SURUGA bank,Ltd
Financial Results for the 1st Half of FY3/22

November 26, 20210

■Table of contents
I Financial Results for the 1st Half of FY3/22
・Actual Results for 1H, FY3/22 (Comparison with 1H, FY3/21 / Comparison with Previous Forecast)

P.１

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

P.３

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

P.４

・Yield/Margins, Loans and Deposits Yield/Average Balance <Non-consolidated>

P.５

・Trends in Expenses, OHR, and Capital Adequacy Ratio <Non-consolidated>

P.６

Ⅱ Business Strategy Based on Mid-Term Business Plan
・The Real Estate Market's Status

P.７

・Forecast of New Loans Disbursed

P.９

・FY21 Sales Policy

P.10

・Streamline to Add Sales Staff and Hours

P.11

・(Shizuoka and Kanagawa Areas) Strengthening Close Ties with Local Communities by Reforming the Area System and Branch Network

P.12

・Consumer/Corporate Solution Sales

P.13

・Investment Real Estate Loans

P.14

・Housing Loans

P.15

・Structured Finance

P.16

・Direct

P.17

・Securities Management

P.19

・Response to Borrowers of Share House-related Loans / State of Response to Customers of Investment Real Estate
Loans

P.20

・Status of Single Building Apartment Loans (Except for Share House-related Loans)

P.22

Ⅲ SDGs・Initiatives for SDGs / in Practice

Reference Materials

P.23

I Financial Results for the 1st Half of FY3/22

Ⅱ Business Strategy Based on Mid-Term Business Plan

Ⅲ SDGs■ Actual Results for 1H, FY3/22 and Comparison with 1H, FY3/21• Gross operating profit fell ¥3.3 billion year-on-year to ¥33.5 billion, mainly due to a decline in net interest income.
• Actual credit costs fell ¥14.4 billion year-on-year to ¥6.6 billion, mainly due to withdrawals of allowance for loan losses owing to revised secured
mortgage collateral.
• For the reasons given above, non-consolidated net income for the first half of FY3/22 increased ¥13.3 billion year-on-year to ¥17.5 billion.
• Due partially to higher non-consolidated net income, consolidated net income for the first half of FY3/22 increased ¥12.3 billion year-on-year to¥17.8 billion.

<Non-consolidated>
Actual resultsfor FY3/21

Gross operating
profitFactors causing variation in ordinary profit(comparison with previous year)(Billions of yen)
1st half
FY3/22Year-on-yearchangeMain factors
Net interest income

・Decline in interest on loans(average balance factors (¥-2.7 billion), yield factors (¥-0.8
billion)

36.8

33.5

(3.3)

Expenses

20.5

20.2

(0.3)

Expenses・Decline in non-personnel expenses (primarily a decline inland and building rent expenses)

Core net operating
profit

15.9

12.9

(2.9)

Actual credit costs

・Withdrawals of allowance for loan losses due to revised
secured mortgage collateral (¥-13.0 billion)

Net operating profit

37.9

13.3

(24.6)

Ordinary profit

8.7

20.8

+12.1

Net income

4.1

17.5

+13.3

(Billions of yen)
20.0

+12.1

+14.4

Actual credit costs

7.7

(6.6)

(14.4)(3.1)

ROE (%)(Net income basis)

3.4

13.6

+10.1

Profit attributable to ownersof parent

5.4

17.8

+12.3

Earnings per share(consolidated)

23.6

76.8

+53.2

(0.1)

Previousyear
results
8.7

(0)

+0.3

+0.6

Actualresults
20.8

０Ordinary profit(FY9/20)

Net interest
incomeNet fees andcommissions

Other operating
income *1

Expe
nse

Gains or losses on
Actual credit
stocks/bonds
costs/otherOrdinary profit(FY9/21)(*1) Other operating income excludes gains/losses on bondtransactions.

1

■ Actual Results for 1H, FY3/22 and Comparison with Previous Forecast•••

Ordinary income was ¥8.6 billion higher than the forecast at ¥49.6 billion due in part to the booking of reversals of allowance for loan losses and gains on bad debts recovered.
Actual credit costs were ¥8.6 billion less than forecast at ¥6.6 billion due to the following factors.
 Actual credit costs normally arising from loans and bills discounted excluding share house-related loans were low.
 Withdrawals of allowance for loan losses due to revised secured mortgage collateral exceeded expectations.
Net income in the first half of FY22 was ¥17.5 billion on a non-consolidated basis and ¥17.8 billion on a consolidated basis, but the full-year earnings forecast will retain the initialprojections, due to uncertainties on such matters as the future of the economy and financial landscape, as well as the lack of changes to the full-year forecast for actual credit costs (seefigure at bottom right for analysis of factors).

[Non-consolidated][Consolidated]

1st half earnings
forecast (1)1st half forecast

Difference(2)(2)-(1)(released 8/13)

Ordinary income

Full-year forecast*As initially

49.6

+8.6

78.0

33.0

33.5

+0.5

64.0

20.5

20.2

(0.3)

41.0

12.5

12.9

+0.4

23.0

Ordinary profit

11.0

20.8

+9.8

Net income

9.5

17.5

Actual credit costs

2.0

(6.6)

operatingprofitExpenses
Core net operating
profit(Billions of yen)
Full-year
1st half forecast

Difference

forecast(4)(4)-(3)*As initially(released
8/13)

forecast

41.0

Gross

1st halfearnings
forecast (3)forecast

45.5

54.1

+8.6

87.0

7.0

11.5

21.3

+9.8

8.0

+8.0

6.0

10.0

17.8

+7.8

7.0

(8.6)

16.0
Forecast (Full year)<Premise Behind FY3/22 Actual Credit Cost Forecast>Released
8/13

a. The full-year projection for actual credit costs from receivables without special factors, such as share house-related loans, ¥1.0 billion, ¥3.0 billion below the previous plan figure.
(1) Lower consumer balance requiring attention/management (2) Higher prices for transfers of loan receivables due to higher real estate prices
b. Actual credit costs for recipients of share house-related loans remain the initially projected ¥4.0 billion for the full year.
c. Reversals of allowance for doubtful receivables due to comprehensive transfers of share house loans is projected to be ¥10.0 billion, ¥5.0 billion less than the previous plan figure.
Causes include some customers desiring these procedures completing the procedures and changing schedules for next year
d. The projected preventive allowance retains the previous plan figure of ¥34.0 billion. This takes into account examinations of the status of consumer borrowers to review borrower classifications andallocation methods, as well as collective bargaining with some customers using investment real estate loans other than share house loans.
The portion below the projected first half amount is expected to arise in the second half.
e. As for the revised secured mortgage collateral, withdrawals of allowance for loan losses is projected at ¥13.0 billion, ¥2.0 billion higher than the previous plan figure, as a result of an examination of first half
results. (For the revised secured mortgage collateral, the collateral value was revised according to rules in a routine revision by the Bank because recent sales of loans to servicers remains far above
mortgage collateral evaluations.)

RevisedChange

16.0

16.0

±0

Normal amount (a)

4.0

1.0

(3.0)

Share house-related loans (b)

4.0

4.0

±0

(15.0)(10.0)

+5.0

34.0

34.0

±0

(11.0)(13.0)(2.0)

Actual credit costs

Comprehensive transfer of share houseloans (c)Preventive allowances (d)Revised secured mortgage collateral (e)2■ Actual Credit Costs, Share House-related Loans <Non-consolidated>• Actual credit costs for share house-related loans booked a loss of ¥6.8 billion despite an increase in allowance for loan losses as initiallyprojected, as there were large withdrawals of allowance for loan losses due to revised secured mortgage collateral.
• Actual credit costs excluding share house-related loans declined ¥3.5 billion year-on-year to ¥0.1 billion.

・Actual credit costs/allowance for loan losses (FY3/22)
Item

１Q

(Billions of yen)
1st half actual
credit costs

２Q

Allowance forloan losses

Share house-related
borrowers

1.2

(8.0)

(6.8)

67.7

Investment real estate loans*

1.9

(1.3)

0.5

54.1

Housing loans

(0)

(0.7)

(0.8)

3.3

Unsecured loans

0.1

(0)

0

2.4

Business financing, etc.

0.1

0.1

0.3

8.4

Total

3.4

(10.1)

(6.6)

136.1

*Investment real estate loans: studio apartment loans, single building apartment loans, other secured loans

・Status of coverage of share house-related loans
Total credit
balanceA

Share houserelated loans

Mortgagecollateral or
guarantee
B

UnsecuredportionC

AllowanceD

Coverage ratio(B+D)/A

September 2021

189.1

153.5

71.8

117.3

106.5

94.31%March 2021

135.7

107.2

52.5

83.1

76.7

95.24%

September 2021

131.6

104.2

61.7

69.8

67.7

98.36%*Based on obligors of share house-related loans.
*Mortgage collateral or guarantee: Calculated by multiplying the estimated amount of collateral, etc. by a fixed rate. (Revision performed during the first half of the current fiscal year.)*Total credit balance, share house related loans: Loans and bills discounted, suspense payments equivalent to loans and bills discounted, and accrued interest on loans and bills discounted.

3

■ Outstanding Balance, Yield, and Delinquency Rate by Loan Category <Non-consolidated>• The yield on loans and bills discounted for all loans decreased by 0.02% compared to the end of June 2021 to 3.59%.
• The consumer loan delinquency rate would be unchanged from the end of June 2021, but due to special factors, it rose 1.49% to 6.68%,
primarily owing in part to an increase in the number of delinquent borrowers of share house-related loans, who suspended their
repayment because they wished to have their loans transferred, as well as those who took advantage of collective bargaining to suspend
payments.
(Billions of yen)
June 2021

Loan category
Period-end balance

Secured loans

Yield

September 2021
Delinquency rate

Period-end balance

Yield

Delinquency rate

1,863.0

3.07%

5.44%

1,823.6

3.07%

7.05%

Housing loans

486.3

2.83%

0.27%

475.1

2.82%

0.27%

Studio apartment loans

161.3

3.39%

1.51%

155.0

3.39%

1.75%

1,073.7

3.24%

3.46%

1,054.3

3.24%

4.70%

Share house loans

105.9

1.40%

58.12%

104.2

1.40%

73.33%

Other secured loans

35.7

4.70%

0.56%

34.8

4.66%

0.34%

Unsecured loans

162.8

10.35%

2.30%

156.8

10.37%

2.28%

Card loans

108.2

11.73%

0.81%

104.5

11.75%

0.85%

Unsecured certificate loans

54.5

7.62%

5.27%

52.2

7.59%

5.14%

2,025.9

3.65%

5.19%

1,980.4

3.64%

6.68%

2.10%

1,848.8

Single building apartment loans

Consumer loans (A)Consumer loans (excluding
house-related loans)share

Investment real estate loans for asset
management companies (B)Structured finance, etc.(C)Total <total of (A), (B), and (C)>

1,891.9

2.74%

17.9

1.92%

-

22.2

1.87%

-

40.6

2.37%

-

50.8

2.34%

-

2,084.4

3.61%

5.05%

2,053.5

3.59%

6.45%

* Delinquency rate = Loans past due for three months or more / loan balance, * Yield: Yield for customers (excluding guarantee fee and accrued interest), period-end balance basis* Yield and delinquency rate of studio apartment loans, secured loans, consumer loans, and the total <(A)+(B)+(C)> are calculated based on original claims before securitization.
* As the balance is aggregated by loan type, if borrowers of share house loans or customers participating in collective bargaining default on scheduled repayment, the delinquency
rate of other types of loans will be affected.

4

■ Yield/Margins, Loans and Deposits Yield/Average Balance <Non-consolidated>••••

The loan-deposit margin increased by 1 basis point year-on-year to 1.78% because the 6 basis point decrease year-on-year in the expense ratio exceeded the 7 basis point decreaseyear-on-year in yield on loans and bills discounted resulting from the continued relaxation of loan repayment conditions such as lowered interest rates.
The net interest margin shrank by 15 basis points year-on-year to 0.81% because a fall in the return on investment stemming from an increase in deposits with the Bank of Japanexceeded a decrease in funding costs resulting from a decrease in the expense ratio.
The average loan balance decreased by ¥179.2 billion year-on-year to ¥2,277.8 billion due partly to special factors (comprehensive transfer of share house-related loans ofapproximately ¥44.2 billion).
The average deposit balance increased by ¥94.9 billion year-on-year to ¥3,284.6 billion.

Net interest margin (overall)
Loan-deposit
margin(overall)

3.48%

2.31%

3.31%

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

Loans (Average balance / Yield)
Net interest
marginAverage loan balance(Billions of yen)
Yield on loans and bills
discounted

3,223.1<Special factors behind change in loans and bills
discounted>
19/9 Securitization of studio apartment loans(approximately ¥-100.0 billion)
20/9 Collection of loans from founder-affiliatedcompanies, share houses Transfers of loan
receivables (approximately ¥-100.0 billion)
21/9 Transferred share house loans (¥-44.2 billion)

3,134.8
2,739.3

3.58%

3.17%

3.07%

3.01%

1.72%

1.79%

1.78%

2,457.0

2,277.8

3.36%

3.21%

3.12%

3.05%

18/9

19/9

20/9

21/9

2.06%
17/9

Deposits (Average balance / Yield)
1.62%

4,050.1

1.51%
1.21%
0.96%

17/9

18/9

19/9

20/9

3,791.3
3,078.9

3,189.7

3,284.6

0.05%

0.03%

0.04%

0.04%

18/9

19/9

20/9

21/9

0.81%

0.09%

Average deposit balance(Billions of yen)
Yield on deposits

21/9
17/9

5

■ Trends in Expenses, OHR, and Capital Adequacy Ratio <Non-consolidated>• OHR increased 4.6% year-on-year to 60.2% due to a decline in gross operating profit.
• Expenses declined ¥0.3 billion year-on-year to ¥20.2 billion. Steady progress is being made in reducing expenses toward next year's goalof ¥40.0 billion by the end of Phase 1 of the Mid-Term Business Plan.
• The capital adequacy ratio increased 2.50% year-on-year to 13.54% (13.82% on a consolidated basis).

Trends in Expenses & OHR
Gross operating
profitNonpersonnel
expenses

Personnel
expenses

Taxes

Trends in Capital & Capital Adequacy Ratio
OHR

Capital adequacy
ratio

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

13.54%
12.70%

57.0

53.9

11.04%
325.5

8.65%

9.23%

42.4
275.2

36.8
33.5
245.3
23.8
9.0

41.7%
12.6
2.0

17/9

23.8
8.5

44.1%
13.1

22.4
7.4

52.8%
12.9

219.7
20.5
7.4

228.9

20.2
60.2%

55.6%

7.2

11.3

11.0

2.0

2.0

1.7

1.9

18/9

19/9

20/9

21/9

17/9

18/9

19/9

20/9

21/9

6

I Financial Results for the 1st Half of FY3/22

Ⅱ Business Strategy Based on Mid-Term Business Plan

Ⅲ SDGs■ The Real Estate Market's Status• With regard to REIT market capitalization, funds for investment continue to flow into Japan's REIT market, despite a temporary decline due to suchfactors as higher long-term interest rates in the U.S.
• Hotel and commercial property capitalization were up compared to the beginning of the year due to the post-pandemic outlook.
• The office market capitalization has been on a recovery trend, in part due to a move to review communication work, although there have been signs of adecline in rent and an increase in vacancy rates due to the progress of remote work and other factors.
• The pandemic has had a limited impact on Japan's relatively stable real estate market, where overseas investors have been making new investments.
(Jan 4, 2021 = 1)

REIT Market Capitalization

Office Market

Unit: yen/tsubo

1.4

Unit: %

24,00013
Average rent

1.3

Vacancy rate - Tokyo

22,50011

Vacancy rate - Osaka
Vacancy rate - Nagoya

21,000

1.2

1.1

1

住宅
Housing
Hotels
ホテル
Commerce
商業

ヘルスケア
Healthcare
Officeオフィス
Logistics
物流

919,5007

18,0005

16,5003

15,000

1

0.9

21/07

21/01

20/07

20/01

19/07

19/01

18/07

18/01

17/07

17/01

16/07

16/01

Nov 2021

Oct 2021

Sep 2021

Aug 2021

Jul 2021

Jun 2021

May 2021

Apr 2021

Mar 2021

Feb 2021

Jan 2021

Source:Bloomberg
Source:Bloomberg

Source: Miki Shoji7■ The Real Estate Market's Status•

The housing market's supply has been gradually increasing, as the number of housing starts increased year-on-year and inventory for existing condominiums has been flat recently.
Demand has been strong and the market has been firm, as shown by the number of condominiums sold in the Tokyo metropolitan area, the number of existing condominiums contracted,
and the contract rate in the first month of sales in the Tokyo metropolitan area.
The Bank separately promotes investment real estate loans, housing loans, and structured finance while carefully monitoring market trends and individual transaction risks.

•

Unit: 1,000 cases

Housing starts by use by year
持家

Owneroccupied
house

600

貸家

Housesfor rent

給与SalaryUnit: 1,000 cases

50

分譲

Condominium

Trends in the number of existing condominiums(metropolitan area)

Unit: %

150
100

500
400

50

25

0

300

-50

200
0

100
0

FY2015FY2016FY2017FY2018FY2019FY2020

FY2021-100
No. of inventory (area graph)No. of contracts (bar graph)No. of newly registered (bar graph)

Inventory (YoY: right axis)

No. of contracts (YoY: right axis)

No. of newly registered(YoY: right axis)

Source: Ministry of Land, Infrastructure, Transport and Tourism

Unit: 1,000 cases

8

Number of condominiums soldin Tokyo metropolitan
Number of販売⼾数

6

Source: Real Estate Information Network for East Japan

Unit: times
7.0

units sold

6.0

(YoY: right axis)
前年同月⽐(右軸)

5.0

Unit: %

Contract rate of condominiums in the first month of sales in the
Unit: %
Tokyo metropolitan area

90

Contract rate

(YoY: right axis)

40

80

20

70

0

60

▲20

4.0

4

3.0
2.0

2

1.0
0
March
2020年3月
2020

September
2020年9月
2020

March
2021年3月
2021

0.0
September
2021年9月
2021

Source) Real Estate Economic Institute Co., Ltd.

▲40

50
March
2020年3月
2020

September
2020年9月
2020

March
2021年3月
2021

September
2021年9月
2021

Source) Real Estate Economic Institute Co., Ltd.

8

■ Forecast of New Loans Disbursed• In the first half of FY3/22, the Bank focused on making assistance to customers the top operational priority in response to the COVID-19
pandemic. In the second half, sales activity increased as economic activity expanded with the vaccine rollout, and the amount of new loan
disbursements gradually built up. The Bank's plan sets a target of ¥120.0 billion in newly disbursed loans for the full year.
• The amount of newly disbursed loans in the first half of FY3/22 built up steadily according to plan to ¥41.5 billion (up ¥18.6 billion year-onyear), compared to the ¥42.0 billion in the plan.
• In addition to the ¥120.0 billion new loan disbursement plan, the Bank purchased loans that met the Bank's medium-risk/medium-return
criteria from the market in October 2021 (amount of loans: ¥30.0 billion; projected yield: 1.30%).

Forecast of the amount of new loans disbursed(Billions of yen)

190.0*

Forecast of the amount of new loans disbursed• Trends in the amount of disbursement by business area, which wasplanned to be promoted in the mid-term business plan
(Billions of yen)
FY3/22 Cumulative Total
1Q

120.0

67.9

21/3

22/3

23/3

* Final fiscal year of Phase 1 of Mid-term Business Plan “Re: start 2025”

Plan

２Q

Consumer loans

14.0

7.2

6.8

90.0

Loans for asset
managementcompanies
Investment realestate loans

7.3

2.8

4.4

*-

Subtotal

21.4

10.1

11.2

90.0

Structured
finance

20.1

9.3

10.8

30.0

Total

41.5

19.4

22.0

120.0

* The planned amount of investment real estate loans for asset management companies is included in the ¥90.0
billion of consumers loans, because we conduct the same promotional activities as for investment real estateloans for individuals.

9■ FY21 Sales Policy••••

In the markets of the Shizuoka and Kanagawa areas, the Metropolitan area and other major urban areas, and the Direct area, we aim for our own model that is "closer and moreconsiderate to customers."
In the Shizuoka and Kanagawa areas, we will reorganize the eight-area system into a 30-area system to precisely address the needs of diverse customers according to thecharacteristics of each area.
In the Tokyo metropolitan area and other major urban areas, we will specialize in secured loans, primarily in the five major urban areas and their large markets.
In the Direct area, we seek to enhance customer touchpoints by utilizing digital technology, including collaborations with other business sectors.

Our understanding of the market■ Shizuoka and Kanagawa areas
Community-based development based on the branch
network in the local area
Shizuoka area
Kanagawa area
61 branches
36 branches
Population: 3.67 million
Private business locations: 190,000
New housing starts: 20,528

Strengthening community-based
services
Eight-area system

Development focused on secured loans in five
metropolitan areas(Metropolitan area)
9 branches and four departments
New housing starts: 407,401(Share of nationwide statistics: 50.5%)

Sales in Tokyo, Shibuya,
Shinjuku, Omiya, Chiba,
and other urban areas(Other major urban areas)
Sapporo, Nagoya,
Osaka, Fukuoka■ Direct

Regional
segmentation

Concept of non-price competition〇 competition

Customerbased

Product-based

Staff for individual
customers

Investmen
t trust staff
Investmen
t trust staff

Loans, investment
trusts, insurance, etc.

Development of niche marketsPrice× competition

Value

Diversity andcarefulness
Custom-madeservices

Uniformity andefficiency
Ready-madeservices

Full product lineup

Limited productlineupExpansion of customer contacts(Major branches)
ANA branch, Recruit branch,T-point branch, So-net branch,D-bank branch, Dream Direct
branchPromotion of comprehensive proposals basedon understanding of customers’ needs

Loan staff

Net development centered on collaboration withcompanies in different industries

11 branches

30-area system

Population: 9.22 million
Private business locations: 370,000
New housing starts: 61,589■ Tokyo metropolitan area and other major urban areas*Total prefectures with branches

Direction

Attribute
Segmentation oftargeting
Properties

Areas

Common to markets
Promotion of DX for customer relations

Customers
Notice

CRM

Companies in different
industries

Application

Personalization
Customer journey

Collaboration

Suruga bank

Digital marketing
foundation

Omni channel

Population: as of January 1, 2021 (Ministry of Internal Affairs and Communications) / private business locations: as of June 1, 2019 (Economic Census for Business Activity) /New housing starts: FY2020 (Ministry of Land, Infrastructure, Transport and Tourism)10

■ Streamline to Add Sales Staff and Hours• Implement a restructuring (by shifting personnel to customer-facing roles) to both expand customer touchpoints and reduce operational and branchmanagement costs through a variety of sales approaches.
• By digitalizing branch operations and centralizing back-office operations at headquarters, we endeavor to shift personnel to customer-facing roles to spend
more time with customers.

Customers
Present

FutureIn-person/remote hybrid sales

More customer touchpoints with planned personnel
and hours in the real and digital worlds[Present action]

Sales

Effecton topline

Morecustomer
servicehours

Channelsales

Visiting
sales

Phone
sales

Countersales[New action]

More top line staff

Branch-in-branch
Digitizationof operations

IT
investment

IT investment
DX promotion

Administration

Branchintegration

No passbook
Cashless

Hub
Satellite

Add customer touchpoints
with new digital counters (incl. DX)

Satellite

Inquiries Center
Remote branches
Reception
Center・Remote・Real-world
・AI chatbot

Consumer-focusedbranches

Branchoperation
costs

AccessCenterNew
Connect

Next-generation branches

Hub branches andsatellite branches

Consumer-focusedbranches

RemoteNotification
CenterNext-generation branches and centralized
operations add staff and hours to increase
touchpoints with customers[Review of branch development andbranch management]
Review of service functions at each branch
Review of ATM locations

Elimination andconsolidation of branchesService desks

InheritanceCenterCoaching(training)

BranchSupportCenterSpot Branch
Inspections(after-the-fact
checks)Loan Operations Center[Operational digitalization]
No passbook, cashless

New Connect

Promotion of digital
passbooks

Expansion of internet
banking functions

More self-service (tablet terminal: SMA-Navi)

Alignment of divisions centralized at HQ
Operational centralization andmanagement with remote functions

Assistance andrestraint by planning
dept.

11

■ (Shizuoka and Kanagawa Areas) Strengthening Close Ties with Local Communities by Reforming
the Area System and Branch Network•••

In the Shizuoka and Kanagawa areas, the Bank will reorganize into a 30-area system, giving each hub, satellite, and independent branch a category and clarified sales roles.
Satellite branches will be critical to streamlining by centralizing back-office functions at headquarters and digitalizing operations. This will create more time for communication
with customers.
The gradual introduction of next-generation branches with enhanced customer consultation spaces will further raise the quality of communication with customers.
Hub/satellite branch organization

Customers

Customers

Customers

Streamlined
operations
Satellite

Satellite

Hub branchSatellite

Sales
Approaches

Satellite

Customers

Customers• Satellite branches will centralize back-office functions at
headquarters and streamline operations to create moretime for communication with customers.
• Meanwhile, expanded internet banking functions andother digitalization will create multifaceted customer
touchpoints.
• Consulting functions will be centralized at hub branches
to perform outbound sales and engage in more intimatetransactions with customers.
• Coordination between hub and satellite branches will put
into practice elaborate strategies based on attributes ofthe local community and area.

[Next-generation branches] To make Suruga Bank a more familiar part of customers’ lives, as well as to provide them with more personalized guidance and meticulous
service, the hub branch at the center of each area will minimize the counter services offered by regular branches and will have a relaxing,
comfortable layout for transactions.
First in Shizuoka Prefecture: Fujiyoshiwara BranchFirst in Kanagawa Prefecture: Atsugi Branch(opened November 8, 2021 after relocation)(opened July 12, 2021 after relocation)

12

■ Consumer/Corporate Solution Sales• The Asset Consulting Office offers personalized solutions that suit the diverse asset building and management needs of consumer customers.
• The Bank collaborates with external companies and other partners to offer corporate customers a variety of solutions. We also provide services forbusiness owners as a gateway to consumer transactions.
Consumer solution sales

Corporate solution sales

Customers
Insurance

Solve problems
Investment trusts

Offer products & services

Defined-contribution
pensions

TrustsBranchSupportAsset Consulting Office
Implementation
team
Planning teamSupport team
Full product lineup for insurance/investment trusts Branches
hold consumer consultation events on inheritance and wills

Assign area managers in Shizuoka and Kanagawa
Follow up branches' work with their great expertise

Promotion organization/policy

Cooperation with branches- Assign staff to main locations- Touchpoint to offer service options(Numazu, Shizuoka, Odawara, Atsugi)

・Business succession/M&A needs matching- Collaboration with group/external
companies

・Asset management, leases, factoring
・Operational streamlining, personnel training(Shinsei Bank, tax accountant corporations,public institutions)- Information aggregation/use- Provide solutions

・Continuous support for businesssuccession/M&As

・Offer answers, rebuild trust・First choice for consultations
・Augment your company's knowledge

Collaboration with external companies- Shinsei Bank・Train personnel with continuous stream oftrainees
・Implement business succession/M&A
operations
・Assist business turnarounds/raising
enterprise value- Local tax accountant corporations- Joint interviews, including withexternal companies
・Independently share knowledge

Stand out from other companies- Start with substantial consumertransactions
・Provide services for business owners as agateway to consumer transactions- Focus on Suruga's regional base・Establish friendly business owner solutions ineastern Shizuoka and western Kanagawa

・M&A advisors/matching・Business succession/tax consulting
・Subsidy/grant plan formulation assistance13

■ Investment Real Estate Loans• Proceed with a B-to-B-to-C model via real estate agents (mostly major listed companies) and a B-to-C model of direct consultations fromconsumer customers.
• In addition to referrals from real estate agents, expand customer touchpoints through online advertising and existing customer relations.
• Continue following the Mid-Term Business Plan by focusing on transactions from the important target segment of wealthy customers.
Investment real estate loans promotion organization
Suruga BankB

Real estate agentsContinue focusing on transactions with wealthy and ultra-wealthy customers

Sales

to

Branch (financial planning)
sales rep
ConsultB
toC

Customers

Amount ratio of investment real estate loans by customer segment

Investment realestate loan
special unit

By amountBy number of
cases

New
customers

Customerreferrals

Mass customers

Online ads(Financial planning) consultations

Ultra-wealthy andwealthy customers
41%

Upper mass

B

Ultra-wealthy andwealthy customers
Mass customers
24%

46％

60%
Upper mass

toC

*Customer segments are classified based on theirfinancial assets at the time of loan screening.
Period: April 1, 2021 to September 30, 2021

(Financial planning) consultations

Existing
customers

Semi-wealthy
customers
19%

Ultra-wealthy and wealthy customers: havefinancial assets worth ¥100 million or more
Upper mass customers: have financial assets worth ¥30
million or more but less than ¥50 million

Semi-wealthy
customers
22%

Semi-wealthy customers: have financial assets worth ¥50
million or more but less than ¥100 million
Mass customers: have financial assets
worth less than ¥30 million

Status of receiving consultations on our investment real estate loans
Status ofreceiving
consultations

Steady pace of customer referrals through continuous
relations focusing on major listed real estate agents

Direct consultations from consumer customers are trending upward
thanks to Suruga Bank product announcements online and remotecustomer service, as well as from building relationships with existingcustomers14

■ Housing Loans•••

The Bank offers housing loans to various segments through our long-standing strength of customized services and loan screening knowledge based on a database accumulated overmany years.
In the Shizuoka and Kanagawa areas, the Bank partners with local governments and takes community-based measures for employees of our corporate customers .
Through specialized products and partnerships with local governments, the Bank supports relocation and settlement from the Tokyo metropolitan area to our local areas withexcellent transportation options.

Housing loan strategy
Apply Suruga's strengths toestablish our domain

Customized products

Seniors
Women
Foreign workers

Diversecareer
paths

etc.

etc.

Entrepreneurs
Professional

etc.

One-to-One Response

Diverse
labor
force

Side/secondary job

April 1, 2021 to September 31, 2021

By number ofcases

Screening

Freelance
Contract/temp workers

We provide various customer segments with housing loans by area in*Segment sampling period:
different measures.
By amountSegmentation based on recognitionof environment
Diversework
arrangements

Amount ratio of housing loans by customer segment

SelfemployedLongaccumulated
knowledge

Corporate
officers

Company
employees andcivil servantsCompany
employees andcivil servants

Corporate
officers

Pensioners

Pensioners
National
metropolitan area
housing loancustomer database

Other

Other

Local
Metropolitan

About
40%

Selfemployed

About
41%

Community-based measures for employees of our corporate customers in Shizuoka
and Kanagawa Prefectures, etc.
Measures for secured loans targeted at areas, segments, usage scenarios, etc.

New measures and promotion of housing loans
Interest in moving to outlying areas (Tokyo area residents)■ Started handling housing loans for customer relocating to andsettling in Shizuoka and Kanagawa prefectures••

Started handling housing loans specifically for customers using relocation andsettlement support programs from local governments in certain areas of Shizuoka
and Kanagawa prefectures (July 2021)
In response to growing interest during the pandemic in relocating to outlying areas,
the Bank is supporting customers who are considering relocating from themetropolitan area and settling in our local areas with excellent transportation options
and we are helping to stimulate the local economy through the population influx.

Greater interest in moving to outlying areas since the pandemic began

Dec 2019
Sep-Oct 2021

2.60%
5.50%

17.00%

26.60%

48.40%

4.10%
10.10%

0%19.80%

20%

27.90%

40%

Very interested

Interested

Not very interested

Not interested at all

38.10%

60%

80%

100%

Somewhat interested

Source: Cabinet Office, "Survey on Changes in Lifestyle Awareness and Behavior Due to the Influence of COVID-19" (November 2021)

15

■ Structured Finance•In the first half of FY3/22, new disbursements totaled ¥20.1 billion at a practical rate of 2.32%. The outstanding balance of loans receivable as of the end of September 2021 was ¥50.8 billion.

•

The Bank will continue expanding administrative resources for both sales and management, will act on LBO and other non-real estate deals, and will build up the medium-risk and mediumreturn portfolio.

Trends in financing amount / Forecast(Billions of yen)

40.0
400

Disbursed (1H)

Balance composition ratio by category (September 30, 2021)

Disbursed (2H)

Rate

2.28%

2.21%

25%

29%

30.0
300

2.0%

10.0
100
6.4

9.7

March 2020

March 2021

20.1
September 2021

1.6%
1.2%

OfficeResidence

20.6

20.0
200

00

2.4%

50.8billion
billionyen
50.8
yen

3%
9%

Business use

28%

6%

Logistics

Renewable energy
Other than realestate* Started in October 2019

Balance of loans receivable

Composition ratio by property area (September 30, 2021)(Billions of yen)

70
700
60
600

50.8

50
500
400
40

Chubu area

10%

6.4
March 2020

5%March 2021

Shizuoka and Kanagawa
Kansai area

200
20
00

36%

33.5

300
30
100
10

Tokyo metropolitan area

29%

September 2021

9%

12%

Other
Non-real estate (LBO,
etc.)

16

■ Direct (1)• The bank created the FI Promotion Office to implement financial inclusion. The office will approach customers nationwide to offer reassuring financial
services that would otherwise be unavailable to them.
Our first goal is to expand financial services to customers who are foreign residents.
• The Bank aims to upgrade alliances and business models by utilizing our powerful digital platform.
• The D-Bank Branch seeks to add customer touchpoints by initiating a new, first-of-its-kind product in Japan, the Sumakoza Account.

Promotion of financial inclusion (FI)■ Established the Financial Inclusion (FI) Promotion Office•Financial inclusion enables diverse people to enjoy financial stability throughout their lives, shares financial knowledge, and facilitates access to financial services. Japanesesociety has an increasing need for financial inclusion.

•

Suruga Bank established the FI Promotion Office in September 2021. It will approach customers nationwide to offer reassuring financial services that would otherwise be
unavailable to them.

•

The office will create financial inclusion, starting with the provision of financial services to customers who are foreign residents, a group of increasing importance as Japan
globalizes.

■ Partnership with Kurofune Co., Ltd.
The Bank formed a business partnership with Kurofune Co., Ltd. in November 2021. Kurofune helps foreigners establish comfortable living and working arrangements in Japan. By
partnering with Kurofune and utilizing its knowledge, the Bank will provide products and services that match the needs of foreign residents.

&

Ref: November 1, 2021 announcement on the Suruga Bank website: "Business
Partnership with Kurofune Co., Ltd." (in Japanese only)

Horizontal rollout of the Bank's digital platform■ Strategy for alliances with external companies
Build and implement new collaborative model with other companies (finance/other sectors)

Collaborate with companies

Improve and expand products

seeking to enter the financial

and services offered withbusiness (FI, etc.)

existing alliance members■ Utilize and expand remote sales
Plan and execute digitalized bank operation workflows and customer touchpoints

Expand remote products andservices enabling online
consultations, applications, andcontracts

Collaborate with tech firms to
improve UI/UX and streamline
operations17

■ Direct (2)Launch of Sumakoza Accounts■ First bank account in Japan designed for cashless payments!
In October 2021, the D-Bank Branch began handling Sumakoza Accounts, the first ordinary savings account in Japan that lets account holders
charge for cashless payments and receive cash benefits.

<Three advantages>
Up to ¥500 a month incash benefits

General full compensation
for fraud damages

Low-fee services

 Can apply to open an account on a smartphone anytime without
visiting a branch (introduced eKYC)
 Automated finance features assist in case you need them
In response to the spreading use of cashless payments, the Bankis adding customer touchpoints by broadly offering Sumakoza
Accounts designed specifically for cashless payments.
Sumakoza website

Ref: September 17, 2021 announcement on the Suruga Bank website: "New Sumakoza
Ordinary Savings Accounts Launch Monday, October 4" (in Japanese only)18

■ Securities Management•••

The balance of investments in the September 2021 period for multi-asset funds that commenced investments in FY2020 was ¥240.7 billion.
As of the end of September 2021, risk diversification led to an unrealized gain/loss of ¥+0.7 billion, despite rising interest rates in the U.S. amid a push to normalize
U.S. monetary policy.
Under the Bank's policy of investing in assets with high liquidity and balancing risk diversity with revenue, our target yield (after deducting costs) is 1.3%
In light of market conditions and surplus funds, the Bank's policy is to gradually build up the balance of investments. The Bank will also approach ESG investment as
a new area for investing.

Securities portfolio
Local government
bonds, etc.

National
governme
nt bonds

SharesOther

Unrealized gains (losses) on securities
・Valuation difference on available-for-sale securities

Multi-asset fund

Yield on securities

End of September
2020(Billions of yen)

0.68％
0.46％

0.45％

Fair valueNet
unrealized gains(losses)

Fair value

Other securities

193.7

8.5

400.8

1009

+2.4

Shares

15.2

6.9

17.0

8.7

+1.7

Bonds

116.5

0.4

140.0

0.4

+0

60.2

0.2

240.7

0.7

+0.4

1.6

0.8

2.9

1.0

+0.2

Other

7.3
211.9
130.9

147.2

12.4

16.4

19.3
56.1

132.5

41.7

25.5

240.7

11.6
60.2
23.4

25.1
140.0

55.4

89.0

94.5

114.4
2.1

17/9

18/9

19/9

20/9

21/9

Year-onyearNet
unrealized
gains(losses)Multi-asset fund*413.2

End of
September 2021

Fair value

5.37％

3.03％

(Billions of yen)

*New investment started under the securities management
policy specified in the mid-term business plan.

・Portfolio of multi-asset fund(As of the end of
September 2021)
Target yield 1.3％
(after costs)

ForeignstocksDomestic
stocksJapanesegovernment
bonds

Fair value
240.7 billion
yen
Advanced countries’
government bonds,
etc.

19

■ Response to Borrowers of Share House-related Loans••••

In order to finally resolve the share house-related loan issue, which is one of the priority issues in Phase 1 of the Mid-Term Business Plan, we have been taking measures tailored to theirindividual circumstances, focusing on the unprecedented exemption for repayment of part of the principal amount of loans as well as comprehensive transfer of loans.
In March 2021, we informed our applicable borrowers that those who request the above scheme will be required to file a petition for civil conciliation by the end of August 2021, and those
who wished to do so filed petitions.
We completed a second comprehensive transfer of share house loans in March 2021, following March 2020. The two actions are scheduled for completion in the second half of FY2021
and the first half of FY2022.
For borrowers of investment real estate loans other than share house loans, we will respond in good faith in accordance with their individual circumstances, including exemption for
repayment of part of the principal amount.

Response to customers since FY2018✔ We established the “Office to Support Customer Owners of Share Houses and Others” whereby we have carefully responded based on each customer’s circumstances, including
lowering the loan 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 financial
institution, including exemption for repayment of part of the principal amount of the loan using ADR.
✔ At present, we have not taken legal action if the share house-related loan has become delinquent.
✔ We adopt the DC method for calculation of allowance for possible losses for share house-related loans. If the loan is delinquent for more than a month, we provide 100% allowance forthe unsecured 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 share houses
and other investment real estate loans” issued
on May 15, 2019

Applicable: Share house loans and other investment real estate 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
amount of the loan, from the perspective of fair share of loss and in view of the
difficulty in their loan repayment, we calculate the loan repayment amountcorrespondent to the settlement 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. By the end of
February 2021, we completed sending to the borrowers who applied for the
exemption a primary calculation notice of the exemption amount. For borrowers
who request the next step, we are proceeding with a civil conciliation or authorized
ADR procedure.

Comprehensive transfer of loans<subrogation scheme>

Ref.: “Announcement Regarding Transfer of ShareHouse-related Loan Receivables” issued on March
25, 2020 and March 1, 2021

Target: share house loans
Content: Before we executed share house loans, we did not sufficiently analyze share house-specificrisks associated with general investment real estate loans, including inappropriate action
such as ignoring impracticability of business plans. Given that the conciliation committee ofthe court recognized that we have an obligation to compensate for damages, based on
typical unlawful behaviors, we agreed to carry the obligation to pay the petitioners thesettlement 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 sharehouse loans.
Status: The first transfer was carried out in March 2020. (257 borrowers for ¥44.0 billion)
The second transfer was carried out in March 2021. (285 borrowers for ¥44.0 billion)
The two actions are scheduled for completion in the second half of FY2021 and the first halfof FY2022.

Reflection in and progress of the business forecasts
 We expect to carry out the third and subsequent comprehensive transfers in the fiscal year ending March 2021. According to the intention of the remaining borrowers, most of them wished for acomprehensive transfer of their loans. We assumed the occurrence of repayment suspension associated with the transfer, and the amount assumed has at present remained steady. <¥4.0 billion for thefull year, as initially forecast> We had planned to carry out the third comprehensive transfer for collectively requesting customers by the end of August, but due to the circumstances of some customers, procedures for some of themwill be completed in the first half of FY2022. <Full-year forecast of ¥-10.0 billion, ¥+5.0 billion from figure announced August 13>

20

■ State of Response to Customers of Investment Real Estate Loans
•
•
•

•

We continue our sincere response to customers of investment real estate loans through special measures such as exemption for repayment of part of the principal
amount of loans and the comprehensive transfer of loans for share houses.
In about two-and-a-half years, around 30% of property owners have an outstanding loan balance of 0, while around 60% are continuing to repay without having
requested an exemption for repayment of part of the principal amount of loans or comprehensive transfer of loans, or having engaged in collective bargaining.
While around 10% of property owners with an outstanding loan balance have not requested an exemption for repayment of part of the principal amount of loans orcomprehensive transfer of loans, and have not participated in collective bargaining, around two-thirds of those have responded or are expected to respond, such as
by consenting with the Bank to procedures for an exemption for repayment of part of the principal amount of loans or requesting a comprehensive transfer of sharehouse loans including future scheduled amounts.
The remaining property owners other than this group have not requested an exemption for repayment of part of the principal amount of loans, reached an agreementwith the Bank, or engaged in collective bargaining such as by entrusting a law firm or other entity. The Bank continues to respond sincerely toward a resolution withthese property owners.

Agreed to or expected to

No agreement to exemption, etc. orparty to collective bargaining, etc.

agree to exemption, etc.

No balance
Released May 15, 2019

(paid, etc.)"Report on Survey of All Properties Concerning
Investment Real Estate Loans"
Real estate properties covered by survey

37,907
Continuing repayments(no application for exemptions, etc.)(As of end of September 2021)

21

■Status of Single Building Apartment Loans (Except for Share House-related Loans)••••

Due to strict self-assessment based on the changes in the self-assessment standards*1 at the end of September 2018, non-delinquent loans of approximately ¥600.0 billion wereclassified as loans requiring special attention.
As of the end of September 2021, 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 maintain or upgrade theclassification of borrowers by providing them with in-depth support for property management, including reporting to them the management status of the property.
In FY3/22, we expect additional provisions to prepare for future credit risks.

Loan balance of single building apartment loans by classification of borrowers and delinquency status (End of September 2021)

Borrower classification

Normal clients
Clients requiring special
attention (*1)
Clients requiring corrective
actionClients at high risk ofbankruptcy
Virtual bankruptcy
clients/bankruptcy
Total

Credit claims such as loans *2

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

Portion not delinquent

1,176.2

252.0

252.0

739.1

603.7

599.7

107.5

75.8

72.7

126.8

67.7

43.8

113.3

33.5

1.5

2,263.1

1,032.9970.0＊1 Loans are classified as requiring special attention if tax return documents are not received or the loan property has negative cash flow even if notdelinquent.
＊2 Credit claims such as loans: Loans and bills discounted, customers’ liabilities for acceptances and guarantees, foreign exchanges, securities lent,suspense payments equivalent to loans and bills discounted, accrued interest on loans and bills discounted

Occupancy rate of single building apartments (periodic survey)
Occupancy rate at the end of September 2021: 87.8% (Survey results for occupancy rate in fiscal 2020: 87.7%)<Survey>• In principle, the person in charge of bank loans visits the location of the property to check not only the occupancy status but also the physical condition of the property andmanagement status.
• If any damage on the property or abnormal management is found, it will be reported to the borrower.
• The survey is conducted on investment properties owned by borrowers where each borrower’s loan balance is ¥50 million or more. (the number of targeted single building
apartments: about 9,000, accounting for more than 90% of the loan balance)• The survey has been sincerely carried out in FY2021 with measures to prevent transmission of the coronavirus as the pandemic continues. (As of the end of September
2021, over 40% of properties have been surveyed.)22

I Financial Results for the 1st Half of FY3/22

Ⅱ Business Strategy Based on Mid-Term Business Plan

Ⅲ SDGs■ Initiatives for SDGs

Posted• Taking into account the social responsibilities requested by stakeholders and diversifying social and environmental issues, we have identified priority
issues that must be addressed by the Group in light of its business opportunities and risks, and also formulated important issues (materiality) to realize
a sustainable society and maintain and improve its corporate value.
Identification ofmateriality issues
We identified materiality
issues by referring to thefour pillars of “stakeholder
capitalism metric/measurement standards”
proposed by the World
Economic Forum in 2020.

Principles ofgovernanceSelection anddetermination ofmateriality issues

Suruga Bank group’s materiality
issuesSuruga Bank group’s initiatives

We analyzed and evaluatedelemental information on bothwhat our Group values and whatstakeholders do, and formulated“materiality” issues that areimportant to both sides.

Our Group’s materiality are the following four
issues.
Each materiality issue, which is notindependent but organically linked with theother issues, is an integral part of fulfilling our
responsibilities to all stakeholders.

We promote the following initiatives in order to solveinternal and external issues of each of the four themes
listed as materiality. Each initiative, which is linked to theSDGs, will contribute to the achievement of sustainable
development goals. We will continue to improve andenhance their effectiveness.

Establish a solid foundation
for governance●Penetration of the corporate philosophy●Enhancement of corporate governance●Establishment of a solid compliance system●Realization of customer-oriented business operations●Strengthening of measures to prevent financial crimes

What Suruga Bank
Group values
Corporate Philosophy
Compliance Charter
Mid-term Business Plan
“Re:Start2025”
HistoryX

People●Human resource development system to support

Create an environment where
employees can play an activerole and grow

What stakeholders value
and expect from the
Suruga Bank Group

Employees

employees to grow

●Enhancement of work-life balance measures●Promotion of diversity and employment of people withdisabilities●Initiatives to improve the mental and physical health of
employees●Initiatives to increase the motivation of employees●Responding to diverse customer needs through retailbanking

Building sustainable local
economies and societies

Prosperity

Relevant
SDGs

Customers●Providing solutions to local companies and businesses●Contributing to regional revitalization throughpartnerships with local governments●Initiatives for Business Continuity Plan (BCP)●Supporting culture, art, and sports for children who will
be future leaders

Regional
community

PlanetRegulatory
authorities●Participation and cooperation in local environmental

Shareholders

Globalenvironment

Contribute to environmental
conservationconservation activities●Reducing environmental impact by promoting
digitization of business procedures and operations●Promotion of environmental measures for branchfacilities23

■ SDGs in Practice•••

The Bank promotes sustainable finance initiatives to create a sustainable society.
We contribute to stimulating the local economy by spreading detailed information on tourism, such as the City Promotion, and partnering with companies and local governments on
encouraging bicycle use.
By arranging an environment where employees can thrive, the Bank seeks to enable work-life balance and to raise employee motivation.

Sustainable finance initiatives

Contributions to regional revitalization through bicycles

Signed the Partnership Agreement on Bicycle Promotion■ Sustainability Link Loans (SLLs)
To encourage improved sustainability performance by companies, loans givecompanies incentives or disincentives according to their achievement ofprescribed Sustainability Performance Targets (SPTs), which are goals thatalign with companies' ESG strategies.

Action thus far
SLL initiative by Outsourcing Inc. with SPTs to arrange settings fordemonstrating one's skills and expanding job opportunities• June 2021: Sompo Japan Insurance Inc.
• September 2021: TEPCO Power Grid, Inc.

City Promotion

As of the end of September 2021
Agreements with three local
governments and six companies

Publicity on social media and elsewhere online about local sightseeing
spots visited on bicycles

・Miya Pota* (Fujinomiya, Shizuoka Pref.)・Izu Pota (Izukyu Corp.)■ Transition Link Loans (TLLs)
To create a zero-carbon society, loans create incentives to achieve prescribed
Sustainability Performance Targets (SPTs) for reductions coordinated withcompanies' greenhouse gas reduction strategies. The purpose of these loans is to
reduce greenhouse gas emissions in concert with companies' long-term strategies.

Action thus far
TLL initiative with SPTs to reduce emissions of CO2 andother greenhouse gases by Kawasaki Kisen Kaisha, Ltd.

■ Positive Impact Finance (PIF)
Comprehensive analysis and evaluation of corporate activity's impact on theenvironment, society, and the economy (both positive and negative effects). The
results are the basis for indicators assessing levels of contribution to achieving
the SDGs. Financing encourages companies to continue this action, which ismonitored.

Action thus far
PIF by Toray Industries, Inc. to accelerate climate change countermeasuresand promote sustainable, recycling-oriented use of resources and production*Short for "pottering": casual cycling in a neighborhood, like taking a stroll

Diversity promotion• Odawara Branch and Odawara Higashi Branch recognized by
Odawara L-Ale as the Gold Stage (the highest rank)*Odawara L Yell (a certification system for companies encouraging and incentivizing women to work) is theCity of Odawara's own system for recognizing companies that encourage and incentivize women to workby applying certain criteria to companies in the city that proactively encourage women to work.
<Four actions for certification>
Foster awareness andbetter workplace cultures
Action to encourage women
to work
Action to achieve work-lifebalance
Independent action

Certification logo
mark

24

Reference Materials

■ Corporate Philosophy

Posted“I’m glad you’re here...
I’m glad we met...”This perception is our goal.

No matter how much the times change ortime passes, we are committed to providing
service from the customer’s perspective,
staying closely in tune with their everyday
lives providing value, and helping ourcustomers 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 bankthat 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 members who provide these services to find their work
meaningful.
Thus, we also strive to be a company that makes not customers, but also staff members feel “I’m glad you’re here... I’m glad we met.”

Reference Material 1

■ Suruga Bank Mid-Term Business Plan —“Re:Start 2025” (Period: FY2019-FY2025)
Corporate
Philosophy

PostedWe want to be a company that makes customers feel,“I’m glad you’re here... I’m glad we met.”
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 thisthrough a commitment to carrying out customer-oriented business, initiatives in our corebusiness of retail banking, 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 institutionthat benefits the public.

Strategic
Management

Restructure the core business of “retail banking”
while promoting “marketable activities” to diversify
risks and stabilize profits.
✔ Establish a revenue base that balance risk andreturn by controlling RA gross operating
profit*.

Promote existing businesses with controlled risk
capital, pursue new business, and prepare forrisks that surface in high-stress environments.
✔ Even after Basel III is revised, we will maintain acapital adequacy ratio of at least 8% to realize
our business strategy.

* RA (Risk Adjusted) Gross Operating Profit = Gross Operating Profit - Actual Credit Costs

Reference Material 2

■ Basic Strategy for Phase 1

PostedEnvironment recognition
Compliance withregulations

Continued negativeinterest rates✔ Basel III revision✔ Reassess businessboundaries based onmarket entry ofdifferent industries✔ Cost reduction andstaff review✔ Focus on noninterest-rate-based
business

FinTech support

Social change

Consumer change✔ Systemization andlabor-saving
investment✔ Platform creation
throughcollaboration withdifferent industries✔ Declining
birthrate/aging
population✔ Population
concentrating incities✔ Improve awarenessaround inheritanceand asset building✔ Diversification oflabor force, work
styles, and service
needs

Strategy

Addressing
priority issues
Share houserelated loans
Promptly dissolve
relationship withfounding family

RetailbankingPhase 2✔ Retarget investment real estate loans and improvetheir quality✔ Evolve toward a solution-based sales model✔ Expand based on area characteristics

Marketable ✔ Shift away from a credit risk-centric portfolio
activities ✔ Aim for stable operation with contained downside riskNew
✔ Partner with external companies
business ✔ Utilize the API collaboration platform

Optimizing allocation of management resources
Reform of branch
operations

Reallocation ofhuman resources

Revision of Groupcapabilities

Cost reduction

FY2023 FY2025

Establish new positioning

Phase 1 (FY2019 - FY2022)

Reference Material 3

■ Revised Branch Network
 In the Tokyo metropolitan area and other major urban areas, we are building a network to centralize management resources and promote sales with the aimof stronger sales capabilities and thorough compliance management.
 In the Shizuoka and Kanagawa areas, we are streamlining operations by consolidating branches, taking into account regional contribution and conveniencefor existing customers, such as the proximity between branches, the number of visiting customers, and relationships with local governments.

・Branch network (as of October 31, 2021)

・Consolidated branches since releasing the Mid-Term Business Plan
Areas

Actual branches: 107 branches in total
Shizuoka:
61 branches
Kanagawa:
36 branches
Tokyo metropolitan area: 5 branches
Other major urban areas: 4 branches

SapporoTokyo
metropolitan
areaInternet branches: 11 branches
Total:
118 branches

Other majorurban areas
Omiya
Osaka

Kanagawa

Chiba

Applicable branches

Integration month

Futakotamagawa Branch

July 2020

Kawasaki Branch

August 2020

Tama Plaza Branch

January 2021

Midtown Branch

October 2021

Sendai Branch

June 2020

Hiroshima Branch

October 2020

Kyoto Branch

November 2020

Keio University Sub-Branch

June 2020

Well-D Nagaizumi Sub-Branch

April 2021

Denmacho Branch

June 2021

Numazu Shizuura Branch

October 2021

Izu Chuo Branch

October 2021

NagoyaFukuoka

Shizuoka

Reference Material 4

<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 anduncertainties. Actual future business results may differ from the targets contained in the present material, due
to unpredictable changes in the external business environment.