Information Meeting The Year Ended March 2008 THE NANTO BANK, LTD

Transcription

1 Information Meeting The Year Ended March 28 THE NANTO BANK, LTD

2 Table of Contents I. Profile of The Nanto Bank III. Management Strategy Profile Outline of Business Foundation Share in Nara Prefecture Present Conditions in Nara Prefecture II. Financial Results for FY27 Summary of Financial Results Management of Securities Disposal of Non-performing Loans Business Forecast for FY28 Dividend Policy Medium-Term Management Plan Results of the Medium-Term Management Plan and Future Issues Outline of the New Medium-Term Management Plan (Long-Term Vision and Numerical Targets) Outline of the New Medium-Term Management Plan (Overall View) Outline of the New Medium-Term Management Plan (Core Net Business Profit) 2. Growth Strategy Growth Strategy (Four Priority Strategies) (By Region/Division) Loan Plan 1 (By Region/Division) Loan Plan 2 Workforce Placement in Osaka Prefecture/ Expanding Offices Strengthen Retail Lending in Osaka Prefecture Strengthen Personal Loan Promotion Reinforce Assets on Deposit Increase Profit on Fees and Commissions by Strengthening Sales of Asset Management Products

3 表紙 Ⅰ I. Profile of The Nanto Bank II. Financial Results for FY27 III. Management Strategy 1. Medium-Term Management Plan 2. Growth Strategy 1

4 Profile of The Nanto Bank (As of the end of March 28) 1.Founded June 1, Location of Head Office 16, Hashimoto-cho, Nara City 3.Capital 29,249 million 4.Number of employees 2,614 5.Number of offices 131 (Japan, as of the end of June 28), 2 (Overseas, representative offices in Hong Kong and Shanghai) 6.Total assets 4,551.7 billion 7.Deposits outstanding 4,9.6 billion 8.Outstanding loans 2,694.2 billion 9.Capital adequacy ratio Non-consolidated:1.53% Consolidated:1.78% (Head Office) 2

5 Outline of Business Foundation Bases for business: Nara Pref. 92, Osaka Pref. 13, Kyoto Pref. 15, Wakayama Pref. 7, Mie Pref. 3, Tokyo 1 Around 3 minutes from central Nara to Osaka city Shiga prefecture Kyoto Prefecture (15 branches) Kansai Science City (Keihanna) Academic/cultural research facilities:15 (as of April 1, 28) Area: 15,41 ha Planned population: 193 thousand people; Planned number of houses: 54 thousand houses ( billion as of the end of March 28) Deposits balance Loans balance Osaka Prefecture (13 branches) Nara Prefecture (92 branches) 3,222.8 Mie Prefecture (3 branches) Tokyo Metropolis (1 branch) Wakayama Prefecture (7 branches) ,546. NANTO BANK branches and offices (As of the end of June 28) 3

6 Share in Nara Prefecture Maintained firmly approximately 5% of of deposit and loan market share within Nara Prefecture Deposit market share in in Nara Pref.: 48.4% Loan Market Share in in Nara Pref.: 5.5% (at (at end end of of March 28) <Deposit Market Share in Nara Pref.> Shinkin RB 15.1% 4.1% City Bank 28.1% Trust 3.9% Nanto Bank 48.4% Change in Share of NANTO BANK 55. (%) Loan market share Deposit market share <Loan Market Share in Nara Pref.> Trust Shinkin.% RB 12.7% 6.2% City Bank 3.3% Nanto Bank 5.5% * Total number of commercial banks, trust banks, and shinkin banks in Nara Prefecture. (excluding agricultural cooperatives, postal savings) 35. Mar.25 Sep.25 Mar.26 Sep.26 Mar.27 Sep.27 Mar.28 Branches NANTO BANK 92 City Bank 37 Regional Bank 2 Trust Bank 2 Shinkin Bank 47 TOTAL 198 <Number of Bank Branches in Nara Pref.> 4

7 Present Conditions in Nara Prefecture Market Condition in Nara and Osaka Prefectures Main Indices Related to Individuals in Nara Prefecture Nara Prefecture National ranking Osaka Prefecture National ranking Source Nara Prefecture National ranking Source 1 Population 1,415 thousand (29) 8,814 thousand (3) 26 Population Census 6 Personal savings (per capita) 5,891 thousand (6) The Central Council for Financial Services Information 27 2 Number of private enterprises (offices) 48 thousand (4) 421 thousand (2) 26 Establishment and Enterprise Census 7 Newspapers subscriptions (per household) 1.37 (1) Japan Newspaper Association 27 3 Housing starts 1 thousand (29) 95 thousand (3) Annual Construction Statistics 26 8 Number of residents traveling abroad (per 1, people) (4) Annual Report of Statistics on Legal Migrants 26 4 Deposits balance 1.3 trillion (22) 79.7 trillion (2) Kinyu Journal Regional Financial Map 28 9 Number of households with piano (per 1, households) 353 (2) National Survey of Family Income and Expenditure 24 5 Loans balance 3.3 trillion (3) 46.3 trillion (2) Kinyu Journal Regional Financial Map 28 Employment rate outside the 1 Prefecture 29.32% (1) 25 Population Census < NANTO BANK s Growth Scenario > of which, 9% works in Osaka Prefecture Priority strategic areas Nanto Bank will increase business loans and personal loans and strive to expand and strengthen sales offices in areas such as Osaka, which are the bank s strategic areas. Existing area centered on Nara prefecture Nanto Bank will make a detailed breakdown of customer segments, develop more strategic business activities, and promote asset management products and personal loans. 5

8 表紙 Ⅱ I. Profile of The Nanto Bank II. Financial Results for FY27 III. Management Strategy 1. Medium-Term Management Plan 2. Growth Strategy 6

9 Financial Results for FY27 - (1) Summary Nanto Bank recorded an ordinary loss of 9 million, a year-on-year decline of 12.1 billion, which was due to the fact that even through the core gross business profit of the top-line profit, was around the same level as that for last year, there was an increase in losses on securities as instability in financial markets brought on by the US subprime loan problem persisted Core gross business profit Ordinary income Core net business profit FY23 FY24 FY25 FY26 FY On the other hand, net income shrank 1.2 billion year on year to 5. billion because there was a substantial drop in credit costs as a result of not only a decline in new nonperforming loans but aggressive efforts to recover and improve the rating of existing loans FY23 FY24 FY25 FY26 FY27 Net income FY23 FY24 FY25 FY26 FY27 7

10 Financial Results for FY27 (2) Management of Securities 1 Shift of of Outstanding Securities There was decline in foreign bonds, whose spread between acquisition cost and management return declined, and an increase in the asset allocation towards yen-denominated bonds which generate strong interest income. Balance of outstanding securities as of March 28: 1,549.8 billion (Down 16.1 billion from March 27) 2, 1, , , 1, , (Dollar and Euro denominated bond) Down 18.7 billion from Mar. 27 (Yen denominated floating rate bond) Up 7.9 billion from Mar. 27 (Yen denominated bond) Up 75.2 billion from Mar. 27 Unrealized Gains and Losses of of Securities As of March 31, 28, Nanto Bank recorded unrealized gains and losses on securities of - 9. billion mainly as a result of a decline in unrealized gains on shares due to the stagnant equity market End-Mar. 24 Bond Duration (years) 3.6 Stocks Other -1.6 End-Mar End-Mar End-Mar. 27 Bonds Securities End-Mar. 28 End-Mar. End-Mar. End-Mar. End-Mar (*After deduction of appraisal profit and loss of securities) Yen denominated bond Yen denominated floating rate bond Dollar and Euro denominated bond Stocks Stocks (ex.investment trust) Yen denominated bond Dollar and Euro denominated bond Total bond End-Mar. 27 End-Sep. 27 End-Mar. 28 8

11 Financial Results for FY27 (2) Management of Securities 2 The book value of of securitized products, such as as synthetic CDOs, CDOs, and Capital Notes, which were written down at at the end of of FY27, declined to to 16.3 billion at at the end of of March 28 from 32.5 billion at at the end of of March 27. (this decline includes.7 billion in in unrealized losses on on securities) ->The share of of securitized products declined to to 1% of of total securities held by by the bank Of Of these, the book value of of products that incorporated subprime loans shrank to to 1.6 billion at at the end of of March 28 from 5.8 billion at at the end of of March 27. <Breakdown of Securities Portfolio> Marketable securities total Trust beneficiary rights Total Overseas securities Yen-denominated bonds Foreign-currency-denominated bonds Domestic bonds Japanese government bonds Local government bonds Other bonds Stocks of which are synthetic CDOs (1) of which are capital notes (2) of which are CMBS of which are CDOs (3) of which are capital notes (4) of which are US mortgages of which are CMBS of which are ABS Other securities of which are CMBS Securitized products that were written down in FY27 {(1)+(2)+(3)+(4)} Other securitized products (a+b+c+d+e) Total securitized products c d e a b ( billion, %) Book value as March 31, 28 (after right down) 1, , , Unrealized gain/loss Unrealized gain/loss ratio <Breakdown of Securitized Products > Synthetic CDO CDO Capital note US mortgage CMBS ABS Total Ranking as of March 31, 28 Book value as of March 31, 28 Losses recorded in FY27 (after right down) Unrealized gain/loss Less than sales Write offs Loss of redemption Total AAA 3.. AA A 4.9. BBB A BB or less BBB BB or less 1.1. AAA AAA 2.. AA A AAA <Reference> Synthetic CDO: Synthetic collateralized debt obligations that make use instruments such as credit derivatives and issued based on products such as corporate bonds, loans, and securities products CDO: Collateralized debt obligations backed by actual assets such as corporate bonds, loans, securitized products Capital note: Securities issued by a securities investment vehicle. The funds raised by the company issuing the capital notes are leveraged and used to invest in high-quality securities ABS: Securities backed by assets such as corporate loans, consumer loans, or leases CMBS: Commercial mortgage backed securities are securities backed by domestic commercial mortgages US mortgage: US mortgage securities issued by government sponsored entities 9

12 Financial Results for FY27 (3) Disposal of Non-performing Loans Change in Cost of Credit Credit costs fell substantially as a result of stricter screening. This was mainly because of an improvement in the income from recovery of bad debts and a decline in the value of disposed non-performing loans for various reasons including the reversal of provisions for possible losses on particular loans following the partial recover of high-risk loans. As a result, credit costs fell dramatically to billion for FY3/8. < Change in Cost of Credit > (%) Core net business profit Credit cost Credit cost ratio FY23 FY24 FY25 FY26 FY *Credit cost=net transfer to general provision for possible loan losses + Disposal of non-performing loans - Bad debt recovered *Credit cost ratio=credit cost / Average balance of loans x1 Breakdown of Cost of Credit FY23 FY FY25 FY26 FY27 Rank down Fall in the price of collateral Net transfer to general provision for possible loan losses Collection-rank up / Variation in reserves rate Bad debt recovered Credits Disclosed under the Financial Reconstruction Law // Non-performing Loans Ratio End-Mar. 24 End-Mar. 25 End-Mar. 26 End-Mar. 27 End-Mar. 28 (%) 6.5. Substandard loans Doubtful loans Loans to bankrupt and quasi-bankrupt loans Non-performing loans ratio 1

13 Business Forecast for FY Core gross business profit Interest income Interest on loans and discounts Interest on securities Interest on deposits Fees and commissions Other operating income (*1) Cost of derivative financial products Expenses Personnel expenses Non-personnel expenses Core net business profit Gains/Losses on bonds (JGBs, etc.) FY (6.3) (17.7) FY28 Forecast (2.9) Net transfer to general provision for possible loan losses - (.5) -.5 Net business profit Non-recurrent gains/losses (2.5) (7.) -4.4 Gains/Losses on stocks Disposal of non-performing loans Ordinary income (.9) Extraordinary gains/losses Bad debt recovered Gain on reversal of provision for possible loan loss Income before taxes Net income Credit cost (*2) (4.4). 4.5 Y/Y change *1 Except bonds (ex. Government Bonds) gains/losses *2 (Net transfer to general provision for possible loan losses + Disposal of non-performing loans) (Bad debt recovered + Gain on reversal of provision for possible loan loss) +8.9 Although core gross business profit is expected to increase mainly as a result of the increase in interest on loans, core net business profit is projected to decline 1.8 billion YoY to 17.5 billion because of an increase in partnership system related expenses. Factors behind changes in interest on loans and deposits for FY28 (comparison with FY27) Loans Net general loans Personal loans (including general accounts ) Loans for local government Deposits Retail (short-term prime) Retail (market) Wholesale Change Since there was a dramatic increase in the gain on securities such as Japanese government bonds, ordinary income is projected to grow 11.9 billion YoY to 11. billion yen Balance factor Return factor Although ordinary income is forecast to increase 11.9 billion YoY, net income is expected to increase only 1.9 billion YoY to 7. billion. This is because 9.1 billion in extraordinary gains, including collection of written-off non-performing loans and gain on reversal of provisions for possible loans losses, were recorded for the previous fiscal year, this fiscal year only 1. billion will be recorded. 11

14 Dividend Policy Changes in Shareholder Return Ratio and Payout Ratio FY23 FY24 FY25 FY26 FY27 FY28 Forecast Net income Total dividends Acquisition of treasury stock Dividend per share ( ) Shareholder return ratio (%) Payout ratio (%) ( 7. billion) ( 1.6 billion) ( 6.) Including dividends for 7th anniversary of the founding of NANTO ( 1) Dividend increase ( 1 per year) Net income Ordinary income FY26 FY27 FY28 Forecast While ordinary income and net income fell temporarily as a result of the recording of losses on securities in FY27, income levels are expected to improve starting in FY28, which made it possible to maintain an interim dividend of 6 per share for FY27. 12

15 表紙 Ⅲ-1 I. Profile of The Nanto Bank II. Financial Results for FY27 III. Management Strategy 1. Medium-Term Management Plan 2. Growth Strategy 13

16 Results of the Medium-Term Management Plan and Future Issues Numerical Targets FY25 (Result) (Target) FY27 (Result) (Compared with FY25) (Compared with Target) Core Core net net business profit profit 17.1 billion 25. billion or or higher 19.3 billion billion billion Capital Capital adequacy ratio ratio 9.19% 1% or or higher 1.53% +1.34% +.53% Balance of of retail retail business loans loans 95.3 billion 1 1 trillion or or higher billion billion billion Balance of of personal loans loans billion 8 billion or or higher billion billion billion Balance of of assets assetson on deposit deposit billion 45 billion or or higher 44.2 billion billion billion <Factor Analysis of Changes in Income from Fund Management and Procurement Comparison with Numerical Targets from Medium-Term MP> +4. Deposits and Loans billion Yield curve flattening -. Balance factors Return factors Loans -7. Deposits, etc. Fund management Fund procurement Fees Expenses and Commissions -8. Loans Deposits, etc. Therefore, Therefore, the the following following issues issues will will be be dealt dealt with with in in the the new new medium-term medium-term management management plan. plan. Improve Improve profitability profitability Improve Improve risk risk management management Increase the effectiveness of Increase the effectiveness of the human resources the human resources 14

17 Outline of the New Medium-Term Management Plan (Long-Term Vision and Numerical Targets) Long-term vision Aim to further increase corporate value and become a bank that grows with the local community Previous Medium-Term Management Plan Value Up NANTO (April 25 March 28) Stage 1 April 28 March 211 Medium-Term Management Plan More Value Nanto Strive to expand the business foundation and improve risk management with the goal of further increasing corporate value Stage 2 April 211 March 214 Create a healthy and sound management system, establish a strong presence, and improve corporate value <Numerical Targets> Item Present 3 years later 6 years later FY27 FY21 Plan June 214 is the 8 th year anniversary of founding. 1.Core net business profit 2.Net income 3.Outstanding loans <Management Indicator> Profitability Efficiency 2.O H R (*2) 7.83% Soundness Item 1.R O E (*1) 3.Capital adequacy ratio 4.Non-performing loans ratio (*3) 19.3 billion 5. billion 2,69 billion FY27 2.7% 1.53% 3.86% 26. billion or higher 12. billion or higher 3, billion or higher FY21 Plan 5.4% 66.25% 1.67% 2.72% Numerical Target R O E 8% or greater Capital adequacy ratio 11% or greater (*1 ) ROE=Net income/ Net assets 1 (*2 ) OHR=Expenses/Core gross business profit 1 (*3 ) Non-performing loan ratio = amount of non-performing loans based on Financial Reconstruction Law / total value of credit provided x 1 15

18 Outline of the New Medium-Term Management Plan (Overall View) Medium-Term Management Plan More Value - Nanto (April 28 - March 211) Basic Policies (summary) 1. Strengthen profitability and improve risk management 2. Invigorate employees and the organization 3. Invigorate local economies 4. Promote CSR <Numerical Targets> 1.Core net business profit 2.Net income 3.Outstanding loans (Management indicator) 1)ROE 2)OHR 3)Capital adequacy ratio 4) Non-performing loans ratio <Priority Strategies> I. Strengthen the sales capabilities of regions and divisions II. Enhance and upgrade internal control systems IV. Promote CSR All measures III. Strengthen human resource management 16

19 Outline of the New Medium-Term Management Plan (Core Net Business Profits) <FY21 Core Net Business Profit Plan (in Comparison with FY27) > 1. FY27 Core net business profit 2. Interest on deposits, etc. 3. Fees and commissions 19.3 billion <Factor of Changes in Interest on Loans and Deposits (from FY27)> Net general loans Retail (short-term prime) Retail (market) Wholesale Personal loans (including general accounts) Loans for local government Change Balance factor Return factor Market sector Interest rates on loans 6. Expenses 7. FY21 Core net business profit 26. billion <Interest-Rate Scenario> (%) Japan Overnight unsecured call rate U.S. EU Short-term prime 3-month TIBOR 5-year JGB 3-month LIBOR US 5-year bond 3-month LIBOR German 5-year bond FY27 Plan FY28 Plan FY29 Plan FY21 Plan 9/27 3/28 9/28 3/29 9/29 3/21 9/21 3/ <Factor of Increases/Decreases in Market Sector (from FY27) > Interest on securities -.8 billion Japan billion; Overseas - 5. billion Average balance: Japan billion Overseas billion Interest on fund management, etc. -.8 billion Interest on fund procurement, etc billion Japan +.7 billion; Overseas billion Interest payables under securities lending transactions -.3 billion Cost of derivative financial products billion <Factor of Increases in Fees and Commissions (from FY27) > Investment trust related Life insurance related Non-personnel expenses + 2. billion +.7 billion <Factor of Increases in Expenses (from FY27) > billion *Investment in projects such as the those related to partnership system. 17

20 表紙 Ⅲ-2 I. Profile of The Nanto Bank II. Financial Results for FY27 III. Management Strategy 1. Medium-Term Management Plan 2. Growth Strategy 18

21 Growth Strategy (Four Priority Strategies) Priority Priority Strategy Strategy Goal Goal Measures Measures Strengthen the Strengthen the sales capabilities sales capabilities of regions and of regions and divisions divisions Improve profitability Improve profitability Management market such as for loans Management Further expand market the such business as for loans foundation (expand to new areas, open 1 offices and add at least 14 employees) Further expand the business foundation (expand to new areas, open 1 offices and add at least 14 Increase employees) retail loans (retail business, personal loans) Deposit Increase and asset retail management loans (retail market business, personal loans) Deposit Expand and asset the FA management team, staff offices market with money consultants Strengthen Expand the the FA system team, staff to recommend offices with items money based consultants on the customer segment (extremely wealthy, wealthy, Strengthen middle/masses) the system to recommend items based on the customer segment (extremely wealthy, Improve wealthy, revenue middle/masses) from service operations by improving sales of assets under management (investment Improve revenue trusts and from life service insurance) operations by improving sales of assets under management (investment trusts and life insurance) Enhance and Enhance and upgrade internal upgrade internal control systems control systems Further strengthening Further compliance strengthening Create compliance appropriate Create internal control appropriate system Implement internal control appropriate system Implement risk control appropriate Improve risk control profitability Improve profitability Legal compliance (improve attitude toward legal compliance) Customer Legal compliance protection (improve management attitude (improve toward attitude legal compliance) toward customer and customer information protection) Comprehensive Customer protection risk management management (improve (improve earnings attitude management toward customer through and comprehensive customer information earnings protection) risk management Comprehensive system) risk management (improve earnings management through comprehensive earnings risk Credit management risk management system) Market Credit risk risk management management Operational Market risk risk management management Operational risk management Strengthen Strengthen human resource human resource management management Invigorate employees Invigorate and the organization employees and the organization Human resource system Human Review resource the human system resource system and qualification system Review Review the the employee human resource evaluation system system and qualification system Reorganize Review the the training/education employee evaluation system system (strengthen younger employees sooner) Make Reorganize greater the use training/education of human resources system (strengthen younger employees sooner) Make Develop greater the use abilities of human of resources female employees Develop the abilities of female employees Promote CSR Promote CSR Fulfill the corporate Fulfill social responsibility the corporate social responsibility Promote environmental protection activities Promote Thoroughly environmental take into protection consideration activities the environment within the bank (expand the number of departments Thoroughly that take are into Environment consideration ISO the certified) environment within the bank (expand the number of Promote departments environmental that are Environment protection in ISO local certified) communities Promote Promote contributions environmental to the local protection community in local communities Organize Promote CSR contributions (establish to a the CSR local office) community Organize CSR (establish a CSR office) 19

22 (By Region and Division) Loan Plan 1 3, 2, Loan Plan by Region Nara Prefecture Osaka Prefecture Kyoto Prefecture Wakayama & Mie Prefecture 2, Tokyo & Other Prefectures 2,694.2 Balance of total financing of at least 3 trillion Increase in Osaka prefecture of more than 2. billion Around 65% of the total increase 1% 5% Loan Composition by Region Nara Prefecture Osaka Prefecture Kyoto Prefecture Wakayama & Mie Prefecture Tokyo & Other Prefectures 2.5 Osaka prefecture s share of total outstanding loans grows to around 25%. 1, 1, , Nara prefecture s share of total outstanding loans decreases to around 5%. 3/25 3/28 3/211 % 3/25 3/28 3/211 2

23 (By Region and Division) Loan Plan 2 Retail Business Loan Plan by Region Personal Loan Plan by Region Nara Prefecture Osaka Prefecture Nara Prefecture Osaka Prefecture Kyoto Prefecture Wakayama & Mie Prefecture Kyoto Prefecture Wakayama & Mie Prefecture 1, Decrease in Nara prefecture 1,3 billion or higher Increase in Osaka prefecture of around 1. billion 1, billion or higher Increase in all areas /25 3/28 3/211 3/25 3/28 3/211 21

24 Workforce Placement in Osaka Prefecture /Expansion of Offices During the period of the present medium-term management plan (the three years from 28 through 21), there will be energetic commitment of human resources and expansion of offices and efforts will be made to increase retail lending. Commitment of human resources at least 14 staff Expansion of offices at least 1 offices [(March 28) 216 staff (March 211) more than 356 staff] [(March 28) 12 offices (March 211) more than 12 offices)] <Expansion of Offices in Osaka Prefecture> <Increase in Staff and Number of Offices in Osaka> (Staff) Increase in the number of employees by 14 for Osaka over three years Osaka Branch (Mar ) Ishikiri Branch (Jun ) Habikino Branch (Apr ) Kawachinagano Branch(Dec ) Yao-Minami Branch(Oct ) Yao Branch(Apr. 24-) Yao Corporate Business Office 35 3 Staff (loan officers) Staff (at sales offices and corporate sales offices Offices (sales offices and corporate sales offices (Offices) 25 2 Yoshida Branch (Dec ) Izumisano Branch (Dec ) Higashi-Osaka Corporate Business Office Osaka-Higashi Branch (Oct. 22-) Daitoh Corporate Business OfficeDaitoh Branch (Dec. 23-) Osaka-Kita Corporate Business Office Osaka Corporate Business Office (Jan. 23-) Osaka-chuo Office Osaka-Kita Branch (Jan. 24-) Sakai Corporate Business Office Sakai Branch (Nov. 25-) Shin-Osaka Corporate Business Office Shin-Osaka Branch (Aug. 26-) Amagasaki Corporate Business Office Open 1 new offices in Osaka over three years Mar. 2 Mar. 21 Mar. 22 Mar. 23 Mar. 24 Mar. 25 Mar. 26 Mar. 27 Mar. 28 Mar. 29 Mar. 21 Mar

25 Strengthen Retail Lending in Osaka Prefecture Steadily increase the outstanding balance of retail loans through an increase in the number of employees and offices in strategic areas Increased the outstanding balance by at least four fold (from 93.8 billion as of March 31, 2, to billion as of March 31, 28) through efforts since 2 (around 8 years) Increase of billion over the three years of the previous medium-term management plan Expected increase of 177. billion during the present medium-term management plan (From FY28 through FY21) Balance of Retail Lending for Osaka Prefecture 6 Actual increase over 3years Retail business loan billion Personal loan Increase plan over 3years billion 3/2 3/21 3/22 3/23 3/24 3/25 3/26 3/27 3/28 3/29 3/21 3/211 Regional RAROA of Business Loans Business Loan Balance Business Loan RAROA <Credit risk estimated at end of March 28>(*Before partial direct write-off) Osaka Prefecture (12 branches) Return rate 1.73% Balance billion RAROA 1.34% of which, 6 newly established branches Balance 11.7 billion RAROA 1.52% Balance 74.1 billion Business Loan Yields Kyoto Prefecture (15 branches) Return rate 2.1% Balance 94.2 billion RAROA.87% RAROA 1.2% Nara Prefecture (92 branches) Return rate 2.34% *Business loan RAROA Risk-adjusted return rate (formula) interest after deducting credit cost / loan amount x 1 *Object: normal and substandard loans (including clients requiring control) 23

26 Strengthen Personal Loan Promotion Strengthen promotion through tie-ups between specialized home loan channels (home loan centers at eight locations and home-loan offices at nine locations) and sales offices Commit personnel and expand home-loan offices with employees specializing in home loans (expected to increase the number of employees by 2 over three years) Actively respond to new projects by strengthening the relationship with the housing related businesses Conduct quick screenings (provide response the following day) and expand product (max. 4 year term) The projections are conservative because of the effect of the revisions on the Building Standards Law and stricter loan screening criteria. Balance of Personal Loan and Changes/ Plans in Personal Loan Ratio Personal loan balance 1, Personal loan ratio % 8 25.% 24.% 22.5% % Actual increase over 3 years billion 3.7% 28.7% Increase plan over 3 years billion 35.% 3.% 25.% % 19.8% % 15.% 3 3/2 3/21 3/22 3/23 3/24 3/25 3/26 3/27 3/28 3/29 3/21 3/211 1.% 24

27 Reinforce Assets on Deposit Assets on deposit (investment trust and individual annuity insurance, etc.) steadily increased Enhancement of products line up [34 products for investment trust, 11 products for personal pension insurance, lump-sum benefit life insurance 1 products Assignment and utilization of professional staffs, and upgrade existing skills of personnel (increase the number of employees with FP and MA qualifications. At least 5% on the employees shall have the qualifications.) Actual and Projected Balance of Assets on Deposit (investment trusts, individual pension insurance, etc.) 1, Investment trusts Personal pension insurance (accumulated sales) JGBs /23 3/24 3/25 3/26 3/27 3/28 3/29 3/21 3/211 Number of Employees with the FP or MA Qualification (persons) 1, % 38% 32% % 51% 44% , /23 3/24 3/25 3/26 3/27 3/28 5% 4% 3% MA (money adviser service technician) 2% FP (financial planner) Percentage of employees 1% with FP or MA qualifications % 3/29 3/21 3/211 25

28 Increase Profit on Fees and Commissions by Strengthening Sales of Asset Management Products Profit on fees and commissions in FY21 (Plan): 9.6 billion (Up 1.7 billion from FY27 ) Investment Trust Income: 4.4 billion ( Up 2. billion from the FY27) During the present medium-term management Insurance Income: 2.6 billion ( Up.7 billion from the FY27) plan (three years), accumulative sales (projected) = 44. billion. Actual and Projected Annual Sales of Investment Trusts and Life Insurance 15 Investment trust Life insurance For the period of the previous medium-term management plan (three years), accumulative sales = 32. billion /23 3/24 3/25 3/26 3/27 3/28 3/29 3/21 3/211 Actual and Projected Revenue from Fees and Commissions Related to Investment Trusts and the Life Insurance Investment trust (trust fees) Investment trust (commission) Life insurance (commission) /23 3/24 3/25 3/26 3/27 3/28 3/29 3/21 3/

29 In this material, we refer to the future performance of the bank. However, these descriptions do not guarantee the performance mentioned in the material and include risks and uncertainties. Please be aware that the future performance mentioned in this material may change from the targets as a result of, for example, changes in the operating environment.

30 Appendix for IR Meeting General Economic Situation in Nara Prefecture 1, 2, 3 Number of Population and Households in Nara Prefecture Housing Starts Land Price Trend for Nara Prefecture Financial Results for FY27 (1) Summary of Profit and Loss (2) Summary of Core Net Business Profit (3) Deposits / Assets on Deposit (4) Loans Situation (5) Capital Adequacy Ratio / Capital Allocation Changes in Deposit / Lending Spread Effect of Increase in Interest Rate Composition of Loans by Industry Shift in Classification of Debtors Partnership System for Regional Banks Expenses Plan CSR 1,

31 General Economic Situation in Nara Prefecture -1 <Local Industries> Feature of industry in Nara Prefecture: Ratio for fabric, plastic and wood is high compared with other prefectures Textiles/Apparel Lumber/Wood products Plastics Food Metal products Machines Printing/Print-related products Chemicals Other products % 1% 2% 3% 4% 5% 6% 7% 8% 9% 1% Nara Pref Nationwide [Source: 26 Establishment and Enterprise Census] <Industrial Production Index in Nara Prefecture> Level of production is still low and remains at the same level Industrial Production Index (Seasonal Adjustment Index) Industrial Production Index of Local Industries (Seasonal Adjustment Index) (Year 25=1) Nationwide (Year 2=1) 14. Plastic Products Nara Prefecture (Year 2=1) Lumber/Wood products Chemicals Textiles Mar. 27 Jun. 27 Sep. 27 Dec. 27 Mar. 28 Mar. 27 Jun. 27 Sep. 27 Dec. 27 Mar. 28 [Source: Nara Prefecture] 1

32 General Economic Situation in Nara Prefecture -2 <Business Condition of Corporation (BSI)> Business confidence in Nara Prefecture remains weak. Business Survey Index (BSI) in Nara Prefecture for the period from April to June 28 significantly declined, and business confidence in Nara Prefecture is weak compared with BSI of Kinki region. <Movement of Corporate Investment> On the whole, movement of capital investment in Nara Prefecture remains weak compared to Kinki region. Within Nara prefecture, capital investments for all industries are expected to decline 23.7% YoY since those for non-manufacturing industries are projected to decline 39.3% but those for the manufacturing industry are forecast to grow 14.7%. <Business Survey Index (BSI)> Forecast +4. (%) +2. Kinki Region Nara Prefecture Apr.- Jun. 28 Jul.- Sep. 28 Oct.- Dec. 28 Corporate investment By business size (excluding land and software investments) (%) Manufacturing Non-manufacturing Large enterprises Leading medium-sized enterprises SMEs All industries Nara Pref. FY28 Plan 1H 2H Kinki Region FY28 Plan 1H 2H [Source: Nara Finance Office Kinki Finance Bureau, survey conducted in Apr.-Jun. 28] 2

33 General Economic Situation in Nara Prefecture -3 Business Bankruptcy Both bankruptcy and total debts increased in 27. Bankruptcy in Nara Prefecture in cases, 66. billion in total debts Employment Conditions Effective ratio of job offers to applicants in Nara Pref. is below the ratio of other prefectures in Japan. Effective ratio of job offers to applicants in Nara Pref. in times,.2 point down from the previous year. Number of Bankruptcies/Total Debts Number of Bankruptcies/Total Debts Effective Ratio of Job Offers to Applicants Effective Ratio of Job Offers to Applicants ( ( billion) 億円 ) (Cases) ( 件 ) Total debts Number of bankruptcies (Thousand people) Effective job offers Effective ratio of job offers to applicants Effective job seekers National average (Times) [Source: TEIKOKU DATABANK] [Source: Nara Labor Bureau, Health, Labor and Welfare Ministry] 3

34 Number of Population and Households in Nara Prefecture Population Population of of Nara Nara Prefecture Prefecture (26): (25): ,41 million, million, comprising comprising 54, 546, households households While While the population the population has been has on been a declining on a declining trend since trend 2, since the number 2, of the households number has of been households on the rise. has been on the rise. As As to future to future population estimates, estimates, in line in with line the with national the national trend, the trend, population the population of Nara Prefecture of Nara is Prefecture expected to is decline expected overall, to decline but forecasts overall, suggest but forecasts rising population suggest numbers rising population for the Osaka numbers commuter belt. for the Osaka commuter belt. Nara Prefecture: Changing of Population and Households (Thousands of people) (Thousands of households) 2, Population Households Estimated Population of Future (Year 2=1) Kashiba city 1, Ikoma city 1. Nara city Nationwide Total of Nara pref [Source: National Population Census] [Source: National Institute of Population and Social Security Research] 4

35 Housing Starts The number of housing starts within Nara prefecture in 27 fell year on year as a result of the effect of the revised Building Standards Law. While the number of housing starts throughout Japan fell in 27, the rate of decline in Nara prefecture was less than for all Japan. Year-on-year Growth Rate of of Number of of Housing Construction Starts Breakdown of Housing Starts in Nara Pref. Breakdown of Housing Starts in Nara Pref. (%) Nara prefecture Osaka prefecture Nationwide (Units) 1,2 1, Owner-occupied Rental House built for sale 759 1,136 1, Jan.27 Mar. May Jul. Sep. Nov. Jan.28 Mar. [Source: Land, Infrastructure and Transportation Ministry ] 5

36 Land Price Trend for Nara Prefecture (%) Land Price Volatility for Residential Use Up for the first time in 17 years (%) -5.4 Land Price Volatility for Commercial Use Nara Pref. National Region Up for the first time in 17 years Nara Pref. National Region Tokyo Kanagawa Saitama Aichi Chiba Osaka Hyogo Kyoto Shiga Nara Shizuoka Okayama Miyazaki Miyagi Hokkaido Gifu Gunma Fukuoka Wakayama Kagawa Nationwide Residential Use Volatility in 27 Ranking (%) Commercial Use Volatility in 27 Ranking Osaka Pref. Wakayama Pref. Kyoto Pref. Ikoma city Nara city Yamabe Yamatokoriyama city Ikoma Mie Pref. Kita katsuragi Tenri city Kashiba city Shiki Sakurai city Yamatotakada Uda city city Katsuragi city Kashihara city Uda Gose city Takaichi Gojo city Yoshino Rise in land prices Stay or Average Volatility Less than -1% Decline in land prices (average volatility more than -1%) 6

37 Financial Results for FY27 (1) Summary of Profit and Loss Core gross business profit Net interest income Fees and commissions Other operating income (*1) Expenses Personnel expenses Core net business profit Gains/Losses on bonds (JGBs, etc.) Net transfer to general provision for possible loan losses Net business profit Non-recurrent gains/losses Gains/Losses on stocks Disposal of non-performing loans Recoveries of write-offs Gains on reversal of provisions for possible loan losses Net income Cost of derivative financial products Non-personnel expenses Ordinary income Extraordinary gains/losses Income before taxes FY (7.4) (.1) (5.7) FY (6.3) (17.7) (2.5) (.9) YoY Change Credit cost (*2) 17.7 (4.4) *1 Except bonds (ex. Government Bonds) gains/losses *2 (Net transfer to general provision for possible loan losses + Disposal of non-performing loans) (Bad debt recovered+gain on reversal of provisions for possible loan losses) -1.2 Growth in interest on loans and deposits and interest on market sector, which includes the cost of derivatives that is the cost of procuring foreign-currency denominated bonds, were almost flat. (Non-consolidated, billion) Net interest income [Real net interest income] Interest on loans and deposits Interest on loans Interest on deposits Interest on market sector [Real interest on market sector] Interest on securities Interest on fund management, etc. Interest on fund procurement, etc. [Cost of derivatives] FY [58.4] [17.5] [7.7] FY27 YoY Change [57.9] [-.4] [17.3] [-.2] [6.7] [-.9] At a time of continuing instability in financial markets stemming from the US subprime mortgage problem, the most conservative write-offs considered likely at the present time were recorded in order to reduce future risk factors as much as possible. Therefore, a loss of 17.7 billion on securities such as JGBs was recorded. (Non-consolidated, billion) Gains and losses on securities such as JGBs Gains on disposal Losses on disposal Write-offs Losses on redemption FY26 (.1) FY27 YoY Change (17.7) Credit costs fell 22.2 billion to a -4.4 billion YoY as a result of reversal of provision for possible loan losses due to strict screenings (Non-consolidated, billion) Credit cost Net transfer to general provision for possible loan losses Disposal of non-performing loans Recoveries of write-offs Gains on reversal of provisions for possible loan losses Gains on reversal of general provisions for possible loan losses Gains on reversal of provisions for possible losses on particular loans FY FY27 YoY Change (4.4)

38 Financial Results for FY27 (2)Summary of Core Net Business Profit Factor Analysis of Changes in Core Net Business Profit Profit increase factor Profit decrease factor Core net business profit for FY Average balance of loans 2,579.8 billion (YoY change billion, Rate of change +1.3%) Loans volume factor +.4 Interest rate on loans 2.1% (YoY +.2%) Lending/deposit operations -.2 Loans return factor Deposit, etc, volume factor Average balance of deposits 4,47.9 billion (YoY change billion, Rate of change +2.1%) Interest rate on deposits.28% (YoY +.15%) Market sector -.2 Securities return factor -2.1 Securities volume factor Deposit, etc, return factor Average balance of securities 1,617.7 billion (YoY change billion, Rate of change -9.1%) Yield on securities 1.66% (YoY -.39%) Interest on products such as call loans YoY +.7 billion Interest on fund management, etc +.8 Interest on fund procurement, etc Fees and commissions increase factor Interest payables under securities lending transactions YoY billion Cost of derivative financial products YoY -.9 billion Fees related to investment trust sales income 2.5 billion YoY -. billion Life insurance sales income 1.9 billion YoY +.2 billion Life insurance premiums for group credit YoY +.2 billion Expenses increase factor Core net business profit for FY Personnel expenses 25.2 billion YoY -.2 billion Non-personnel expenses 19.6 billion YoY +1.1 billion Non-personnel expenses increase factor --- system co-sharing related expense 8

39 Financial Results for FY27 (3)Deposits and Assets on Deposit 4,. Deposits Outstanding Balance of deposits, particularly for personal deposits, has been stable. YoY change billion Balance of deposits as of March 31, 28 rose YoY change rate +.5% 1.7 billion year on year to 3,946.4 billion. 3, ,86.1 3, , , , ,18.6 3,58.1 3, ,143.3 Mar Deposit outstanding 2 Personal deposits 3 Negotiable deposits Mar. 25 Personal Government/Finance Mar. 24 3, , Mar. 26 Mar. 25 3,86.1 3, Mar. 27 Mar. 26 3, , Mar (%).5. Corporate Interest rate on deposits Mar. 27 3, , Mar. 28 3, , YoY Change YoY Change rate Assets on Deposit Assets on deposit have steadily increased, but as of March 31, 28, growth slowed as a result of a decline in fund price due to stagnant markets. Assets on deposit as or March 31, 28, grew 1.5 billion year on year to 44.2 billion Mar Assets on deposit Investment trust Public bonds Foreign currency deposits Mar Mar. 26 Investment trust Foreign currency deposits Mar Mar Mar Mar. 27 Public bonds Mar YoY change billion YoY change rate +.37% Mar. 28 Mar YoY YoY Change Change rate

40 Financial Results for FY27 (4) Loans Situation Loans Outstanding by Sector The balance of loans has steadily risen, particularly for individual loans and retail business loans. Loans outstanding amounted to 2,694.2 billion, as of the end of March 28, a year-on-year increase of 48.8 billion. (%) 35, , , Mar. 24 Mar. 25 Personal loans Retail business loans Wholesale loans Loans for local government , Mar Interest rate on loans 2.1 2, , Mar Mar ,. YoY change billion YoY change rate +1.8% Loans Outstanding by Prefecture. 1,. <Retail Business Loans> Mar Mar. 25 <Personal Loans> Mar Mar Mar Mar. 24 Mar. 25 Mar. 26 Mar. 27 Mar. 28 Osaka Prefecture YoY change billion YoY change rate +15.% Other Osaka Pref. Nara Pref. Osaka Prefecture YoY change billion YoY change rate +29.4% Other Osaka Pref. Nara Pref. 1

41 Financial Results for FY27 (5)Capital Adequacy Ratio/Capital Allocation Capital Adequacy Ratio Capital Allocation As of the March 31, 28, the capital ratio was 1.53% (TIER I ratio of 9.17%). Nanto Bank has issued 2. billion in preferred fund certificate in order to respond to changes in the financial environment and to handle the increase in risk assets such as the growth in loans in order to improve profits. 3, (%) (Capital surplus) 42.3 billion Operating risk Credit risk Deposits & loans risk Stock risk. 1, , ,73.6 2,63.7 2,84.8 Mar. 24 Tier I ratio Mar. 25 Risk-weighted assets Mar. 26 Mar. 27 Mar. 28 Capital adequacy ratio * Calculated by standard method of Basle II from March 27 As for risk-weighted assets, calculated by credit risk = standard method, Operational risk = basic method H 28 1H 28 of April 28 Distribution for Risk capital Amount of of risk capital adequacy billion billion billion <Interest-rate risk for bank account> (As of the end of March 28) 99 percentile method Amount of interest-rate risk 3.1 billion Outlier ratio 13.4% <Calculated method for amount of risk> Confidence level Holding period Credit risk 12 months Market risk Deposits/loans and discounts Stock/bonds, etc. 99% 3 months 3 months *Correlations within the market risk categories are ignored. *Credit Risk: a business group is identified as a single entity. Bonds risk Crossstockholdings 6 months Operational risk Basel II Basic Approach 11

42 Changes in Deposit/Lending Spread In the medium-term management plan, interest rates are expected to gradually rise, and the margin for money on deposits and loans for FY21, the last year of the medium-term management plan, is projected to rise.6 percentage points compared to FY27. The short-term prime rate for the second half of FY29 and the second half of FY21 are each expected to rise.25 percentage points. Raise of short-term prime rate 2H FY29.25% Interest Margin between Deposits and Loans 2H FY21.25% (%) (%) Interest on loans Interest spread Funding cost.28 Interest on deposits 預金利回 Medium-term management plan More value NANTO FY25 FY26 FY27 FY28 FY29 FY

43 Effect of Increase in Interest Rate Effect on yearly income due to increase in interest rate (calculated based on the portfolio of Japanese yen assets as of March 28) Short-term interest rate increased 25 bp (1) Parallel shift = Effected income Up.4 billion (2) Steepening = Effected income Up 1.6 billion (3) Flattening = Effected income Down.8 billion (1) Increase in short-term interest rates = Increase in medium- and long-term interest rates (Parallel shift scenario) Increase in shortterm interest rates.25% = Increase in medium- and longterm interest rates.25% Investment Interest on loans and discounts Interest and dividends on securities 3.8 billion 2.8 billion.9 billion Funding 3.4 billion - Interest on deposits + NCD 3. billion =.4 billion Interest on fund procurement, etc. Effect on income.4 billion (2) Increase in short-term interest rates < Increase in medium- and long-term interest rates (Steep scenario) Increase in shortterm interest rates.25% < Increase in medium- and longterm interest rates.5% Investment Interest on loans and discounts Interest and dividends on securities 5. billion 3.5 billion 1.6 billion Funding 3.5 billion - Interest on deposits + NCD 3.1 billion =.4 billion Interest on fund procurement, etc. Effect on income 1.6 billion (3) Increase in short-term interest rates > Increase in medium- and long-term interest rates (Flat scenario) Increase in shortterm interest rates.25% > Increase in medium- and longterm interest rates.% Investment Interest on loans and discounts Interest and dividends on securities 2.5 billion 2.2 billion.3 billion Funding 3.3 billion - Interest on deposits + NCD 2.9 billion =.4 billion Interest on fund procurement, etc. Effect on income -.8 billion 13

44 Ratio of Loans by Industry As As of of March March 31, 31, 28, 28, industries industries with with the the largest largest number number of of outstanding outstanding loans, loans, in in order order of of volume volume of of loans, loans, were were the the manufacturing manufacturing industry, industry, local local public public entity, entity, wholesaling wholesaling and and retailing retailing industry, industry, and and services services industry. industry. There There has has been been a a downward downward trend trend in in the the share share of of outstanding outstanding loans loans held held by by the the construction construction industry, industry, real real estate estate industry, industry, and and local local public public entity. entity. Loans Outstanding by Industry Ratio of Loans by Industry Domestic lending total volume Manufacturing Agriculture Forestry Fishery Mining Construction Electric, gas, heat supply and water utility Information communication Transportation Wholesaling & retailing Finance & insurance Real estate Services Local public entity Personal and others March 25 2, March 26 2, March 27 2, March 28 2, YoY change ( billion) Compared with at end- March End-Mar. 25 End-Mar. 26 End-Mar. 27 End-Mar % 5% 1% Manufacturing Construction Wholesaling & retailing Finance & insurance Real estate Services Local public entity Others 14

45 Shift in Classification of Debtors <The March 28> Total credit (loans): 2,727.1 billion (increase of 44.1 billion from Mar. 27) Loans to normal debtors: 2,41. billion (increase of 15.8 billion from Mar. 27) Loans to debtors requiring caution and Substandard debtors: 255. billion (decrease of 44.8 billion from Mar. 27) Loans to potentially bankrupt debtors and lower: 71. billion (decrease of 16.8 billion from Mar. 27) (Subject: Credit related bonds such as loans) Balance (As of the end of March 27) Normal assets Assets requiring caution As of the end of March 28 Substandard assets Potentially bankrupt assets Bankrupt and effectively bankrupt assets For collection or write-offs a b c d e F g 1 Normal debtors 2, , Debtors requiring caution Substandard debtors Potentially bankrupt debtors Bankrupt and effectively bankrupt debtors New debtors Total 2, , Loans to normal debtors: Increase of 15.8 billion from March 27 Loans to debtors requiring caution and Substandard debtors Decrease of 44.8 billion from March 27 Lower than doubtful assets Decrease of 16.8 billion from March 27 Lower than doubtful assets (for collection or right-offs) 26.2 billion 15

46 Partnership System for Regional Banks <Purpose> Reduce the cost related to main system, which is centered on accounting system for the future, and create a new investment capacity for the expansion of strategic investment for IT. Properly adjust ourselves to the changing financial environment and enrich product provision and customer services. Maintain future system development to cut down costs, retain system staff, or acquire new technology by outsourcing system development and operation. May 7, 28 transition to a partnership system for regional banks Members of the Partnership System for Regional Banks: NANTO BANK, Joyo Bank, Hyakujushi Bank, Juroku Bank, Yamaguchi Financial Group (Yamaguchi Bank, Momiji Bank) This Partnership System for Regional Banks received the Minister of Economy, Trade and Industry Commendation Award in the IT Investment Streamlining Promotion Category in October

47 Expenses Plan Expenses Plan Growth in personnel expenses are expected to be flat. Non-personnel expenses are projected to increase because of the increase in depreciation expenses accompanying start-up investments for the Partnership System for Regional Banks and system investments to strengthen sales. The number of employees is expected to grow in order to strengthen the sales capabilities. 6. ( billion) Expenses Personnel expenses Non-personnel expenses Taxes OHR Target for Medium-Term MP 8. (%) (Persons) 3, Bank Employees ,5 2,69 2,65 2,614 2, , FY25 FY26 FY27 Implement more effective and efficient staff assignments Commit personnel to Osaka prefecture Strengthen efforts by the retail division FY21 <In three years> increase of around 14 employees increase or around 15 employees Improve and expand the internal management system increase or around 5 employees. 6. Organization changes after introducing partnership system decrease of around 3 employees Merger and closing of offices decrease of around 1 employees 17

48 CSR 1 Nanto Bank will fulfill its corporate social responsibility by making use of its human network rooted in the local community and continue to work to protect the environment and make contributions to society that help enliven the local community. Stakeholders in the Bank Customers Local community Shareholders Employees Main CSR Efforts Promoting environment protection activities Organizing CSR Promoting contributions to society Expanding disclosure 18

49 CSR 2 Nanto Bank is one of the constituent companies of the social responsibility investing (SRI) index. Nanto has been incorporated into FTSE4Good, which is drawing attention throughout the world. * FTSE4Good Index series Composed of corporations that fulfill criteria recognized globally regarding factors such as the environment, society, and human rights Share price index developed by the UK-based FTSE Up until now, 8 Japanese banks have been incorporated into the index Since its establishment in 1934, the bank s consistent activities over many years, which are focused on its core business of financial services but also extend to local industry surveys and research, promotion of tourism, environment protection/planting trees, and sponsoring charity activities, scholarships, have been praised. More value Nanto Priority strategy Promoting CSR 19