SURUGA bank, Ltd.
Financial Results for the three months ended
June 30, 2020

August 14th, 20200

■ Actual Results for 1Q,FY3/21;Comparsion with Previous Forecast
・Actual results for the first quarter of the fiscal year ending March 2021 progressed generally in line with the full-year forecast.
・Ordinary income was ¥22.1 billion representing progress of 26.0% towards the full year forecast.
・Actual credit costs were ¥7.3 billion, 52.7% of the forecast of ¥14.0 billion for the first half of the fiscal year, reflecting factors generally in line with the forecast.
This is 36.8% progress of the forecast of ¥20.0 billion for the full year, representing progress in line with the full-year forecast, because actual credit costs in thesecond half of the fiscal year are planned to be ¥6 billion, reflecting the reversal of provision of allowance for loan losses associated with the transfer of sharehouse-related loans in the second half of the fiscal year.
・Although net income (non-consolidated) for the current fiscal year progressed by only 5.6% of the full-year forecast of ¥5 billion due to the progress in actual
credit costs, it posted a surplus of ¥200 million contrary to the deficit forecast of ¥4 billion for the first half of the fiscal year.
・Although net income (consolidated) for the current fiscal year progressed by only 8.4% of the full-year forecast of ¥6 billion for the same reason of nonconsolidated net income, it posted a surplus of ¥500 million contrary to the deficit forecast of ¥3.5 billion for the first half of the fiscal year.

【Consolidated】【Non-consolidated】
1st Quarter
FY3/21①

Previous forecast
First half

Second half

Full year
②

進捗
①/②

Ordinary income

２２.１

４３.０

４２.０

８５.０

２６.０％

Gross operating profit (A)

１８.３

３６.０

３４.０

７０.０

２６.２％

Expenses (B)

１０.４

２２.０

２１.０

４３.０

２４.３％

Core net operating profit

７.９

１４.０

１３.０

２７.０

２９.３％

Ordinary profit

０.５

０.０

７.０

７.０

Net income

０.２

(４.０)

９.０

Actual credit costs (C)

７.３

１４.０

RA gross operating profit
(A－C)

１１.０

OHR（B÷A）

Capital adequacy ratio

1st Quarter
FY3/21③（Billions of yen）

Previous
forecast
Full year
④

進捗
③/④

２５.０

９６.０

２６.０％

８.２％

０.９

８.０

１２.１％

５.０

５.６％

０.５

６.０

８.４％

６.０

２０.０

３６.８％

２２.０

２８.０

５０.０

２２.０％

５６.８％

６１％

６１％

６１％

１０.４９％

１０.３％

１０.８％

(Note1) RA (Risk Adjusted) gross operating profit = Gross operating profit - Actual credit costs(Note2) The earnings forecast for the fiscal year ending March 31, 2021 was calculated with thought to impacts of the coronavirus (COVID-19)pandemic foreseeable at the present time. However, if the impacts continue for a long time,the earnings forecast may be revised, for instance, due to further increase in net credit costs.

© 2020SURUGA bank, Ltd. All rights reserved.

１

1

■ Actual credit costs, share house loans ＜Non-consolidated＞
・Actual credit costs of share house-related loans amounted to ¥1.1 billion due to an increase in delinquencies and downgrades ofborrowers who suspended their repayment because they wish their loans to be transferred.
The coverage ratio improved by 1.07% from the previous fiscal year-end to 92.36% due to collateral coverage and provision ofallowance.
・Actual credit costs for investment property loans were ¥5 billion.

・Actual credit costs and Allowance for loan losses（Billions of yen）

Actual credit
costs
1Q

Allowance forloan losses

Share house-related loans

１.１

１０３.７

Investment property loans*

５.０

５８.６

Housing loans

０.８

５.５

Unsecured loans

０.３

２.９

Business financing loans, etc

０.０

８.８

合計

７.３

１７９.７

Item

(Note) Investment property loans: one-room apartment loans, single building apartment loans, other secured loans

・Share house loans (status of coverage)
Total credit
balanceA
Sep. 30, 2019
Mar. 31, 2020
Jun. 30, 2020

２４６.１
１９２.１
１９０.４

Share house claims

１９９.３
１５４.７
１５４.０

Collateral or
guarantees,
etc.
B
９０.６

７２.７
７２.１

Unsecuredportion
C

１５５.５
１１９.３
１１８.２

Allowance
D

１３５.１
１０２.５
１０３.７

Coverage ratio(B＋D)／A

９１.７４％
９１.２９％
９２.３６％(Note1) Based on obligors of share house loans(Note2) Covered amount : Estimated amount, calculated by multiplying the covered amount including collateral, etc. with a certain ratio.
(Note3) 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.
© 2020SURUGA bank, Ltd. All rights reserved.

２

2

■ Outstanding balance, yield, delinquency rate by loan category ＜Non-consolidated＞
・The rise in the delinquency rate of individual loans (0.54% increase from the end of March 2020) was mainly due to an increase in the delinquency amount of sharehouse loans to share house-related borrowers and other loans, as well as the postponement of quarterly loan transfers in view of the impact of the novel coronavirus.
<Specific explanation>
・The rise in the delinquency rate of housing loans (0.20% increase from the end of March 2020) was mainly due to an increase in the number of obligors in repayment
difficulty, such as company representatives and individual business owners, due to the impact of the novel coronavirus.
・The rise in the delinquency rate of share house loans (3.45% increase from the end of March 2020) was mainly due to the suspension of repayments by borrowers ofshare house-related loans who wish their loans to be transferred.
・Investment property loans for corporate customers and asset finance remained strong. (¥9.9 billion as of June 30, 2020)（Billions of yen）
（億円）
Jun. 30, 2020

Mar. 31, 2020
Loan category

Period-end
balance

Yield

Delinquency

Period-end

ratebalance

Yield

Delinquency
rate

２,０９９.０

３.１２％

４.１４％

２,０６５.５

３.０９％

４.７０％

Housing loans

５５１.３

２.８７％

０.５９％

５３７.７

２.８６％

０.７９％

One-room apartment loans

１９５.６

３.４１％

１.６５％

１８８.９

３.４０％

１.９２％

１,１５６.１

３.３３％

３.３４％

１,１４４.８

３.２８％

３.６８％

Share house loans

１５４.６

１.４７％

２７.８９％

１５３.９

１.４６％

３１.３４％

Other secured loans

４１.２

４.８９％

１.０５％

３９.９

４.８５％

１.２９％

２０７.９

１０.２３％

１.７６％

１９５.７

１０.２３％

１.９３％

１３８.４

１１.５２％

０.７０％

１２９.２

１１.５６％

０.７８％

６９.４

７.６６％

３.８８％

６６.４

７.６５％

４.１５％

２,３０７.０

３.７４％

３.９３％

２,２６１.２

３.６９％

４.４７％

６.６

２.１９％

－

９.９

２.２３％

－

Secured loans

Single building apartment loans

Unsecured loans
Card loans
Unsecured certificate loans
Consumer loans
Corporate loans for property
investment and asset finance(Note1) Delinquency rate = Loans past due 3 months or more / Loans(Note2) Yield: Yield for customers (excluding guarantee fee, accrued interest), period-end balance basis(Note3) Yield of one-room apartment loans, secured loans and consumer loans are calculated based on original claims before securitization.
(Note4) As the balance is aggregated by loan type, if obligors of share house loans default on scheduled repayment, the delinquency rate of other types of loans will be affected.

© 2020SURUGA bank, Ltd. All rights reserved.

３3

■Yield / Margins ＜Non-consolidated＞
・The loan-deposit margin rose by 0.16% year-on-year to 1.80%, mainly due to a 0.20% decline in the expense ratio resulting from a decrease in
expenses and an increase in the average balance of deposits.
・The net interest margin shrank by 0.21% year-on-year to 1.00%, mainly due to a fall in the return on investment stemming from an increase indeposits with the Bank of Japan.
・The loan balance decreased by ¥266.8 billion year-on-year to ¥2,459.4 billion, including about ¥100.0 billion decrease due to special factors.
・The deposit balance increased by ¥129.3 billion year-on-year to ¥3,271.1 billion.

Interest margins (Non-consolidated)

Loans (Period-end balance / Yield)
Loans (Period-end balance) (Billions of yen)

Loan-deposit margin (overall)

Yield on loans and bills discounted

Loan-deposit margin (after deduction of expenses, overall)
Net interest margin (overall)

3.48%

2.24%

1.39%

3.48%

2.27%
1.58%

3.39%

2.16%
1.46%

3,133.8

3,244.0

3,150.4
2,726.2※1
2,459.4※2

3.58% 3.57% 3.45%

3.15%

3.11%
16/6

17/6

18/6

3.19% 3.16%

19/6

1.64%

1.80%

Deposits (Period-end balance / Yield)
Deposits (Period-end balance) (Billions of yen)

1.21%

Yield on deposits

1.00%

4,089.8 4,071.8

3,871.5
3,141.8

0.10%

16/6

17/6

18/6

20/6

(Note1)Factors contributing to the decline in the fiscal year ended June 2019 included approximately ¥100.0 billion decrease
resulting from the securitization of studio apartment loans.
(Note2)Factors contributing to the decrease in the fiscal year ended June 2020 included approximately ¥100.0 billion decrease
associated with the collection of loans from the founder-affiliated companies and the transfer of share house-related loans.

19/6

0.09%
0.05%

20/6
16/6

© 2020SURUGA bank, Ltd. All rights reserved.

3,271.1

17/6

18/6

0.0３% 0.04%

19/6

20/6

４

4

■Capital Levels, Expenses and OHR ＜Non-consolidated＞
・Capital adequacy ratio (non-consolidated) rose by 184 basis points year-on-year to 10.49%, mainly due to an increase in own capital anda decrease in risk-weighted assets. (10.64% on a consolidated basis)
・The OHR rose by 3.1% year-on-year to 56.8% due to a decline in gross operating profit, despite efforts to reduce expenses based on structuralreforms set forth in the medium-term management plan.

Trends of Capital & Capital Adequacy Ratio

Trends of Expenses & OHR

Capital adequacy ratio

Own capital（Billions of yen）

12.01% 12.49% 12.14%

288.0

317.5

328.2

17/6

18/6

Gross operating profit

Non-personnel expenses

OHR

Taxes

（Billions of yen）

10.49%
26.5

8.65%

219.0

16/6

Personnel expenses

19/6

28.2

26.4

21.5

241.1

20/6

© 2020SURUGA bank, Ltd. All rights reserved.

12.3

12.2

12.0

11.5

4.8

4.5

4.3

3.6

46.6%
6.2

43.4%
6.4

45.7%
6.6

1.2

1.2

16/6

17/6

53.7%

18.3

10.4
3.7
56.8%

6.6

5.7

1.0

1.2

0.9

18/6

19/6

20/6
５

5

Reference Materials

■On the Business Alliance with Nojima Group・In May 2020, the Bank concluded the "capital and business alliance agreement" with Nojima Corporation (hereinafter referred to as "Nojima"). The Bank establisheda new management system with President Nojima of Nojima Corporation as Vice Chairman of the Bank to strengthen the relationship between the two companies.
・It has been determined that mutual introduction of customers, using both Suruga and Nojima group functions and customer bases, will be launched sequentially after
August 2020 from various touch points*.
*Stores or branches, websites, EDM, etc.
・Both companies will continue to promote win-win cooperation by leveraging the customer bases of both groups.

Details of theBusiness Alliance(1) Joint RetailTech business(2) Joint development of online services and FinTech business utilizing the customer bases of both companies(3) Collaboration in sales strategies,such as sales of mutual products and sales promotion at stores and branch offices of two companies(4) Discounted cross-selling of Nojima’s products and services to Suruga Bank’s customers(5) Regional revitalization centered on the Greater Tokyo Area and Tokai region

Nojima Group's broad business portfolio
Digital appliancespecialty store
operation business

Mobile carrierhandset shop
operation business

Internet business

Overseas business& others

Nojima Group's customer contact points
Kanagawa

Shizuoka

Tokyo

OnlineRebuild a sustainable business model on the uniqueretail infrastructure of Suruga Bank
New businesses✔Alliances with 3rdparties✔Use of API
integration platforms

CRM* to support
consulting sales

Sophisticateddigitalmarketing*Customer Relationship Management

Business expansion using the Bank's infrastructure
Shizuoka &Kanagawa✖

Tokyo
metropolitan area
＆ other major
cities area✖

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

参１

7

■ Actual Results for the three months ended June 30, 2020 year-on-year
・Gross operating profit decreased by ¥3.1 billion year-on-year to ¥18.3 billion, mainly due to a decrease in interest on loans and bills discounted.
・Expenses decreased by ¥1.1 billion year-on-year to ¥10.4 billion as a result of efforts to reduce expenses based on structural reforms set forth in themedium-term management plan.
・Net operating profit increased by ¥5.7 billion to ¥12.6 billion due mainly to the reversal of provision of general allowance for loan losses (transferred to specificallowance) caused by the suspension of repayment by borrowers of share house-related loans who wish their loans to be transferred.
・Net income (non-consolidated) decreased by ¥3.1 billion year-on-year to ¥200 million, mainly due to an increase in the disposal of non-performing loans anda decrease in net gain on stocks.
・Net income (consolidated) decreased by ¥3.3 billion year-on-year to ¥500 million for the same reason as non-consolidated.

＜Non-consolidated＞
1st Quarter
FY3/20

1st Quarter
FY3/21Year-on-year
ChangeGross operating profit

２１.５

１８.３

(３.１)

Expenses

１１.５

１０.４

(１.１)

Core net operating profit
Net operating profit
Ordinary profit
Net income

Factors causing variation in ordinary profit(year-on-year basis)（Billions of yen）

９.９

７.９

(２.０)

６.９

１２.６

+５.７

５.５

０.５

(５.０)

３.４

０.２

(３.１)

Main factors
Net interest income

・Decline in interest on loans(average balance factors (-2.6 billion yen), yield factors (-200 million yen))

Net fees and commission

・Reduction in fees related to securitization

Net other operating income

・Reduction in profit on sales of securitization accounts receivable(-1.9 billion yen)

Expenses・Decrease in non-personnel expenses (expense for investigation of all loans, etc.,
was recorded in the previous year)

Gains (losses) on stocks / other・Reduction in gain on sales of cross-held stocks after elimination of such stocks(-1.8 billion yen)

Actual credit costs

・Increased delinquencies and downgrades of share house-related borrowers
who suspended their repayment because they wish their loans to be transferred(＋2.2 billion yen)（Billions of yen）
Actual credit costs

ROE (％)(net income basis)
Profit attributable to ownersof parent

Earnings per share (yen)(consolidated)

６.４
６.４０％

７.３
０.４７％

+０.９
(５.９２％)

５.０

Previousyear
results

5.5

(5.0)
(2.5)

３.８

０.５

(３.３)

１６.６

２．１

(１４.４)

＋1.4
(2.0)

(0.9)

＋1.1

0.5

(2.1)
０

Ordinary profit
Net interest（3 months ended
incomeJun.30, 2019）

Net other
Net fees andExpensescommissions operating income*

Gains (losses)
on stocks/
otherActualresults

Actualcredit costs

Ordinary profit（3 months ended
Jun.30, 2020）(Note) excluding gains (losses) on bonds© 2020SURUGA bank, Ltd. All rights reserved.

参２8

〈 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 notIntended 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 unpredictablechanges the external business environment.

© 2020SURUGA bank, Ltd. All rights reserved.

9