Annual Report 2013 Year Ended March 31, 2013
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Annual Report 2013 Year ended March 31, 2013 Hokuhoku Financial Group, Inc. Company outline (as of March 31, 2013) Company name: Hokuhoku Financial Group, Inc. Date of establishment: September 26, 2003 Location of head office: 1-2-26 Tsutsumicho-dori, Toyama City Purpose of business: Management and control of subsidiaries and affiliates and ancillary and related business Capital: ¥70,895 million Shares issued and outstanding: Common stock .................................. 1,351,630,146 Preferred stock (Type 5) .................... 107,432,000 Exchange listings: Tokyo Stock Exchange (First Section) Sapporo Securities Exchange This document contains forward-looking statements. Statements of this kind do not constitute guarantees of future performance, as factors such as changes in the operating environment may cause actual performance to differ. The figures stated in this document are, in principle, rounded down to the nearest whole unit. CONTENTS Profile .................................................................................................. 1 Message from the Management .......................................................... 2 Medium-term Management Plan.......................................................... 4 Performance Highlights ....................................................................... 6 Corporate Governance ........................................................................ 10 Approach to Compliance ..................................................................... 13 Risk Management System ................................................................... 15 Corporate Social Responsibility ........................................................... 20 Topics ................................................................................................. 23 Consolidated Financial Statements Consolidated Balance Sheet ............................................................ 26 Consolidated Statement of Income .................................................. 27 Consolidated Statement of Comprehensive Income ........................ 27 Consolidated Statement of Changes in Equity ................................. 28 Consolidated Statement of Cash Flows ........................................... 30 Notes to Consolidated Financial Statements .................................... 31 Independent Auditor’s Report .............................................................. 53 Non-consolidated Financial Statements The Hokuriku Bank, Ltd. Non-consolidated Balance Sheet (Unaudited) .............................. 54 Non-consolidated Statement of Income (Unaudited) .................... 55 The Hokkaido Bank, Ltd. Non-consolidated Balance Sheet (Unaudited) .............................. 56 Non-consolidated Statement of Income (Unaudited) .................... 57 Corporate Information .......................................................................... 58 Outline of Subsidiaries — Hokuriku Bank ............................................. 59 Outline of Subsidiaries — Hokkaido Bank ............................................ 60 Board of Directors and Audit & Supervisory Board Members ............... 61 ........................................................................ 62 Profile The operations of the Hokuhoku Financial Group Since its establishment in 1877, Hokuriku Bank has extend beyond the limits of a single district. developed an extensive network of branches throughout Our extensive network is outlined below. the Hokuriku district. On account of trade through the Hokuriku district ........................................ 149 branches Kitamae-bune or “Northbound Ships,” branches extended Toyama prefecture ...................................... 91 branches to the major cities of Hokkaido, enabling the bank to Ishikawa prefecture ..................................... 36 branches meet customers’ needs. The Hokkaido Bank, which was Fukui prefecture ........................................... 22 branches established in 1951, has developed a network of branches Hokkaido .................................................... 158 branches throughout Hokkaido, and built a firm business structure centered on individuals and small and medium-sized Three major metropolitan areas ............... 17 branches enterprises. Tokyo and Yokohama .................................. 10 branches The Hokuriku Bank, Ltd. and The Hokkaido Bank, Ltd. Nagoya ........................................................ 3 branches underwent management integration in September 2004 to Osaka and Kyoto ......................................... 4 branches form the Hokuhoku Financial Group Inc., which today oper- Others (Sendai, Niigata, Nagano, Takayama) ... 4 branches ates a super-regional financial network that encompasses Overseas .................................................... 8 offices the Hokuriku region, Hokkaido, and Japan’s three major New York Representative Office (Hokuriku Bank) metropolitan areas (Tokyo, Osaka, and Nagoya areas). Yuzhno-Sakhalinsk Representative Office (Hokkaido Bank) London Representative Office (Hokuriku Bank) Singapore Representative Office (Hokuriku Bank) Bangkok Representative Office (Hokuriku Bank) Comprehensive business alliance Dalian Representative Office (Hokuriku Bank) May 2002 between Shanghai Representative Office (Hokuriku Bank) Hokuriku Bank and Hokkaido Bank Shenyang Representative Office (Hokkaido Bank) (As of June 30, 2013) Agreement on full integration of May 2003 management of Hokuriku Bank and Hokkaido Bank London Yuzhno Shenyang September Sakhalinsk New York Hokugin Financial Group, Inc. Dalian 2003 established Shanghai Hokuriku Bank Group comes under Bangkok management of Hokugin Financial Singapore Group Management integration effected through equity swap Hokkaido September Hokuhoku Financial Group, Inc. is 2004 born. Hokuriku district Ishikawa Toyama Fukui Tokyo Osaka Nagoya Three major metropolitan areas Hokuhoku Financial Group, Inc. Annual Report 2013 1 MESSAGE FROM THE MANAGEMENT (from left) Yoshihiro Sekihachi Eishin Ihori Chairman President (concurrently serving as president of (concurrently serving as president of The Hokkaido Bank, Ltd.) The Hokuriku Bank, Ltd.) 2 Hokuhoku Financial Group, Inc. Annual Report 2013 We would like to express our sincere appreciation to all our customers for their continued patronage of the Hokuhoku Financial Group. Hereunder, we present Annual Report 2013 of the Hokuhoku Financial Group. The report includes the Group’s business performance for fiscal 2012, an outline of our current medium-term management plan, and an introduction to the various business strategies we have been pursuing. We hope that it will assist you in understanding the Group’s present situation and future prospects. For the Japanese economy, there have been a number of signs of improvement recently, including a likely recovery in business performance figures, centered on export-oriented companies, under the influence of the yen’s depreciation since the inauguration of the Abe administration. At the same time, however, interest rates appear increasingly likely to maintain their present low levels, and financial institutions will thus continue to face a difficult earnings environment for some time to come. Amid these circumstances, from fiscal 2013 the Hokuhoku Financial Group commenced its latest medium-term manage- ment plan, dubbed “GO for IT!.” Our achievements under the previous medium-term plan include further expanding the number of customer accounts, increasing deposits to ¥10 trillion, and realizing stable operation of a joint IT system for three banks (the Hokuriku Bank, the Hokkaido Bank, and the Bank of Yokohama). On the negative side, however, we have been faced with a number of serious obstacles to achieving adequate earnings, most notably low growth in interest and non- interest revenues, and expenses hovering at a high level. There is also the need to create a system for nurturing the desired job skills in an increased number of young bank employees, as well as the necessity for enhanced compliance and more rigorous internal control. Under our new medium-term management plan, covering the three-year period from April 2013 to March 2016, we aim to become a trustworthy financial group that enjoys friendly relations with all members of its local communities. To this end, we have dedicated this three-year period to establishing an optimized business strategy for sustainable growth by deploying a market strategy that involves strengthening our relationships with local customers. We also plan to reallocate the Group’s management resources to improve management efficiency, reinforce our employee training systems, cultivate a corporate culture of fair and stable banking, and strengthen our internal control systems. The scheduled commencement of services on the Hokuriku Shinkansen (Bullet Train) and Hokkaido Shinkansen lines is expected to stimulate economic growth in the operational areas of the Group’s two banking subsidiaries – the Hokuriku Bank and the Hokkaido Bank. The Hokuhoku Financial Group intends to play an important role in revitalizing these banks’ local economies by leveraging its strengths in information collection to offer a business-matching service as well as enhanced support for clients’ overseas business developments. At the Hokuhoku Financial Group, we will work to enhance our enterprise value by earning the trust of our regional communities and helping revitalize local economies. We ask for your continued support