SURUGA bank, Ltd.
Financial Results for the 1st Half of FY3/21

November 27, 20200 Table of Contents
I Financial Results for 1H, FY3/21
・ Actual Results for 1H, FY3/21 (Comparison with 1H, FY3/20 / Comparison with Previous Forecast)

P. 1

・ Actual Credit Costs, Share House Loans <Non-consolidated>

P. 3

・ Outstanding Balance, Yield, Delinquency Rate by Loan Category <Non-consolidated>

P. 4

・ Yield/Margins <Non-consolidated>

P. 5

・ Expenses and OHR, Capital Levels <Non-consolidated>

P. 6

・ Forecast for FY3/21 <Non-consolidated & Consolidated>

P. 7

II COVID-19 Pandemic Response
・ COVID-19 Pandemic Response

P. 8

III Bonds management, Sales, Securities, Structural reform・ Status of Bonds

P. 9

・ Status of Market of Real Estate

P. 11

・ Retail Banking (Systems of Sales/Investment Property Loans/Housing Loans)

P. 12・ Asset Finance

P. 16

・ Securities Management

P. 17

・ Structural Reform

P. 18

IV Status of Alliance Nojima Group・ Status of Alliance with Nojima Group

P. 20

V CSR
・ Status of CSR Initiatives for FY3/21

Reference Materials
・ Highlight of Medium-Term Business Plan “Re:Start 2025”© 2020 SURUGA bank, Ltd. All rights reserved.

P. 21

I Financial Results for 1H, FY3/21

II COVID-19 Pandemic Response

III Bonds management, Sales, Securities, Structural reform

IV Status of Alliance with Nojima GroupV CSR

 Actual Results for 1H, FY3/21; Comparison with 1H, FY3/20• Actual results for the 1st Half of FY3/21 have changed deficit forecast to surplus, as expenses and actual credit costs decreased more than the previous forecast.(Note)• Gross operating profit decreased by 5.5 billion yen year on year to 36.8 billion yen mainly due to the decrease of net interest income.
• Actual credit costs rose by 1.3 billion yen year on year to 7.7 billion yen due to downgrades of the classification of borrowers related to share house loans.
• Net income for the 1st Half of FY3/21 (non-consolidated) decreased by 11.4 billion yen year on year to 4.1 billion yen due to the decrease of gains on sales of stocks in addition to thefactors above.
• Net income for the 1st Half of FY3/21 (consolidated) decreased by 10.4 billion yen year on year to 5.4 billion yen due to the minus factors of non-consolidated.
(Note) SURUGA bank, Ltd. revised the earnings forecast for the 1st half of FY3/21 in its “Announcement Regarding the Revision to the Earnings Forecast” on October 29, 2020.

<Non-consolidated>

Factors contributing to changes in ordinary profit(Comparison with previous year)(Billions of yen)
1st half
FY 3/20

1st half
FY 3/21Year-on-yearchangeMain factors
・ Decline in interest on loans(average balance factors (–4.4 billion yen), yield factors (–1.2billion yen)

Gross operating profit

42.4

36.8

(5.5)

Net interest income

Expenses

22.4

20.5

(1.9)

Net fees and commissions

・ Reduction in fees related to securitization

Core net operating profit

19.8

15.9

(3.8)

Net other operating income

・ Reduction in profit on sales of debt securitized accounts
receivable (–1.9 billion yen)

Net operating profit

18.3

37.9

＋19.6

Expenses・ Decrease in non-personnel expenses

Ordinary profit

19.3

8.7

(10.6)

Actual credit costs

・ Downgrades of borrowers of share house-related loans

Net income

15.6

4.1

(11.4)

20

Actual credit costs

6.3

7.7

+1.3

(Billions of yen)
(5.2)

+1.6

(10.6)
Previousyear
results

(5.4)

(2.0)

19.3

ROE (％)(Net income basis)

14.4

3.4

＋1.9

(10.9)(1.3)
Actualresults

Profit attributable to ownersof parent

15.9

5.4

8.7

(10.4)
0

Earnings per share(yen) (Consolidated)

68.9

23.6

(45.2)

Ordinary
profit(1H FY3/20)

Net interest
incomeNet fees
andcommissions

Net other
operatingincome(Note)

Expenses Gains (losses)
Actualon stocks/
credit costs
otherOrdinary
profit(1H FY3/21)(Note) Net other operating income excluding gains (losses) on bonds© 2020 SURUGA bank, Ltd. All rights reserved.

1 Actual Results for 1H, FY3/21; Comparison with Forecast• The ordinary income represented progress of 53.1%, the gross operating income represented progress of 52.6%, and expenses represented progressof 47.7%, toward the full-year forecasts.
• Actual credit costs represented progress of 38.9% toward the full-year forecast.
The full-year forecast of 20.0 billion yen remains unchanged on the assumption of the occurrence of downgrades of borrowers of sharehouse loans, who would suspend their repayment because they wish their loans to be transferred.
• The net income (non-consolidated) represented progress of 83.9% toward the full-year forecast.
• The net income (consolidated) represented progress of 91.3% toward the full-year forecast.
<Non-consolidated><Consolidated>
FY3/21 (Forecast)
1st half(1)

1st half
FY 3/21(2)

Progress(2)/(1)

Ordinary income

85.0

43.0

45.1

53.1％

Gross operating profit (A)

70.0

36.0

36.8

52.6％

Expenses (B)

43.0

22.0

20.5

47.7％

Core net operating profit

27.0

14.0

15.9

59.0％

Ordinary profit

7.0

0.0

8.7

Net income

5.0

(4.0)

Actual credit costs (C)20.0

RA gross operating profit(A – C)
OHR(B ÷ A)

Capital adequacy ratio

FY3/21(Forecast)(3)(Billions of yen)
1st half
FY 3/21(4)

Progress(3)/(4)

96.0

50.9

53.0％

124.6％

8.0

10.4

130.7％

4.1

83.9％

6.0

5.4

91.3％

14.0

7.7

38.9％

50.0

22.0

29.0

58.1％

61％

61％

55.6％

10.8％

10.3％

11.0％

(Note 1) RA (Risk Adjusted) Gross Operating Profit = Gross Operating Profit – Actual Credit Costs(Note 2) Figures of the full-year forecasts on the table are those announced on May 14, 2020. The interim earnings forecast was revised, which was announced in “Announcement Regarding the Revision to the Earnings Forecast“
on October 29, 2020.

© 2020 SURUGA bank, Ltd. All rights reserved.

2 Actual Credit Costs, Share House-related Loans <Non-consolidated>• Actual credit costs of share house-related loans amounted to 4.1 billion yen due to an increase in delinquencies and downgrades of borrowers who
suspended their repayment because they wish their loans to be transferred.

• The coverage ratio improved by 3.02% from the previous fiscal year-end to 94.31% due to increase in collateral coverage and provision of allowance.
• As a result of our continuous repayment support in consideration of each borrower’s individual circumstances focusing on consumer loans, actual
credit costs for borrowers other than borrowers of share house-related loans reduced by 5.5 billion yen year on year due to the resolution of longterm delinquency and upgrades of the classification of borrowers resulting from relaxation of repayment conditions.

・Actual credit costs and Allowance for loan losses(Billions of yen)
Actual credit costs
1st half FY3/21

Item
1Q

2Q

Allowance

Share house-related loans

1.1

2.9

4.1

106.5

Investment property loans (Note)

5.0

(2.0)

2.9

55.8

Housing loans

0.8

(0.7)

0.0

4.5

Unsecured loans

0.3

(0.1)

0.1

2.6

Business financing loans, etc.

0.0

0.4

0.4

9.3

Total

7.3

0.4

7.7

178.9

(Note) Investment property loans: Studio apartment loans, Single building apartment loans, and other secured loans

・Share house-related loans (Status of coverage)
Total credit balance
Share house loan
receivables

A

Covered amount

Unsecured portion

Allowance

Coverage ratio

B

C

D

(B ＋ D) / A

Sep. 30, 2019

246.1

199.3

90.6

155.5

135.1

91.74％

Mar. 31, 2020

192.1

154.7

72.7

119.3

102.5

91.29％

Sep. 30, 2020

189.1

153.5

71.8

117.3

106.5

94.31％(Note 1) Based on obligors of share house-related loans.
(Note 2) Covered amount: Estimated amount, calculated by multiplying the covered amount including collateral, etc. by a certain ratio.
(Note 3) Total credit balance, share house loan receivables: Loans and bills discounted, suspense payments equivalent to loans and bills discounted,
and accrued interest on loans and bills discounted.
© 2020 SURUGA bank, Ltd. All rights reserved.

3 Outstanding Balance, Yield, Delinquency Rate by Type of Loan<Non-consolidated>•••

Loan yield(Note1) of both consumer loans and corporate loans for property investment,(Note2) which were set forth for promotion in the mid-term business plan, was 3.63％.
The rise in the delinquency rate of consumer loans (1.04% increase from the end of June 2020) was mainly due to an increase in the number of delinquent borrowers ofshare house-related loans, who suspended their repayment because they wish their loans to be transferred.
(The delinquency rate of whole consumer loans was pushed up in part by the fact that delinquent borrowers of share house loans were also delinquent on other loans)
The delinquency rate of whole consumer loans except for share house-related loans was 2.32% as of September 30, 2020.
(Note1) Yield: Yield for customers (excluding guarantee fee, accrued interest), period-end balance basis(Note2) Corporate loans for property investment: Asset management company loans for property investment and asset finance, defined as new business fields in the mid-term business plan.

(Billions of yen)Jun. 30, 2020
Type of Loan

Period-end
balance

Yield

Sep. 30, 2020
Delinquency rate

Period-end
balance

Yield

Delinquency rate

2,065.5

3.09％

4.70％

2,025.4

3.07％

5.81％

Housing loans

537.7

2.86％

0.79％

522.7

2.85％

0.51％

Studio apartment loans

188.9

3.40％

1.92％

180.8

3.40％

1.79％

1,144.8

3.28％

3.68％

1,129.8

3.26％

3.80％

Share house loans

153.9

1.46％

31.34％

153.4

1.46％

45.87％

Other secured loans

39.9

4.85％

1.29％

38.5

4.81％

1.15％

195.7

10.23％

1.93％

185.4

10.26％

2.13％

129.2

11.56％

0.78％

122.4

11.61％

0.83％

66.4

7.65％

4.15％

63.0

7.64％

4.66％

Consumer loans (A)2,261.2

3.69％

4.47％

2,210.8

3.66％

5.51％

Consumer loans (Except for share house-related loans)

2,070.9

2.34％

2,021.8

Secured loans

Single building apartment loans

Unsecured loans
Card loans
Unsecured certificate loans

Corporate loans for property investment (B)Total<(A) + (B)>

2.32％

9.9

2.23％

－

17.8

2.25％

－

2,271.1

3.67％

4.45％

2,228.7

3.63％

5.46％

(Note 1) Delinquency rate = Loans past due 3 months or more / Loans(Note 2) Yield: Yield for customers (excluding guarantee fee, accrued interest), period-end balance basis(Note 3) Yield and the delinquency rate of studio apartment loans, secured loans and consumer loans are calculated based on original claims before securitization.
(Note 4) As the balance is aggregated by loan type, if obligors of share house loans default on scheduled repayment, the delinquency rate of other loan types will be affected.

© 2020 SURUGA bank, Ltd. All rights reserved.

4 Yield/Margins <Non-consolidated>• The loan-deposit margin rose slightly by 7 basis points year on year to 1.79% due to the fact that the decrease in the expense ratio of 16 basis points year on
year as a result of promoting the structural reform set forth in the mid-term business plan exceeded the decrease in the loan yield of 8 basis points year on year
as a result of continued relaxation of loan repayment conditions such as lowered interest rates.
• The net interest margin shrank by 25 basis points year on year to 0.96% due to the fact that a fall in the return on investment stemming from an increase indeposits with the Bank of Japan exceeded a decrease in funding costs resulting from a decrease in the expense ratio, etc.
• The average loan balance decreased by 282.3 billion yen year on year to 2,457.0 billion yen due partly to the special factors (see Note2 of the graph below).
• Deposits (average balance) increased by 110.8 billion yen year on year to 3,189.7 billion yen.

Loans (Average balance/Yield)

Interest margins (Non-consolidated)

Yield on loans and bills discounted

Loans (Average balance) (Billions of yen)

Loan-deposit gross margin

3,105.1

Loan-deposit margin (after deduction of expenses)

3,223.1

3,134.8
2,739.3(Note1)
2,457.0(Note2)

Net interest margin

3.49%

3.48%

2.29%

2.31%

3.31%

3.17%

3.58%

16/9

17/9

3.36%

3.21%

3.12%

18/9

19/9

20/9

3.07%

2.06%
1.72%

3.59%

1.79%

(Note1) Factors contributing to the decline in the first half of the FY3/20 included a decrease of approximately 108.0 billion
yen resulting from the securitization of studio apartment loans.
(Note2) Factors contributing to the decline in the first half of the FY3/21 included a decrease of approximately 90.0 billion
yen associated with the collection of loans from founder-affiliated firms and the transfer of share house-related loans.

Deposits (Average balance / Yield)
1.42%

1.62%

1.51%

4,036.3

1.21%

4,050.1

Deposits (Average balance) (Billions of yen)

3,791.3

3,078.9

3,189.7

0.05%

0.03%

0.04%

18/9

19/9

20/9

0.96%

0.10%

16/9

17/9

18/9

19/9

0.09%

20/9
16/9

© 2020 SURUGA bank, Ltd. All rights reserved.

17/9

Yield on deposits

5 Expenses and OHR, Capital levels <Non-consolidated>• OHR increased by 280 basis points year on year to 55.6% due to a decrease in gross operating profit despite efforts to reduce expenses based on
the structural reform set forth in the mid-term business plan.
• Capital adequacy ratio (non-consolidated) rose by 181 basis points year on year to 11.04%, mainly due to an increase in own capital and a decreasein risk-weighted assets (11.25% on a consolidated basis).

Trends of Capital & Capital Adequacy Ratio

Trends of Expenses & OHR
Personnel expenses

Gross operating profit

Non-personnel expenses
Taxes

OHR

54.0

57.0

Own capital(Billions of yen)(Billions of yen)

12.22%

53.9

12.70%
9.23%

325.5
42.4

295.9

9.3

23.8

23.8

9.0

8.5
44.1%

12.7

41.7%
12.6

2.0

16/9

44.7%

22.4

20.5

52.8%
7.4

55.6%
7.4

13.1

12.9

11.3

2.0

2.0

2.0

1.7

17/9

18/9

19/9

20/9

© 2020 SURUGA bank, Ltd. All rights reserved.

16/9

11.04%

8.65%

36.8

24.1

Capital adequacy ratio

17/9

219.7

228.9

245.3

18/9

19/9

20/9

6

 Forecast for FY3/21 <Non-consolidated & Consolidated>•••

The full-year forecast of operating profit for FY3/21 was revised upward by 15.0 billion yen to 42.0 billion yen, reflecting the reversal of general allowance for possible
loan losses.
The operating profit for the second half year of FY3/21 is expected to be approximately 4.0 billion yen. The factor behind this is that it is expected to transfer fromgeneral allowance for possible loan losses to specific allowance for possible loans losses due to the suspension of repayment of share house loans by borrowers whowish their loans to be transferred, while reversal of allowance is expected to be decreased from the first half year resulting from the purpose use of general allowancefor possible loan losses in line with comprehensive transfer of share house loans (the same level of loan transfer in March 2020).
Other items remained the same as the initial forecast.

(Billions of yen)<Consolidated><Non-consolidated>

Previous
Forecast
announced on
Nov. 13(Unchanged)

Previous
Forecast
announced on
May 14(Note1)(A)

Current Forecast
announced on
Nov. 13(Note2)(B)

Ordinary income

85.0

85.0

45.1

39.9

±0.0

Gross operating profit

70.0

70.0

36.8

33.2

±0.0

Expenses

43.0

43.0

20.5

22.5

±0.0

Core net operating profit

27.0

27.0

15.9

11.1

±0.0

Operating profit

27.0

42.0

37.9

4.1

＋15.0

Ordinary profit

7.0

7.0

8.7

(1.7)

±0.0

8.0

Net income

5.0

5.0

4.1

0.9

±0.0

6.0

Actual credit costs

20.0

20.0

7.7

12.3

±0.0

Risk-Adjusted
Gross operating profit(Note3)

50.0

50.0

29.1

20.9

Change(B) – (A)

2nd-half
Forecast

1st half

96.0(Note1) Disclosed on May 14, 2020: “Consolidated Financial Results for the Fiscal Year Ended March 31, 2020”(Note2) Disclosed on November 13, 2020: “Consolidated Financial Results for the Six Months Ended September 30, 2020”(Note3) RA (Risk Adjusted) Gross Operating Profit = Gross Operating Profit – Actual Credit Costs© 2020 SURUGA bank, Ltd. All rights reserved.

7

I Financial Results for the 1st Half of FY3/21

II COVID-19 Pandemic Response

III Bonds management, Sales, Securities, Structural reform

IV Status of Alliance with Nojima GroupV CSR

 COVID-19 Pandemic Response
Placing the highest priority on the lives and health of customers, employees and their family
members, we will provide necessary financial services as financial infrastructures essential for
maintaining social functions.
【Number of consultations related to COVID-19 and loan responses】
Number of changes inrepayment conditions ofconsumer loans

Number of changes in repayment
conditions of corporate loans

Number of new
corporate loans

797State ofemergency(cases)・ Number of consultations and responses (until November 20, 2020)
Number of changes in repayment conditions ofconsumer loans: 1,851
Number of changes in repayment conditions ofcorporate loans: 168
Number of new corporate loans: 645

588

・ The number of consultations for both consumer andcorporate loans regarding COVID-19, which peaked in
May 2020, has been gradually decreasing.

343
237

228

211
140

49

71

Mar.

Apr.

May

Jul.

Jun.

Aug.

Sep.

Oct.

Nov.(Note)(Note) Figure in Nov. is until Nov. 20

Expected impact of a protracted pandemic and the third wave of COVID-19
Main business
Impact on new loans

Expected impact••

Associated with economic stagnation or contraction, new loans may be stagnant.
As it becomes difficult to examine the property for loan execution, which also makes it difficult to screen the loan,
new loans may be stagnant.

••Declines in the price of land and properties may increase actual credit costs.
As borrowers’ repayment sources such as rent income and other income may decrease, actual credit costs may
increase because of our support for borrowers with relaxation of repayment conditions.
Associated with economic stagnation or contraction, actual credit costs may increase due to worsening
corporate earnings.

Impact on existing loans•© 2020 SURUGA bank, Ltd. All rights reserved.

8

I Financial Results for the 1st Half of FY3/21

II COVID-19 Pandemic Response

III Bonds management, Sales, Securities, Structural reform

IV Status of Alliance with Nojima GroupV CSR

 Progress of Response to Borrowers of Share House-related Loans••••

A final solution for share house-related loans is one of the priorities in the first phase of the mid-term business plan.
Exemption for repayment of part of the principal amount of loans is an unprecedented measure. The overall adjustment of various atypical events has been generally completed.
We are currently making a primary response to borrowers.
Following the comprehensive transfer of share house loans in March 2020,we expected most of the remaining borrowers would wish a comprehensive transfer of their loans andmany repayment would suspend. However, the number of such cases during the first half of this fiscal year was smaller than expected.
For requests from borrowers of investment property loans other than share house loans, we will respond in good faith based on their individual circumstances.

Response to customers since FY2018
 We established ”Office to Support Customer Owners of Share Houses and Others“ whereby we have carefully responded based on each customer’s circumstances, including lowering theloan interest rate and deferred repayment of the principal amount for a certain period. At the same time, we have considered taking all possible options as a bank, including exemption for
repayment of part of the principal amount of the loan using ADR.
 At present, we have not taken legal action even if the share house-related loan become delinquent.
 We adopt the DCF method for calculation of allowance for possible losses of share house-related loans. If the loan is delinquent for more than a month, we provide 100% allowance for theunsecured amount.

Exemption for repayment of part of theprincipal amount of the loan
<Repayment support scheme>

Details: “Exemption for repayment of part ofthe principal amount of loans for sharehouses and other investment real estateloans” issued on May 15, 2019

Applicable: Share house loans and other investment property loans
Content: If the borrower has a rental loss on the property, including loan repayment, when
they individually requested exemption for repayment of part of the principal amountof the loan, from the perspective of fair share of loss and in view of the difficulty intheir loan repayment, we calculate the loan repayment amount corresponding to thesettlement amount we are responsible for, which will be offset with their repayment
amount upon mutual consent.
Status: The acceptance of applications was closed on November 30, 2019.
We are now making a primary response regarding the exemption amount for loansof borrowers who requested such exemption. For borrowers who request the next
step, we will take a civil conciliation or authorized ADR procedure.

Comprehensive transfer of loans<Subrogation scheme>

Ref.: “Announcement Regarding Transfer of
Share House-related Loan Receivables”
issued on March 25, 2020

Applicable: Share house loans
Content: Before we executed share house loans, we did not sufficiently analyze share housespecific risks not associated with general investment property loans, including
inappropriate action like ignoring the impracticability of business plans. Given thatthe conciliation committee of the court recognized that we have an obligation tocompensate for damages, based on typical unlawful behaviors, we agreed to carry
the obligation to pay to the petitioners the settlement amount based on the
conciliation recommendation. After offsetting our claims with our obligation to pay
the settlement amount, we will make a comprehensive transfer of share house loans.
Status: The first transfer was implemented in March 2020. (257 borrowers for 44.0 billion
yen)

Reflection in and progress of the business forecast
 After the first comprehensive transfer of share house loans in March 2020, as most of the remaining borrowers wished a comprehensive transfer of their loans, we expected a temporary
increase in credit costs on the assumption of the occurrence of repayment suspension associated with the transfer. (Allowance is prorated on a quarterly basis on the assumption of theprovision of allowance of 15.0 billion yen, approximately 90% of 16.8 billion yen for unsecured share house loans as of the end of March 2020.)
・・・Although the number of borrowers who would suspend repayment was lower than expected at the beginning of the fiscal year, we maintained the 20.0 billion yen ininitially expected full-year credit costs on the assumption of the occurrence of repayment suspension associated with another comprehensive transfer of loans.
 The second comprehensive transfer of share house loans is expected to be implemented on the same scale as the first one within this fiscal year toward closing.
・・・The number of borrowers in the second group who have filed a petition for conciliation is roughly the same as the first one.

© 2020 SURUGA bank, Ltd. All rights reserved.

9 Status of Single Building Apartment Loans (Except for Share House-related loans)•••

Partly due to changes in self-assessment standards at the end of September 2018, non-delinquent loans of approx. 730 billion yen are classified as loans requiring
special attention.
At the end of September 2020, most loans were not delinquent.
We made regular examination of about 9,000 properties out of those for single building apartment loans and confirmed the occupancy status.
We will aim to remain or upgrade the classification of borrowers by providing them with in-depth support for property management, including reporting management
status to them.

Loan balance of single building apartment loans by classification of borrower and delinquency status (as of Sep. 30, 2020)(Billions of yen)

Debtor classification

Credit claims
such as loans

Portion of single building
apartment loans (excluding
share house cases)

Portion not delinquent

1,114.5

190.5

190.5

Clients requiring special attention(Note)

909.2

736.0

731.1

Clients requiring corrective action

190.2

103.4

96.5

Clients at high risk of bankruptcy

118.5

39.6

34.8

Virtual bankruptcy client/Bankruptcy

100.7

33.7

1.9

2,433.3

1,103.3

1,055.0

Normal client

Total(Note) Loans are classified as requiring special attention if tax return documents are not received or the loan property has negative cash flow even if not delinquent.

Occupancy rate of single building apartments (periodic survey)

Occupancy rate as of September 30, 2020: 87.5％ (Survey result for occupancy rate in 2019: 86.7％)
Survey: In principle, the person in charge of bank loans visits the location of property to check not only the occupancy status but also the physical condition of
the property and management status.
If any damage on the property or abnormal management is found, it will be reported to the borrower.
The survey is to be conducted on investment properties owned by borrowers where each borrower’s loan balance is 50 million yen or more(the number of targeted single building apartments: about 9,000, accounting for more than 90% of the loan balance)
In FY 2020, taking measures to prevent the spread of COVID-19, we have carefully conducted a survey, completing it on about 30% of the targeted
properties as of September 30, 2020.
© 2020 SURUGA bank, Ltd. All rights reserved.

10 Situation of Real Estate Market
•
•
•
•
•
•

The TSE REIT index, which decreased due to concerns over the spread of COVID-19, slowly recovered in line with the resumption of economic activity.
In the office market, there were indications of downward rent rate and upward vacancy rates due to the spread of remote work. However, their impact has been limited at this time.
In the housing market for living, there were signs of recovery of demand after the lifting of the state of emergency and there is an increasing trend in the number of new condominiums
sold and number of sales contracts of existing condominiums.
Under these circumstances, on the back of global monetary easing, the Japanese real estate market, which has relatively high stability, has encouraged inflows of new investment funds.
On the other hand, preference of asset-type properties is polarized, and winners and losers have become clear even among the same asset type.
Amid signs of a third wave of COVID-19, we need to carefully monitor the future outlook.
While carefully monitoring market trends and risks of individual transaction, we will promote each of investment property loans, housing loans and asset finance.

11

Trends in TSE REIT index

140

Unit: Yen/tsubo
22,500

Unit: ％
13

Office Market
平均賃料
Average rent

空室率-東京Vacancy rate – Tokyo

Vacancy rate – Osaka
空室率-大阪20,00090

10Vacancy rate – Nagoya
空室率-名古屋

7
17,500440
2017年1⽉
Jan. 20172018年1⽉
2019年1⽉
2020年1⽉
2021年1⽉
Jan. 2018
Jan.
2019
Jan.
2020
Jan.
2021
Housing
Officeindex
TSE
REIT index
東証REIT指数
住宅指数
オフィス指数
商業・物流等指数
Commercial and

15,000Aug. 2015
2015年8⽉(Note) Closing prices as of end of Jan. 2017 are taken as 100

Aug.
2017
Aug.
2018
Aug. 2019年8⽉
2019Aug. 20202017年8⽉
2018年8⽉
2020年8⽉

1

Source: Miki Shoji Co., Ltd.

Prices as of end of Nov. 2020 and futures (TSE REAT index only) are closing prices as of Nov. 20, 2020
(or standard prices)

Unit: Cases
7,500

Aug. 20162016年8⽉

Unit: Cases
50,000

Number of condominiums soldin Tokyo metropolitan area

Trends in existing condominiums(Tokyo metropolitan area)

Unit: ％
50

0

5,000

25,000
-50

2,500
0

0

Jan.
1⽉ Feb.
2⽉ Mar.
3⽉ Apr.
4⽉ May5⽉ Jun.
6⽉ Jul.
7⽉ Aug.
8⽉ Sep.
9⽉ Oct.
10⽉ Nov.
11⽉ Dec.
12⽉
2015年
2015

2016年
2016

2017年
2017

2018年
2018

2019年
2019

2020年
2020

Source: Real Estate Economic Institute Co., Ltd© 2020 SURUGA bank, Ltd. All rights reserved.

19/10 19/11 19/12 20/1 20/2 20/3 20/4 20/5 20/6 20/7 20/8 20/9 20/10

-100

No.
of inventory (area graph)
在庫件数(面ｸﾞﾗﾌ）

No.
of contracts (bar graph)
成約件数（棒ｸﾞﾗﾌ）

No.
of newly registered (bar graph)
新規登録件数（棒ｸﾞﾗﾌ）

Inventory(YoY: right axis)
在庫(前年同⽉⽐:右軸)No.
contracts (YoY: right axis)
成約件数(前年同⽉⽐:右軸)

No.
of newly registered
新規登録件数(前年同⽉⽐:右軸)(YoY: right axis)

Source: Real Estate Information Network for East Japan11

 Forecast of Mid-Term Business Plan “Re:Start 2025” New Loan Disbursements• In FY22, the final year of the first phase of the mid-term business plan, we plan to execute new loans of 190.0 billion yen for the year. We are currently
restructuring the retail banking system toward the execution of the plan.
• In FY20, we conservatively planned to execute new loans of 70.0 billion yen for the full year, considering the impact of COVID-19.
In the first quarter, our top priority was to support customers who were affected by COVID-19. Since economic activity resumed after the lifting of thestate of emergency, new loans have gradually increased to 22.9 billion yen for the first half of FY20.

Trends in New Loan Disbursements

Forecast of New Loan Disbursements(Billions of yen)•

Trends in the amount of loans executed by business categoryemphasized on the mid-term business plan

(Billions of yen)

190.0(Note)

70.0

12.8

FY3/20FY3/21

Full year

1st half

Consumer loans

6.2

8.7

3.8

4.9

Asset managementcompany loans forproperty investment

0.2

4.5

1.1

3.4

Subtotal

6.4

13.2

4.9

8.3

Asset finance

6.4

9.7

2.1

7.5

12.8

22.9

7.0

15.9

1Q

2Q

22.9
FY3/20FY3/21

FY3/23(Note)

Total(Note)Final year of first phase of medium-term business plan “Re:Start 2025”© 2020 SURUGA bank, Ltd. All rights reserved.

12 Sales Promotion System••••

With 101 branches in our hometown, Shizuoka and Kanagawa prefectures, we have strengthened the solutions sales system for local customers.
We have developed sales of secured loans focusing on investment property loans in the Tokyo metropolitan area and other major urban areas.
We develop nationwide sales through direct channels such as internet branches and call centers.
Customer information obtained through each channel, which is stored in the retail system infrastructure, is utilized for proposal activities at various customer contact
points.

Our market■Shizuoka area
65 branches

Solution sales promoted in Shizuoka and Kanagawa areas
Proposals are made at various customer contact points based on the database・4 sub-areas (Mishima/Izu, Numazu, Shizuoka, Hamamatsu)
・11 branches provide housing loans
・Developing solution sales to meet local customers’ needs

Customer

ＤＭ

ＳＮＳ

ＡＴＭ

■Kanagawa area
36 branches■Tokyo metropolitan area and other major urban areas
10 branches+4 departments

・Tokyo metropolitan area (6 branches), other major urban areas (4branches)・Investment property loans are centered on Tokyo Head Office・Developing sales focusing on secured loans

Contact

ＰＣ
Information storage
and analysis
Information sharing
and utilization

DWH(Note)

Call center
BranchMarketingAutomatic
screening

Asset consulting
Retail system
Infrastructure

CRM(Note)

Support・Data analysis and feedback of alist of target customers
・ Promotion of digital marketing

Consulting by experts

Smart Eye
(Note)〈analytical CRM〉

Support for businesssuccession and M&A

Collaboration with Shinsei Bank andlocal accounting offices in thebusiness succession area

Timely proposals by digital marketing■Direct

11 branchesPhonee-mailSmartphone

・4 sub-areas (Yokohama/Yokosuka, Shonan, Central area,
Odawara)・9 branches provide housing loans
・Developing solution sales to meet local customers’ needs

・4 alliance branches (ANA, Recruit, T Point, So-net)
・3 call centers (Shizuoka, Kanagawa, Tokyo)
・Mainly non-face-to-face contacts through alliance

The balance of thea/c is insufficient
before salary istransferred to thea/c.

The amount ofuse of othercredit cards
increased.

Utility bills cannot be debited
due to an insufficientbalance of the a/c.

We send a proposal for acredit-card loan to thosecustomers on a timely
basis based on the
scenario(Note)DWH…Data Warehouse CRM…Customer Relationship Management Smart Eye…our BI tool

© 2020 SURUGA bank, Ltd. All rights reserved.

13 Investment Property Loans
•
•
•
•
•

Investment property loans include studio apartment loans, single building apartment loans, and secured loans.
The amount of loans executed for the fist half of FY20 was 13.2 billion yen. (Aggregated amount of loans for individuals and asset management companies)
Approximately 60% of the above amount was for the affluent and mass affluent, showing a sign of shift to the target segments set forth in the mid-term business plan.
Both the number of consultations and loan executions increased due to strengthening approach to new real estate agents.
While refining the risk management system, including loan screening and operational flows, we promoted sales aiming to expand opportunities to approach the affluent.

Customer segments stated in the mid-term business plan

The shift to affluent and mass affluent segments, positioned as key customers, isprogressing and this approach is being strengthened

Main customers
Market classification

Former(Amount of financial assets held)(Note)

Investment property loan amount executed by customer segment(Note)Segments are classified by customers’ financial assets at the time of loan screening(Period: April 1 to September 30, 2020)

FutureBy amount

HNWI

By numbers(500 million yen or more)
84,000 households

HNWI & Affluent

Affluent(100 to 500 million yen)
1,183,000 households

Mass

HNWI & Affluent

Mass

Mass affluent(50 million to 100 million yen)
3,222,000 households

@50％

@60％
Customer

CustomerUpper Mass

Upper mass
(30 to 50 million yen)
7,203,000 households

Mass Affluent

Upper Mass

Mass Affluent

Mass(Less than 30 million yen)
42,031,000 households(Note)Reference: NRI estimated value

HNWI & Affluent, financial assets of 100 million yen or more

Upper Mass, financial assets of 30 million yen to less than 50 million yen

Mass Affluent, financial assets of 50 million to less than 100 million yen

Mass, financial assets of less than 30 million yen

Promotion of investment property loans

Promotion
activities• Build relationship with major real estate companies to approach the affluent.
• Create innovative measures for inbound demand by collaborating with major real estatecompanies.
• Focus on BtoC strategy by leveraging the affluent network to expand opportunities.
• Place the consultation form on the real estate portal site.
Etc.

© 2020 SURUGA bank, Ltd. All rights reserved.

Sophisticationof riskmanagement• Introduce an index like DSCR based on objective data from a third party.
• Add processes to check operational flows (interview, direct receipt of documents forconfirmation etc.).
• Limit branches that can handle loans in order to maintain internal control andstrengthen cooperation.
• Visit and confirm the property with the customer.
Etc.

14

 Housing Loans••

We developed Suruga’s own housing loan strategy through our long-standing strength of customized services and loan screening know-how based on a long-term accumulated
database.
Focusing on the introduction of customers from real estate agents (B to B to C), we also promoted working with Alliance of the Nojima Group and Recruit as B to C businessmodels.
We implemented the development of new financial instruments and revised existing ones to meet new lifestyles and senses of value, and customers’ needs.

Housing loan promotion system

Housing loan strategy
Dominate specific areas where we canleverage our strengths

Offer customized products
Subdivide segments based on market
perception

Screening

Freelance

Diversification by
workstyleContract/agency temp
Multiple jobs/second job

One-to-one response

•

etc.

SeniorDiversification by
workforce

FemaleForeign

Diversification bycareerReal estate agents

Ｂ

Persons who are
dedicated tohousing loansＢto9 branches and 1 dept.
in Tokyo metropolitan area
and other major urban areas

Ｃ

2 branches in Shizuoka
3 branches in Kanagawa

toCustomers

Sales

Salesperson (Financial plan)at sales office consultation
CustomerreferralNew
customers

Target advertisement on the Web(Financial plan) consultation

Ｂ

etc.

Branches providing
housing loans(Financial plan) consultationto

Housing loans in cities
nationwide/Customer
database

Entrepreneurs
Professional

Loan screening
expertise developed
over decades

Suruga bankＣ

Existing
customers

Referral(Financial plan) consultation

etc.

Other branches

New measures for housing loans■Support for buying second house during COVID-19 pandemic■Cooperative measures with Recruit Holdings■Cooperative measures with NIFTY Lifestyle Co., Ltd.

Following changes in lifestyles and business environment under themindsets of “with corona” or “after corona,” customer needs have increased
for moving to, or buying a second house in local areas such as eastern
Shizuoka and western Kanagawa having geographical advantages of goodaccess to the Tokyo metropolitan area. In response to these needs, thebank expanded its “secondary house resort loans.” (September 7, 2020)

Started a scheme to have customers referred to Suruga
from the housing loan site operated by Recruit Holdings,
targeting self-employed workers and freelancers,
who are Suruga’s strengths.
(August 24, 2020)

Started a customer referral scheme to postcontents of customers’ original consultation for
housing loans on real estate search site “NIFTY
Fudousan” operated by NIFTY Lifestyle Co., Ltd.
(October 1, 2020)© 2020 SURUGA bank, Ltd. All rights reserved.

15

 Asset finance• The sales of the product started in the second half of FY2019, and we have gradually expanded resources since April 2020 when the Structured
Finance Department was established.
• The business has steadily progressed, establishing a medium-risk/medium-return portfolio while diversifying target properties.
• The average loan interest rate moved in a range of 2.0% to 2.5%.

Trends in executed asset finance

Asset finance balance by category (as of Sep. 30, 2020)(Billions of yen)

3%

7.5
4.2

27%
2.2

3Q

2.1

4Q

2Q

(Participate
in finance)
Consultation

物流
Logistics
事業用
Business
再生エネルギー
Renewable energy

42%

Asset finance property location ratio (as of Sep. 30, 2020)(Finance)
Major financial
Consultation
institution etc.
Loan arranger(and senior lender)

21%
Investors

Structured
Finance
Department

Average interest rate:
2.38%

2
FY3/21

Asset finance sales system

Sales

5%

Officeオフィス

レジデンス
Residence

13.1 billion yen

1Q

1
FY3/20

Suruga bank

23%

Sales
(Participate in finance) Consultation© 2020 SURUGA bank, Ltd. All rights reserved.

10%
22%

Tokyo metropolitan area
首都圏

46%

Kansai area
関⻄圏

静岡・神奈川Shizuoka, Kanagawa
その他
Other

16

 Securities Operations• In the mid-term business plan, we determined to start new investments in the market by distributing resources to operations in the market, setting atarget of yield 0.7% on a comprehensive income basis.
• Under the policy of diversifying risks and stabilizing earnings while securing liquidity, we started investments into the multi-asset fund in the first half of
FY2020. (Balance as of Sep. 30, 2020: 60.2 billion yen)
• We will establish ALM and risk management systems, aiming at stable operations by curbing downside risks.

Portfolio of investment securities

Unrealized gains (losses) on securities(Billions of yen)

JGBs

Corporate Bonds

Foreign Bonds

Multi-asset Funds
230.9

11.6

60.2
147.2
130.9
19.3

56.1

16.4

132.5
12.4

23.4

41.7

25.5

4.7

5.3

4.7

3.6

51.8

Fair valueNet
unrealized
gains(losses)

Fair value

Available-for-sale
Securities

113.5

10.7

193.7

8.5

+80.2

Stocks

17.5

9.3

15.2

6.9

(2.3)

Bonds

94.5

0.7

116.5

0.4

+22.0

Multi-asset funds(Note)

―

―

60.2

0.2

+60.2

Other

1.4

0.7

1.7

0.9

+0.3

・Portfolio of multi-asset funds

17/9

18/9

19/9

20/9

© 2020 SURUGA bank, Ltd. All rights reserved.

Foreign
外国株式
stocksTarget yield 0.7％
(Comprehensive income basis)

89.7
2.1

16/9

Net
unrealized
gains(losses)(Note) New investments started in line with the policy to distribute resources to operations in
the market, which is set forth in the mid-term business plan.

109.7
83.7

Year on
year

Sep. 30, 2020

Fair value

211.9

53.0

125.0

Sep. 30, 2019

Other
(Billions of yen)

27.6

2.0
23.1

StocksJGB日本国債

Fair value

60.2 billionyen
G. bonds of
先進国国債
advancedcountries17 Structural Reform; Reform of Branch Operations• As of November 20, 2020, we have consolidated three branches (one is planned) in the Tokyo metropolitan area, three branches in major cities
nationwide, and one branch in the Kanagawa area, centralizing management resources.
• We have centralized the back office functions of branches into the Headquarters to improve the efficiency of branch functions and increase customer
contacts through diversified sales methods.
We will enrich communication with customers by leveraging created manpower and time.
・Branch operation efficiency

・Branches consolidated
Area

Month ofconsolidation

Branch name

Frontline of centralized operations at HQ

Operation Center (HSC)

Futakotamagawa Branch

July 2020

Kawasaki Branch

August 2020

Tama Plaza Branch

Jan. 2021 (planned)

Centralize and manage operations throughremote functions

Sendai Branch

June 2020

BranchHiroshima Branch

October 2020

Kyoto Branch

November 2020

Kanagawa

Keio University Sub-Branch

June 2020

Tokyo
metropolitan
area andother majorurban areas• Consolidation of branches, aiming to strengthen sales
capability and ensure compliance management.
• Centralized management will ensure thorough complianceand accumulated sales know-how and information sharing
will enhance sales capability and human resource
development.
• Centralize management resources into each branch in Tokyo
metropolitan area, Osaka, Nagoya and Fukuoka to promotesales.

Other majorurban areas

Shizuoka andKanagawa• Branch consolidation is conducted to improve the efficiency
of operations from the perspective of contributing to the local
community and existing customers’ convenience, including
proximity between branches, the number of visiting
customers, the volume of deposits and loans, and therelationship with the local government.

© 2020 SURUGA bank, Ltd. All rights reserved.

Support and check by thesecond line of HQ’s
“operational management”

BranchCreate manpower and time in order to improve customer contact
points through centralized operations

Sales activities with created manpower and time × expansion ofcustomer contact points through digital sales activities［New sales methods］

Expand sales activitiesTokyo
metropolitan
area

Increase contact points bysetting digital points(including DX)

Strengthen sales
personnel［Conventional sales methods］
Phone sales
Channel sales

Door-to-door sales

OTC sales18 Structural Reform; Group Function Review• We are restructuring companies within the group in order to review and consolidate group functions and optimize management resources.
• We reviewed the overlapping credit guarantee business conducted by three subsidiaries within the group and integrated two companies into Direct One Co.,
Ltd. At the same time, leasing business was also integrated in order to increase synergies.
• LNP Co., Ltd. discontinued its insurance policy solicitation operations after their transfer in May 2020 and was liquidated in November 2020.
• CHUBU SERVICER Co., Ltd., which is to be liquidated in March 2021, is currently preparing for it.
• The liquidation of LNP Co., Ltd. and CHUBU SERVICER Co., Ltd. will have a minor impact on financial results for the fiscal year ending March 2021.

・Review of credit guarantee function

・Group Function Review
Company nameMain business(Before reform)

Main business(After reform)

Note

Integration of
3 companies

Surviving
Business

Absorbed
Business

DIRECTONE
Co., Ltd.

Suruga CapitalCo., Ltd.

Money lending
Credit guarantee
Leasing

Leasing
Credit guarantee
Investment

Money lending
Credit guarantee
Leasing

Investment

Surviving company
succeeding in theabsorption-type split

Money
Lending
Business

CreditGuarantee
Business

Leasing
Business

Surviving company succeedingin the absorption-type split

Company Splitting

Absorption-Type Merger
SDP Co., Ltd.

Credit guarantee

LNP Co., Ltd.

Insurance policy
solicitation

CHUBU
SERVICER
Co., Ltd.

―Defunct Company―

Liquidation completed
in November 2020―

To be liquidated
in March 2021

CreditGuarantee
Business

Defunct Company
Servicer© 2020 SURUGA bank, Ltd. All rights reserved.

Succeeded
Business

Absorption-Type Split

Leasing
Business

CreditGuarantee
Business

Investment
Business

Company Splitting

19

I Financial Results for the 1st Half of FY3/21

II COVID-19 Pandemic Response

III Bonds management, Sales, Securities, Structural reform

IV Status of Alliance with Nojima GroupV CSR

 Status of Alliance with Nojima Group• Nojima Corporation (hereinafter called Nojima) and Suruga Bank have established an Alliance Committee chaired by their presidents and an Alliance
Promotion Meeting chaired by their vice presidents to discuss synergies, including those of group companies of both companies.
• We promote mutual customer referral with Nojima and NIFTY, including measures to attract customers to branches or stores and enclosure of preferredfliers in mailing envelopes addressed to customers.
• We also started linking contents with the real estate search site of NIFTY Lifestyle Co. Ltd. and NIFTY onsen (hot spring) website, as well as cooperation
with Cygni Corporation, which has sales channels to animal clinics and pet shops.
(1)
(2)
(3)
(4)
(5)

Details of theBusiness Alliance

Joint retail tech business
Joint development of online services and fintech business utilizing the customer bases of both companies
Collaboration in sales strategies, such as mutual sales of products and sales promotion at stores and branch offices of two companies
Discounted cross-selling of Nojima’s products and services to Suruga Bank customers
Regional revitalization centered on the Tokyo metropolitan area and Tokai region

NIFTY Fudousan

NIFTY Onsen

Rebuild a sustainable business model on the unique retailinfrastructure of Suruga Bank

Nojima Group’s broad business portfolio
Digital appliance specialty
store
operation business

Mobile carrierhandset shop
operation business

Internet business

Overseas business &othersNew businesses✔ Alliances with 3rdparties✔ Use of API
integration platforms

CRM* to support
consulting sales

Sophisticateddigitalmarketing*Customer Relationship Management

Nojima Group’s customer contact points
Kanagawa

ShizuokaTokyo

Business expansion using Suruga’s infrastructure
OnlineShizuoka &Kanagawa✖

Tokyo metropolitan
area & other majorurban areas✖

Online(Note1) Nifty Fudousan is a Japanese real estate listing site.
(Note2) Nifty Onsen is a listing site featuring hot springs in Japan.

Aiming for synergies between “Nojima, which aims to build a new type of business for the IoT age and beyond” and“Suruga Bank, which aims to improve financial functionality to help solve customers’ problems.”© 2020 SURUGA bank, Ltd. All rights reserved.

20

I Financial Results for the 1st Half of FY3/21

II COVID-19 Pandemic Response

III Bonds management, Sales, Securities, Structural reform

IV Status of Alliance with Nojima GroupV CSR

 CSR Contribution to Local Communities• Contribute to local communities through industry–university–government collaboration and bicycle promotion
Revitalization of local communities throughindustry–university–government collaboration[Pharma Valley Project]•This is a project to develop manufacturing, human resources, and communities,
aiming to become the prefecture with the world’s most healthy and long-lived
people, focusing on “health promotion and overcoming illness” as well as“establishment of economic base.”

Revitalization of local communities through bicycles•

Suruga Bank signed a “Partnership agreement on bicycle promotion” with the Council
to Make Shizuoka Prefecture a Mecca of Cycle Sports(Note) on June 19, 2020.
Aim at “Realization of Fuji no Kuni (Shizuoka Prefecture), Mecca for Cyclists” by working together
for specific measures based on the Shizuoka Prefecture’s “Good Bicycle Japan” project.

(Note) Organization established in April 2018 to make Shizuoka Prefecture a mecca of cycle sports through public–private cooperation

Ride SHIZUOKA 2020 Round OYAMA[Special sponsorship for open lectures held by Shizuoka
Cancer Center]•

Since 2004, Suruga Bank has been a special sponsor for open lectures
held by Shizuoka Cancer Center, the core of Pharma Valley Project.

(Note)”Open lecture held by Shizuoka Cancer Center”© 2020 SURUGA bank, Ltd. All rights reserved.

•

Across Izu Peninsula Ride 70 km

Suruga Bank signed a “Partnership agreement on bicycle promotion” withHiratsuka City on June 24, 2020.
Promote tourism in Hiratsuka City and expand visitors from outside through bicycles

Hiratsuka LaLa Pota Miyagase Ride 70 km

Hiratsuka LaLa Pota “Hiratsuka Hakkei Tour”

21

Reference Materials Corporate Philosophy“I’m glad you’re here… I'm glad we met…”
This perception is our goal.
No matter how much the times change or time passes,
we are committed to providing service from the customer’s perspective,
staying closely in tune with their everyday life,
providing value, and helping our customers lead more prosperous lives.
<Our Ambition>
We aim to serve as a bank that always thinks of customers first in any situation.
By genuinely listening to our customers and providing added value that only Suruga Bank can deliver, we aim to be the kind of bank that makes
customers feel “I’m glad you’re here… I’m glad we met.”
To provide customers with truly satisfying service, it is vital for staff who provide these services to find their work meaningful. Thus, we also strive
to be a company that makes not only customers, but also staff feel “I’m glad you’re here… I’m glad we met.”© 2020 SURUGA bank, Ltd. All rights reserved.

Reference Materials 1

 Suruga Bank Mid-Term Business Plan – “Re:Start 2025” (Period: FY2019–FY2025)
We want to be a company that makes customers feel,"I’m glad you’re here... I’m glad we met”

Corporate
Philosophy

Customer satisfaction

Shareholder value

Employee satisfaction

Contribution to society

Providing value

New Vision for Suruga Bank
Vision• To realize our corporate philosophy, we will create a “new Suruga Bank” that delivers customer
satisfaction and ensures that staff feel their work is meaningful. We will achieve this through acommitment to carrying out customer-oriented business, initiatives in our core business of retailbanking, and by creating unique value in ways that are distinct to our bank.
• We will also establish measures for thorough compliance and controlling appropriate risk/return,and develop a “new sustainable business model” as a public financial institution that benefits the public.

Strategic
Management

Restructure the core business of ‘retail banking’ while
promoting ‘marketable activities’ to diversify risks andstabilize profits

Promote existing businesses with controlled risk capital,
pursue new business, and prepare for risks that surface
in high-stress environments

 Establish a revenue base that balances risk andreturn by controlling RA gross operating
profit(Note) Even after Basel III is revised, we will maintain acapital adequacy ratio of at least 8% to realize
our business strategy(Note) RA (Risk Adjusted) Gross Operating Profit = Gross Operating Profit - Actual Credit Costs© 2020 SURUGA bank, Ltd. All rights reserved.

Reference Materials 2

 Basic Strategy for Phase 1
Environment
recognition
Continued negativeinterest rates
 Cost reduction, staff
review
 Focus on non-interest
rate-based business

Compliance withregulations
 Basel III revision
 Reassess businessboundaries based onmarket entry of different
industries

Fintech support

Social change

 Systemization and laborsaving investment
 Platform creation throughcollaboration withdifferent industries

 Declining birthrate/aging
population
 Population concentratingin cities

Consumer change Improve awarenessaround inheritance andasset building Diversification of labor
force, work styles andservice needs

Strategy

Addressing priority
issuesShare houserelated loans
Promptly dissolve
relationship withfounding family

Retailbanking Retarget investment real estate loans and improve their quality
 Evolve toward a solution-based sales model Expand based on area characteristics

Marketable
activities

 Shift away from a credit risk-centric portfolio
 Aim for stable operation with contained downside riskNewbusiness Partner with external companies
 Utilize the API collaboration platform

Optimizing allocation of management resources
Reform of branch
operations

Reallocation of humanresources

Revision of groupcapabilities© 2020 SURUGA bank, Ltd. All rights reserved.

FY2023–
FY2025

Establish new positioning

Phase
2

Phase 1 (FY2019–FY2022)

Cost reduction

Reference Materials 3

 Financial Plan Overview Target Management Indices(Billions of yen)

FY3/23

Non-consolidated

FY3/20Net interest income

84.9

71.0

Actual credit costs

2.4

20.0

RA gross operating profit(Note1)

77.8

49.0

Net income

24.4

6.0

OHR(Note2)

54％

Up to 60%

10.2％

Over 10%

25.3

7.0

Capital adequacy ratio

Consol-idated(Final FY of Phase 1)

Net income(Note1) RA (Risk Adjusted) Gross Operating Profit = Gross Operating Profit – Actual Credit Costs(Note2) OHR (Overhead Ratio) = Expenses / Gross Operating Profit© 2020 SURUGA bank, Ltd. All rights reserved.

Reference Materials 4 Sales Strategy OverviewIn the first phase, we will lay the foundation for a sustainable business model based on our unique retail infrastructure.

Key Points
 Utilize knowledge and expertise built up over decades to continue to position personal loans as a pillar of our retail banking business.
 Improve financial support capabilities to solve customer issues
 Promote marketable activities in order to shift away from loan-centered portfolio and stabilize profit

Retail banking

Business domain

Asset field

Life field

Business field

Marketable
activities

Unsecured Loan/Asset Consulting/Corporation
Shizuoka andKanagawa

Tokyo
metropolitan
area and othermajor urban
areasSpecified-Purpose loan

Asset succession(inheritance)

Business succession
M&A

Protection insurance

Private pension
products

Business loans

Housing loans

Securities
management

Investment property loans

Infrastructure

Alliances with external companies
CRM(Note1) platform

API(Note2) collaboration platform

Channel platform

Marketing platform(Note1) Customer Relationship Management(Note2) Application Programming Interface© 2020 SURUGA bank, Ltd. All rights reserved.

Reference Materials 5 Overview of Structural Reform Establish a business foundation that promotes our new business strategy by implementing efforts tooptimize management resources, including “reform of branch operations,” “reallocation of humanresources,” and “revision of group capabilities.”

Reform of branch operations
 Boost efficiency of branch
operations
 Optimize branches and the
ATM network
 Improve customer contact

Reallocation of human resources

Revision of group capabilities

 Shift human resources to frontline operations

 Improve profitability groupwide
 Review capabilities that alignwith the group’s strategy

Establish a business foundation that promotes our business strategy
 Implementation of the above measures is expected to reduce expenses by about 15% comparedwith FY18
FY22 plan
FY18 results
Expenses

46.8 billion yen© 2020 SURUGA bank, Ltd. All rights reserved.

40.0 billion yen

Reference Materials 6

 Reference Information (Links)
Page No.

1, 2

Title of disclosure
Timely disclosed on October 29, 2020: “Announcement Regarding the Revision to the Earnings Forecast”
https://www.surugabank.co.jp/surugabank/common/english/pdf/201111_en.pdf
Disclosed on May 14, 2020: “Consolidated Financial Results for the Fiscal Year Ended March 31, 2020”
https://www.surugabank.co.jp/surugabank/common/english/pdf/200514_en.pdf

7Disclosed on November 13, 2020: “Consolidated Financial Results for the Six Months Ended September 30,
2020”
https://www.surugabank.co.jp/surugabank/common/english/pdf/201113_en.pdf
Disclosed on May 15, 2019: “Outline of the criteria for exemption for repayment of part of the principal amountof the loan”

9

https://www.surugabank.co.jp/surugabank/common/english/info/pdf/190515_a_en.pdf
Timely disclosed on March 25, 2020: “Announcement Regarding Transfer of Share House-related Loan
Receivables”
https://www.surugabank.co.jp/surugabank/common/english/pdf/financial_results_2003_01.pdf

20
Reference
Material

Timely disclosed on May 19, 2020: “Business & Capital Alliances with Nojima Corporation”
https://www.surugabank.co.jp/surugabank/common/english/pdf/200519_en.pdf
Disclosed on November 14, 2019: “Suruga Bank Mid-Term Business Plan ‘Re:Start 2025’”
https://www.surugabank.co.jp/surugabank/common/english/pdf/191114_en.pdf© 2020 SURUGA bank, Ltd. All rights reserved.

Reference Materials 7

〈 Inquiries 〉
IR Office, SURUGA bank, Ltd.
Tel: +81-3-3279-5536
e-mail: ir.koho@surugabank.co.jp

The foregoing material contains statements regarding future business performance. These statements
are not intended as guarantees of any specific future performance, which is subject to a variety of risks
and uncertainties. Actual future business results may differ from the targets contained in the present
material, due to unpredictable changes in the external business environment.

© 2020 SURUGA bank, Ltd. All rights reserved.