The Juroku Bank 31 st Financial Results Briefing [Fiscal year ended March 218] May 31, 218
Contents Overview of Results for FY218/3 Overview of results for FY218/3 4-1 Capital 11 Business strategy Comprehensive business tie-up 13-15 Reform of sales structure 16 Efforts to improve profitability 17-18 Efforts to streamline operations 19 Efforts to reduce costs 2 Efficient branch operation 21 Juroku Bank s ESG 22 FY219/3 business forecasts FY219/3 earning forecasts 24 Profitability, Efficiency 25 Earnings forecasts and other future-related statements made in this document are based on information available at the time of publication and a certain level of assumptions that are considered to be reasonable. Actual results may differ significantly due to a wide range of factors. 2
Overview of Results for FY218/3
Overview of Results for FY218/3 Non-consolidated (Unit: ) 216/3 217/3 218/3 YoY 1H 2H Full 1H 2H Full (A) 1H (B) 2H (C) (C) -( B) Full (D) (D) - (A) Core gross operating profit 334 317 651 317 299 616 279 32 23 581 35 Net interest income 289 283 572 28 27 55 239 247 8 486 64 Fees and commissions 37 3 68 25 3 56 38 45 7 84 28 Other operating profit (except Gains / losses on JGBs and other debt securities) 7 3 1 11 1 1 1 8 7 1 Expenses 263 253 516 259 252 511 252 235 17 487 24 Personnel expenses 146 143 29 144 141 285 14 13 1 27 15 Non-personnel expenses 1 98 198 98 99 197 95 93 2 189 8 Net core operating profit 71 63 135 57 47 15 26 67 41 93 12 Gains / losses related to securities investment 35 24 6 26 48 22 19 3 16 22 44 Gains / losses on JGBs and other debt securities 3 28 59 26 76 49 6 39 45 32 17 Gains / losses on equities 5 4 1 27 27 12 42 3 55 28 Credit costs 8 36 28 9 38 28 11 6 17 5 23 Ordinary profit 133 57 19 86 33 119 62 59 3 122 3 net income 95 26 122 61 3 91 46 46 93 2 Consolidated (Unit: ) 216/3 217/3 218/3 YoY Core gross operating profit 72 683 645 37 Expenses 552 547 532 15 Net core operating profit 168 135 113 22 Ordinary profit 223 145 139 6 Net income attributable to shareholders of the parent company 133 1 99 1 Overview of non-consolidated results Ordinary profit increased by.3bio yen YoY to 12.2bio yen Net income increased by.2bio yen YoY to 9.3 billion yen Net core operating profit increased sharply in 2 nd half of FY218/3 4
Overview of Results for FY218/3 (non-consolidated) Fees and commissions (half-year basis) 5 4 3 2 1 The highest level in the past 3 years 37 3 25 3 Full-year 84 38 45 Breakdown of fees and commissions 5 4 3 2 1 37 9 1 26 Individual-related Corporate-related Others Individual-related is on the recovery trend from the bottom of 16/9, corporate-related is the highest level in the past 3 years 3 9 2 25 7 3 14 3 6 3 36mio yen effect of ATM fee hike in November 216 38 1 5 2 22 45 12 6 27 Personnel expenses (half-year basis) Non-personnel expenses (half-year basis) 15 145 Down 1.5bio yen YoY as a result of business efficiency reform Full-year 27 15 YoY 15 1 Down.8bio yen YoY as a result of cost cut for advertising, software, etc. Full-year 189 8 YoY 14 135 13 125 146 143 144 141 14 13 95 9 1 98 98 99 95 93 12 85 5
Overview of Results for FY218/3 (non-consolidated) Net interest income(half-year basis) Loan balance, Yield(half-year basis) JPY loans and deposits JPY securities investment Foreign currencies 289 283 29 28 Bottomed out 18 27 27 2 28 247 25 27 239 63 59 15 23 12 55 21 5 36 41 19 17 28 24 195 19 189 189 15 Average balance of JPY loans Average yield 45, 1.198 1.141 1.7 44, 1.14.974.944 43, 42, 41,426 41, 4,259 39,483 4, 38,974 38,793 39, 38,328 38, 37, 36, 35, % 1.4 1.2 1..8.6.4.2. -.2 -.4 -.6 -.8-1. Loan interest (year on year) Bank of Japan started Qualitative and Quantitative Monetary Easing with a Negative Interest Rate. -1. -2. -3. -4. -5. 215/4 215/1 216/4 216/1 217/4 217/1 Securities investment average balance, Average yield(half-year basis) JPY securities Foreign currency securities % JPY average yield Foreign currency average yield 15, 2.5 2.257 1.984 1.866 1.95 2. 1.586 1.574 1, 1.5 13,929 13,623 13,337 12,998 11,117 1,937.93.872.834 1..781 5,.654.764.5 2,496 3,192 3,891 4,116 1,57 1,861. 6
Overview of Results for FY218/3 (non-consolidated) Gains / losses related to securities (half-year basis) Bonds Stocks Net yen 25, Nikkei 225(left) U.S. 1Y yield(right) % 3. 6 4 2-2 35 24 26 5 3 28 26-4 -48 19 27 12 6 3 42-39 23, 21, 19, 17, 15, 217/4 217/7 217/1 218/1 2.5 2. 1.5 218/3-4 -6-8 -76 Confirmed profits on stocks following positive upturn in stock market Confirmed losses as a result of replacing low yield U.S treasury bonds with high yield bonds following rise of U.S. 1year yield Gains / losses on valuation of securities JPY bonds Stocks Other securities 1, 921 858 881 85 757 736 8 85 67 6 683 564 53 4 649 746 745 Status of duration year JPY bonds Foreign currency bonds 8 7.15 7.3 6.65 7 6.22 5.76 5.74 6 4.588 4.441 5 3.95 3.36 3.48 3.51 4 2-2 271 264 186 77-11 49 5-55 -37-59 3 2 1 7
Overview of Results for FY218/3 (non-consolidated) Core OHR(half-year basis) % 95 9 85 8 75 78.6 79.9 81.7 84.1 9.4 77.7 Down 12.7pts Profit of customer services(half-year basis) 2 1-1 -2-3 -9 Profit of customer services = loan average balance difference in interests rates for depositors and borrowers + net income from fees and commissions - operating costs Turned positive -12-26 -2 4 7-4 -34 Interest Rates on JPY deposits and JPY loans % 2. 1.6 1.495 1.44 1.363 JPY Loans 1.297 1.228 1.177 1.115 JPY Deposits BOJ s Qualitative and Quantitative Monetary Easing with a Negative Interest Rate started Net interest margin(half-year basis) %.12.81.69.8.55.48.41 1.2 1.43.996.96.935.4.8.4.72.47.36.25 Loan rates decline curve is flattening. -.4 -.57..18.87.83.85.8.79.61.42.31.28.22 13/3 13/9 14/3 14/9 15/3 -.8 8
Overview of Results for FY218/3 (non-consolidated) Loan balance(by region) Loan balance(by sector) Gifu Aichi Others 41,742 42,335 39,45 39,435 39,661 4,44 4, 4,779 4,796 4,852 4,82 4,685 4,593 Large companies SMEs Individuals Local governments 41,742 42,335 39,45 39,435 39,661 4,44 4, 4,126 4, 4,167 4,52 4,124 3,921 3, 17,95 18,347 18,625 19,437 2,264 2,919 3, 12,413 12,962 13,416 13,928 14,568 15,381 2, 2, 16,23 16,379 16,396 16,827 17,154 17,257 1, 16,288 16,286 16,351 16,374 16,699 16,62 1, 6,234 6,41 5,724 5,727 5,893 5,696 Loan-to-deposit ratio % Loan ratio to SMEs and individuals % 78. 76. 74. 72. 7.76 72.67 72.45 73.15 73.73 76.17 78. 76. 74. 73.36 74.4 75.16 76.12 75.99 77.9 7. 72. 68. 7. 9
Overview of Results for FY218/3 (non-consolidated) Home loan balance (including apartment loan) Apartment loan / Card loan balance Gifu Aichi Others Apartment loan Card loan 2, 15, 13,657 16 14,326 118 14,855 128 15,434 131 16,87 14 16,941 143 2,5 2, 11 11 111 113 128 133 1, 8,339 8,888 9,311 9,791 1,351 11,61 1,5 1, 1,89 1,912 1,981 2,43 2,62 2,15 5, 5,211 5,319 5,415 5,51 5,595 5,735 5 Deposit balance(by region) Gifu Aichi Others Deposit balance(by sector) Individuals Corporates Local governments 6, 54,394 53,52 54,379 54,686 55,22 55,237 6, 54,394 53,52 54,379 54,686 55,22 55,237 5, 4, 927 462 498 51 411 41 15,293 14,613 14,87 14,944 14,681 14,667 5, 4, 3,232 2,768 3,235 2,537 2,943 2,744 15,142 14,658 14,939 15,467 15,325 15,245 3, 3, 2, 38,174 38,427 39,11 39,231 4,125 4,168 2, 36,18 36,75 36,24 36,682 36,951 37,247 1, 1, 1
Capital Capital ratio(non-consolidated) Capital ratio (consolidated) 1 million yen 6, 5, 9.99 Capital Capital ratio (Domestic rule) Capital ratio (Domestic Basel III fully implemented basis) 9.65 9.64 9.22 9.3 8.54 % 12. 1. 1 million yen 6, 5, 1.7 Capital Capital ratio (Domestic rule) Capital ratio (Demestic Basel III fully implemeted basis) 1.34 1.35 9.88 9.68 9.15 % 12. 1. 4, 8.7 8.59 8.61 8.57 8.4 8.33 8. 4, 8.95 8.83 8.87 8.84 8.67 8.6 8. 3, 6. 3, 6. 2, 4. 2, 4. 1, 2,782 2,739 2,789 2,729 2,744 2,656 2. 1, 3,52 3, 3,57 2,988 3,9 2,95 2. 3, 2,5 Improvement in capital quality 2,785 2,814 2 2 39 31. Capital (non-consolidated) 2,71 2,739 2,729 2,656 21 18 1. Core capital consists of only Tier1 capital as of the end of March 218 2, Preferred shares 1,5 1, 2,195 2,34 2,5 2,559 2,629 2,656 Subordinated debt 5 Common shares, Retained earnings, etc. 13/3 14/3 15/3 16/3 17/3 18/3 11
Business policies
Comprehensive business tie-up Comprehensive business tie-up with Tokai Tokyo Financial Holdings The Juroku Bank, Ltd. In March 218, Juroku Bank and Tokai Tokyo FH agreed on comprehensive business tie-up Launch joint venture subsidiary for securities business in FY219, to achieve profit as early as 1st fiscal year Objectives of the tie-up 1.To strengthen the business base of two companies which both operate in same business area, by supporting each other as equal partners. 2.To enhance two companies corporate value by realizing new financial group s visions beyond banking and securities business and providing variety of high quality financial services to customers via making the best use of two companies business resources. The largest bank in Tokai area (Central Japan area) The largest securities company in Tokai area (Central Japan area) Juroku Bank Comprehensive business tie-up Tokai Tokyo FH A new financial business model under integration of banking business and securities business 13
Comprehensive business tie-up Juroku Bank Tokai Tokyo FH Customer base in Gifu Prefecture Abundant network in local society Services to wealthy class Joint venture subsidiary for securities business Expertise for asset management business Variety of products for asset management Best use of branch space and human resources created in business efficiency reform, for banking-securities tie-up branches and new businesses Deposit Loan Investment trust Insurance New business Joint branches for wealthy class A new form of branch Securities company Insurance shop One-stop shop Bank agent business Bank products Security products Insurance products Non financial products 14
Comprehensive business tie-up Juroku Bank s client assets on deposit Joint venture subsidiary for securities business Takeover of Tokai Tokyo FH s 4 branches in Gifu Prefecture Seino-area 55bio yen Gifu-area 2,2bio yen Hida-area 17bio yen Chuno-area 62bio yen Tono-area 55bio yen Starts business with approximately 1 staffs Takeovers Tokai Tokyo FH s 4 branches in Gifu Prefecture (Gifu, Ogaki, Tajimi, Nakatsugawa) Aims to obtain 1 to 2% equivalent of Juroku bank s total client assets of 3.3 trillion yen every fiscal year Aims to obtain 1 billion yen client assets in early stage Expands banking-securities tie-up business to Tokai Tokyo FH s uncovered Chuno-area and Hida-area Aichi Prefecture 1,6bio yen 3, 2,5 2, 1,5 1, 5 Forecast of joint venture subsidiary s outstanding balance of client assets on deposit Launch 1st FY 2nd FY 3rd FY 4th FY 5th FY 15
Reform of sales structure Started Branch Activity Process Evaluation System in April 216 Abolished sales quota, customer-oriented sales process is highly evaluated Evaluation based on short-term results of figures Reform Customer-oriented sales Provide services which customers truly need Evaluation based on sales process Flow of Branch Activity Process Evaluation System PLAN DO CHECK ACTION Branches ning a business policy Branch Business Policy Sales activity Progress check Activity review Action for next FY Headquarters Block Manager Setting evaluation criteria Activity Process Evaluation Criteria Feedback of activity results Evaluation of activity process Block Business Promotion Leader Business Promotion Manager Follow-up Follow-up On-site check 1 st evaluation Executive officer in charge Executive Board Meeting Business Promotion Manager conducts 1 st evaluation with reference to results of onsite check and opinions of Headquarters and Block Managers 2 nd evaluation Final evaluation 16
Efforts to improve profitability Enhancement of loans Enhancement of customer engagement Introduction of a new tool for evaluation of customers business potentials (ECBP) (March 218) Tied-up with i Connect Partners, introduced a system to share customers business issues by creating a database of customers business details A systematic ECBP which does not rely on skills of individual officers Establishment of Financial Intermediary Enhancement Study Group (January 218) Tied-up with 9 regional banks, started studies for enhancement of ECBP Advance the knowledge for ECBP Release of Growth Loan (March 218) Released a loan product which requires ECBP and creation of business plan documentation Branch Activity Process Evaluation System ECBP 1 million Yen Number of ECBP based borrowers and outstanding balance of ECBP 6, based loans 1,761 5, 4, 3, 2, 1, 17,6 17,2 16,8 16,4 16, 15,6 5 453 4 913 198.6bio yen 47 968 21.5bio yen 339.5bio yen 16/3 17/3 18/3 16,379 Outstanding balance of loans to SMEs 16,827 17,257 16/3 17/3 18/3 JPY interest revenue of loans 391 393 Number of customers 2, 1,5 1, 5 3 Bottomed out Enhancement of loans 2 16/3 17/3 18/3 19/3 17
Efforts to improve profitability Launch of Corporate Solution Team Sales structure for corporates Launched Corporate Solution Team in January 218 Selection of products Branches Headquarters Specialist Specialist Specialist Specialist Support of sections in charge of products Beyond the framework of products, to a new sales structure to find customers true needs and realize more speedy proposals from various angles Corporate Solution Team Proposals to Customers true needs Direct sales Tie-up Branches Targets of Juroku Bank s main or submain corporates Customers Customers 2,5 2, 1,5 1, 5 Corporate solution related revenue Derivatives Syndicated loans and Commitment fees Private Placement Bond fees M&A fees Business matching fees 966 862 62 224 36 81 66 279 53 614 144 264 2,3 1,91 16/3 17/3 18/3 19/3 337 297 326 246 695 Promotion of M&A with Business Succession Team Proposal of order-made derivatives products which meet customers needs Proposal of CSR private placement bonds to customers eager to contribute to local society Support to develop customers sales channels by holding business matching meetings (Example)Gifu University Juroku Bank NEXCO Central Japan Discover Local Ingredients Project Awarded as a characteristic effort by Cabinet Office in February 218 18
Efforts to streamline operations Expansion of Branch Reform Project Branch Reform Project Centralizes back office functions in branches to the headquarter to eliminate back office operations from branches Creates time for branch staffs to consult with customers Establishes a branch structure which realizes operations with less human resources Deposit and settlement 217/4 217/1 218/4 Full-scale expansion Trial in some branches Expansion to all branches in Gifu Prefecture Expansion to all branches Loan Trial in some branches Expansion to all branches Slimming down of Headquarter functions Reorganized headquarters in June 217, changed from 17 divisions 2 offices 45 groups structure to 13 divisions 2 offices 35 groups structure and eliminated duplicated works Realizing efficiency by reviewing work process Introduced wireless LAN in Headquarter building, realized more efficient and paper-less meetings Saved 2, hours a year by reducing meetings (abolished meetings, reduced frequency, reduced participants) Number of personnel 2,4 2,2 Personnel plan in branches 2,369 2,254 Number of personnel 8 6 696 Personnel plan in headquarters 572 4 2, 2 1,8 17/3 18/3 19/3 17/3 18/3 19/3 19
Efforts to reduce costs Personnel plan Number of personnel 3,8 Juroku Bank group (consolidated) in 14th Mid-term Managment Number of personnel 3,8 Juroku Bank (non-consolidated) 3,6 3,4 3,2 Actual 3,453 3,442 Actual 3,48 3,337 3,38 3,366 3,232 3,6 3,4 3,2 Actual 3,65 3, 2,8 2,6 3, 2,8 2,6 Actual 2,826 2,62 2,544 2,4 17/3 18/3 19/3 2/3 Expenses plan 2,4 17/3 18/3 19/3 2/3 Actual 3 285 28 26 24 Personnel expenses Actual 27 246 24 Actual 197 2 18 16 Non-personnel expenses Actual 189 175 165 22 2 17/3 18/3 19/3 2/3 14 17/3 18/3 19/3 2/3 2
Efficient branch operation Yamanote branch (Toyota city, Aichi Prefecture) Ginan branch(ginan town, Gifu Prefecture) Quick Counter in Yamanote branch Special features of Yamanote branch Quick Counter enables branch staffs to operate without touching cash Open until 17: on weekdays and realizing Sunday operations due to the reduction of cash counting burdens Operations by 7 staffs Special features of Ginan branch Provide variety of services as Holiday Juroku Ginan on Saturdays and holidays Open on holidays from 1: to 17: (operations by 4 staffs) Juroku Bank s 3 rd Holiday Juroku 21
Juroku Bank s ESG Environment Forest protection Forest protection activity at Juroku Bank s Forest MITAKE Made an agreement on forest protection with Mitake Town and Gifu Prefecture, conducted forest protection activity at Juroku Bank s Forest MITAKE Name of the forest Location Size Juroku Bank s Forest MITAKE Mitake Town, Gifu Prefecture 6.71 ha Agreement term Sep. 217 ~ Mar. 223 Activities Maintenance of forest, promenades, Studies of environment Comprehensive Agreement on Creation of Forest Resources and Gifu s Education for Forest with Gifu Prefecture Agreement date February 2 th 218 Purpose To promote Creation of River Island Gifu by conducting sustainable activities related to Creation of Forest Resources and Gifu s Education for Forest Social Activities to improve labor environment Comprehensive Agreement on Work Style Reform with Gifu Labor Bureau Held Seminar for human resource shortage issues 3 times to resolve human resource shortage issues in local economy About Gifu s Education for Forest Seminar for human resource shortage issues @Takayama City (Dec. 217) Seminar for human resource shortage issues @Gifu City(Feb. 218) Seminar for human resource shortage issues of inns, hotels and sightseeing businesses @Takayama City(Feb. 218) Gifu s Education for Forest is an effort to connect Gifu s culture of sharing values with forests to the future. It is defined as Studies from forests and woods which can be achieved in nature-rich environment Governance Governance structure Auditors Meeting Incl. 2 outside Auditors Audit Meeting Audit Division Shareholders Meeting Board of Directors Incl. 2 outside Directors Executive Board Meeting President Vice President Managing Executive Officers Directors, Executive Officers Headquarters Branches Advice Management Advisory Council Personnel Advisory Committee Compensation Advisory Committee Risk Management Meeting Operational Risk Management Meeting Compliance Meeting 22
FY219/3 business forecasts
FY219/3 earning forecasts Non-consolidated 218/3 (actual) (unit : ) (unit : ) 219/3 (forecasts) year-on -year 218/3 (actual) 219/3 (forecasts) year-on Core gross operating profit 581 592 11 Ordinary profit 139 151 12 Net interest income 486 493 7 Fees and commissions 84 97 13 Other operating profit (except Gains / losses on JGBs and other debt securities) 1 2 8 Expenses 487 45 37 Personnel expenses 27 247 23 Non-personnel expenses 189 175 14 Net core operating profit 93 142 49 Gains / losses related to securities investment 22 13 9 Gains / losses on JGBs and other debt securiti 32-32 Gains / losses on equities 55 13 42 Credit costs 5 17 22 Ordinary profit 122 145 23 Net income 93 1 7 14 th Medium-Term Management : Progress Item Consolidated Net income attributable to shareholders of the parent company Overview of non-consolidated forecast Net interest income up.7bio yen YoY Fees and commissions up 1.3bio yen YoY Expenses down 3.7bio yen YoY -year 99 12 3 Gains / losses related to securities investment down.9bio yen YoY Ordinary profit up 2.3bio yen YoY Net income up.7bio yen YoY 218/3 (actual) 219/3 (forecasts) Final year of plan (22/3) Earning capability Net income(consolidated) 9.9 billion yen 1.2 billion yen 1 billion yen Growth potential Community presence (deposit average balance + loan average balance) 9,624.2 billion yen 9,943.2 billion yen 1 trillion yen (Customer base) Deposit average balance 5,51 billion yen 5,66.1 billion yen 5,7 billion yen Loan average balance 4,123.1 billion yen 4,337.1 billion yen 4,3 billion yen Financial soundness Capital ratio (consolidated) Domestic Basel III fully implemented basis 8.6% Around 8.33% Around 8.7% 24
Profitability, Efficiency Profit of customer services 4 28 2 11 4-9 -12-2 -26-2 -34-4 18/9 19/3 Net interest margin %.1.5. -.5 -.1.69.81.55.48 -.57.41.77.49 18/9 19/3 % 95 9 85 8 75 7 Core OHR Actual(half-year-basis) 9.4 84.1 81.7 79.9 78.6 8.9 77.7 % 95 9 85 8 75 7 85.5 83.8 Actual (full-year-basis) 75.9 69.9 65 65 6 6 18/3 19/3 2/3 25
Improving management efficiency to survive competition Building strategies by region Expanding contact points with customers Offering solutions above and beyond expectations Contributing to the growth of customers and local economy Positive cycle Long-term vision Financial group that is needed by customers and grows with customers Ensuring customeroriented approach Basic Policy Exploring core business operations deeper Taking on new revenuegenerating opportunities Addressing changes of external environment swiftly Engagement First Helping each employee improve performance Actively getting involved in community tasks Improving fund management capacity Building a stable and indefinite revenuegenerating structure to support local communities