The Hyakugo Bank, Ltd.
First Section of TSE and First Section of NSE (8368)
INFORMATION MEETING
Presentation for FY2018 Financial Results May 31, 2019 Table of Contents
Strengthening Integrated Financial Effects of Road Construction on Mie’s Economy Service Capabilities ………… 33 Effects of Road Construction on Rebuilding the Securities Portfolio ………… 34 Mie’s Economy ………… 4 Detailed Review of Cost Structure ………… 35 Outline of Financial Position Organizational/Personnel Innovation Summary of Financial Results ………… 8-16 FY 3/2020 Forecasts (published figures) ………… 17 Promoting Diversity ………… 36 Review of the Previous Medium-term Management Optimizing the Branch Network ………… 37 Plan: “Next COMPASS 140” Achievements in Three Priority Areas ………… 19 Branch Strategy and Personnel Planning ………… 38 The Medium-term Management Plan: IT & Digital Innovation ………… 39 Results for Key Numerical Targets ………… 20 Status of Operating Income from Services to Customers Initiatives for ESG/SDGs ………… 40 (published figures) ………… 21 New Medium-term Management Plan Appendix “KAI-KAKU 150 1st STAGE—Gateway to the Future" Long-term Vision Deposits and Loans ………… 42 Long-term Vision and Five Future Goals ………… 23 Deposits (including negotiable certificates of deposit), Depository Assets ………… 43 Timeline for Realizing the Vision of the Bank Loans ………… 44 within 10 Years ………… 24 Milestones Toward Realizing the Long-term Vision ………… 25 Risk-monitored Loans ………… 45 Integrated Risk Management ………… 46 Gateway to the Future Outstanding Nonperforming Loans Overview of the New Medium-term Management Plan ………… 26 by Disclosure Standard and Coverage ………… 47 Numerical Targets (General) ………… 27 Trends of Debtor Classification ………… 48
Profit Structure Innovation Hyakugo Bank’s Credit Policies ………… 49
Strengthening Loan Income ………… 28-30 Mie Prefecture’s Shares of Deposits and Loans ………… 50
Strengthening Fees and Commissions ………… 31-32 Group Companies ………… 51 2 Effects of Road Construction on Mie’s Economy Effects of Road Construction on Mie’s Economy
Maibara JCT Yoro JCT
Daian IC Tokai-Kanjo Expressway Shin-Yokkaichi Toin IC Nagoya-Nishi Meishin JCT JCT Expressway Komono IC Isewangan Suzuka PA Yokkaichi Expressway Smart IC Shin-Meishin JCT Kameyama- Expressway Nishi JCT (routes running in Higashi Meihan Mie Prefecture) Expressway
Kusatsu JCT Kameyama JCT
Number of occurrences of traffic congestion Time required to drive on the Higashi Meihan Expressway between junctions (Yokkaichi JCT – Kameyama JCT) 45 min 1.279 times
Approx. Reduction 90% of up to reduction 25 min 20 min
Before opening of After opening of Before the opening of After opening of Shin-Meishin Expressway Shin Meishin Expressway Shin Meishin Expressway Shin-Meishin Expressway (2017) (expected) (with congestion on a (with no congestion) holiday) * Source: Website of Central Nippon Expressway Company Ltd. 4 Effects of Road Construction on Mie’s Economy
Development of industrial park anticipating opening of the Manufacturing industries are flourishing in Mie Prefecture Shin-Meishin Expressway
2015 2016 2017 2018 ※Prepared based on data on factory location trends by year Yamazaki Mazak Manufacturing Hamaotome and area released by Mie Prefecture 5 Effects of Road Construction on Mie’s Economy
Economic benefits of extending the Tokai-Kanjo Expressway Areas along the Tokai-Kanjo Expressway (Inabe-shi)
Maibara Yoro Gifu Daian Inabe-shi Prefecture Tokai-Kanjo Expressway Nagoya-Nishi Toin Meishin Yokkaichi Komono IC
Shin- Isewangan Suzuka PA Yokkaichi Expressway Mie Aichi Smart IC Shin-Meishin Prefecture Daian IC Prefecture (routes in Mie Prefecture) Higashi-Meihan
Kusatsu Kameyama- Kameyama Industrial park Nishi complexes Toin IC Tokai-Kanjo Expressway Shin- Yokkaichi
Number of companies that have located Number of employees at companies their factories in industrial park located in industrial parks
Approx. (Unit: number of companies) Approx. (Unit: persons) 1.8 times 46 1.2 times 13,200 11,200 26
Relocation and construction of new Inabe 1996 2018 1996 2018 Branch (May 27, 2019) (Before start of (before start of construction) construction) 6 Outline of Financial Position Outline of Financial Position Summary of Financial Results
A decrease in gain and loss from stocks and other securities and an increase in credit costs caused net income to decline 1.7% year-on-year (Unit: million yen) Comparison with the FY 3/18 FY 3/19 Change Gross operating income (Million yen) Medium-term Management Plan Gross operating income (1) 51,753 55,131 3,378 The Medium-term Management Plan 551,609 Interest income 48,108 49,388 1,279 targets Fees and commissions 106.8% 8,628 9,300 671 FY 3/19 (actual) 55,131 Other operating income (4,983) (3,556) 1,426 Of which, gain and loss from government bonds and other (2) (2,785) 70 2,855 Net operating income bonds The Medium-term Provision of general allowance for (3) － Management Plan 7,947 loan losses (574) (574) targets Expenses (4) 41,216 40,987 (229) FY 3/19 (actual) 14,718 185.2% Net operating income (1) – (3) – (4) 10,536 14,718 4,181
Core net operating (1) – (2) – (4) 13,322 14,073 751 Ordinary income income The Medium-term Non-recurring gain and loss Management Plan 9,124 4,995 304 (4,690) targets Of which, disposal of bad debts (5) 166 1,387 1,221 164.7% FY 3/19 (actual) Reversal of allowance for doubtful 15,023 accounts (6) 1,526 － (1,526) Gain and loss from stocks and other 4,318 1,665 (2,652) Net income securities The Medium-term Ordinary income 15,531 15,023 (508) Management Plan 6,529 targets Extraordinary gain and loss (154) (177) (22) 164.9% FY 3/19 (actual) 10,766 Net income before income taxes 15,377 14,845 (531) Net income 10,956 10,766 ▲190 • Net operating income increased due mainly to increases in interest income and Credit costs (3) + (5) – (6) (1,360) 812 2,173 other operating income. • Each profit item significantly overachieved the Medium-term Management * Part of dividend income of insurance reported under “Non-recurring gain and loss” in the previous fiscal year has been reported under “Fees and commissions” and “Expenses” from the current fiscal Plan’s targets. year, and the figures for the previous fiscal year have been reclassified accordingly. 8 Outline of Financial Position Interest Income
An increase in interest on loans contributed to an increase in interest income of 2.7% year-on-year
(Unit: million of yen) Factors behind increase/decrease in interest income
FY 3/18 FY 3/19 Change (Unit: million yen) Loans Deposits Securities Interest income 48,108 49,388 1,279Total interest income 53,153 54,044 891 + 2,150 + 137 (1,270) Loan interest 31,938 34,089 2,150 +2,744 Interest and dividends 20,061 18,791 (1,270) +170 on securities (594) (33) Other 1,152 1,164 11 +262 +2 Interest expenses 5,045 4,657 (388) Other (1,272) Interest on deposits 1,137 999 (137) balance factor balance Average
Other 3,908 3,657 (251) factorYield Yield on loans 48,108 (head office and all branches) 49,388 Deposit-loan yield margin (domestic operations departments) 1.06% 1.05% minus 0.01P Loans 1.22% Deposits 1.15% 1.05% 1.00% +1,279 million yen 0.91% 1.17% 1.10% 1.02% FY 3/18 FY 3/19 0.98% 0.90% Historical overall profit margin ＜Head office and all branches (including domestic 0.05% 0.05% 0.03% 0.02% 0.01% and international operations departments)> Returns on securities investments (domestic operations departments) 0.22% +0.08 P 1.03% 1.02% 0.14% 0.93% 0.95% 0.94% 0.08% 0.08% 0.08% FY 3/15 FY 3/16FY 3/17 FY 3/18 FY 3/19 FY 3/15 FY 3/16FY 3/17 FY 3/18 FY 3/19 9 Outline of Financial Position Fees and Commissions
An increase in housing loan handling fees and insurance sales commissions, etc. contributed to an increase in fees and commissions of 7.8% year-on-year
(Unit: million yen) Fees and commissions graph (non-consolidated) (Unit: million yen) +671 9,300 FY 3/18 FY 3/19 Change Depository Consulting-related 787 Fees and commissions 8,628 9,300 671 assets-related 8,628 Other 740 Fees and commissions 12,714 13,816 1,102 7,521 7,390 2,032 Commissions related to depository 7,150 646 assets 2,109 2,032 (76) 486 750 2,109 Investment trust commissions 1,080 820 (259) 2,162 Insurance sales commissions 931 1,143 211 2,029 2,032 Financial instruments brokerage 6,479 commissions 96 68 (28) 5,778 Consulting-related commissions 740 787 46 4,712 4,608 Housing loan handling fees 1,593 2,498 904 4,634 Fees and commissions expenses (expenses) 4,085 4,516 430 Of which, payment of housing loan guarantee and insurance premium, etc. 2,405 2,972 566 (expenses) * Part of dividend income of insurance reported under “Non-recurring gain and loss” in the previous FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 fiscal year has been reported under “Housing loan guarantee and insurance premium, etc.” from the current fiscal year, and the figures for the previous fiscal year have been reclassified accordingly. Commissions related to depository assets (Hyakugo Bank + Hyakugo Securities) (Unit: million yen) Housing loan handling fees (Unit: million yen) Hyakugo Bank Hyakugo Securities 2,498 (after excluding the Bank’s brokerage amount) 3,548 3,316 3,321 3,133 3,018 Year-on-year 1,439 1,286 1,159 1,100 1,593 Increase of 904 985 million yen 1,237 (up 56% ) 1,026 1,192
2,029 2,162 2,032 2,109 2,032
FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 10 Outline of Financial Position Expenses
Expenses decreased 0.6% year-on-year due mainly to a decrease in non-personnel expenses. OHR declined 1.14P year-on-year
Non-personnel Personnel (Unit: million yen) Expenses and core OHR taxes expenses expenses (Unit: million yen) OHR (core gross profit basis) FY 3/18 FY 3/19 Change 80.24% Expenses 41,216 40,987 (229) Minus Personnel 78.14% 22,589 22,644 55 1.14 P expenses 77.40% Non-personnel 16,465 16,305 (159) expenses 75.57% 43,013 74.43% Taxes 2,161 2,037 (124) 1,762 42,447 41,786 2,732 41,216 * Part of dividend income of insurance reported under “Non-recurring gain and loss” in the 2,104 40,987 previous fiscal year has been reported under “Personnel expenses” from the current fiscal 2,161 year, and the figures for the previous fiscal year have been reclassified accordingly. 2,037 17,109 16,430 16,671 16,465 Major factors underlying decrease in expenses 16,305 Non-personnel expenses Supplies expenses (PC and office equipment, etc.) (128) million yen Maintenance and management expenses (126) million yen 24,140 23,285 23,010 22,589 22,644 Deposit and insurance premiums (89) million yen Taxes Consumption tax (100) million yen FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 11 Outline of Financial Position Credit Costs (nonperforming loans ratio)
An increase in the provision of allowance for specific loan losses caused a year-on-year increase in credit costs
(Unit: million yen) Credit costs (non-consolidated) Provision of specific allowance (Unit: million yen) FY 3/18 FY 3/19 Change Other for loan losses Loss on sale of receivables Provision of general allowance Credit costs (1,360) 812 2,173 and other securities for loan losses Of which, provision of general Credit cost ratio (*) (603) (574) 29 0.09% allowance for loan losses 0.08% Of which, provision of specific allowance for loan losses (*) (923) 943 1,866
Of which, loss on sale of － 291 291 0.04% receivables and other securities 0.02% Credit cost ratio (0.04)% 0.02% 0.06 Ｐ 2,894 (0.04)% * Before reversal of allowance for loan losses 2,298 136 March-end March-end 173 33 Change 2018 2019 108 Nonperforming loans 52,454 52,250 (204) 3,194
Nonperforming loans coverage ratio 1,327 812 2,896 203 152 80.92% 219 291 79.70% 79.12% 79.15% 78.38% 904 (1,360) 943 166 Nonperforming loans ratio (470) (879) (574) 2.39% (923) 2.13% 2.04% 1.67% 1.50% (603) FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 12 Outline of Financial Position Deposits (including negotiable certificates of deposit)
Individual deposits and corporate deposits both remained strong, increasing total deposits 3.7% year-on-year
(Unit: 100 million yen) Total deposits (average balance) (Unit: 100 million yen) FY 3/18 FY 3/19 Change Tokyo and Osaka 49,929 Total deposits 267 (average balance) 48,141 49,929 1,787 Aichi Prefecture Mie Prefecture 48,141 Mie Prefecture 43,261 44,687 1,425 235 4,973 46,961 Aichi Prefecture 4,644 4,973 329 46,584 260 Aichi Prefecture 345 An increase of Tokyo and Osaka 235 267 32 45,196 32.9 billion yen 336 4,644 year-on-year (Unit: 100 million yen) 4,497 (7.1%) 4,255 FY 3/18 FY 3/19 Change 3,980 Individual deposits (average balance) 36,056 36,979 922 Mie Prefecture 33,487 34,271 783 Aichi Prefecture 2,548 2,688 139 Tokyo and Osaka 20 20 (0) 44,687 (Unit: 100 million yen) 43,261 41,983 42,204 FY 3/18 FY 3/19 Change 40,879 Mie Prefecture An increase of Corporate deposits 9,764 10,244 479 142.5 billion yen (average balance) year-on-year Mie Prefecture 7,621 7,974 352 (3.3%) Aichi Prefecture 1,929 2,025 95 Tokyo and Osaka 212 244 31 FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 * Mie Prefecture includes Shingu and Internet branches. 13 Outline of Financial Position Loans
Individual loans such as housing loans and loans to medium-sized companies and SMEs increased, resulting in an 8.8% increase year-on-year in total loans
(Unit: 100 million yen) Total loans (average balance) (Unit: 100 million yen) Tokyo and Osaka Aichi Prefecture Mie Prefecture FY 3/18 FY 3/19 Change Share of loans to medium-sized companies/SMEs in total loans (Ending balance of medium-sized companies/SMEs 71.15% Total loans including individuals and public corporations) 70.58% (average balance) 29,848 32,462 2,613 68.92% 32,462 66.29% Mie Prefecture 16,043 16,499 456 63.37% Aichi Prefecture 29,848 7,931 9,272 1,340 6,691 29,058 Tokyo and Osaka 5,874 6,691 816 28,387 5,874 (Unit: 100 million yen) 27,431 6,081 9,272 FY 3/18 FY 3/19 Change 6,211 5,690 Loans to SMEs Aichi Prefecture (average balance) 11,285 11,994 708 An increase of 7,931 134.0 billion yen Mie Prefecture 6,771 7,033 261 Year-on-year 7,254 (16.9%) Aichi Prefecture 2,950 3,124 173 6,691 6,382 Tokyo and Osaka 1,562 1,835 272 16,499 (Unit: 100 million yen)
FY 3/18 FY 3/19 Change Mie Prefecture 16,043 An increase of 15,722 45.6 billion yen Housing loans 15,358 15,484 (average balance) 8,908 10,258 1,350 Year-on-year (2.8%) Mie Prefecture 5,390 5,743 353
Aichi Prefecture 3,518 4,514 996 FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 * Mie Prefecture includes Shingu and Internet branches 14 Outline of Financial Position Securities Investments
Decrease in share prices caused valuation gains (losses) on securities to decline 7.6% from the end of the previous fiscal year Government Municipal Corporate (Unit: 100 million yen) FY 3/18 FY 3/19 Change Shares Securities balance bonds bonds bonds Securities balance 17,886 17,414 (472) (Unit: 100 million yen) Investment Foreign Other Government bonds 5,948 5,416 (531) trusts securities Municipal bonds 3,901 3,653 (248) 21,438 Minus 472 10 20,013 20,493 Corporate bonds 4,006 3,362 (643) 2,651 14 27 Shares 1,932 1,826 (106) 544 2,630 3,222 17,886 36 17,414 1,794 865 42 Investment trusts 1,195 1,319 124 935 963 1,195 1,792 1,623 1,750 Foreign securities 865 1,792 926 1,932 1,319 5,612
FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/15 FY 3/16 FY 3/17FY 3/18 FY 3/19 * Including trust beneficiary rights 15 Outline of Financial Position Equity Ratio
An increase in risk assets, resulting from an increase in loans, etc., caused the equity ratio to decline 0.53 percentage points year-on-year (Unit: 100 million yen) Equity capital, shareholders’ equity, and equity ratio (Unit: 100 million yen) Computation method of Standard Fundamental internal rating- Equity capital Shareholders’ equity* Equity ratio credit risk asset value approach based approach Fundamental internal rating-based March-end March-end March-end Standard approach As of approach 2017 2018 2019 (SA) (FIRB) Equity capital (For equity ratio calculation 2,329 2,244 2,285 purposes) Risk Assets 24,451 21,839 23,458 10.27% Equity ratio 9.52% 10.27% 9.74% (JGAAP) 9.74% (JGAAP) Shareholders’ equity* 2,354 2,443 2,530 9.52% 2,530
Method of computing value-at-credit-risk : Standard approach (until 3/2017) 2,443 FIRB (from 9/2017) Method of computing value-at-operational risk : The Standardized Approach (TSA) 2,354 2,329 Benefits of introducing FIRB 2,285 2,244
Sophisticated management of risk and Revision of equity equity capital capital computation method due to the introduction of FIRB Achieves Enhances financial financial health intermediary capability March-end 2017 March-end 2018 March-end 2019 * Shareholders’ equity is not affected by a change in the computation method of credit risk asset value. 16 Outline of Financial Position FY 3/2020 Forecasts (published figures)
Net income is forecast to decrease due mainly to an increase in costs. Dividends will be maintained at the previous year’s level and include the 140th commemorative dividend.
Forecast (non-consolidated) (Unit: million yen)
FY 3/19 FY 3/20 (forecast)
Gross operating income 55,131 52,700 Interest income 49,388 50,000 Fees and commissions 9,300 9,100 Other operating income (3,556) (6,400) Net operating income 14,718 10,600 Ordinary income 15,023 11,000 Net income 10,766 9,600
Consolidated net income attributable to shareholders of the parent (consolidated) 10,843 10,000
Dividend forecast
Interim Year-end Full year
4.50 yen 4.50 yen 9.00 yen
17 Review of the Previous Medium-term Management Plan:
“Next COMPASS 140”
Maintaining Our Solid Position Toward the Next Stage Review of the Previous Medium-term Achievements in Three Priority Areas Management Plan
Review of “Next COMPASS 140:” Maintaining Our Solid Position Toward the Next Stage
Employee awareness survey Interest income + Ratio of employees 80.5 % 1.9 * Comparison with FY 3/16 who have job satisfaction Work-style Reforms billion yen 80.5% Topline Innovation 49.3 billion yen 77.7% 47.4 billion yen
FY 3/17 FY 3/19 FY 3/16 FY 3/19 Total overtime Reduction by work hours Fees and *Compared to FY 3/16 16.8 % commissions +1.8 * Comparison with FY 3/16 billion yen 477,830 hrs. Three Points of Focus 9.3 billion yen 397,284 hrs. 7.5 billion yen
Supporting and growing FY 3/16 FY 3/19 together with the region FY 3/16 FY 3/19
Number of Number of consultation on 852 clients which 2,167 business succession cases underwent business assessment companies Consultation on M&A 852 cases 2,167 companies Consultation on business succession 427 328 cases 630 companies 135 425 193
FY 3/16 FY 3/19 FY 3/16 FY 3/19 19 Review of the Previous The Previous Medium -term Management Plan: Medium-term Management Plan Results for Key Management Indicators
The Bank performed favorably during the three-year period covered by the previous Medium-term Management Plan, with a significant increase in deposits and loans, and achieved most numerical targets. Results for Key Management Indicators The previous medium-term management plan period Change over the Item FY 3/16 FY 3/19 three-year Topics (results) (results) period Average balance of Average balance of housing loans total deposits 4,658.4 4,992.9 +334.5 billion yen (Unit: 100 million yen) (including negotiable billion yen billion yen Increase rate 7.1 % Growth certificates of deposit) 2,749 10,258 potential Average balance of 2,838.7 3,246.2 +407.5 billion yen loans billion yen billion yen Increase rate 14.3 % 7,509 Exceeded 1 trillion yen Core net operating 11.8 14.0 +2.2 billion yen Profitability income billion yen billion yen Increase rate 18.6 % FY 3/16 FY 3/19 Compared with ROE (*) the Medium- % % term + P (Shareholders’ equity base) 5.90 4.32 Management 1.62 Balance of loans in Aichi Prefecture Plan targets (Unit: 100 million yen) Efficiency 3,287 10,191 Core OHR (Core gross operating 78.14 % 74.43 % Improvement of 3.71 P income base) 6,904 Capital adequacy Obtained FIRB approval Exceeded Achieved sophisticated ratio (SA) % (FIRB) % 1 trillion yen Soundness (Based on full 9.14 9.30 risk and equity capital implementation of Basel III) management
(*) temporary factors: Posted gain on redemption of retirement benefit trust March-end 2016 March-end 2019 of 3.6 billion yen in FY 3/16. 20 Review of the Previous Status of Operating Income from Services to Medium-term Management Plan Customers (published figures)
Moved operating income from services to customers into the black
Turnaround of operating income from services to customers Change in average balance of loans and Change in fees and Change in operating deposit-loan yield margin commissions (Unit: million yen)expenses (Unit: million yen) Average balance Deposit-loan yield margin (all departments) of loans (100 million yen) 9,300 32,462 42,949 8,628 42,486 1.10% 29,848 29,058 7,521 41,288 7,390 41,190 28,387 1.05% 1.04% 1.03%
Increases in corporate loans and Productivity improvement project Increase in consulting commissions housing loans 2017
FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/16 FY 3/17 FY 3/18 FY 3/19
Changes in operating income from services to customers (Unit: 100 million yen) 37 Further growth of profit in core 15 businesses 0
(24) Turned (26) Execution of new positive (49) Medium-term Management Plan FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/22
Operating income from services to customers Average balance of loans x (interest rate on loans - interest on deposits, etc.) + fees and commissions - operating expenses (including retirement benefit expenses in extraordinary gain and loss) 21 New Medium-term Management Plan: KAI-KAKU 150 1st STAGE— Gateway to the Future
—Aiming to Transform into a Digital & Consulting Bank— Long-term Vision Long-term Vision and Five Future Goals
Five Future Goals
Digital & consulting bank that opens up the future to Long-term vision customers and the region
Envision the future to be realized from the perspectives of our five stakeholders based on fulfilling our social roles (ESG and SDGs).
Customers’ perspective Maximize benefits of financial intermediary capability and provide high-quality consulting solutions.
The Bank’s perspective Regional perspective Five future Establish solid management foundations by Contribute to the development of the building a sustainable business model and goals to be regional economy by creating new value and ensuring stable profits and soundness. pursued become a vital resource of the region.
Shareholders’ perspective Employees’ perspective Aim to increase share price, market Create workplaces where employees can fulfill capitalization, ROE, and shareholder returns their potential to the maximum and experience through sustainable growth and enhancing job satisfaction from being appreciated by corporate value. customers.
23 Long-term Vision Timeline for Realizing the Vision of the Bank within 10 Years
After three years building the foundation, the Bank will shift to a sustainable business model and realize the vision of the Bank within 10 years Vision of the Bank within 10 years (numerical targets) Item Core OHR Capital adequacy ratio Net income
Targets In the 60% range 10% or more 15.0 billion yen or more
Previous Medium- After 10 term Management 1st STAGE of Innovation 2nd STAGE of 3rd STAGE of Plan Next Medium-term Management Innovation Innovation years The 140th Plan (FY2019-2021) The 150th anniversary FY2022-2024 FY2025-2027 anniversary
Tough external environment • Negative interest rates Realizethe Vision of • Downsizing of regional market Course of events • Entries from other industries/shift with innovation to cashless society the Bankthe Impacts of innovations on boosting Natural course of earnings events
Factor for temporary profit decline
Strategic IT investment to improve efficiency
First year Three years of building the Three years of adopting Three years of accelerating Sustainable of innovation foundation aggressive strategies growth business model 24 Long-term Vision Milestones Toward Realizing the Long-term Vision
Steadily achieve the milestones set to realize the vision of the Bank within 10 years
Previous After Timeline/ Medium-term 1st STAGE of 2nd STAGE of 3rd STAGE of Management Plan Innovation Innovation Innovation 10 years Target item The 140th The 150th anniversary FY2019-2021 FY2022-2024 FY2025-2027 anniversary FY2018 FY2021 FY2024 FY2027 FY2028 (actual) (targets) (targets) (targets) (targets)
Net income 10.7 billion 10.0 billion 12.0 billion 14.0 billion 15.0 billion yen yen or more yen or more yen or more yen or more
Less than Approx. Approx. In the % Core OHR 74.4 % 60 79 % 75 % 70 % range
Market share of 36.8 % Approx. Approx. Approx. loans in Mie 41 % or (*as of % % % Prefecture September 2018) 39 40 41 more
Number of personnel with 161 300 450 600 650 persons or persons or persons or persons or professional persons qualifications more more more more Number of personnel with professional qualifications 1st Grade Certified Skilled Professional of Financial Planning, CFP, Small and Medium Enterprise Management Consultant Three years of Three years of building Three years of adopting aggressive the foundation accelerating growth strategies 25 Gateway to the Future Overview of the New Medium-term Management Plan
Overview of the Medium-term Management Plan “KAI-KAKU 150 1st STAGE—Gateway to the Future” comprising three reform measures and 14 basic strategies
Three innovation measures 14 basic strategies
(1) Strengthen topline (loan income) Profit Structure Profit (2) Strengthen topline (fees and commissions) Profit Structure (3) Develop new businesses/new fields
innovation ESG/SDGs for Initiatives (14) (4) Rebuild securities portfolio
Strengthen Integrate physical (5) Thoroughly review cost structure consulting (face-to-face sales)
solutions And digital channels Organization/ (6) Reform organizational culture (promote
personnel diversity) Create new value (7) Increase efficiency of Improve organization/personnel productivity (8) Develop professional human resources further (9) Strengthen business management system Organizational/ IT & digital (10) Mobile channel strategy personnel &digital IT innovation innovation (11) New business strategy Streamline (12) Operations digitization strategy organization/ personnel (manpower savings) (13) Branch office digitization strategy
26 Gateway to the Future Numerical Targets (General)
We set numerical targets designed to further strengthen the Bank’s management structure over three years in order to build the foundation while looking 10 years into the future.
Numerical Targets of the Medium-term Management Plan Final year Item FY 3/19 (actual) FY 3/22 (target)
Target achievement Profitability Net income 10.7 billion yen 10.0 billion yen or more indicator indicators Capital efficiency ROE (Shareholders’ equity base) 4.32% 3.7% or more indicator
Efficiency indicator OHR (Core gross operating profit base) 74.43% Less than 79%
Soundness Capital adequacy ratio 9.74% 9.5% or more indicator Average balance of total deposit 5,230 billion yen or (including negotiable certificates of deposit) 4,992.9 billion yen
Performance evaluation more 3,700 billion yen or Average balance of total loans 3,246.2 billion yen Growth indicator more indicators Loan-to-deposit ratio (average balance base) 65.0% 70.8% or more Operating income from services 1.5 billion yen 3.7 billion yen to customers Profit indicator Corporate solutions fees 941 million yen 2,000 million yen Number of personnel with Human resources 161 persons 300 persons development indicator professional qualifications 27 Gateway to the Profit Structure Innovation Future Strengthening Loan Income (General)
Increase average balance of loans, such as loans to local medium-sized companies/SMEs and consumer loans, by approx. 500 billion yen.
JPY-denominated loans Average balance plan Total loans Average balance plan Loans to medium-sized companies Consumer loans (Unit: 100 million yen) (Unit: 100 million yen) and SMEs in the region JPY-denominated Foreign currency (Unit: 100 million yen) Housing loans Unsecured loans loans -denominated loans +111.6 +347.2 + 458.1 14,102 37,043 billion yen 11,841 billion yen Average billion yen 492 annual rate: +10.7% 2,146 10,725 10,630 32,462 372 13,610 Average Average annual rate: Average 1,617 annual rate: +10.9% annual rate: +3.4% 10,258 +10.8% 34,897 30,845 FY 3/19 FY 3/22 FY 3/19 FY 3/22 Average annual rate: Foreign currency-denominated loans Average balance plan +4.3%
• Increase average balance of loans by approx. 50.0 billion yen by further strengthening the operation system and based upon careful risk analysis. • Provide loans for excellent floating-rate loan deals that offer reasonable spreads. FY 3/19 FY 3/22
Improve loan-to-deposit ratio
FY 3/22 FY 3/19 (actual) (final year of the Medium-term Comparison with FY 3/19 Management Plan) Loan-to-deposit ratio 65.0% 70.8% or more +5.8P or more 28 Gateway to the Profit Structure Innovation Strengthening Loan Income Future (Loans to Medium-sized Companies and SMEs)
Deepen business feasibility assessment to further strengthen financial intermediary capability and increase market share for loans. Toward More Sophisticated Business Feasibility Assessments Change in volume of loans to medium-sized companies/SMEs in the region (average balance) (Unit: 100 million yen) Client supporting project Loans to medium-sized companies/SMEs in Aichi Prefecture 11,841 Improve level of business feasibility (average balance during the fiscal year) assessment activities Loans to medium-sized companies/SMEs in Mie Prefecture 3,755 (average balance during the fiscal year) 10,725 Previous business feasibility assessment activities 10,289 3,354 Place emphasis on identifying current status ・ Business feasibility 9,925 3,166 assessment 8,086 Prepare the business feasibility assessment sheet/ 2,957 ・One-on-one client 7,371 support improving financial position support activity 7,123 Allowing execution of loans based on different ・Cash flow support loans, 6,968 criteria etc.
Support for core FY 3/17 FY 3/18 FY 3/19 FY 3/22 businesses Win support
Change in the loan balance based on business Propose solutions for enhancing Become their feasibility assessment and number of clients who corporate value main bank Branches Head office External received a business feasibility assessment Establish Group institutions Balance of loans based on sustainable the business feasibility assessment 2,167 clients (Unit: 100 million yen) Number of clients who received a Collaboration business business feasibility assessment transactions FY 3/19 1,635 clients 3,721 Average yield on 1,051clients loans based on 3,068 business 630 clients feasibility Achieve differentiation and superiority in loan 2,389 assessment transactions 1,616 1.26 % JPY-denominated loans (average yield) Expand share of Strengthen loan 0.91% loans income
FY 3/16 FY 3/17 FY 3/18 FY 3/19 29 Gateway to the Profit Structure Innovation Future Strengthening Loan Income (Housing Loan Strategy)
Improve sales force and productivity to establish a system that secures an annual loan volume of 200 billion yen.
Housing loan promotion measures and numerical targets Single-year execution of housing loans (Unit: 100 million yen) Annual execution of Strengthen Strengthen Competitive housing loans schemes of training for interest rates 2,354 moneylenders sales force Ensure steady execution of housing loans of 1,636 200 billion yen or more 1,238 Review administrative Centralize 1,120 Strengthen procedures back-office promotion of Accumulated strong work to the Flat 35 loans Streamline Head Office sales know-how operations During Medium-term FY 3/16 FY 3/17 FY 3/18 FY 3/19 Management Plan period
Average balance of housing Average rate of 10.8 loans (plan) (Unit: 100 million yen) increase over three years % 13,610 Aichi Annual rate of 12,633 Enhance promotion increase measures Prefecture 11,525 15.1 % p.a. 10,258
8,908 8,146 Mie 7,509 Prefecture Consider reorganization Shift personnel to the of personal plaza Bank’s operations in Aichi Prefecture
FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/20 FY 3/21 FY 3/22 (plan) (plan) (plan) 30 Gateway to the Profit Structure Innovation Future Strengthening Fees and Commissions (Corporate Solutions Fees)
Enhance offerings of solutions and support system to address customers’ management issues and strengthen non- interest income Corporate solutions fees
Number of cases of business Change in issue amount of (Unit: million yen) succession consulting support provided private placement bonds 4,790 Issue amount of private placement bonds (Unit cases) 3,950 Number of cases of consultation on Of which, issue amount of donation-type business succession provided private placement bonds 425 2,060 423 Newly established 2,010 4,790 million yen 1,330 425 cases 286 Solution Business Division (Results as of March 31, 2019) (Results as of March 31, 2019) 50 Personnel in charge of FY 3/17 FY 3/18 FY 3/19 corporate customers FY 3/17 FY 3/18 FY 3/19 staff Number of business matching Personnel in charge of 60 individual customers organization Structured finance-related fees meetings held 1,343 (Unit: million yen) (Unit: cases) 381 312 1,343 cases 762 381 million yen 311 (Results as of March 31, 2019) 421 (Results as of March 31, 2019) FY 3/17 FY 3/18 FY 3/19 FY 3/17 FY 3/18 FY 3/19
Corporate solutions fees (plan) (Unit: Million yen) Comparison with Breakdown for FY 3/22 FY 3/22 (plan) (Unit: million yen) FY 3/19 +1,059 2,000 M&A 630 +422
1,554 Structured finance-related 478 +96 1,139 Business matching 300 +215 941 Derivatives 240 +189 Private placement bonds 150 +90 IT & digital-related 20 +20 FY 3/19 FY 3/20 FY 3/21 FY 3/22 Other 182 +24 (actual) (plan) (plan) (plan) 31 Gateway to the Profit Structure Innovation Strengthening Fees and Future Commissions (Depository Assets-related Fees)
Make customer-oriented proposals for depository assets according to their needs in order to increase the penetration ratio of depository assets and strengthen depository assets-related fees Depository assets sales strategy to increase penetration ratio Trend of depository assets penetration ratio (combined total of the (Unit: 100 million yen) Depository assets Bank and Securities) and plan Total balance of deposits (as of fiscal year-end) Depository assets penetration ratio * excluding negotiable certificates of deposit penetration ratio 50,988 Balance of depository assets (as of fiscal year-end) Depository assets penetration * combined total of the Bank and Securities 50,270 ratio (%) 49,552 5.27% = 48,829 5.08% Balance of depository assets Total balance of deposits + 4.88% 2,834 Balance of depository assets 4.41% 2,689 2,544 Integrated management of deposits and depository 2,255 assets through collaboration between the Bank and Securities FY 3/19 FY 3/20 FY 3/21 FY 3/22 (plan) (plan) (plan) Sales system and change of awareness Numerical targets for depository assets-related fees (Unit: million yen) Based on customer- FY 3/19 FY 3/22 Increase Allocation of sales oriented principle (actual) (plan) force by segment Investment trusts 820 1,176 +356 New sales system based on collaboration Propose importance Insurance 1,143 1,496 +353 of asset formation between the Bank and Financial instruments Securities brokerage 68 225 +157 Improve 401K 79 100 +21 efficiency of insurance Shift from deposits to (defined contribution pension) consultation service asset formation locations Total 2,110 2,997 +887 32 Gateway to the Profit Structure Innovation Future Strengthening Integrated Financial Service Capabilities
Provide new financial service capabilities to establish a presence and ensure a sustainable competitive advantage in the sales area Integrated financial service capabilities Non-financial support ( support in core businesses)
Business matching Formulate Support for Hands-on support in Industry- management overseas core businesses academia- improvement business (Collaboration with government plans development consulting firms) collaboration
The Bank’s M & A Specialization: Existing Diversification Specialization: Low into new fields High Utilize services subsidies Business Know-how: Differentiation from Know-how: succession Syndicated other banks High Low measures loans Private placement bonds Support through Liquidation of funds Loans claims (Establish the Bank’s own funds)
Financial support 33 Gateway to the Profit Structure Innovation Future Rebuilding the Securities Portfolio
Aim to rebuild the Bank’s portfolio in order to earn stable income by reinvesting proceeds from large volumes of redemptions of JPY-denominated bonds and secure income Investment policy by investment target Investment target Future investment policy Direction JPY-denominated • Under the negative interest rate policy, the Bank will reduce JPY-denominated bond bonds investments. Foreign currency- • The Bank will mainly invest in high-liquidity bonds, such as Ginnie Mae bonds and denominated bonds European government bonds. • The Bank will maintain the balance at its current level and buy and sell individual Securities stocks flexibly while capturing the right timing.
• The Bank will increase investment trust holdings depending on timing from the Investment trusts, etc. perspectives of both income and capital gains.
Plan for the securities portfolio Change in average balance of JPY-denominated Foreign currency- securities bonds denominated securities Shares Investment trusts, etc. Alternative investment targets for proceeds 16,904 Other from redemptions of JPY-denominated bonds 45 16,617 40 (500 billion yen) 1,255 (Unit: 100 million yen) 1,721 14,851 771 43 Shift to loans such as loans to medium-sized 826 769 13,910 1,721 46 companies/SMEs and housing loans 1,427 769 1,721 769 1,965 14,004 2,500 Investment stance focusing on RORA/ 12,659 Rebalance into a portfolio that is less 10,352 8,873 susceptible to market fluctuations
FY 3/19 FY 3/20 FY 3/21 FY 3/22 (actual) (plan) (plan) (plan) 34 Gateway to the Future Profit Structure Innovation Detailed Review of Cost Structure
Continue strategic IT investments and productivity improvement project to achieve reductions of expenses in the future Trend of expenses and core OHR and plan
Core OHR (Unit: 100 million yen) 80.24% Less than 79%
75.57%
74.43% Around 75% 417 416 412 Consumption tax, etc. (Taxes) 409 +2.6 22 To 400 (Taxes) Strategic or less Reducing IT investment (Non-personnel 20 expenses expenses) +12 176 (Non-personnel -8.8 expenses) 163 (Personnel expenses) (Personnel 217 expenses) 226 (1) Launch of new branch office system (2) Introduction of tablet PCs (3) Digital transformation of operational processes (4) Consider adoption of smartphone banking, etc.
FY 3/17 FY 3/18 FY 3/19 During the medium-term management plan period FY 3/22 2nd STAGE (plan) (target) 35 Gateway to the Organizational and Personnel Innovations Future Promoting Diversity
Create workplaces that support employees with diverse work styles to achieve their full potential and build an organization that offers job satisfaction and a sense of unity Promoting diversity centered on work-style reforms
Social issues Difficulty in securing human resources due to a decline in working population A growing number of employees need reductions in working hours, etc.
New medium- Diversity Management term Take a step management plan Division further WorkWork-stylestyle Previous Final medium-term Reforms Further enhancement of Corporate value management goal job satisfaction enhancement Break plan Promotion Office away Penetrate organization Foster workplace culture Bring out maximum potential of diverse human • Encourage male • The Work-style employees’ participation resources Reform Declaration in parenting Changing Changing Promote Working long • Work-style • Introduce Promote Promote awareness systems active hours homeworking active active Reforms Award participation participation participation Pillar by persons Other by female by senior “Kaeru Project” with employees employees disabilities • Review internal Dedicated Going home Changing employees meeting • Reduce total overtime early work flow procedure High Support career Establish and review work hours • Promote BPR development, etc. evaluation Foundation systems • Utilize RPA Support work-life balance Promote penetration (parenting/nursing care) of contents
Standard perception Improve productivity through “Kaeru Project” Create an environment that supports (change/go home) diverse work styles
Previous work- Realize work-style reforms Realize diversity management style model Previous Medium-term Management Plan (FY2016-2018) New Medium-term Management Plan (FY2019-2021) 36 Gateway to the Organizational and Personnel Innovations Future Optimizing the Branch Network
Increase efficiency of branch network by eliminating inefficient overlapping of sales areas, while maintaining branch network and convenience for customers
Consolidate functions by adopting branch-in-branch method Downsizing of Sub-branches
Maintain and secure Eliminate overlaps convenience of Distance from Trends of in branches in customers main branches customers and neighboring visiting sales areas No changes to branch code branches branches and account number. Study/ review
Number of branches consolidated 16 branches Rollout of through the branch-in-branch method over three years (1) Limiting the services offered “105 Plaza ” Two branches are (2) Changing 10 branches business hours over three Branch operation with a located in one building years (3) Setting non- small staff business days on (Two employees and two- A branch weekdays four part-timers) A branch B branch Introduced first to Kiyamachi Plaza (one employee and two part- timers) • Limited services offered B branch Newly Cash handling services and established consulting services Sub-branch • Closed during lunch hours 12 ：00 - 13 ：30
Promote improved operational efficiency by downsizing sales force and sharing and transfer of sales know-how. 37 Gateway to the Organizational and Personnel Innovations Future Branch Strategy and Personnel Planning
Set direction of branch strategy and aim for systematic reallocation of personnel while looking 10 years into the future Personnel plan (reallocation) in the Medium-term Management Plan
Optimization and streamlining of Prioritized personnel allocation the Head Office and Branches Three-year toward realizing the basic strategies personnel plan
Work out surplus Reduce the actual Personnel employees workforce by reallocation About about 120 About employees 230 employees 110 employees
Optimization of the BPR of branch Strengthen sales force Increase the sales force branch network operations at branches in the Head Office • Effects of branch • Promote paperless • Increase corporate customer • Solution Business Division consolidation (branch-in- customer liaison operations liaison professionals Also provide training to branch method) • Consolidate back-office • Increase housing loan staff employees of branches • Downsizing of sub-branches operations to Head Office • Open new branches (Aichi Prefecture)
Improve the operational Allocate personnel to Streamline Head Office Strengthen human efficiency of depositary various priority operations resource development assets sales • Internal Head Office trainees measures • Promote digital strategy • Assign person in charge of • Introduce CRM and BI tools • External professional • Promote diversity, etc. each segment • Improve data analysis trainees • Efficient collaboration capability • Send young employees on- between the Bank and loan to companies outside Securities the Bank
38 Gateway to the Future IT & Digital Innovation
The Bank will implement four strategies using IT & digital and create new value and profit opportunities
Four strategies in IT & Digital innovation
Mobile strategy FinTech New business strategy Mobile strategy Enhance smartphone Form alliances banking Collaboration with local “Accessible anytime, anywhere” Enhance API functions communities/other industries Practical use of biometric (face) Cashless payment business authentication IT digital consulting Passbook-less and personal Information collection on new Strengthen points contact of seal-less banking transactions technologies Business model creation New business strategy Provision of new “Creative responses to environmental customer experience New changes” customerswith establishment Digital Innovation Division Operations digital (Digital Strategy Section/ transformation strategy Tsunagaru @ Net Section) “From partial optimization to total optimization” Next-generation branch (flexible deployment) No filling out forms, personal Paperless Branch digital transformation seal-less, and cashless Utilize RPA/AI Safe-less, approval stamp-less, Utilize tablet PCs strategy and paperless Sort out data, utilize data “from clerical work base to consulting Branch digital Operations digital base” transformation strategy BPR transformation strategy
39 Gateway to the Future Initiatives for ESG/SDGs
The Bank will implement the 13 management strategies set out in the Medium-term Management Plan as initiatives for ESG/SDGs and practice sustainable management. E S Priority issues SDGs to be addressed Specific action items G
Provide investments and loans/support for renewable energy- Protecting global and related projects Environ- Provide environmentally sensitive products ment regional environments Conduct forest preservation activities Conduct energy saving, recycling, and CO2-reducing activities
Support regional companies to resolve issues (business succession, etc.) Creating regional Support regional companies to increase added value economy Adapt to and support a cashless, digital society Provide support to individual customers for asset management/inheritance, etc. Conduct customer-oriented business operations
Social Support persons with disabilities to live Sustainably independently/participate in society Conduct contribution activities to support regional societies developing regional Provide support for financial education and asset management societies education, etc.
Promote women’s active participation in workplaces, Work-style reforms employment of persons with disabilities, and work-style Promoting diversity reforms Support development of sophisticated human resources
Strengthening Strengthen corporate governance Govern- Strengthen risk management system ance business management systems Strengthen compliance 40 Appendi ｘ Appendix Deposits and Loans
Deposits (ending balance) (Unit: million yen) Loans (ending balance) (Unit: million yen)
March-end March-end March-end March-end March-end March-end March-end March-end March-end March-end 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Corporate deposits 792,017 817,514 852,381 897,550 940,577 Corporate sector 1,761,131 1,796,820 1,793,112 1,837,194 2,023,492
JPY liquid 515,643 531,742 559,677 607,132 637,719 Large companies 703,672 670,007 615,873 597,913 701,520
Medium-sized JPY time 272,149 280,270 286,610 284,375 296,595 71,858 67,247 65,736 70,576 68,607 companies Foreign currency 4,223 5,501 6,093 6,043 6,261 Small and medium-sized 985,599 1,059,565 1,111,502 1,168,705 1,253,367 companies Individual deposits 3,452,448 3,489,272 3,551,239 3,647,772 3,741,707 Individual sector 788,485 845,213 909,265 1,014,861 1,188,146 JPY liquid 1,636,971 1,685,030 1,798,213 1,900,053 2,000,289 Public corporations 268,388 245,149 238,333 249,991 230,114 JPY time 1,802,285 1,790,090 1,736,663 1,728,979 1,720,154 Governments 6,733 2,862 1,491 120 0 Foreign currency 13,192 14,150 16,362 18,739 21,263 Other 261,655 242,287 236,841 249,870 230,114 Public funds deposits 127,313 108,116 112,305 145,611 165,245 Total loans 2,818,004 2,887,184 2,940,712 3,102,047 3,441,753 JPY liquid 90,014 84,164 81,376 110,241 126,707 (excluding 2,811,271 2,884,322 2,939,220 3,101,926 3,441,753 JPY time 37,298 23,952 30,928 35,370 38,537 governments)
Foreign currency 0 0 0 0 0 (Offshore book) 0 0 0 0 0
Other 42,688 38,046 36,054 31,961 35,456 Consumer loans 768,703 826,295 891,264 997,845 1,172,255
Total deposits 4,414,467 4,452,949 4,551,980 4,722,896 4,882,986 Housing loans 727,908 784,465 848,167 952,761 1,125,634
Deposits in Mie Other loans 40,795 41,830 43,097 45,084 46,621 4,023,506 4,051,769 4,133,334 4,298,018 4,427,746 Prefecture* Deposits outside Mie Loans in Mie 390,961 401,180 418,645 424,877 455,239 1,550,658 1,559,710 1,590,550 1,647,928 1,688,946 Prefecture Prefecture* Loans outside Mie Tokyo and Osaka 16,704 13,621 13,276 9,518 11,169 1,267,345 1,327,473 1,350,161 1,454,118 1,752,807 Prefecture
Aichi 374,256 387,559 405,368 415,358 444,069 TokyoandOsaka 609,745 637,053 590,938 606,232 733,660 Negotiable certificates of 179,378 202,311 179,465 187,500 182,115 deposit Aichi 657,600 690,419 759,223 847,885 1,019,146 * Deposits in Mie Prefecture and Loans in Mie Prefecture include Shingu 42 Appendix Deposits (including negotiable certificates of deposit), Depository Assets
Mie Aichi Tokyo Hyakugo Securities Total deposits Depository assets, amount (after excluding the Bank’s brokerage) Prefecture Prefecture and Osaka Financial instruments Investment Insurance (average balance) 49,929 of contracts acquired brokerage trusts (Unit: 100 million yen) 267 48,141 (including Hyakugo Securities) 235 (Unit: million yen) 139,258 46,961 46,584 260 4,973 118,602 114,436 345 4,644 45,196 60,034 113,264 336 4,497 4,255 99,583 42,138 42,152 3,980 33,138 49,718 20,418 27,995 27,354 14,484 44,687 24,685 43,261 6,072 24,753 41,983 42,204 8,283 40,879 10,809 10,476 44,321 36,647 42,384 30,951 28,317
FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19
Corporate deposits Mie Aichi Tokyo Individual deposits Mie Aichi Tokyo (average balance) Prefecture Prefecture and Osaka (average balance) Prefecture Prefecture and Osaka 10,244 36,979 (Unit: 100 million yen) (Unit: 100 million yen) 20 9,764 244 36,056 212 20 9,455 34,841 35,161 2,688 9,010 233 2,025 34,023 20 2,548 8,607 21 271 1,929 23 2,478 2,471 295 1,892 2,379 1,657 1,498
33,487 34,271 7,974 31,620 32,341 32,668 7,330 7,621 6,812 7,081
FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 43 Appendix Loans
Mie Aichi Tokyo 32,462 Total loans Prefecture Prefecture and Osaka (average balance) (Unit: 100 million yen) 29,848 6,691 29,058 28,387 27,431 5,874 6,081 Mie Aichi Tokyo 6,211 Loans to small and Prefecture Prefecture and Osaka 5,690 9,272 medium-sized companies 7,931 (average balance) 11,994 7,254 (Unit: 100 million yen) 11,285 1,835 6,691 6,382 10,761 1,562 10,191 1,399 9,281 3,124 1,216 2,950 597 2,731 2,296 2,471 16,499 15,722 16,043 15,358 15,484 7,033 6,771 6,387 6,503 6,630
FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19
Mie Aichi Mie Aichi Consumer loans Prefecture Prefecture Housing loans Prefecture Prefecture 10,258 (average balance) 10,716 (average balance) (Unit: 100 million yen) 9,350 (Unit: 100 million yen) 8,570 8,908 4,584 7,923 8,146 4,514 7,319 3,576 7,509 3,024 6,908 3,518 2,543 2,076 2,978 2,505 2,042
6,131 5,774 5,743 5,243 5,379 5,545 5,390 4,865 5,004 5,167
FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/15 FY 3/16 FY 3/17 FY 3/18 FY 3/19 44 Appendix Risk-monitored Loans
Change in risk-monitored loans (Unit: 100 million yen)) Year-on- 3/31/2015 3/31/2016 3/31/2017 3/31/2018 3/31/2019 year
Loan balance and risk-monitored loan ratio by major industry Risk-monitored loan ratio by region 3/31/2017 3/31/2018 3/31/2019 6.00 Line graph ... Risk-monitored loan ratio (%) Bar graph ... Loan balance (100 million yen) Tokyo 0.65% 0.00% 0.00% 4.11 Osaka 0.00% 0.00% 0.00% 3.61 Aichi 1.10% 0.86% 0.80% 16,889 1.95 Mie 3.07% 2.70% 2.57% 1.01 0.94 2.57 10,191 0.02 0.00 0.80
0.00 0.00 4,619
3,627 2,678 3,440 6,006 2,227 1,057 1,231 1,216 1,329 Realestate Goods leasing Manufacturing Construction Transportation Postal Wholesale Retailing Finance Insurance welfare and Medical local and National Public bodies Tokyo Osaka Aichi Mie
45 Appendix Integrated Risk Management
Risk is controlled within an appropriate range according to the Bank’s operating capabilities based on integrated risk management. Compared to core capital of 228.6 billion yen and allocable capital of 134.7 billion yen, actual amount of risk is 57.3 billion yen.
(Unit: 100 million yen) Method of measuring risk Method of Confidence Holding measurement interval period Risk buffer Credit risk 939 VaR 99% One year (including market-related credit exposure)
Cross-shareholdings VaR* 99% Six months Market risk Investment rates, portfolio VaR 99% Three months Unallocated investment, investment trusts capital Core capital 294 Operational risk The standardized approach 2,286 Credit risk * Amount of risk of cross-shareholdings is measured after taking into consideration unrealized gains 190 or losses (valuation gains (losses) minus the VaR-equivalent value) Allocable capital 1,347 Credit risk Market risk 125 785 Market risk 57.3 billion yen 371 Operational Operational risk 78 risk 78 Risk capital Allocable Allocated capital End of March 2019 228.6 billion yen resources 105.3 billion yen Actual risk amount 134.7 billion yen 573 billion yen
* Risk buffer : Capital not allocated to risk limits in the case of emergencies (equivalent to 4% of equity ratio) * Unallocated capital : Unused portion of allocable capital 46 Appendix Outstanding Nonperforming Loans by Disclosure Standard and Coverage
Loans disclosed under the Financial Reconstruction Act Nonperforming Loans under Internal Assessment Standard Risk-monitored Loans (target: total credit exposure) (target: total credit exposure) (target: loans) * For substandard loans, only loans are included. Category Amount Reserve covered by Credit Non- Credit for Coverage Classification Category Category Classification collateral Classification Balance outstanding categorize Category II outstanding possible ratio III IV and d guarantee loan losses 20 － － Loans to borrowers 20 Failure 18 2 <7> (1) (13) Bankrupt and 73 in legal bankruptcy <7> quasi-bankrupt 37 36 100.00% 53 － － <43> Substantial failure 39 13 assets <36> (4) (16) 427 Past due loans 72 <412> Possible failure 379 246 61 Doubtful assets 379 234 72 81.00% (72) Debts past due by Substandard three months or 1 68 26 5 46.55% more
Watch listWatch loans Under control 107 28 79 Restructured loans 67 522 517 Sub-total 299 114 79.15% Total <492> <488>
Ratio of loans disclosed under the Others Ratio of risk-monitored loans over total 863 306 557 Financial Reconstruction Act (sub-total) loans ……1.50% Normal assets 34,289 over total credit exposure ……1.50% Normal [Reference] 33,387 33,387 [Reference] Ratio of loans disclosed under the Ratio of risk-monitored loans over total Financial Reconstruction Act over total loans if partial direct write-offs were 34,812 72 － 34,812 credit exposure if partial direct write-offs Total 34,026 713 Total carried out ……1.42% <34,781> (78) (30) <34,781> were carried out ……1.41% (Unit: 100 million yen) * Amounts less than stated units are rounded * Total credit exposure: Loans, customers’ liabilities for acceptances and guarantees, the Bank’s down. guaranteed private placements, foreign exchange, and suspense payments and accrued interest, which are equivalent to loans * Values shown in the section “Nonperforming Loans” under “Internal Assessment Standard” are after loan losses reserves, with the value indicated in parentheses representing amounts of reserves corresponding to the respective sections. * The Bank does not carry out partial direct write-offs, but the amounts that would be derived if a partial direct write-off were carried out is shown in angled brackets
Trends of Loans disclosed under the Financial Reconstruction Act (Unit: 100 million yen) 3/31/2015 3/31/2016 3/31/2017 3/31/2018 3/31/2019 Year-on-year Bankrupt and quasi-bankrupt assets 115 81 79 64 73 9 Doubtful assets 473 433 445 393 379 (13) Substandard loans 97 108 84 67 68 1 Total 686 623 609 524 522 (2) Nonperforming loans ratio 2.39% 2.13% 2.04% 1.67% 1.50% minus 0.17 Ｐ 47 Appendix Trends of Debtor Classification
Upper: # of debtors/Lower: credit exposure (Unit: million yen) Debtor Classification as of 3/31/2019 Ratio of Other under downgrading Under Possible Substantial Upgrade Downgrade Normal close Failure Other to possible control failure failure observation Bulk, etc. failure or lower
188,407 162,020 619 36 70 116 10 25,536 8 0.10% － 851 Normal 2,985,524 2,630,492 16,140 1,824 2,634 783 269 333,381 256 0.12% － 21,651
Other under 2,159 474 1,301 10 78 13 2 281 1 4.31% 474 103 close observation 86,453 12,420 60,796 819 1,618 76 88 10,633 25 2.06% 12,420 2,603
Under 214 16 23 138 14 4 1 18 － 8.88% 39 19 control 11,434 667 1,721 7,252 472 70 49 1,200 － 5.18% 2,389 592 Possible 1,395 29 80 15 1,060 31 7 173 20 124 38 failure 39,271 380 992 546 32,434 455 779 3,681 315 1,919 1,235 Substantial 473 15 3 － 2 303 10 140 11 20 10 failure 5,789 8 12 － 19 3,789 629 1,330 153 40 629 32 － 3 － － 4 15 10 7 7 － Failure 624 － 61 － － 49 252 261 110 110 － 192,680 162,554 2,029 199 1,224 471 45 26,158 47 664 1,021 Total as of 3/31/2018 Credit exposure by debtor classification 3,129,098 2,643,968 79,724 10,442 37,179 5,225 2,068 350,488 861 16,879 26,712
# of debtors 1st Half of 2nd Half of 1st Half of 2nd Half of 1st Half of 2nd Half of 1st Half of 2nd Half of 1st Half of 2nd Half of 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 Subject to Head Office 72 64 59 56 45 44 40 46 48 53 support Subject to branch support 322 320 315 352 361 343 308 293 271 259 # of instances of 23 23 23 25 21 21 28 25 32 25 upgrading # of instances of 25 26 16 19 28 19 11 12 14 15 downgrading Change in nonperforming 500 million (700) (600) (2.5) billion 1.2 billion 4 million (2.4) billion 80 million (800) 10 million loans yen million yen million yen yen yen yen yen yen million yen yen 48 Appendix Hyakugo Bank’s Credit Policies
Compliance with Hyakugo Bank’s credit policies (as of March 31, 2019) (Unit: 100 million yen) Classification Content Limit Compliance Loans for individuals engaging in 7% or lower of total loans 2,409 1,947 5.66% housing leasing business Loans for other real estate industry 7% or lower of total loans 2,409 1,939 5.64% Loans for non-banks 10% or lower of total loans 3,441 1,597 4.64% Total loans for large companies by Tokyo and Osaka sales departments Loans for large companies 6,883 4,274 12.42% should be 20% or less of the Bank’s total loans Loan balance per borrower Credit for a borrower should be 10% or less of the Bank’s equity capital 228 220 9.63% Loan balance per corporate group Credit per corporate group should be 25% or less of the Bank’s equity capital 571 487 21.33%
Changes in loans by industry (Unit: 100 million yen) Share by Industry 3/31/2015 3/31/2016 3/31/2017 3/31/2018 3/31/2019 industry Manufacturing 3,831 3,686 3,455 3,349 3,627 10.53% of which, transportation equipment manufacturing 692 693 621 676 795 2.31% Agriculture, Forestry, Fishery, Mining, Quarrying and Gravel quarrying 174 163 207 209 241 0.70% Construction 1,057 1,024 1,026 1,034 1,057 3.07% Utilities 516 581 700 761 900 2.61% Telecommunication 182 181 174 106 123 0.35% Transport and Post 966 986 1,004 1,170 1,231 3.57% Wholesale and Retail 2,940 2,705 2,564 2,508 2,678 7.78% Finance and Insurance 2,523 2,944 2,738 2,560 3,440 9.99% Real estate and Rental 3,397 3,571 3,880 4,377 4,619 13.42% of which, Real estate 2,323 2,559 3,003 3,307 3,399 9.87% Academic research, Specialist and Technical services 134 137 129 137 136 0.39% Accommodation and Food and beverage 318 295 295 294 315 0.91% Lifestyle-related services and Entertainment 241 259 228 242 245 0.71% Education and Learning support 75 65 72 74 76 0.22% Medical and Social welfare 1,007 1,074 1,128 1,196 1,216 3.53% Other services 362 383 388 407 399 1.15% National and local government 2,564 2,357 2,321 2,440 2,227 6.47% Other 7,884 8,452 9,092 10,148 11,881 34.52% Total by industry 28,180 28,871 29,407 31,020 34,417 100.00% 49 Appendix Mie Prefecture’s Shares of Deposits and Loans
Deposits Loans Including megabanks Mega Other Shinkin Bank B Bank A Hyakugo Bank Hyakugo Bank Bank A Bank B Shinkin Other Mega
8.8 9.2 12.7 12.7 12.9 43.7 Mie Prefecture 36.8 14.3 15.0 11.5 17.2 5.2
* Excludes Agricultural Cooperative, Fisheries Cooperative, JP Bank, and Hyakugo Bank’s Shingu Branch (Unit: %) (as of September 30, 2018)
Excluding megabanks Other Shinkin Bank B Bank A Hyakugo Bank Hyakugo Bank Bank A Bank B Shinkin Other
10.1 13.9 14.0 14.1 47.9 Mie Prefecture 38.8 15.1 15.8 12.1 18.2
20.3 23.9 7.1 9.4 39.3 Kuwana District 27.4 9.5 10.0 19.0 34.1
7.7 12.7 7.2 35.3 37.1 Yokkaichi District 30.6 29.0 9.6 13.4 17.4
7.6 7.1 14.7 22.5 48.1 Suzuka District 33.0 22.6 20.3 6.6 17.5
21.0 24.0 9.5 7.2 38.3 Iga District 34.2 4.7 11.4 24.1 25.6
7.7 8.4 12.9 7.1 63.9 Tsu district 58.1 12.2 14.4 4.6 10.7
5.1 17.1 28.5 2.3 47.0 Matsusaka District 34.4 4.7 32.3 16.0 12.6
10.0 7.7 17.3 3.2 61.8 Ise District 50.9 6.6 18.5 5.9 18.1
2.6 1.7 24.9 5.2 65.6 Toba Shima District 59.5 2.2 30.9 2.0 5.4
5.5 33.9 28.9 31.7 Kishu District 28.8 31.1 28.7 11.4
* Excludes Agricultural Cooperative, Fisheries Cooperative, JP Bank, and Hyakugo Bank’s Shingu Branch (Unit: %) (as of September 30, 2018) 50 Appendix Group Companies
Enhancing the comprehensive Think tank services strength of the entire Group Services for individual customers Can provide integrated financial services. Hyakugo Economic Group companies work together in pursuit of Research Institute Company service efficiency improvements, while working Limited Hyakugo Securities to secure further profits outside the Group. Investigative research Management consulting services Company Limited Financial instruments trading services Services for corporate customers
Hyakugo Card Co., Ltd. Hyakugo Leasing Hyakugo Bank Company Limited Credit card services Lease services
Bank Backup Services Hyakugo Computer Soft, Co., Ltd. Computer-related contracted Hyakugo Staff Service Hyakugo Property Research services Company Limited Company Limited OA equipment and software sales Employment placement, human resources Local surveys and assessment work education, and training services, and payroll for the Bank’s real estate collateral calculation and labor management services Hyakugo Kanri Service Company Limited Hyakugo Business Service Hyakugo Office Service Printing, storage, and administrative Company Limited Company Limited services for the Bank’s documents, Money collection and delivery and Concentrated management and forms, etc. cash arrangement services administrative services, etc. for the ATM maintenance and management Bank’s notes, etc.
51 Please direct inquiries concerning this document to: The Hyakugo Bank, Ltd. Corporate Planning Division Nishiura/Muraoka at Public Relations CSR Section TEL (059) 223-2326 FAX (059) 223-2384 https://www.hyakugo.co.jp/
This document contains forward-looking statements, including forecasts, outlooks, targets, and plans. These statements are not intended to guarantee future performance, as they are subject to risks and contain uncertainties. Please keep in mind that future results may differ due to factors including changes in the business environment. Furthermore, the information concerning entities other than the Bank contained in this document has been quoted from publicly available information, etc., and the Bank has not verified the accuracy or appropriateness of such information, nor does the Bank guarantee the accuracy or appropriateness of such information.