Suruga Bank Mid-Term Business Plan

“Re:Start 2025 Phase 2”
FY2023 - FY2025© 2023 SURUGA bank, Ltd. All rights reserved.

Contents

１. Introduction

3. Priority Measures
Priority Measure 1: Reorganizing from a Sales Headquarters
System to Four Autonomous Profit Centers

1-1 Corporate Philosophy(1) Community Bank

1-2 Review of Phase 1(2) Direct Bank

1-3 Environmental Recognition Underlying Plan Formulation(3) Greater Tokyo/Wide-Area Bank
(4) Market Finance

Priority Measure 2: Completing Cost Structure Reform(1) Network Reorganization

2. Phase 2 of the Mid-Term Business Plan

(2) Shifting Talent to the Front Office by Streamlining Headquarters Functions(3) IT Cost Structure Reform

Mid-Term Business Plan Overview

Priority Measure 3: Minimizing and Stabilizing Actual Credit Costs

Management Strategy I: Evolving the Retail and Solution Businesses

Through Higher Credit Quality- How We Differentiate
Management Strategy II: Building a Sustainable Revenue Structure(1) Status of Investment Real Estate Loans and Organizational Negotiation
Partners

Management Strategy III: Risk-Taking and Risk Diversification(2) Improving Credit Quality for Other Investment Real Estate Loans

Phase 2 KPIs and Promotion Framework

Priority Measure 4: Pursuing Cloud Computing and DX in IT

Action Policy

Platforms
Priority Measure 5: Vector Alignment with Stakeholders(1) Vectors with Shareholders(2) Vectors with Employees(3) Vectors with Society11-1. Corporate Philosophy: At the Heart of our Planning
The Suruga Bank Corporate Philosophy“I’m glad you’re here...
I’m glad we met...”This perception is our goal.

Our Ambition
Our heartfelt desire is forcustomers to be glad Suruga Bankis there for them, and to want us
as their lifelong partners.

No matter how much the times change
The Suruga
or time passes, we are committed toBankproviding service from the customer’s
Corporate
perspective, staying closely in tune with
their everyday lives providing value, andPhilosophy
helping our customers lead more
Our Mission
Our Commitment
prosperous lives.
Contribute to society throughto Stakeholders
customer-centricfinancial services creating
added value only Suruga Bank
can provide

We are committed to providing
peace of mind and prosperity
to society, our customers, andour employees21-2. Review of Phase 1
Objective: Reduce risk by reallocating assets to a middle-risk/middle-return revenue structure, laying the foundation for asustainable business model
Environmental Recognition
As defined in Nov. 2019

Promptly dissolved relationship with founding family

Priority Issues

 Completed the dissolution of capital relationship/financing transactions with the founding family in
February 2020, when all financing amounts were eliminated.

Share house-related loans Addressed each customer's situation and implemented partial principal reductions/lump-sum debt
transfer in a special scheme unprecedented in the financial industry, in order to achieve final
resolution.

✓Cost reduction, staff review✓Focus on non-interest rate based business

Laying the foundation for a sustainable business model based on a unique retailinfrastructure

Compliance with regulations

Social change✓ Declining birthrate/aging population✓ Population concentrating in cities(Top line strategy)

Addressing Fintech✓ Systemization and labor-saving investments✓ Creating platforms throughcross-industry collaboration

Sales Strategy✓ Basel III revision✓ Reassess business boundaries based onmarket entry from other industries

Consumer changes

 In the investment real estate loan business, pivoted toward quality with middle-risk/middle-return. Transactions with affluent& semi-affluent segments, positioned as new focus segments, reached 60% of new transactions.
 Stable asset accumulation in the new structured finance business area, with loan balances exceeding 100 billion yen,growing at a pace exceeding the plan's assumptions.
 In the housing loan business, developed a unique strategy to target customers in new segments created by a diversifying
society. Expanded support for diverse needs, including second home financing, through a fleshed-out product lineup.
 In the solution business, we built a system combining digital marketing with proposing solutions to customers' issues related
to asset formation, investment, succession, and life planning, looking ahead to a world where people live to 100 years old.
 Established a system promoting claim purchase through securities management and external cooperation.

✓ Improving awareness ofInheritance/asset-building✓ Diversifying labor force, work
styles and service needs

Phase 2
FY2023
to
FY2025

Establishing a new position

Continued negativeinterest rates

Phase 1 Strategies and Main Achievements(Cost strategy)

Structural
Reform

Optimizing management resource allocation and establishing a business foundation toempower new management strategies
 Consolidated and transferred branches/ATMs. Reorganized into a hub/satellite branch structure to optimize the network andto establish close ties with local communities in accordance with the characteristics of each area. Consolidated back-office
operations at headquarters and streamlined business operations by incorporating DX, etc. in parallel to shift talent to frontoffice tasks.

3Phase 1 KPI Targets and Results
Phase 1 KPI Targets and Expected Results in FY2022(Billions of yen)
FY2022Phase 1 Plan

RA gross operating
profit1
2

OHR

49.0

FY2022
Forecast• RA gross operating profit falls short of plan by 5.0 billion yen
Despite delays in initiating loans due to COVID-19 and otherunanticipated factors when the plan was created, our operationalfoundation came together steadily, including the execution of 230 billion
yen in loans (including monetary claims purchased) in the final year of
the plan.



Improvement in actual credit costs exceeded the initial plan, and RA
gross operating profit, when excluding losses on sales of securities,
reached 61.0 billion yen, exceeding the initial plan. However, as a resultof losses on sales of government bonds (17.0 billion yen) and otheractions to restructure the securities portfolio in anticipation of Phase 2,
total RA gross operating profit fell below the plan's target.

44.0

Under 60%

85%

6.0

9.0

Capital adequacy
ratio

Over 10%13%• OHR fell short of the +25% YoY target due to a significant decrease in grossoperating profit, despite cost reductions (-3.5 billion yen YoY).

Profit attributable toowners of parent

7.0

10.0

• Net income was up 3.0 billion yen YoY, despite lower gross operating profit,
due to cost reductions and lower actual credit costs.

230.0• The capital adequacy ratio exceeded the planned level, as the steadyincrease in profits during Phase 1 offset the negative impact of the sharebuyback in FY2021.

Net income[Reference Indicators]

New loans3
Expenses

190.0
40.0

36.5

• New loans exceeded the plan due to a significant increase in structured
finance loans and claim purchases, although investment real estate loans
and housing loans fell short of the plan.

1RA (Risk Adjusted) Gross Operating Profit = Gross Operating Profit - Actual

Credit Costs
2OHR (Over Head Ratio) = Expenses / Gross Operating Profit
3New loans: Amount of new execution (acquisition) of business areas promoted
by consumer loans, investment real estate loans for asset managementcompanies, structured finance, monetary claims bought, etc.

4

1-3. Environmental Recognition Underlying Plan Formulation

 Increasing geopolitical risk

 Shift to customer-driven business models

 Review/restructuring of global supply chains Growing interest rate instability/uncertainty

 Polarization of social structure Growth in single senior citizens

Globalstructuralchanges

Shift to
 Changes in lifestyles/behavior due todigitaladvance of DX
technologies

Structuralchanges inJapanese
society

Accelerating
ESG trends Climate change issues
 Diversification of work styles
 Importance of reskilling

Implications on Phase 2 of the Mid-Term Business Plan
Retail/Solution Businesses

Agile responseto new retail/solution
needs

Risk management

Sustainability

Greater breadthand evolution inrisk diversification

Evolution of
SDGs initiatives
Promoting diversity

Assumptions for the financial and market environment in this plan: Although interest rates in Japan have recently become increasingly unstable anduncertain, the equilibrium level interest rate for the Phase 2 period is assumed to remain unchanged. In addition, other major financial and market
environment indicators, such as in the Japanese stock market, are also assumed to remain flat.

5

Contents

１. Introduction

3. Priority Measures
Priority Measure 1: Reorganizing from a Sales Headquarters
System to Four Autonomous Profit Centers

1-1 Corporate Philosophy(1) Community Bank

1-2 Review of Phase 1(2) Direct Bank

1-3 Environmental Recognition Underlying Plan Formulation(3) Greater Tokyo/Wide-Area Bank
(4) Market Finance

Priority Measure 2: Completing Cost Structure Reform(1) Network Reorganization

2. Phase 2 of the Mid-Term Business Plan

(2) Shifting Talent to the Front Office by Streamlining Headquarters Functions(3) IT Cost Structure Reform

Mid-Term Business Plan Overview

Priority Measure 3: Minimizing and Stabilizing Actual Credit Costs

Management Strategy I: Evolving the Retail and Solution Businesses

Through Higher Credit Quality- How We Differentiate
Management Strategy II: Building a Sustainable Revenue Structure(1) Status of Investment Real Estate Loans and Organizational Negotiation
Partners

Management Strategy III: Risk-Taking and Risk Diversification(2) Improving Credit Quality for Other Investment Real Estate Loans

Phase 2 KPIs and Promotion Framework

Priority Measure 4: Pursuing Cloud Computing and DX in IT

Action Policy

Platforms
Priority Measure 5: Vector Alignment with Stakeholders(1) Vectors with Shareholders(2) Vectors with Employees(3) Vectors with Society

6

2. “Re:Start 2025 Phase 2”: Mid-Term Business Plan Overview

Customer
Satisfaction

VisionValue for
Shareholder

Employee
Satisfaction

Contribution toSociety・ In order to realize our Corporate Philosophy, we will create a "new Suruga Bank" where customers are

truly satisfied and employees feel fulfilled by providing unique value through our core business of retailbanking, and by doing business with a rigorous customer orientation
・ We will establish measures for thorough compliance and controlling appropriate risk/return, and develop

Shared in Phases 1 & 2“I’m glad you’re here…I’m glad we met…”
This perception is our goal.

Corporate
Philosophy

a new sustainable business model as a financial institution that benefits the public

I. Evolving the Retail and Solution Businesses
We will create sources of differentiation founded in resolving AID (Anxiety, Inconvenience, Dissatisfaction) for our customers, leadingthem to say "I'm glad you're here...I'm glad we met..."Phase 2
Management
Strategies

II. Building a Sustainable Revenue Structure
We will counteract the decline in the top line due to the collection of existing loans and pivot to a sustainable revenue structure with threemeasures: growth of new business revenue through four autonomous profit centers, cost structure reform, and minimizing andstabilizing actual credit costs through higher credit quality
III. Risk-Taking and Risk Diversification
In accordance with the Risk Appetite Framework (RAF), we will repeat a cycle of active risk-taking and verification in selected areas,
diversifying away from our traditional risk structure concentrated in specific real estate areas1
1Single building income properties (relatively high share of older properties and properties located in regional areas) executed prior to the full-scale rollout of Phase 1

7Management Strategy I: Evolving the Retail and Solution Businesses –How We Differentiate
From past to present, Suruga Bank has offered solutions from its uniqueperspective rooted in resolving customer “concerns”

Digital infrastructure supporting differentiation(examples)

Bigger dreams for customers

Time deposits with Jumbo
lottery tickets
Designed as a "fun financial service foreven bigger dreams" in the era of ultralow interest rates.
A first for a Japanese bank, this product isthe result of employees' desire to help ourcustomers dream bigger.

Supporting women's dreams of owning their own
homes

Housing loans for women
At a time when banks' screening
procedures were not keeping pace withdiversifying lifestyles and employment
patterns, Suruga became the firstJapanese bank to commercialize ahousing loan for women and support
their ambition for home ownership.

Uniquely Suruga

2000

Focused early on the many niche markets within the
housing loan market. Employees sensitive tocustomers’ “concerns” rapidly commercialize a
product to support them.

Screening via data mining

Consistently providing high-quality services

Automated loan screening
systemUtilizing CRM
Providing the right product/service
at the right time by integrating
customer information and account data

Financing a wide range of customers
unlocks sophisticated methods toanalyzed detailed screening/repayment
data, making screenings even faster.

Uniquely Suruga

1999
Uniquely Suruga

1996

Uniquely Suruga

Ahead of other banks, we successfully automatedloan screening by combining screening our
expertise with a vast database analyzed by our
proprietary logic cultivated over many years ofspecialization in retail banking.

In the early days of the Internet, opened the first
Internet branch of a Japanese bank. Despite being a
regional bank, we helped customers across Japan
dream bigger and have peace of mind via the Internet
and without visiting a branch.
Also became one of Japan's first financial
institutions to offer mobile banking.

1999

The trump card in retail strategy.
Ensuring consistent relationships at all
customer touchpoints, anytime,
anywhere. Accumulated information
becomes a source for improving the retailmindset and marketing capabilities of theentire organization.

Earning miles for bank transactions

ANA Branch
Developed the world's first card that integrates
cash card, mileage, and e-money functions.
Offering a unique product that earns miles forbanking transactions.

Products/services developed
from Suruga's uniqueperspective
Uniquely Suruga

Translating current trends into products/services"Smart accounts"/accounts for non-Japanesecustomers
Dedicated accounts for more economical andsecure use of the now-ubiquitous cashless
payments.
Created accounts exclusively for nonJapanese customers.

Consulting with peace of mind in the era of 100year lifespansmusu-bi (End-of-Life Support Service)
As part of our asset consulting services,helping customers figure out how to tie
their lives together in a way true tothemselves.

2004

Created new markets and provided high-quality, uniquevalue by combining ANA's diverse customer base andmarketing expertise with Suruga's retail business.

Uniquely Suruga

2021/2022

Focused on growth areas/non-Japanesecustomers to fulfill needs gaps and provide
access to financial services to all.

Uniquely Suruga

2022

Through services to prepare for eventualities, suchas visualization of assets, funeral insurance, andinforming customers about funeral styles, we offer
proposals to turn anxiety into peace of mind and tohelp people enjoy a brighter, more positive rest of
their lives.

8

Management Strategy II:
Building a Sustainable Revenue Structure
New Business Gross Profit (Core Gross Operating Profit, New Portfolio)• New business gross profit is to grow 2.2x vs. FY2022 through Management
Strategy I (Evolving the Retail and Solution Businesses)
Breakdown of new
business gross profit

FY2025Plan

Retail/Solution Businesses
Solution Business1
Investment real estate loans

Market Finance
Structured financeMarket operations, etc.2

New Portfolio Total

FY2022
Forecast

Change

6.5

2.2

+4.3

3.0
3.5

0.8
1.3

+22
+2.2

9.5

5.1

+4.4

4.5
5.0

2.1
3.0

+2.4
+2.0

16.0

7.3

+8.7

2.2x

Building a sustainable
revenue structure through"three arrows"(Unit: Billions of yen)

1Solution Business includes asset consulting, housing loans, unsecured loans, etc.
2Market operations, etc. includes claim purchases

Expenses• As part of Management Strategy II (Building a Sustainable Revenue Structure),
we plan to implement and complete cost structure reforms in continuation from
Phase I
* Expenses: 36.5 billion yen (FY2022 forecast) → 32.5 billion yen (FY2025)(-4.0 billion yen)

Actual Credit Costs• Plan to stabilize actual credit costs at low levels by proactively taking
measures to improve the quality of loans for non-share house single
income property loans*Actual credit cost: Approx. 9 billion yen (average of FY2020-2022
forecast) → Average of less than 3 billion yen/year from FY2025 onward(Approx. -6.0 billion yen)

Decrease in core gross operating profit fromold portfolio

52.5 billion yen → 32.5 billion yen(FY2022 forecast)(FY2025)(-20.0 billion yen)
Definitions: New/Old Portfolio• New: Revenue from goods and services contracted on orafter April 2020
Old: Revenue from goods and services contracted on or before
March 20209

New Disbursement: Trend and Plan
New loan, etc. disbursement
Claimspurchased
債権購入
Structured
finance
Structured
finance
Investment
realestateloans
Investment realestateloans
Solution
Business(housingloans, unsecured loans, etc.)
ソリューション事業（住宅ローン、無担保ローン等）

230.0
New loan disbursement plan for the
final year of Phase 1 (FY2022)(Unit: Billions of yen)

Priority Measure 1
Reorganizing from a Sales Headquarters System

240.0
50.0

(4) Market Finance- Claim purchases -

P22

60.0

(4) Market Finance- Structured finance -

P21

70.0

(3) Greater Tokyo/Wide-Area Bank
- Investment real estate loans -P20(1) Community Bank
(2) Direct Bank
(3) Greater Tokyo/Wide-Area Bank:- Housing loans -

P17

163.8

190.0

to Four Autonomous Profit Centers

67.9

60.0

On Phase 1
planformulation

FY2020
FY2020

FY2021
FY2021

FY2022
FY2022

FY2025
FY2025…

Forecast

Plan

In the final year of Phase 1 (FY2022), achieved new disbursement at a level balancing contractual commitments andprepayments. In Phase 2, we plan to strengthen the operational foundation we have built and increase the share of new
disbursement through origination.

10

Management Strategy III:
Risk-Taking and Risk Diversification
Change in composition of assets under management from FY2018 to FY2025
100%
90%

Securities management

80%

Structured finance (non-real estate)
Business financing

70%

Unsecured loans

60%

Housing loans

50%

Monetary claim purchases (real estate area)
Structured finance (real estate area)

40%

Single building income loans130%

Non-real estate
relatedApprox.
60%

20%(New portfolio)

Approx.
40%

10%

Approx.
30%

Real estate related

Specified real estatearea loans2(Old portfolio)

0%

Assets undermanagement

End of FY2018
Results

End of FY2022
Forecast

End of FY2025
Plan

3,035 billion yen

2,500 billion yen

2,500 billion yen

1Single building income loans + studio apartment loans + other secured loans + loans to asset managementcompanies executed before full-scale rollout of Phase 1
2Single building income loans (relatively high share of older properties and properties located in regional areas)

executed prior to the full-scale rollout of Phase 1

In AUM, our plan is to decrease the ratio of legacy specified real estate area loans from approx.
60% (end of FY2018) to approx. 40% (end of FY2022) to approx. 30% (end of FY2025)
11

Phase 2 KPIs

Main KPIs

Ordinary income

Net income(Consolidated)

Capital adequacy
ratio

Key action indicators
for achieving main KPIs

FY2025Plan

10.5 billion yen

13.0 billion yen

10.0 billion yen

11.0 billion yen

11.3%

10%+
(effective)

New business grossprofit

7.3 billion yen

16.0+
billion yen

Expenses

36.5 billion yen

Less than
32.5 billion yen(Based on finalized Basel
III)

Secondary KPIs

FY2022
Forecast

Actual credit costratio

-5 bps*Figures/indicators without "consolidated" are for Suruga Bank (non-consolidated)

Approx.
15 bpsNotes

・ Profit attributable to owners of parent
・ Figures for FY2022 are current estimates(FY2022 forecast pre-Basel III finalization is 13.0%)
・ Any unrealized loss on securities
is deducted from core capital・ Revenue from goods and services issued on or after
April 2020
・ Based on core business gross profit (excluding
gains on cancellation of investment trusts)

・ Intended cruising speed for FY2025 and beyond
・ Actual credit costs / Loans and bills discounted(average balance) × 10000(Loans and bills discounted = Loans + Purchasedmonetary claims)

12Phase 2 Promotion Framework
Organizational structure beginning April 2023
Audit andSupervisory
Committee

Nomination andCompensation
Committee
Compliance
Committee

Board ofDirectors

Sustainability
Promotion Committee

PresidentInternal Audit
Department

Executive
Committee

Corporate Philosophy
Promotion Committee
Risk committees

General Management
Planning Headquarters

Direct Bank

IT & Operations
Headquarters

Sales Division

Greater Tokyo/Wide-Area Bank
Market Finance
Headquarters
Solution Promotion
Headquarters

Administrative Units

Community Bank

Loan Screening
Headquarters
Loan Administration
Headquarters
Corporate
Administration Division

In order to differentiate as established in the Phase 2
management strategies, all executives and employees and theirrespective organizations will take action based on the keyword"Agile" (emphasizing speed, taking on challenges, andautonomous decentralization).
The following changes were made to the organizational
structure to encourage this "Agile".
〇 Abolishing the system of control by executive directors and delegating
authority and responsibility to general managers at each headquarters.

〇 Reorganizing from a sales headquarters system to four autonomous profit
centers. Transitioning to a system enabling each bank/headquarters toquickly implement strategies tailored to their respective customer
segments and competitive environment.

〇 In order to provide a new customer experience and rapidly innovate thebranch model from a DX perspective, the Business Administration Divisionand the Systems Department were merged to form the IT & Operations
Headquarters.

Compliance Department

13Action Policy in “Re:Start 2025 Phase 2“Phase 2
Management
Strategies

Business
Structure

I. Evolving the Retail and Solution Businesses
II. Building a Sustainable Revenue Structure
III. Risk-Taking and Risk Diversification

1.

Reorganizing from a Sales Headquarters System to Four Autonomous Profit Centers(2.2x new business revenue)• Community Bank, Direct Bank, Greater Tokyo/Wide-Area Bank, Market Finance2.

Priority Measures

Completing Cost Structure Reform(Expenses: 46.8 billion yen in FY2018 ⇒ 32.5 billion yen planned in FY2025)• Network Reorganization, Shifting Talent to the Front Office by Streamlining Headquarters Functions, IT Cost

Revenue
Structure

Structure Reform
3.

Minimizing and Stabilizing Actual Credit Costs Through Higher Credit Quality• Improvement of credit quality to a level where actual credit costs average less than 3 billion yen/year fromFY2025 onward

Infrastructure

4.

Pursuing Cloud Computing and DX in IT Platforms

5.

Vector Alignment with Stakeholders• Aligning vectors with shareholders, employees, and society to strengthen driving force behind management
strategies

Phase 2
Keywords

Agile

Kyo-soResilience

Speed, taking on challenges,
autonomous decentralization

Collaboration, dialogue, value
creation

Recovery, flexibility, risk
diversification

14

Contents

１. Introduction

3. Priority Measures

1-1 Corporate Philosophy

Priority Measure 1: Reorganizing from a Sales Headquarters
System to Four Autonomous Profit Centers

1-2 Review of Phase 1(1) Community Bank

1-3 Environmental Recognition Underlying Plan Formulation(2) Direct Bank
(3) Greater Tokyo/Wide-Area Bank
(4) Market Finance

Priority Measure 2: Completing Cost Structure Reform(1) Network Reorganization(2) Shifting Talent to the Front Office by Streamlining Headquarters Functions

2. Phase 2 of the Mid-Term Business Plan
Mid-Term Business Plan Overview
Management Strategy I: Evolving the Retail and Solution Businesses(3) IT Cost Structure Reform

Priority Measure 3: Minimizing and Stabilizing Actual Credit Costs
Through Higher Credit Quality- How We Differentiate(1) Status of Investment Real Estate Loans and Organizational Negotiation
Partners

Management Strategy II: Building a Sustainable Revenue Structure(2) Improving Credit Quality for Other Investment Real Estate LoansManagement Strategy III: Risk-Taking and Risk Diversification

Priority Measure 4: Pursuing Cloud Computing and DX in IT

Phase 2 KPIs and Promotion Framework

Platforms

Action Policy

Priority Measure 5: Vector Alignment with Stakeholders(1) Vectors with Shareholders(2) Vectors with Employees(3) Vectors with Society

15

Priority Measure 1: Reorganizing from a Sales Headquarters
System to Four Autonomous Profit Centers

Aiming to be a lifelong
partner building
high-quality, long-term
relationships and keeping
close connections withcustomers

01

Community
Bank1
Shizuoka, Kanagawa

02

Direct Bank
Nationwide business utilizing
digital technologies

Under our banner as “FI
Innovator“, expanding thecustomer base by providing
digital-enabled retail solutions
to social and individual
challenges

Mission in the four business areasfor growth of the new portfolio

Providing "personalized
financial solutions"focused on real estate tosupport the achievement ofprosperous lifestyles

03
Greater Tokyo/WideArea Bank2

04
Market FinanceGreater Tokyo area and major
Japanese cities

Expanding investment andloan areas with a focus on
middle-risk/middle-return
while improving
management capabilities
and expertise,
which are the cornerstonesof the financial services
industry

1Community Bank: Sales organization including sales offices in the Shizuoka area (58 branches) and Kanagawa area (35 branches)
2Greater Tokyo/Wide-Area Bank: Sales organizations including sales offices and promotion departments in the five major

metropolitan areas (Greater Tokyo area [5 branches + 3 departments] and other metropolitan areas [4 branches])(Number of branches is as of March 31, 2023)

16

Priority Measure 1: (1) Community Bank
Aiming to be a lifelong partner building high-quality, long-term relationships and keeping close
connections with customers

Direction of Individual Solutions

Direction of Corporate Solutions
Providing solutions beyond overall management

First Pillar

Second Pillar

Third Pillar

Expanding sharewith customers

Securing originality
for target segments

Creating contact
points, mainly
outboundFinancial

Shifting to accountsales

Strengthening targetingand proposal
capabilities based on area
characteristics

・Enhancing loan officers
・Enhancing financial
advisors (FAs)Management
support Business financing with appropriate assessment
 Utilizing public institutional loans such as SDGs guarantees
 Improving cash flow through factoring and leasing, etc.
 Internet banking and other fund management services
 Cashless payment support
 Streamlining settlement operations with business cards, etc.

 Business succession, M&A

Continuation
management
Visit

Phone

Customers
E-mailWorkplace

BranchPriority
customersegment

High-quality proposals basedon a deep and broad
understanding of thecustomer's "AID"

Teleconferencing

Building
quality,
long-term
relationships

FA team

Potential priority
customersegment

New/Existing

Loan officers,
liaisons,
FA counters
Proposals to customers
matched with the solution

 Matching for human resources support and development Support for non-Japanese customers, etc.

An integrated cooperative structure acrossthe Suruga Bank Group
Sales offices

DirectOne

Suruga Card

Suruga Computer
Service

Suruga Staff
Service

Corporate
consulting
offices

Asset
Consulting
Department

Customers
Structured
Finance
Department

FI Planning Office
FI Promotion
OfficePartner companies
Certified tax
accountants

SurugaInstitute17

Priority Measure 1: (2) Direct BankFor non-Japanese customers, developing/launching dedicated products such as accounts exclusively for non-Japanese customers
and car loans
Direct Bank aims to increase the number of contracts by expanding its product lineup and upgrading B2B2C/D2C
marketing methods to meet nationwide unsecured loan needs, centered on digital (non-face-to-face) services

Suruga's strength to promote FI as a business
Customer management andscreening functions

Retail finance infrastructure
Our CRM, specialized for retailCustomer management in new areas,e.g. non-Japanese

Real-time integration of demographic
data such as age, gender, etc., as wellas accountdata such as actual transfers anddeposits/withdrawals• Managing new information, e.g., residence
status, is handled by customizing thecustomer management system

Digital + Marketing
Utilizing digital solutions

Implement effective proposals throughtimely messaging via MA tools, ourConnect app, etc.

• Addressing risks in AML/CFT and
implementing appropriate controls

Diverse customer communication
methods

Unique credit model

Marketing• Our proprietary automated screening
system accumulates data from application
to disbursement

Call centers with per-role
specialization, e.g., secured,unsecured, and general contact,
respond to customers individually byphone, e-mail, interactive SMS,
chatbot, etc.

Implementing effective and optimal
B2B2C/D2C marketing (incl. digital) as
appropriate so that our non-face-to-facesolutions can be applied nationwide• Integrates undeveloped management data
to evolve individual credit-specific scoringmodels every day

Unsecured loan contracts and Internet accounts:
Trend and planned target• Sep. 2021: Reorganization, establishment of FI
Promotion Office• Oct. 2021: Launched smart accounts• May.2022: Launched accounts exclusively for nonJapanese customers without permanent

FY2020

FY2021

FY2022

Number of accounts opened (main Internet branch accounts)

FY2023

Number of new contracts

FY2024FY2025

Number of cross-sells (existing customers)

residency

18

Priority Measure 1:(3) Greater Tokyo/Wide-Area Bank: Housing Loans
Providing home-centric personalized financial solutions
Providing optimal financial solutions needed to meet the needs of each individual customer and help them achieve prosperous lifestyles

TargetingConsulting tailored

Targeting according to area
characteristics

to each customer

High-income
earners

Change ofresidence

Businessowners

Cross-regional
residents

Housingloans

Customers

Using

etc.

Non-JapaneseLong-term relationships
originating in the home

Supporting the way
customers want to live

Business area
Borrowing

Nationwide business through a network oflocations across five major metropolitan
areas and direct services

Dialogue●Direct housing
loan center＋9 locations

Understa
nding
needs

Proposals

●

●

●
●
●
●●

●

Saving

Exploringissues

Preparing Smart accounts
 Smartphoneapps Cardsetc.
 Car loans Education loans Renovation loansetc.
 Fixed term
 Investment trusts iDecoetc.

 Insurance
 End of life
support Trustsetc.

Credit expertise
Credit decisions based on longcultivated data and expertise

Product lineup
Full lineup from 0.5% to 3%

Life plan support

19

Priority Measure 1: (3) Greater Tokyo/Wide-Area Bank:
Investment Real Estate Loans
Focus segments
Marketsegmentation(Financial assets held)*

BeforeRe:Start

Growth direction

Phase 1

Phase 2

• Polished, professional sales structure with a dedicated teamSuper
affluent

Customers(500+ million yen)
84,000 households• Flexible product development capabilities tailored to diverse needs and property locations• Tailor-made support cultivated in the housing loan business

Customers

Affluent

Inorganic areas(100-500 million yen)
1.183 million
households• Alliances through deepening transactions with partner companies

Emerging
affluent(50-100 million yen)
3.222 million
households

Organic areas• Expanding transaction volume through stronger relationships with partner companies• Expanding scope by developing new partner companies

Customers
Providing unique value through customer-oriented
business operations

Upper mass(30-50 million yen)7.203 million
households• Providing optimal services based on a customer-oriented approach• Proprietary screening system combining factors such as customer's asset background,

Mass segment(Less than 30 million yen)
42.031 million households

property value, etc.
• Upgrading talent capabilities to improve solution skills

New loan disbursement plan

Share of newly-disbursed loans
 FY2020-FY2022
 By financial assets held* Percentages of total loan value

17%
17%
Super affluent

63%

Affluent

Emerging affluent

20% Upper mass

23%

700

475

Mass segment*Source: NRI estimates

23%
Phase 1

FY2022

FY2023

FY2024FY202520

Priority Measure 1: (4) Market Finance: Structured Finance(as of April 1, 2023)

 Structured Finance started from scratch in Phase I. By the end of Phase I, its balance exceeded 100 billion yen.
This is planned to reach 200 billion yen at the end of Phase 2. (Fig. 1)

Structured Finance Department
Total: 29 members (incl. dept. head)

Sales Group
15 members

 Real estate to non-real estate loans outstanding is approx. 60% to 40%.

Middle/Back Group
13 members

Number of employees holding qualifications(with duplicates)
ARES Certified Master: 11*
Real Estate Transaction Agent: 10(including those passing the exam only)
Certified Property Manager: 1
MBA: 1 / Securities Analyst: 1
CFP: 2 / AFP: 17
Chief of Money Lending Operations: 4

Real estate in scope is also diversifying. (Fig. 2)
 Controlling risk through attention to leverage level(Currently, more than 80% has LTV of 75% or less) (Fig. 3)* Including those who passed the first examination in FY2022

Fig. 1: Structured Finance Balance Trend(Unit: 100 millions of yen)

2,000

Fig. 2: Breakdown of Balance by Asset(as of Jan. 31, 2023)

Fig. 3: Breakdown of Balance by LTV(as of Jan. 31, 2023)

17%

10%

27%

1,260

36%

20%

690
53%
335

9%

28%

6
FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025(Forecast) (Plan)(Plan)(Plan)

Offices
Residential
Business (logistics/trading)Non-real estate (LBO/renewables)

Under 50%

50%-60%60%-75%

Over 75%21

Priority Measure 1: (4) Market Finance: Market Operations/Claim Purchases
Basic Policy:

In market operations, etc., strengthen risk control while promoting a shift
to a more stable revenue structure

Securities management

Claim purchases

Plan to restructure the securities portfolio in light of changes in the market
environment
 Implemented: Reduce investment balance mainly in multi-asset funds withvaluation losses

Plan to invest in areas where our credit judgment skills canbe utilized, with a focus on middle-risk/middle-return, while
taking into account the needs of other companies Assets underlying claims purchased to date areinvestment condominium loans accumulated by ourskills*Loss on valuation of securities as of Mar. 31, 2023: -1.2 billion yen

 To implement: Plan to gradually shift to a stable revenue structure in securities
investment*Expected balance on Mar. 31, 2026: Approx. 450 billion yen(including approx. 60% yen bonds)
Assumed yield on dividends in FY2025: Approx. 0.7%

March 31, 2023 investment
performance
Number of
Average
Balanceclaims6,200

31%Mar. 312022 balance
466.2 billion yen
62%

31%

Mar. 312023 balance
40% 303.5 bil. yen 51%

1%

1%

62%
6%

6%

9%

Yen bonds

Foreign debt

Other (stocks, etc.)

Multi-asset funds

130 bil. yen

interest rate

Average residual
maturity

2.08%

31 years

Property locations(at time of purchase, by number of claims)
End of fiscal

year 2025/3
SharePlanned balance
Kanto area (Tokyo, Kanagawa, Saitama) 450 billion
78% yen(Plan)
Area

Kansai area (Osaka, Hyogo, Kyoto)

17%

Other

5%

Share of Tokyo 23 wards/ordinance designated cities:
98.5%

22

Contents

１. Introduction

3. Priority Measures
Priority Measure 1: Reorganizing from a Sales Headquarters
System to Four Autonomous Profit Centers

1-1 Corporate Philosophy(1) Community Bank

1-2 Review of Phase 1(2) Direct Bank

1-3 Environmental Recognition Underlying Plan Formulation(3) Greater Tokyo/Wide-Area Bank
(4) Market Finance

Priority Measure 2: Completing Cost Structure Reform(1) Network Reorganization

2. Phase 2 of the Mid-Term Business Plan

(2) Shifting Talent to the Front Office by Streamlining Headquarters Functions(3) IT Cost Structure Reform

Mid-Term Business Plan Overview

Priority Measure 3: Minimizing and Stabilizing Actual Credit Costs

Management Strategy I: Evolving the Retail and Solution Businesses

Through Higher Credit Quality- How We Differentiate
Management Strategy II: Building a Sustainable Revenue Structure(1) Status of Investment Real Estate Loans and Organizational Negotiation
Partners

Management Strategy III: Risk-Taking and Risk Diversification(2) Improving Credit Quality for Other Investment Real Estate Loans

Phase 2 KPIs and Promotion Framework

Priority Measure 4: Pursuing Cloud Computing and DX in IT

Action Policy

Platforms
Priority Measure 5: Vector Alignment with Stakeholders(1) Vectors with Shareholders(2) Vectors with Employees(3) Vectors with Society

23

Priority Measure 2: Completing Cost Structure Reform
Completed cost structure reforms, cutting by 30% vs. FY2018 to build a sustainable revenue structure

Three pillars of cost structure reform

Expenses
Trend(1) Network Reorganization
Reorganizing our network to be sustainable
over the medium to long term by reducing
office area for the Tokyo head office andmatching area characteristics.

［+3.5% front office human resource
ratio vs. Sep. 30, 2022]［20% (FY2019) → 50% (FY2025)
strategic IT investment ratio]

FY2025Plan

Phase 2
Reduction

46.8 billionyen

36.5 billion
yen

32.5 billion
yen-4.0 billion yen-30%Expenses by fiscal year

500
Priority Measure
2: (2)
Shifting Talent to
the Front Officeby Streamlining
Headquarters
Functions(Unit: Billions of yen)

468
400
365
300

325

200

(3) IT Costs, DX Promotion
Formulating IT roadmap to achieve bothsignificant IT cost reductions andstrategic IT investments

FY2022
Forecast

Priority
Measure 2: (1)Network
Reorganization［-25% number of branches vs. Sep. 30, 2022](2) Personnel Expenses/Outsourcing
Expenses
Shifting talent to the front office bystreamlining headquarters functions andstreamlining/adopting digital technologies
in operations

FY2018Results

100
Priority
Measure 2: (3)IT Cost
Structure
Reform0
FY2018 FY2019 FY2020 FY2021 FY2022

FY202524

Priority Measure 2: (1) Network Reorganization
Faceto-face

Aiming to optimize branch functions/network by
evolving the hub/satellite structure to support deeper relationships with customers

Strategy

Major
initiatives

Generating personnel and time to expand
contact with customers by centralizing
back-office operations at sales offices to headquarters
Hub/satellite structure to be thekey to reorganizing

Satellite
branchAccelerating optimization of
headquarters, branch functions,and network

Accelerating the downsizing of the Tokyo head office aswell as the network reorganization and operation task
reduction by reviewing the functions of satellite branches
in order to optimize management resources

Review of branch functions in accordancewith area characteristics
101

Hub branchSatellite
branchPhase 2

Satellite
branchBranch reductions: Approx. 20•

Branches specialized in services for individuals•

Remote customer service system introduced toprovide highly professional consultation byheadquarters staff

Sales Office Support Center（ESC）•

Operations/verification support centralized at headquarters
・ New account opening support, notification/change operations
・ Identity verification systems, anti-money laundering registration
・ Online consultation regarding satellite branch operations, etc.

Administrative processing and operational support by

the Sales Office Support Center•

Cashless branches → May 2023 trial•

Introduction of ATMs supporting tax payments

NonStrengthening
face-todigital channels
face

Going beyond the convenience of DX to provide a new customer
experience Non-face-to-face
Expanding anddiversifying
customertouchpoints andcommunication
methods

Our Connect
smartphoneapp

Adopting
digital atbranches
Collaborating with otherindustries using digitaltechnologies

Evolving digitalmarketing analysis

Providing personalized
proposals/products

Strategically reallocating of management resources toensure agile response to new retail/solution needs achieving

Innovating branch operations and streamlining
operations

Centralization of back-office
operations at headquarters
Establishment of hub/satellite system

Phase 1

Expanding web-based
applications /transactions

25

Priority Measure 2: (2) Shifting Talent to the Front Office by
Streamlining Headquarters Functions
Streamlining sales office
operations

Streamlining headquarters
Streamlining headquarters
operations

Streamlining branch operations
Headquarters centralization/verification
support for back-office operations using theSales Office Support Center

Appropriately allocating talent throughfurther streamlining of headquarters
operations

Strengthening support for sales
offices

Reorganizing headquarters
Integration/reorganization of
departments due to review of
headquarters operations, etc.

Establishing a sales office support
framework utilizing DX/remote functions

Reallocating to front officeareas (e.g., sales) throughaction in four categories*+3.5% front office humanresource ratio vs. Sep. 30, 2022

Reorganizing the network
Optimizing the branch network
Consolidating human resources throughnetwork reorganization based on
demographics and branch proximity

Reviewing branch functions
Introducing cashless branches andindividual services-only branches
tailored to area characteristics

Shifting to digitaltechnologies
Evolving smartphone app
Enhancing functionality of theConnect smartphone app

Promoting self-service transactions
Encouraging self-service transactions
using the "SMA-Navi" counter tablet

Shifting talent to the front office to provide value to more customers
26

Priority Measure 2: (3) IT Cost Structure Reform
Shrinking IT costs and shifting to strategic IT investments
Through development of our IT roadmap, we are fundamentally reviewing our IT cost structure and drastically reducing/optimizing these costs, shifting tostrategic IT investments• Plan to shrink to 6 billion yen in costs per year in FY2027, based on a shift to cloud computing for accounts targeted for the same year
• Expanding the proportion of strategic IT investments (20% in FY2019 ⇒ 50% in FY2025/60% in FY2027) to appropriately adapt to environmental
changes and establish/strengthen competitive advantage

9.5 billion yen
8.0 billion yen
7.3 billion yen
6.0 billion yen

Operation/maintenanceStrategic
investment
FY2019

FY2022

FY2025

FY2027

Reducing operation/maintenance costs and shrinking investment in system upgrades by promoting use of cloud services
and reviewing system configuration/functions
In key strategic areas, e.g. digital channels, reducing development costs and providing services rapidly by in-housing
systems
Cultivating IT talent, e.g. app developers and cloud engineers

27

Contents

１. Introduction

3. Priority Measures
Priority Measure 1: Reorganizing from a Sales Headquarters
System to Four Autonomous Profit Centers

1-1 Corporate Philosophy(1) Community Bank

1-2 Review of Phase 1(2) Direct Bank

1-3 Environmental Recognition Underlying Plan Formulation(3) Greater Tokyo/Wide-Area Bank
(4) Market Finance

Priority Measure 2: Completing Cost Structure Reform(1) Network Reorganization

2. Phase 2 of the Mid-Term Business Plan
Mid-Term Business Plan Overview(2) Shifting Talent to the Front Office by Streamlining Headquarters Functions(3) IT Cost Structure Reform

Priority Measure 3: Minimizing and Stabilizing Actual Credit Costs
Through Higher Credit Quality

Management Strategy I: Evolving the Retail and Solution Businesses- How We Differentiate(1) Status of Investment Real Estate Loans and Organizational Negotiation
Partners

Management Strategy II: Building a Sustainable Revenue Structure(2) Improving Credit Quality for Other Investment Real Estate LoansManagement Strategy III: Risk-Taking and Risk Diversification

Priority Measure 4: Pursuing Cloud Computing and DX in IT

Phase 2 KPIs and Promotion Framework

Platforms

Action Policy

Priority Measure 5: Vector Alignment with Stakeholders(1) Vectors with Shareholders(2) Vectors with Employees(3) Vectors with Society

28

Priority Measure 3: Minimizing and Stabilizing Actual Credit
Costs Through Higher Credit Quality
Striving to improve the quality of loan assets in order to keep actual credit costs below 3 billion yen/year
on average* from FY2025 onward* Actual credit cost ratio: Approx. 15 bps(Actual credit cost ratio = Actual credit costs / Average balanceof loans)

Disclosed claim value1
Unit: Billions of yen

Share houserelated
borrowers

Organizational
negotiation
partners

Mar. 31, 2020

175.5

Dec. 31, 2022
(A)

―

―

(With the completion of the lump-sumtransfer of claims, the remaining
claims3 will be transferred to thesame management system asothers)―90.4

Efforts to improve credit quality

Coverage ratio (Dec. 31, 2022)
Appraisedcollateral value2
(B)

34.9

Allowances/guarantees
(C)

―

54.4

Coverage ratio(B+C)/A―

98.80%• Share house claim lump-sum transfer
conducted over four instances from Mar.
2020 to Sep. 2022, completing repayment
in kind scheme (Total: 1,051
borrowers/1,339 properties)• Coverage ratio exceeded 90% throughpreventive allowance provisioning, etc.
• Negotiations are ongoing toward early
resolution


Nonorganizational
negotiation
partners4

132.5

105.2

40.1

27.5

64.31%(See page 30)• Proactively improving credit quality throughperiodic occupancy rate surveys,
improvement proposals, use of assessment
sheets, etc.
(See page 31)

1Disclosed claims under the Financial Reconstruction Act
2Normally, 90% of the total valuation method amount is used for collateral valuation of loans and other credit-related claims, but figures here use 100% of the total valuation method amount. Note that in thepast, the ratio of the amount of claims transferred to the collateral valuation for income-producing properties for investment real estate loan financing has exceeded 200%.
3Amount of disclosed claims for share house-related loans after completion of lump-sum transfer of claims: 24.0 billion yen (share house-related loans total: 32.8 billion yen)
4"Non-organizational negotiation partners" shows the total for single building income loans

29Priority Measure 3: (1) Status of Investment Real Estate
Loans and Organizational Negotiation Partners
Status of efforts to dateUnder
negotiation/dispute

Organizational
negotiation
partners

After approximately four years of repayment support and consultation
efforts, more than 40% of the 37,907 properties surveyed have a loanbalance of zero, and more than 50% are maintaining loan repayment.

Number of surveyed realestate properties in theReport (Investigation of
All Investment Real
Estate Loans)published May 15, 2019:

However, approximately 3% of the loans other than those are undernegotiation or pending (i.e., those for which organizational negotiations areunderway or repayment support agreements have not been reached), and37,907we will continue to take appropriate measures to resolve these issues.

Borrowers continuing
repayment

No balance(Including repayment support
agreement partners)(e.g., fully repaid)

As of Dec. 31, 2022

Basic approach to future action

1

From the viewpoint of striking early settlements, we are actively cooperating in clarifying loan circumstances incertain types of cases where the bank is likely to be found liable in tort in a lawsuit.

2

In addition, there have been several cases in which the sale of investment real estate has led to full repayment, and we arealso moving forward with proposals to consider voluntary sales of real estate.

3

With regard to investment real estate loan cases, each case has its own very individual qualities, and we believe it is necessary

to consider the unique circumstances of each case individually when determining whether and to what degree there is an
obligation to compensate for damages.

30Priority Measure 3: (2) Improving Credit Quality for Other
Investment Real Estate Loans
Efforts to improve credit quality

Regularly communicating with customers, starting with occupancy rate surveys, and working with management companies, real estatecompanies, specialists, and other business partners to improve the profitability of customer-owned investment properties and prevent
deterioration of collateral properties, etc.

Overview and results trend for
occupancy rate survey

Main actions to improve quality
90.0%

Support tailored to actual circumstances
Risk-based safeguarding
・ Proposal of effective

improvement measures
・ Developing flexible
repayment plans

Collaborating withpartner companies

・ Gathering risk
information
・ Evolving reserve
estimation methods

・ Building more partnercompanies in the areas ofrepair, property
management, sale,taxation, and legal affairs

89.0%
87.6%

88.0%
87.0%
86.0%
85.0%

Regular communication
Assisting customers when
they wish to review theManagementcompany

management company forowned real estateRealestatecompany

FY2019

Sharing information
discovered during(Repairs required,etc.)

occupancy rate surveys(Property damage/defacement/etc.)

Specialists

FY2021

FY2022

Referring real estate

Survey content:

companies when

• Covers customer properties with a single building income loan balance of 50 million

customers wish to sell
their owned real estate

yen or more
(Approx. 8,500 properties, 90% of total outstanding balance)

Regularoccupancy
rate surveys
Property
information

FY2020• Fundamental procedure is for our staff to visit the subject property to check not only
occupancy status, but also for any property damages and management status• For any discovery of property damage, abnormality in property management, etc.,
Referring to tax

information is shared with customers and we consult with them on how to respondaccountants,
attorneys, and otherspecialists

31

Contents

１. Introduction

3. Priority Measures
Priority Measure 1: Reorganizing from a Sales Headquarters
System to Four Autonomous Profit Centers

1-1 Corporate Philosophy(1) Community Bank

1-2 Review of Phase 1(2) Direct Bank

1-3 Environmental Recognition Underlying Plan Formulation(3) Greater Tokyo/Wide-Area Bank
(4) Market Finance

Priority Measure 2: Completing Cost Structure Reform(1) Network Reorganization

2. Phase 2 of the Mid-Term Business Plan

(2) Shifting Talent to the Front Office by Streamlining Headquarters Functions(3) IT Cost Structure Reform

Mid-Term Business Plan Overview

Priority Measure 3: Minimizing and Stabilizing Actual Credit Costs

Management Strategy I: Evolving the Retail and Solution Businesses

Through Higher Credit Quality- How We Differentiate
Management Strategy II: Building a Sustainable Revenue Structure(1) Status of Investment Real Estate Loans and Organizational Negotiation
Partners

Management Strategy III: Risk-Taking and Risk Diversification(2) Improving Credit Quality for Other Investment Real Estate Loans

Phase 2 KPIs and Promotion Framework

Priority Measure 4: Pursuing Cloud Computing and DX in IT Platforms

Action Policy

Priority Measure 5: Vector Alignment with Stakeholders(1) Vectors with Shareholders(2) Vectors with Employees(3) Vectors with Society

32

Priority Measure 4: Pursuing Cloud Computing and DX
in IT Platforms


Proactively utilizing cloud and other new IT technologies to build a flexible and agile next-generation IT infrastructure to achieve
management and sales strategies
Driving DX through shifting non-face-to-face and face-to-face channels toward digital, providing new customer experiences andreforming branch operations

Phase 2
Strengthening non-face-to-face digital channels
Reforming branch operations and streamlining
operations

Phase 1
Designing IT strategy, grand design, and roadmap
Strengthening IT digital infrastructure and in-housing in
key strategic areas
Moving to cloudtechnologies

Expanding web applications

Shifting branches to digital

Upgrading data analysis
infrastructure

Cloud computing foraccounts

Cultivating talent in new IT
techPhase 2Phase 12020

2023

 Establishing a plan to evolve our IT by

Phase
1

Enhancing smartphoneapp

Beyond Phase 2
IT infrastructure supporting
management strategies
Expanding and accelerating IT
strategic investment

designing an IT strategy and grand design Educating/cultivating talent in new IT tech topromote in-housing in key strategic areas

Beyond Phase 2
2025

2027
Major IT technologies/applications• Evolving/automating operations by introducing a cloud-based call center system• Strengthening/evolving digital communication infrastructure through introduction of anext-generation internal network• Rapid service deployment through active introduction of cloud services• Cloud-based call center• Software network• Mesh network• Low-code/no-code
development

33

Promoting DX in Phase 2
Strengthening digital channels

Reforming branch operations andstreamlining operations

Non-face-to-face✔ Reducing branch operational load through shifting operations to digital✔ Providing optimal products/services for each customer✔ Improving value and convenience provided to customers and offering new

and headquarters collaboration✔ Accelerating branch operation streamlining and headquarters

customer experiences✔ Providing diverse communication methods and customer touchpoints

Behavioral analysis and product proposals / digital passbook /various notification services / chat function

Expanding web-based applications
Opening accounts / loan applications /strengthening security / improving convenience

Providing diverse communication methods
Providing AI chatbots/diverse communication methods

concentration to achieve next-generation branches

Mutual cooperation/integration

Expanding services for the Connect smartphone
applicationFace-to-face

Expanding SMA-Navi
All processes completed via tablet / no manual required / noadministrative work required

Shifting branches to digital/reducing
operations
Paperless, cashless, seal-less / device optimization

Strengthening sales office/headquarters cooperation
Centralizing counter operations at headquarters(Sales Office Support Center) / implementing
RPA and teleconferencing

Integrating internal/external digital data and innovating operations

Upgrading data analysis infrastructure Utilizing highly fresh data to support decision-making
 Utilizing various internal/external information to support business innovation through DX
 Cloud computing and big data analysis in data analysis infrastructure Significantly expanding and integrating data collection and analysis areas(all internal digital data) Enabling cross-sectional big data analysis of internal and external digital data
 Using AI and machine learning to analyze unstructured data, e.g. audio/images

34

Contents

１. Introduction

3. Priority Measures
Priority Measure 1: Reorganizing from a Sales Headquarters
System to Four Autonomous Profit Centers

1-1 Corporate Philosophy(1) Community Bank

1-2 Review of Phase 1(2) Direct Bank

1-3 Environmental Recognition Underlying Plan Formulation(3) Greater Tokyo/Wide-Area Bank
(4) Market Finance

Priority Measure 2: Completing Cost Structure Reform(1) Network Reorganization

2. Phase 2 of the Mid-Term Business Plan

(2) Shifting Talent to the Front Office by Streamlining Headquarters Functions(3) IT Cost Structure Reform

Mid-Term Business Plan Overview

Priority Measure 3: Minimizing and Stabilizing Actual Credit Costs

Management Strategy I: Evolving the Retail and Solution Businesses

Through Higher Credit Quality- How We Differentiate
Management Strategy II: Building a Sustainable Revenue Structure(1) Status of Investment Real Estate Loans and Organizational Negotiation
Partners

Management Strategy III: Risk-Taking and Risk Diversification(2) Improving Credit Quality for Other Investment Real Estate Loans

Phase 2 KPIs and Promotion Framework

Priority Measure 4: Pursuing Cloud Computing and DX in IT

Action Policy

Platforms
Priority Measure 5: Vector Alignment with Stakeholders(1) Vectors with Shareholders(2) Vectors with Employees(3) Vectors with Society

35

Priority Measure 5: Vector Alignment with Stakeholders
Creating value for stakeholders by providing services
addressing issues faced by customers and communities
Corporate Philosophy"I'm glad you're here...I'm glad we met..." This perception is our goal.

External environment(social issues)

Structural changes
in Japanese societyPolarization of social structureGrowth in single senior citizens

Global structural changes

Increasing geopolitical risk



Review/restructuring of
global supply chainsGrowing interest rateinstability/uncertainty

Shift to digitaltechnologies

Shift to customerdriven business models
Changes in lifestyles/behavior
due to advance of DX

Accelerating ESG trendsClimate change issues

Diversification of work styles

Importance of reskilling

Realizing asustainable society

Value provided to
stakeholders

Management resources toutilize Group strengths

Financial capital・ Enhanced equity capital

Human capital・ Highly skilled
professional talentSocial/relationshipcapitalMateriality
recognizedby the Group

Establishing a solid
governancefoundation

Building a sustainablelocal economy/society

Business model/activities
Customers

・ Unique retail banking
expertise cultivated overmany years of experience

Natural capital・ Rich regional nature
・ Abundant tourism
resources

Corporate value enhancement
and sustainable growth of the
Group



Re:Start2025 MT Business Plan
Phase 2 (FY2023 - FY2025)

Shareholders■ Providing unique value throughour core business of retail banking■ Establishing a framework forappropriate risk/return control

Employees ・ Strong customer base・ Nationwide networkIntellectual capital Providing solutions
 Helping live a richer life



I. Retail Solutions
Business EvolutionContributing toenvironmental
conservation

Creating anenvironment where
employees can thriveand grow

Society
II. Building a Sustainable
Revenue Structure

Agile

Corporate
governance

Sustainable improvement
in corporate value
Stable/sustainable
shareholder returns
Enhanced capital and highsoundness
Job satisfaction andfulfillment
Promoting diversity,
workplace reform
Reskilling support

Community revitalization
Realizing a sustainable
environment/society
Sound corporate
climate/culture

P37

P38

P39

III. Risk-Taking and
Risk Diversification

Contributing to the SDGs

Kyo-soRiskmanagement

Resilience

Compliance36

Priority Measure 5: (1) Vectors with Shareholders
Sustainable improvement in corporate value
contributing to shareholder value

Profitability•

Doing business in line with Phase 2 management strategies•

Proactively considering strategic alliances, etc. contributing toProfitability

enhanced corporate valueSoundness
Capital adequacy ratio: 10%*+ (effective)•

Accumulate profits to secure enough equity capital for risk-taking

Returns

Sustainableimprovement incorporate valueSoundness•

Returns

Returning profits to stakeholders, taking into consideration the Group's
corporate philosophy and long-term vision•
Basic policy on shareholder return
Strive to enhance shareholder returns in consideration of the optimalbalance between capital soundness and growth investment•
Dividends
Basic policy to pay stable dividends with a payout ratio of approx. 30%•

Purchase of treasury shares
Flexible purchase as a shareholder return measure contributing to capitalefficiency, taking into account business performance, capital conditions,
opportunities for growth investment, and market conditions (including stock
prices)•Promotion of ESG/SDGs* Based on finalized Basel III. In capital adequacy ratio, any unrealized loss on securities
is deducted from core capital.

37

Priority Measure 5: (2) Vectors with Employees
Organizing management issues from the perspective ofhuman capital and rolling out measures contributing tosustainable corporate value enhancement

Strategic issues for human capital✓ Total empowerment of all employees✓ Large-scale reassignment (reskilling)✓ Cultivating management talent (external dispatch,diversity promotion)

KPIs
Item

TargetInvesting in new talent cultivation(3-year total)

100+ milliom
yen

Percent of female managers

30%+

Childcare leave utilization rate (annual)

100% (menand women)

Overall satisfaction in employee
motivation survey

Changes in roles required
・ Changes in employee composition

Toward problem-solving

・ Work style reforms✓ Raising motivation/awareness of all employees
and expanding their circle of activity✓ Diversifying work styles and options✓ Providing options to support reskilling✓ Visualization/pitching appeal of career paths

・ Re-allocation of human resources

60%+

Taking on
the challengeof differentiation

Strategic issues forhuman capital✓ Cultivating employees with expertise✓ Mid-career hiring of experienced andprofessional talent

Toward problemsolving✓ Career support encouraging talent development in・ New products/services

Expandingspecializedbusiness areas

・ Business models

・ Cultivating individuals' strengths
・ Strengthening specialized areas

specialized fields✓ Remuneration incorporating the talent market＋

Strategic issues forhuman capital✓ Motivating employees to think✓ Reaffirming/communicating our strengths

Toward problemsolving✓ Providing a forum to expand scope ofthought/discussion✓ Rewards for enhancing corporate value✓ Rewards for taking on challenges

Introducing a share remuneration plan for executives••

In addition to the current share remuneration plan for officers, introducing a share remuneration plan for
executives from the perspective of human capital investment
Increasing engagement of executives and aligning with shareholder vectors to enhance corporate value
over the long term

38

Priority Measure 5: (3) Vectors with Society: Governance
Framework We have targeted the Prime Market so as to provide a higher level of governance. We are committed to sustainable growth and medium- tolong-term enhancement of corporate value by optimizing the risk/return balance through both our mid-term business plan and RAF.
 In light of the fact that the Company is under a business improvement order, we will further enhance corporate governance by increasing thetransparency and objectivity of management and by strengthening the monitoring system.
*This is based on the management structure to be proposed at the212th Annual General Meeting of Shareholders.

■ Fundamental approach to corporate governanceIn our corporate philosophy, the perception of "I'm glad you're here..." "I'm glad we met..." isour goal. In order to achieve this, we have established and put into practice a Compliance
Charter as a standard of conduct for our officers and employees. By putting it into practice, we
aim to achieve a healthy organizational climate and corporate culture while also ensuring
thorough compliance and customer-oriented business operations.

■ Corporate governance structure

Board of Directors

Compliance Committee

President

Sustainability Promotion
Committee

Corporate Philosophy
Promotion Committee

Executive Committee

Risk committees*

Departments (11 headquarters)

Risk committees*

Outsidedirectors

45%(5 of 11)Percentage offemaledirectors■ Director compensation structure
Nomination andCompensation Committee

Internal Audit
Department

Internal
directors

9%(1 of 11)Percentage ofindependent outside
directors

General Meeting of
Shareholders
Audit and Supervisory
Committee■ Composition of the Board of Directors

Outside director/Chairs/Committee chairs

ALM Committee

Credit Risk Committee

Integrated Risk
Management Committee

Business Risk Committee
System Risk Committee

 Introduced an ex-post delivery
share remuneration plan
In 2020, the Company introduced an ex-post delivery
share remuneration plan for directors (excluding
outside directors and Audit & Supervisory Committee
members) to link director remuneration more clearly to
the Company's performance and share value and toraise their awareness of the need to contribute toimproving the Company's performance and corporate
value over the medium- to long-term.

Basic composition
Shareremuneration
20%
Bonus
20%

Standard
model

Basic
remuneration60%

In addition, to prevent excessive risk-taking and appropriately supervise directors, compensation for outside
directors and Audit and Supervisory Committee members is not linked to business performance, but consists
only of basic remuneration.

Forfeiture of share remuneration (Clawback/malus clauses)
The Company has established clauses (clawback and malus clauses) in its share issuance rules stipulating
total or partial forfeiture of share-based remuneration in order to curb excessive risk-taking, ensure soundmanagement, and prevent serious misconduct such as accounting irregularities as well as large-scalecorrection of past fiscal year financial results.

39

Priority Measure 5: (3) Vectors with Society
We aim to achieve sustainable, long-term value creation by ensuring customer-oriented business operations and providing the
Suruga Bank Group's unique value through the promotion of its retail solutions business, as a means of realizing the Bank's
corporate philosophy.
Sustainability management in the Suruga Bank Group
Board of Directors
Supervision
Executive Committee

Reporting
Reporting/Collaboration

Key
issues•••Stakeholders

Sustainability Promotion
Committee
Matters related sustainability transformation (SX) policies/initiatives
Identifying materiality, establishing mid- to long-term targets
Monitoring/supervising action status, etc.

Responsible party:
President

Meetings: Twice a year

VisionCorporate
Philosophy

Mid-term Business
Plan

Sustainability actions are driven by the Sustainability Promotion
Committee and its subordinate organization, the Sustainability Promotion
Council, consisting of members from executive divisions

P

A
C

Customers

D

Dialogue on key issues and PDCA

Shareholders

Dialogue
Kyo-socycle for business strategy

Engagement

Sustainability Promotion Council

Employees

Responsible party: General
Manager, General Management
Planning HQ

Sustainability Promotion Council members (HQ GMs, etc.)

Headquarters•

Sales offices

Consolidated
subsidiaries

Information gathering and gap assessment led by members of the Sustainability

Society

Promotion Council as antenna activities for initiatives, and action on important issues*Toward the launch of Phase 2, the Board of Directors resolved to establish the Sustainability Promotion Committee on March 17, 2023,
which will beign operation on April 1, 2023.

40

<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 unpredictablechanges in the external business environment.