1H FY2021 Earnings Results Briefing

December 6, 2021

I. Earnings Results for 1H of FY2021 and Numerical Targets for
FY2021

II. Management Strategies of The Chugoku Bank Group

Summary

4

Change in Net Interest Income

5

Major Accounts (1) Deposits & Assets in Custody

6

Major Accounts (2) Loans

7

Major Accounts (3) Securities

8

Net Fee Income

9

Corporate Solution-related Revenues

10

Revenues Related to Assets in Custody

11

ExpensesLong-term Management Plan “Vision 2027: Plan for Creating the
Future Together”

18

Medium-term Management Plan “Plan for Creating the Future
Together: Stage II”

19

KPI

21

Declaration of Chugin Pertaining to the SDGs

23

III. Major Initiatives (Sustainability)
1. Enhancement of Initiatives for Regional Revitalizationand the SDGs
2. Deepening of Customer-oriented Sales Activities

2530

3. Vitalization of the Organization

34

12

4. Enhancement of the Digitalization Strategy

37

Credit Costs and Non-performing Loans

13

5. Establishment of a Sustainable Growth Model

39

Capital Adequacy

14

Corporate Governance41

Earnings Forecasts

15

Alliance/Partnership Strategies

42

Shareholder Return Policy

16

Commencement of Consideration for Transition to the Holding
Company Structure

44

For inquiries regarding this document, please contact:
Management Planning Department, The Chugoku Bank, Ltd. (Shimizu or Matsuo)
TEL: +81-86-234-6519 Email: souki01@chugin.jp
2Section I
Earnings Results for 1H of FY2021
andNumerical Targets for FY2021

1H of FY2021 Earnings Results –Summary–(biillion yen)[Consolidated]

1H
FY20181H
FY20191H
FY20201H
FY2021

YoY

vs. Plan*

14.0
9.7

12.9
8.6

11.9
8.2

15.2
10.1

3.3
1.9

4.7
3.0

OHR (%)

39.6
32.9
7.5
-0.8
27.2
68.6

37.7
30.0
7.5
0.1
27.3
72.6

38.9
30.3
7.5
0.9
26.4
67.7

40.4
31.3
8.8
0.2
25.9
64.0

1.5
1.0
1.3
-0.7
-0.5
- 3.7

1.4
1.1
0.4
-0.1
-0.6
- 3.9

Core business net profit

12.4

10.3

12.5

14.5

2.0

2.0

12.0

10.2

12.2

14.5

2.3

2.2

Equity trading and evaluation loss
Other

0.2
-0.3
0.3
0.9

1.0
1.0
0.4
1.3

3.2
0.8
0.9
0.0

1.4
-0.4
1.5
0.1

-1.8
-1.2
0.6
0.1

-3.4
-0.8
-0.2
0.1

Ordinary profit
Net income

13.2
9.4

12.2
8.4

11.1
7.7

14.3
9.7

3.2
2.0

4.5
2.9

Consolidated ordinary income
Profit attributable to owners of parent[Non-consolidated]Core business gross profit
Net interest income
Net fee income
Net other operating profits
Expenses (-)

Excl. gains or losses on cancellation of investment
trustsCredit cost (Minus numbers indicate reversals (gains))
Bond trading loss, write-off*Forecast published on May 14, 2021.

• Profit attributable to owners of parent: 10.1 billion yen (a year-on-year increase of 1.9 billion yen and an increase of 3.0 billion
yen vs. the published plan, the first increase in profit in six fiscal years)
Core business net profit increased by 2.0 billion yen year on year, reflecting increases in net interest income and net fee income
and a steady reduction in expenses.
Ordinary profit grew significantly by 3.2 billion yen year on year due mainly to a decrease in credit costs.

4

1H of FY2021 Earnings Results –Supplementary Information on Net Interest Income–[Loan yield][Breakdown of net interest income] Yen-based: ¥26.6 billion (+¥0.3 billion YoY)
Interest on loans and discounts:+¥0.2 billion YoYInterest on securities: -¥0.1 billion YoY
Decrease in interest on deposits:+¥0.1 billion YoYForeign currency-based:¥4.7 billion (+¥0.7 billion YoY) Interest on loans and discounts:-¥0.8 billion YoY
 Interest on securities: +¥0.2 billion YoY
 Decrease in foreign currency
procurement:+¥1.3 billion YoY

31.3
0.5

-0.3

0.5

0.1

Loan yield

Loan yield (yen)
1.08

1.06

0.92

0.87

0.87

0.86

0.84

0.81

0.80

0.80

1H FY2018

1H FY2019

1H FY2020

1H FY2021

FY2021Plan

Foreign currency +0.7

Yen +0.3(billion yen)

(%)

-0.1

0.1

30.3

(%)

1.3

-1.3
0.6

[Return on securities]
1.20

-0.4

1.10
0.91

外
貨
市
場
調
達

2021
1H FY2021

外
貨
有
証
利
回

Fund procurement fromforeign exchange market

外
貨
有
証
平
残

Return on foreign currency
securities

外
貨
貸
出
利
回

Avg. foreign currency
securities balance

外
貨
貸
出
平
残

0.85

Loan yield (foreign
currency)

邦
貨
預
金
利
息

Avg. foreign currency loanbalance

邦
貨
有
証
利
回

Interest on yen deposits

邦
貨
有
証
平
残

Return on yen securities

Avg. yen securities
balance

Loan yield (yen)Avg. yen loan balance

1H FY2020

中
間

邦
貨
貸
出
利
回

0.89
0.80

0.94

+1.0 billion yen
邦
貨
貸
出
平
残

0.81

中
間

0.84
0.75

0.82
0.71

Return on securities
Return on yen securities
1H FY2019

FY20191H FY2020

FY20201H FY2021

FY2021Plan• Yen-based net interest income: While interest on securities declined by 0.1 billion yen year on year due mainly to a drop in yield, yen-based net
interest income increased by 0.3 billion yen year on year, mainly reflecting a year-on-year increase of 0.2 billion yen
in interest on loans and discounts arising from an increase in loan balance.
• Foreign currency net interest income: Increased by 0.7 billion yen year on year due mainly to a decrease in foreign currency procurement expenses.

5

1H of FY2021 Earnings Results － Major Accounts (1) Deposits & Assets in Custody－[Average balance of deposits and assets in custody]+6.2%(billion yen)

8,500

Total assets incustody(Deposits + NCD)
Financial instrument
brokerage

Investment trusts

7,500

Insurance
Municipal bonds

6,500

Other
Deposits + NCD

7,816.8(6,805.0)
188.3
137.3
401.4
284.8

8,757.4(7,776.5)+4.1%

8,373.4(7,409.3)

8,239.2(7,278.5)

143.5
139.8

144.9
121.6
416.6

431.6
265.9

144.0
124.6
420.5

277.7

607.2

275.0

+12.1%

5,500

3,500

565.7

1,993.8

1,866.0

1,802.0
1,640.4

+4.6%

+5.2%

4,500
Domestic retailclients
Deposits + NCD

269.0

+6.8%

2,020.5
Domestic corporateclients
Deposits + NCD

143.3
133.7
428.0

586.1

585.6

475.2

8,723.3(7,749.3)

4,689.3

1H FY2019

4,890.8

1H FY2020

5,148.7

4,957.0

1H FY2021

FY2020* Financial instrument brokerage is based on acquisition price. Municipal bonds are based on face value. Insurance is based on the average balance thattakes into account cancellations. Investment trusts are based on net assets.

5,189.7

FY2021Plan• Deposits + NCD increased significantly for both corporate and retail clients due mainly to securing funds on hand and reduced consumption during
the COVID-19 pandemic.
• In FY2021, deposits + NCD are expected to slow down due to the recovery of consumer sentiment and revitalization of corporate business activities
reflecting the progress of vaccinations.

61H of FY2021 Earnings Results － Major Accounts (2) Loans －+3.2%[Average loan balance]
4,778.0

5,000（billion yen）

21.6

4,994.2
24.7

Hong Kong Branch

1,164.1
4,000

Personal loans

Loans to theheadquarters*3

3,000

Local government
loans
Urban
development*2＋2.7%

5,193.2

5,155.8

5,053.1

23.7

24.4

1,197.3

1,170.6

612.9

542.9

631.2

458.5

467.5

450.8

634.2

623.2

23.9

1,207.6

1,133.5

476.2
481.8
582.7

529.9
474.1

+2.2%

+4.1%

609.1

637.1

2,000
+0.8%
+1.6%

1,000

Local
development*1

2,081.9

2,192.2

1H of
FY2019
1H
2019

1H of
FY20201H
2020

2,228.90
1H FY2021
of 20212,224.0

2,242.4

FY2020

FY2021Plan*1 Local: Regions other than Tokyo and Osaka *2 Urban: Tokyo and Osaka *3 Loans to the headquarters: Non-Japanese loans and SF centers• In 1H of FY2021, we continued to actively respond to local development and financial needs in urban areas. Responding to anincrease in deposits, etc., we increased the book balance while limiting loan risk to the headquarters. Total loans grew 3.2% year onyear.
• We will create local financial demand by supporting clients’ main businesses through consulting while continuing financial support.
7

1H of FY2021 Earnings Results － Major Accounts (3) Securities －[Average balance of securities][Unrealized gains/losses]＋96.1(billion yen)

Others*1

2,296.3
EquityInvestment
trusts

2,000

15.8
93.6
149.3

2,342.7

15.1
84.7

307.2

2,431.7

16.4
85.3

16.7
86.6

172.0

180.9

147.2
＋81.3

Foreign currency
bonds*2

2,438.8

303.8

385.0

End of Sep. End of Mar. End of Sep.
2020
2021
2021

(billion yen)
Total

＋12.3

397.4

YoY

116.0

136.6

148.4

32.4

Held to maturity

0.2

0.2

0.2

0.0

Other securities

115.7

136.4

148.2

32.5

Equity

47.5

62.2

65.8

18.3

Investment trusts

33.9

53.4

57.9

24.0

Foreign currency bonds

6.0

- 0.2

2.2

- 3.8

Yen bonds

27.1

20.0

21.4

- 5.7

[Duration of bonds](year)-11.8

1,791.9
Yen bonds

1,730.4-30.0

1,780.1

5.5

1,750.1

5.8

5.8

5.8

4.2

4.4

4.2

2.5
Yen bonds

1,000

1H FY2019 1H FY2020 1H FY2021

FY2021Plan*1. Others: Investment partnerships, etc. *2. Foreign currency bonds: Includes foreign currency investment trusts

End of Sep.
2020

Foreign currency bonds

End of Mar.
2021

End of Sep.
2021

End of Mar.
2022
Plan

• Increased by 96.1 billion yen in 1H of FY2021 as a result of purchases of foreign currency bonds in the upward trend of interest
rates.
• In FY2021, we will continue to consider increasing the balance of foreign currency bonds and investment trusts through management
focused on risk and return.

8

1H of FY2021 Earnings Results – Change in Fees and Commissions –[Net fee income]＋1,253

8,841＋857(million yen)(million yen)

8,000

7,535

7,588
＋630

6,000

Assets in custody*

2,162

1,135

15,672

15,000
4,319

＋442

4,761

1,812
＋155

Investment banking
operations

2,442

16,529

1,619

1,464

4,000

-181
Remittance/collection fees

2,576

2,784

Other

1,662

1,528

10,000

＋351

2,932

2,603

3,283

-729

5,444

4,715

5,000

2,000

0

2,178

2,977

3,770

0

1H FY2019

1H FY2020

1H FY2021*Four products in custody (investment trusts, insurance, municipal bonds, financial instrument brokerage) + inheritance-related operations

FY2020

FY2021Plan• In 1H of FY2021, revenues from assets in custody and investment banking operations were robust (exceeding revenues
recorded before the COVID-19 pandemic).
• Going forward, we will endeavor to increase fees and commissions by continuing to strengthen consulting sales and review
various fees and commissions (improving profitability), etc.

9

1H of FY2021 Earnings Results － Corporate Solution-related Revenues －[Revenues from solutions for corporate customers] (million yen)

9,919

(Net interest income, net fee income, net other operating profits)

238

＋23

4,736

4,713

135

307
Other
Other investmentbanking
Fees onsyndicated loans
Intermediary fees

543

193
158

(M&A, consulting, etc.)

Fees on corporate
bonds

1,143

Interest on loans*Marketable
loans

8%
30%

＋161

514

685

CLO

353
311

284

[Trends of Business Succession and M&As]

185

601

Number of businesssuccession consultations

655

411

231
5,711

189

＋510

(SF, non-Japaneseloans)

Over 900
576
225

2,795

447
272

2,285
Investment banking
Operations(net fee income)

Asset finance

27%

511

553

Project finance

35%

963

144
Fees on derivatives

Corporate loans

664

249

272

3,492

[Breakdown of loans to the headquarters](Balance at end of Sep. 2021)

1,973

M&A fees (million yen)184

13
* Foreign currency loans
are extraordinary profit.

1H FY2019

1H FY2020

1H FY2021

FY2021Plam
Plan

1H FY2019

1H FY2020

1H FY2021

FY2021 Plan

• In 1H of FY2021, total corporate solution-related revenues increased by 23 million yen due mainly to growth in intermediaryfees for M&A and business matching, and fees on corporate bonds centered on private placement bonds.
• In FY2021, we will also expand the provision of solutions in response to diversified customer needs.

10

1H of FY2021 Earnings Results － Revenues Related to Assets in Custody －[Breakdown of revenues related to assets in custody](million yen)Group total(Securities,
asset mgmt.)

＋987

2,980
(2,162)Financial instrument
brokerage

Municipal bonds
Life insurance

55
396
72
894

2,811
(1,812)

67

2,575

999
79

＋229

230

1H FY2019

110

1,270

[Sales of installment
investment trusts]

645

33

10

416
24

1,294

1H FY2020

including Tsumitate NISA
(million yen)

3,430

3,690

Total number of subscribers(persons)

12,258
11,427735
1H
FY20201Hof
FY2020140

1H
FY2021
1HofFY2021

11,821

1,934
290

420

1H
1H
1H
FY2019 FY2020 FY2021

1H
FY2019
1HofFY2019[Number of
iDeCo contracts]

558

1,119

1H FY2021

3,600

558

744

84

76

1,356

＋384
Investment trusts

Number of contracts
signed（＋630）

818
Inheritance-related[Inheritance-related
operations]

3,798(2,442)(Bank parent)Group subsidiaries

7,336(4,761)1H
1H
1H
FY2019 FY2020 FY2021

FY2021Plan• In 1H FY2021, revenues related to assets in custody increased by 987 million yen, reflecting a robust market environment andintegration between banking and securities services (cooperation within the Group).
• In FY 2021, we will strengthen support for customers’ asset formation and succession of assets while using non-face-to-face channels.

11

1H of FY2021 Earnings Results － Details of Increase/Decrease in Expenses －[Expenses]
Flat(billion yen)(billion yen)

-0.5

30

27.3
Taxes

Other property
expenses

20

1.8
6.0

50

26.4

25.9

1.5

1.5

52.7

52.7

3.0

2.9

11.6

11.7

40
5.7

2.0

5.7

Deposit insurance
premium

1.0

1.0

System expenses

4.3

4.2

-0.7

1.0

30

8.3

10

＋0.3

14.1
(0.4)

13.7

(0.6)

7.8

3.5
20

Personnel expenses(Retirement benefit
cost portion)

2.1
-0.5

14.0
(0.4)

0

＋0.2

27.7

10

27.9

（1.3）

（0.9）

FY2020

FY20210
1H FY2019

1H FY2020

1H FY2021

Plan• In 1H of FY2021, personnel expenses increased due to an increase in bonuses and the impact of the revision to the personnel
system. However, total expenses fell by 500 million yen year on year, which is attributable to the reduction in system expenses.
• In FY2021, we will control total expenses while implementing strategic expenditure (to consider new businesses, reorganization of
branches, etc.)

121H of FY2021 Earnings Results －Credit Costs and Non-performing Loans－[Credit costs](billion yen)

Other credit costs*
Provision of general allowance for loan losses
Provision of specific allowance for loan losses[Non-performing loans (NPL)](billion yen)

(Loans disclosed under the Financial Revitalization Law)
*The Chugoku Bank does not carry out partial direct write-offs.

■Calculation method of general allowance for loan losses• Expected loss rate is calculated based on the actual loan loss
rates for three consecutive calculation periods, with one period
being three years and each moved one year forward.
• The expected loss rate shall be either the “three-period average”
or the “most recent two-period average,” whichever is larger.

• Loans to “healthy accounts” and “substandard I” accounts areadjusted by taking into consideration the average remaining
period of the receivables.

1.73%

1.68%

1.50%

1.45%

91.6

89.0

31.1

30.2

38.3

39.1

19.6

22.0

19.6

End of Sep.
2020

End of Mar.
2021

End of Sep.
2021

NPL ratio

1.58%* NPL ratio after partial
direct write-offs

1.34%

3.2

81.9

0.0

1.0
0.0
1.4

Substandard

2.1

1.4

1.1

0.2
0.4
0.7

-0.4

1H FY2019

Doubtful

Bankrupt

1H FY2020

1H FY2021

28.8

33.4

Other credit costs include loan write-offs, allowance for credit to specific foreign borrowers, allowance for loss on sales of loans, loss on sales of loans, and recovery of written off claims.

• We proactively implemented support since the initial stage of the spread of COVID-19, resulting in limited credit costs.
• We have maintained a good quality of assets, with non-performing loans continuing at a low level.

13

1H of FY2021 Earnings Results － Capital Adequacy －[Capital adequacy ratio (Basel III)][Capital adequacy (consolidated)](%)(billion yen)

FY2020Total equity

13.90

13.50

578.8

17.7

550.9

568.4

17.5

84.9

93.0

8.1

4,155.6

4,164.0

8.4

4,002.5

4,010.1

7.6

153.0

153.8

0.8

1H FY2021<Regulatory
standards>

Valuation difference on availablefor-sale securities
Risk-weighted assets, etc.

13.02

13.41
13.01

12.63

Credit risks

Change561.1

Common equity Tier 1 capital

Consolidated capital adequacy ratio

1H FY2021

Operational risks

Non-consolidated capital adequacy ratio[Other Basel regulations]

End of Sep.
2020

End of Mar.
2021

End of Sep.
2021

FY2020Consolidated leverage ratio

6.52%

6.63%

3% or more

Consolidated liquidity coverage ratio (LCR)

201.8%

214.4%

100% or more

Consolidated net stable funding ratio(NSFR)―

135.5%

100% or more

7.2%

15% or less

Consolidated stress test (IRRBB)

5.9%• The total capital adequacy ratio rose due mainly to the increase in profit and growth in capital arising from valuationdifference on available-for-sale securities, etc.

1414

Earnings Forecasts[Earnings forecasts]
Trend of consolidated net income

Non-consolidated

Consolidated(billion yen)

FY2020

FY2021ResultForecast

Vs. published forecast at

YoY

17.9

16.1

14.4

beginning of term

Consolidated ordinary profit

21.2

25.1

3.9

3.6

Consolidated net income

14.4

17.9

3.5

3.2

Core business gross profit

76.3

78.6

2.3

1.6

Net interest income

58.8

61.3

2.5

1.9

Net fee income

15.6

16.5

0.9

0.0

Net other operating profits

1.8

0.7

- 1.1

- 0.4

Expenses (-)

52.7

52.7

0.0

- 0.2

Core business net profit

23.5

25.8

2.3

1.8

Credit cost (-)

8.0

5.7

- 2.3

- 2.8

Provision of general allowance
for loan losses
Provision of specific allowance forloan losses

3.7

2.2

- 1.5

- 1.6

4.2

3.2

- 1.0

- 1.4

Securities-related gains/losses

5.0

2.8

- 2.2

- 1.4

Other

- 1.5

0.1

1.6

0.3

Ordinary profit

19.0

23.1

4.1

3.6

Net income

13.0

16.6

3.6

3.1

11.9

FY2018FY2019FY2020

FY2021
Plan

Trend of core business net profit
22.8

FY201820.7

FY201925.8

23.5

FY2020

FY2021Plan• Core business net profit steadily increased, reflecting the increases in net interest income and net fee income. Credit costs are also
expected to decrease on a year-on-year basis.
• In FY2021, we anticipate that profits will increase year on year on both consolidated and non-consolidated bases for the second
consecutive year.

15

Shareholder Return Policy[Shareholder return policy for FY2021]
Shareholder return ratio of at least 35% through dividends and share buybacks (Consolidated basis)
Dividend

Dividend payable based on the current
earnings forecasts:

From November 15, 2021 to December 30, 2021

23 yen per share;
Total amount of dividend: 4.3 billion yen
FY2017(billion yen)

1.0 billion yen (upper limit);
1.2 million shares (upper limit)

Share buyback

FY2018FY2019Dividend per share

20 yen22 yen22 yen(Interim dividend)(10 yen)(10 yen)FY2020*Including commemorative
dividend of 1 yen

FY2021(Plan)

23 yen23 yen(11 yen)(11 yen)(11.5 yen)

Net income

①

19.4

15.3

10.8

14.4

17.9

Total dividends

②

3.8

4.1

4.1

4.3

4.3

Payout ratio

②÷①

19.7%

27.1%

38.2%

30.0%

24.0%

Share buybacks

③

2.9

1.4

-

1.0

Shareholder return amount

②+③

6.8

5.5

4.1

5.3

Shareholder return ratio(②+③)÷①

35.1%

36.2%

38.2%

36.9%

Non-consolidated*In the calculation of the payout ratio, share buybacks are those carried out within one year from the general meeting of shareholders.

Consolidated
shareholder returnat least 35%

Consolidated (from FY2020)• We plan to implement shareholder return of 35% or more of consolidated net income (Profit attributable to owners of parent).
• We will pay an annual dividend of 23 yen per share as planned at the beginning of the fiscal year. We also announced a share buybackplan of 1.0 billion yen at the maximum.

16

Section II
Management Strategies of
The Chugoku Bank GroupLong-term Management Plan “Vision 2027:
Plan for Creating the Future Together” as the Basis In March 2017, we formulated our 10-year Long-term Management Plan “Vision 2027: Plan for Creating the Future Together” basedon our long-term vision to “Create with Our Community, Customers and Employees a Rich Future that We Can All Share” withthe aim of establishing a sustainable business model by overcoming the declines in population and profitability.

Corporate
principles

Long-term vision
Create with Our Community, Customers and Employees

Corporate visiona Rich Future that We Can All Share

[Framework for achieving the long-term vision]

Initiatives for creating a rich future─ Improve the quality of the services we provide─ Increase opportunities to provide services

Initiatives for creating the foundation of management
─ Enhance our capabilities to provide services
─ Reform the mindsets of individuals and the organizational culture18

Positioning of the Medium-term Management Plan
“Plan for Creating the Future Together: Stage II”
 Based on the achievements of the structural reforms (strategic investments and streamlining operations and enhancing sales capabilities
through BPR measures) under the previous Medium-term Management Plan, we will establish “our proprietary business model,” which canquickly respond to changes of the external environment and enables the Group and local communities to grow together.
 To that end, we will strengthen our organizational power and human resources development under the new Medium-term Management
Plan.
FY2017

3 years

FY20203 years

FY20234 years

FY2026Long-term Management Plan “Vision 2027: Plan for Creating the Future Together”
Previous Medium-term Management Plan
“Plan for Creating the Future Together: Stage I”

New Medium-term Management Plan “Plan for
Creating the Future Together: Stage II”

HOP Enhance tangible aspects

STEP Enhance intangible aspects

ThoroughstructuralreformSecure personnel
and time for sales
activities

Domestic exchange & counterreception
Sales offices

Teller operation reforms

Sales
Sales activity reforms(organization and human resources)

Headquarters

Reduction of HQ operations
Workstyle reforms

JUMP Culmination of efforts

1
Enhancement ofinitiatives for regional
revitalizationand the2
SDGs
Deepening ofcustomer-oriented
sales activities

Five
Pillars3

Vitalization of theorganization

4

Loans
Concentration of loan administration
to HQ and streamlining“Plan for Creating the Future Together:
Stage III”

5

Enhancement of
the digitalization
strategy

Establish a businessmodel that enables
the Group and local
communities to growtogether
The Chugoku Bank
Group will become
the regional platform

Establishment of asustainable growth
model

19

Five Pillars of the Medium-term Management Plan
“Plan for Creating the Future Together: Stage II”

1Enhancement of initiatives for regional revitalization and the SDGs
 Confront the various issues surrounding the local areas and aim to solve the issues, create new businesses and work
toward the SDGs.
 Solve social and environmental issues by providing our know-how to customers, forming various partnerships, and working
toward the SDGs.

2

Deepening of customer-oriented sales activities As The Chugoku Bank Group, provide new value to customers and solve their various issues.
 Strengthen integrated sales by sales offices and the HQ, enhance services including non-financial services, enter new
business areas including personnel placement, local trading companies and business consulting services, and strengthensynergies within the Group.

3

4

5

Vitalization of the organization
 Position employees as the Group’s important stakeholder and raise their job satisfaction and offer support in self-fulfillment
and development.
 Establish an organizational system where employees can work with greater job satisfaction than before by reforming thepersonnel system, reviewing the performance commendation system, and further delegating authority to blocks and sales
offices.
Enhancement of the digitalization strategy
 The rapid progress of digitalization of finance provides a significant business opportunity for the Group.
 Aim to increase customer contact points and create new customer experience using digital technologies throughincreasing/improving smartphone apps for retail customers and opening a portal website for corporate customers. Further
streamline banking operations through digitalization.
Establishment of a sustainable growth model To respond to the harsh market environment, such as sustained negative interest rates, strive to stabilize revenue in thecore business, including new business areas, and fundamentally review the cost structure to achieve sustainable profit
growth.

20

Key Performance Indicators (KPIs) of the Medium-term Management
Plan “Plan for Creating the Future Together: Stage II”
 We have set the value we can provide stakeholders as the KPIs of the Medium-term Management Plan “Plan for Creating the
Future Together: Stage II.”
 We will aim to increase the regional (East Setouchi Economic Zone*1) population and GDP in the long run by achieving the KPIs.
Stakeholder

KPI
Number of projects addressing local issues andcontributing to the SDGs

Local community(1) Sum of the number of startups for which we
provided support*2 and the number ofcompanies we provided support in businesssuccession*3(2) Activities contributing to the improvement offinancial literacy*4

Customers

Customer satisfaction*5 (Retail and corporate)

Employees

Labor share in core business net profit before
payment of personnel cost*6
Profit attributable to owners of parent

Results for 1H of FY2021 /Plan for FY2021

Final year of the Mediumterm Plan (FY2022)

Final year of the Long-term
Plan (FY2026)

Continuous improvement

Continuous improvement－

98 (total in one and a half years)

200 companies over 3 years－

Continuous improvement－

Continuous improvement

Continuous improvement

At least 54%－

15.0 billion yen

30.0 billion yen

Maintained stably at 12%

Maintained stably at 12%－

At least 5%(single-year basis)

274 (total in one and a half years)
More than 5,000 lecture
participants

Questionnaire to individual
customers will be conducted.
(74% satisfaction in FY2020
corporate questionnaire)

51.95%(Plan for FY2021)
A level exceeding that of the final yearof the Medium-term Management Plan:

17.9 billion yen(Plan for FY2021)

Shareholders, etc.
(All stakeholders)Consolidated total capital adequacy ratio (Basel III)
Consolidated ROE

13.90%(Actual results for 1H of FY2021)

3.20%(Plan for FY2021)*1 East Setouchi Economic Zone: Okayama Prefecture, Kagawa Prefecture, eastern Hiroshima Prefecture (Bingo region), western Hyogo Prefecture (Harima region)*2 Number of startups for which we provided support: Number of startups as a result of our event for startup support, etc.
*3 Number of companies we provided support in business succession: Number of companies to which we provide business succession consulting services*4 Activities contributing to the improvement of financial literacy: Number of event and study sessions that contribute to the improvement of financial literacy and business skills, etc.
*5 Customer satisfaction: Sum of “Satisfied” and “Somewhat satisfied” replies in customer questionnaires (corporate and retail customer questionnaires are conducted every other year)*6 Labor share in core business net profit before payment of personnel cost: Personnel expenses divided by the sum of core business net profit and personnel expenses

21

Declaration of Chugin Pertaining
to the SDGs

Declaration of Chugin Pertaining to the SDGs
Under the long-term vision for the Long-term Management Plan to “Create with Our Community, Customers and Employees aRich Future that We Can All Share,” The Chugoku Bank Group declared that it will work toward addressing the social andenvironmental challenges as mentioned below, aiming to contribute to the achievement of the SDGs through its businessactivities and realize sustainable growth together with the community.

Declaration of Chugin
Pertaining to the SDGs

Priority challenge

Regional community and society• Contribute to activation of the regional
economy and community
Aging society• Support secure and safe living for older people

Financial services• Provide financial services for a better life

Diversity• Promote diversity and work style reform
Environmental conservation• Contribute to the conservation of a sustainable
environment

Corresponding goal

Principal initiatives• Proactive involvement in town development• Provide a place for co-creation of the region• Provide a wide range of solutions from startups tobusiness succession• Respond to lifelong asset management andmaintenance needs• Provide support for succession of assets• Provide support for medical and nursing business
operators• Promote systematic asset formation using NISA,
etc.
• Provide support using educational loans, loans forsenior customers, etc.
• Conduct financial literacy education programs• Improve working environments for diversified humanresources• Provide support for women’s long-term careerformation• Provide a place for employees’ job satisfaction anddevelopment• Promote initiatives for renewable energy businesses• Provide support for environment-related businesses• Reduce environmental burdens
23

Section III

Major Initiatives (Sustainability)

1. Enhancement of Initiatives for Regional Revitalization and the SDGs:
Initiatives for Regional Revitalization
Initiatives for Regional
Revitalization

The Chugoku Bank Group, as a whole, will strengthen the initiatives for regional sustainable
development by positioning the SDGs for regional revitalization as the “prime pillar” of theMedium-term Management Plan.

Recognition of issues

Initiatives to date

 Decline of regional communities• Decline in population, aging society with low birthrate, shortage of successors• Decrease in companies, and a reduction in job
opportunities and startups
 Responses to COVID-19 and large-scale disasters• Social change and worsening of corporate
businesses due to the COVID-19 pandemic

Support for startups
Okayama Innovation Project• Startup support comprising a“School” and “Contest,” to discoverand award talented persons.

Okayama Tech Planter• Creates industries andincubates new ventures bydeveloping science technologies

Responses to COVID-19 Approx. 9,700
Amount actually spent
Number of cases implemented

Regional revitalization is needed.

Approx. 330.0 billion yen(including approximately
180.0 billion yen paid tothe Warranty Association)

May 2020

Sep. 2020 Mar. 2021 Sep. 2021

Issuance of social bonds (COVID Bonds)• For the maintenance of the regional economy
and employment through financial support(Our message to customers by issuing the
COVID Bonds)• For the maintenance of soundness and thecreation of available capacity for risk taking,and improvement of capital efficiency

Roles to be played by The Chugoku Bank Group

Mutualcooperation

Human resources,
information, funds

Information on
industries andcompanies

Partner companies
for realization

Establish a place for cocreation (a platform)

Local
governments

The Chugoku Bank
Group
グループ

Universities,
research
institutes, etc.

 Through the provision of “human resources,” “information,” “funds,” and “know-how,” we will create an attractive regional
community in collaboration with regional related organizations and companies.

Okayama Prefecture, an advanced
prefecture for the SDGs
SDGs Future Cities• Okayama City, Maniwa City, Kurashiki
City, Nishiawakura Village
Japan SDGs Award• Okayama University• Geographical History Club of Sanyo
Gakuen Junior and Senior High School,etc.

 Okayama25

1. Enhancement of Initiatives for Regional Revitalization and the SDGs:
Responses to Climate Change
Reponses to climatechangeOur policy is to accelerate the support and disclosure of the transition to regional
decarbonization through thorough deliberation by the Board of Directors.

Recognition of issues
 Risk of regional companies falling behind the transition to decarbonization• Industrial structure in Okayama Prefecture (In Mizushima Industrial Area, there aremany manufacturing companies such as Mitsubishi Motors-related companies)• We strongly recognize the risks of transition to decarbonization considering the many
manufacturing companies in our credit portfolio.
 Risk of occurrence of natural disasters• Okayama Prefecture has experienced few natural disasters to date thanks to its mild
climate. However, we have faced higher disaster risks in recent years such as thewestern Japan torrential rain disaster (in July 2018).
 Risk of loans and securities becoming stranded assets• Portfolios and risk management need to be reviewed.

Composition of prefectural grossproduction by economic activity (%)

11.2

10.1
9.2
8.9

12.5
7.5

41.8

46.9

Okayama Prefecture

Japan total

Manufacturing
Real estate
Wholesale and retailHygiene and social
businesses
Others

Source: “Report on Prefectural Accounts” producedby the Cabinet Office, 2018
*Task Force on Climate-related Financial Disclosures (TCFD)Countermeasures Policy
Initiatives to date “Policy for Responsible Financing and Investment Activity (April 2021)”• We clarified that we will carefully examine financing and investment
activities* that pose a risk or a negative impact on the environment or society
and make efforts to reduce or avoid the impact of such elements.
(*Weapons, coal-fired power generation, palm oil plantation development
and logging business)
Initiatives for “SDGs through our core business”• Private placement bonds for social contribution(part of the proceeds will be applied to the initiatives for the SDGs)• Chugin Sustainable Bonds(The interest rate will change according to the achievement of the set goals.)• Chugin SDGs Support(Providing support for the preparation of our customers’ SDGs declaration)

21.9

30.0

 Future initiatives “Responses to risks and opportunities
through TCFD”
We expressed our support for the recommendation of the
TCFD* at the end of May 2021.
Governance
Strategy
Riskmanagement
Indices andgoals

To be disclosed inJune 2022

Possibilities of risks and opportunities Financial support and consulting for
decarbonization
 Feasibility study Infrastructure-related demand, andcooperation with local government BCP Consulting

ESG investments in and loans to growth fields

 Sophistication of risk management, etc.

26

1. Enhancement of Initiatives for Regional Revitalization and the SDGs:
Newly established Regional Revitalization & SDGs Promotion Department
 We established a dedicated department, “Regional Revitalization & SDGs Promotion Department” to aggressively promote theRegional Revitalization SDGs as the first pillar of the Medium-term Management Plan.
 We will create our future in cooperation with regional partner companies from the medium- to long-term perspectives of ESG/SDGs.
Organization

Promotion system

Regional Revitalization &SDGs Promotion Department

The Regional Revitalization & SDGs Promotion Department formulates the initiative policy of the entire
Group concerning regional revitalization and the SDGs, and provides support for the regional
headquarters and sales offices.
Wide area network
Regional network

Regional
revitalization
Municipality• Cooperation withmunicipalities• Tourism-related
business, etc.
Startups• Startup support
business• Industry-academia
collaboration, etc.

Regional network

Sales Cooperation Sales Cooperation Sales
officeofficeoffice

SDGs

Sales Cooperation Sales Cooperation Sales
officeofficeofficeCooperation

SDGs• Planning andimplementation of various
measures• Promotion planning ofsales offices, etc.
CSR
• Cooperation, donations• Planning of CSR
events, etc.

Sales office network

Cooperation

Cooperation

Regional
headquarters

Regional
headquarters

Sales office
Regionalorganization

Educational
institution

Regional
company

Municipality

Regional clusters will beformed in cooperation with
regional major players.

Consulting and cooperation

Provision of know-how,cooperation
Provision of measures andplatforms

Regional Revitalization & SDGs
Promotion Department
Consulting and cooperation

Headquarters, each department concerned,
associated company group

 TCFD (Task Force on Climate-related Financial Disclosures)• In May 2021, we expressed our support for the TCFD recommendation toward response to climate change, one of the priority issues.
• To realize the information disclosure in June 2022, we will promote responses by establishing a suitable promotion systemthroughout the entire Chugoku Bank.
 We will provide support for our customers and seek cooperation with municipalities concerning the decarbonization and environmental
issues of the region.
27

1. Enhancement of Initiatives for Regional Revitalization and the SDGs:
Local Trading Company and Personnel Placement
 We will establish a business model that enables the Group and local communities to grow together by using the know-how,information, and networks of the Group.
 Through a local trading company and personnel placement, we will accelerate our support for our customers’ main
businesses and contribute to the development of the local economy.
Local trading company

Personnel placement

Local trading company

Introduction of personnel
capable of reaching top
management“Setonowa”(Local newspaper)(Branding, design)

Strengths(Advertising and production)• Provides the knowledge that banks lack, such as in distribution,
promotion, design, and marketing, through joint ventures with companies
representing the region.
• Disseminates the region’s appeal by making the most of the know-how
and networks of the five participating companies and the bank’s
managerial resources.

Number of Breakdown (by subject item)
consultations
Food

16
11

107

33

56

Craft products

8 for consulting

Industrial
products
Technologies

Including 7 for marketing

OthersFrom November
2020 toSeptember 2021

Number of contracts
concluded: 29

and 1 for planning
development
21 for channel development

Understanding customer needs
 Alteration of generation
 Reorganization
 Development of new businesses,

Customer

The Chugoku Bank

(Local department store)
Analysis, strategy
Product planning, development
Branding
Channel development
Promotion

For solution ofmanagerial issues

etc.

Discussion sheet for managerial issues
 Business process Industry trends, strengths and weaknessesof your company
 Concerns of the President, etc.

Outline of “Personnel placement” (since August 2019)(Characteristics)
We serve as both CA (Career Advisor) for job seekers and RA(Recruiting Advisor) for recruiting companies.
• We deeply grasp the needs of recruiting companies byeffectively using the discussion sheet for managerial issues. We
not only provide information to personnel placement companies
but also directly scout job seekers through interviews.

We contribute to customers’ growth and regional
development.

28

1. Enhancement of Initiatives for Regional Revitalization and the SDGs:
SDGs/ESG through our main business By accelerating the SDGs and ESG through our main business, we will provide strong support for our customers’ achievementof decarbonization and the SDGs, etc.
 We will endeavor to improve our long-term and sustainable corporate value through support for the region and our customers.
SDGs and ESG through our core business
Rating and Investment
Information, Inc.

“Chugin Sustainable Loan”

Third-party opinion on the lending scheme

Set environmental targets, report

Check environmental targets and the reports
Okayama Economic
Research Institute Ratio of CO2 reduction to net sales (%)
 Ratio of recovery and recycling of fluorocarbons (%)
 Annual power generation of renewable energy

The Chugoku Bank

Customer

Loan

Customers’ principal SPTs*
Total amountachieved:
1,350 million yen Ratio of reduction of electric power used (%)*Sustainability Performance Targets

May 2021 Jun. 2021

Jul. 2021

Aug. 2021 Sep. 2021 Oct. 2021

“Chugin SDGs Support”
Details of the support

The Chugoku Bank will support
your efforts toward the SDGs.
Illustration of Chugin SDGs Support
Sorting of efforts toward the SDGs

Assisting preparation of an
SDGs declaration document

Assisting PR of efforts
toward the SDGs

 Simplified diagnoses and feedback on tackling the
SDGs
 Support for the preparation of a SDGs declaration
 External public relations via websites. An SDGs
declaration will be posted on our website if acompany wishes.

Total number ofapplications:324

Apr. 2021 May. 2021 Jun. 2021 Jul. 2021 Aug. 2021 Sep. 2021 Oct. 2021

29

2. Deepening of Customer-oriented Sales Activities: Corporate solution
 Corporate solution: Sales offices and the HQ unite to propose the optimal solution for the customer.
Local support activities (corporate solution)

Customers for relationship management

 Assigned a Relationship Management rep in HQ
High-quality
sales offered bysales offices and
HQ in unison

 Carries out sophisticated solution sales that link information of thesales sites and professional knowledge of HQ to establish a deeper
relationship with large-volume clients

 Established the Ship Finance Center Consolidates lending operations for ocean-going ships in the
Bingo district of Hiroshima Pref.
 Offers high-quality sales by professionals in charge of ships

 Strengthening consulting business through external
partnerships

 Provides consulting services to customers with managerial issues
on business succession, M&A, business plan formulation, etc.

Optimalsolution for thecustomer

Capital contribution,
human resources

The Chugoku Bank

Not only a sales office but also the headquarters will be in charge of acustomer who has a significant impact on the regional economy andexpects to expand transactions with The Chugoku Bank.
Proposals with higher added value
Sharing of managerial issues and provisionof solutions• Consulting on succession of businessand personnel management• Business matching, financing, etc.

Final year of theMedium-termManagement Plan
200
customers

51 customers 61 customers
20 customers
1H FY2020

2H FY2020

1H FY2021

・・・

2H FY2022

Chugin Infinity Fund

Okayama CapitalManagement

Capital contribution,
human resources

Cooperates with our programs associated with startups such as“Innovation Project” and “Tech Planter.”
Provides support for the formulation of growth strategies and growth
support by using equity funding.

SMEs withmanagerial issues

Long Black
Partners Co., Ltd.

Investment framework: 500 million yen(from October 2020)
Investments were made

 Assisting through investment in funds
 Startup support “Chugin Infinity Fund”
 Business succession support “Succession Japan Fund”(measure of the TSUBASA alliance)

100
in six cases totaling
million yen 100 million yen.
400 million yen

 Cashless billcollection using an app.
 On-line gifts, etc.

Cooperation

Provide support for
new growth companies• For regional
development• For improvement of
profitability within the
Group

30

2. Deepening of Customer-oriented Sales Activities:
Retail Solutions, Group Synergies
 Retail solutions: We provide support to customers based on both financial and non-financial aspects according to customer
segments and channels
 Group synergies: Further synergies will be sought by strategic assignment of active bank employees (secondment) andassumption of the position of president of a group company, etc.
Life plan support activities (retail solution)

Expand transactions with customers
Life Plan Center (Five centers as of September 2021)

Face-to-facechannels

Non-face-to-facechannels Increase the number of branches that conductbusiness on holidays (Life Plan Center, sales offices) Develop an optimal branch network
 Improve customer convenience through digitalization

Insurance

LoansManagement• Remote consultation, completing transactions online,
partnerships with fintech companies

 The former Housing Loan Center has become theLife Plan Center by strengthening its functions.
(Our holiday channels are introduced to customers
by sales offices.) Cross-selling with consulting sales are conductedbased on customers’ life plans by grasping theneed for housing loans and insurance.

Cross-selling with housing loans as the starting point
Non-financial
services “Chugin Okomarigoto Kaiketsu (Problem-solving) Support”• Inheritance, end-of-life preparations, real estate, housework,
nursing care, etc.

Review of insurance, asset management

Maximization of group synergies
Strategic
group
companies

Expanding thework areas

 Strategic assignment ofactive bank employees (secondment)

Average balance of personal loans (billion yen)
Active bank employees willassume the position ofpresident.

• Chugin Lease, Chugin Securities, Chugin card,
Chugin Asset Management, the local trading
company “Setonowa,” etc.

 Consideration of new business areas• New lease areas, utilization of real estate• Strengthening equity investment throughthe use of funds, etc.

Repricing
Full repayment
Conclusion of a
housing loan contract
Insurance, Tsumitate NISA, app, unsecured loans, Okomarigoto Kaiketsu(Problem-solving) Support

Other personal loans

337.8

804.1

Housing loans

339.5

338.7

831.1

868.9

Actual results for FY2019 Actual results for FY2020

Plan for FY2021

Steady growthof transaction
bases

FY2022 (Final fiscal yearof the Medium-termManagement Plan)31

2. Deepening of Customer-oriented Sales Activities:
Regional Headquarters Structure and Autonomously Set Goals
 Regional Headquarters Structure: Cooperation with region (city, town, village) will be further strengthened by establishingseven regional headquarters according to the administrative divisions.
 Autonomously set goals: Independent and self-disciplined sales activities will be strengthened based on the regional
characteristics and markets of sales offices and regional headquarters.

Chuo
Bingo
Hiroshima

BicchuHanshin
Bizen

Shikoku• Challenges and needsof the region• Situation of eachregion, demographics,
industries, number ofsales offices, market
share, etc.
Areal analysis andstrategy planning

Objectives of the regional headquarters structure: Understanding the challenges and needs that become more
complicated and diversified in each region
 The “Regional Headquarters,” being closest to the field, will lead inplanning and implementation of the sales strategies and regional
revitalization SDGs measures.
• Transfer of authority (cooperation with the region, strategy
planning, personnel system, etc.)• Functional enhancement: (research and analysis, liaison with theheadquarters, sales support, etc.)• Regional
headquarters’ activity
policy• Characteristics andinformation of theregionSWOT analysis• Putting the measuresof the headquarters
into practice, etc.

Headquarters

Mimasaka

Customers in the region

Sevenregional
headquarters

Introduction of “Autonomously set goals” by sales offices

Regional headquarters andsales office

Introduction of regional headquarters

Budgetmeeting

Objectives of autonomously set goals:Independent and self-disciplined planning of strategy and activities
based on the regional characteristics and markets.

Establishment of sales systems in which the sales office, theheadquarters and the Group companies have a sense of unity.

Further pursuit of customer-oriented sales activities andimprovement of earnings power.

32

2. Deepening of Customer-oriented Sales Activities: Channel Reform Project The Channel Reform Project started after being triggered by changes in the external environment.
 Our channel strategy will be reviewed mainly in sales office strategy, corporate strategy, and retail strategy for customer
needs and solutions to problems.

Concept(1) In order to realize the sales strategy described in the Medium-term Management Plan, we will endeavor toboost the top line and enhance profitability by establishing optimum channels for customer needs.
(2) While improving appropriate office networks, we pursue positive effects such as an increase in contact points
with customers and improvement of convenience.
External environment• COVID-19 pandemic andpost pandemic• Changes in customer needs• Rapid digitalization

Organize our services and channels to fit the new sense of value of customers (retail and corporate).
Reconsider the ideal form of sales offices (services, personnel, clerical functions, etc.) reflecting the rapid
digitalization.
Consider the utilization methods of resources (sales offices and personnel) according to the new channel
strategy.

Sales office strategy

Corporate strategy

Retail strategy

 Optimize and diversify our sales office
network to fit the needs, sense of value
and realities of our customers.
 Respond to the need for sales office
networks and financial needs byconsidering the reality of the region.
 Implement a fundamental revision to thesales office strategy based on the Group’s
sales strategy.

 Aggregation of the personnel involved incorporate solutions, and strengthening sales
power under the segment strategy(improvement of quality).
 Improvement of efficiency through digitalization,and maintenance of contact points withcustomers (improvement of quantity).
 Increase transactions with existing customers,
and development of new customers of morethan a certain scale toward the strengthening of
the customer base.

 “Selection and concentration” of thesales office functions and bank
employees• Improvement of productivity of Life
Plan Advisors.
• Enhancement of transactions withcustomers of active generations bystrengthening the Life Plan Center.
• Strengthening of sales activities formass layers via digital channels.

33

3. Vitalization of the Organization
 On the basis of “Chugin Heart,” we will build a corporate culture from the bottom up to establish a flexible organization capableof responding to internal and external environmental changes.
 We will create an environment where employees can maximize their potential by providing a “comfortable working environment”
and improving “job satisfaction” to provide more customer-oriented quality services as The Chugoku Bank Group.
Activate the organization by responding toenvironmental changes

October 2022
We will endeavor to realize thetransition to a holding company

April 2020
Revision of the performancecommendation system• The commendation system waschanged from quantitativeevaluation to qualitative evaluation.
October 2017
Introduction of “Flat Meeting”• “Meeting for casual but serious discussion”
Communication among employees is deepened
and various ideas and improvement measures
are proposed by the participants.

June 2021, October 2021
Introduction of Regional Headquarters
Structure and Autonomously Set Goals• Transfer of authority and functional
enhancement are promoted by establishingregional headquarters in each region.
• Independent and self-disciplined sales
activities are strengthened by autonomously
set goals by the sales offices

June 2015
Establishment of “NEXT 10
Promotion Department”• CS, ES, diversity, and “Chugin
Heart” are centrally controlled andpromoted while always taking thenext decade into consideration.

Changes in the external
environment
Changes in the internal
environment

April 2021
Revision to the personnel systemof The Chugoku Bank Group• The overall personnel system was revised for the first time in about 17 years, with the aim ofcreating “a group of human resources desired internally and externally.”• Expansion of fields in which one can demonstrate capability, and development of a corporate
culture of self-discipline and challenge
Career path

April 2014
Establishment of “Chugin Heart”

Work styleSelf-discipline• “The standards and sense of value of behavior and judgment” for the directors
and employees of The Chugoku Bank Group were clarified.

Challenge34

3. Vitalization of the Organization
Promotion of diversity

We will realize the medium- to long-term improvement of corporate value throughemployees’ work style reforms and achievements by diversified human resources.

“Diversity Poster”
We have created a poster for further promotion by

the whole Group by visualizing specific measuresconcerning diversity.

We will make efforts to deepen understandingof our current status and future direction

among employees, and transmit our message
both inside and outside the Group.

353. Vitalization of the Organization
Promotion of diversity

We will realize medium- to long-term improvement of corporate value through theemployees’ work style reforms and achievements by diversified human resources.
2021 Certified Health &Productivity Management
Organizations
White 500

Monthly extra working hours

Health and productivity management
Promotion of work-life balance and initiatives for work-style reforms
12 hours and 30 minutes• Use of the flex time system, work interval system, and staggered working hours
Reduction of extra working hours by
improving productivity and work
• Introduction of a system to accurately record the time of arriving at and leaving thestyle reforms↓
6 hours and 2 minutes
office, and the time the employee logs in to their personal computer.
Establish a working environment• Taking of annual paid holidays per hour and mandatory taking of
where diversified human resources
FY2017FY2018FY2019FY2020can demonstrate their abilities
10 days of paid holidays.
• Encourage managers to understand the importance of childcare andnursing care leave, and promote the taking of 100% of the allocatedRatio of employees who
Number of female
tookchildcareleave
managers
childcare leave by both male and female employees.
Support for maintaining a healthy work-life balance• Improve related systems so that employees can continue to work without anxiety
when dealing with life events such as childcare and nursing care.
• We were granted “Platinum Kurumin” Authorization as a childcare support
company.
• We established a reemployment system for those retired from The Chugoku Bank.
Diversity (Employment of specialized personnel with a diverse sense of value)• Since 2019, we have actively employed people with special skills including
consultants and lawyers from companies other than financial institutions.
• We introduced training programs for those hired mid-career. (For improvement of
their satisfaction and demonstration of their ability)• In October 2021, we established a specialty course. (To help provide a career pathfor those working to become a specialist in a specific field)

Men

Women

109
88%

118

126

142

100%

*The ratio of employees whose child was bornin the period April 1, 2019 to March 31, 2020
and took the leave by March 31, 2021.

Mar. 2018 Mar. 2019 Mar. 2020 Mar. 2021

 Those who were appointed as general managers of the
Headquarters in June 2021:• A mid-career hire (General Manager of theInternational Department)• Female employee (General Manager of theRegional Revitalization & SDGs Promotion
Department) There are already many mid-career hires and female
employees as branch managers.

36

4. Enhancement of the Digitalization Strategy
 Digital strategy vision of The Chugoku Bank: “Pursue comprehensive services business to serve every aspect of customers’ lives andbusinesses”
 We will powerfully promote digitalization by using people (sales), products (sales offices) and information as a regional financial
institution.

Step 1 (This Medium-term Plan)
Improve user convenience ofexisting services

Retail clients

Expand digitalization
 Digitalize sales offices(Less back office andmanager operations)(Completion of transactions
on tablets at sales offices) Improve convenience ofretail app

Highly convenient
smartphone app

Step 2 (Next Medium-term Plan)
New financial services
Combination of physicaland digital business• Used all the time
• Optimal proposals• Liaison with realtransactions
Username:

Sales office tablet“TSUBASA Smile”

 Next-generationtype sales office(Remoteconsultation booth) Sophistication of
proposals(Omni-channel)(Utilization of AI)

Next-generation-typesales office

SUBMIT

Expansion of digitalization on
the back of technology evolution

Corporate Provision of corporate portal services
Corporate platform
業績予測(Web, app)

Café

Hospital

Drugstore

TravelShopping
mall･･･

Coordination with crossindustrial coordination channel

Development of digital channel

 Enhanced online meetings

Introduce and provide physical and digital
services beyond finance on a daily basis

Password:

July 1, 2020
Establishment of Digital Innovation
Promotion Center(Non-face-to-face loan application)(Indication of financeable amount)(Digitalization of loan agreements)

Step 3 (2030)
Comprehensive services,incl. non-financial
Provision of services forevery aspect of life

各種情報提供業務サービス
資金調達 営業支援
会計

受発注
生産管理

 Sophistication and one-stop
service on a corporate portal

A partner for business &management consulting
All external sales reps will shift to consultants
who support local companies’ important
decision-making
Network of experts

 Provision of online financing andpersonalized information, etc.
(Using AI)

In-houseknowledge databaseAI
Quickly provides appropriate data according to
the proposal from among a vast sea of data

Bank’s customer
base network

Industry andregion information

37

4. Enhancement of the Digitalization Strategy: Utilization of “Chugin App”
 On July 7, 2021, we introduced “Chugin App” for individual customers.
 Going forward, we endeavor to realize a new retail business style centering on “Chugin App.”

Chugin App

Future utilization to retail sales

ID

Functions to be introduced
under consideration

Password

Transfer of funds (to other banks)
Opening of ordinary deposit
accounts and investment trust
accounts
 Notice of scheduled withdrawals
 Card loan transactions and inquiries
 Appointments to visit a sales office→The customer specifies the outline of
the consultation, the sales office, and timeof the visit



ログイン

Status of app usage (total cases)
Passbook App

Approx.
100,000 cases

Three months
after release

Chugin App

1H FY2019

Approx.
40,000 cases

2H FY2019

1H FY2020

2H FY2020

1H FY2021• Sales office• Life Plan Center
Starting
point

Non-face-to-faceBalance and deposit/withdrawal
statement inquiries
Transfer of funds (between the
bank’s main office and branches)
and transfer of funds (between thesame customer’s accounts)

Data analysis of customer
informationFace-toface

Aiming to serve as the “Main Channel” that links
with individual customers

Functions currently available• Chugin App• Website, social
media, email• Call center, etc.

Number of customers with whom
we met face to face:
Approx. 230,000
Encourage them to use
face-to-face services
to provide them with higher
value-added proposals.

Number of customers with whom
we have not met face to face:
Approx. 1,770,000

 Higher added value is provided to customers in face-toface sales situations.
• We provide consulting services for solutions toproblems by precisely understanding customer
needs.
• We approach customers whom we have not seen yet.
 Clerical staff will be transferred to non-face-to-face
work.

38

5. Establishment of a Sustainable Growth Model We have succeeded in thoroughly streamlining operations due to the digitalization and BPR that we promoted under theprevious Medium-term Plan.
 We will carry out fundamental cost reductions toward a sustainable growth model while maintaining and improving customer
convenience.
Reduction
targetExpenses (billion yen)

[Reference] Expected improvement of BOJ standard OHR (% change vs FY2019)-1% (BOJ’s improvement standard)-3.2 billion yen vs FY2019

-3%
-4%

55.6

54.2

54.0

52.7

- 4.4%

52.7- 4.7%- 4.7%

Strive to achieve the standard by improving
profitability and reducing costs
FY2017FY2018FY2019FY2020

FY2021FY2019FY2022

FY2020*The reduction target includes the end of the 1.4 billion yen per year amortizationof the TSUBASA mission-critical system.

Number of employees

2,995
2,928

• Employees decreased due to theinitiatives for BPR.
• We pursue the improvement of
productivity under the current Mediumterm Management Plan.
2,889

Branch-withina-branch

2,818

The medium- to long-term goal of the decrease to*Number of employees on a non-consolidated
2,800 employees will be achieved.
basis (excluding seconded employees)(Previous Medium-term Plan)
BPR period(Current Medium-term Plan)
Emergence of effects

Sep. 2018

Sep. 2020

Sep. 2019

Sep. 2021

Retail banking offices
and subbranches

Full-banking
services

159

FY2022

Reduce to a 145 office level during
the Medium-term Plan period

Number of sales offices
No. of offices
in Japan

FY2021

155

151

150

1

6

10

12

33

34

30

31

126

121

121

119

Mar. 2019

Mar. 2020

Mar. 2021

Sep. 2021*Excludes overseas and internet branches

39Corporate GovernanceandAlliance Partnership Strategy

Corporate GovernanceWe pursue “sound and sustainable growth” concurrently with “medium- to long-term improvement ofcorporate value” by enhancing corporate governance.
We will also endeavor to improve capital efficiency by constantly reducing cross-shareholdings.
Selection of the Prime Market
 We selected the application for the Prime Market in which further sophisticatedgovernance system is required. (as announced on October 28, 2021)
Nomination andCompensation
Committee

Board of Directors

Strengthening of governance Percentage of independent outside directors: 37.5%(6 of 16 directors; 1 is female)(Executive) Directors

Audit & Supervisory Committee
Members (Directors)(arbitrary committee)

Audit and Supervisory
Committee

Chairperson: Outside
Director

 Established a Nomination and Compensation Committee (Dec. 22, 2017) Formulated the “Basic Policy for Successor Plan and Development Plan ofRepresentative Director” (Dec. 21, 2018)
 The Group’s governance will be enhanced by transition to the holding
company structure (scheduled for October 2022).
Initiatives toward reducing cross-held shares The relevant shares are held only when it is considered as necessary forcontinuous growth and corporate value improvement of the issuers of the sharesand the Group.
 From the perspectives of capital efficiency and the reduction of shareholding
risks, we will reduce the shares through communication with the issuers.

Outside director

Outstanding
cross-held shares
12.1

62.4

Year-end book value (billion yen)
*Including deemed holdings shares
Consolidated equity ratio (%)

11.5

61.7

11.3

• Profitability, taking cost of capital
into account• Relationship with local economy• Viewpoint on managerial strategy

9.7

9.3

55.1

54.3

53.7

Mar. 2020

Mar. 2021

Sep. 2021

60.5

The Board of Directors will examine the status on a regular basis.

[Judging whether or not theshares should be held]

10.8[Shares not satisfying theshareholding criteria]• Negotiate improvement of transaction
profitability• Negotiate reduction of the number ofshares held

Mar. 2017

Mar. 2018

Mar. 201941

Alliance/Partnership Strategies
Under the TSUBASA Alliance, we pursue scale advantage and synergies in this broad and large-scalealliance. Concurrently, we will contribute to the regions’ further development with diversified alliancestrategies.
TSUBASA Alliance Co., Ltd.

TSUBASA Alliance Total assets of member banks reached
91 trillion yen, just behind Japan’s megabanks (as of June 2021).
 Customers comprise 26 million
individuals and 2.2 million corporates,
corresponding to the scale of megabanks.

Response to important issues common to each member bank,and aggregation of businesses
Horizontal development of advanced services and functions
developed by member banks ahead of competitors

Newly establishedin October 2021

AML Center

Business Strategy Division

 Anti-money laundering andcounter-financing of terrorism

 DX
 ESG/SDGs
 New businesses
 Human resources development
 Information aggregation andutilization

T&I Innovation
Center Co., Ltd.
 API Platform, FinTech

Cooperation

Regional cooperation strategy
Branch location(Major alliances)
Okayama Co-creation Partnership
Financial
institution

Head office location

Sharing operation departments

TSUBASA FinTech foundation

Sharing sub-systems

Sophisticating AML operations

TSUBASA Smile

Okayama Future Co-creation Alliance Enhancing the top line
Coordinated finance

Effective use of group companies

Inheritance-related operations

Personnel exchange

M&A business platform

The Business Strategy Division was established in the TSUBASA
Alliance Co., Ltd. with the aim of sharing knowledge among
member banks and further strengthening the alliance.

Localgovernment

 Cost reduction, streamlining of operations

University

Sharing the mission-critical system• Cooperation with regional financial
institutions
Support for startups, business meetings,
personnel exchange, etc.
• Cooperation with Okayama University
We will contribute to achievement of theSDGs and regional development by
sharing information and know-how.

Comprehensive agreements on regional revitalization• Okayama Prefecture, Okayama City, Kurashiki City,
Mimasaka City, Tamano City, Fukuyama City

42

Commencement of Consideration forTransition to the Holding Company Structure

Commencement of Consideration for Transition to theHolding Company Structure: Background
The Chugoku Bank Group commenced consideration for transition to the holding company structure in October 2022.
 With the diversification of challenges and needs of regional society and customers arising from the changes in various social trends, etc., the roles
expected of a regional financial institution are also changing.
 To respond to changing challenges and needs of regional communities and customers in a precise manner, we need to sustainably renew theGroup’s products and services by planning and implementing our Group strategy free from the ideas of the existing business.
 In addition, amid the trend of deregulation for the business scope of the banking industry, we are in the midst of the creation of an environment inwhich we will find it easier to try new businesses in line with the challenges and needs of regional communities and customers.

Social trend
Competitiveenvironment

Settlement of
low interest
rates

Depopulation
Aging society

COVID-19

Development
of digitaltechnology

Entry into thebanking businessfrom different
industries

Acceleration of
global warming
countermeasures

Changes in thought
and behavior patterns

Change in ways of thinking and actions

Regional communities and customers• Evolution of the products andservices we provide

The Chugoku Bank Group

Corporate

Retail• Efforts to realize new businesses

The Chugoku Bank

• Successor problem• Need for human resources• Establishment/
Discontinuance of business• Response to DX and SX*,etc.

• Inheritance measures• Cashless settlement• Eliminating the necessity tovisit a sales office for simple
procedures• Preparing for disasters andsickness, etc.

Regional communities• Town development

Challenges and needs have become more diversified
and sophisticated* DX: Digital Transformation: To change life and business by using digital technologies.
SX: Sustainability Transformation:
An idea to change the status of management by achieving business continuity, growth, and ESG (Environment, Society
and Governance).

Expansion of business scope

Banking
Act-related
deregulation

Group company• Abandoned houseproblem, etc.

Group company• Attracting enterprises

Group company• Promoting DX

44

Commencement of Consideration for Transition
to the Holding Company Structure: Our goals(1) Expansion of the scope of business(3) Evolution of the Group’s governance We will make efforts to provide products and services that

 Our goal is to achieve the improvement of corporate value

truly fit the needs of the region and customers without

and sustainable growth of the entire Group by combining

adhering to the conventional ideas of the banking industry.
 We will expand the scope of business of the Group while
trying out various measures including business domains.

“aggressive” governance represented by the businessportfolio management including new domains and“defensive” governance including risk management andinternal control.

 We will improve management efficiency by distributing
limited management resources in a way that is optimum forthe entire Group.
 The holding company will play the main role in promoting
fundamental measures to improve the efficiency of theentire Group such as the aggregation of work andHolding company(2) Appropriate distribution of management resources

Design of the Group’s business models
Distribution of management resources

Securities

Lease

Bank

Card

Shift from thebusiness models
of banks

Investment
management

Bank
Local
tradingcompany

promotion of digital transformation (DX).

Guarantee
of credit
Consultingof various
types

Variousnewbusinesses

Our goals under the current Medium-term Management Plan:

Comprehensive service business centering on finance45

This material contains forward-looking statements. These statements do not guarantee our futurebusiness performance and include risks and uncertainties. It should be noted that future
performance may differ from the targets mentioned herein due to changes in the management
environment and other factors.