AEON Financial Service Co., Ltd.
Results for the First Half of Fiscal Year 2014

Aeon Financial Service Co.,Ltd.
Co., Ltd.

Results for the First Half of Fiscal Year 2014

11H FY 2014 Consolidated Results■ Business Scale
1Q
Results
Number of cardholders,consolidated
Domestic

Change from start of FY

Results

Change from start of FY

34.39 million+490 thousand

34.86 million+960 thousand

23.79 million+340 thousand

24.05 million+600 thousand

3.82 million+140 thousand

3.96 million+280 thousand+¥20.2 billion ¥2,908.1 billion+¥114.4 billion

AEON Bank accounts
Finance receivables

First Half Total¥2,813.9 billion■ Consolidated Results
2Q1QResults

YoYResults

First Half Total
YoYResults

YoY

Difference fromforecast

Ordinary income¥72.9 billion 112% ¥78.2 billion 119% ¥151.1 billion

116% +¥6.1 billion

Ordinary expenses¥64.6 billion 116% ¥67.0 billion 107% ¥131.6 billion

111% +¥5.7 billion

Ordinary profit¥8.2 billion

90% ¥11.1 billion 359% ¥19.4 billion

158% +¥0.4 billion

Net income¥3.8 billion

85%Dividends
Aeon Financial Service Co., Ltd.

-

¥7.1 billion-¥10.9 billion

433% +¥3.9 billion¥25
Results for the First Half of Fiscal Year 2014

2Results by Segment(Billions of yen)

1Q
Results

Fee businessBankingbusiness
Overseasbusiness
Adjustment

Results

YoY

Results

YoY

Ordinary profit

124%
124%

35.7
8.0

116%
235%

68.9
13.6

120%
172%

[Profit margin][16.8%][-0.0%][22.5%][+11.4%][19.8%][+6.0%]

Ordinary income
Ordinary profit

10.5
0.08

121%
15%

10.8
0.28

128%
266%

21.3
0.36

124%
58%

[Profit margin][0.8%][-5.3%][2.7%][+1.4%][1.7%][-2.0%]

Ordinary income
Ordinary profit

7.9(1.6)70%-

9.2(0.7)

107%-

17.2(2.4)

86%-[Profit margin]

[－]

[－]

[－]

[－]

[－]

[－]

Ordinary income
Ordinary profit

24.9
5.3

118%
111%

27.7
5.6

125%
234%

52.6
10.9

122%
152%

[Profit margin][21.3%][-1.4%][20.2%][+9.4%][20.7%][+4.1%]

Ordinary income

Ordinary profit

(3.6)
(1.0)
72.9
8.2

112%
90%

(5.3)
(1.9)
78.2
11.1

119%
359%

(9.0)
(3.0)
151.1
19.4

116%
158%

[Profit margin][11.4%][-2.9%][14.3%][+9.6%][12.9%][+3.4%]

Ordinary profit
Ordinary income

Total

YoY

First Half Total

33.2
5.5

Ordinary income

Creditbusiness

2Q

Aeon Financial Service Co., Ltd.

Results for the First Half of Fiscal Year 20143

Consolidated Balance Sheets
Consolidated
Cash and deposits

Results(Billions of yen)

Change fromstart of fiscal year

337.9

Consolidated-78.6 Deposits

Results

Change fromstart of fiscal year

1,651.6

-66.0

759.5

+122.3

Domestic

433.0+103.3[Call money][100.0][+95.1]

Overseas326.5+19.03.6+0.5

Loans and bills
discounted

1,388.5+111.8Domestic

1,160.0+96.3

Loans391.0+37.4

Overseas

228.4

+15.4

Allowance for loss onrefund of interest received

Accounts receivable –installment

918.0

-39.3

Accounts payable – tradeand other liabilities

259.5

-64.2

Customers’ liabilities for
acceptances and guarantees

180.2

+3.8

Acceptances andguarantees

180.2

+3.8

Allowance for
doubtful accounts(47.9)-0.4

Total liabilities

2,852.2-3.5

Securities and otherassets

369.4

-14.0

Total net assets

293.9

-13.3

3,146.2-16.8

Total liabilities and net
assets3,146.2

-16.8

+0.6%

Shareholders’ equity ratio

9.2%

+0.2%

Total assets
Interest rate spread

8.0%

(*)

Interest-bearing debt

*Change from previous fiscal year

Aeon Financial Service Co., Ltd.

Results for the First Half of Fiscal Year 2014

4

Progress of Synergy from Management Integration
Initiatives

Effects

More convenientfinancing・Increased convenience of cash advances bybasing credit decisions on household income
and asset information

Domestic loan balance

Expandedoverseas
business・Accelerated business expansion by shifting
to a bank holding company structure

Full-fledged developmentof credit card businessin Indonesia

・Unified marketing plans

Improved efficiency withuse of invoices anddirect mail【Synergy fromManagement Integration】

Strongermarketing power

Stronger sales
force and higher
productivity
Aeon Financial Service Co., Ltd.

・Consolidated overlapping departments,
shifted personnel to sales departments
・Consolidated sales bases of companies andstrengthened cooperation+¥102.9 billion from FY 2011

Integrated business centersand head office functionsof each company
Consolidated 10 of the sales
bases suited to integration
Results for the First Half of Fiscal Year 2014

5

Progress of Cost Efficiency Improvements (Domestic)(Billions of yen)

1Ｑ

2Ｑ

Results

Results

Change from 1Q

48.1

50.5

+2.48

45.1

45.0

-0.12

Ratio of ordinary expenses toordinary income[YoY change]

93.8%[+3.9%]

89.0%[-6.9%]-4.9%[－]

Advertising and promotion

8.5

7.9-0.58

Administrative expenses(excluding interest refunds)

17.0

16.6

-0.4

Financial expenses

1.9

1.8-0.14

Salaries and fringe benefits

9.3

9.3

+0.08

Equipment expenses4.1

4.3+0.13

General expenses

1.0

1.2+0.24

Bad debt allowance

2.0

2.1+0.14

Interest refund expense

1.0

1.4+0.4

Ordinary income
Ordinary expenses

Aeon Financial Service Co., Ltd.

Results for the First Half of Fiscal Year 20146

Key Initiatives for the Second Half

Aeon Financial Service Co., Ltd.

Results for the First Half of Fiscal Year 20147

Credit Card Business (Card Shopping Transaction Volume)
・1Q: Expanded transaction volume through joint sales promotions with outside affiliated merchants
・2Q: Transaction volume up 10% year-on-year on recovery in transactions with AEON GroupYoY Comparison of Card Shopping Transaction Volume by Place of Use

115%
111%
110%

112%

111%

113%
111%

108%
112%
108%

105%

110%

109%

107%
Outside affiliated merchants

104%

Total transaction volume

100%

95%

44Aeon Financial Service Co., Ltd.

556677‘148899(Month)

Results for the First Half of Fiscal Year 20148Credit Card Business (Stronger Marketing Power)
・Promoted card use through direct mail marketing to cardholders with no recent activity
・By activating these cardholders, we significantly expanded the monthly activity rate andusage amount
Effect of Promoting Credit Card Use with Direct Mail

All Cardholders

ActivatedCardholders

EffectMonthly activity rate

40%47%+7%

Monthly usageamount

¥32

¥78

+¥46

thousandthousandthousand(Based on card use from July to September 2014 by cardholders who were sent direct mail in June)

Aeon Financial Service Co., Ltd.

Results for the First Half of Fiscal Year 2014

9Credit Card Business (Organization of Customers)
・Using co-branded card strategy and other approaches to create organizations of younger
cardholders, who have high activity rates
・Promoting switch to G.G card, which has high activity rates and usage amounts
Monthly Activity Rates and Usage Amounts by Age Group
20s

50%

30s

Monthly activity rate

40s

Organization

G.G
cardholders

40%50sEncourage switching30%
60s and older

20%
220

330
Monthly
usageamountamountMonthly
usage

Aeon Financial Service Co., Ltd.

440

550(Thousandsof yen)

Results for the First Half of Fiscal Year 2014

10Credit Card Business (Expansion of Financing Business)
・Expense/income ratio improved with recovery of cash advances and reduction of credit loss and service
fee expenses
・Total balance of cash advances and AEON Bank’s card loans projected to reach a record ¥420.0 billion
Cash advance
expense/income ratio* Domestic Financing Balance
AEON Bank’s card loans(Billions of yen)

500

81%
80%

Cash advances

65%
420.0

397.6

400

60%

391.0
40%

300
20%
353.6

2000%

1000-20%
'06

'07

'08

'09

'10

'11'12*(Income from cash advances － Credit loss expenses － Service fees) ÷ Income from cash advances

Aeon Financial Service Co., Ltd.

'13'14/9'14(FY)(Plan)

Results for the First Half of Fiscal Year 201411Fee Business (Strengthening E-money Business)・Strengthened affiliated merchant development with introduction of smartphone payment
・Plan to expand transaction volume to ¥2,000 billion
E-money Transaction Volume and Number of Affiliated Merchants

Launch of smartphone payment

2,500(Billions of yen)

Number of affiliated merchants (right axis)
E-money transaction volume (left axis)(Thousandsof merchants)

20200

2,000

2,000

15150

1,600
1,500
Addition of affiliated merchants

10100
1,000500

950.70550
0'10'11'12'13'14(FY)(Plan)
Aeon Financial Service Co., Ltd.

Results for the First Half of Fiscal Year 201412

Overseas Business (Strengthening Screening and Debt Collection)
・Reviewed credit scoring
・Reduced credit loss expenses by systematizing collections
Systematization of Screening and Debt Collection

Bad Debt Allowance(Billions of yen)

Operating profit
Operating expenses (excluding bad debt allowance)

30

Bad debt allowance

20

10・Increased credit screening accuracy
・Improved collection efficiency

01Q 2Q 3Q 4Q 1Q 2Q‘13Aeon Financial Service Co., Ltd.

‘14
Results for the First Half of Fiscal Year 2014

(FY)
13

Overseas Business (Increasing Investment in Overseas Markets)
・Expanding investment in human resources and systems to accelerate growth
Shenyang
Beijing
TianjinJapanShanghai
ShenzhenTaiwanGuangzhou
LaosHong Kong

India
MyanmarThailandPhilippines

Growth Driven by Investment■Investing in human resources andsystems to accelerate growth

Speed of growth up to now:
Operating profit ¥3.0 billion＝10 years
Operating profit ¥5.0 billion＝15 years

Vietnam
Cambodia
Malaysia

Local subsidiary

Accelerating profit
growthIndonesia

Representative office
Aeon Financial Service Co., Ltd.

Results for the First Half of Fiscal Year 2014

14Banking Business (Turning AFS Group Finance Receivables into AEON Bank Loan Assets)

・Expanding unsecured loans and converting installment payments and investment loans to bank assets
・Shifting to ordinary deposits and increasing low-cost deposits

Finance Receivables and Deposits
Deposits

Loans and bills
discounted

Loans and bills
discounted

Deposits

Time deposits
Cash advances

Housing loans
Cash advances

Housing loans

Time deposits

Unsecured loans
Investment loans

Unsecured loans
Investment loans

Accounts receivable – installment

Accounts receivable – installment

Shopping

ShoppingInstallmentpayments

Ordinary deposits

FY Ended March 2014
Aeon Financial Service Co., Ltd.

Ordinary deposits

Installment
payments
FY Ending March 2015 (Plan)
Results for the First Half of Fiscal Year 201415

Banking Business (AEON Bank’s Net Interest Income)・Expanding auto, renovation and solar power loans in addition to card loans
・Improving cash flow by reducing the cost of funds(Billions of yen)

80

Trend by Fiscal Year

(Billions of yen)

Yield on interest-earning assets (right axis)
Net interest income (left axis)

4.0%

Trend by Quarter in FY 2014
Yield on interest-earning assets (right axis)

4%

18

Net interest income (left axis)

3.2%

60

3%

3.7%

2%

40

3.8%

16

1.9%

4.0%

14
3.5%

1%
200%
-1%

0'11'12'13'14(Plan)

Aeon Financial Service Co., Ltd.

(FY)

1210

3.0%
1Q

2Q

3Q

4Q

(FY)

(Plan)
Results for the First Half of Fiscal Year 201416

Forecast of Results for FY 2014
Forecast of Results

Results

YoY

Ordinary income¥320.0 billion

112%

Ordinary profit¥51.0 billion

124%

Net income¥26.5 billion

128%

Net income pershare¥128.37

123%

Dividend
forecast
Aeon Financial Service Co., Ltd.

InterimYear end

Full year(Actual)(Forecast)(Forecast)

¥25

¥35

¥60
Results for the First Half of Fiscal Year 201417

(Reference) Allowance for Possible Credit Losses and Allowance for Loss on Refund of Interest Received■ Allowance for Possible Credit Losses (Domestic Credit Card Business)(Billions of yen)

FY 2013 1H
Allowance for possible credit losses, beginningof period

FY 2014 1H

26.4

24.2

Provision for possible credit losses

4.7

4.0

Write-off of credit losses(including transferred debt)

6.1

5.3

Allowance for possible credit losses, end ofperiod

25.122.9

Allowance ratio

2.6%

2.1%

(Domestic subsidiaries) AEON Bank: ¥3.0 billion, AEON Product Finance: ¥4.7 billion, AEON Housing Loan Service: ¥0.8 billion■ Allowance for Loss on Refund of Interest Received(Billions of yen)

FY 2013 1H

FY 2014 1H

Allowance for loss on refund of interest
received, beginning of period

3.7

3.0

Provision for loss on refund of interest
received

1.1

2.5

Interest refunded(Sums refunded and appropriation of interest
to principal)

1.8

1.9

Allowance for loss on refund of interest
received, end of period

3.0

3.6Aeon Financial Service Co., Ltd.

Results for the First Half of Fiscal Year 201418