Business strategy of Hokkoku Financial Holdings
And the second quarter of the fiscal year ended
March 31, 2023.

October 28, 2022

Contents

1.Summary of Financial Results
・Overview of Financial Results for the Second
Quarter of the Fiscal Year Ending March 2023

4

2.The Medium-Long Term Business Strategy~Progress6
・Medium-to Long-Term Targets
・The Medium-Long Term BusinessStrategy 2022 8
9・Surplus Capital
10
・Reduction of strategic stockholdings
11・Shareholder Return Policy and ROE Targets
12・Supporting Growth through Private Equity
13
・Established a subsidiary in Singapore

Outline of the second quarter of the fiscal year ended
March 31, 3.2023
・Loans Outstanding and Yields by Segment ~・Loans and bills discounted ~ Yield by segment ~・Trends and Forecasts of Credit Costs
・Operation of negotiable securities
・Portfolio of market divisions
・Key Initiatives Operational Revenues～Card Leasing Consulting・Card Business

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

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1. Summary of Financial Results

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Overview of Financial Results for the Second
Quarter of the Fiscal Year Ending March 2023
[Hokkoku Financial Holdings Consolidated Profile]<Ordinary income 20.463 billion yen YOY +4.646 billion yen><Interim net income 12.895 billion yen +3.02 billion yen YoY>
Revenues increased year-on-year due to the recording of gains on the sale of securities, including strategic shareholdings, while losses on the sale of securities were also
recorded.
Despite the booking of a loss on the disposal of some software, profits rose YoY due to a decrease in bad debt disposal costs due to a change in the reserve method.

(1) SUMMARY【CONSOLIDATED】（Millions of yen)
Rate of increase
2021.92022.9 Fluctuation or decrease
Ordinary income 44,736
51,3286,592
14.7%
Ordinary profit
15,817
20,463
4,646
29.3%
Profit＊9,875
12,8953,020
30.5%* Profit attributable to owners of parent【Hokkoku Bank】（Millions of yen)
Rate of increase
2021.92022.9 Fluctuation or decrease
Ordinary income 39,486
45,167
5,681
14.3%
Ordinary profit
15,25519,996
4,741
31.0%
Profit9,618
12,8193,201
33.2%
Ordinary profit
6,344
7,343
999
15.7%

(2) Capital adequacy ratio
2021.92022.32022.9 Fluctuation

Capital adequacy
ratio(Consolidated)

12.61%

11.21% △ 1.40%

13.31%（Millions ofyen）Consolidated Profit and Loss

204
158
128
90
2020.99850
2021.9Ordinary Profit

2022.9ProfitCapital連結自己資本比率の推移
adequacy ratio(Consolidated)
13.31%
12.61%
11.21%

2021.92022.32022.9

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2. The Medium-Long Term Business Strategy~Progress-

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Medium-to Long-Term Targets～Level of image over the medium to long term based on future environmental
expectations and action policies-※2022.4.28 PublishedItem

FYE March
2022
ActualConsolidated Operating Income

19.2 billion yen

21 billion yen

23.1 billion yen

37.7 billion yen

Consolidated Net Income

9.4 billion yen

12.9 billion yen

14.4 billion yen

24 billion yen

Revenues from Key Initiatives(Consolidated)(New Business Revenues, Including CardLeasing Consulting)

3.2 billion yen

7.9 billion yen

9.5 billion yen

12.5 billion yen

4.2%

5.7%

5.9%

8.0%

ROE (Consolidated)*FYE Mar. 2025
FYE Mar. 2027
Three years later 5 years from now

FY3/2032
About 10 years
later※ ROE is calculated by the amount of net income attributable to owners of the parent to Basel III Core Equity on a domestic
base bank basis.
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

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Medium-to Long-Term Target Levels(Details and Consolidated)※2022.4.28 PublishedFYE March 2022 FYE Mar. 2025
ActualThree years later

FYE Mar. 2027
5 years fromnow

FY3/2032
About 10 years
laterInterest on loans and deposits

23.8 billion yen

24 billion yen

24.3 billion yen

24.8 billion yen

Fees and commissions

7.2 billion yen

11.4 billion yen

13.3 billion yen

17.4 billion yen

Card Business1.2 billion yen

3 billion yen

3.3 billion yen

3.4 billion yen

Leasing Business1.2 billion yen

1.8 billion yen

2 billion yen

2.7 billion yen

Consulting & advisory

600 million yen

2.4 billion yen

3 billion yen

4 billion yen

Market management

29.4 billion yen

19 billion yen

16 billion yen

22.1 billion yen

Total Credit Cost

11.8 billion yen

3 billion yen

3 billion yen

3 billion yen

General and administrativeexpenses

30.3 billion yen

31 billion yen

28.9 billion yen

25.4 billion yen

6.9 billion yen

8 billion yen

6.3 billion yen

4.3 billion yen

9.4 billion yen

12.9 billion yen

14.4 billion yen

24 billion yen

Item

Of which, system costs*
Net income※:Total of software development costs (depreciation expenses) and running costs (office outsourcing expenses, etc.)
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The Medium-Long Term Business Strategy 2022

※2022.4.28 PublishedThree Measures for increasing corporate value<Progress>

1.To improve capital efficiency◆Creation of surplus capital by conversion to domestic banks◆PBR of the highest level among regional banks with a total return
ratio of 40% or more
Stock repurchases up to◆For 50% in three years with a policy of not holding strategic stocks
Sell off

2.Identification of incentives for management, employees,
and shareholders

P.9～10

P.11◆Aiming for ROE5.0% in two years and ROE8.0% in ten years,
Introduced a compensation system linked to ROE

3.Supporting Growth through Private Equity◆Through 100% owned subsidiary QR Investment Co., Ltd.,
Aggressively investing capital

P.12
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Surplus Capital
The core capital required to maintain an equity ratio of 8.0% is ¥178.4 billion.
Aim to invest in growth by taking into account shareholder returns and the costof capital with 105.9 billion yen in surplus capital.
FYE Mar. 2022

FYE Mar. 2023 (Forecast)International standard line basis

Domestic banks basis

Total capital
286.4 billion yen
Unrealized gain on
available-Unforsale securities

Surplus capital
105.9 billion yen

49.2 billion yen

Growth investment
37.6 billion yen

36.7 billion yen

Shareholder Returns
11.6 billion yen

20 billion yen

36.7 billion yen

Unrealized gain on
available-for-salesecurities

Core capital
178.4 billion yen

Subordinated bonds

36.7 billion yen

20 billion yen＝ 8.0%＝ 12.6%
Risk Assets

Risk Assets

2.2715 trillion yen

2.2308 trillion yen

Repayment ofsubordinateddebentures
20 billion yen

Growth investment

37.6 billion yen

M&A

15 billion yen

Inauguration of the
new company

15 billion yen

QRI's PE spending

7.6 billion yen

Shareholder Returns

11.6 billion yen

Share buyback

9 billion yen

Dividends

2.6 billion yen

Considered at 5% to 7%
cost of capital

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

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Reduction of strategic stockholdings
The plan to cut 6.9 billion yen in three years is to reduce it by 1.2 billion yen
in six months (18% progress rate)
Verify the appropriateness of the holdings to be commensurate with our costof capital.
Book Value of Listed Strategic Stockholdings (Billions of yen)

300

Reduction in strategic stockholdings for listingBook value(Billions of yen)

Number of stocks284

1.2 billion yen
reduction

250
220

2022.350

1382022.9

43

126

200
200

181

150

138

▲8

Reduction

126
115

▲12

(including some buyers)
92

100

69

Three-year KPI―▲69

Progress rate

―

18%

50

0
0
2018.32019.32020.32021.32022.32022.92023.32024.32025.3Future

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Shareholder Return Policy and ROE Targets

Advance ROE8.0% target 10 years from now.
FYE March
2022
ActualFYE Mar.
2023
A year later

Total return ratio

60%

115%

40% or more

Total dividends

24 Billion yen

26 Billion
yen

Dividend increase policy

Repurchase of theCompany's stock

30 Billion yen

90 Billions ofyen (*)

Continuously implement

Consolidated equity
ratio(Domestic Standards)

9.94%

9.66%

8.0% or more

Consolidated ROE(Domestic Standards)

4.2%

4.5%

Item

FYE Mar. 2024
Two years later

FYE Mar. 2025
Three years
later

FYE Mar. 2027
5 years fromnow

FY3/2032
About 10 years
later

5.0%～8.0%

5.0%※Acquisition of treasury stock by the end of September 2022: 400,500 shares approx. 1.8 billion yen
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

8.0%
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Supporting Growth through Private Equity
QR Investment, five funds for each life stage
Operates (total over 17 billion yen), with a IRR of about 5% to 10%.
Positioning of each fund

Fund Investment Status (as of 2022.9)
Total

Fund name

Number ofcases(Billions of
yen)

Issue
amount(bil)

Hokuriku Region Venture Fund

ー

1

1.0

Noto SDGs Fund

7

7

2.6

QRI Growth Support Fund

10

1

0.5

Ishikawa SME Revitalization Fund

50

27

23.8

QR Fund

100

2

5.1

Total

―

38

33.0

Plan (number of investments and total fund amount)Three years
later

5 years fromnow

About 10years later

Number of investments

185

400

805

Total fund amount(billion yen)

500

1,000

2,000

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Established a subsidiary in Singapore■As a subsidiary of consulting firm The CC Innovation, Ltd.,
Established a subsidiary in Singapore and started 2022.10 businesses[Background and Purpose of Establishment]
・Focus on strengthening consulting functions in line withfinancial functions as part of FHD Group-wide strategy
・Compared to the branch format, it is easier to exercise
consulting functions
・Loans and other operations can be covered by local
corporations and domestic banking operations.
Conversion to domestic banks allows for more flexible Capital strategy

Overview of the Singapore subsidiary
Trade Name

CC Innovation Singapore Pte. Ltd.

Opening

October 2022 (Established July 2022)

Main Operations

Consulting, investment and loan operations, etc.
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3. 2Q FY2023

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Loans Outstanding and Yields by Segment ~・In loans to individuals, housing loans increased. Commercial loans declined slightly, but the ratio of loans to SMEs was at a high level of 77.4%.
・Overall yields were largely unchanged as a result of improved yields as a result of more pricing-oriented dialogue with business loans.

Loans outstanding and yields
億円

1.06%

1.02%

3,699
3,209

18,921
2019.3

Stores by region(Billions of yen)

0.95%

0.92%

0.92%

3,425

3,152

3,135

3,287

3,026

3,175

2,973

2,509

19,72820,012

19,931

19,8922020.32021.32022.32021.9Total of three
Hokuriku
Ishikawa
Prefecture
ToyamaPrefecture
Fukui
Prefecture2022.9local public body

Medium and large companies

Small and Medium Enterprise, etc.

loan yield

Other

2022.3Comparison
with 2021.9

Percentagechange from2021.923,931

23,95623,852△ 79△ 0.3%

18,06618,11918,062△4△ 0.0%

4,674

4,645

4,608

△ 66

△ 1.4%

1,191

1,190

1,181

△ 10

△ 0.8%

2,234

2,083

1,836

△ 398

△ 17.8%

Breakdown by Attribute

Breakdown by size
(Billions of yen)
End of Sep. 21 End of March 22 End of Sep. 222022.9Compared to
September 21
Increase/Decrease

Compared to
September 21
Rate of change

2021.9Meter Loan

26,16526,03925,688

△477

△1.8%

Of which, SMEs, etc.

19,926

19,931

19,892△34△0.2%(Ratio of SMEs, etc.)

76.2%

76.5%

77.4%

―

―

Of which, medium-and largesized companies, etc.

2,949

2,973

2,509

△440

△14.9%

Other loans

Of which, local
governments and public
corporations

3,290

3,135

3,287

△3

△0.1%

local goverments
and public

2022.3(billion of yen)
Percentage
Comparisonchange2022.9with 2021.9
from
2021.9△ 4.6%
12,219△ 583

Commercial loan

12,802

12,757

Consumer loans

10,072

10,146

10,181109

1.1%

Housing loans

9,728

9,819

9,870

142

1.5%

344

327

310

△ 34

△ 9.9%

3,290

3,135

3,287

△3

△ 0.1%HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

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Loans and bills discounted ~ Yield by segment ~Average Newly Disbursed Interest Rates (by Attribute)

Yield by segment2020.3→2021.3→2022.3→2022.91.237-0.0691.168-0.029

1.139

0.013

1.152

0.854

-0.0140.840-0.021

0.819-0.0200.799

Secured

0.724

0.005

0.729

-0.0080.721-0.0130.708

Un secured

3.305-0.0783.227-0.0543.173-0.004

3.169

Local
goverments

0.519-0.1400.379-0.0750.304-0.020

0.284

Businessloans
Consumer
loans

(％)

2021.32021.92022.32022.9Business loans

1.127

0.899

0.894

1.278

Consumer loans

0.694

0.575

0.547

0.507

Commercial loans

Yield Conditions by Attribute

Consumer loans(%)

Yield by region (business loans)
2020.3
Total of3prefectures in
Hokuriku area→

2021.3→2022.31.4

2022.9

→

1.3

1.276

1.237
1.168

1.2

1.365

-0.0801.285-0.035

1.248

0.002

1.250

1.139

1.152

0.840

0.819

0.799

2021.32022.32022.91.1
1.0

Ishikawa

1.351-0.0771.274-0.021

1.239

0.014

1.253

0.9

Toyama1.430-0.0971.333-0.072

1.287-0.026

1.261

0.8

Fukui

1.287

-0.0661.221-0.0441.196-0.0191.177

0.7

Others0.552-0.018

0.534

0.022

0.526

0.030

0.556

0.912
0.854

2019.32020.3

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016Trends and Forecasts of Credit Costs■In FY9/2022, credit costs were only about 100 million yen, partly due to the effect of the change in allowancemethods (▲ of about 3.3 billion yen).
■The forecast for FY3/2023 is unchanged from the initial forecast of ¥5 billion.
■We intend to continue to maintain a high coverage ratio and reduce the risk of future impact on earnings throughthe implementation of adequate provisions.
Credit Costs (Millions of yen)<Preservation Status>

2020.32021.32021.92022.32022.9Disclosed claims under
the financial reconstruction
law(Billions of yen)

561

608

645

758

778

Amount of preservation(Billions of yen)

534

587

619

659

677

Coverage ratio (%)

95.1

96.5

95.8

86.9

86.9

15,00011,8202022.9Credit cost: Approx. 100 million yen
Impact ▲ of change in reserve
methods: Approx. 3.3 billion yen

10,000

5,000

5,000
3,000

0

FYE Mar. 2020

FYE Mar. 2021 FYE March 2022

※Hokkoku Bank on a non-consolidated basis

FY9/2022

FYE Mar. 2023

FYE Mar. 2025

FYE Mar. 2027

FY3/2032※Hokkoku Bank on a non-consolidated basis
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Operation of negotiable securities■We will diversify investments from a medium-to long-term perspective and secure profits through flexible trading.
■In the period ending September 2022, the company secured a gain on sales of net stock and policy-held stock.
Recorded a loss on sales due to the replacement of foreign bonds.
Changes in Realized Gains/Losses by Asset

Balance of securities (book value)(Billions of yen)(Billions of yen)

16,000281

14,217

300

184
8

2,200

11,07512,0001,500

10,076

785
918

8,000
1,848

200
775

747

657

1,880

11
31

28
115

72

100

45

60

50

42
1
27

32
23

16
8

9
23

2019.32020.32021.32022.3

2,351
0

2,251

78

150

693

837

819
927

202

187

200

782

9,550
10,000250

13,00914,000

164

150

181

11
▲ 50

-50

1,221

6,000

2022.9Valuation gains (devaluation losses) on securities
8,189

4,000
6,481

6,626

8,227

(Billions of yen)
1000

7,012

800

2,000

600
0

882
784

400
2019.32020.32021.32022.3499

2022.9
335

200
0

▲ 113

-200
2019.32020.32021.32022.32022.9

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Portfolio of Market Sectors (Excluding Strategic Stockholdings)■Equity securities held for net investment account for about 60% (based on market value)■The portfolio of the market sector excluding strategic stockholdings becomes unrealized losses on the whole due to the impact of
the rise in interest rates.
■Increase investment in multi-asset funds to strengthen diversification and stabilize net interest income.
Operational status as of the end of September 2022
(Excluding strategic stockholdings)

Forecast for March 2023

Book value atthe end of theperiod(Billions of yen)

Balance at the end of
the period (Billions ofyen)

Stock Investment as of the end of September 2022

Stock balance (market value) 115.6
billion yen
Of which, net investment of ¥70.4 billion

Net investment
Purpose shares

502

202

576

Book value of net investment
shares

Yendenominated
bonds

8,227

▲126

8,537

Net unrealized gains on
investments in stocks

Foreign bonds

2,351

▲218

2,496

Investment
trusts

782

▲72

745

Multi-Asset

2,200

▲196

2,500

Total

14,062▲410

14,854

31

297
502

Book value of strategic
stockholdings
Gain on valuation of strategic
stockholdings

124

Unlisted equity securities

202

Appraisal
profit/loss(Billions of yen)

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Key Initiatives Business Revenues: Card-Leasing Consulting(Million of yen)

3,000

609

2,000

1,252

1,000

534

601

1,362

1,246
442
610

1,392

1,478

1,602

2020.32021.32022.3861

0Card businessLeasing business2022.9Consulting(Million of yen)2020.3

Consulting

2021.32022.32022.9

609

534

601

442

Leasing Business

1,252

1,362

1,246

610

※
Card Business

1,392

1,478

1,229

675

Total

3,253

3,374

3,076

1,727

※In the card business from fiscal 2022.3 onward, the effect of the change in accounting standards was taken into account. Figures for fiscal 2022.3 were ¥373 million and¥186 million for fiscal 2022.9.
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Card Business■Since the Hokkoku Bank itself handles the card merchant business, micro businesses can also enjoy cost benefits,
The cashless environment in the region is steadily expanding.
Number of debit cards issued (cumulative)(Thousands ofsheets)

350

282

300
250

206

200

303

239

Debit card utilization rate
60%
40%

30.6%

35.7%

42.5%

40.7%

39.8%

2021.32022.32022.9

154

150

20%

100
50

0%

0
2019.32020.32021.32022.32019.32022.9EC mall openings (COREZO)

Number of Card Member Stores(Stores)
7,500

2020.3(Stores)

6,114

6,386

6,654

6,310

300

279

2022.32022.9

206

6,000

200
4,500

265

4,078

100

3,000

1,500

24

32

2019.52020.300
2019.32020.32021.32022.32022.9※2019.5.20 Open

2021.3

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We prohibit you from copying or duplicating this material or distributing it to third parties without
first obtaining the authorization of Hokkoku Financial Holdings, Inc. This document has been
prepared solely for the purpose of providing information and is not intended to solicit the purchaseor sale of any particular security. All or part of the information contained in this document issubject to revision or change without prior notice. These materials contain forward-looking
statements. Please note that these statements are not guarantees of future performance and may
differ from the targets due to changes in the business environment and other factors.

Contact information regarding this material
Hokkoku Financial Holdings, Inc. General Planning Department, Public Relations IR
TEL :076-223-9705
E-mail : cyosa@hokkokubank.co.jp
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