Hirogin : Overview of Financial Results for FY2022

Hirogin Holdings, Inc.

Overview of Financial Results for FY2022

- IR Presentation -

June 2023

Today's agenda

Financial results

• Net income attributable to owners of the parent fell
• 1. billion yen year on year to 12.5 billion yen, due mainly to the response to market trends, including losses on sales of foreign bonds reflecting a negative spread and losses on valuation of stock holdings. Nevertheless, our main businesses recorded positive business performance.
• Net income attributable to owners of the parent is projected to rise by 15 billion yen year on year to
• 1. billion yen in FY2023.
• We expect to achieve the final target of the Mid-Term Plan 2020 of more than 27 billion yen in net income attributable to owners of the parent.

Investment in growth

• Targeting ROE exceeding costs of shareholder capital over the medium to long term, we will move forward with efforts to increase ROE by improving RORA and controlling financial leverage while balancing various other considerations, including maintaining soundness, investing in growth, and improving returns to shareholders.
• In addition to proactively responding to demand for funds reflecting expectations, such as those for rising interest rates and rebuilding our securities portfolio, we plan to enhance our earning capacity by putting risk assets to effective use and venturing into new business fields through our subsidiaries, including Hirogin Lease.

Advancing the holding company to the second stage

• The first stage of the Mid-Term Plan following the transition to a holding company structure is generating steady results due to factors including efforts to transform employee awareness associated with this transition and progress on enhancing Groupwide joint efforts.
• In the second stage, the functionally enhanced management planning sections of the holding company will play central roles in improving the quality of Group companies, expanding the axes along which their businesses are based to further enhance Groupwide joint efforts, and reallocating management resources through structural reforms.

Returns to shareholders

• By eliminating the target dividend table and switching to a dividend policy targeting a payout ratio of roughly 40%, we plan to pay dividends of 36.0 yen/share in FY2023, up 9 yen/share from last year.
• We will also proactively acquire treasury shares (3 billion yen in FY2023), targeting a consolidated capital adequacy ratio of roughly 11% for the holding company.

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Contents

Summary of business

01p.3 performance

02

Toward sustained growth

p.11

03

Conclusion

p.32

04

Appendix I & II

p.34

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Summary of business

01 performance

02 Toward sustained growth

03 Conclusion

04 Appendix

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Summary of business	FY2022	FY2023 Business performance projections
performance

Overview of financial results for FY2022

• Net income attributable to owners of the parent fell 10.4 billion yen year on year to 12.5 billion yen, due mainly to response to market trends, including losses on sales of foreign bonds reflecting a negative spread and losses on valuation of stock holdings. Nevertheless, our main businesses recorded positive business performance.

Summary of consolidated business performance

						(Billion yen)
			FY2022	YoY	(Change rate)	vs.
				change	Announced*2
Consolidated gross profit			79.3	-12.7	(-13.7%)
(excluding gain/loss related to treasuries	1	96.1	-3.1
and other bonds)
Net interest income			66.2	-3.3
Net fees and commissions income			20.8	-0.3
Income from specific transactions and other		-7.7	-9.0
businesses
(including gain/loss related to treasuries and	2	-16.7	-9.5
other bonds)
Operating expenses	(-)		58.0	0
Credit costs	(-)	3	0.6	-11.8
Gains/losses related to equities, etc.		4	-2.2	-7.3
Other			0.4	0
Ordinary profit			18.7	-8.3	(-30.6%)	0.2
Extraordinary gains/losses			-0.5	-6.3
Total income tax, etc.	(-)		5.7	-4.2
Net income attributable to non-	(-)		0	0
controlling interests
Net income attributable to owners of the	5	12.5	-10.4	(-45.4%)	0
parent
(Ref.) Operating overhead ratio *1			60.4%	1.9%

*1. Operating overhead ratio = operating expenses / (consolidated gross profit-gain/loss from treasuries and other bonds)

2. Comparison to figures announced in the "Notice of revision of forecasts of consolidated business performance," released March 22, 2023

Key points of FY2022 financial results

1. Consolidated gross profit (excluding gain/loss related to treasuries and other bonds)

• The cost of raising funds in foreign currency rose sharply with rising interest rates overseas, driving net interest income down.
• Corporate solutions sales, a key target in the Bank consulting business, and also a priority management target, grew steadily (up 2.3 billion yen YoY).

1. Gain/loss from treasuries and other bonds

• To restructure the securities portfolio, we sold off foreign bonds, for which spreads had become negative due to rapid increases in policy interest rates in the U.S. (recording a loss on sales of 18.4 billion yen and a book value of 246.4 billion yen on the sale).

1. Credit costs

• We recorded 4.3 billion yen in preventive reserves, including increases in reserves for certain customers (vs. 11.6 billion recorded in FY2021).
• At the same time, credit costs at 600 million yen remained low thanks to progress on collections from major borrowers and the recent lack of major bankruptcies.

1. Gains/losses related to equities, etc.

• We recorded a loss of 5.3 billion yen (write-down of stock, etc.) on shareholdings due to increased valuation losses accompanying falling stock prices and other factors.

1. Net income attributable to owners of the parent

• In addition to the factors above, net income attributable to owners of the parent fell by 10.4 billion yen YoY to 12.5 billion yen due in part to the effect of elimination of 7 billion yen in gains on return of retirement benefit trusts recorded in the previous year.

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