will strengthen the integrated S&T 12 49 business model in other regions while 59 taking into account local regulations and 17 business practices
*Indexed by global gross profits of FY18 Q1 as 100, calculated using management accounting.
30 Sales & Trading: Provide a variety of market services in response to changes in the business environment
Capturing business opportunities Enhanced Origination & Distribution (O&D) business model from market changes caused by COVID-19
Providing diverse market solutions in response to Initiatives to respond to environmental changes caused changes in the market environment by COVID-19
Providing bank loans in Japan Diversified investor Increasing loan demands demands due to lower Growing need for due to COVID-19 O&D interest rates financing
Equity-related solutions We will further strengthen our O&D business in light of
Contributed to the expansion of funding 19 - instruments based on investor needs, increasing demand for financing due to the impact of COVID- including hybrid finance and private finance Support from the 19, clients’ asset turnover needs, and more diverse investor central bank Debt-related solutions
needs in the low interest rate environment COVID Q1 ordinary income of Global Markets Division in SC increased by JPY 21.6B Leverage our financial origination capabilities and our ability YoY to capture investor needs Higher market FICC & Equity trading Global Products Unit and related-departments are working volatility Leverage market changes such as rising together to expand our investor base and diversify volatility and widening spreads Enhancing our capability to provide O&D methods solutions to clients and improving FX trading the risk-return profile through the ⁃ We are working to create products that meet investor needs through integrated S&T business strategy loan participation and securitized products ⁃ Established a department for O&D business promotion in Mizuho Offsetting the negative impact on retail and corporate businesses Securities (October 2019)
31 Asset Management Company Current business environment and key strategies
Current business environment Key strategies
Declining birthrate and Changes related to COVID-19 Key strategies aging population Uncertain economy Continuing low interest rates Respond to environmental changes arising from COVID-19 and to changing customer needs, as a unified group by Acceleration of business via enhancing asset management functions through strengthening Diversification remote channels of lifestyles investment capabilities and solution providing capabilities. Change in worker Pursue efficiency and advantages through innovation and Rising awareness of the preferences and workstyles SDGs business process change.
Society is more aware of sustainability Retail Institutional Promoting proactive investment of Develop our solutions business Mission domestic financial assets in Japan Enhance the shift from savings Support for medium- to Sustained economic to asset formation in an age of in order to meet clients’ long-term asset formation growth longevity diversified needs under an uncertain environment Earnings Plan * FY2020 (JPY B) FY2019 FY2023 Plan Q1 Progress Asset management capabilities
Gross profits 52.9 47.0 11.4 24% 60.0 Strengthen and provide asset management capabilities to ensure we are customers’ first choice Expenses -33.1 -33.0 -7.9 24% -32.0
Net business Operational transformation 13.3 7.0 1.6 23% 23.0 profits Pursue efficiency and advantages aiming at strengthening our ROE 5.2% 1.5% 2.5% 11.2% foundations for business growth over the medium to long term
* Figures for FY2019 and FY2020 are calculated using FY2020 management accounting rules. 33 Figures for FY2023 are disclosed in 2019. Retail: Enhancing the shift from savings to asset formation
Product development capabilities Strong distributor base Products selected by customers despite market turmoil Extensive support for distributors Investment ability cultivated Global Group-wide collaboration to Balanced in the field of pensions equity capture customer needs Broad distributor base Remote support Diversified investment via flexible Strict selection of competitive and One of the largest Website exclusively for distributors asset allocation sustainable growth companies distributor bases by 251 One Forum “Investment Sommelier” “Future World” series number (JPY B) Video content Base value AUM Investment Sommelier 1,500 Breakdown of AM-One AUM 105 One Channel 1,200 ESG by distributor (as of Mar 2020) 95 900 Developed Countries Online seminars 85 Non-group 600 Developing Countries Group Sales persons Retail investors Total approx.1 75 Global distributors distributors Balanced funds from 300 JPY T 43% Hold seminars via online 65 other companies 1.6 57% 0 channels (e.g. Zoom, FaceTime) 55 19-Feb 19-Mar 19-Apr 19-May 19-Jun From Feb 19, 2020 to Jun 30, 2020 rebased to 100 as of Feb 19, 2020 From the end of Sep 2016 to the end of July 2020 Defined contribution pension plan (“DC”) Resilient performance during Outstanding track record by - Corporate DC and individual-type DC (“iDeCo”) - the market turmoil caused by COVID-19 capturing growth of investee companies Expand potential investors with iDeCo as a hook 2 AUM share Number of individuals Investment Education Company A Rose to the 2nd rank enrolled in Corporate DC and iDeCo in the industry Life plan simulation 14.5% 13.0% One of the largest in the industry M (Mar 2020) Designer for 100-year life 13.6% Highly evaluated by external agencies 1.43 R&I Fund Award 2020 3 Company B Strategically expand partnership for Robo Advisor Won most awards (21 awards, 11.3% 4 consecutive years) distributing channel of iDeCo Smart Folio
Initiatives for corporate pension funds
Enhancement of asset management Proposal for a sustainable retirement Expansion of new business areas consulting benefit plan Impact to clients’ financials with increasing Hold discussions to address the gap between Launched pension operations entrustment market volatility due to the COVID-19 the plan design and current environment services as a comprehensive support pandemic solution to meet outsourcing needs for Utilize portfolio analysis for strengthening Continued low interest pension related operations provision of solutions Longevity rate environment Simple diagnostic tool based on financial data TB Pension entrustment Current portfolio Proposal Cash Japanese Necessity for Asset management International Cash 2% bonds国内債 Alternativeｵﾙ 券 20% Fiduciary contract 外国株式equity 8% 20% reviewing 17% Japanese 15%ﾀﾅ management 17% bonds 1… pension plans 33% International equity Japanese Japanese 24% equity Extension of Clients equity International 25% Change in work styles Plan advisory Advice, 外国 33% bonds retirement age International債… 14% services bonds 9% Operations related to plan Providing solutions to regional banks administration
Fiduciary management Respond to outsourcing Respond to increasing needs for securities deposits Support for administrative operations in asset Balance sheet investments • Support regional banks to management decision making (establishment • Tailor-made proposals based of regional banks promote the shift from savings to of a decision-making body, and selection of on portfolio status asset formation for their asset managers and investment products) customers through providing (JPY B) • One-stop services including investment products AUA* risk management and Liabilities 2,000 JPY 1.7T personnel development Assets Respond to review of Raise the level of Control income retirement benefit plans 1,000 downside risk Equity • Respond to the necessity for reviewing plans caused by industry consolidation 0 FY16 FY17 FY18 FY19
*Assets Under Administration, aggregated amount at the time of contract. 35 Investment capabilities: Aiming to be customers’ first choice
Aiming too be a total solution provider ESG investment Focus on engagement Policy Conduct engagement and exercise voting rights to encourage invested corporates to improve their sustainability and enterprise value Providing the best solution for each customers’ needs, and products Focus on engagement with overseas corporates as well
with an edge through high value-added asset management 4 “Stewardship activity surveys conducted by management organizations” 1st overall rating (Dec-19)
1st Japanese asset management company 5 to have a statement of commitment to the 2012 UK Stewardship Code Financial Reporting Council (FRC) was categorized as Tier 1 Solution for diverse investment targets Enhancement of ESG integration Multi-asset class strategies controlling risk in line with customer needs Established Sustainability Investment Team to strengthen ESG integration 1 Conduct themed research about ESG topics Consolidated North American offices to AM-One USA in order to strengthen global quantitative management Diversified line-up of ESG products capabilities across Tokyo and NY Develop, provide, and categorize products appropriately which AUM of GRiPS2 fund which uses quantitative incorporate ESG elements management: approx. JPY 2.0T (at end of July 2020) 6 AUM of ESG products for institutional clients : approx. JPY 600B
“Future World (ESG) ” 7 initial amount of JPY383B: 2nd largest Products with an edge
3 For inorganic growth Alternative investment with AMOAI Example: Sourcing excellent HF by AMOAI
All HF Consider using M&A for further acquisition of clients outside Japan & (7,000-8,000) products outside Japan, where high growth is expected Careful selection of which are Number of funds Outside researched annually Japan expected for high profit growth (approx. 550) Expanding business scale Recommended Select Revenue Outside funds recommended Japan Small and mid cap, which have (19 funds) funds through Profit Revenue continuous research Profit Higher efficiency large room for growth including existing ones Current In the future 1. Asset Management One USA Inc. located in NY. 2. Multi-asset class strategy ”Global Risk-factor Parity Strategy”. 3. Asset Management One Alternative Investments. 4. Based on the survey of IR managers of companies listed on the First Section of the Tokyo Stock Exchange, asking asset management companies with highly evaluated. stewardship activities among 117 asset management companies (buy side). Conducted by Mizuho Research Institute in 2019. 5. As a head office of a Japanese asset management company. 6. Products which clearly incorporate ESG elements into their investment philosophy and process; as of March 2020. 36 7. Global ESG High Quality Growth Equity Fund No Currency Hedge. Redesign of business operations: Strengthening the foundation for medium- to long-term growth
Shift to a more efficient business structure Organization design to enhance employee performance
Redesign of business operations in Asset Management One Cost structure reforms Our vision Accelerate the reduction in fixed costs Innovative and conversion to variable costs Welcoming organization Work environment where each employee where employees can can perform at high levels Implement work style reforms to adapt to focus on high value- social changes driven by COVID-19 added work Pursue work styles in which employees Review of office Paperless HR Automation plans workflow system reform can choose where and when to work depending on circumstances Expense ratio target* FY19 FY20 FY23 Innovative (Result) (Target) (Target) Creating a new value Productive Expense ratio 63% 69% 57% Streamlining business operations Investing more resources in strategically important business areas Enhance our resilience to adverse conditions Productive such as market collapse a Boosting the productivity of Reform method, media, place Optimize the allocation of corporate resources administrative work and speed of business
Sophistication of fund governance HR system reform in Asset Management One Develop personnel with strong expertise and sense of responsibility to Improving efficiency of asset management achieve sustainable results Clarify job Combine funds Role-based Performance Flexible compensation descriptions and aligned to results Redeem small-sized funds pay individual responsibility -based pay * Calculated based on the management accounting rules for FY20. 37 Outside Director Session Agenda 1. 5-Year Business Plan and summary of progress 2. Matters of vital importance deliberated on in the three statutory committees 1) Nominating Committee • Allocation of personnel towards accelerating the unified group strategy 2) Compensation Committee • Reinforce performance-linked compensation and secure a level of compensation aligned with the competitiveness of executives 3) Audit Committee • Monitor the progress of the 5-Year Business Plan ₋ Status of reduction in personnel/personnel expenses and revision to HR system ₋ Integrate and restructure Research & Consulting and IT Systems functions 3. Future challenges Even greater efficiency in performing business under a new normal after COVID-19 (increasing productivity) 4. Conclusion
39 Appendix
■ Summary of FY18 and FY19 Financial Results and Targets for the 5-Year Business Plan
FY18 FY19 FY20 FY23 Results Results Plan Plan (JPY B)
Consolidated Net Business Profits 1 (+Net Gains (Losses) related to ETFs and others) 408.3 672.5 570.0 Approx. 900B
Credit-related Costs -19.5 -171.7 -200.0
Net Gains (Losses) related to Stocks (-Net Gains (Losses) related to ETFs and others) 1 259.8 126.5 80.0
Net Income Attributable to FG 96.5 448.5 320.0 2 CET1 Capital Ratio target level G&A Expenses (Excl. Non-recurring Losses and others) -1,440.6 -1,411.4 -1,407.0 -1,340.0 2 Lower end of the CET1 Capital Ratio 8.2% 8.8% 9-10% range ■ FY20 Q1 Financial Results FY20 Progress (JPY B) Plan Q1 Results
Consolidated Net Business Profits (+Net Gains (Losses) related to ETFs and others) 1 570.0 220.2 38.6%
Credit-related Costs -200.0 -39.0 19.5%
Net Gains (Losses) related to Stocks (-Net Gains (Losses) related to ETFs and others) 1 80.0 -1.5 -1.9%
Net Income Attributable to FG 320.0 122.3 38.2%
G&A Expenses (Excl. Non-recurring Losses and others) -1,407.0 -340.6 24.2%
2 CET1 Capital Ratio ‐ 8.6%
1. Net Gains (Losses) related to ETFs and others (2 Banks) + Net Gain on Operating Investment Securities (SC Consolidated). 2. Basel lll finalization fully-effective basis, excluding Net Unrealized Gains (Losses) on Other Securities.
40