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Unsecured Loans Sharply Increasing

3, 08. 2006

   The six major Japanese banking groups are believed certain to report the highest ever consolidated earning for the term ending in March of this year. Criticisms may arise against them for making too much profit unless they seriously consider returning part of the earnings in some way to their clients or improve their services.

   Against this background, JINBN sent questionnaires to the major banking groups to ask them six questions, including those on their projections on their earnings for the financial term ending in March of this year and their explanations to the anticipated criticism from the public and measures they might take for it. All of the six major groups responded to the survey.
   The results of the survey showed that the amount of loans extended without collateral, or "unsecured loans", was on the tendency of rise. All the groups indicated their readiness in general to increase the extending unsecured loans in the future. Mizuho Financial Group said that such loans it extended has increased three fold over the past three years. The group said it would continue to offer more unsecured loans mainly to smaller firms in the future.

Japanese Bankaers Association resides in Ginko Kaikan at Marunouchi Area, Tokyo.All major banks are affiliated with the association.
Japanese Bankaers Association resides in Ginko Kaikan at Marunouchi Area, Tokyo.All major banks are affiliated with the association.

   Mitsui Trust Holdings says it has positively working on lending of funds for business without collateral, such as "business loan" designed for financing small and medium businesses, since April last year. Sumitomo Mitsui Financial Group noted that, of its clients that made use of its "business select loan" which was extended without collateral in principal, about 30% were new clients. This indicated that the number of the borrowers of such loans was rising..
   As for answering to the anticipated criticism, Mitsubishi UFJ said it would like to win customers' understanding and supports by offering them better products and services, while Risona Holdings also replied it would consider returning the earnings to the clients through offering them better products and services.
   The detailed findings of the survey are as follow:

Q1. Earnings Forecasts for Term Ending March 2006?
Mitsubishi UFJ Financial Group, Inc.
Ordinary Revenue 4,085,000 Mln Yen (+55.4% on year)
Ordinary Profit 1,065,000 Mln Yen (+79.5% on year)
Current Net Profit 760,000 Mln Yen (124.6% on year)
Sumitomo Mitsui Financial Group (1)SumitomoMitsui Financial Group
  (Consolidated) (Unconsolidated)
Ordinary Revenue 3,500,000 Mln Yen 54,000 Mln Yen
Ordinary Profit 850,000 Mln Yen 48,000 Mln Yen
Current Net Profit 550,000 Mln Yen 70,000 Mln Yen

(2)Sumitomo Mitsui Banking Corp
Net Business Profit 950,000 Mln Yen
Ordinary Profit 660,000 Mln Yen
Current Net Profit 430,000 Mln Yen
Mizuho Financial Group, Inc.  
Ordinary Revenue 3,400,000 Mln Yen (+1.2% on year)
Oridinary Profit 980,000 Mln Yen (+49% on year)
Current Net Profit  630,000Mln Yen (+0.4% on year)
Risona Holdings, Inc.
Ordinary Revenue 761,100 Mln Yen (-0.0% on year)
Orodinary Profit 277,200 Mln Yen (-2.7% on year)
Net Profit for Quarter 265,700 Mln (-16.2% on year)
Mitsui Trust Holdings, Inc. (Chuo Mitsui & Mitsui Asset Put Together)
Market-based Net Business Profit 190,000 Mln Yen (-1,100 Mln Yen, or -0.6%, on year)
Net Business Profit 184,000 Mln Yen (-12,100 Mln, or -6.2%, on year)
Ordinary Profit 130,000 Mln Yen (-19,900 Mln, or -13.3% on year)
Net Current Profit 120,000 Mln Yen (27,900 Mln Yen, 30.3%, on year)
The Sumitomo Trust Banking & Co., Ltd.
  (Consolidated) (Unconsolidated)
Adjusted Net Business Profit 185,000 Mln Yen 160,000 Mln Yen
Ordinary Profit 155,000 Mln Yen 135,000 Mln Yen
Current Net Profit 95,000 Mln Yen 85,000 Mln Yen
Q2.What are reasons for big profit increases (for the April-December)?
Mitsubishi UFJ Financial Group, Inc. Operating net profit from the three divisions dealing with clients for retailing, corporate and property in trust went up smoothly. In addision, there was an increase of about 1 trillion yen in exposure-related expenses because of reimbursement on reserves funds from major clients whose business improved, etc.
Sumitomo Mitsui Financial Group ①Revenue increases stemming from increased efforts concerning investment trusts, annuity insurances, securities brokerage and investment bank business, and the promotion of strengthening and cooperation within the group.
②Decrease in the exposure-related expenses in the current fiscal year arising from the bad debt reserves increased in the previous fiscal year to better cope with future risks."
Mizuho Financial Group, Inc. Revenues corresponding to deposits and loans decreased. But, revenues increased from collecting fees on over-the-counter sales of investment trust, syndicated loans for firms and M&S. Also, labor and other expences were reduced.
Risona Holdings, Inc. The consolidated net profit for the quarter to December 2005 showed a decline on year. (As answer for Q1)
Mitsui Trust Holdings, Inc. The market-based net business profit which shows the earning of the core business decreased 9,800 mln yen on year at 116,300 mln yen.
The Sumitomo Trust Banking & Co., Ltd. On a consolidated basis, each subsidiary showed improved results and the revenues of the new subsidiaries - Sumishin Matsushita Financial Services Co. and First Credit Corp. - also contributed. On an unconsolidated basis, besides the afore mentioned piling up of market-based revenues, the sales of investment trust and annuity insurance, and receipts of commissions on brokerage in real estate business showed continued improvement.

Q3.What were the profits from the core business of lending?
Mitsubishi UFJ Financial Group, Inc. Interest on loans: 927,777 mln yen
Sumitomo Mitsui Financial Group Fund profit: 697,600 mln yen (accounting for 60.9% of gross business profit)
Mizuho Financial Group, Inc. Interest of loans: 794,110 mln yen (-1% on year)
Risona Holdings, Inc. Of the gross consolidated profit for the quarter to December 2005, fund profit is 407,600 mln yen.
Mitsui Trust Holdings, Inc. Interest on loans for the quarter to December 2005: 64,700 mln yen (-12,000 mln yen on year)
The Sumitomo Trust Banking & Co., Ltd. On an uncosolidated basis, interest on loans: 100,300 mln yen against loans of 10,836,900 mln yen

Q4.Because of the zero interest policy of the Bank of Japan, banks can enjoy raising of funds without cost. Under this condition, people say that it is tantamount to robbing the general pulic of money that banks are making profits. How would you answer to this criticism?
Mitsubishi UFJ Financial Group, Inc. The interest rates on deposits and loans are determined on the basis of overall consideration to financial plicy and deposit insurance and other costs. As a new group it is hoped to win customers's support by conducting customer-centered management and offering better products and services to them.
Sumitomo Mitsui Financial Group (no answer).
Mizuho Financial Group, Inc. Deposit interest rates are determined in accordance with the market level, and there is a limit to what each individual bank can do. On the one hand, the deposit interest rates are low because of the zero-interest rate policy. On the other hand, it is thought that there are many individuals and firms enjoying theunusually low levels of interest rates on housing loans and other borrowing.

It should be added that Mizuho Bank is offering, under the "Mizuho Milage Club"arrangement, credit card service free of annual fees, which is deposit coming with the function of the credit card service, free off-hour ATM service, and discounted charges on money transfers.

Profits are returned to customers also in the form of providing safety for the money by the use of IC cash cards and the introduction of biometric signature (planned for the first half of this year). Products and services that bear merits for the customers will be continued to be offered in the future.
The group is making increased efforts as a whole to promote the CRS (corporate social responsibility), and it is determined to make greater contribution to the public by coping with environmental problems and other activities. Pleas see the HP which carried a CSR reporton February 15.
Risona Holdings, Inc. The return of profits will be considered through offering products and services which will satisfy the customers with cost reduction.
Mitsui Trust Holdings, Inc. As shown above in the anser to Q3, market-based net business profit showed a decrease on year. It is thought that the profit was appropriate to the services the company offered.
The Sumitomo Trust Banking & Co., Ltd. In order to carry out management activities, the company as a business firm has to bear a certain extent of cost. Under the circumstances, interest rates on loans to individuals and firms declined considerably under the zero interest. Profits from the sales of investment trusts and other various products and revenues from trust business and real estate business are carried out by the company as trust bank contributed to the overall revenue.

Q5.Profits are made as they are. So how about raising the deposit interest rates? Is this considered?
Mitsubishi UFJ Financial Group, Inc. The same as above (answer to Q4)
Sumitomo Mitsui Financial Group As for the time deposits, interest rates are decided in accordance with the market movements on a daily basis.
Mizuho Financial Group, Inc. As it has been noted, deposit interest rates are determined in accordance with the market levels, and it is difficult to raise deposit interest rates unde the zero interest policy.
Risona Holdings, Inc. Deposit interest rates are decided after comprehensively studying the interest moves on the market and other matters.
Mitsui Trust Holdings, Inc. Deposit interest rates are decided in compliance with the market movements. The interest rates in the future will depend on market movements.
The Sumitomo Trust Banking & Co., Ltd. Raising of deposit interest rates will be studied by taking into consideration such matters as future interest rate movements. Studies will be made also on the development of new deposit products.

Q6.Complaints are heard increasingly against high commissions charged for your services. How do you feel about it? Do you plan to lower them?
Mitsubishi UFJ Financial Group, Inc. Commissions are decided by taking into consideration the cost involved in the system maintenance and other necessary expenditures. The new group hopes to gain support of customers by conducting the management soly dedicated to them and offering them better products and services.
Sumitomo Mitsui Financial Group Various charges reflect the minimum cost calculated as necessary for offering services.
Mizuho Financial Group, Inc. As noted above (in answer to Q4)、many types of charges can be reduced or exempted by taking advantage of "Mizuho Milage Club".
Risona Holdings, Inc. Charges are decided, although ununiformly, on the basis of the services offered and office expenses. They have been revised from time to time.
Mitsui Trust Holdings, Inc. We believe that we offer right services to the charges.
The Sumitomo Trust Banking & Co., Ltd. Charges are set in appropriate ranges on the basis of cost involved for the business.

Q7. Changes do not seem to have been made in conducting business of making loans with collateral. Those engage in venture businesses strongly suggest that banks improve their ability to examine the loanees so that loans can be made without collateral. How do you feel about this? And would you let us know how much your "loans made without relying on collaterals" account for your total lendings?
Mitsubishi UFJ Financial Group, Inc. The group offers the products for lending without colatteral, such as "Business Loan 'yukatsuryoku (finance vitality)'" and Bizway.Efforts will be continued to make other products to meet the need of customers.(1) (2).
The loans outstanding of The Bank of Tokyo-Mitsubishi UFJ to medium and small businesses without collateral as of the end of December 2005 was 995,300 mln yen.
Sumitomo Mitsui Financial Group Since March 2002, the group, getting ahead of other banks, has been offering the "Business Select Loan" service in which loans are made "without collateral or guarantee from a third party as a general rule". The accumulated number of loans extended under such serive now stands at about 170,000 with lending amounting to 4.2 trillion yen. It might be added that, of the customers who have utilized this service program, about 30% are new customers. By taking advantage of know-how obtained through the practice of the "Business Select Loan" service to the fullest extent, the group launched in April 2005 the "SMBC-Creser Loan"service whichi is designed to serve firms with an annual income of less than 3 billion yen.
Mizuho Financial Group, Inc. As of the end of September 2005, the outstanding loans extended by Mizuho Bank had totaled about 20 trillion yen, of which about 1,200 billion yen was business loan made without collateral. This means that such loans had gone up three fold since September 2004, when the amount was 400 billion yen. Efforts will be continued to make unsecured loans to medium and small businesses.
Risona Holdings, Inc. Each case is examined separately and comprehensively. Efforts will be continued to develop products to meet the need of the customers. (Please see: "Risona SME Connect Loan" and others.)
Mitsui Trust Holdings, Inc. In April 2004, the company started dealing with "Business Loan" which is a financing service for medium and small firms. The company is also tackling positively with unsecured lending to finance businesses.
The Sumitomo Trust Banking & Co., Ltd. The company is focusing on lending without excessively relying on collateral or other security, but based on the business and reality of each individual loanee. The company is also positively working on the offering of syndicated loans and buyout financing and other new type of lending.

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