FY2018
Earnings Results Briefing

June 3, 2019

Table of Contents
Summary of FY2018 Earnings Results

FY2019 Forecasts and Major Initiatives

Summary

4

Earnings forecasts

13

Change in Net Interest Income

5

Progress of the Medium-Term Management Plan

14

Major Accounts: Deposits and Loans

6

Advance Local Promotion Activities

15

Major Accounts: Securities

7

Initiatives in Open Innovation

16

Fees and commissions

8

Strengthening Sales Activities Based on Life Planning

17

Expenses

9

Store/Channel Strategy

18

Credit Cost Trends/Non-performing Loans

10

FinTech19

Capital Adequacy Ratio

11

BPR

20

TSUBASA ALLIANCE

21

SDGs / ESG

23

Towards the Next Medium-Term Management Plan

25

Shareholder Returns

26

For inquiries regarding this document, please contact:
Management Planning Department, The Chugoku Bank, Ltd.
Mr. Fumiyama / Mr. Maniwa
TEL: +81-86-234-6519; FAX: +81-86-234-6587

Email: souki01@chugin.jp

Section I
Summary of FY2018
Earnings Results

FY2018 Earnings Results —Summary —FY2015FY2016FY2017FY2018(100 million yen)Core business gross profit
Interest income
Fees and commissions
Other operating income
Expenses (-)

855
700
150
5
554

820
677
152
-9
548

795
662
146
-12
556

770
630
148
-8
542

-25
-32
2
4
-14

vs. Plan*
-16
-19
-8
10
-10

Core business net profit
OHR (%)

301
64.8

271
66.9

239
69.9

228
70.3

-11
0.4

-6
0.1

Credit expense (- is reversal (profit))
Bond sales gains/redemption
Equity sales gains/redemption
Other

-37
17
33
16

-2
-20
43
-7

-17
-24
44
2

41
11
14
6

59
35
-30
4

9
8
-1
2

Recurring profit
Extraordinary gain/loss
Net income

406
-3
259

289
-4
190

279
-1
194

219
-2
153

-60
-1
-41

-6
1
-1

Consolidated recurring profit

434
272

316
203

309
212

236
161

-73
-51

-6
-1

Net income attributable to owners of parent

YoY* Profit results released on Nov. 9, 2018

• Core business net profit decreased by 1.1 billion yen year on year due to the impact of a significant decrease in
securities interest despite cost reduction efforts.
• Recurring profit decreased by 6.0 billion yen year on year due to a reversal of provisions for credit expenses (mainly
attributable to general provisions for doubtful receivables).

4

FY2018 Earnings Results – Change in Net Interest Income –[Loan yield][Factors behind changes in net interest income] Foreign currency-based (-1.8 billion yen
year on year)• Loan interest: +4.3 billion yen yoy• Securities interest: -2.1 billion yen yoy• Increase in foreign currency
procurement: -3.3 billion yen yoy

 Yen-based (-1.4 billion yen year on year)• Loan interest: +100 million yen yoy• Securities interest: -1.7 billion yen yoy• Decrease in deposit interest: +200
million yen yoy(100 million
yen)

14

36

- 13

- 38

-1

662

17
- 16

650

2

Loan yield
貸出利回り
Yen loan yield
邦貨貸出利回り

-6

1.01

1.03

1.08

1.09

0.95

0.89

0.86

0.84

FY2016FY2017FY2018FY2019Plan[Securities yield]

7

0

(%)

(%)

- 33

-1

-3.2 billion

630

1.20

0.97

FY2019Foreign currency otherForeign currency average
securities balance
Foreign currency
securities yield
Foreign currency depositinterest
Foreign currency
procurement

Foreign currency
loan yield

Foreign currency averageloan balance

Yen other

Yen deposit interest

Yen securities yield

Yen average
securities balance

Yen loan yield

Yen average loanbalance

FY2018

2019
年度

外貨その他

外貨調達

外貨預金利息外貨有証利回外貨有証平残外貨貸出利回

外貨貸出平残邦貨その他

邦貨預金利息邦貨有証利回邦貨有証平残邦貨貸出利回

年度

邦貨貸出平残

2018

1.17

1.20

1.03
0.95
0.86

0.95

600

1.24

0.95

0.90
0.81

Securities
yield
有価証券利回りYensecurities yield
邦貨有価証券利回り

Yen
邦貨有価証券利回り(投信解約益除く)
securities yield (excl. investment trust redemption gain)
FY2016FY2017FY2018• Yen net interest income Loan interest: +100 million yen yoy since the drop in yield was covered by an increase in average balance
Securities interest: -1.7 billion yen yoy mainly due to a drop in reinvestment yield• Foreign currency net interest income
Loan interest: +4.3 billion yen yoy mainly due to a rise in yield on the back of a U.S. interest rate hike
Securities interest: -2.1 billion yen yoy mainly due to a decrease in average balance owing to a reduction in balance

FY2019Plan

5

Major Accounts – Deposits and Loans –[Average balance of deposits and NCD]
(100 million
yen)64,57760,000

Other

3,914

67,15567,537

4,920

4,627

16,235

15,96015,47550,00030,00040,000

+0.8%

+2.4%

20,000(100 million
yen)

40,000

Domestic privateclients

45,187

46,27420,00045,518Hong Kong Branch

167

Personal loans

10,523

Non-Japanese
SF centers
Local government
loans

0FY2018

258

218

＋4.5%

Urban
Development *2

48,27547,344＋3.5%

11,006

11,397

3,833

4,596

5,099

5,055

4,932

4,740

6,699

-7.3%

6,209

-8.3%

5,690

46,675

10,000FY2017

＋1.9％

＋4.0％

+1.7%

+3.1%

Domestic
corporate clients[Average loan balance]

＋0.5％

＋3.9％

FY2019Plan

Local
Development *1

＋3.4%

＋5.9%

19,237

20,38021,090FY2017FY2018FY2019Plan

0*1 Local development: Regions other than Tokyo and Osaka*2 Urban development: Tokyo and Osaka• Deposits and NCD demonstrated robust growth in terms of both private and corporate customers.
• The annual growth rate of total loans was +4.0%, due to efforts to increase loans, mainly for local development.
6

Major Accounts – Securities –[Appraisal profit and loss][Average balance of securities](100 million
yen)25,311Others*Equities
Investment trust-51

23,456

1,351

139
977
1,411

20,000Foreigncurrency bonds

4,571

End of Mar.
2019

Year on year

1,419

1,341

- 78

Held to maturity

4

4

0

Other securities

1,415

1,337

- 78

Of which, stock

730

532

- 198

Of which, investment trusts

328

353

25

Of which, foreign-currency
denominated bonds

-8

22

30

Of which, bonds

360

423

63

(100 million y en)-1,855115
1,071

End of Mar.
2018

23,405
+73

155
1,050

+289

1,700

-1,726

2,845

Total

+655

3,500

[Duration of bonds](Year)-1,084

5.1

5.4

4.1

4.2

End of Mar. 2019

End of Mar. 2020
Plan

4.7

Bonds

18,20318,08417,0004.2
Bonds
Foreign currency bonds
End of Mar. 2018

10,000* Investment partnerships

FY2017FY2018FY2019Plan• In FY2018, the balance of foreign currency bonds was reduced, reflecting a rise in U.S. interest rates, which resulted in a significant decreasein the balance of securities.
• In FY2019, a certain level of profit is expected to be secured by increasing foreign currency bonds and stock-type assets.
• While the durations of bonds have become longer, we will manage them by reducing the balance and taking into account the interest rate risk.

7

Fees and commissions[Revenue related to assets in custody][Fees and commissions]+842(Million yen)+276

15,72814,886

14,61015,000+61

Assets in custody

10,000Investmentbanking
operations

4,259

+67

2,025

4,320

2,092

+502

+307

4,822

2,399

(Million yen)

FY2017FY2019Plan

FY2018

Revenue of bank parent

4,259

4,320

4,822

Investment trusts

1,362

1,317

-

Life insurance

1,201

1,929

-

Municipal bonds

74

101

-

Financial instrument
intermediary services

1,620

970

-

Revenue of subsidiaries (*)

2,957

2,060

2,284

Group total

7,216

6,380

7,106

(*) Subsidiaries: Chugin Securities Co., Ltd. and Chugin Asset Management Company, Limited[Investment banking operations]
5,000

Remittance/collection fees

5,141

5,139

5,194
(Million yen)
Total

Other

3,185

3,335

3,313

0
FY2017FY2018FY2019Plan

FY2017FY2019Plan

FY2018

2,025

2,092

2,399

Of which, loans

837

1,018

1,053

Of which, commissions on
loans

642

404

420

Of which, M&A

93

242

360

Of which, business matching

81

98

180

• In FY2018, fees and commissions revenue increased by 276 million yen year on year, reflecting growth of revenues
from assets in custody and investment banking operations.
• In FY2019, we will endeavor to further increase revenues by enhancing life plan support activities and providing
comprehensive solutions.

8Expenses[Expense trends](100 million
yen)

-14

600

556
Taxes

36

500

400

300

554

542
-5

[Main factors behind increase/decrease in expenses (year on year)]+12 FY2018

32

31

Other property
expenses

122

121

Deposit insurance
premium

21

20

21

System expenses

87

90

92

+7

128

Year on year:-1.4 billion yen(Unit:
100 million yen)

Year on
year:

Taxes

-5

• Consumption taxes on
TSUBASA: -4-11• Salary: -6(due to decreases inpersonnel and overtime work)• Bonus: -4

Year onyear:

Main factors+7• Sales measures (Sales
promotion expenses): +4• Structural reform-related: +1+2• Retirement benefit expenses:+6• Salary: -3 (due to decreases
in personnel and overtime
work)

Personnel
costs

Main factors

 FY2019 Plan
200

100

Personnel costs

289(Retirement benefit
expense portion)

(7)

-11
（-2）

278

(5)

+2
(+6)

(Unit:
100 million yen)

280

(11)

Year on year:+1.2 billion yen

0
FY2017FY2018FY2019Plan

Otherproperty
expenses
Personnel
costs• In FY2018, personnel costs decreased significantly due to the dissemination of work style reform and the improved
efficiency of operations.
• In FY2019, expenses are expected to increase by 1.2 billion yen year on year due to increases in expenses
associated with enhanced sales activities and structural reform as the final stage of our structural reform plan.

9

Credit Cost Trends/Non-performing Loans[Non-performing loan (NPL) trends][Credit cost trends]*We do not implement partial direct write-offs.

2,000(100 million
yen)

Other credit costs
General provisions for
doubtful receivables
Individual provisions for
doubtful accounts

41

37

1

0

(100 million
yen)

(%)

NPL ratio

1.80%*NPL ratio after partial
direct write-offs

24
29

2.0
1.50%

0
-0
-17
-17

13

1.14%

1.0

693

0.0

1,000

812
Calculation method of general provision for
doubtful receivables:

Substandard

FY2018

161

719
163

Estimated loss ratio is calculated based on actual
loan loss ratios of three 3-year relevant periods,
each of which is moved one year forward.
Estimated loss ratio is taken from the higher of
either “the average of three relevant periods” or“the average of the most recent two relevant
periods.” “Performing loans” and “Loans requiring
attention I” are adjusted considering the numberof remaining years of loans.

FY2017

1.40%

1.52%
1.23%

10

3.0

Doubtful

Bankrupt

444

200

347

279

206

209

213

FY2016FY2017FY2018-2.0

0FY2019Forecast-1.0• Credit cost = general provisions for doubtful receivables + individual provisions for doubtful accounts + loan write-offs + specific foreign borrowers + provisions for loss onclaim sales + loss on claim sales - gain on reversal to loan loss account• Other credit costs = Loan loss write-offs, specific foreign borrowers, provisions for loss on claim sales, loss on claim sales• Credit cost increased significantly due to a reversal of provisions for general provision for doubtful receivables.
• With a continued decline in the NPL ratio, the quality of assets was maintained.

10Capital Adequacy Ratio[Trend of capital adequacy ratio][Capital adequacy (consolidated)]

16.0
(%)
(100 million yen)

T otal equity

Consolidated capital
adequacy ratio

13.38

17

5,247

5,265

18

3

1

-2

39,69140,867

1,176

Credit risks

38,05439,2801,226Operational risks

1,637

1,586

-51

End ofMarch 2018

End ofMarch 2019<Regulatory
standards>

Consolidated leverage ratio

6.03%

6.20%

3% or more

Consolidated liquidity coverage ratio (LCR)

142.9%

151.7%

100% or more

7.7%

4.5%

15 % or less

Risk weighted assests, etc.

12.88
13.06

12.0

12.87

Non-consolidated capital
adequacy ratio

12.56[Other Basel regulations]10.0
End of March 2017

End of March 2018

YoY

5,267

Tier2

13.22

End ofMarch 2019

5,250

Tier 1, including common shares

14.0

End ofMarch 2018

End of March 2019

Consolidated stress test (IRRBB)• The total capital adequacy ratio remained at a stable level.

11Section II
FY2019 Forecast andMajor Initiatives

FY2019 Forecast–Earnings Forecasts–[Parent]

FY2018FY2019(100 million yen)

ActualPlan

Comparison w ith

YoY

the Medium-termManagement Plan

Core business gross profit

770

748

-22

15

Interest income

630

591

-39

-22

Fees and commissions

148

157

9

-1

Other operating income

-8

-1

7

37

Expenses (–)

542

554

12

15

Core business net profit

228

193

-35

0

OHR (%)

70.3

74.1

3.8

0.5

Credit expense (+ is reversal (profit))

41

37

-4

17

Bond sales gains/redemption

11

6

-5

-9

Equity sales gains/redemption

14

29

15

-1

Other

6

-2

-8

4

Extraordinary gain/loss

219
-2

188
-4

-31
-2

-23
0

Net income

153

128

-25

-16

Recurring profit[Year on year: ]• Both core business net profit and net income are
expected to decline year on year due to a decrease
in securities interest.
[Comparison with the Medium-term Management
Plan]:• Core business net profit is expected to achieve thetarget level of the Medium-term Management Plan,
reflecting an increase in loan interest.
• Net income is expected to fall short of the target levelof the Medium-term Management Plan due to anincrease in credit cost.
■ Factors relating to changes in interest income, etc.

(100 million yen)Comparison with the Medium-

YoY

term Management Plan

-39

-22

-24

+4

Loan interest

+1

+17

Securities interest & dividends

-24

-34

Others (e.g., swap cost)

-1

+21

Foreign currency interest income

-14

-25

Loan interest

+16

+17

Securities interest & dividends

+31

+7

Foreign currency procurement cost

-62

-57

Others

+0

+7

+7

+35

-32

+13

① Interest income
Yen-based interest income[Consolidated]

Change (Impact on profit)

Foreign currency procurement cost
included in other business profit

Consolidated recurring profit

236

207

-29

-30

②

Net income attributable to owners of parent

161

138

-23

-21

①＋② Interest income (net)13

Progress of Medium-Term Management Plan
“Plan for Creating the Future Together: Stage I”[Positioning of the current medium-term management plan]

Consolidated
net income
20.3 billion
yen

Structural reform period
30.0 billion
during the long-term
yenCurrent medium-term management plan (10 years)
plan period
Apr. 2017 – Mar. 2020
13.8 billion
yenWithout structuralreforms[Numerical targets of the current
medium-term management plan]

In three years

In 10 years

Overall points of the local promotion project*1

15,000 pt

20,000 pt

Overall points of life plan support activities*2

Continuous improvement

Continuous improvement

Customer satisfaction survey

Continuous improvement

Continuous improvement

Net income attributable to owners of parent¥16.0 billion¥30.0 billion

Consolidated capital adequacy ratio (Basel III)

Stable at 12%

Stable at 12%(FY ending March 2027 Single year) 5% or more

Consolidated ROE

FY2016
Actual

FY2019FY2026Plan

Medium-term Plan
® Updated plan

*1 Overall points of the local promotion project are activities that involve the provision of optimal solutions to theneeds and issues of the community and client companies by appropriately evaluating the client company’sbusiness content, managerial issues and growth potential (i.e., business assessment) that have beenstandardized in our original way.
*2 Overall points of life plan support activities involve the provision of precise information that suits the customer’slife plan and providing products and services that we think are the best through our understanding of eachcustomer’s life events.

[Structural reform (BPR measures)][Status of major items]
Average balance of local development loans

Average balance of personal loans
1,139.7 billion yen

2,109 billion yen
1,100 billion yen
2,000 billion yen

FY2019Medium-term Plan

FY2019Plan

FY2019Medium-term Plan

Target figures in the 10-year strategy(Vision 2027 “Plan for Creating the Future Together”)

FY2019Plan[Headquarters] - Implementing reduction of work andwork style reform- Loans (Concentration of loanadministration work)- Over-the-counter (Introduction of[Sales branches] store tablets, and over-the-counter
operation reform)- Sales (Introduction of tablets fornegotiation, etc.)
Securing
personnel

Target number of
personnel in the Mediumterm Plan(as of end of Mar. 2020)

180

Actual results as ofend of Mar. 2019:
Approx. 250

 Main items exceeded the Medium-term Business Plan targets, and the structural reforms are also steadily in line with the plan.
 In FY2019, we will implement the final process of the structural reform, and the relevant measures to achieve the Long-termManagement Plan.

14

Improve the Quality of Services Provided—Advance Local Promotion Activities—

 Contribute to the improvement of corporate value by deepening dialogues with customers and providing comprehensive
solutions that fit management challenges.
 Increase business loans and fee business through “the expansion of customers” and “the enhancement of transactions.”[Initiatives to enhance local promotion activities]
Conduct interviews to grasp customers’ management
challenges and needs by deepening dialogues with them.

[Commencement of business consulting services: April 2018](Customers’ challenges)
Various• Increase in sales
needs• Consideration toward
overseas development• Building human resources systems, enhancing
internal welfare systems• Labor shortage, concerns over businesssuccession, etc.

Organization

Customers

Chugoku Bank

Discussion notes on management
challenges
 Business process Industry trends, advantages anddisadvantages of the customer’s company
 Matters the president is concerned about, etc.

[Expansion of solutions]

Activities 11 staff members engaging
in such services at the
Headquarters[Revenue from consulting] Support for formulating the
Medium-term Plan Support for management of
human resources system and0labor administration
 Improvement of business
FY2017processes, etc.

70 million yen
Plan

23 million yen

FY2018FY2019[Commencement of recruitment service (planned for July 2019)]
Recruitment
 Human resources for executive management
service

Solutions (examples):Startup support

Overseas assistance

Consulting

Cultivation of sales
channelsManagement
improvement

Recruitment service

FinanceBusiness succession

Leasing, securities, etc.

Scheme Search for personnel needs towards the solution ofmanagement challenges
Þ Introduce human resources in cooperation withexternal companies.

Effects

 Offer solutions to customers’ challenges concerning humanresources.
 Aim to contribute to revenue of 50 million yen within a few
years.

15

Improve the Quality of Services Provided —Initiatives in Open Innovation—
 Cooperate with local governments and private operators to build a startup support system around
Chugoku Bank.
 Foster future core companies of the local community by discovering entrepreneurs at an early stage andproviding hands-on support until commercialization.
[Startup support system][Commercialization support]

Founders & second founders, students, existing operators intending to carry out innovative
business

Okayama Innovation Project
Hosted by: The Chugoku Bank,The Sanyo Shimbun
Special sponsor: Saintmarc Foundation

Support entrepreneur development
Þ Acquire management skills

Hosted by: The Chugoku Bank,
Leave a Nest
Special Sponsor: Kobashi Industries,
Co., Ltd.

Support science technology
venturesÞ Foster specialized businesses(Total no. of applicants in FY2018: 158)

Systemimprovement

FinancialsupportConsultations

Sales growthMulti-faceted support will be provided for startups in cooperation
with municipalities and private business operators.

Financial support

Okayama Tech Grand Prix
(Total no. of applicants in FY2018: 20)

Commercialization support[Hands-on support, financial support (startup financing, investment in innovation funds)]
Support for ventures that play a keyrole in local industries

Private business
operator

Business
consultation

Okayama Tech Planter

Okayama Innovation School
Okayama Innovation Contest

Chugoku Bank

Municipality

Creation of new business based on
locally developed technologies

Establishment of a new ecosystem that fosters a startup momentum in the communityand develops local industries

 Support for funds
Investments in university-originatedventures, etc. by Chugin Innovation Funds
 Loans for startup support
169

Number of loans

108

Loan amount(100 million yen)

39

48

FY2017FY201816

Improve the Quality of Services Provided—Strengthening Sales Activities Based on Life Planning— Contact with customers has increased due to the strengthening of “want to meet more, want to know more”
activities.
 Customer-friendly service will be enhanced in terms of “inheritance measures” needs, which are increasing
as the aging society advances.
[Inheritance-related business][Life plan support activities]

In October 2016, we started testamentary trust and inheritanceprocedure support services as part of the banking business.

Main activity items

Catch phrase: “Want to meet more, want to know more”
Established a new process assessment in FY2018
Cooperation between sales
Gathering customer information
channels

Process

No. of contacts with customers

Holding seminars for customers

The 11 items associated with life plans were assessed.
(Accounts of young customers, housing loans, assets incustody, inheritance-related matters, etc.)

Achievements(No. of contacts with customers)

Improves the quality of
proposals+34(+25.2%)

160
+8

169
152

(Number of testamentary trusts received at the Headquarters)

216

104

2H FY2018

2H FY2017

branches has been
reinforced.

(+5.3%)

135

2H FY2017

Transactions will be increased, including future
generations, by offering general proposals based on theinheritance measures as a starting point.

(Personnel at the Headquarters as of March 31, 2019)
Number of persons in charge at the Headquarters(Financial Advisor Desk): 17(No. of depositors)(Unit: thousand)(Unit: thousand) Support service for drawing up a will (Drawing up a property
management ledger, etc.)
 Testamentary trust (prior approval for execution of a will) <Drawing up,
storage, and execution of a will> Inheritance procedure support services <Supporting the preparation of anagreement on division of inheritance, work proxy, etc.>

Since April 2018, the inheritance-related business has
been enhanced by increasing persons in charge at theFollow-up by sales
Headquarters.

Through “want to meet more, want to know more” activities,

Increases opportunities for
proposals

The first regionalbank in westernJapan(Our services (examples))2H FY2018

FY2016

135
Increasing steadily.

FY2017FY201817

Expand Opportunities to Provide Services—Store/Channel Strategy—

 Formulate store/channel strategies according to changes in the environment and customer needs.
 Increase contacts with customers and improve the efficiency of store operation and store counters.

Environmental
changes

Changes in customer
needs• Decreases in population and visitors• Spread of IT channels (Bank transfer and application for loans
are conducted via the Internet.)• A bank teller is expected to handle “inquiries” and “consulting.”• Strengthen the positioning of stores as a face-to-face channel with customers (enhance
consultation).
• Enhance non-face-to-face (e.g., IT) channels for customers whose needs aredeposit/foreign exchange and loans.
⇨ Achieve operation that combines “increased contact with customers” and “improved
efficiency of store operation.”(Store/channel strategy)

Strengthen
sales

Improve CS• Review store functions according to market attributes• Strategically allocate personnel (quality, quantity)• Strengthen the functions of holiday channels by Life Plan Centers(review the functions of Housing Loan Centers)• Improvement of convenience by reinforcing the IT channel
strategy• Expand the group sales system (stores specializing in personal
Improveloans, lightweight stores)
efficiency• Flexible setting of business days and business hours
Concentrate • Relocate/integrate stores based on a store-within-a-store method[Improvement of efficiency and concentration]
 Reorganization of the southern part of Okayama Prefecture(Kojima District, Kurashiki City)
Integration of stores by the storeEstablishment ofwithin-a-store method
a special officeCore branch[Store/channel strategy]

Kojima Branch

Integration

Former Shimotsui Branch
The former branchsite is used.

Shimotsui Branch(attached)

Shimotsui Special Office Customers’ burden will be minimized.
• The stores will not be abolished, and only thefunctions are integrated.
• The account numbers and passbooks will not
be changed due to a transfer.
 The deteriorated convenience for customers iscompensated for.
• The financial services for the customers of therelevant areas will be continued byestablishing a special office.

Promote the improvement ofefficiency in the store operationand of store tellers while obtaining
the understanding of thecustomers[Business day]• Two days a week only.
(Open on pension
payment days, etc.)[Business hours]• 10:00 to 12:00,
13:00 to 15:00

Kojima,Kurashiki City

Okayama City・

18

Expand Opportunities to Provide Services —FinTech— Enhance new services of non-face-to-face channels by utilizing IT channels and AI.
[FinTech Business Contest][New services applying FinTech]
Customer
User registration
Log-inTSUBASA
FinTechCommon platform

Services of partner companies
API“TSUBASA Alliance Finovation
Challenge”(Host: T&I Innovation Center Co., Ltd.)

ChuginID

API

Services by
Chugoku Bank

Introduced in
May 2019

 Digital passbook
 Promote cashless payment

Commenced in
March 2019

Commencement of settlement by J-coin Pay
Provide settlement services byscanning QR code with a smartphone
toward a cashless society.

● Sales promotion utilizing AI
Support drawing up a life plan by grasping customer needs
based on big data analysis.
Personal loan
Assetmanagement(Passbook app)
Jointly developed by
TSUBASA・Common FinTech platform
Use of Chugin ID• Balance management on areal-time basis, checking
deposits and withdrawals, nopassbook entry needed• Reduction of passbook (paper)

Number of applicants: 123 from 104 companies
No. of companies for final presentation: 6(Outline of the ideas provided by
the participating companies)
 Provision of services combining finance andhealth by using comprehensive services for theprevention of dementia.
 Individual-friendly life support services by linking
SNS data to bank data Financial services and peripheral services for theelderly using communication robots

Going forward, collaborations with theparticipants of the contest will be considered by
the TSUBASA member banks and T&I.

 Improvement of convenience forcustomers
 Cost reduction in the issuance of
passbooks

19

Expand Opportunities to Provide Services —BPR—

Headquarters

 Generate sales personnel and time through thorough structural reforms, leading to enhancement of the top
line and reduction of OHR.
Reduce operations of the headquarters, and implement workstyle reforms
 Reduction and acceleration of operations by electronized discussions.
 Eliminate the use of paper by developing a wireless LAN environment and distributing
tablet devices
Increase in personnel during the current medium-term management plan period:
110 Þ Actual performance: Approx. 130

Loans
Concentration of loan business at the Headquarters
 The operations of the loan center started.

Business offices• Since October 2018, the loan business has been concentrated. This system will be
expanded to all stores by the end of March 2020.
Number of staff members to be secured during the Medium-term Plan: 40 (150 as ofMarch 31, 2021) ⇒Actual performance: Approx. 60

Deposit & foreign exchange, store

Image of the business reform of branches
High-counter teller

Low-counter teller

Establish counter receptiontablets “TSUBASA Smile”(from May 2019)

Rationalizing teller allocation considering job sorting of high- and lowcounter tellers
 Operations of high-counter tellers, mainly BS, will be simplified byadopting OR slips, etc.
 Operations of low-counter tellers, mainly bank clerks, will focus on
dialogues with customers by using store tablets.
Improved
convenience ofcustomers

Execution of store operation reforms

 Improve operations through introduction of store tablets and significant
simplification/centralization of administrative work

• Reduce employees’ administrative work at counters and have them concentrate on
financial services
Increase in personnel during the current medium-term management plan period:
30 Þ Actual performance: Approx. 70

Sales

Effects of the sales activity reforms[External sales activities per day]Grew steadily

Loan

5.1
customer
visitsAssetmanagement

4.0
customer
visits(Before introducing
tablets for negotiation)

Nov. 2018

Execution of sales activity reforms
 Introduce tablets for negotiation• This enables access to information and sale of assets in custody during visits tocustomers, reducing the burden of administrative work upon returning to the office.
Installed with a map information system, the tablets allow more efficient sales
activities.
Þ The no. of customer visits by external sales representatives is expected toincrease by 30–40%.

Improved value ofthe services provided
through improved
efficiency＋11.5％

5.8
customer
visits

＋7.5％

4.3
customer
visitsMar. 201920

TSUBASA ALLIANCE ①
 We pursue synergy that exceeds management integration by advancing the largest alliance of regional banks.
<Financial results for FY ended March 2019 (Consolidated)
Comparison with other banks/in the order of total assets>

New

Prefectures where head
offices are located.
Prefectures wherebranches are located.

(Trillion yen)

Total assets

Deposits

Loans

Mitsubishi UFJ Financial Group, Inc.

311.1

180.1

107.4

Sumitomo Mitsui Financial Group, Inc.

203.6

122.3

77.9

Mizuho Financial Group, Inc.

200.7

124.3

78.4

TSUBASA *4

65.7

54.1

41.8

Resona Holdings, Inc. *1

59.1

51.1

36.1

Sumitomo Mitsui Trust Holdings, Inc. *2

57.0

31.9

29.0

TSUBASA *3

55.0

45.1

34.5

Fukuoka Financial Group, Inc.

20.8

14.0

12.9

Concordia Financial Group, Ltd.

18.9

15.9

12.6

Mebuki Financial Group, Inc.

17.3

14.3

11.1

*1 Since April 2018, Kansai Mirai Financial Group, Inc. (Kansai Urban Banking Corporation and The Minato
Bank, Ltd.) has been included in the scope of consolidation.
*2 Since October 2018, Japan Trustee Services Bank, Ltd. and two other banks have been excluded in thescope of consolidation.
*3 Joined by The Hokuetsu Bank, Ltd. in April 2018, which has been included in the name of Daishi
Hokuetsu Financial Group, Inc. since October 2018.
*4 Joined by The Musashino Bank, Ltd. in March 2019, and The Shiga Bank, Ltd. in May 2019.

Total assets of TSUBASA follows
those of the mega banks.

21

TSUBASA ALLIANCE ②
 The scope of the TSUBASA alliance has been expanded significantly.

New

The members increased.
Joined by Musashino Bank in Mar.
2019, and Shiga Bank in May 2019.

New

 Declaration of SDGs by
TSUBASA (May 2019)New

 Passbook app was introduced. (Chiba and Hokuyo
Banks in Feb. 2019; Daishi Bank in Apr. 2019;
New
Chugoku Bank in May 2019)
Joined by Hokuetsu Bank in Apr. 2018.
 TSUBASA Smile was introduced.
(Daishi Bank in Nov. 2018; Chiba Bank in Apr. 2019;
Chugoku Bank in May 2019)
 TSUBASA FinTech shared platform started operation. (Apr. 2018)

The members increased.

 Agreement on sharing a clerical section(Chiba and Daishi Banks in Feb. 2018)
 Tie-up in the asset management business
Banks in Mar. 2016.
(Toho Bank in Jun. 2017; Hokuyo Bank in Aug. 2017;
Daishi Bank in Jan. 2018)
The TSUBASA ALLIANCE was
Tie-upintheinheritance-related businesses
established by Chiba, Daishi and(Daishi and Chugoku Banks in Oct. 2016; Toho Bank in Jun. 2017)
Chugoku Banks in Oct. 2015.

The members increased.
Joined by Iyo, Toho and Hokuyo

 T&I Innovation Center was established.
(Chiba, Daishi, Chugoku, Iyo, Toho, and Hokuyo Banksand IBM Japan in July 2016)
 Shared backbone system was adopted. Shift to new systems.
(Chiba Bank in Jan. 2016; Daishi Bank in Jan. 2017; Chugoku Bank in May 2017)

Rationalization ofindirect sections
Cooperation
among different
industries

Creation of new
businesses

Further cost reduction andimprovement of service
22Responses to SDGs and ESG (1) Aim for long-term and sustainable improvement of corporate value through responses to SDGs and ESG.
[10-year strategy; Long-term vision] Jointly develop affluent future life to be shared between
local community, customers and employees.

SamefutureEnvironment[SDGs (Sustainable Development Goals)] Realize “Sustainable society” by achieving the 17 goals.

Initiatives for agribusiness Branding of agricultural products(business matching) Support for startups (incorporation ofagriculture) Investments and loans, including funds
 Provision of information on subsidies
and business trends

Local promotion activities

Social[Chugin Agri-support Fund] Started in October 2015
 Positioned as a core business of
the Bank and adopted inperformance assessments
SIB business of Okayama City “Okayama
Kenkooo Daisakusen”
 The largest SIB business in Japan (*SIB: Social
Impact Bond) Promotion of health by granting
points Contributes also to sound corporate
management• Support for sixth sector
industrialization (processing anddistribution)• Established in October 2013
• Total amount of fund: 500 million yen• Investment period: Up to 15 years
Diversified solutions
Regional
Startup support
revitalization
Business
Management
improvement succession, etc.

We are engaging
in all aspects ofthe following:• Loans• Investments• Bank guarantees
The first initiativeof the Japanesebanking industry[Chugin Agricultural Fund]• Support for primary industry
operators (farmers)• Established in June 2017
• Total amount of fund: 1.0 billion yen• Investment period: Up to 15 years

A win-win relationship
Increase in
Progress ofloans andcustomers
fees andand the local
commission
economyrevenue

Initiative for promoting issuance ofprivate placement bonds for donation
to educational institutions
 Started in 2016
 Donation is granted according to
the amount of issue of private
placement bonds (books, desks,
chairs, sporting goods, etc.)
 Donation ceremonies were held
together with our clients.

Actual amount of bonds
10.9
issued (Total)
1.5
billionyen
FY2016

7.8 billion
yen

FY2017billion yen

FY201823

Responses to SDGs and ESG (2)Governance

Strengthened and sophisticated governance Percentage of independent outside directors: 29.4% (as of Mar. 31, 2019)• Six outside directors (of them, five independent outside directors)
 Established a nomination and compensation committee (December 22, 2017)• Chaired by an outside director, the committee carries out appropriate deliberations.
 Performed assessment of effectiveness of the Board of Directors
 Formulated the “Plan for a Successor to the Representative Director and the Basic
Policy concerning the Nurturing Plan”
 Grasping appropriate cost of capital ⇒ To be used for the revision of crossshareholding Reinforcing countermeasures against financial crimes (Established “Money-laundering

Nomination andcompensation committee

Strengthened
governance

Majority
Chairperson

Outside directors

Countermeasure Center on October 1, 2018)

Initiative for reduction of cross-held shares[Policy for cross-held shares]
 The relevant shares are held only when it is considered as necessary forsustainable growth of the issuers of the shares and the Group as well as for the
improvement of corporate value.
 From the perspectives of capital efficiency and the reduction of shareholding risks,
we will reduce the shares through the issuers.

(Consolidated) comparison with
common stock, etc. Tier 1
14.10%

13.26%

12.61%
11.54%

63.1billion 63.0billionyenyen
61.3billion
yen[Judging whether or not the sharesshould be held]• Profitability taking cost of capital into
account• Relationship with local economy• Viewpoint on managerial strategy[Shares not satisfying the shareholding
criteria]• Negotiations for improvement of
profitability in transactions• Negotiations for reducing the numberof shares held
The Board of Directors will verify thestatus on a regular basis.

11.28%

60.6billion
59.4billion
yenyen

Cross-held shares(book value)

Mar. 2015 Mar. 2016 Mar. 2017 Mar. 2018 Mar. 201924

Towards the Next Medium-term Management Plan Under the current Medium-term Management Plan, we implemented securing of business hours and measures for structural reforms centering on
personnel relocation.
 In May 2019, we set up the next Medium-term Management Plan Formulation Project, discussing growth measures centering on promising areas.

Stage I

Stage II

Current Medium-term Management
Plan (April 2017 to March 2020)

Next Medium-term Management Plan
(April 2020 to March 2023)

Towards the final fiscal year
under the 10-year strategy
Establish sustainableearning capacity.

Concentrationof management
resources
Promotestructuralreform and BPR

Investments insystems

Improvement of productivity (Securing business hours and sales staff members)[Next Medium-term Management Plan Formulation Project]
Cost reduction

Acceleration of
store strategy
Improvement oflaborproductivity

Enhancementof corporate
revenue

Strategies of
the wholecompany

Enhancementof ALM
functions

Enhancement of local support activity and life plan
support activity (Enhanced consulting capability)

Long-term
visions
achieved

Enhancementof personal
incomeEnhancementof service
revenue
Enhancementof the Groupstrategy<Outline of the Project>
Period• May 2019 to March 2020

Structure• Approx. 30 persons(of them, five full-time staff members)

Activities• The long-term vision and framework aremaintained.
• Reconsidering the measures to achieve the longterm vision in line with the changes in the external
environment.

25

Shareholder Returns
 Shareholder return will be conducted at a 35% total payout ratio.
 We will increase the percentage of dividends which represent stable shareholder return. We plan to pay an annual dividend of
22 yen per share (an increase of 2 yen).

Dividends

Actual shareholder return in FY2018

Planned shareholder return for FY2019

Annual dividend will be 22 yen per share, anincrease of 2 yen per share.

Annual dividend will be 22 yen per share.

Share buybacks equivalent to 1.5 billion yen were
implemented (November 2018 and February and May 2019). Of which,Share buybacks will be flexibly implemented with aplanned total payout ratio of around 35%.

(Of which, stable dividend: 18 yen per share; payout ratio:
32.4%)(Of which, stable dividend: 18 yen; payout ratio: 27.1%)

Sharebuybacks

shares equivalent to 500 million yen are being acquired.

[Shareholder returns] (Unit: 100 million yen)
FY2015FY2016FY2017FY2018FY2019(Plan)

259

190

194

153

128

39.2

38.5

38.1

41.5

41.5

Per share

¥20

¥20

¥20

¥22

¥22

(interim)

(¥10)

(¥10)

(¥10)

(¥10)

(¥11)

Payout ratio ②÷①

15.1%

20.3%

19.6%

27.1%

32.4%

Share buybacks ③

52

29

30

Of which, shares equivalent to 500

Non-consolidated net
income ①
T otal dividends ②

15−

million yen are being acquired.

T otal payout ratio(②+③)÷①

35.2%

35.5%

35.1%

36.9%

*Share buyback as a factor in calculating payout ratio: Calculated based on buybacks during one year from time of shareholders meeting.

about 35％

26

This document includes forward-looking statements. These statements are not a guarantee of future
performance, and involve risks and uncertainties. Note that future performance could possibly differ fromthe goals and targets herein due to factors, including changes in the business environment.