Shinsei IR Day Growth Areas: Structured Finance Business

Shinsei Bank, Limited February, 2017

2

Total Picture of the Institutional Business

Corporate banking

Real estate finance

Specialty finance

Project finance

Financial institutions

Structured finance

Institutional business Principal transactions

Business succession

Growth Areas Stable Revenue Areas Growth Stability

Establish a well-balanced revenue base with growth, stability, and potential. Create new values through group integration and collaboration with regional banks .

Strategic Initiative Areas Potential

Regional financial institutions

Group integration

Collaboration with regional banks

Global markets business

Individual business

Group member companies

etc. etc.

3

Structured Finance: History

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 -

2000 Started “Shinsei Bank”

2004 IPO on the First Sec. of the Tokyo Stock Exchange

2010 Implemented the First Medium-Term Management Plan (“MTMP”)

2013 Implemented the Second MTMP

2016 Implemented the Third MTMP

Over 15 years of history since Shinsei Bank started Risk management framework based on lessons

learned from the Lehman collapse Launched project finance on a full scale operation after

the heightened momentum for renewable energy following the Great East Japan Earthquake

Real estate finance

Specialty finance

Project finance

2011 The Great East Japan Earthquake

Started operation in the dawning non-recourse loan market in the early first decade of the 2000s.

Resumed

Resumed

Know-how

Made a full scale launch in 2012

2013 - Quantitative and qualitative

easing by the BOJ

2008 The Lehman

collapse

Know-how

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Create added values from our unique positioning that is different from both megabanks and regional

financial institutions

Structured Finance: Shinsei Group’s Strengths

Expertise and high analytical skills

based on extensive experience

Relationships with regional financial

institutions

Flexibility and mobility that can be realized only

by a small-sized bank

Neutral position not belonging to any

major corporate groups Networks with foreign investors

Markets that are not captured by megabanks due

to their size

Risks that are not taken by regional

financial institutions

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Syndication Business and Collaboration with Regional Banks

Origination

Structuring

Distribution

Expand opportunity for earning profits through building win-win relations with regional financial institutions

Syndication Business

Profit-earning opportunity for the Shinsei Group

Profit-earning opportunity for regional financial institutions

Contribute to revitalization of regional economies by offering new financing opportunities

Structured Finance

Investment needs from regional financial

institutions

Know-how of Shinsei Trust & Banking <Group Integration>

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Real estate companies and REITs

18.1

14.8 15.5

0

5

10

15

20

Assets under management (JPY trillion)

J-REIT market Real estate private placement fund market (Japan)

8.0

14.8

0

5

10

15

20

Asset size based on acquisition price (JPY trillion)

Source: Graph prepared by Shinsei Bank based on the research data from Sumitomo Mitsui Trust Research Institute

Non-recourse investments

The market size of real estate private-placement fund inverted and started to expand again in 2016

Although the market is partially overheated, there are many contributing factors: Favorable fundraising environment backed by

monetary easing Effects of government policies for the coming Olympic

games in Tokyo Inbound investments by foreign investors

Market Overview: Real Estate Finance

J-REIT market has been expanding significantly since 2011 Distribution facility and hotel assets are growing rapidly

recently J-REIT as one of the exit strategies of real estate private

placement fund investments contributed to the growth The market is expected to keep expanding supported by

for example a purchase by the BOJ Strong and steady demand for funds from real estate

companies centered on medium-to-large seized developers

Source: Graph prepared by Shinsei Bank based on the research data from The Association of Real Estate Securitization

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Strategies and Progress of the Third MTMP: Real Estate Finance

Strategies

Real estate non-recourse finance: Execute approximately JPY200 billion in new deals every year by responding to customer needs in a speedy and flexible manner, while carefully considering market conditions as well as determining its risk-return profile. Seek large scale deals by strengthening the syndication business.

Real estate companies and REITs: Accumulate the balance by expanding our market share, capturing J-REIT’s external growth and IPO opportunities. Boost profitability by winning deals we perform as an arranger.

Progress in FY2016

0

2,500

5,000

7,500

10,000

2016.3 2019.3

Real estate non-recourseReal estate companies and REITs

Operating asset balance

Up 4% (annual average growth rate)

Plan Actual

0

2,500

5,000

7,500

10,000

2016.3 2016.12

Real estate non-recourseReal estate companies and REITs

(Unit: JPY 100million) Down 4% (annual average rate)

Operating asset balance

Real estate non-recourse finance: New deals executed from April to December (9 months) amounted to JPY 183.4 billion although we provided finance on a selective basis primarily in assets of domestic and overseas offices, hotels, and distribution warehouses. The asset balance decreased by approximately JPY50 billion during the same period above through the sell-down as a disposal strategy of syndication business as well as a high level of prepayments in the market where property trading still remains active.

Real estate companies and REITs: Executed a number of new deals centered on J-REITs. We also successfully won those deals with Shinsei performing as an arranger. Deals for real estate companies such as developers trended steadily with the strong demand for funds.

(Unit: JPY 100million)

8

0

10

20

30

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0

2,000

4,000

6,000

8,000

2012.12 2013.6 2013.12 2014.6 2014.12 2015.6 2015.12 2016.6

Certified Capacity Introduced Capacity

0

10,000

20,000

30,000

40,000

2012.12 2013.6 2013.12 2014.6 2014.12 2015.6 2015.12 2016.6

Renewable energy power generation facilities implemented (Japan)

（MW）

（MW）

Market Overview: Project Finance

Mega Solar (Output 1MW or more)

Other Renewable Energies (wind, biomass, and others)

Source: Graph prepared by Shinsei Bank based on the statistical data from the Agency for Natural Resources and Energy

Global project finance origination volumes (JPY trillion)

Source: Graph prepared by Shinsei Bank based on the data from Project Finance International ($1=JPY110)

Market size

In the volume of origination, global project finance has been performing stably at over JPY20 trillion since 2010. Strong needs are expected to continue centered on infrastructure projects.

In the domestic power generation facilities for renewable energy, its unintroduced capacity remains significant while the certificated capacity of mega solar power plants has hit a peak. In others such as wind and biomass areas, their markets are still small but we expect them to grow in the medium-to-long terms.

Trending stably at more than JPY20 trillion

unintroduced

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Strategies and Progress of the Third MTMP: Project Finance

Strategies

Japan: Diversify deals leveraging our market presence we developed through mega solar deals. We focus on: Deals requiring sophisticated risk analyses Alternate power source deals such as wind,

biomass, and thermal Overseas: Develop and execute quality deals

leveraging our networks with Japanese sponsors and overseas financial institutions

Progress in FY2016

0

1,000

2,000

3,000

4,000

2016.3 2019.3

Operating asset balance

(JPY 100 million) Up 24%

(annual average growth rate)

Plan

1,000

1,500

2,000

2016.3 2016.12

Operating asset balance

Up 40% (annual average

growth rate)

Actual

Japan: New deals closed from April to December (9 months) amounted to JPY71.2 billion. (the same period for FY 2015: JPY13.8 billion) Mega solar deals continue to perform strongly and closed unlimited output deals by leveraging sophisticated risk analysis techniques. We also closed other two thermal power deals. In addition, some deals in wind and biomass power generation are currently under consideration.

Overseas: New deals closed from April to December (9 months) amounted to JPY51.3 billion (the same period for FY2015: JPY41.8 billion) Well-balanced originations geographically in the Asia and Europe regions, and Australia. Deals introduced by Japanese sponsors are increasing.

(JPY 100 million)

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Issues and Approaches on Structured Finance

Real estate finance Issue: Overheated domestic property market ↓ Approaches: Judge risks and returns of individual deals strictly

(Particularly for hotel, distribution warehouse, and development deals)

Exposure control through syndication business Diversify our portfolio by executing overseas deals on

a selective basis

Project finance (Japan) Issue: Mega solar power plants that have hit a

peak ↓ Approaches: Finance wind and biomass power generation Finance thermal power generation through

collaboration with infrastructure funds Diversify deals including refinance and mezzanine

loans Cooperate with group companies including Showa

Leasing

Project finance (Overseas) Issue: Unclear global economy including developing

countries / The rise of foreign currency funding costs

↓ Approaches: Execute deals sponsored by trustable players such as

Japanese companies Mitigate risks using ECA (Export Credit Agency) Diversify deals for execution regarding regions and industries Consider various deals to develop quality deals which offer

sufficient returns after deducting foreign currency funding costs

Structured finance as a whole Issue: Shrinking spreads against the backdrop

of monetary easing / Continuous development of experts

↓ Approaches: Develop high-return deals through careful and detailed

risk analyses Boost profitability using syndication business Deploy personnel in a timely and flexible manner Continue to employ mid-career experts

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Our Goals

0

2,500

5,000

7,500

10,000

12,500

15,000

March 2016actual

December2016 actual

March 2019plan

Real estatenon-recourse

Real estatecompaniesand REITs

Projectfinance

Specialtyfinance

Up 9% (annual average

growth rate)

Operating asset balance (JPY 100 million)

To achieve high growth and profitability by offering our customers

value-added financial services through financial technologies

and tailor-made services

Our goals

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Disclaimer

• The preceding description of Shinsei Bank Group’s Medium-Term Management Plan contains forward-looking statements regarding the intent, belief and current expectations of our management with respect to our financial condition and future results of operations. These statements reflect our current views with respect to future events that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may vary materially from those we currently anticipate. Potential risks include those described in our annual securities report filed with the Kanto Local Finance Bureau, and you are cautioned not to place undue reliance on forward-looking statements.

• Unless otherwise noted, the financial data contained in these materials are presented under Japanese GAAP. The Company disclaims any obligation to update or to announce any revision to forward-looking statements to reflect future events or developments. Unless otherwise specified, all the financials are shown on a consolidated basis.

• Information concerning financial institutions other than the Company and its subsidiaries are based on publicly available information.

• These materials do not constitute an invitation or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.