Shinsei IR Day Retail Banking Business

Shinsei Bank, Limited February 2017

1

Number of Individual Customer Accounts

Total number of retail accounts surpassed 3 million in August 2016 Achieving high customer satisfaction ratings in outside surveys

1st place in the “Banking Service” category of the 2016 Customer Satisfaction Index Survey conducted by the Service Productivity & Innovation for Growth

1st place in the “Internet Banking” category of the 2016 Oricon Japan Customer Satisfaction Survey

0.5

0.7

0.9

1.1

1.3

1.5

1.7

2.0

2.2

2.4

2.6

2.8

3.0

3.2

2008/3 2011/3 2013/3 2014/3 2015/3 2016/3 2016/6 2016/9 2016/12

# of Customers (left axis, million)

Assets excluding yen deposits and bank bonds (right axis, JPY trillion)

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1.1%

1.2%

1.1%

1.1%

4.2%

7.0% 7.2%

7.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2008/3 2011/3 2013/3 2014/3 2015/3 2016/3 2016/6 2016/9 2016/12

Market Share: Balance of Individual Customer Deposits

Deposits from individual customers serve as the core of the Shinsei Group’s low cost, stable funding.

Balance of yen deposits remains stable at approx. JPY 4.8 trillion. No significant changes in market share.

Foreign currency (FCY) deposit balance of USD-equivalent 3.2 billion (approx. JPY 380.0 billion) as of Dec 2016.

Significantly larger market share of FCY deposits compared to JPY deposit market share. Realizing stable funding from retail banking customers.

Source: Deposits: Statistics of the Bank of Japan, Domestic banks Individual deposits

Market share of individual customers’ FCY deposit balance among banks operating in Japan

Market share of individual customers’ JPY deposit balance among banks operating in Japan

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200

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400

450

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2008/3 2011/3 2013/3 2014/3 2015/3 2016/3 2016/6 2016/9 2016/12

FCY deposit balance (USD equivalent, left axis, USD billion)FCY deposit balance (JPY equivalent, right axis, JPY billion)

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0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

0

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100

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500

2008/3 2009/3 2010/3 2012/3 2014/3 2016/3 2016/6 2016/9 2016/12

Balance (left axis, JPY billion)Share (right axis, %)

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200

400

600

800

1,000

1,200

2008/3 2009/3 2010/3 2012/3 2014/3 2016/3 2016/6 2016/9 2016/12

StructuredBondsInsurance

InvestmentTrusts

(JPY billion)

【Asset Management Product Balance Trend】

【Investment Trusts】 A remarkable reduction in customers’

investment appetite has resulted from the Bank of Japan’s negative interest rate policy.

Despite fund redemptions and the shelving of the establishment of new funds, resulting in a reduced deal-basis balance, market share maintained.

【Asset Management Product Sales】 Shifted focus of operations to supporting the

medium to long-term asset building and management of current customers.

Expanded services and product offerings, particularly mutual funds and insurance, in order to meet a diverse range of investment objectives and management needs Provide novice investors and the asset-

accumulation generation with an approachable investment environment.

Expanded target customer base through the offering of fixed premium insurance products in addition to providing product features suited for inheritance purposes which facilitate a multi-generation transaction relationship.

【Investment Trust Balance Market Share】

Source: Japan Investment Trust Association

Market Share: Investment Trusts

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Variable Initial

3 Years Fixed

Initial 5 Years Fixed

Initial 10

Years Fixed

Initial 20

Years Fixed

35 Year Fixed

Shinsei Bank 60.0 85.0 85.0 105.0 120.0 185.0

Maximum 72.5 120.0 125.0 105.0 240.0 212.0

Minimum 49.7 35.0 38.0 45.0 90.0 110.0

Recently saw strong sales results by capturing refinancing needs after the Bank of Japan introduced the negative interest rate policy (NIRP).

Customer focus has shifted to costs other than interest rates due to low interest rate environment, and in regard to social issues such as the social advancement of women and becoming unable to work as before Our unique housing loan features (sick child care services, etc.) are well received by customers and differentiates Shinsei Bank from other banks.

Maintained a certain level of profitability even after the NIRP was introduced.

Sources: Balances – Statistics of the Bank of Japan, Domestic banks and Shinkin banks housing loans for individual customers Interest rates – Data surveyed by Shinsei Bank Three mega banks, Resona, Sumitomo-Mitsui Trust Bank, Mitsubishi-UFJ Trust Bank, Yokohama Bank, Chiba Bank, Sony Bank, Sumishin SBI, Jibun Bank, ARUHI

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

2004/3 2006/3 2008/3 2011/3 2014/3 2016/3 2016/12

Balance (left axis, JPY trillion)

Share (right axis, %)

(Customer interest rates as of Dec. 31, 2016, bps)

Market Share: Housing Loans

5

Need to maximize customer base in terms of both quality and quantity Activation of existing customers (wide range of age groups and geographic areas) Utilization of the Group customer base Utilization of ex-Shinsei membership bases

Awareness of Retail Banking Business Issues

Lack of new customers and the aging of existing customers in the sale of asset management products

Investing opportunity needs increasing in the asset-accumulation generation and younger demographics

Changes in product profitability influenced by economic and financial markets conditions

Work on deepening relationship and expanding customer base by optimizing communication, touch points and messages

Recognized Issues

Countermeasures

6

Initiatives Implemented

Channel Facilities New branches (Shibuya, Nagoya, and Tama plaza) ⇒ Touch points and consulting opportunities increased Partner ATM network expanded ⇒ Touch points increased Creation of the customer service space “Beans” ⇒ Floor space for serving customers enlarged in branches

Operations Revision of over-the-counter operations ⇒ More time to interact with customers

Operations centralized and outsourced Tablet based document entry ⇒ More time to interact with customers

Operations centralized and outsourced Outbound calling consolidated in the ⇒ More time to interact with customers “Direct Banking Team”

Customer service Omotenashi project ⇒ Improving customer service skills and morale

Product; Service Low minimum investment products, reduction of minimum investment on existing products ⇒ Message optimized and consulting opportunity increased Expanded offerings of fixed premium insurance products Minimum investment amounts reduced for investing in investment trusts Minimum investment amounts reduced for structured bonds

Attracting Customers ⇒ Message optimization and consulting opportunities increased Birthday JPY time deposit Offering of higher interest rates on time deposits in branch locations

Further develop relationships with customers through the use of a new CRM system going forward and expand the customer base by introducing new online banking services equipped with communication functions

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Customer Information

• Interaction/Transaction history • Website/Online access by customers • Customer analysis score • Customer’s portfolio • Customer’s life event • Good use of AI

Channels • PC, Smartphone, email, and SNS • Online banking • Housing loan staff • Operation staff

Operations

• Interlinking of all systems • Tablet connectivity • Paperless • List, Pipeline • Report Aggregation

Connecting Customers, Channels, Staff and Systems Through CRM

Seeking to expand the business base by strengthening the relationships between customers and the Bank through the optimization of customer touch points by appropriately compiling and using customer information and maximizing the number of customer contacts through the integration of business functions

Provision of customer-interaction data with other divisions

Compile and utilize customers’ investment preferences, info. from other institutions, etc.

Identify products in which a customer will be interested

More tools to directly connect with customers

More channels for transactions and procedures

Complete transaction/procedures in collaboration with other divisions

Customers Staff

Use of indexes which are automatically aggregated in real time

CRM system

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High-level Use of Customer Information Through the Application of AI (1)

Use AI to analyze customer information in order to deepen relationships with customers Commenced test marketing based upon “Pin Point Cross Selling” model Develop the above-mentioned marketing to establish a higher-level marketing model in the future in order to offer products to customers via the

most appropriate channel and at the best timing Outsourced to SecondXight Inc. to analyze a large amount of data & info using scientific & statistical techniques and to develop a highly

accurate forecasting model in a shorter period of time

Pinpoint Type Cross Selling Customer Enlightenment Type Cross Selling

Event Based Type Cross Selling

Customer segment “Upper DINKS, 30s

Customer segment “Family, 30s” Customer segment “Urban area, Single, 20s”

Product A

Product B

Product C

Product D

60%

40%

Purchase rate 80%

…

Customer

Product A

Product B

Product C

Product D

Product F

Product E

Purchase rate 50%

55%

30% 50%

70%

Time

Prof

itabi

lity

Customer

Product G 50%

60%

SNS： Went to see a condo♪

EBM

Info fed into EBM automatically

Attribute Purchase Excellent sales rep.’s

expertise

Analysis model developed

Customer

…

Events found and recommended

Housing Loan Preferential Rate

Campaign

Current

• Segment customers by attribute - “Urban area, Single, 20s”, “Family, 30s”, etc.

• Purchase rate to be calculated for each segment to make cross-selling - Product B：80%, Product C：60%

• Identify purchase pattern/history of profitable customers - Profitable customers: Product A→B→D Unprofitable customers: Product A→C→G

• Follow the identified flow to make cross-selling - Purchase rate of Product B is lower than Product C, but a purchaser of Product B ended up being a profitable customer. Therefore, Product B should be offered as a cross-selling product.

• Event detection model & Appropriate product advice model to be developed based on attribute, account/transaction info, and excellent sales rep’s know-how. (Event Based Marketing)

• Various big data to be automatically fed into EBM to cross sell most suitable products for life events, etc. - SNS message, etc. to be fed and analyzed to offer housing loan preferential interest rates, etc.

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Current Operation • Measures implemented according to

Forecasting Model in response to a business which is promoted at the time

• Analysis conducted by mainly classical statistics “White Box” method (logistic regression analysis, decision tree)

• Data to use: Attribute, Transaction, Month-end balance by product, Withdrawal/Deposit history, Interaction over the counter, by phone, etc.

Matters Currently Not Being Addressed

• Financial advice for customers about suitable products via suitable channel

• Proposals for the Bank to draw up customer-activation measures

• Analysis using data across multiple products, e.g. loans, investment products, various financial cards, etc.

• Broader usage of web behavioral data such as blogs

• Accurate forecasting of suitable products & channels based upon individual customer characteristics → Clearly identify “which product” should be recommended to “whom” “at which time” and in “what manner”

• Establishment of Forecasting Model with higher-level machine learning methods (Black Box model such as Deep learning, Ensemble learning, etc.)

• Continual improvement/adjustment of the Model by learning from feedback about implemented measures

Objectives of Collaboration with SecondXight Inc.

A. Increase Utilized Data

B. One-To-One Basis

C. Analytical Technique Enhancement

High-level Use of Customer Information Through the Application of AI (2)

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Expected Effectiveness A) Increase in data utilization B) Forecasting Model enhancement Expected effectiveness approx. 2 to 6 times for all products C) Analytical technique enhancement

Structured bond – Product A

(approx. twice that of the previous method)

Mutual fund – Product D (approx. 5-fold that of the previous method)

Insurance – Product C (approx. 4-fold that of the previous method)

Provide approx. 3 million customers with score, pick up top 5,000 customers ranked in “probability of forecasting”, and compare their response results in 2 months

Existing method: White box model New method: Black box model

Structured deposit – Product B (approx. 3-fold that of the previous method)

High-level Use of Customer Information Through the Application of AI (3)

0% 5% 10% 15% 20% 25%

Existing method New method 0% 1% 2% 3% 4% 5% 6%

0% 1% 2% 3% 4% 5% 6% 7%

0%

1%

1%

2%

2%

Existing method Existing method

Existing method

New method New method

New method

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Next Generation Online Banking

Concept of New PowerDirect

Conversion to a communication tool from a transaction tool (with a next generation CRM)

Customer-friendly online banking, easy to view and easy to use

High-level security to protect customers’ assets (prevent customers’ assets from being stolen by crime groups)

Excellent maintainability and extendibility system

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Account info Fund transfer FCY deposit

Logout

登録情報

各種設定

時Login Time： yyyy/m/d

Ms. --- -- branch (Branch code 123) A/C # 1234567

Account balance（JPY equivalent） mm dd, yyyy hh:mm

Total 999,999,999,999 yen JPY savings 999,999,999,999 yen → Trx history → Fund transfer JPY time deposit 999,999,999,999 yen → Trx

FCY savings 999,999,999,999 yen → Buy → Sell FCY time deposit 999,999,999,999 yen → Trx Structured deposit 999,999,999,999 yen → Balance inquiry → Trx

Mutual fund 999,999,999,999 yen → Trx（Mutual fund Top) → A/C info TOP

Structured deposits

Mutual Funds FX JPY deposit Card loan Housing loan

Recent 5 transactions JPY savings

Date Code Credit Debit m/d 123456789012345 123,456,789,123 円 123,456,789,123 円 m/d 123456789012345 123,456,789,123 円 123,456,789,123 円 m/d 123456789012345 123,456,789,123 円 123,456,789,123 円 m/d 123456789012345 123,456,789,123 円 123,456,789,123 円 m/d 123456789012345 123,456,789,123 円 123,456,789,123 円

A/C info Top ｜ Withdrawal

Deposit ｜ Step Up Program ｜ T Point program ｜ Notice box ｜ お取り引きレポート ｜ 入金方法

Product ・Services ｜ Campaign ｜ Interest rates ｜ FAQ

＜Seminar which interest you scheduled> 【Urgent Seminar】 Brexit influence → Seminar Sing up

（ ? ）

Request for Application forms or Product brochures

Phone: → XXX - XXXX - XXXX Chat: → Ask now Videophone: → Connect now

※ It may take time to connect

Reservation for Consultation at branch

Incomplete procedures: Mutual fund a/c opening Please return documents by post. → Material request NISA A/C opening My Number registration is not completed. → Doc. upload

Please update your address.

Email address is not yet registered with us.

Online seminar starts soon

＜Today’s Seminarど What happens to US employment data. ～

→ Enter

＜Message from the Bank rep

Thank you for your visiting our branch. Feel free to contact me if you have any question. Kudo

My Page

New communication beyond time and space

Seamless collaboration with sales-force workflow

Important info retrieved from CRM to display here Event notice for individual customer (Recommend)

Status retrieved from SF to display here, and induce to & coordinate with the next action

Account details retrieved from core system to display here

Face-to-face communication with the Bank rep

Online seminars through CRM or another system

Individualized message entered by the Bank rep after a sales session at the Bank branch

Next Generation Online Banking – Website Screen Image

13

Smartphone Banking

Nov 2013 Homepage smartphone compatibility upgraded Feb 2014 Smartphone specific banking website launched Mar 2014 Account opening application software provided for Smartphone users May 2014 Application software provided for Smartphones (support app)

Aug 2015 Foreign currency transaction application software provided for Smartphones Apr 2016 Mutual fund transaction via Smartphones started Sep 2016 FX transaction application software provided for Smartphones

【A/C opening app】 【Support app】

【FCY deposit app】 【FX app】

Timeline Establishing Smartphone-banking Environment & Functions

Timeline of Improving Smartphone-banking Functions

2014/7 2014/9 2015/3 2015/9 2016/3

Number of PowerDirect Logins via Smartphone (monthly total)

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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.