Second Medium-Term Group Business Plan
(Plan Period: April1, 2019 to March 31, 2022)

Table of Contents

１. Summery of Second Medium-Term Group Business Plan
(1)
(2)
(3)

Results of First Medium-Term Group Business Plan・Challenges・External Environment
Summery of Second Medium-Term Group Business Plan（Goals・Basic strategies・Business objectives）
Change of Net Income during the 2nd Medium-Term Group Business Plan

２. Basic Strategies
Basic strategy(1) 「Create growth business models with local regions」
Basic strategy(2) 「Structural reform for enhanced productivity」
Basic strategy(3) 「Developing human resources for value creation」
３. Management Philosophy and Value Creation Process1１. Summery of Second Medium-Term Group Business Plan2

（１） Results of First Medium-Term Group Business Plan・Challenges・External Environment
Integration
2016

and
Results(Plan period: October 1, 2016 to March 31, 2019)

Group Plan

(1) Combination of ingenuity for regional
revitalization(2) Expansion of comprehensive financial
services(3) Expansion of area and channels(4) Innovation of operations(5) Development of the new group‘s corporate
management structure

BasicIntegration
Strategies

Objectives

Second Medium-Term

Getting the new group on the right track
to success

Position

Business

First Medium-Term Group Business Plan

＜FY2018＞

Targets

ROE
5% or more
Net Income
Approx. ￥47 bn
Capital Adequacy Raito
10% level
OHR(combined value for banks) Approx. 60%(*1)

Forecasts－￥45 bn－－(*1) Based on core net business profit

Group’s Strengths
Group’s Weaknesses

External
Environment

Wide-area network with core market, Ibaraki andTochigi prefectures, and strong customer base

Results and Achievement
 Cost reduction by sharing expertise andstrengthening securities investments (Cover
top-line down-turn risk of loan interest
income and fees & commissions) Strengthen comprehensive financial services
provision system (Making lease andsecurities companies into FG subsidiaries)

Keywords
Structuralreforms to
improveproductivity(business andorganizational
reforms)

Utilization of
IT services
and data (ITinvestment
strengthening)Enhancementof consulting
services

Challenges and Issues
 Development and expansion of businessareas in response to the shrinking oftraditional banking business Service level improvement throughdigitization and data utilization
 Productivity improvement through structuralreformComprehensive financial services including
leasing, securities subsidiaries

High-cost structure mainly consisting of network maintenance

Structural problems in local
communities

Diversity of customer needs,
customer contact points

Other industries entering into
financial services

Long lasting low interest rate

Uncertainty in the global economy

Cyber attack, Information leaks3（２） Summery of Second Medium-Term Group Business Plan In the second mid-term plan, we will promote the structural reform mainly of business process andorganization through the integration of our core system in Jan. 2020, develop the optimization of ourchannels and networks, and perform structural reforms such as the unification of the FG and subsidiarybanks’ organization.
 At the same time, we will build a business model that grows together with the region, enhance consulting
services and IT utilization, and is positioned as a transition to the next growth period with the effects ofstructural reforms.
Second Medium-Term Group Business Plan （Apr. 2019～Mar. 2022）
Goals

Building the region's future as a comprehensive financial
service group

Position

Achieve full-scale growth / Transitional period to next growth■ Position of 2nd group business plan

Revenue fromconsulting services(1) Create growth business models with local regions

Invest in growthEstablish New
business model Enhance consulting services
 Proactively utilize and invest in IT
 Business area expansion

Basicstrategy(2) Structural reform for enhanced productivity

Structural reform(Operations /Organization)

 Establish common platform Group governance advancement

Enhance productivity
Reduce cost(3) Developing human resources for value creation
 Development of specialized personnel
 Reform of personnel and training system
 Working style reform and diversity promotion

Business
Objectives＜FY2018＞*2＜FY2021＞
ROE (Consolidated)
5.0% or more
Net Income (Consolidated) ¥45 bn
approx. ¥47 bn
1Core OHR* (total)around 60%(*1 excluding system integration expenses)(*2 earning forecast for FY2018)

2018

2019

2020

2021

FY2022～■ Value provided to stakeholders
Customer /Area
Shareholders

Employee

Support for realization of growth andsolutionsImproved corporate value throughsustainable growth
Improvement of job satisfaction4（３） Change of Net Income during the 2nd Medium-Term Group Business Plan (FY2018→FY2021）
Consolidated Net Income (*1)
（FY2021）¥47bn （＋¥2.0 bn compared to the FY2018 forecast）（¥Bn）(*1) Net income attributable to owners of the parent

Other than channels ・customers

Profit from channels ・customers＋４.５ （Profit before tax）

45.0

Net interest
Income from Net Fees andDeposits and Commissions
Loans

±0.0

Cost
Reduction

+3.0

+1.5

-１.５ （Profit before tax）

Net interest
Income fromSecurities-6.5

Consoli‐datedNet
IncomeProfit fromGroup
Companies
Profit fromSecurities
transaction

+1.5

-1.0

SystemIntegration
Expenses

(*2)

-1.0

Extraordinary
LossesTax increase due to profit
increase -１.０

Consolidation
Adjustment

-1.0

47.0

+3.0
(*4)

(*3)

+2.5

Consoli‐datedNet
Income(*1)(*1)(*2) Includes gains on cancellation of private offering investment trusts.
(*3) Profit Increase of Mebuki Lease, Mebuki Securities, and other group companies.
(*4) Improvement of adjustments related to securities and others.

FY2018 Forecast

FY2021 Target

Foreign currency denominated loans＋2.0 /Net interest Income
from deposits and loans Yen-denominated loans -2.0
Fees from Corporate Customers＋2.0 /Net Fees andCustomer Assets under Custody＋1.0 /Commissions
Insurance and others -1.5
Cost Reduction

Personnel Expenses -1.5 /Non-personnel Expenses -1.5

Net interest Income
from Securities

Yen-denominated bonds -4.5 /Foreign currency denominated bonds -2.0

Profit from Securities
transactions

Gains on cancellation of private offering investment trusts -10.0 /Stocks -2.0 / Bonds ＋11.0

Extraordinary Losses

Elimination of branch impairment of FY2018

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２. Basic Strategies

6【Basic strategy（１）】 Create growth business models with local regions
Strategicgoals

 While providing consulting services and utilizing IT services and data, we will support
customers grow and resolve problems. Through utilizing resources owned by the group to
expand our business areas, we will create growth business models with local regions.

【Basic strategy 1】
Enhancement of consulting services for customer growth【Basic strategy 2 】
IT services / Data utilization and IT investment enhancement＜Tactic 1-1＞ Support needed for business support
and problem resolution＜Tactic 1-5＞ Expansion of services for digitalization

 Expansion of business support menu
 Strengthen business succession and M & A initiatives
 Strengthen middle risk and business improvement
support Promotion of business evaluation＜Tactic 1-2＞ Strengthening problem-solving sales
for wealthy customers
 Asset management through integrated banking andsecurities business Dealing with inheritance related needs
 Strengthening services based on financial gerontology＜Tactic 1-3＞ Support for customer asset formation
 Improvement of convenience and enhancement ofproposals by utilization of AI, etc.
 Expand the customer base for asset managementbusinesses (enhancement of educational activities)

 Improve customer productivity and support digitization
 Expansion of smartphone and web services to improve
convenience Dealing with a cashless / digital society
 Enhance data analysis and marketing functions
 Efficiency improvement of public funds business【Basic strategy 3 】
Develop and expand business areas＜Tactic 1-6＞ Diversification of profit opportunities by
expansion of business areas
 Strengthening equity investment, structured finance Expansion of trust services
 Strengthening investment securities capabilities＜Tactic 1-4＞ Regional revitalization efforts
7【Basic strategy（１）】 Create growth business models with local regions～ Enhance consulting services for customer growth ～ With regard to issues and objectives shared through dialogue with customers, we will strengthen ourconsulting function to provide services and solutions in a one-stop manner according to the life stages
and industry characteristics of each customer.
【Business model to grow with the region】
 Business evaluation initiatives
 Increase contact with customers(utilize sales office and head office
staff)
 Specialist staff such from external
partner companies【Corporate customers】
Approximately 30,000 main customers
 Customers using business evaluation
services Customers using business reform
support services
 Newly acquired customers

 Asset management specialists
 Utilization of Robo Advisor
 Enhancement of online
content
 Loan Plaza / Loan Center

Dialogue andtask sharing

Dialogue andtask sharing【Individual customers】
About 1.8 million individuals withpayroll or pension
 Wealthy customers deposits
 Customers using asset
management services
 Customers using various loans【Mebuki FG】 Providing comprehensive financial services as a group
Consulting and solutiondelivery system
To realize

To realize

Organization

Human resources

Promotion of business evaluation(Subsidiary banks）
Development andexpansion oforganization for
consulting business（Subsidiary banks）

Establishment of IT anddigitization promotion
organization（FG）【Corporate customers】／【Community 】●Solutions ●Performance improvement●Employment creation ●Local revitalization, etc.

Shifting personnel toconsulting business(+ 100 people)

Development ofspecialized personnel

Group functions
Lease / Securities

Trust service,
Recruitment service【Individual customers】●Asset management ●Asset succession●Securing safety and security, etc.

【Mebuki FG】●Increase in service revenue●Expansion of loan-deposit transactions●Increase in customer assets under custody, etc.

●Improvement of corporate value●Improvement of job satisfaction

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【Basic strategy（１）】 Create growth business models with local regions～ IT services / Data utilization and Strengthening IT investment ～ Through improving the level of IT services and promoting utilization within the Group, the use of
external knowledge and collaboration, and the establishment of a new shared organization in the group,
we will provide customers with tools and know-how that have been put into practical use.

Support for problem resolution anddigitization of customers

Utilization and collaborationof external knowledge
FinTechAI utilization
IT literacy

Human resource
development in the IT field

Establishment of
new organization
Data analysis/
Marketing advancement

IT and digitization
promotion

Promotion of consulting in
the IT field

BPR Sharing needs and issues
AI-OCR

RPA

Voice
recognition/
FAQ

Marketing
Data analysis

 Deep understanding ofcustomers

Business
digitization

API linkage
Financialmanagement

Improvement of customer
convenience and services
Utilization of TV
monitor at teller
window/
Tablettransactions

Improvementof smartphone
application

Expansion ofservices thatcan becompletedonlineAI-targeting

Promotion of IT utilization
within Mebuki FG

 Providing services/solutions
 Deployment of internallyimplemented tools andaccumulated knowledge

9【Basic strategy（２）】 Structural reform for enhanced productivity
Strategicgoals

 By optimizing channels and networks, and consolidating and streamlining grouporganizations such as business processing and IT division, we will shift the allocation of
resources such as branches, personnel, and investment from existing fields to new revenue
fields, and will lead to build a highly productive management base.
 At the same time, we will work to upgrade the group-wide business management system andstrengthen the group governance system.

【Individual strategy①】
Building a highly productive management
base＜Tactic 2-1＞ Channels and network optimization＜Tactic 2-2＞ Streamline business processing and
IT divisions
 Branch network optimization, enhancement of nonface-to-face channels
 BPR promotion utilizing digital technology, RPA, etc.
 Integrating administrative procedures, streamlining ofoperations based on integration of core systems【Individual strategy②】
Advance group management andgovernance＜Tactic 2-3＞ Advancement and optimization ofgroup management＜Tactic 2-4＞ Strengthening group governancesystem Standardization and integration of head office
function and duplicate subsidiaries
 Introduction of RAF, strengthening AML / CFT
measures Strengthen supervisory function of the board of
directors
 Corporate activities in line with ESG / SDGs

Customer contact / Management base
Customers / Local Communities
Cultivation of optimal channels according tocustomers’ needs and location, etc. (multiple channels)＜Customer contact ＞

Think Tank / Consulting / IT Solution / Credit Card / Credit Guarantee （Subsidiaries）
Effective allocation of management
resources(Unified and shared management base)＜Management base (organization andfunction of headquarters)＞
Bank core system /business process
Head officeplanning andmanagement
functions

Common platform

Business
processing and IT
management

Strategic planning
function for sales andsecurities investment

Management system
related to risk and AML

IT development
and management
functionsGroupgovernancefunction10【Basic strategy（２）】 Structural reform for enhanced productivity～ Building a highly productive management base ～ We review the functions and roles of digital channels and manned branches in light of customer needs,
customer contact diversification, and advances in IT digital technology, improve customer
convenience and simplicity, and strengthen consulting functions.
Channel and branch network optimization

Digital channel【Direction】 Function expansion /Investment expansion
Expansion ofsmartphone appfunctions(Functions related tosettlement and financing)

Expansion ofservices that can becompleted online

Enhancement of thedirect channel(visit free transactions)

Enhancement of
ATM functions

In-person channel【Direction】 Function review / Diversification /Branch network optimization

Enhancecollaboration
between nonface-to-face anddirect channels

New branch
openings /Strategic staff
shifting

Consolidation of branches/ reduction of functions(Streamline about 20% of
current branch offices (* 1))

Diversification of
branches using
digital technology

Streamlined operationin branches(*1) Including function changes

Investment of management resources（same as (1) -2 Individual strategy）

Saving of management resources

Improving customer convenience and simplicity
Effect /Aim(wider contact with customers using digital channels)

Enhancement of consulting function (increase in consulting time by 100,000 hours a year (* 2))(* 2) 100 people input × 4.5 hours (per day) × 240 business days = 100,000 hours a year11

【Basic strategy（２）】 Structural reform for enhanced productivity～ Shifting management resources by promoting structural reform (people, things, money) ～Human resources(total staff)<Save> approx. 1,000 people(o/w regular employees 500 people)＜Human resources “saved"＞（Reduction of work volume converted into number of personnel）
Unification and streamliningof business processing and
IT divisions
Consolidation of head office
functions and subsidiaryfunctions and streamlining
operations

Unifying and integrating
business procedures /AI implementation/
Utilization of RPA
Function integration
Business unification

Rebalancing online andoffline transactions-220

IT investment¥15 bn (*1)

Securities
investment,
structured finance,
new fields＋60

Money (expenses)

（¥Bn）
115.3

Expenses(includes system
integration costs)

2nd mid-termbusiness plan
（FY2019-FY2021）-5.0 or lessIntegration

FY2015FY2018FY2021¥5 bn or more（*2)
Effects of structural reform (decrease)

115.0

IT investment
Branch investment

Regularemployees
6,500(-300)(* 2) Single-year reduction compared to fiscal 2018 /Includes items that have an effect after fiscal 2022

(approx.2.0)
approx.
113.0

6.0

Regularemployees
6,800

Cost reduction by structural reform(table 3) Actual and forecast of expenses

11.0

7.0

10,800 people＋40（2 banks total）(*1) 3 years total

15.0

FY2015-FY2018＋100

Strengthening IT
planning andIT consulting(New organization)-130

Streamlining branch
networks（¥Bn）

Enhancement ofconsulting function

10,000 people-200（2 banks’ total)

Promote further adjustment of total
personnel by structural reform<Human resources“invested”>-450

Simplifying operations
and documents
Shifting to onlinetransactions（table 2）Actual and forecast of IT
investment and branch investment

Personnel reduction 800 people（table 1）Number of personnel (forecast)

BPR and digitization of
branch operations

Things(investment amount)<Invest> 200 people

FY2018
ForecastCoresystemintegration

FY2019FY2020 Personnel reduction
approx. ¥3 bn
 Streamlining branch network approx. ¥1 bn
 Business process integration / BPR
113.0(approx.3.0)
approx. ¥1 bn
111.0
approx.
(approx.3.0)
110.0
approx.
Core system integration
108.0
costs
FY2021

FY2022～

Expenses (excludingcore system integration
costs)

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【Basic strategy（３）】 Developing human resources for value creation
Strategicgoals

 We will promote the development of specialized human resources by strengthening support
for developing skills through the use of external knowledge, and build up a human resources
group required for the implementation of the second mid-term plan.
 We will expand various working styles to promote work-life balance, and create a system torealize contribution to customers and the local region through the display of consulting
functions, all while leading to higher job satisfaction for employees.

Training andsecuring ofspecializedhuman
resources

Main tactics＜Tactic 3-1＞ Training and securing of specialists in consulting and IT fields＜Tactic 3-2＞ Construction of a training system that utilizes external knowledge,
human resources exchange, OJT, etc.
 Establishment of human resources development and training system jointly by the two banks
utilizing external dispatch services
 Securing highly specialized personnel (ex. mid-career recruitment)

Expansion of
personnel andtraining system

Promotion ofworking stylereform anddiversity＜Tactic 3-4＞ Introduce and expand personnel system to promote motivation
improvement
 Visualizing work and career plans and establishment of support system for career formation
 Review of course classification in subsidiary banks＜Tactic 3-5＞ Maintaining a working system and environment to promote worklife balance Expansion of work at home, telework, flexible work system Reduce total working hours by improving productivity＜Tactic 3-6＞ Strengthen support for career and skills improvement of womenand retired rehires

 “Higher job satisfaction for employees" through basic strategies（1）（2）（3）Higher job satisfaction for employees
Pride in work (feeling ofcontributing to customers
and local region)

Trust in the organization(Working style reform andfostering motivation)

Group unity(Human resources exchange,
joint training)

Execution of basic strategy（1）（2）（3）Career improvement support <Tactics 3-4・6>＜Tactic 3-3＞ Introduce and expand a skills certification system that promotes
continuous skills improvement

Support for developing skills <Tactics 3-1・2・3>

Individual
strategy

Training andsecuring ofspecialized
personnel

Support foradvancementof skills

Create motivation
to challenge new
initiatives

Support for careeradvancement of
women and retired
rehires
Raise the skills of young
employees

Institutional expansion and reform<Tactics 3-4・5>
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３. Management Philosophy and Value Creation Process14Management Philosophy and Value Creation Process Mebuki Financial Group is committed to providing high-quality comprehensive financial services
based on the group’s philosophy, and contributing to the sustainable growth of local communities byimproving its corporate value.

SocialissuesInvested
capitalManagement Philosophy / Vision (Strategic goals)

Population
decline
Aging

Group
Philosophy

Assetformation
Asset
succession

HumancapitalCorporate
growthBusiness
succession

Intellectual
capitalDiversity

Together with local communities, we will continue to build a more
prosperous future by providing high-quality comprehensive financial
services.

Building the region’s future as a comprehensive financial services group

VisionFinancial
capitalThe Group will maintain and promote the relationships with customers
and local communities, as well as the deep understanding of local
communities that both banks have developed over the years. At thesame time, the Group will use its wide-area network to expand its zoneof economic interactions, expand the scale and scope ofcomprehensive financial services that it offers, and grow along with
communities by promoting “the development of local industries, therevitalization of local economies , and the creation of new markets”.

Compliance

Sustained improvement of corporate
value through circulation of value creation

Digitization

Providing value tostakeholders

Communities
・Regional
revitalization
・Environmental
conservation

Customers
・Financial services
・Secure andconvenient

Providing comprehensive
financial services.

Shareholders
・Corporate value
improvement
・Shareholder return

Employees
・Working stylereform・Improvement ofjob satisfaction

15

Management Philosophy and Value Creation Process～ Efforts for SDGs and ESG ～ Mebuki Financial Group will work with all of our stakeholders, including customers, shareholders,
employees and business partners, to build a more prosperous communities aim to grow together.

Society
We will work in harmony with local communities to create a more prosperous
regional society Support children to become independent (financial education support) Local employment support collaborating with local governments (cooperation with Ibaraki and Tochigi prefectures / education loans) Business succession support for next-generation leaders and successors
 Diversity Initiatives (promotion of work-style reform / promotion of active participation of women)

EconomyWe will take initiatives to provide comprehensive financial services and promote the revitalization of
the regional economy utilizing a wide-area network.
 Discover regional industries and support the creation of new businesses (hold business plan contests /support with Mebuki Regional Revitalization Fund) Develop new businesses and expand economic exchange (support for manufacturing companies / support for
agricultural businesses)
 Business succession, M & A support, and make efforts to resolve the shortage of human resources Make initiatives to support local sustainable growth (support to refurbish of traditional homes / promote local
creation in cooperation with local governments)

Environment
With the aim of maintaining the natural environment, we will engage in initiatives
to bountiful and beautiful environment to the future.
 Dissemination and development of renewable energy through environment related financing for
power generation projects using clean energy
 Handle environment-related loans for the introduction of environment-friendly private placement bonds, solar power generation facilities, etc.
 Create environment-friendly branches (installation of solar power generation systems, reduction of energy consumption through switching to LED lights)
 Environmental conservation activities (Joyo Furusato no Mori / Ashigin Forest)

Governance
We will work to strengthen and enhance corporate governance in order to secure the trust of our stakeholders.
In order to achieve a peaceful and fair society, we will work to cut off relations with antisocial forces and preventmoney laundering and terrorism funding.

16Inquiries

Mebuki Financial Group, Inc. Corporate Planning Department
TEL

029-300-2869

E-mailir@mebuki-fg.co.jp

URL

https://www.mebuki-fg.co.jp/

This document has been prepared for information purposes only and does not form part of a solicitation to sell or purchase any securities.
Information contained herein may be changed or revised without prior notice.
This document may contain forward-looking statements as to future results of operations.
No forward-looking statement can be guaranteed and actual results of operations may differ from those projected.

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