SURUGA bank, Ltd.
Financial Results for the nine months ended
December 31, 2021

February 10, 2022
0

■ Actual Results for 3Q of FY3/22; Comparison with 3Q, FY3/21• Gross operating profit fell ¥5.8 billion year-on-year to ¥48.9 billion, mainly due to a decline in net interest income.
• Actual credit costs fell ¥4.3 billion year-on-year to ¥6.6 billion, mainly due to withdrawals of allowance for loan losses owing torevised secured mortgage collateral. Progress is generally as planned with the full-year forecast remaining unchanged at ¥16 billion.
• Quarterly net income (non-consolidated) increased ¥1.8 billion year-on-year to ¥9.4 billion.
• Quarterly net income (consolidated) was ¥9.5 billion, unchanged on previous year.

<Non-consolidated>(Billions of yen)

3Q resultsfor FY3/21

3Q resultsfor FY3/22

Year-on-yearchangeGross operating profit

54.8

48.9

(5.8)

Expenses

30.5

29.8

(0.7)

Core net operating
profit

23.7

18.6

(5.0)

Net operating profit

50.7

37.7

(13.0)

Ordinary profit

13.6

13.6

(0.03)Net income

Actual credit costs

ROE (%)(Net income basis)

Profit attributable toowners of parent

EPS (¥) (Consolidated)

7.5

9.4

+1.8

10.9

6.6

(4.3)

4.2

4.8

+0.6

9.4

9.5

+0.1

Factors causing variation in ordinary profit (YoY)
Main factors
Net interest income

・ Decline in interest on loans(Average balance factors -¥3.9billion, yield factors -¥1.7billion)

Expenses・ Decline in non-personnel expenses (-¥0.6billion)・ Decline in personnel expenses (-¥0.4billion)

Actual credit costs

・ Withdrawals of allowance for loan losses due to revised
secured mortgage collateral (-¥13billion)
・ Increase in recoveries of written-off claims (+¥2.1billion)(Billions of yen)

20.0
Previousyear
results
13.6

(5.3)

41.3

+0.7

+0

＋0.7

+0.6

+4.3

(0.4)

０
Ordinary profit(FY12/20)

40.6

Actualresults
13.6

Net
interest
incomeNet fees and Other operating
commissions
income*Expenses

Gains onstocks/bonds/otherActual credit Ordinary profit(FY12/21)
costs*Excludes gains/losses on bonds.

1

■ Actual Credit Costs, Share House-related Loans <Non-consolidated>• Despite an increase in allowance for loan losses as initially projected, actual credit costs for share house-related loans recorded a loss of¥5.3 billion on the back of large withdrawals of allowance for loan losses due to revised secured mortgage collateral in the first half of theyear.
• Actual credit costs on investment real estate loans, other than share house-related loans, were recorded at ¥11.7 billion as a result of
increasing the allowance for loan losses in 3Q as a preventive measure in light of collective bargaining moves by some customers.

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

1Q

(Billions of yen)

2Q

Actual credit
costs for 3Q

3Q

Allowance forloan losses

Share house-related loans

1.2

(8.0)

1.4

(5.3)

68.2

Investment real estate loans*

1.9

(1.3)

11.2

11.7

64.6

Housing loans

(0)

(0.7)

0.2

(0.5)

3.5

Unsecured loans

0.1

(0)

0.1

0.1

2.1

Monetary claims bought

―

―

0.1

0.1

0.1

Business financing, etc.

0.1

0.1

0.3

0.5

8.7

Total

3.4

(10.1)

13.3

6.6

147.4

*Includes studio apartment loans, single building apartment loans, and other secured loans.

・ Coverage status on share house-related loans
Total credit
balanceA

Share house-relatedloans

Mortgagecollateral or
guarantee
B

UnsecuredportionC

AllowanceD

Coverage ratio(B＋D)/A

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%

December 2021

130.0

103.1

60.0

70.0

68.2

98.60%*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 (revised in first half of 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.

２

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

The yield on loans and bills discounted for all loans was 3.53%, down 0.06ppt from the end of September 2021.
The consumer loan delinquency rate rose 1.85ppt from the end of September 2021 to 8.53%, primarily owing to an increase in the number ofdelinquent borrowers of share house-related loans who suspended their repayments because they wished to have their loans transferred, and as
some customers using investment real estate loans took advantage of collective bargaining to suspend payments. Despite this however, the overall
consumer loan delinquency rate excluding these special factors remained unchanged compared to the end of September 2021.

(Billions of yen)
Loan category

December 2021

September 2021
Balance

Yield

Delinquency rate

Balance

Yield

Delinquency rate

1,823.6

3.07%

7.05％

1,787.4

3.05％

9.04％

Housing loans

475.1

2.82％

0.27％

466.2

2.80％

0.33％

Studio apartment loans

155.0

3.39％

1.75％

147.9

3.38％

2.14％

1.054.3

3.24％

4.70％

1,036.0

3.23％

7.16％

Share house loans

104.2

1.40％

73.33％

103.0

1.40％

81.72％

Other secured loans

34.8

4.66％

0.34％

33.9

4.62％

0.23％

156.8

10.37％

2.28％

150.3

10.38％

2.32％

Card loans

104.5

11.75％

0.85％

100.7

11.76％

0.86％

Unsecured certificate loans

52.2

7.59％

5.14％

49.6

7.58％

5.29％

1,980.4

3.64％

6.68％

1,937.7

3.62％

8.53％

2.74％

1,807.7

Secured loans

Single building apartment loans

Unsecured loans

Consumer loans (A)Consumer loans(excluding share house-related loans)
Investment real estate loans for asset management

1,848.8

4.11％

22.2

1.87％

－

27.6

1.84％

－

Structured finance, etc. (C)

50.8

2.34％

－

58.8

2.25％

－

Monetary claims bought (D)

－

－

－

29.9

1.96％

－

2,053.5

3.59％

6.45％

2,054.2

3.53％

8.05％

companies (B)Total (A+B+C+D)*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+D) 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 repayments, the delinquency rate of other types of loans will be affected.

３

■ Yield/Margins, Loans and Deposits Yield/Average Balance <Non-consolidated>• The loan-deposit margin dropped 0.03ppt on the previous year to 1.77% as the decline in yield on loans and bills discounted (down 0.1ppt
YoY), caused by continued rate reductions with changes to loan repayment conditions, exceeded the declining expense ratio (down 0.06ppt
YoY).
• The net interest margin was 0.78%, down 0.17ppt year-on-year, as the fall in return on investment outweighed the decline in funding costs.
• The average loan balance decreased by ¥174 billion year-on-year to ¥2,262.2 billion partly due to special factors (lump-sum transfer ofshare house-related loans of approximately ¥44.2 billion).
• The average deposit balance increased by ¥100.6 billion year-on-year to ¥3,286.8 billion.

Net interest margin
Loan-deposit
margin (overall)

3.51%

2.34%

3.30%

Loan-deposit margin(after deductionof expenses)

Loans (average balance / yield)
Average loan balance(Billions of yen)
Net interest margin

Yield on loans and bills discounted

3,228.7

3.16%

3.07%

2.98%

1.74%

1.80%

1.77%

3,093.7

3.60%

3.35%

Dec ‘17

Dec ‘182,700.7
3.20%

Special factors behind change in loans and bills
discounted
Dec ‘19: Securitization of studio apartment loans(approx. -¥100billion)
Dec ‘20: Collection of loans from founder-affiliatedcompanies, share houses, transfer of loan
receivables (approx. -¥100billion)
Dec ‘21: Transfer of share house receivables(-¥44.2billion)

2,436.2

2,262.2

3.12%

3.02%

Dec ‘20

Dec ‘21

1.99%
Dec ‘19

Deposits (average balance / yield)
1.68%

1.49%

1.19%

4,048.5

0.95%

Dec ‘18

Dec ‘19

Dec ‘20

3,613.4

Yield on deposits

3,086.7 3,186.2

3,286.8

0.05% 0.04% 0.04%

0.04%

0.78%
0.09%

Dec ‘17

Average deposit balance(Billions of yen)

Dec ‘21
Dec ‘17

Dec ‘18

Dec ‘19

Dec ‘20

Dec ‘21４

■ Trends in Expenses, OHR, and Capital Adequacy Ratio <Non-consolidated>• OHR increased 5.2ppt year-on-year to 61.0% due to a decline in gross operating profit.
• Expenses declined ¥0.7 billion year-on-year to ¥29.8 billion. Steady progress is being made in reducing expenses toward the ¥40 billion
target by the end of phase one of the mid-term business plan.
• The capital adequacy ratio (non-consolidated) increased 1.84ppt to 13.24% (13.52% on a consolidated basis).

Trends in expenses & OHR
Personnel
expenses

Gross operating profit

Non-personnel
expensesTrends in capital & capital adequacy ratio
Taxes

Capital adequacy ratio

Own capital

OHR(Billions of yen)(Billions of yen)

87.2

13.24%

13.35%

78.2

339.1
62.2
54.8
35.5
13.4
18.9

40.7%

35.4
12.1
20.3

45.2%

32.9
11.1

53.0%

30.5
11.1

55.8%

9.83%

11.40%

9.05%
48.9

266.8
223.6

29.8

234.2

247.7

61.0%
10.7

19.0

17.0

16.3

3.1

2.9

2.8

2.4

2.7

Dec ‘17

Dec ‘18

Dec ‘19

Dec ‘20

Dec ‘21

Dec ‘17

Dec ‘18

Dec ‘19

Dec ‘20

Dec ‘21５

■ New Loan Disbursements• From the beginning of fiscal 2021, ¥120 billion worth of new loans was planned for the full year, heavily weighted to the second halfconsidering the impact of the pandemic. Despite struggling with changes in the economic environment due to the rise and control ofcoronavirus cases, new loans totaled ¥69 billion in the third quarter of 2021.
• Receivables were purchased from the market in the third quarter of 2021 commensurate with our middle-risk/middle return strategy.
• Current market conditions remain unpredictable with the rapid spread of the sixth Covid wave of the Omicron variant. Although the outlook is
increasingly uncertain, we aim to achieve the annual plan with stronger sales toward the end of the fiscal year when the real estate market
picks up.

・ Changes in loan disbursements promoted under the mid-term business plan
1Q-3Q
FY3/22

1Q(Billions of yen)

2Q

3Q

Consumer loans

23.6

7.2

6.8

9.5

Investment real estate loans for asset
management companies

12.9

2.8

4.4

5.6

Subtotal

36.5

10.1

11.2

15.1

Structured finance

32.5

9.3

10.8

12.3

Total (A)

69.0

19.4

22.0

27.4

Monetary claims bought (B)29.9Grand total (A)+(B)

9９.０

29.9
19.4

22.0

57.3

６

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) Posted
Corporate
Philosophy

We 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
Continued negativeinterest rates

FinTech support

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

Social change✔ Systemization andlabor-saving
investment✔ Platform creation
throughcollaboration withdifferent industries✔ Declining
birthrate/aging
population✔ Population
concentrating incitiesConsumer change✔ 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

■ Initiatives for SDGs

PostedIdentification ofmateriality issues

Selection anddetermination ofmateriality issues

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

We identified materiality
issues by referring to thefour pillars of “stakeholder
capitalism metric/measurement standards”
proposed by the World
Economic Forum in 2020.

We analyzed and evaluatedelemental information on bothwhat our Group values andwhat stakeholders do, andformulated “materiality” issues
that are important to bothsides.

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

We promote the following initiatives in order tosolve internal and external issues of each of thefour themes listed as materiality. Each initiative,
which is linked to the SDGs, will contribute to theachievement of sustainable development goals.
We will continue to improve and enhance theireffectiveness.

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

Principles ofgovernance

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 branchfacilities

Reference Material 4

■ Assumptions Underlying Actual Credit Cost Forecast For FY3/22

Posted・ From FY3/22 interim results explanatory materials (P2) (Billions of yen)

Full-year
forecast
Actual credit costs

16

Normal credit costs (a)1Share house-related loans (b)4Bulk transfer of share house loans
receivable (c)Preventive allowances (d)Revised secured mortgage collateral (e)

(10)
34
(13)

Normal credit
costs (a)The actual credit cost of receivables without special factors such as share house-related loans is assumed to be ¥1 billion for the full year,
a decrease of ¥3 billion from the previous plan due to the following two factors: 1. Lower consumer balance requiring
attention/management; 2. Higher prices for transfers of loan receivables due to higher real estate prices

Share houserelated loans (b)Actual credit costs for recipients of share house-related loans remain unchanged from the initially projected ¥4 billion for the full year.

Bulk transfer ofshare house loans
receivable (c)Reversal of allowance for loan losses from the bulk transfer of share house loan receivables is expected to be ¥10 billion, a decrease of¥5 billion from the previous plan. Causes include some costomers desiring these procedures completing the procedures and changing
schedules for next year.

Preventive
allowances (d)The projected preventive allowance remains unchanged from the previous plan at ¥34 billion. This takes into account examinations of
the status of consumer borrowers to review borrower classifications and allocation methods, as well as the situation where collective
bargaining has been seen among some customers who are 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.

Revised secured
mortgagecollateral (e)As for the revised secured mortgage collateral, withdrawals of allowance for loan losses is projected at ¥13billion, an increase of ¥2 billion
from the previous plan, as a result of an examination of first half results.
(For the revised secured mortgage collateral, since recent sales of loans to servicers remains far above mortgage collateral evaluations,the collateral value has been revised based on the Bank’s periodic review rules.)Reference Material 5

<Inquiries>
IR Office, SURUGA bank, Ltd.
Tel: +81-3-3279-5536
e-mail: ir.koho@surugabank.co.jp
The foregoing material contains statements regarding future business performance. These statements
are not intended as guarantees of any specific future performance, which is subject to a variety of risks
and uncertainties. Actual future business results may differ from the targets contained in the present
material, due to unpredictable changes in the external business environment.