Presentation to investors on interim period ended September 30, 2007

November 30, 2007
©2007 SURUGA bank, Ltd. All rights reserved.

Management for the New Era
Japan
Japan –– Reaching
Reaching aa Turning
Turning Point
Point

From
From anan Expanding
Expanding toto aa
Shrinking
Shrinking Society
Society

From
From aa Centralized
Centralized to
to aa
Decentralized
Decentralized Structure
Structure

From
From Prioritizing
Prioritizing Production
Production totoPrioritizing
Prioritizing Life
Life

From
From aa Development
Development
To
To aa Recovery
Recovery Policy
PolicyFrom
From Global
Global Standard
Standard
toto Unique
Unique Culture
CultureFrom
From anan attitudeattitude ofof Respecting
Respecting Bureaucrats
Bureaucrats
andand Looking
Looking Down
Down onon thethe Public
Public toto aa
Recognition
Recognition ofof Popular
Popular Sovereignty
Sovereignty

From
From aa Material
Material toto ananInformation
Information Economy
EconomyChanges
Changes inin Corporate
Corporate Management
Management
To corporate management that co-creates values with society

From
From “Homogeneous“Homogeneous Level
Level Competition”
Competition”
toto “Heterogeneous“Heterogeneous Level
Level Competition”
Competition”

Source of corporate values
Market needs

Technology
seedsSocial knowledge creation

Culturalknowledge
base(Combination of tradition
and innovation)

Customer (Region, Town, Community)
Knowledge resources formed by social relation
Customer
Knowledge
and ability

Socialknowledge

Culturalknowledge

Traditional
knowledge

Creative circulation of knowledge resources

From
From “Selective“Selective Competition”
Competition” toto“Heuristic“Heuristic Competition”
Competition”

Understand customer needs and values

To New Competition
Different from Before

From
From “Unified“Unified Competition”
Competition” toto“Pluralistic“Pluralistic Competition”
Competition”

Company

Required to respond sincerely to future expectations of the entire society, and realize unique value creation.
©2007 SURUGA bank, Ltd. All rights reserved.

1

SURUGA’s Management Paradigm
Shift
Shift ofof Management
Management Paradigm
Paradigm<20th Century TypeManagement Paradigm><SURUGA’<SURUGA’s Management Paradigm>
MissionMission TypeType Corporate
CorporateModel
Model
The
feasibility
The feasibilityofof thethemission
missionisisthethe scalescaleforforgrowth.
growth.

The
The quantitative
quantitative factor
factor isisthethe scalescale forfor growth.
growth.
Management
Management
Seeking
Seekingafter
afterQuantity
Quantity

Management
Management
Seeking
Seekingafter
afterQuality
Quality
Seek
Seekquality
qualityfulfillment
fulfillment

Competition
Competition ofof
Tangible
Tangible Assets
AssetsCompetition
Competition ofof
Intangible
Intangible Assets
AssetsCreativity
Creativityisisthe
the resource
resourceforcompetitiveness.
for competitiveness.

VolumeVolume expansion
expansion

Significant
Significant asset
asset expansion
expansion

SURUGA’s Management
Management
SURUGA’s

Economic
Economic TypeType Corporate
CorporateModel
Model【SURUGA’s【SURUGA’s Corporate
Corporate Philosophy
Philosophy –– Mission】
Mission】
Help
Help toto givegive shape
shape andand aa timeframe
timeframe forfor
customers’
dreamsaslife
customers’ dreams as life andand businessbusiness concierge.
concierge.

【Style of Corporate Activities】
All-out Quality -Best quest by the top class service

All-out Uniqueness -Creation of distinction rather than differenceAll-out Openness -Enjoyment of familiarity, a free andvigorous corporate atmosphere【SURUGA’s【SURUGA’s Management
Management Principles
Principles -- Model】
Model】
GrowthGrowth as
as aa value
value exchange
exchange systemsystemManagement
Management thatthat SURUGASURUGA Aims
Aims at
at
Deep understanding & analysisof the external environment

Deep understanding & analysisof the inside of the company（Business management field）（Organizational management field）
Organizational power

Strategies
・Innovation – for understanding andpredicting market requirements andchanges and maintaining superiority /Improvement – for corresponding tochanges in the time course
・Response to the competitiveenvironment beyond the boundaries ofindustries and business categories

Customers・Market

Corporate
atmosphere

Companies
External
environment

Human
Resources
Time

System &structure・Develop high readiness forchange and establish superiority
not only to respond to changes
but also to create changes
・Nurture the sources for creatingvitality to support companies’
sustainable growth.
Time©2007 SURUGA bank, Ltd. All rights reserved.

2

Business design
Major markets
The greater Tokyo,
Evolving into a more
Nagoya and Osaka area attractive market

The greater
Tokyo area
The greater
Osaka area

The greater
Nagoya area

Kanagawa
area

Biggest market expected toincrease as a centerof society and economy.
↓
In a market with increasing
competition, market segments
and “high added value”
strategies are the key.

Expected to continue
growing in the futureThis is a growing area withthe characteristics of both a“city” and a “local region.”↓

Deployment of uniquestarategies in Yokohama,
Shonan, Keno, and Odawara

Covering the entire Japanese market＋
Expansion of customer data basethrough alliance strategies

Shizuoka
area

Real network
Japan Post Group's network withapprox 24,000 branches nationwide

Attractive as a mature market
An attractive market withhigh maturity located between
the greater Tokyo andNagoya areas.
↓

Facilitate “customer bonding”
and improve operational
effectiveness at the sametime for the further growth.

Effective assignment of management resources

Direct bank
There are enough areas
to be cultivated.

5 core businesses

Mortgage
Mortgage loans
loans

Personal
Personal loans
loans

CreditCredit cards
cards

WealthWealth management
management
products
products

SME
SME loans
loans©2007 SURUGA bank, Ltd. All rights reserved.

3

Financial Unbundling -Vertical to Horizontal
Concept of Horizontal
Business Model
TraditionallySales・Origination（ vertical structure)
Traditional financial institutions

each possesses all functions.

Each financial
institution’s
own sales
network

Distribution
businessJapan
Post GroupOEM supply to other companies
by advanced financial institutions
Product
development・Risk
diversification

development
developmentand
andsalessales○○ShiftShifttotomulti-channels
multi-channels○○OverallOverallcost
costmanagement
management○○ShiftShiftloans
loanstoto profits
profits

Platform

Fundprocurement○○Separation
Separationof
ofproduct
product○○Enhancement
Enhancementofofmarketingmarketingpower
power○○Establishment
Establishment ofof productproductmanagement(including
management (including
risk
riskmanagement)
management)
金融機関の新たな役割

New role of financial institutions

Future○○Intermediate
Intermediateservice
serviceforformarketmarket by
bysecuritization
securitization○○Function
Functionofof riskrisk
diversification
diversification

New financial model (horizontal
horizontal structure）
structure

Change to a horizontally connected business model©2007 SURUGA bank, Ltd. All rights reserved.

4

Business Cooperation in Consumer Loans
with Japan Post Holdings Co., Ltd.
In order to establish a consumer loan business that both contributes to the national
economy and is convenient to a wide range of customers nationwide through thedevelopment of effective financial products and services, SURUGA agreed on a policy toadvance consultations aimed at realizing business cooperation with Japan Post Holdings
Co., Ltd.
SURUGA will consider a wide range of business cooperation throughout the consumer
loan business by working on market development of new consumer loans by selling
SURUGA products through Japan Post Group network, providing support for the smoothcommission of consumer loans through Japan Post Bank Co., Ltd. and cooperation
required for future expansion of the consumer loan business by Japan Post Bank Co.,Ltd.
Both SURUGA and Japan Post Holdings Co., Ltd. will promote the materialization ofbusiness models and project planning in close contact with one another, and establish areliable and efficient business management system.
©2007 SURUGA bank, Ltd. All rights reserved.

5

Business strategies of Japan Post Bank andthe bank agency system

Diversifying
financial needs

Introduction of
the bank agency
systemCompetitive Landscape of financial institutions(by amount of deposits)
Tokyo,
Other regional
Osaka,Nagoya
citiesMajor banks
Diversifying products
products
Diversifying
andservicesand services

Importance ofof
Importanceproduct development
development
product

Diversification
Diversification ofof
Delivery
Delivery channels
channels

ImportanceImportance ofofsales
strategies
sales strategies

Japan Post BankJapan Post Bank
Regional financial
Institutions

Regional
Financial
Institutions

Use of the bank agency
system“investment products sales
by banks system”

Major banks

Accomplishing retail business model

Major banks

Regional Financial
Institutions

Seeking expansion
into other regional cities
Seeking expansion
into major cities

・Development and selection of differentiated products
・Creating Group synergy with Japan Post Holdings
Co., Ltd.

Nationwide

Locally based・Establishment of consulting-oriented service

disappearing boundaries⇒ seamlessness©2007 SURUGA bank, Ltd. All rights reserved.

6

The Japan Post Network extends nationwide
Number of branch offices ofJapan Post Bank and post offices
Hokkaido

The strength of Japan Post Bank is a
network of 24,000 bases nationwide.

Japan Post Bank 5
Post offices 1,510

Kinki Region
Chugoku Region

Tohoku Region

Japan Post Bank 46
Post offices
3,874Japan Post Bank 11
Post offices
2,212Japan Post Bank 10
Post offices
2,553

Kanto Region
Japan Post Bank 110
Post offices
4,856

Kyushu Region
Japan Post Bank 13
Post offices
3,441

NumberNumber ofof branchbranch offices
offices bybytype
type ofof financial
financial institution
institution
Unit: Number of branches or offices

Chubu Region
Shikoku Region
Japan Post Bank 6

Okinawa Region

Post offices

Japan Post Bank 32
Post offices
4,307

1,126

Japan Post Bank 1
Post offices
200

Domestic financial institutions

23,238Major commercial banks

2,470

trust banks
Regional banks

7,484

Second-tier regional banks

3,312

Cooperative banks

7,777

Credit cooperatives

1,901Japan Post Group

Note: Japan Post Bank directly operates 234 branch offices, but 152 of those (65%)
are located in seven prefectures (Tokyo, Saitama, Chiba, Kanagawa, Aichi, Osaka,and Hyogo).
Among the remaining 40 prefectures, 29 prefectures have two or fewer branch offices.

294

About 24,600
234

Direct branch offices of Japan Post Bank

Post offices

About 24,600

The numbers of domestic financial institutions are as of March
31, 2006. The number of post offices is as of March 31, 2007.

©2007 SURUGA bank, Ltd. All rights reserved.

7

Partial Mesh Model
Three
Three Partial
Partial Mesh
Mesh Models
Models”Partial Mesh”
Mesh” is a model that connects core bases with important bases in a fullmesh scheme, and with other bases (satellites) by hub and spoke.

Regional
Regional
Base
Base

Regional
Regional
Base
Base

A
A CoreCore
Financial
Financial
Institution
Institution

Satellite
Satellite
Initiative
Initiative
Type
Type

Regional
Regional
Base
BaseCore Initiative
Initiative Type
Type
Core

Regional
Regional
Base
Base

Product
Product Development
Development Function
Function Model
Model

In
Inthisthismodel,
model,aa core
corefinancial
financialinstitution
institutionisisinincharge
chargeofof productproduct
development
function,andseveralotherfinancial
institutions
development function, and several other financial institutions
aroundaroundthe
thecorecoreinstitution
institutionform
formaanetwork
networkof
of financial
financial
distributors.
distributors.

AgencyAgency TypeType Model
Model

In
Inthisthismodel,
model,financial
financialinstitutions
institutionswith
withcustomer
customerdatabases
databases
becomeagenciesandarepositioned
asretailers
thatbecome agencies and are positioned as retailers thatcontrol
controlthethecustomer
customerdatabases.
databases.

Satellite
Satellite Initiative
Initiative TypeType Model
Model

In
Inthisthismodel,
model,financial
financialinstitutions
institutionswith
withstrong
strongbrand
brand power
powerlink
linkseveralcore
financial
institutions
with
a
wide
varietyofseveral core financial institutions with a wide variety ofstrengths
strengths at
atmultiple
multiplelevels
levelsagainst
againstaa uniqueunique andandstrongstrongbackgroundofcustomeracquisition.
background of customer acquisition.

Seek after only a simple
quantitative Expansion(number of branches andamount of funds, etc.)

It is required to utilize strength
as a product supplier, and establish a businessmodel that creates a Win-Win relationshipthrough cooperative businesswith business owners that havestrong customer networks.

©2007 SURUGA bank, Ltd. All rights reserved.

8

Consumer Loan Market Structure and Strategies
Small loans will be offered through banks from now.
InterestHigh

Markets that are
expected to havelarge movements.

Retail banking

Credit card
Cashing loans
Installment Sales

20％

Credit card
Revolving loans～～

Home equity loans

10％

Purpose-designed loans

Banks become the leading
character in retail loans as
they are in Europe and theUnited States.
・・・Secured5％

Mortgage loans

・・・Unsecured

Low
Banks

Circumstancesof
Nonbanks

Business model of nonbanks with an interest rate of morethan 20%＝high risk × (cost of credit)＝high cost ○ (prevention of customer withdrawal/
cost of attracting new customers)
Under the circumstances of interest rate
upper limit reductions, the existing business modelwith high cost cannot survive.

The majority of the banks are unable to provide small loans

Circumstancesof
General banks

Card/ Credit Companies

without nonbank guarantees due to their lack of retail loan
(retail banking, credit) know-how or actual achievements.

Interest rate ofexisting banks(10% or less)In order forbanks to takecontrol of retailloans
as in Europe
and the UnitedStatesBusiness
Type

Consumer FinanceInterimInterest

Interest rate ofnonbanks(more than 20%)

Radical banks that establish a business modelat an interim interest rate can take control ofretail loans.
○Long-term business expansion at the interim interest
rate. → Accumulation of database and know-how.
○Structure that enables the maintenance of long-term
relations at a low cost.

©2007 SURUGA bank, Ltd. All rights reserved.

9

Customized Marketing by detailed Segmentation
Risk
Risk analysis
analysis andand customized
customized model
model input
input byby highly
highly detailed
detailed customer
customer segment
segment
Multidirectional & Multilateral Mortgage Loan BasesSURUGA Type Customized Products
SURUGA’s unique mortgage loans focusing on avariety of values through a deep understanding ofcustomer life and work styles

Lifestyle Base
Active Seniors

A great potential by detailed segmentation

Single Women
ＤＩＮＫＳ

There are many
undeveloped markets!

Young Executives
Licensed Specialists& Managements
CreatorsCompany Owners &Self-Employed
Individuals improving
careers

Job Base

Temporary
Employees
Foreign Nationals
with Careers

Small Category
513 Groups

Second House

Medium Category
59 Groups

RemodelingTrans-Housing
Resort &Resort Villa
Luxury Home

Large Category
12 Groups

Market Base
Loan
Loan Products
Products Model
Model

Detailed segmentation of customers by lifestyles
and work styles from multidirectional andmultilateral points of view.

○Self-Employment Model○Active Senior’s Model○Doctor’s Model○Lady’s Model, etc.

Establishment
Establishment ofof Credit
Credit Model
Model

Accumulating datain the credit system
Pricing
MarketingCredit Screening
Risk Control©2007 SURUGA bank, Ltd. All rights reserved.

10

Product Development Focusing
on Various Values and Lifestyles
Help shape women’s dreams
Start
Start offeringoffering thethe Dream
Dream Style
Style Series
SeriesAppearance of women creating new lifestyles
Traditional female segments

Young
Young women
women

ChangeChange ofof socialsocial environment
environment

Support the Realization of a Sustainable Society
Collaboration with COJ
Social rules and awareness that have started changing
Society only requiring
current comfort

Wasteful society increasing
environmental load
irresponsibly

To a society responsible
for future generations

To a society maximallyutilizing minimum
environmental resources

Diversification
Diversification ofof thethe sense
sense ofof values
valuesSeniorSenior women
womenHousewives
Housewives

Diversification
Diversification ofof women’s
women’slife
life andand work
work styles
stylesIncrease
Increase ofof positive
positive women
women desiring
desiring
fulfillment
fulfillment both
both at
at andand away
away fromfrom work
work

Appropriate proposals based on new ideas and viewpoints
that are different from the traditional styles, and based on
individual needs, desires and lifestyles.

SeriesCitizens and companies with environmental
awareness have started moving on for therealization of a sustainable society.

Collaboration with
Carbon Offset Japan (COJ)

now offered.

Line-up of products and services supporting the success of womenDream Style Series – 1st product(Started from August 2007)

Morgage Loan
「A secure mortgage loan with 「Happy Life Support」 to help active women who
are moving ahead to realize their dreams in both lifestyles and medical careSURUGA promotes the Pink Ribbon Campaign for Breast
Cancer in Japan as an official supporter for the NPO J. POSH
(Japan Pink-Ribbon of Smile and Happiness) by offering Dream
Style mortgage Loan.

SURUGA collaborates financially with COJ, the company supporting the actionof citizens with environmental awareness through the concept and activities
of carbon offset in order to realize a sustainable society.
Japan’s first mortgage loan based on the concept of carbon offset

Eco-friendly mortgage loan is scheduled to be offeredin spring, 2008 in collaboration with COJ

About Carbon Offset Japan (COJ)
Carbon Offset Japan, Intermediate Ltd.
Foundation: July 12th, 2007
Representative: Takejiro Sueyoshi (Special Advisor, United Nations
Environment programme (UNEP))
Business Description: Information gathering and research regarding
environmental protection/ Business regarding the reduction and offset ofgreenhouse emissions©2007 SURUGA bank, Ltd. All rights reserved.

11

Approaches to the Golden Age Generation
Traditional
Traditional concept
concept ofof seniors
seniors
Realizing a steadypost-retirement life by utilizing
property they’ve gained

Living with a worry aboutproperty they’ve gained
Impossible to realize dreams

Concept
Concept ofof “Golden“Golden Age”
Age”

＜SURUGA’s Desire＞
Hoping for the seniors to live a fulfilling
second life by cleverly utilizing
asset management and loans
in this time of increased longevity!

↓

Realizing a positive second
life by utilizing property gained
and loans in a balanced manner↓

Living frugally after retirement“Extended Style”“Closed Style”
Product
Product line-up
line-up forfor thethe Golden
Golden AgeAge generation
generation

Home
Home Acquisition
Acquisition

Dream
Dream Life
Life Home
Home Loan
Loan

Asset
Asset Management
Management

Dream
Dream Life
Life Plan
Plan 11

Resort/Resort/ Resort
Resort Villa
Villa

Dream
Dream Life
Life Asset
Asset

Product Lineup

The 2nd product (Started from March 2006)

Unsecured
Unsecured

Dream
Dream Life
Life Plan
Plan 22

Hope to realize my dream!
Hope to live in my desired style！

Starting
Starting offeringoffering Trust
Trust byby WillWill andand Legacy
Legacy Management
Management by
by aa bankbankStarted from September 2007

Dream Life Series to realize post-retirement dreams
The 1st product (Started from February 2006)

Hope to live cheerfully
and positively!

Responding to the desire of customers to pass down the
precious legacies they have built up over a lifetime
Trust by Will

Legacy Management
Increase of needs
regarding legacy
management business

Three major worries of the elderly

2. Inheritance

1. Health

3. Pension

The 3rd product (Started from April 007)

WealthWealthManagement
Management
Products
Products

Dream
Dream Life
Life Pension
Pension TimeTime Deposit
Deposit && Installment
Installment Savings
Savings

Dream
Dream Life
Life TimeTime Deposit
Deposit

The 4th product (Will start from spring 2008)

Asset
Asset
Management
Management

Status of Legacy Management Businessat Financial Institutions throughout Japan

Dream Life Support(Reverse Mortgage)(Source: The Investment Trusts
Association HP)

Number of Storage of the Last Will and Testament

2003
2004
2005
2006

Storage Only

Execution
Included

Total

9,407
8,956
8,436
8,018

34,246
39,20944,272
49,32843,65348,16552,70857,346

Legacy Management(Number Accepted)

2,119
2,538
2,862
2,943

©2007 SURUGA bank, Ltd. All rights reserved.

12

Alliance Strategies Based on the Concept of Separationof Product Development and Sales
Forefront Company

Collaboration of values utilizing strength

Enabler Company

Specialized in the flexible provision of
products and services

Specialized in sales utilizing customer base

Possession of a large amount of customer ID

High ability in planning and proposal making

High market shares in specific fields

Unique product development

Various points of customer contact

Flexible system design

Trusting brand power

Flexible and speedy response

Subject company for collaboration
with different industries

Internet banking branch office strategies
based on the concept of financial OEM

NTT Communications Corporation
Members:Approx.
Approx.66million
millionMembers:Oneofthelargestinternetproviders
One of the largest internet providers

G-Plan Inc.
Members:Approx.
Approx.1.45
1.45million
millionMembers:Oneofthelargestpoint
utilization
One of the largest point utilizationsitesininJapan
Japan
sites

SURUGA bank

OCN branch

Realizing creation of newmarket and provision of
SURUGA’s unique values
through the collaborationof different industries

Fulfilling
Fulfillingfinancial
financialservice
servicelimitedtolimited toOCN
OCNmembers
membersthat
that
increases
increasesPoint
PointTokens
Tokensinin
accordance
accordancewith
withthetheuseuseofoftheservice.
the service.

Started from September, 2007

Internet banking branch office

G-Point club
Financial
Financialservice
servicelimited
limitedtoto
GGPoint
Pointmembers
membersfor
forsavingsaving
GGPoints
inaccordance
Points in accordancewith
withthetheuseuseofofthe
theservice.
service.Point
Point
integration
integrationisisalso
alsoavailable.
available.

Started from September, 2007

©2007 SURUGA bank, Ltd. All rights reserved.

13

“bank 2.0” – A New Form of Finance“bank 2.0” by SURUGA takes hold of trends in advance witha high readiness for change and creates a new era

Diversification and a wide
selection of channels

Financial
Financial services
services
BlendedBlendedinto
into LifestyleLifestyle

Collaboration
Collaborationof
of Creation of New
Different
Different Industries
Industries Business Types

How lifestyleinfrastructure is achieved

Provision of seamless financial
services

Enabler
Enabler Strategies
Strategies
New Value Creation

Separation of ProductDevelopment and Sales

Penetration tolifestyle infrastructureMarketMarket Out
Out

Debit
Debit Card
Card
MobileMobile && IC
IC CardCardbank 1.0

bank 2.0

Product
Product Out
Out

Co-creative
financial services
with customers
Customer
CustomerParticipation
Participation
Product
Development
Product Development
To
Tobecome
becomemeasures
measuresthat
thatachieve
dreamsachieve dreamsand
andpurposes
purposes

Internet
Internet

To become the place toremember,discoverFinancial
Financialactivities
activitiesthatthat and realize
areareonly
onlymeasures
measuresdreamsMutualParticipation

To become a network community
with mutuality
Information
Transmission

How good content
is achieved

CoCo-creative
financial services©2007 SURUGA bank, Ltd. All rights reserved.

14

Interest Margins （Overall）
Loan-deposit
Loan-deposit margin
marginNet
Net interest
interest margin
marginSURUGAAll Regional Banks
0.96% 1.01%(Yield(Yieldononoutstanding
outstandingloans
loans --Yield
Yield onondeposit)
deposit)

Loan-deposit margin

1.05%

SURUGAAll Regional Banks

0.80%

0.49%

0.45%

0.44%

0.44%

1.59%
03/9

04/9

05/9

06/9

07/9

（07/3）

2.05%

2.01%

1.93%

1.85%

1.85%

03/9

04/9

05/9

06/9

07/9

（billion yen）
Average balance of deposits

2,199.4

0.35%

0.80% 0.80%

0.73%（07/3）

2,700.4

0.65% 0.66%

2,673.4

0.13%

3.72%

0.08%

3.42%
03/9

04/9

05/9

06/9

0.05%

0.05%

04/9

05/9

07/9
03/9

04/9

2,704.9

2,649.9

2,080.903/92,771.7

Yield on deposits

2,136.2

3.29%
3.07% 3.11%

3.29% 3.36%

Average
Average balancebalance and
and
yield
yield onon deposits
deposits（billion yen）
Average balance of outstanding loans

2,028.2 2,035.5

3.23%

1.70%

Average
Average balancebalance and
and
yield
yield ofof outstanding
outstanding loans
loans

Yield on outstanding loans

3.06%

2.99%

1.86% 1.89% 1.92%（07/3）

0.47%

SURUGAAll Regional Banks

1.19%

06/9

07/9

（include negotiable certificates of deposit）

05/9

06/9

07/9

©2007 SURUGA bank, Ltd. All rights reserved.

15

Yield／Margins （Domestic）
Yield・Expense
Yield・Expense ratio
ratio

Loan-deposit
Loan-deposit

Yield on outstanding loans

Loan-deposit Margin
Loan-deposit Margin(All Regional Banks)

Expense ratio
Yield on deposits

3 . 1 5%

3.17%

3.60%

3 . 2 0%

3.25%

1.72%

1.80%

1.83%

0.83%

0.83%

0.77%

04/9

05/9

03/9

1.81%

1.92%

（07/3）

0.70%

0.72%

06/9

07/9

Net
Net interest
interest margin
marginNet interest margin
Net interest margin(All Ragional Banks)

1.40%
1.35%

1.34%
1.31%

0.92%

1.32%

0.27%
0.08%
03/9

0.05%

0.04%

04/9

05/9

0.08%
06/9

07/9

0.98%

1.23%

1.05%

0.75%
（07/3）

0.43%

0.44%

0.42%

0.42%

0.42%

03/9

04/9

05/9

06/9

07/9

©2007 SURUGA bank, Ltd. All rights reserved.

16

Gross Operating and Yen loan-deposit income
Gross
Gross Operating
Operating Income
IncomeYen
Yen loan-deposit
loan-deposit income
income（billion yen）

（billion yen）

Record income highs
Income from mortgage loan sales
Other operating income (except income from mortgage loan sales)
Net fees and commissions
Net interest income

３６.２
３３.４

1.5
0.8
1.2

29.8

03/9

３３.７

0.07
1.6

0.8
2.3

３７.８

34.0

４１.１
0.1
2.7

31.8
30.4

0.6
2.7

29.0
27.5

31.9

33.0

34.4

04/9

05/9

06/9

38.2

03/9
07/9

04/9

05/9

06/9

07/9

©2007 SURUGA bank, Ltd. All rights reserved.

17

Core Net Operating and net income
CoreCore net
net operating
operating income
incomeRecord income highs

Net
Net Income
Income（billion yen）

Record income highs（billion yen）

Income from sales of mortgage loan assets
Parenthesis indicate income after saleof mortgage loan sales

42.5
38.2

20.0

35.9

20.5

２.０

31.3
30.2

14.3

(26.6)

０７/９

１.５
０５/９
０４/９
０３/９
１４.
１４.１

１６.
１６.９

０６/９

２１.
２１.０

０６/９

06/3

１０.
１０.１

１０.
１０.０

１５.
１５.３

05/3

０７/９

8.7

１８.
１８.３

(12.6)

04/3

10.4

07/3

08/3 (forecast)

０３/９

０４/９

４. ６

４. ６

04/3

05/3

０５/９
６. ７

06/3

07/3

08/3 (forecast)©2007 SURUGA bank, Ltd. All rights reserved.

18

Strong Focus on Retail
Consumer
Consumer loan
loan balancebalance andand ratio
ratio
Consumer loan ratio

1,616.0
1,524.8
1,418.7

210.6
181.2
２
１..２
９１
++９

170.0
１
６
６..１
０
０
１
１
++

1,159.0 1,251.2

1,343.670.8%

1,700.1

New consumer loans second half
New consumer loans first half

241.8

228.2
213.9

230.4

220.4

..１１
８８４４
＋
＋

167.5

７
９..７
８９
++８

（billion yen）

（billion yen）

Personal loans
Mortgage loans

1,329.0

New
New loans
loans

1,405.3

1,469.7

124.2

116.4
113.2

112.4

74.7%
72.7%

67.8%
65.0%

111.7

03/9

04/9

05/9

06/9

07/9

04/3

100.7

107.9

05/3

06/3

117.5

07/3

106.7

07/9

©2007 SURUGA bank, Ltd. All rights reserved.

19

Focus on More Profitable Products
Consumer
Consumer loans
loansSuper home loan

Personal
Personal loans
loans
As
Asof
ofSep
Sep30
30,,20072007
Units
Units::billion
billionyen
yen(averagerate)(average rate)

796.9 （3.8%） Personal loans
230.4 (7.7%)
Mortgage loans

672.8 (3.3%)

100%=230.4 billion yen (7.7%)
Unsecuredcommitment line
(personal)

Securedpersonal loans

loans
155.0 （5.1%） Unsecured
on deed4.3（7.0%)

Unsecured loans on deed
Unsecured commitment line
Secured personal loans

167.5
8.4

100%=1,700.1 billion yen (4.1%)

71.0 (13.3%)

50.3

210.6

181.2

5.1

6.5

66.8

230.4

（billion yen）

4.3
71.0

58.4

108.7

116.1

04/9

05/9

138.6

06/9

155.0

07/9

©2007 SURUGA bank, Ltd. All rights reserved.

20

Mortgage Loans
Distribution
Distribution ofofnewmortgagerates
new mortgage rates
Under 2.0%
2.5% to under 3.0%
3.5% to under 4.0%
4.5% to under 5.0%

【cumulative】

0.4%
4. 2 %

2.0% to under 2.5%
3.0% to under 3.5%
4.0% to under 4.5%
5.0% or higher

0.4%
4. 3%
0.4%
4. 2%

Mortgage
Mortgage loan
loan balancebalance by
bygeographicalgeographical area
area

0.4%
4. 5%

The Greater Tokyo area

Other

2 0 .5 %17. 7%

20. 9%

23. 1%

22. 1%

2 6 .8 %3 2 .0 %3 6 .2 %4 0 .1 %13. 4%

22. 7%

22. 9%

3 3 .2 %3 1 .3 %22. 0%

31. 0%

Shizuoka

0.4%
4. 7%

1 5. 8%

11. 2%

14. 2%

Kanagawa

2 9 .0 %13. 9%

29. 1%

13. 0%

12. 3%

11. 9%

27. 0%

25. 6%

24. 7%

4 2 .0 %3 9 .0 %2 7 .2 %2 5 .6 %3 6 .4 %3 4 .2 %3 1 .9 %16. 7%

15 . 9%15. 0%

14. 2%

13. 0%

0. 3 %

0. 4 %

1. 6%

2. 2%

2. 3%

4 .1 %

2 .7 %

2 .4 %

2 .2 %

2 .4 %

04/9

05/9

06/9

07/9

03/9

04/9

05/9

06/9

07/9

03/9

©2007 SURUGA bank, Ltd. All rights reserved.

21

Delinquency and Loss Rates on Consumer Loans
Mortgage
Mortgage Loans
Loans

Personal
Personal loans
loans▲ Yield
Delinquency rate
Loss rate▲ Yield

Delinquency rate
Loss rate

3.61%

7.33%

7.67%

7.89%

7.87%

7.73%

3.19%
3.07%

3.04%

3.11%

0.41%
0.35%

0.28%

0.13%

0.14%

03/9

04/9

0.20%

1.12%

0.93%

0.37%
0.26%

0.88%
0.65%

0.23%
0.63%

0.66%

0.59%

0.19%
05/9

06/9

07/9

03/9

Delinquency rate = amount 3 months or more overdue /remaining average amount of loan

04/9

0.45%

05/9

0.57%
0.32%

06/9

07/9

Loss rate = default ratio ×(1 - recovery rate)©2007 SURUGA bank, Ltd. All rights reserved.

22

Asset Management Products Sales
Commission
Commission fromfrom mutual
mutual funds
funds
and
insurance
products
and insurance products

Balance
Balance breakdown
breakdown ofof investment
investment products
products（million yen）

Fee for Personal pension
Fee for Fire insurance
Sales commission for Mutual funds
Fee for Mutual funds
Fee forSingle premium life insurance

2,017

815

Balance of investment products
Balance of personal assets under management(Including personal deposits)

1,356

8.6%
631
89
108

574

147

484
127
150
74
48

173

03/9

04/9

93

5.3%

631

757

581

502

504

69.0
23.9

26

26

26.9
13.3
4.8

06/9

07/9

03/9

325
05/9

3.6%

184.9

14.4%
254.5

46.7

100.5

04/9

153.3
104.1

68.1

35.6
18.8
5.6

125.8

11.4%

75.2

106.9

381
196

335.8

Ratio of investment products

1,594

969

（billion yen）

Personal Pension funds
Investment trusts
JGBs in custudy
Foreign currency deposits
Single premium life insurance

6.3

44.4
4.4
0.9

49.3
4.1
3.1

05/9

06/9

07/9

35.2

©2007 SURUGA bank, Ltd. All rights reserved.

23

Expenses and OHR
55.5%（billion yen）

54.3%

41.1
36.2

33.4

33.7

OHR
Gross Operating Income
Personnel expenses
Non-personnel expenses
Taxes

37.8

51.1%

Expenses
OHR =

50.1%
１８.５

１８.３

１８.５

Gross operating
income

２０.０

１８.９

48.7%

7.2

6.9

6.8

6.8

6.9

10.2

10.1

10.4

10.8

11.7

1.0
03/9

1.2
04/9

1.2
05/9

1.3
06/9

1.3
07/9
©2007 SURUGA bank, Ltd. All rights reserved.

24

Breakdown of Problem Assets basedon the Financial Rehabilitation Law（billion yen）
Debtorclassification
Claimsagainstbankrupt andsubstantiallybankrupt
obligors

Claims withcollection
riskClaims for
specialattention

Sub-totaｌ

NormalassetsTotal

Sep 07
07
Creditbalance

15.0

34.5

33.5

83.1

2,212.6

2,295.7

Proportion

Consumer/
Corporate

Proportion

Total
collateralandguarantees

Collateral

Guarantees＊NOTE

Coverageratio

Reserve

Reserved
ratio

Total
coverage
ratio

Consumer

7.6

0.44%

4.3

2.8

1.4 56.49%

3.3

100%

100%

Corporate

7.4

1.25%

5.9

4.0

1.8 79.25%

1.5

100%

100%

Consumer

5.1

0.30%

2.9

2.0

0.9 57.69%

1.5 69.60%

87.14%

Corporate

29.3

4.95%

17.9

8.7

9.2 61.14%

10.1 88.61%

95.57%

Consumer

7.2

0.42%

5.0

4.6

0.3 69.18%

0.3 14.29%

73.58%

Corporate

26.3

4.43%

12.0

11.9

0.07 45.78%

6.1 43.34%

69.28%

Consumer

19.9

1.17%

12.2

9.5

2.7 61.39%

5.1 66.68%

87.13%

Corporate

63.1

10.64%

35.9

24.6

11.2 56.88%

17.8 65.54%

85.14%

Consumer

1,682.7

98.82%

Corporate

529.8

89.35%

0.65%

1.50%

1.46%

3.62%

96.37%

Consumer

1,702.7

100%

Corporate

592.9

100%

100%

Total coverage ratio 85.62%
Coverage ratio : Covered by collateral and guarantees
Reserved ratio ： Reserved for unsecured portion
Total coverage ： Covered by collateral, guarantees
ratio
and reserves＊NOTE:The guarantee is not provided by us. We do not extend the guarantee by paying fee to external entity,
but the third party, who serves as the joint guarantor to the borrower, extends the guarantee.
©2007 SURUGA bank, Ltd. All rights reserved.

25

Bad-loan Ratio／Credit costs status
Bad-loan
Bad-loan Ratio
Ratio

CreditCredit costs
costs status
status【Half year basis】

Ratio of disclosed assets
Ratio of disclosed assets after deduction from reserves（billion yen）

Core net operating income
Actual credit costs(credit costs-collection of claims written off)

Ratio of disclosed assets after deduction from reserves,
collateral and guarantees

Actual credit costs ratio (actual credit costs/loan average balance)

7.84%

21.0

7.23%
6.23%
5.80%
5.44%
4.10%

14.1
4.57%
3.41%

3.62%

03/9

1.36%

04/9

0.64%

0.57%

2.62%
1.68%

15.3

16.9

18.3

5.8

6.5

0.64%

6.7
0.22%

1.01%

05/9

0.67%

0.52%

06/9

07/9

2.4

0.10%

1.2
03/9

04/9

05/9

06/9

07/9

©2007 SURUGA bank, Ltd. All rights reserved.

26

Bond Portfolio
JGBs

Foreign bonds

Corporate bonds

Regional government bonds（billion yen）

Average life (Year)

４３８.９

４３１.１

9.8
14.7

12.8
13.1
26.1

33.1

３６６.５

381.2

17.1
20.3

0.71

0.64

0.59

379.0

0.51

343.1

341.0

Composition

Composition

Composition

311.5

Composition

Composition

31.6

23.3
15.1
20.5

18.9
13.6
22.3

0.58

４１０.１

４０２.２

Short

49.8％

Short

50.1％

Short

51.3％

Short

56.8％

Short

57.1％

Variable

40.2％

Variable

42.3％

Variable

46.1％

Variable

40.8％

Variable

40.7％

Mid-Long

9.9％

Mid-Long

7.5％

Mid-Long

2.4％

Mid-Long

2.3％

Mid-Long

2.1％

03/9

04/9

05/9

06/9

07/9

©2007 SURUGA bank, Ltd. All rights reserved.

27

Status of Risk Amount
Outlier Ratio

Integrated
Integrated Risk
Risk Management
Management(billion yen)

Tier I
Buffer(UnallocatedCapital)
90.4
167.0

(Equivalent to5.5% of Risk Asset)

1. Confidence level

99% (common)

2. Holding period (business days)・Credit risk
240 days

・Deposits and loans, bonds, etc.
Interest & price fluctuation risk 60 days
(Trading tallied is 10 days)
・Price fluctuation risk for equities 120 days

3. Operational risk
Basic methods

76.6
23.1

48.6
16.1
42.5

CreditCredit Risk
Risk
MarketMarket Risk
Risk

21.4

As of the end of
March, 2007
Sources for
Allocation

11.0

11.1

First Half,2007
Allocated
CapitalSeptember, 2007
Risk AmountAt the end of
September, 2007
Interest
Rate
Shock
range

±200 bp

Interest
Rate Risk
Amount8.0 billion yen

Outlier
Ratio

4.3%

Operational
Operational Risk
Risk

©2007 SURUGA bank, Ltd. All rights reserved.

28

Owned Capital
DeferredDeferred tax
tax assets
assets // Tier
Tier ⅠⅠ ratioratio

CapitalCapital adequacy
adequacy ratio
ratio（billion yen）

Deferred tax assets
Tier Ⅰ

175.7■ Deferred tax assets/Tier Ⅰ■ Amount of owned Capital (non-consolidated)
BIS standard(consolidated)
Domestic standard(non-consolidated)
11.60%
ＴｉｅｒⅠratio(non-consolidated)

11.07%

159.0

36.9%

143.8

120.9

10.32%

10.29%

132.5

25.6%

9.75%

9.36%

18.1%

8.93%

11.3%

10.99%

11.60%
11.09%
10.55%

184.7

9.70%

9.14%

8.32%

10.37%（billion yen）（％）
【New standard】

168.3

152.8

9.8%
141.3

44.6
34.0

129.8
26.1
18.0

03/9

04/9

05/9

06/9

17.2
07/9

03/9

04/9

05/9

06/9

07/9

©2007 SURUGA bank, Ltd. All rights reserved.

29

First Half Result 2007 and FY 2007 forecast（billion yen）

Sep 07
Forecasted（A ）Results
Sep 07（B）

Results
Mar 07

IncreaseorDecrease（B-A）

Forecasted
Mar 08

４１.０

４１.１

＋０.１

７６.９

８２.０

２０.０

２０.０

０

３７.７

３９.５

Net operating income

２１.０

２３.０

＋２.０

３７.２

４２.５

Core net operating
income

２１.０

２１.０

０

３８.２

４２.５

Ordinary profit

１８.５

１９.１

＋０.６

３０.４

３６.５

Net income

９.５

１０.１

＋０.６

２０.０

２０.５

Actual credit cost

３.３

１.２

▲２.０

５.５

４.３

Gross operating income
Operatingexpenses

・・・Record income highs©2007 SURUGA bank, Ltd. All rights reserved.

30

SURUGA’s Concept of Social Responsibilities
CSR from now

To Value Proposition CSR
Communication based on
sense of value
Establishing
Establishingdistinction
distinctionin
inthe
the market
marketTrusting
relationshipwithstakeholders
Trusting relationship with stakeholders
Clean
CleanManagement
Managementand
and law-abiding
law-abiding
Management
Managementof
of ultimate
ultimatetransparencytransparency
andandabsoluteabsoluteaccountability
accountability

CRS Starting Line

Communication based on function
Minimum
Minimum requirement
requirementfrom
fromsocietysociety
Risk
Riskreduction
reduction

CSR, essential factor indoing business usingsocial infrastructure

Fairness

CoexistenceSocial activities
Human rights
protection

Legal
Compliance
Employment

Sophistication ofcustomer Information
management

Eco office
Regional
revitalization

Socialcontributions

Economic activities

Ecological activities
Educational activities forenvironmental awareness

Equilibrium

Environmentally conscious
financial products

Pollution
prevention

Corporatecontinuity
Safety ensuringof financial transaction

Eco procurement

Profit planning

Profitability
Cash flow
Products with highsocial value

Sustainable growth©2007 SURUGA bank, Ltd. All rights reserved.

31

Vision for Growth Under Management Philosophy
GrowthGrowth as
as aa systemsystem forfor exchanging
exchanging values
valuesGrowthGrowth as
as aa company
company with
with aa mission
missionDefine growth as ability to exchange value with stakeholders

Make dreams a reality as a ‘life and businessconcierge.’Define growth as enhancing the ability to deliverby helping customers realize their dreams.

Shareholders
Effectivemanag
ementof capital

SURUGA

Employees
Participate
directlyin system torealizeoneself andplayrole in society

Customers(SURUGA group)

SURUGA(SURUGA group)

GrowthSuruga’s
missionSupports
ahappierlifestyle

Otherstakeholders

GrowthGrowth based
based onon CCPPSS management
management
Management

Ｃ

Culture-oriented
Supporting culture nationally and regionallyPeople-based

Ｐ

Focusing on human capital

Ｓ

Aiming to enhance social contributions

Social-perspective

Respect culture. Use that culture as strength to fuel growth
Achieve growth not only based on corporate beliefs, but also human
ethicsRemain aware of one’s role in public society and act in line with thecodes of society©2007 SURUGA bank, Ltd. All rights reserved.

32

For further details regarding the above, please contact

IR & PR Office,
Suruga Bank, Ltd.
Tel: +81-3-3279-5536
e-mail: ir.koho@surugabank.co.jp

This presentation contains forward looking statements about busines
performance. These statements are no guarantee of future businessperformance and inherently contain risk and uncertainties. Future
performance is subject to changes in business environment and may
differ from management targets.

©2007 SURUGA bank, Ltd. All rights reserved.