Filing under Rule 425 under the U.S. Securities Act of 1933
Filing by: Mitsubishi Tokyo Financial Group, Inc.
Subject Company: UFJ Holdings, Inc.
MTFG SEC File No. 1-10277
Investor Presentation
- Creation of Mitsubishi UFJ Financial Group-
This document contains forward-looking statements in regard to forecasts, targets and plans of Mitsubishi Tokyo Financial Group, Inc. (“MTFG”), UFJ Holdings, Inc. (“UFJ”) and their respective group companies (collectively, the “new group”). These forward-looking statements are based on information currently available to the new group and are stated here on the basis of the outlook at the time that this document was produced. In addition, in producing these statements certain assumptions (premises) have been utilized. These statements and assumptions (premises) are subjective and may prove to be incorrect and may not be realized in the future. Underlying such circumstances are a large number of risks and uncertainties. Please see the latest disclosure and other public filings made by MTFG and the other companies comprising the new group, including Japanese securities reports, annual reports, shareholder convocation notices, and MTFG’s registration statement on Form F-4, for additional information regarding such risks and uncertainties.
In addition, information on companies and other entities outside the new group that is recorded in this document has been obtained from publicly available information and other sources. The accuracy and appropriateness of that information has not been verified by the new group and cannot be guaranteed.
The financial information used in this document was prepared in accordance with accounting standards generally accepted in Japan, or Japanese GAAP.
1
Table of Contents
Key Points of Today’s Presentation
Transaction Summary
Integration Schedule
Objectives of the Integration
Key Financial Targets
Business Portfolio
EPS Analysis
Cost Synergies
Revenue Synergies
Opportunities and Strategies across Business Lines (Retail/Corporate/Trust Assets)
Summary
2
Risks relating to the Transaction
The success of the management integration and achieving the financial targets presented in this presentation is subject to many uncertainties and risks. The following are a few of those risks. See also other public filings made by MTFG and UFJ Holdings, including the Form F-4 that may be filed by MTFG with the SEC.
Possible difficulties in integrating the business and operations of MTFG and UFJ, including:
unanticipated asset-quality problems in UFJ’s asset portfolio;
difficulties in integrating the domestic and overseas branch and subsidiary network and head office functions;
difficulties in integrating information and management systems;
difficulties in integrating personnel and corporate culture;
difficulties in implementing and maintaining uniform internal controls, disclosure policies and other standards to a significantly larger operation; and
possible impairment of strategic relationships.
The combined entity’s customer base may be eroded – Expected scale of business may not be achieved.
A number of revenue increases depend on growth in the overall market
Mortgage loans
Investment banking services
Annuities
Wealth management products
Pension administration
Investment trust products
The various macro-economic factor assumptions may be incorrect. In particular, some revenue projections are dependent on interest rate increases.
MUFG may not be able to achieve the goals of its business strategies due to:
Weak economic conditions in Japan
Declines in stock prices and real estate prices
Adverse regulatory developments or changes in laws, governmental policies or economic controls in Japan
Competitive pressures in Japan and overseas
MUFG may have to offer lower commission rates
MUFG may have difficulties providing distinguishable products and services
Dramatic changes in the business environment may lead to:
Unsuccessful cross-selling efforts
Unsuccessful deployment of personnel
Anticipated synergies failing to materialize
MUFG’s strategy may expose it to higher risks:
High default rates in consumer finance and SME loans
Interest rate risks in new products
Foreign exchange risks in overseas business
If SMFG/STB enters a competing bid or brings additional lawsuits against UFJ Group, the management integration may be unnecessarily delayed and significant litigation-related costs may arise.
Possible difficulties or delay in acquiring necessary approvals, or unfavorable conditions may be unexpectedly imposed by relevant regulatory authorities.
3
Key Points of Today’s Presentation
Transaction Summary
Shareholder Value Creation through Management Integration
Opportunities and Strategies across Business Lines
4
Transaction Summary
Shareholder Value Creation through Management Integration
Opportunities and Strategies across Business Lines
5
Transaction Summary
Mitsubishi UFJ Financial Group, Inc
Company Name
2005/10/1 (Sat)
Effective Date
MTFG : UFJ = 1 : 0.62
Merger Ratio
Tokyo/Osaka/Nagoya/New York/London
Listing
Management
Mitsubishi UFJ Financial Group
Chairman: Ryosuke Tamakoshi
Deputy Chairman: Haruya Uehara
President: Nobuo Kuroyanagi
Mitsubishi UFJ Securities Co., Ltd.
The Bank of
Tokyo-Mitsubishi UFJ, Ltd.
Mitsubishi UFJ Trust and Banking Corporation
6
Integration Schedule
9/04
11/04
5/05
10/05
6/05
2/05
8/04
UFJ Capital Enhancement
Basic Integration Policies Ann.
Basic Agreement on the Management Integration
Integration Definitive Agreement
FY04 Financial Result Announcement
Dispatch Proxy Materials
Listing of Mitsubishi UFJ FG
in Tokyo, Osaka, Nagoya, NY, London
Creation of Mitsubishi UFJ FG
Shareholders’ Meeting
Approval of the Integration
Merger Ratio Announcement/
Investors Meeting
New Group’s Mgmt Framework Ann.
17 integration committee meetings were held
7
Objectives of the Integration
Creation of Premier Financial Group with Global Footprint
Large Corporations/SMEs/Retail
Bank/Trust Bank/Securities/Card/Leasing.
Tokyo/Chubu/Kansai, Domestic/Overseas
Balanced Business Mix
Our Aspiration to join
Leading across Business Lines
Retail Deposits and Loans.
Corporate Customer Base, Corporate Loans.
Investment Trust, Pension Trust.
Strength across Business Lines
the “Global Top 5”
Enhance Shareholder Value
Total Assets: JPY 195Tn (End 9/2004 Combined base)
Strong Financial Base
Market Value: JPY 10Tn (End 12/2004 Combined base)
Advantage of Scale and Financial Base
8
Transaction Summary
Shareholder Value Creation through Management Integration
Opportunities and Strategies across Business Lines
9
Key Financial Targets
(JPY Bn)
Change
FY08 Target
FY04 Forecast*1
Consolidated Net Operating Profit*2
+50~60%
Approx. 2,500
Approx. 1,600
Consolidated
Expense Ratio
Approx.
-10 pts
40~45% Range
50%~55% Range
Consolidated Net Income
-
Approx. 1,100
-410
Consolidated ROE
-
Approx. 17%
Approx. -9%
*1 Combined base of both groups’ publicly announced financial estimates
*2 Consolidated net operating profit before consolidation adjustments excluding dividend income from subsidiaries (managerial accounting basis )
<Assumed Macro Projections>
FY08
FY05
FY07
FY06
3M Ave. Tibor
0.46%
0.13%
0.41%
0.29%
10Yrs Ave. JGB
2.29%
1.81%
2.29%
2.22%
JPY for 1 USD (FY End)
105
105
105
105
Real GDP Growth Rate*3
1.1%
1.9%
1.0%
1.8%
*3 BTM Research Office estimates
11
Business Portfolio
Further Strengthen Three Core Business Lines with a Focus on Retail
Create More Stable and Balanced Business Portfolio
FY08 Target
FY04 Forecast
Target Net Operating Profit
FY08 Target
Approx. \2,500Bn
Others
(incl. Treasury/UNBC)
Others (incl. Treasury/UNBC)
Approx. 10%
Trust Assets
2~4%
Trust Assets
FY04 Forecast*1
Approx. \1,600Bn
Retail
15%+
Others (incl. Treasury/UNBC)
20~25%
Retail
35%+
Corporate
Trust Assets
1~2%
Corporate
Approx. 50%
Corporate
55~60%
Retail
Core Net Operating Profit Ratio
Approx. 75% 85~90%
*1 Combined base of MTFG and UFJ
11
EPS Analysis
New Group’s EPS Expected to Exceed MTFG’s Stand-alone EPS in FY06
Aim to Further Increase EPS Growth Rate by FY08
Increase of New Group’s EPS Target*1 *2 (A)
over MTFG’s Stand-alone EPS Target*3 (B)
[Reference] Target EPS Growth
FY07
Target
FY06
Target
FY08 Target
EPS Accretion Rate Approx. Approx. Approx.
3% 10% 21%
EPS Accretion Rate=((A)/(B) -1)×100
New Group
EPS CAGR (FY06-FY08)*4
New Group*1*2
Approx. 19%
MTFG
Stand-alone
MTFG Stand-alone*3
Approx. 10%
FY06 FY07 FY08
*1 Fully-diluted basis (dilution calculated based on conversion prices in UFJ interim report as of September 2004)
*2 When calculating EPS target of the new group, contributions from reversal gain of general provision and revenue synergy effects are eliminated.
*3 EPS estimate based on the new plan, with some assumptions including interest rates and treasury revenue forecast; reviewed and changed since MTFG’s primary midterm plan announced in June 2004
*4 Compound Annual Growth Rate
12
Cost Synergies
In the first one to two years after the merger, merger costs expected to temporarily exceed cost synergies
Through the implementation of cost reduction strategies, aim to realize annual JPY 240Bn (net approx. JPY 180 Bn) of cost synergies in FY08 (with an approximately 50% phase-in expected in FY07)
Cost Synergies (FY08 Target)
Major Cost Reduction Strategies
Annual Total
Approx. JPY 240Bn
Major Breakdown*1
Staff reduction: JPY40Bn
System related cost: JPY80~90Bn
Branch rationalization: JPY20Bn
Subsidiaries: JPY30Bn
Others (HQ): JPY60Bn
Staff Reduction/Relocation
Total Reduction of approx. 10,000 Employees
Relocate approx. 4,000 Employees to Focus Areas
System Integration
Complete Systems Integration of Securities Firms and Overseas Branches First
Expected to Conduct Full Integration (incl. Domestic Accounting System) by end of FY07
Branch Rationalization
Retail: approx. 170 Offices
Corporate: approx. 100 Offices
Overseas: approx. 30 Offices
*1 For items other than “subsidiaries,” the figures shown are aggregation of banks, trust banks and securities firms on a non-consolidated basis
One-Time Cost (Estimated Total)
One-Time Cost *2
Approx. JPY 320Bn
(Annual Ave. : JPY 60Bn)
Major Breakdown
System integration
Branch rationalization
Tax, CI, HQ function integration and others
*2 Estimated total one-time cost associated with the management integration including system integration cost over five years (FY05-09)
In addition to the above one-time costs, extraordinary charges of approx. JPY 360 Bn (of which more than a majority is non-cash items such as write-offs and provision for additional reserves) expected in FY05
13
Revenue Synergies
Revenue Synergies Expected to Outweigh Potential Revenue Decrease from Adjustment in Loan Exposures in FY08
Revenue Synergies (FY08 Target)
Decrease in revenue is expected during the first 1 to 2 years of the merger due to customer and exposure adjustments.*2
Revenue synergies will begin to offset such revenue decrease as business strategies are implemented.
Annual Increase in Gross Profits*1
Approx.
JPY 40Bn
*2 Level of decrease for each year expected to be at similar levels as level
of increase in gross profit for FY08
*1 Net increase in gross profits to be realized in FY08
Major Sources of Revenue Synergies
Retail
Wealth Management Products, Residential Mortgage Loans and Credit Card Business, etc.
Corporate
Overseas Services, Real Estate Business and Settlement Business, etc.
Trust Asset
Enhanced Product Development Capability, Outsourcing Business
(Securities Administration Services for Other Financial Institutions Such as Regional Banks)
14
Transaction Summary
Shareholder Value Creation through Management Integration
Opportunities and Strategies
across Business Lines
15
Retail ~ Profit Target
Aim to at least Triple FY04 Net Operating Profits in FY08 by Increasing Revenues mainly in Investment Product Sales and Consumer Finance and through Cost Synergies
Target Net Operating Profit
Earning Drivers*1
Securities Business and Others
MTFG Actual/Target
Testamentary Trust/
Real Estate
New Group Target
Rising Interest Rate effect
Investment
Product
Sales
Including Synergies:
Approx. JPY120-130Bn
Consumer
Finance
Loan
FY04 Forecast
Approx. JPY 270Bn1
Rising Interest Rate effect
*1 Breakdown of Changes in Gross Profit Growth from FY04 forecast to FY08 target (excluding the effect of expected rising interest rates and Nicos becoming a subsidiary)
FY03 FY04 Forecast FY06 Target FY08 Target
*1 Simple combined base of MTFG and UFJ
16
Retail ~ Integration Effects
Share Leading Products and Sales Skills while Strategically Reallocating Staff
Aim to increase Revenue by leveraging the Strong Retail Customer Base
Integration Strategy
Retail Deposits (9/04)
Opportunity for Sales of Investment Products
Mutually Provide Products and Share Sales Skills
Increase Product Sales to its Leading Customer Base
Strategically Reallocate Staff
Credit Card Business
Jointly Promote Comprehensive Card
Residential Mortgage Loans
Share Skills to Develop Relationships with Housing Developers
Share Product Development Capability and Sales Skills
Cost Reduction
Streamlining of Approx. 170 overlapping Offices
More Effective Staff Deployment
Systems Integration
17
MTFG+UFJ
Mizuho
Approx.
60
Tn
SMBC
Approx.
31
Tn
Approx.
32
Tn
(Note) BTM+MTB for MTFG, UFJ Bank+UFJ Trust for UFJ, Subsidiary Banks+Revitalization Corporations for Mizuho. Non-consolidated Basis
New Group’s Customer Base*1
Segments
by Customer Assets
Number of Customers
Customer Assets
JPY 10MM ~
Approx.2MM
Approx.JPY 40Tn
JPY 0.5MM ~
Approx.10MM
Approx.JPY 25Tn
~ JPY 0.5MM
Approx.30MM
Approx.JPY 1~2Tn
*1 Based on September 30, 2004 data
Retail ~ Sales of Investment Products
Expand Investment Products Sales by Taking Advantage of Changing Individual Financial Asset Structure in Japan
Aim to maximize Revenues by Strengthening Product Development Capability through Global Strategic Alliances and Increasing Sales Force
Major Strategies
Individual Financial Assets (3/04)
Business Model/Product Strategies
Actively Utilize Global Strategic Alliances (e.g., Manulife, AIG, AXA, Millea)
Resource Allocation
Increase Sales Force by Approx. 1,000 (Currently 2,500)
Thorough Training in Sales Skills and Compliance (at Retail Academy)
Japan
Cash, Deposit
US
Debt
Insurance, Annuities
JPY
1,412Tn
USD
18
34.9Tn
Inv. Trust
Equity
Revenue Increase Plan
Source: Research and Statistics Department of Bank of Japan
“Flow of Funds (1st Quarter 2004) — Japan and US Overview”
% of Investment Products in Financial Assets
Investment Products Sales
FY08 Revenue Target (image)
(80% Increase from FY04)
Provide Attractive Products
Enhance Consulting Skills
(JPY Bn)
6,000
Revenue Forecast (FY04)
JPY 95~100Bn
5,000
4,000
Foreign Currency Deposit
3,000
Number of Customers
Pension Insurance
2,000
Allocate Staff to Each “High Net Worth” Customer
Equity Inv. Trust
1,000
0
FY03
FY04 Forecast
FY08
Target
Corporate ~ Profit Target
Aim for 35-40% Increase in Net Operating Profits in FY08, Compared to FY04 Combined Figures, Driven by SME Lending, Settlement, Investment Banking and Overseas businesses
Target Net Operating Income
Earning Drivers*2
Real Estate
MTFG Actual/Target
Including Synergies
Approx.
JPY 30~40Bn
Rising Interest Rate effect
New Group Target
Overseas
SME Lending
FY04 Forecast
Approx. 920Bn
Securities
Rising Interest Rate effect
Investment Banking*3
Settlement
*2 Breakdown of changes in gross profit growth from FY04 forecast to FY08 target (excluding the effect of revenue increase from deposits and lending revenue decrease due to NPL collection)
*3 Domestic investment banking revenues from banks and trust banks. Investment banking revenues from Mitsubishi UFJ Securities are included in the securities business
FY03 FY04 Forecast FY06 Target FY08 Target
*1 Combined base of MTFG and UFJ
19
Corporate ~ SME Market
Develop New Business Models through Diverse Channels and Strategic Resource Allocation
Expand Customer Base by Efficiently and Effectively Exploring the Enormous SME Market
SME Market
New Business Models:
Increase Distribution Channels
Expanding Channels
Establish SME-Specialized Department in Existing Offices
Actively Spread Small Offices across Japan
Strategic Alliance
Strengthen Alliances with TKC and Financial Institutions
Promote Strategic Alliances to Prepare for Future Deregulation of Agencies
Product Strategy
Strengthen Product Line-ups to Response to Diverse Needs
Promote New Loan Product Designed for Small Corporations
Strengthening Sales Force
Actively Recruit Former Employees of Financial Institutions and Transfer Employees to New Sales Force
Existing Customers
(16%)
Significant Room to Expand Customers Base
Total
Approx.
1,800,000
Potential Customers (84%)
Source: Teikoku Data Bank (As of 9/04)
Avg. Balance for SME Lending
Packaged Loan Products (execution)
(JPY Bn)
1,600
1,400
FY03 1H=100
1,200
1,000
800
600
400
200
FY03 FY04 Forecast FY08 Target
FY03 FY03 FY04 FY04 FY08 Target
1H 2H 1H 2H Forecast
0
150
140
130
120
110
100
90
20
Trust Assets ~ Profit Target
Aim to Triple Net Operating Profits, Compared to FY04 Combined Figures, by Providing Full Spectrum of leading Asset Management/Administration Services
Target Net Operating Profit
Earning Drivers*2
MTFG Actual/Target
Trust Business (other than Pensions)
New Group Target
Custody
Including Synergies
Approx.
JPY 5~10Bn
Investment Trust
(Asset Administration)
Corporate
Pension
FY04 Forecast
Approx. 24Bn
Investment Trust
(Asset Management)
*2 Breakdown of Changes in Gross Profit Growth from FY04 forecast to FY08 target
FY03 FY04 Forecast*1 FY06 Target FY08 Target
*1 Simple combined base of MTFG and UFJ
21
Trust Assets ~Integration Effects
Enhance Efficiency by utilizing Economies of Scale and Reallocate Management Resources into Strategic Areas
Outstanding Presence
Integration Strategy
Pension Trusts
Aim to Secure Japan’s No.1 Presence and Business Scale
Asset Management : Approx.\34Tn
Asset Administration: Approx.\130Tn
Promote Efficiencies
Efficient Staff Deployment
Reduce Duplicate System Investment
Develop and Provide Cutting-Edge Products
Promote Profitable Products
Expand Securities Administration Business Outsourced by other financial institutions including Regional Banks
Specified Money Trusts
For Pension
MTFG
MTFG
(Both as of the end of Sept. 2004)
UFJ
Investment Trust
(Asset Administration)
UFJ
MTFG
UFJ
(All as of the end of Sept. 2004)
22
Summary
Strategic Management Integration in an expanding business phase
Steady Implementation of Integration Strategy in the Early Stage
Steady Enhancement of Shareholder Value and Enterprise Value
23
Appendix
Five Competitive Advantages
Highly Complementary Business
Highly Complementary Networks
Strong Capital Base
Progress in UFJ’s NPL Disposition
Market Value Based Ranking among Global Financial Institutions
ROE Target Comparison
Opportunities and Strategies across Business Lines (Retail/Corporate/Trust Assets)
Branches and Direct Channels
Basic Policy of System Integration
Management Structure of the New Group
Key Financials
24
Five Competitive Advantages
Aim to Join the “Global Top 5” by Leveraging Five Competitive Advantages
1. Japan’s Preeminent Global Banking Network
2. Strong Business Foundation Based on Retail Deposits and Diverse Customer Base
3. Strong Financial/Capital Foundation
4. Highly Complementary Business and Networks
5. Strong Corporate Governance and Transparent Management Appropriate for an NYSE-listed Company
25
Highly Complementary Business
Lending Portfolios (As of end of 9/2004)
Overseas 10%
Overseas 5%
MTFG
Large
corporations 44%
UFJ
Individuals 19%
Individuals 28%
Large
corporations 30%
New Group (Simple Combined)
SMEs 27%
SMEs 37%
Overseas 8%
Large
corporations 37%
Individuals 23%
SMEs 32%
Note: MTFG figures are the sum of the non-consolidated figures of BTM and MTBC (Banking accounts + Trust accounts). UFJ figures are the sum of the non-consolidated figures of UFJ Bank (including two separate subsidiaries) and UFJ Trust Bank (Banking accounts + Trust accounts)
26
Highly Complementary Networks
Domestic and Overseas Network (9/2004)
Domestic Total
600
546
400
366
Overseas Total
200
100
81
80
UFJ
MTFG
0
Central Japan
60
40
26
20
148
Eastern Japan
150
UFJ
MTFG
0
100
263
300
Note: For MTFG, sum of BTM and Mitsubishi Trust; for UFJ, sum of UFJ Bank and UFJ Trust
212
50
22
200
0
100
UFJ
MTFG
0
UFJ
MTFG
Western Japan
200
186
150
Note: For MTFG, sum of BTM, Mitsubishi Trust and Mitsubishi Securities; for UFJ, sum of UFJ Bank, UFJ Trust and UFJ Tsubasa Securities
100
81
50
0
UFJ
MTFG
27
Strong Capital Base
MTFG has JPY 1.65 Tn in Retained Earnings with no Gov’t Fund
Ability to Accelerate Repayment of JPY 1.4 Tn Gov’t Funds, Taking Advantages of New Group’s Anticipated High Profitability
Capital Base (As of 9/2004)
(JPY Tn)
MUFG
MTFG
UFJ
(Combined)*1
(Reference)
(JPY Tn)
Tier1
5.52
2.20
4.02
Tier1
(ex Gov’t Funds)
(B)-(A)
Tier1 Ratio
1.40
0.00
Gov’t Funds
(ex Gov’t Funds)
(B)
1.40
0.21
1.44
1.65
Retained Earnings
4.88
5%
Tier2
4.97
2.15
2.81
0.76
Deduction Items
0.26
0.07
0.89
(JPY Tn)
(Reference) MUFG Net Income Target
RWA
97.66
43.20
54.45
Net Income Target
BIS Ratio (%)
10.48
9.92
10.92
FY2008 (Target)
1.1
Tier1 Ratio (%)
5.66
5.10
7.39
(Reference) Tier1 (ex. Gov’t Funds)
Tier1
4.12
0.80
4.02
(A)
4.21
1.85
7.39
(%)
Tier1 Ratio
*1 Excludes MTFG’s JPY700 Bn investment in UFJ Bank’s Preferred Stock from Tier 1 and deduction items
28
Progress in the Disposal of UFJ’s NPLs
Drastically Reduce Major NPLs and Enhance Financial Soundness
Large Troubled Borrowers
NPLs under FRL Law *1
(JPY Tn)
Support by IRCJ
Daiei, Misawa, Daikyo
8
8.0%
3%-4% Range
Expected
7.0%
6.0%
6
5.0%
Debt-Equity Swap and Drastic
Asset Restructuring
Sojitsu
4
4.0%
3.0%
2
2.0%
1.0%
Collection and Sale of Loan
APLUS
0
0.0%
04/9
04/3
03/9
03/3
05/3(target)
NPL Ratio
NPLs
*1 Simple combined base of MTFG+UFJ
29
Market Value-based Ranking among Global Financial Institutions
Ranked #9 Globally (As of 12/2004) in Terms of Market Value on a Simple Combined basis
Aim to Rank within the Global Top 5 by FY2008
(As of 12/31/2004)
(JPY Tn)
Rank
Financial Institutions
Market Value
Rank
Financial Institutions
Market Value
15
MTFG
6.9
1
Citigroup INC
26.0
16
ING Group
6.8
2
HSBC Holdings
19.9
17
BNP Paribas
6.6
3
Bank of America Corp
19.7
4
AIG
17.8
5
J.P.MORGAN CHASE & CO.
14.4
21
Mizuho FG
6.2
6
BERKSHIRE HATHAWAY
11.6
7
ROYAL BANK OF SCOTLAND
11.0
31
SMFG
4.7
8
WELLS FARGO & CO.
10.9
9
MTFG + UFJ
10.1
47
UFJ
3.2
10
UBS AG
9.8
Source: Data Stream
30
ROE Target Comparison
Aim to Achieve Approx.17% ROE in FY2008
ROE
BoA
*1
20.0%
Citi
MUFG
JP
SMFG
MTFG
Mizuho FG
10.0%
MTFG+UFJ
0.0%
5.00%
Source: Company Disclosure based on publicly available IR materials
of each company
(As of 3/04 for Japanese banks; as of 12/03 for US Banks)
10.00%
Note 1:Excluding Trust Preferred Securities
Note 2:Circles indicate the Net Income size
Tier 1 Ratio
31
Retail-1~ New Group’s Visions and Strategies
Aim to Maximize Customer Satisfaction and Revenues by Providing Leading Products and Services
New Group’s Vision and Business Strategies
Maximize Shareholders’ Value
Maximize Profit while Maintaining Sound B/S
Seek High Business Efficiency (Net Income per Employee, Expense Ratio)
Provide Regionally Diverse and Trusted Customers with Leading Products and Services
Make Consumer Finance Business an Important Source of Revenues by Leveraging Strengths in Credit Cards and Consumer Loans
Develop Overseas Business with Strong Global Network
Maximum Customer Satisfaction
Provide Services that Satisfy Customer Needs and Increase Repeat Customers
Branch Layout, Staff and Products which Meet Customer Needs
After-hours/Weekend Services Available
Convenient Services, incl. “Super IC Card” with Advanced IT Technology
Provide Comprehensive Financial Services Across Various Business Lines including Banking, Trust, Securities and Global Operations
Provide Training
focused on “Personality” and
“Career Development”
Participative and Respectful Corporate Culture
Social Responsibility and Contribution
Establish Advisory Committee
Contribute Certain Portion of Profit (after public fund repayment)
Contribute to Promote Investment Education
Launch Educational Campaigns to Prevent Overborrowing
Compliance
Establish Reliable Compliance Standard
Thoroughly Prepare for Information Security, “Personal Data Protection Law” (incl. Acquisition of ISO Certification)
32
Retail-2 ~ Consumer Finance Business
Explore New Business Opportunities by Responding to Diverse Needs of Individual Customers in the Developing Market
Increase Revenue by Fully Utilizing New Group’s Expertise, Customer Base and Infrastructure
Business Model
Reorganize and Crystallize New Group’s Expertise and Infrastructure
Utilize Advantages of Bank-issued Credit Cards
Utilize Cutting-edge IT Technology
Product Strategy
Feature IC Card with High Security Capability
Strengthen Product Line ups including Affiliated Products with Acom
Resource Commitment
Increase Sales Staff in Branches
Major Strategies
Sample: Retail Revenue Breakdown of a Financial Institution in US
Others
A Bank
Others
B Bank
5%
1%
Credit Card
Credit Card
Retail
Banking
25%
37%
JPY
1.1Tn
42%
JPY
0.3Tn
Consumer
Loans
7%
Retail
Banking
63%
Consumer Loans
20%
Loan Increase Plans (MTFG)
Integration of Group’s Card Companies
Customers
Target by FY07
Interest Rate
IC Card
Unified Management
Approx. 300Bn
9
Exisiting Individual Customers
%
~
(Revolving/Cashing)
15
Acom Affiliated
or
15
8
Existing Customers with Lending
%
~
200Bn
100
UFJ Nicos
Approx. 18
Needs
Products
%
~
DC
Cash-One
Mobit
or
15
New Customers with Lending
%
100 Bn+
18
Approx.
Needs (Direct Channel)
%
DC
Nicos
UFJ Card
DC Cash-One
600Bn
500
Total
-
-
~
33
Retail-3 ~ Residential Mortgage Loans
Strong Prospects in Residential Mortgage Loan Market due to Decreasing Role of the Public Sector and Increasing Number of Households
Aim to Significantly Expand Sales of Residential Mortgage Loans by Combining Strengths of Both Groups
Residential Mortgage Loan Market
Major Strategies
Business Model
Utilize UFJ’s Sales Skills through Housing Developers and MTFG’s Product Development Capability
Focus on Corporate Market and Actively Promote Affiliated Loans
Regional Expansion
Product Strategy: Strengthen MTFG’s Product Development Capability
Resource Commitment: Establish a Residential Mortgage Loan Specific Department within the New Commercial Bank
Residential Mortgage Loans by Categories
(JPY Tn)
200
Housing Loan
Corporation
Other Public
Institutions
150
100
Private
Financial
Institutions
50
0
FY02
FY01
FY00
FY99
FY98
Residential Loan Balance/
Origination Target*1
FY03
Source: Government Housing Loan Corporation Annual Report
(JPY100mm)
(JPY Tn)
(Ten Thousand Households)
Projected Number of Households
25
40,000
(Annual growth rate from 5 yrs average)
5,500
23
5,000
Origination
(Left-axis)
35,000
4,500
21
Up to 600 Bn Increase from FY04
30,000
4,000
Balance
(Right -axis)
19
3,500
3,000
17
25,000
2,500
15
20,000
2,000
FY04 Forecast
FY08 Target
20
16
2010
2005
2000
1995
1990
1985
1980
(Year)
Source: Ministry of Internal Affairs and Communications, National Institute of Population and Social Security Research “Household Projection for Japan (Oct. 2003)”
*1 Includes Construction funds for Rental property
34
Corporate-1 ~ Domestic Investment Banking
In Expected Market Growth Environment, Provide Global Customer Base with Comprehensive and Innovative Financial Services by Strategically Allocating Resources
Domestic Syndicated Loans Market*1
Major Strategies
Business Model
Provide Large Corporations with Customized Services while Promoting Mass Sales for SMEs
Promote New Businesses Based on Market Needs
Strengthen Growing Businesses such as Derivatives, Syndicated Loans and Securitization
Enhance Efficiency in Developed Businesses such as Bond Issuance
Resource Commitment
Reallocate Staff to Focus Areas by Reducing Staff in Headquarters and Back Offices
(JPY Tn)
60
50
40
30
20
10
0
FY07
FY06
FY05
FY04
FY08
Real Estate Securitization Market*1
Revenue Target*2
(JPY Tn)
4,000
5.0
3,500
Others
3,000
FY03 Actual
Approx. 240Bn
Structured
Finance
2,500
Syndicated
Loans
4.5
2,000
Securitization
1,500
1,000
Derivatives
for Clients
500
0
4.0
FY08 Target
FY06 Forecast
FY03
FY08
FY07
FY06
FY05
FY04
*1 MTFG estimates as of 2/2005. Subjective forward-looking figures with risk of not being achieved
*2 Domestic Investment Banking Revenue from Banks and Trust Banks
35
Corporate-2 ~ Settlement Business
Establish Strong Presence by Combining UFJ’s and MTFG’s Competitive Strengths (Domestic Settlement and FX Service)
Major Strategies
FX Volume (Trade Volume Share)
Business Model: Reorganize the Product Line-ups in Accordance with Customer Needs
New Product Strategy: Create New Products with Advanced IT Technology
Resource Commitment: Train Staff in Settlement and IT Skills
Domestic Settlement
(USD 10Bn)
50
40
UFJ
30
20
Business Model
Leverage Japan’s Leading Global Network
New Product Strategy: Provide Leading FX Services and Products
FX/Cross-Border
Business
10
MTFG
Simple Combined
(FY03)
0
Bank B
(FY03)
Bank A
(FY03)
New Bank
(FY08 Target)
(%)
Transfer to Other Domestic Banks
(MM)
(Number of Contracts
:Thousand)
On-line Corporate Banking Services
21
250
% of Shares
(Right-axis)
400
Number of Transfers
(Left-axis)
20
Aim to increase # of Contracts by 1.5x Compared to FY04
200
300
19
200
150
18
100
FY08
Target
FY04
Forecast
FY03
17
100
20
FY08
Target
FY07
Target
FY06
Target
FY05
Target
FY04
Forecast
FY03
FY03
36
Corporate-3 ~ Asia Operation
Establish Strong Business Relationships with Multi-national and Local Corporations, through Branch Network and Processing Services, incl. CMS and Investment Banking, while Maintaining Leading Share of Services for Japanese Corporations
Major Strategies
Business Model
Support customers expanding to foreign countries following the business localization overseas
Firmly support Japanese corporations which operate in PRC
Product Strategy
Strengthen CMS and settlement function in Asian countries
Strengthen Syndicated loans, derivatives and trade finances
Resource Commitment
Upgrading Asian main system
Allocate strategic resources into PRC
Overseas Revenue Driver *1
Target Operating Income
Revenue Growth Drivers*1
Seek to
Approx.Double
*1 Breakdown of Changes in Gross Profit Growth from FY04 forecast to FY2008 target
Overseas Offices
Japanese Companies in Asia
(#)
50
India/Vietnam
New Group
12,000
40
SMBC
10,000
ASEAN
30
8,000
Mizuho
20
6,000
NIES
10
4,000
China
2,000
Europe/Africa/Middle East
US
Asia Oceania
0
0
Asia
US
Europe
FY04 Forecast
FY08 Target
FY2000
FY2003
*2 Total overseas offices, including branches and satellite offices of banks and trust banks based on each company’s disclosure report as of FY2003)
37
Trust Assets-1 Pension Business
Retain High Share and Increase Revenues by Focusing on More Profitable Products
Corporate Pension Shares
Major Strategies
Business Model
Promote More Profitable Products by Specialist Sales Force with Consulting Skills
Product Strategy
Expand Product Line-ups by Combining Expertise
Resource Commitment
Enhance Product Supply by Promoting Affiliated Products
40%
35%
30%
New Trust Bank (MTB+UTB)
25%
20%
15%
10%
5%
0%
FY08
FY07
FY06
FY05
FY04
FY02
FY03
Pension Product Mix
Profitable Products Balance
Pension Commission Rates
FY08(Target)
FY04
(JPY Tn)
5
Sales Plan
Actual Sales
Profitable Products
4
JPY 12.6 Tn
JPY 20.2 Tn
3
Overall Commission Rates
2
Passive Asset Management
1
0
Passive
Balanced
Profitable Products, etc.
FY03
FY06
FY05
FY04
FY07
FY06
FY05
FY04
FY03
FY02
FY08
Alternatives
Specified Passive
Enhanced Passive
38
Trust Assets-2 Investment Trust Business
Aim for Significant Revenue Increase in Growing Investment Trust Market
(#3 in Asset Management, #1 in Administration Services)
Expanding Investment Trust Market (Net Asset Basis)
Major Strategies
<Asset Management>
Business Model
Establish United Brand through Integration
Product Strategy
Develop New Products by Taking Advantage of Platforms Established through Annuity Management
Resource Commitment
Strengthen Sales Support Staff, Co-operate with Retail Sales
<Asset Administration>
Business Model
To Establish De Facto Standards in Administrating Equity Investment Trusts by Further Expanding Leading Market Share
Privately Placed
(JPY Tn)
Publicly Placed
Market Expected to Expand
100
50
0
FY08
FY07
FY06
FY05
FY04
*Publicly Placed Inv. Trust figures based on Japan Center for Economic Research Estimates.
Privately Placed Inv. Trust figures based on MTB Estimates
Investment Trusts Management Balance
(Net Asset Basis)
Investment Trusts Administration Balance
(JPY Tn)
(JPY Tn)
Increase in Administrating amount of Profitable Equity Investment Trust
40
Increase Shares
and Balance of Asset Management of Investment Trusts
% Share
Privately Placed
Publicly Placed
10
35
15%
30
10%
25
5
20
5%
15
0%
0
10
FY04
FY05
FY06
FY07
FY08
FY04
FY05
FY06
FY07
FY08
Administration Balance
Administration Balance for Equity Inv. Trust
*Sum of Mitsubishi AM and UFJ Partners AM (Before the Establishment of Mitsubishi AM, Used the Sum of Tokyo Mitsubishi AM, Mitsubishi Trust AM and UFJ Partners AM)
39
Branches and Direct Channels
| Š |
|
Respond to the diverse needs of customers, and organize a highly convenient network of branches, ATMs and direct channels which can be accessed “whenever” and “wherever” |
Network of new group (End of Sept 04)
Enhance direct channels by utilizing IT
Throughout 24 hours
UBOC
(301 locations)
In general, overlapping locations are planned to be merged of the integration date
Overseas
Over 40 countries
408 locations
(Including 301 locations of UBOC)
Currently studying whether to merge or abolish the overlapping locations (mostly in the metropolitan area, approx. 200 retail/90 corporate)
Domestic
Convenience store
ATM
Approx. 16,000
locations
Non-branch
ATM
Approx. 2,100
locations
Central Japan
Retail: 170 branches
Corporate: 75 locations
West Japan
Retail: 267 branches
Corporate:123 locations
Non-branch
East Japan
Retail: 475 branches
Corporate: 185 locations
Including Tokyo Metropolitan
Retail: 450 Branches
Corporate: 170 locations
Further develop Convenience store ATM
Develop branches focused on consulting or Plus-type branches
Further develop UFJ24
Establish outlets focused on handling transactions for large corporations
Develop outlets focused on mid to small-sized companies in areas where there is currently no presence
Throughout world
Asia: Oceania: 55 locations
Europe: Middle East, etc.: 26 locations
Americas: 26 locations
UBOC: 301 locations
| Š |
|
The number of overseas branches are the sum of banks, trust banks and UBOC |
| Š |
|
Number of domestic branches are the sum of banks, trust banks and securities companies |
40
Basic Policy of Systems Integration
Aiming to realize the benefits of the integration at an early stage by implementing systems integration in two stages
Basic policy is to maintain and enhance customer convenience as well as to safeguard the security and stability of relevant systems
Mitsubishi Tokyo UFJ Bank
On the Integration Date
Domestic operations/information systems : Separately Maintain BTM and UFJ Bank’s Existing Systems
(sort customer transactions using “Front-end Transfer Method”)
Market-related systems/Overseas systems : Complete Integration into BTM’s System
Full-scale Systems Integration (by December 2007)
Adopting BTM’s system for basic systems, including OS. Incorporating and utilizing the strong points of UFJ’s
systems featuring year-round 24-hour ATM service.
Mitsubishi UFJ Trust and Banking
On the Integration Date
Most systems remain separate including domestic accounting systems.
Certain systems including international and market-related systems: complete integration into MTB’s system.
Full-scale System Integration (by the end of FY07)
Planning to adopt MTB’s systems for domestic operations, trust assets operations and
real estate operations, while adopting UFJ Trust’s systems for pension plan administration and stock
transfer agency businesses (stock administration)
Mitsubishi UFJ Securities
To Complete Integration of all systems by the Integration Date
(Systems for the wholesale business will be integrated into Mitsubishi Securities’ systems, while
systems for the retail business will be integrated into UFJ Tsubasa Securities’ systems.)
41
Management Structure of the New Group
Introduce “integrated business group system” to the new group
(Will provide flexible financial services with regional characteristics taken into consideration)
Implement a strong internal control system, such as CSA (Control Self Assessment),
based upon COSO framework, as is appropriate for a global “top 5” financial
institution
Full compliance with the U.S. Sarbanes-Oxley Act and risk management system
as a NYSE-listed company
Integrated business group system
Corporate Risk Management
New trust bank
New securities company
New Bank
Corporate staff
Internal audit framework
Risk management framework
Corporate Planning
Financial Planning
Accounting
Corporate Communi-cations/IR
General affairs/ Secretariat
Credit risk
Retail
Close cooperation
Market risk
Assess effectiveness of internal control
Operational risk
BSC Approach (Cascading down of Strategic Objections)
Corporate
Information risk
Compliance
Trust assets
Compliance framework
Implementation of a strong internal control system in compliance with COSO framework
(Establish strong internal control system such as CSA)
42
Key Financials 1
Key retail products and services (End of March 2004)
(\bn)
SMBC
Mizuho FG
New group
MTFG
UFJ
Balance of loans to individuals
8,345.4
10,959.9
19,305.3
13,875.9
12,335.6
Year on year growth
600.3
713.2
1,313.5
210.0
513.1
Retail deposits
33,402.3
26,754.3
60,156.6
31,631.8
30,465.3
Year on year growth
1,409.8
421.6
163.7
171.9
1,237.9
Retail foreign currency deposits
1,481.6
571.3
N.A
537.5
944.1
Cumulative sales of investment annuities
360.9
254.0
614.9
482.9
N.A
Balance of investment trusts
1,387.2
1,016.3
2,403.5
2,005.7
1,214.5
Year on year growth
666.1
330.8
313.5
174.4
491.7
Note: Figures are the sum of the 2 banks of MTFG and UFJ on a non-consolidated basis (excluding securities companies). Figures for other companies are derived from each companies’ disclosed materials such as Disclosure Report and IR materials. Investment trust balances are sourced from Kinyuuzaiseijijo magazine.
Circled figures indicate ranking among Japanese financial institutions as of the end of March 2004
(No./\bn)
Testamentary trusts/Real estate commissions (End of March 2004 and FY2003)
Sumitomo Trust
Mizuho Trust
New group
MTBC
UFJ Trust
Number of testamentary trusts (with execution)
8,626
5,423
14,049
1,953
4,877
Real estate commissions
22.0
14.5
36.4
N.A
N.A
Note: Real estate commissions are on a management accounts basis, and include commissions of housing sales subsidiaries. Figures for other companies are sourced from the Nikkei Financial Daily.
43
Key Financials 2
(Unit: 1,000 companies)
Corporate customers after integration (image) (End of August 2004)
Revenue
BTM+UFJ
Sumitomo Mitsui
Mizuho
Number
% of total
% of total
Number
% of total
Number
\100 bn +
1.3
0.6%
0.5%
1.1
0.5%
1.3
\10 bn - \100 bn
9.0
4.4%
3.5%
7.8
3.4%
9.7
\3 bn - \10 bn
15.8
7.7%
6.4%
14.2
6.5%
18.5
Up to \3 bn
177.8
87.2%
89.7%
199.8
89.7%
255.3
Total
203.8
100.0%
100.0%
222.9
100.0%
284.8
Publicly listed companies
3.0
1.5%
1.1%
2.5
1.1%
3.1
Note: Based on data from Teikoku Data Bank Cosmos II
Comparison of loan balances to corporations/mid to small-sized business loan balances (End of March 2004)
(Unit: \Trillion)
MTFG+UFJ
SMFG
Mizuho FG
Loan balance to corporates*1
69.7
41.5
53.8
Mid to small-sized business loan balances*2
28.3
21.5
27.1
*1 Consolidated loan balances (the sum of bank accounts and trust accounts) excluding consumer loan balances.
*2 Domestic Loan balance to SMEs excluding consumer loan balances, both extracted from each company’s disclosure. (MTFG refers to Bank of
Tokyo-Mitsubishi + Mitsubishi Trust Bank, UFJ refers to UFJ Bank + UFJ Trust + certain subsidiary companies, SMFG refers solely to the
Sumitomo Mitsui Bank on a non-consolidated basis, and Mizuho FG refers to Mizuho Bank + Mizuho Corporate Bank + Mizuho Trust + certain
special subsidiaries established for rehabilitation purposes.
44
Key Financials 3
Pension Trusts, Securities Trusts, and other trust products
(Asset balances at end of March 2004)
(\ bn)
MTBC
UFJ trust
Total
Estimated Rank
Pension trusts
7,818.7
4,782.2
12,600.8
No. 1
Independently operated designated money trusts
7,120.4
3,844.2
10,964.6
No. 1
Specified money trusts
4,090.3
1,873.3
5,963.6
No. 1
Investment trusts
9,527.3
12,582.1
22,109.4
No. 1
Note: Welfare pension fund and defined benefit pension fund in market value, others in book value
Source: Internal estimates from each trust bank.
45
For U.S. Investors
Filings with the U.S. SEC
Mitsubishi Tokyo Financial Group, Inc. (“MTFG”) may file a registration statement on Form F-4 (“Form F-4”) with the U.S. SEC in connection with the proposed management integration of UFJ Holdings, Inc. (“UFJ”) with MTFG. The Form F-4 (if filed) will contain a prospectus and other documents. If a Form F-4 is filed and declared effective, UFJ plans to mail the prospectus contained in the Form F-4 to its U.S. shareholders prior to the shareholders meeting at which the proposed business combination will be voted upon. The Form F-4 (if filed) and prospectus will contain important information about MTFG, UFJ, management integration, and related matters. U.S. shareholders of UFJ are urged to read the Form F-4, the prospectus and the other documents that may be filed with the U.S. SEC in connection with the management integration carefully before they make any decision at the UFJ shareholders meeting with respect to the proposed business combination . The Form F-4 (if filed), the prospectus and all other documents filed with the U.S. SEC in connection with the management integration will be available when filed, free of charge, on the U.S. SEC’s web site at www.sec.gov. In addition, the prospectus and all other documents filed with the U.S. SEC in connection with the management integration will be made available to shareholders, free of charge, by calling, writing or e-mailing:
MTFG CONTACT: UFJ CONTACT
Mr. Hirotsugu Hayashi Mr.Shiro Ikushima
26F Marunouchi Bldg., 4-1 Marunouchi 2-chome, Chiyoda-ku 1-1 Otemachi 1-chome, Chiyoda-ku Tokyo 100-8114
Tokyo 100-6326 Japan Japan
81-3-3240-9059 81-3-3212-5458
Hirotsugu_Hayashi@mtfg.co.jp shiro_ikushima@ufj.co.jp
In addition to the Form F-4 (if filed), the prospectus and the other documents filed with the U.S. SEC in connection with the management integration, MTFG is obligated to file annual reports with, and submit other information to, the U.S. SEC. You may read and copy any reports and other information filed with, or submitted to, the U.S. SEC at the U.S. SEC’s public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549 or at the other public reference rooms in New York, New York and Chicago, Illinois. Please call the U.S. SEC at 1-800-SEC-0330 for further information on public reference rooms. Filings with the U.S. SEC also are available to the public from commercial document-retrieval services and at the web site maintained by the U.S. SEC at www.sec.gov.
Forward-Looking Statements
This communication contains forward-looking information and statements about MTFG, UFJ and their combined businesses after completion of the management integration. Forward-looking statements are statements that are not historical facts. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements are generally identified by the words “expect,” “anticipates,” “believes,” “intends,” “estimates” and similar expressions. Although MTFG’s and UFJ’s management believe that the expectations reflected in such forward-looking statements are reasonable, investors and holders of UFJ securities are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of MTFG and UFJ, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the public filings with the SEC and the local filings made by MTFG and UFJ, including those listed under “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors” in the prospectus included in the registration statement on Form F-4 that MTFG may file with the U.S. SEC. Other than as required by applicable law, MTFG and UFJ do not undertake any obligation to update or revise any forward-looking information or statements.
46