Value Creation Story

Top Message

Sustainability Promotion

Business Strategy

Corporate GovernanceBank Data

Financial Section

Looking back on FY2022

Permeation of consulting services aligned with customer issues and needs

Top Message
President

Hidefumi Kobayashi
We will present a new future forthe region and make continuous
efforts for a sustainable society.

The outbreak of COVID-19 has finally entered its third year,

successors for SMEs, a shortage of human resources, andcausing a major impact on social and economic activities.

sustainment of local industries and employment.

With the complete containment of COVID-19 still out ofUnder these circumstances, to continue to fulfill oursight, due to soaring prices of crude oil and other resources,

mission as a regional financial institution into the future, we

raw materials, and grains, as well as difficulties inlaunched in April 2021 “Vision 2030: ~Leading Company

procurement, caused by the normalization of life with

Creating a Path to the Future~,” our management plan

COVID-19 and Russia’s invasion of Ukraine, among others,

covering a period of 10 years until FY2031. Based on this,prices have risen along with the deterioration of businesswith aims to offer our customers the optimal solutions byconfidence, raising concerns worldwide about theenhancing our financial services and expanding the scope

acceleration of inflation.

of our businesses in the non-financial sector, and to deepen

In the financial markets, the yen has depreciatedour capabilities as a corporate group leading the region bysignificantly, and both interest rates and stock prices havecreating networks centered on the Miyagi and Sendai areas

become unstable.

and expanding the scope of our operations, we have

It is difficult to predict the future, and there is a growing

stepped up our response to various measures, including

sense of uncertainty about the outlook of politics, thedigital transformation (DX) and initiatives for new

economy, and society. Even after the containment ofbusinesses.

COVID-19 and other circumstances, its effects and scars

As a result, due to the permeation of consulting services

will be so great that I believe we will not return to the

aimed at solving customer issues and other factors, for theprevious world.

fiscal year ended March 31, 2022, we secured consolidated

In addition, some of our branches were severely

net income after-tax of ¥22.2 billion, reaching a record high,damaged by a large magnitude 7.4 earthquake with its

and “income from customer services (Note)” amounted toepicenter off the coast of Fukushima Prefecture on March¥3.4 billion, returning to the black for the first time in nine

16. We need to continue to pay close attention to natural

years. My view is that we made a good step towarddisasters and other emergencies.

strengthening profitability, which is the Bank’s top priority.

In addition, the Tohoku region, including Miyagi

We are deeply grateful that this was thanks to thePrefecture, is facing a mountain of social issues such assupport of our stakeholders, including customers, local

aging society with low birthrate, falling population, a lack ofcommunities, employees, and shareholders.

■Net income (consolidated) (Billions of yen)

■Income from customer services (Billions of yen)
3.4
22.2

18.2

16.5
(0.6)

(3.3)
FY2020

FY2021

FY2022

FY2020

FY2021

FY2022(Note) Income from customer services = (Average balance of loans and bills
discounted× Loan to deposit spread) + Fees and commissions - Expenses(including retirement benefit costs)

12

THE 77 BANK INTEGRATED REPORT

13

Value Creation Story

Top Message

Sustainability Promotion

Business Strategy

Corporate GovernanceBank Data

Financial Section

Main achievements in FY2022 and challenges

First step toward realizing “Vision 2030”

Achievements
I would like now to discuss the achievements of FY2022,

I feel that it is very important to show our major direction

the first year of “Vision 2030.” The first achievement is thatboth inside and outside the Bank, and although it was a big“Vision 2030” got off to a good start.

challenge, I am glad that we formulated the 10-year

The management plan “Vision 2030,” which commenced

management plan.

in April 2021, is the first 10-year plan for the Bank created

As briefings on “Vision 2030” by the Bank’s officers wereby backcasting from “our target form (what we want toheld at all branches, the interest of employees is highbecome)” and “what we want to achieve” in 10 years. Even

compared to the previous medium-term management plans.

if we plan and implement goals and measures that are likely

Judging by their reaction and level of understanding, I

to be achieved in about three years by extending the statusbelieve that “Vision 2030” provided an opportunity forquo, we will not be able to keep up with the speed of

employees to think about not only the immediate future butchanges in the world and will become content with small

also actions each of them should take. I feel that it was achanges. In other words, maintaining the status quo will be

year in which the understanding and permeation of big

the best we can do in the rapidly changing financial industry.

goals, in addition to the long-term management direction

It is necessary to make a leap forward if we want to grow. I

and thinking, deepened.

believe that we need to show the direction of management,

The second achievement is that consulting services

set big goals, think hard to achieve them, and act boldly andhave been put into practice and started to generate results

carefully.

for both corporate and individual customers. In the previous

medium-term management plan, we had developed ademonstrate their creativity unrestricted by conventional

structure for consulting services as a top priority, and “Visionideas, to develop new attractive businesses and sectors,

2030” put forward “Financial × Consulting” as a businessand to foster a challenger spirit, so that the 77 Bank Groupmodel. Therefore, I feel that the awareness of consulting

will go beyond its existing trajectory and become a “leading

services is spreading reasonably within the Group.

company creating a path to the future.” Many employees

As a result of this, fees and commissions from corporate

took on the challenge to participate in the “businessclients grew from ¥600 million in FY2018 to ¥2.7 billion incontest,” with young employees who had been with the

FY2022, as we gradually increased the number ofBank for five years or less accounting for about 20% of theemployees in the Consulting Promotion Division, which wasapplicants. There were also many unique ideas. I feel that

established in 2018, and stationed headquarters staff at

all branches, headquarters, and Group companies

each location in Miyagi Prefecture to discover customer

deepened their understanding of the efforts to reform ourneeds and provide solutions in cooperation with branches.

corporate culture and are starting to change positively.

Furthermore, group-wide fees and commissions fromassets in custody amounted to ¥4.0 billion in FY2022, as wehave been carrying out initiatives in collaboration with 77
Securities, which was established in July 2016, and createdthe “Wealth Management Office” within the Business
Promotion Division in June 2021 to implement measures in
response to customer needs.
In addition, our involvement in structured finance as a

■Balance of corporate loans (term-end) (Billions of yen)
3,027.2

3,151.9

FY2020

FY2021

3,359.9

new means of lending moved forward.
Following the establishment of the “Structured Finance
Section” within the Consulting Promotion Division in June
2021, we have improved our structure to strengthen our
measures targeting regional redevelopment and renewableenergy facilities, among others. The loan balance is
expected to increase by about 20% each fiscal year

MissionMissionBank Creed

VisionVision 2030

(Ultimate goal)(10-year period)

VisionLeading company creating a path to the future

Value
Strategy

Value(Values sharedacross the Group)

Strategy(Tactics)

1. Top customer satisfaction strategy
2. Double productivity strategy
3. Regional growth strategy
4. Corporate culture reform strategy

77 Bank Group SDG Declaration~More than ever, and forever, with our region~■Fees and commissions from corporate clients (Millions of yen)
2,766

(FY2022: ¥166.3 billion).
The third achievement is that, in light of trends such as asignificant decline in the number of customers visiting our

FY2022

2,055
1,556

branches over the medium- to long-term as well aschanging customer flow lines, we revamped our branch
network through branches within branches, etc. As a result,

FY2020

FY2021

FY2022

non-personnel and personnel expenses were significantly
reduced, and core OHR improved to 58.22%. In addition,■Fees and commissions from assets in custody (Group total) (Millions of yen)

the personnel generated by the revamp of our branch
network was allocated to boost the number of liaison
personnel from headquarters and to increase training

4,096
2,638

3,294

opportunities such as external trainees. At branches that
became branches within branches, internal job rotation was

Short-term Management Plan

enhanced due to the increased number of personnel. All of

FY2020

FY2021

FY2022these contributed greatly to human resources development.
The fourth achievement is that, as part of efforts toreform our corporate culture, we held a “business contest”
and an “essay contest” to solicit new business ideas not■Core OHR (core gross operating income expense ratio) (%)
71.35

62.27

58.22

FY2021

FY2022

only from within the Bank but also from our Group
companies. These contests were held to encourage theofficers and employees of the 77 Bank Group to
FY202014

THE 77 BANK INTEGRATED REPORT

15

Value Creation Story

Top Message

Sustainability Promotion

Business Strategy

Corporate GovernanceBank Data

Financial Section

Priority initiatives for FY2023

Challenges“Vision 2030” sets forth key factors to unlock a new future. I

The third challenge is “sustainability” efforts. Various

believe that we must respond to the changing environment,

countries and companies are accelerating their efforts forfocusing on the key factors.

climate change issues and carbon neutrality, and a wide

Enhancing our strengths, improving our weaknesses, and revitalizing our organization

As for “next challenges,” the first challenge is efforts forrange of initiatives is being called for. Regional financial“digital transformation.” We are still implementing various

institutions are expected to play the role of leading their

Top customer satisfaction strategy

initiatives related to the digital field, and there are areas that

regions toward the realization of a sustainable society, as

we need to further strengthen as a “leading company” that

The core concept of the “top customer satisfaction strategy”

becoming commoditized these days, I believe that there will

well as addressing their own issues related to ESG and theleads the region, such as initiatives for new things,

is “Financial × Consulting + Non-financial.” It means toeventually be a limit to our business if we just stick to

SDGs.

expand our business areas in the non-financial field andfinancial operations. Therefore, we aim to improve customer

provide the best solutions to our customers, while pursuingexperience and become number one in customer

the highest-level of financial functions and consulting.

satisfaction by expanding our business domains andresponses to customer needs, cyber security, andstreamlining of administrative processing.

We also need to further enhance our “disclosure of nonfinancial information” related to sustainability going forward.

The second challenge is initiatives for “new businesses

The fourth challenge is initiatives for “corporate culture

and sectors.” In “Vision 2030,” we aim to establish 10

I believe that “consulting services” are a very compatiblereform.” “Culture eats strategy for breakfast” is a famous

projects in new businesses or sectors by FY2024 with thebusiness model for banks. Banks collect a lot of information

quote. To change corporate culture, each individual must

potential to become viable businesses in the future.

because they deal with many customers. Furthermore, if

We have four goals on initiatives for new businesses

take on the challenge of self-transformation.

trusting relationships with customers deepen, we can expect

and sectors. The first goal is to expand the range ofproviding services in new non-financial businesses andsectors.

Considering the extent to which customer needs have been

Corporate culture does not change quickly in a short

met and contributions to earnings have been made in

to receive many various inquiries. By strengthening oursolutions we provide to our customers; the second goal is toperiod of time. As I mentioned earlier, things are changing

collaboration with Group companies or in fields other than“consulting services,” we will be able to support our

diversify the 77 Bank Group’s businesses and revenue

for the better, but we need to aim for further growth and takebanking, we need to further level up our efforts for new

customers in solving their issues.

sources; the third goal is to improve our consulting

on challenges.

businesses and sectors.

Key factors in “Vision 2030”

In addition, our major difference from general consulting

capabilities by taking the same perspective as customers;

firms is that we can engage in financial operations such as

and the fourth goal is to make our corporate culture

lending. As dealings with customers will continue over achallenging.

long period of time, regardless of whether they are

In “Vision 2030,” we aim to establish 10 projects in newcorporate or individual customers, we hope to be of service

businesses and sectors by FY2024 with the potential toto our customers by leveraging our unique strengths andbecome viable businesses in the future. I believe that it isenhancing our support for resolving customer issues. There

necessary to break away from the overly cautious corporate

are still issues to be addressed such as the handling of

culture of the past and address various challenges,

highly specialized fields, but I believe that if we raise theincluding risk taking, at the same speed as changes in thelevel of our responses to these issues, we will be able toworld.

create a strong business model.
However, as traditional deposit-taking and lending

Key factors

services and services related to assets in custody are

An engine (key factors) will be necessary to go beyond
our existing trajectory, and unlock a new future.

Digitaltransformation

New businesses
and sectors■ KPIs related to the top customer satisfaction strategy
Resultin FY2022
Proportion of companies in Miyagi Prefecture for whom weare their main bank (main bank trends surveys)*
Number of corporate lending clients outside Miyagi Prefecture
Proportion of households in Miyagi Prefecture holding assets

Human
resources

Financialfoundations

Proportion of individuals in Miyagi Prefecture using loans
from the 77 Bank
Group net income
Other items

Vs. FY2021

Targetin FY2023

Interim target
for FY2026

ー

ー

[56%]

ー

1.07x

Vs. FY2021

1.08x

Vs. FY2021

+5%

Our target form
for FY2031
Vs. FY2021

[59%]
Vs. FY2021

1.2x

+10%
[62%]

Vs. FY2021

1.5x

ー

ー

17%

Over 21%

12.7%

ー

17.0%

20.0%

JPY 2.2 bn

JPY 1.8 bn

JPY 2.0 bn

JPY 3.0 bn

Establish 10 projects in new businesses or sectors (by FY2024)*TEIKOKU DATABANK, Ltd. research16

THE 77 BANK INTEGRATED REPORT

17

Value Creation Story

Top Message

Sustainability Promotion

Business Strategy

Corporate GovernanceBank Data

Financial Section

Interim target
for FY2026

Our target form
for FY2031■ KPIs related to the regional growth strategy

Double productivity strategy
Improving productivity is a major issue for Japanese

Additionally, we will introduce branch tablets, a support

companies and is also the highest priority for us. Without

system for sales and lending, and a data linkage platform,

productivity improvement, we cannot grow as a company.

while promoting the use of AI in each operation and carryingout other measures.

In the external environment related to future digital

Resultin FY2022
Cases of growth support for founders

Targetin FY2023

1,490 cases

1,550 cases

2,000 cases

3,000 cases

10,331

10,20010,0009,069

CO2 emissions (t-CO2)

utilization, in addition to Pay-easy and PayB for digital

Meanwhile, large-scale cyber-attacks are on the rise

payments of taxes and public utilities bills, a unified QR

worldwide, and frauds and other activities that exploit online

code system for local tax payments is scheduled to bebanking and other systems are expected to further increaselaunched in 2023. The government, the Japanese Bankers

in the future. Therefore, it is necessary to strengthen our

Association and other parties aim to abolish the use of bills

response to cyber security and to achieve both convenience

Corporate culture reform strategy

and checks by the end of FY2027 and shift to online

and safety. As our operations become digital and DX

banking transfers and “Densai.” As such, the Bank also

advances, the Bank’s employees need to become more

To reform corporate culture, it is important that each officer

Despite such circumstances, I hope that officers andneeds to go digital.

digitally literate, and it is also essential to develop andand employee thinks for themselves and transforms

employees will recognize again that “bank work is fun andthemselves. I hope to establish among officers andvaluable” under “Vision 2030.”

In addition, the Bank of Japan is conducting research

secure human resources with expertise. Therefore, due toand demonstration on a central bank digital currency

the need to put more efforts into improving IT literacy, we(CBDC), and efforts toward cashless payments are thought

announced in April 2022 our approach to developing andto progress further.

strengthening “digital technology human resources.” We will

For individual transactions, the Bank will also aim tostep up our efforts with the goal of increasing the number ofbuild a system that allows all transactions, including identity“digital technology human resources” who are required toverification, to be carried out using smartphones. For

acquire the IT Passport, a national qualification, and meet

corporate transactions, the Bank will introduce a portal siteother requirements, so that the number will reach 1,310 orand promote online banking.

more, equivalent to more than 50% of all bank employees,by March 31, 2025.

We will also analyze and utilize data obtained throughdigitalization for both individual and corporate transactions.

■ KPIs related to the double productivity strategy
Resultin FY2022
Labor productivity in core operations*
Administrative work at bank branches
Usage of non-face-to-face channels

Targetin FY2023

JPY 11 mn
Vs. FY2020

(15%)(Corporate)13%(Retail)15%

JPY 11 mn
Vs. FY2020

(25%)(Corporate)15%(Retail)17%

Interim target
for FY2026
JPY 13 mn
Vs. FY2020

(50%)(Corporate)20%(Retail)20%

Our target form
for FY2031
JPY 16 mn
Vs. FY2020

(50%)(Corporate)30%(Retail)30%* (Interest on loans and bills discounted + fees and commissions - interest on deposits, etc. - expenses + personnel expenses + depreciation) / number of
employees (part-time employees counted as 0.4)

Regional growth strategy
I believe that it is important to support the growth andleveraging the strength of the Bank’s branch network anddevelopment of local companies and industries as part ofextensive overseas network; support for fostering start-up

efforts for regional revitalization. The increases ofcompanies; building relationships with companies

companies and jobs will create a virtuous cycle in which

expanding into Miyagi Prefecture; and involvement in

employment will be generated, more people will settle, andregional development projects, including the Sendai area.

towns will be formed in local communities. The Bank hopes

In addition, the Bank will support customers’ initiatives

to firmly respond to various issues such as: growing

for carbon neutrality and the SDGs, which they will be urged

customer needs related to human resources such as

to address in their respective supply chains and society. By

specialized talents; addressing business succession

doing so, we hope to create businesses that are useful for

problems, which are said to be faced by about one-third of

local communities and customers.

Other items

Support increased economic growth rate in Miyagi Prefecture
Aim for 100% participation in regional development projects in Miyagi Prefecture

employees a common understanding that one’s attitude andWe support our customers, guide them at times, andactions to try to change will have an impact on those aroundeven act together with them, helping them realize their

them and that the accumulation of such changes will lead tovarious “dreams.” Moreover, finance is an integral part ofmajor changes as a synergistic effect for the entire

business, and a banking job can be a rewarding career.

organization.

Although the business environment is difficult, I believe

In FY2022, officers at the managing director level andthere is a lot of room for development because many new

above visited each branch and provided detailed“non-financial” businesses that are different fromexplanations, such as the concept of “Vision 2030” and theconventional banking will be born due to the progress ofaims of each key measure, as well as answers to questions

deregulation.

from employees. I myself am still in the process of sharing

The Bank’s officers and employees can enjoy their work

my thoughts and having dialogue with employees at alleven more by taking on challenges positively andbranches.

contributing more broadly and deeply to local communities.

This is the first stage of our corporate culture reform, but

If, to that end, each individual thinks about their own growth,

based on my observation of officers and employees, I haveacts, and absorbs various knowledge to make proposals toa good feeling that there is a growing understanding that an

customers and delight them, it will result in the growth of theorganization can change significantly if each individual

Bank. I will endeavor to foster this awareness.

thinks and acts for themselves.

I hope to give our officers and employees many

There is no doubt that the business environment foropportunities such as presentations of new services andregional financial institutions is difficult. While the situation

various contests, constantly stimulate our organization sowhere the conventional deposit-taking and lending businessthat each individual will think and take the next step foralone is no longer viable will further deepen, local

themselves while taking action, and lead management while

communities face major problems of falling population andenhancing the diversity and challenger spirit of our officers

aging society with low birthrate.

and employees.

■ KPIs related to the corporate culture reform strategy
Resultin FY2022
Proportion of female managers

Other items

14.2%

Targetin FY2023
15.0%Interim target
for FY2026
18.0%

Our target form
for FY2031
30.0%

Implement various initiatives to “foster an ambitious spirit”
Increase the number of “specialist personnel” that serve a purpose for customers andlocal communities

SMEs; support for the development of sales channels

18

THE 77 BANK INTEGRATED REPORT

19

Value Creation Story

Sustainability Promotion

Business Strategy

Corporate Governance

Sustainability initiatives

Capital policy and shareholder returns

Development of local communities

Delivering appropriate returns to shareholders

Bank Data

Financial Section

The philosophy of our Bank Creed is “desiring communal

business feasibility evaluation that incorporates the external

Based on “Vision 2030,” from the perspectives of building

endeavor for appropriate shareholder returns while taking

prosperity and serving local communities” and has been in

environment. In particular, solutions cannot be provided bystrong financial foundations by improving customer

into consideration changes in the business environment andour DNA since our founding. I believe that the spirit of

the 77 Bank Group alone due to the breadth of solutions

satisfaction and productivity as well as realizing our mission

other factors.

constantly contributing to the development of local

required. Therefore, it is important to build a network withto our shareholders, “Offer growth and returns together withIn terms of capital, we will pursue efficient utilization, bycommunities as a company that coexists with them iscompanies inside and outside the region with technicalthe 77 Bank Group,” we announced the “Policy of Return ofcontinuing to make investments that will enhance corporate

deeply rooted in each of our officers and employees.

capabilities and know-how, regional public bodies, and otherProfits to Shareholders” on January 28, 2022.

value, including not only investments in new businesses but

With aims to create a future for local communities andparties. Through the expansion of solutions, we will build aSpecifically, on the premise of strengthening ouralso investments for business expansion in existing sectors,

realize a sustainable society, the Bank formulated the “77support system to solve problems faced by local customers.

financial foundations, we will gradually increase the dividend

while considering a balance with the enhancement of capital

Bank Group SDG Declaration” in July 2020. In the

In addition, as climate-related environmental issues arepayout ratio to net income attributable to owners of thenecessary for risk-taking in the local economy.

management plan “Vision 2030,” the “SDG Declaration” isbeing recognized as risks and attracting public attention, weparent to 30% by FY2024, aiming to improve shareholder

also regarded as a shared organizational value, and theare aware that social demands on financial institutions are

returns and capital efficiency.

SDGs are incorporated as part of the management strategy.

also increasing.

We will realize sustainable growth and enhancement ofcorporate value by continuing to engage with ourWhile the dividend payout ratio for FY2022 will be

stakeholders in a high-quality and constructive manner andWe have, as needed, strengthened governance through the

The Bank announced its support for the

22.4%, the same level as FY2021, we plan to increase theproactively disclosing financial and non-financial

establishment of the “Sustainability Committee” and otherrecommendations of the Task Force on Climate-related

dividend payout ratio to 26.8% based on the earnings

information.

measures and enhanced support for customers by

Financial Disclosures (TCFD) in July 2021. In response toforecast for FY2023. In accordance with this policy, we will

launching “77 SDGs Support Services and Loans” and otherthe four recommended areas of disclosure in the TCFD

services.

recommendations (governance, strategy, risk management,

However, to solve a customer’s challenges in promoting

and metrics and targets), we need, and thus will continue tothe SDGs such as climate change, the customer itself must

make active efforts, to further expand disclosure content byrecognize its specific current issues and requires solutions

developing and strengthening the disclosure system.

■Dividend trends(Yen)

Annual dividends

and financial support for solving the issues clarified byMission18.2%

VisionMissionBank Creed

VisionVision 2030

Value

77 Bank Group SDG Declaration(Values sharedacross the Group)(10-year period)~More than ever, and forever, with our region~

Value
Strategy

19.9%

20.2%

30.0%

26.8%

Dividend payout ratio (consolidated)

22.4%

22.4%
80
67.5

(Ultimate goal)

The 77 Bank Group supports
sustainable development goals (SDGs).

Strategy(Tactics)

20

Top Message

1. Revitalization of the Regional Economy
2. ‌Responding to Global Warming
and Climate Change
3. ‌Encouraging and Supporting the
Activities of Our Employees
4. Advancing Corporate Governance

*45

47.5

50

50

FY2018FY2019FY2020

FY2021

FY2022

FY2023 (Forecast)

FY2024 (Target)* The Bank conducted a 1-for-5 consolidation of shares on October 1, 2017. If calculated based on the number of shares after the consolidation,
the interim dividend for FY2018 is ¥22.50 per share and therefore the annual dividend equals ¥45 per share.

In closing
The environment surrounding regional financial institutions

I myself will take the lead for all officers and employees oflike the Bank is extremely harsh at present. However, I

the 77 Bank Group to make every effort for the development

believe that if we steadily implement the Bank’sof the regional economy. We will meet the expectations ofmanagement plan, “Vision 2030,” we will be able to open up

the 77 Bank Group’s stakeholders, including our customers,a bright future together with our local communities andlocal communities, employees, and shareholders. We ask

customers.

for your continued support and patronage.

Short-term Management Plan

THE 77 BANK INTEGRATED REPORT21