Information Meeting—The First Half Ended
September 2018—

THE NANTO BANK, LTD.

Table of Contents
I. About the Nanto Bank, Ltd.

III. Management Strategy

1. Profile of the Nanto Bank..................... 2

2. Operating Areas of the Bank..................... 3

3. Summary of the Local Economy..................... 4

II. FY2018 First Half Financial Results andBusiness Forecasts for the Full Year
1. Summary of Profit and Loss (Results) ................... 6
2. Summary of Profit and Loss
(Performance Forecasts, Consolidated) ............... 7
3. Balance of Deposits and Loans..................... 8

4. Yields for Deposits/Loans andInterest Income..................... 9

5. Fees and Commissions/Expenses…................ 10

1. Progress of the Medium-Term
Management Plan
(1) Summary(2) Target Metrics(3) Transforming Our Earning Structureand Loans Portfolio
2. Sales Reform(1) Bolster Non-interest Income(ii) Corporate Solutions Business(2) Increase Retail Loans

7. Non-Performing Loans(iii) Personal Loans.................... 13................... 24(i) Retail Business Loans(ii) Osaka Strategy

8. Capital Adequacy Ratio andShareholder Returns................... 19(i) Securities and Inheritance Business6. Securities Investments Management .................... 11.................... 12....................15(3) Channel and Sales Structure................... 27(4) Group Strategy................... 28

3. Clerical Operations Reform................... 29

4. Regional Revitalization................... 30

表紙Ⅰ

I. About the Nanto Bank, Ltd.

1

1. Profile of the Nanto Bank(as of September 30, 2018)

1. Founded

June 1, 1934

2. Location of head office

16 Hashimoto-cho,Nara City

Corporate Philosophy(i) Pursue sound and efficient management(ii) Provide superior comprehensive financial services(iii) Contribute to regional prosperity(iv) Strive to become a highly reliable, friendly and attractive bank

3. Capital¥37,924 million

4. Number of employees

2,675

5. Number of offices

140 (Japan)
2 (representative offices in Hong Kong and Shanghai)

6. Total assets¥5,918.1 billion

7. Deposits outstanding¥4,939.3 billion

8. Outstanding loans¥3,368.3 billion

9. Capital adequacy ratio

Non-consolidated: 9.50%
Consolidated: 9.86%

10. Market share in Nara Prefecture

Loans: 49.6%
Deposits: 49.1%

11. External credit rating“A” (Stable) from JCR“A-” (Stable) from R&I(Head Office)22. Operating Areas of the Bank
Operating Areas of the Bank

Our Network of Branches<Map of Japan>･･･ Branch location
Kyoto Pref.

Hyogo Pref.
Osaka Pref.

Mie Pref.

Tokyo
Nara
Osaka

Nara Pref.

Number of branches(as of September 30, 2018)

Headquarters
Subbranches
and branches

Agencies

Total

70

20

Wakayama
Pref.

6

2

-

8

Kyoto Pref.

11
1
20
1
1
110

4
2

-

15
3
20
1
1
140

Mie Pref.
Osaka Pref.
Hyogo Pref.
Tokyo
Total

28

2

Wakayama Pref.

Nara Pref.

2

92

3

3. Summary of the Local Economy
Market Characteristics
Nara Prefecture:
A substantial retail business market
Osaka Prefecture: Second largest economy among all the country’s prefectures,substantial retail and corporate business markets<Key indicators>
Ranking is among the 47 prefectures of Japan
MetricNara Pref.

SourceOsaka Pref.

Rank

Rank

Population(Thousandsof people)

1,348

30th

Ministry of Internal Affairs and Communications, Population
Estimates, October 2017

Deposits balance(¥ trillion)

11.5

24th

Loan balance(¥ trillion)

3.6

Per-capita income(¥ thousand)

Balance of savings per household
Housing starts

8,823

3rd

Kinyu Journal, Financial Map 2018

94.3

2nd

31st

Kinyu Journal, Financial Map 2018

45.6

2nd

2,494

38th

Cabinet Office Economic and Social Research Institute (ESRI),
fiscal 2015

3,127

9th

(¥ thousand)

17,816

1stMinistry of Internal Affairs and Communications, National Survey of
Family Income and Expenditure, November 2014

14,80118th(Thousandsof units)

6

37thMinistry of Land, Infrastructure, Transport and Tourism, Building
Starts, fiscal 2017

67

3rd

Percentage of people who enter post-secondary education

(%)

58.7

7th

Ministry of Education, Culture, Sports, Science and Technology,
March 2017

59.7

6th

Percentage of people who answer correctly on thefinancial literacy examination

(%)

60.5

1st

The Central Council for Financial Services Information, June 2016

54.1

38th

Cross-prefecture employment ratio

(%)

28.8

2nd

Ministry of Internal Affairs and Communications, National Census,
October 2015

6.4

14th

Number of private enterprises (offices)(Thousandsof units)

48

40th

Ministry of Internal Affairs and Communications, Economic Census,
July 2014

413

2nd

Value of shipped manufactured goods(establishments employing at least 4 workers)(¥ trillion)

1.8

37th

Ministry of Economy, Trade and Industry, Census of Manufacturers,
June 2017

15.8

4th

Sales value of wholesale goods(¥ trillion)

0.7

42nd

Ministry of Economy, Trade and Industry, Census of Commerce,
July 2014

38.9

2nd

Sales value of retail goods(¥ trillion)

1.0

35th

Ministry of Economy, Trade and Industry, Census of Commerce, July 2014

8.4

2nd

Number of items designated as National Treasures andImportant Cultural Properties(Items)

1,327

3rd

Agency for Cultural Affairs, November 2018

677

5th

(%)

8.9

7th

Japan Tourism Agency, Consumption Trend Survey for Foreigners
Visiting Japan, 2017

44.1

1st

Ratio of visits by foreign tourists coming to Japan(sightseeing and leisure purposes)

4

表紙Ⅰ

II. FY2018 First Half Financial Results andBusiness Forecasts for the Full Year5

1. Summary of Profit and Loss (Results)
Analysis of Change Factors
in Core Net Business Profit

FY2018 First Half Financial Results (Non-consolidated)(¥ billion)(¥ billion)

1

Core gross business profit

2

Interest income

3

Fees and commissions

4
5
6

Other operating income (*1)
Cost of derivative financial
instruments
Expenses7

Personnel expenses

8

Non-personnel expenses

9Core net business profit

10 Gains/Losses on bonds (JGBs, etc.)
Net transfer to general provision forpossible loan losses
12 Net business profit
11

FY20171H

FY20181H

Y/Ychange

26.1
24.0
2.3
-0.2

24.0
21.2
3.1
-0.4

-2.0
-2.7
+0.7
-0.1

0.3

0.5

+0.1

20.3
11.4
7.6
5.8

19.6
11.0
7.4
4.4

-0.6
-0.4
-0.2
-1.3

-0.1

-1.4

-1.3

-

-0.2

－ 5.7

Core net business profit for 1H FY2017

5.83

1) Average balance of loans(Average balance Y/Y change +¥82.5 billion)+0.392) Interest rate on loans(0.90%, Y/Y change -0.04 pt)-0.783) Average balance of deposits(Average balance Y/Y change +¥62.4 billion)-0.004) Interest rate on deposits(0.01%, Y/Y change -0.00 pt)+0.08

Deposits/loans sector total-0.305) Average balance of securities(Average balance Y/Y change -¥127.5 billion)

-0.80

-0.2

6) Yield on securities(1.06%, Y/Y change -0.18 pt)

-1.39

3.3

-2.4

7) Interest on fund management-0.018) Interest on fund procurement-0.20

13 Non-recurrent gains/losses

2.1

0.7

-1.4

14

Gains/Losses on stocks

1.5

0.9

-0.6

15

Disposal of non-performing loans

0.0

0.8

+0.7

Market sector total

-2.41

16

Bad debt recovered

0.0

0.0

-0.0

17

Reversal of allowance for loan losses

0.5

-

-0.5

4.0
4.7

-3.8
+4.7

+0.79

19 Extraordinary gains/losses

7.8
-0.0

9) Fees and commissions(investment trust revenues: Y/Y change +¥0.12 billion
life insurance revenues: Y/Y change +¥0.36 billion
corporate solutions business-related income: Y/Y change+¥0.27 billion)

20 Income before income taxes

7.8

8.7

+0.9

2.2
6.5

+0.4
+0.4

10) Others (Cost of derivative financial instruments: Y/Y change+¥0.12 billion)

22 Net income

1.7
6.0

-0.15

21 Income taxes11) Expenses+0.68

23 Credit cost (*2)

-0.5

0.4

+1.0

18 Ordinary income*1 Excludes gains/losses on bonds (JGBs, etc.)*2 (Net transfer to general provision for possible loan losses + Disposal of non-performing
loans) – Bad debt recovered - Reversal of allowance for loan losses

Core net business profit for 1H FY2018

4.44

6

2. Summary of Profit and Loss (Business Forecasts, Consolidated)
FY2018 Consolidated Financial Results

Business Forecasts for the Full Year of FY2018(¥ billion)

FY2017

results<First half term>

FY2018

forecasts

Y/YchangeCompared to
the MediumTerm
ManagementPlan(¥ billion)

FY2017FY20181H

1H

results

results

Y/Y change

1Core net business profit

12.0

13.5

+1.5

-0.7

1

Consolidated ordinary income

8.0

4.2

-3.8

2

Interest income

47.2

46.4

-0.7

-1.0

2

Profit attributable to owners ofparent

6.0

6.5

+0.5

<Business forecasts for the full year>

3

Interest on loans

30.9

30.2

-0.6

+0.5

4

Interest on
securities

19.5

20.0

+0.5

-2.4

5

Financing cost

3.8

4.4

+0.5

-0.7

6

Fees and commissions

5.3

7.2

+1.9

-1.6

1

Consolidated ordinary income

18.1

13.8

-4.3

7

Other operating income
(*1)

-0.1

-0.5

-0.3

+1.7

2

Profit attributable to owners ofparent

13.1

13.2

+0.0

8

Expenses

40.3

39.7

-0.6

-0.3

9

Net business profit

10.6

11.5

+0.8

-2.9

4.0

10

Ordinary income

17.1

13.2

-3.9

-2.3

(¥ billion)

11

Net income

12.8

13.0

+0.1

+1.5

(¥ billion)

Credit cost (*2)

-3.2

1.2

+4.4

-0.2

*1 Excludes gains/losses on bonds (JGBs, etc.)*2 (Net transfer to general provision for possible loan losses + Disposal of non-performing loans) - Bad
debt recovered - Reversal of allowance for loan losses

FY2018results

forecasts
Y/Y change<Ordinary income for consolidated subsidiaries>

3.6

3.5

3.1
12

FY2017

3.2

3.0
2.5

FY20161H

FY20171H

FY20181H

7

3. Balance of Deposits and Loans
Balance of Deposits

Balance of Loans* Number in bracket denotes Y/Y change<By sector>

5,000.0

4,815.2 4,762.3 4,843.8(¥ billion)

247.3

217.4

897.6

888.4

(+37.9)(-9.2)

197.8

4,939.3
212.1<Y/Ychange>+95.4

3,500.0(¥ billion)

Government/Banks(+14.3)

915.8

889.3
(+0.9)* Number in bracket denotes Y/Y change<By sector>

3,120.5505.8

Corporate(+26.4)742.6

3,240.9 3,295.5
574.8

714.8

3,368.3
591.6

601.1

Local
governments(-9.4)
Wholesale(-7.5)

676.5

684.1

<Y/Y
change>+72.7

Personal(+60.6)

3,607.2

3,626.7(+54.4)(+19.4)

3,716.1

885.6

3,776.8(+89.4)

NegotiableCD(-5.9)

62.9

0.0

29.7

40.4

34.5

1,029.9

969.0(+7.7)(+52.7)(+30.6)986.4

1,012.7

1,041.3(+25.7)(+26.3)(+28.5)

Personalloans, etc.
(+28.8)1,070.1

0.0

September 30, September 30, September 30, September 30,
2015
2016
2017
2018

<By prefecture>

September 30, September 30, September 30, September 30,
2015
2016
2017
2018

(¥ billion)<By prefecture>

September September September September
30, 2015
30, 2016
30, 2017
30, 2018 Y/Y change

3,800.8

3,816.4

3,886.9

3,973.5

+86.6

314.5

308.4

305.5

313.9

+8.4

Others

363.9
272.9

350.1
257.5

346.5
264.3

355.1
262.0

+8.5
-2.2

Negotiable CD

62.9

29.7

40.4

34.5

-5.9

Nara Pref.
Osaka Pref.,etc.
Kyoto Pref.

938.4

Retail business(+60.9)(¥ billion)

September September September September
30, 2015
30, 2016
30, 2017
30, 2018 Y/Y change
Nara Pref.
Osaka Pref.,etc.
Others1,529.8

1,629.8

1,683.4

1,711.1

+27.6

747.6

773.0

805.5

843.9

+38.3

843.1

837.9

806.5

813.2

+6.6

8

4. Yields for Deposits/Loans and Interest Income
Interest on Deposits and Loans

Yields for Deposits/Loans
Yields for deposits

Yields for loans

Interest on deposits(¥ billion) 17.5

(%)
1.00

1.13

1.09

1.01

0.98

0.95

0.92

17.2

16.3

Interest on loans
16.0

15.6

15.3

15.2

0.90

10

0.05

0.04

0.02

0.02

0.01

0.01

0.01

0.00
FY20151H

FY20152H

FY20161H

FY20162H

FY2017
1H

Decrease in Loan-Deposit Interest Margins

FY20172H

FY2018
1H*Year-on-year change(¥ million)

1.2

1.1

0.6

0.5

0.4

0.3

0.3

FY20151H

FY20152H

FY20161H

FY20162H

FY20171H

FY20172H

FY2018
1H

0

Yields for New Housing Loans Granted
(%)
0.90

0

-82
0.80

0.84

-164

-200

0.79

0.78
-226

-243

0.75

0.70

0.72

0.71

0.71

FY20171H

FY2017
2H

-335
-381

-400
FY20152H

FY20161H

FY20162H

FY20171H

FY20172H

FY20181H

0.60
FY20151H

FY20152H

FY20161H

FY20162H

FY20181H

9

5. Fees and Commissions/Expenses
Fees and Commissions(¥ billion)

ExpensesFees and Commissions

Expenses(¥ billion)

Personnel expenses

5.4

6.0

20.0

4.4
3.0

Non-personnel expenses

20.3
1.1

19.6
1.1

7.6

7.4

11.4

11.0

FY20171H

FY2018
1H

Taxes

10.0

0.0

-2.1

-3.0

FY20171H(¥ billion)

-2.2

0.0

FY20181H<Fees and Commissions/Expenses>

2,669

3.1
2.3

<Number of personnel>(People)

2,500

2,615

2,624

2,550
2,460
2,300

0.0

2,000
FY20171H

FY20181H

March 31, March 31, March 31, March 31, March 31,
2016
2017
2018
2019
2020
(forecasts) (plan)

March 31,2022
(plan)

10

6. Securities Investments Management
Balance of Securities(¥ billion)

1,500.0* Investment trusts: Bond investment trusts,
Equity investment trusts, J-REITs, multiassets, market neutral, bear funds, etc.

1,719.9-¥1.5 billion
from March 31,
2018

1,629.9

123.0
64.4
107.0
322.8

226.2

1,479.3

63.6
66.3

271.1

265.9

77.7
63.8

77.9
12.6

60.0

61.3

66.4

17.4

12.6

58.1

Other

22.9

1,477.7
Investment trusts(+¥87.4 billion)

358.5

Equities(+¥2.0 billion)

79.7
69.8
144.0

1,007.7

40.0

Bonds

59.6

55.8

167.1

1,102.5(¥ billion)
80.0

32.2

1,000.0

500.0

Profit/Loss on Valuation of Securities

Euro-denominatedbonds(+¥6.0 billion)

US dollardenominated bonds(-¥23.1 billion)

899.3

825.6

Yen bonds(-¥73.7 billion)

20.0

44.9
33.0

Equity

0.0

-5.8

-9.7

-12.0

March 31,2017

March 31,2018

September
30, 2018

176

176

-20.0

March 31,
2016

Cross-shareholding Stocks(¥ billion)

187

180

0.0
March 31,2016

March 31,2017

March 31,2018

September 30,
2018

Number of stocks

50.0

150
Book value<Bond duration>
March 31,2016

March 31,2017

March 31,2018

September 30,
2018

Yen bonds

4.2 years

4.2 years

3.6 years

3.4 years

Foreignbonds

5.3 years

4.9 years

6.0 years

6.2 years

Total

4.5 years

4.4 years

4.1 years

4.0 years

51.7

49.0
46.4

45.7

March 31,2018

September 30,
2018

40.0

50
March 31,2016

March 31,201711

7. Non-Performing Loans
Credit Cost

Breakdown of Credit Cost

* Credit cost ratio = Credit cost / Average balance of loans(¥ billion)

(%)

1.9

2.0

0.08

(¥ billion)

1.9
2.0

0.04

1.0

0.4
0.2

0.01

2.1

Disposal of
non-performing loans

1.4
0.0

0.01

-0.9

0.00

0.0

-0.1

-0.01

Credit cost

Net transfer to general provision
for possible loan losses

0.2

Credit cost
ratio

0.05

0.1

-0.4

0.0
-0.5

0.4
0.8
0.0
-0.2

-0.5
Bad debt
recovered

-0.5
-0.04

-1.0
FY20151H

FY20161H

FY20171H-2.0
FY20151H

FY20181H

FY20161H

FY2017
1H

Loans Based on the Financial Reconstruction Law /Non-Performing Loans Ratio

Disposal of Non-Performing Loans by Region
1.5(¥ billion)(¥ billion)

Nara Pref.

1.2

74.1

0.1

0.0

0.0

-0.0

-0.0

Others

-0.3

0.1

9.5

50.9

1.60

Specialattention

54.4

Doubtful

7.1

1.00

43.5

Bankrupt
or de facto
bankrupt

0.00

62.3
12.0

56.4

46.0

-0.3
0.0

FY2016
1H

67.9

-0.0

-0.5

FY2015
1H

1.87

50.0

0.3
0.0

12.2

0.6

2.00

2.08

1.0
Osaka Pref., etc.

Non-performing
loans ratio

2.36

100.0

0.5

FY20181H

FY20171H

FY2018
1H

5.4

7.4

4.1

3.7

FY20151H

FY20161H

FY20171H

FY20181H

12

8. Capital Adequacy Ratio and Shareholder Returns
Capital Adequacy Ratio<Non-consolidated><Capital adequacy ratio>(¥ billion)

10.07

Consolidated

9.88

9.86

9.42
9.85
300.0

9.64

9.19

(%)

10.00

9.50

1)

Capital adequacy
ratio

2)

Capital3)

Risk assets(¥ billion)March
31, 2017

September
30, 2017March
31, 2018

September
30, 2018

Changefrom March
31, 2018

9.19%

9.85%

9.64%

9.50%

-0.14%

211.5

233.7

236.6

241.3

+4.6

2,300.7

2,372.4

2,454.1

2,539.2+85.0<Consolidated>(¥ billion)March
31, 2017

Non-consolidated<Implementation of public stock offerings andthird-party allocation of shares>
Capital raised: Approx. ¥17.3 billion

1)

Capital adequacy
ratio

2)

Capital3)

Risk assets

September
30, 2017March
31, 2018

September
30, 2018

Changefrom March
31, 2018

9.42% 10.07%

9.88%

9.86%

-0.02%

219.3

241.8

245.5

252.8

+7.3

2,327.7

2,400.3

2,482.6

2,563.5

+80.8

200.0

Shareholder Returns
5.00

241.8

245.5

219.3
100.0

211.5

(yen)

252.8
241.3

233.7

<Dividend per share>100
A commemorative dividend is plannedin recognition of the 140th anniversaryof the Bank’s founding

80

236.6

70

70

70

70

<Capital>
Consolidated

60

Nonconsolidated

0.0

0.00
March
31, 2017

September
30, 2017March
31, 2018

September
30, 2018

50
FY2014 FY2015 FY2016

FY2017FY2018 FY2019(forecasts)*Corrected according to post-stock merger standards

13III. Management Strategy

14

1. Progress of the Medium-Term Management Plan (1) Summary
Plan period:

From April 2017 to March 2020

Positioning:

We have set the three years as a period in which to strive to change to arobust structure in consideration of the changing financial climate. For
the plan’s final year coinciding with our 85th anniversary, we will makesure to achieve good results in terms of earnings and the financial
position.

Vitality Creation Plan II—Changing and Taking
on Challenges

Business Model Reform<Awareness Reform>
Improve humanresources quality• Personal solutions business• Corporate solutions business• Osaka strategy
 Bolster our market investment skills

Improve salesquality Strengthen our group strategy<Clerical Operations Reform> Promote clerical operations BPR
 Build an organizational operation that enables the staff
to focus on sales activities<Expenses Reform> Shift in expense structure Revise expenses as a whole

Improve clericaloperations quality

Improve OHR

 Build a new business model Strengthen our retail strategy

Raise ROA and ROE<Sales Reform>

Build a robust structure

Regional Revitalization

 Foster a spirit of taking on challenges amongbankers

Raise our capital adequacy ratio Ensure the permeation of improvement culture
and ethos that are unique to the Nanto Bank Make strategic investment for human resource
development and IT

15

1. Progress of the Medium-Term Management Plan (2) Target Metrics◆ OHR rose because core gross business profits fell—mainly in relation to interest on securities, thoughexpenses were reduced.
◆ The non-interest income ratio rose because of efforts directed at the corporate/personal solutions business.
◆ In terms of capital adequacy ratio, loans and the market sector’s risk assets increased.
◆ In terms of ROA and ROE, first half net income remained almost at the same level.
FY2016FY2017Full year

Full year(results)(results)

FY20181H

Y/Y change(results)

Compared to
FY2017FY2019target

OHR

74.45%

77.03%+2.58%

81.54%+4.50%

Less than 70%

Non-interest
income ratio

10.40%

10.83%+0.43%

13.87%+3.03%

20% level

Capitaladequacy ratio

9.19%

9.64%

+0.45%

9.50%-0.14%

Approx. 10%

ROA

0.24%

0.20%

-0.03%

0.15%-0.05%At least 0.3%

ROE

4.88%

4.90%

+0.01%

4.61%-0.28%At least 5%

Medium-Term Management Plan
16

1. Progress of the Medium-Term Management Plan (3) Transforming Our Earning Structure and Loans Portfolio◆ Change of profit structure: The non-interest income ratio was raised from 10.4% for the full year of FY2016 to
13.8% for the first half of FY2018.
◆ Change of loan portfolios: The ratio of retail finance such as retail business loans and personal loans, etc.
was raised to 62.2% in the first half of FY2018.
Profit Structure(Core Gross Business Profit Basis)

Loan Portfolios

Bolster fee business

100%

57.8

(%)

50

18.1

17.5

20.5

20.0

29.8

30.5

(%)

15

Loans forlocal
governments

61.8

19

Wholesaleloans

Deposits/
loans sector
incomeMarketsectorincomeIncrease retail loans

100%

30
31.7

Retailbusiness
loans

61%

24.4

Non-interest
income10.4

13.8

FY2016
Full Year

FY20181H

20

0%FY2019Full Year(plan)

Medium-Term Management Plan

33
66%

62%

31.4

31.7

33

FY2016FY2018FY2019Full Year(plan)

Personal
loans

0%Full Year

1H

Medium-Term Management Plan

17

1. Progress of the Medium-Term Management Plan (3) Transforming Our Earning Structure and Loans Portfolio (ii)
◆ Change of profit structure: We continued to step up efforts to increase profits related to securities/inheritance business and tocorporate solutions business.
◆ Change of portfolios: We bolstered retail loans and at the same time strengthened the focus on yield improvement.
<Profits related to securities andinheritance business>

2.0

1.63

(¥ billion)

0.16
Others1.01
1.0

0.03 Life
insurance
0.26 (excluding
corporate-<Profits related to corporate
solutions business>* Total amount of income
from M&A advisory
service, businesssuccession support,(¥ billion)
private placement bonds,
lease agency services,syndicate loans, foreignexchange-relatedtransactions, businessmatching and corporate
insurance(¥ billion)

0.59

2,100.1

2,010.3(%)

2,000.0
1,070.1

1,041.3

0.5

0.62<Yields for retail loans><Balance of retail loans>

1.00

Personal loans

1.30

1.10

Personal loans

0.32

1.26

1.24

1.05

1.03

Retail business loans

1,000.0

owned life
insurance)

1,029.9969.0

0.71 Investment 0.84

Retail business loans

trust

0.0

FY20171H

FY20181H

0.0

FY20171H

FY20181H

Increasing fees and commissions<Profits related to securities and inheritance business>

0.0

0.00
September 30,
2017

September 30,
2018

FY20171H

FY20172H

Increasing deposits/loans and interest income<Increasing the balance of retail loans>◆Strengthening business for the wealthy◆Focusing on Osaka to increase business loan finance◆Stepping up sales making the most of trust operations,securities subsidiaries, and Hoken No Madoguchi◆Increasing customer convenience for personal loans<Profits related to corporate solutions business>◆Stepping up consulting-oriented sales◆Making all-out efforts for problem-solving sales based on
business practicality assessments

FY20181H<Yield improvement>◆Stepping up solutions-oriented sales for medium-riskclients◆Improving yields for housing loans18

2. Sales Reform (1) Bolster Non-interest Income (i) Securities and Inheritance Business◆ In Nara Prefecture, wealthy families with ¥30 million in financial assets account for about 25% of total households.
On the other hand, customers that make transactions of ¥30 million or more with the Bank represent only 3% of total customers→ Developing wealthy people as customers and increasing transactions with them are issues to be addressed.
<Percentage of households><Percentage of financial assets held>

Nara Prefecture
marketTransactions
w ith Nanto

Nara Prefecture
marketTransactions
w ith Nanto

Number ofhouseholds

Number ofhouseholds

Balance offinancial assets

Balance oftransactions

About
25%

About
3%

The super-rich

The rich(such asbusinessowners)Number of clientswith a balance of,or who maketransactionsof, ¥30 million
or more with Nanto

About
20%
About
60%

◆Providing a wide range of financial instruments making themost of the securities subsidiary◆Supporting smooth succession to assets through trust
operations◆Promoting integrated corporate/personal transactions forbusiness owners→ Developing and deepening new transactions with thewealthy
Stepping up approaches to the hidden wealthy through data
analysis◆Increasing convenience by expanding non-face-to-facesales channels◆Making the most of Hoken No Madoguchi to provide
financial services to a wide range of customers who cannot
visit the Bank on weekdays→ Strengthening support for potentially wealthy people

The semi-rich◆Expanding transactions with Nara fans nationwide using
Internet branches effectively, thus contributing to regional
revitalization in Nara

The general
population*Estimates*Estimates19

2. Sales Reform (1) Bolster Non-interest Income (i) Securities and Inheritance Business◆ Strengthening the financial instruments agency sales system in the first half of FY2018 as Nanto’s securities subsidiary wasscheduled to begin sales operations◆ Making the most of cooperation among banking/trust/securities operations to develop securities/inheritance business based on
Nanto’s customer base

Major Initiatives

Assets under Management—Sales Results

Investment trust sales(¥ billion)

20.0

20.2

Trust operations

23.6

18.4
Fundedinvestment
trust

0.0

<Trust operations results>

FY2016FY2017FY20181H

1H

1H

Testamentary substitute trusts

17.5

Calendar-year gift trustsLife insurance sales(¥ billion)

15.0◆Starting in August
to air a series of TV
commercials entitled“The People of the Nanto
Family” with “inheritanceand wills” as its theme

12.7
6.5

1,207 cases/¥3.8 billion
104 cases/¥1.5 billion

Testamentary trusts

58 cases

Heritage arrangement

14 cases* April 17, 2017–September 30, 2018

Making Nara Securities Co., Ltd. a wholly owned subsidiary
0.0

FY2016FY2017FY2018

1H

1H

1H◆The Bank made Nara Securities its subsidiary in October and its
wholly owned subsidiary in November

12.0◆Planning to begin sales through cooperation between banking
and securities operations around the spring of 2019(¥ billion)

Financial products
intermediation sale

10.0

0.0

Opening offices in cooperation with Hoken No Madoguchi
Group Inc.
◆The Bank opened two offices in July and one office in November.

1.1

1.3

FY2016FY2017FY20181H

1H

1H◆By establishing a holiday sales system, Nanto strives to acquire
asset-building clients who cannot visit its offices on weekdays.

20

2. Sales Reform (1) Bolster Non-interest Income (ii) Corporate Solutions Business◆ Focusing on expanding the customer base and increasing dialogue with corporate clients by increasing the number of new
customers to which retail business loans were granted and that of customers to which loans were granted based on businesspracticality assessments◆ Make all-out efforts for problem-solving sales based on business practicality assessments in order to bolster corporate
solutions business and increase retail business loans<Number of newly-acquired retail businesscustomers >2,000(Entities)

17,000

Number of businessloan customers(Entities)<Number of business loans based on
business practicality assessments>

10,000(Entities)

8,150

1,204
1,017
1,000

970

15,000

5,030
5,000

1,992
0

FY20161H

FY20171H

FY20181H

13,000

Increase the number of business loan customers

Bolster our corporate solutions business

0March 31, 2016

March 31, 2017

March 31, 2018

Increase the number of business loans based on
business practicality assessments

Increase retail business loans21

2. Sales Reform (1) Bolster Non-interest Income (ii) Corporate Solutions Business◆Strengthening consulting-oriented sales to meet diverse needs, thus increasing profit-making opportunities
Strengthening Solutions-Oriented Sales<Corporate solutions business-related income>(¥ million)
FY2016FY2017FY20181H

1H

1H◆Efforts to discover managers’ needs to sell their business as they
become elderly

M&A and businesssuccession

59

60

35

Private placement bonds

42

74

107

Lease intermediaryservice－－

134

Syndicated loans, etc.

7

73

189

Derivatives-related

98

80

81

Referral of businessalliance partners

19

16

31

Corporate insurance

3

17

18

231

323

597

Total

M&A advisory
Support services results(Cases)213

M&A
advisory200(¥ billion)

Bringing M&A needs to light

Making the most of syndicated loans◆Making proposals, including not only funding needs but alsofinancial rebalancing

Growth in privately placed CSR bonds◆Publicizing the CSR activities of bond-placing companies by
donating goods to elementary and junior high schools, etc.

Beginning to handle lease agency services◆In April 2018, our sales personnel started to directly makeproposals for finance leases that do not transfer ownership of thelease assets to the lessee.

Private placement bonds

Lease agency services

Number and amount of bonds
underwritten

New lease customers of Nanto Lease Co., Ltd.
(Cases)Number of bonds
underwritten

68(Entities)

446

500

50

100

64

5.0

89

50
20

4.0
2.3
0
FY20161H

FY20171H

FY20181H

0.0

FY20161H

FY2017
1H

243
174

Amount of
5.5 bonds
underwritten

FY20181H

0

0

FY20161H

FY20171H

FY20181H

22

2. Sales Reform (1) Bolster Non-interest Income (ii) Corporate Solutions Business◆Making the most of investment funds to support companies in developing business at various stages such as foundation and growth◆Aiming at increasing the corporate value of companies targeted for investment and encouraging synergies with the Bank’s operations
mainly through business alliances with such companies

Utilization of investment funds
Area
Sales areas
Domestic
Overseas

Amounts contributedby the Bank

PurposeNanto Regional Vitalization Support Funds¥0.49 billion

Supporting businesses in growing at various stages such as foundation,
new business development, growth, listing, and business succession

Nara Prefecture Tourism Revitalization Fund

¥0.49 billion

Stimulating demand for accommodation in Nara Prefecture, increasing
tourism consumption, etc.

Nanto Senary Industrialization Support Fund

¥0.24 billion

Supporting businesses in the senary industry certified under the Senary
Industrialization and Local Consumption of Locally Produced Products

Nanto CVC Fund

¥0.99 billion

Supporting businesses at the stage of foundation or growth, which areconsidered highly likely to contribute to Japan’s economy, industry, andregional promotion

Nanto CVC Fund No. 2¥2.97 billion

Established in October 2018 by investing ¥3 billion because the Nanto
CVC Fund was expected to reach the amount that could be invested

TM Nippon Renewable Energy Fund 2017 Fund

¥1.0 billion

Promoting infrastructure investments to contribute to revitalization of
local economy, including in renewable energy

All-Japan Fund to Make Japan a Country Built on Tourism¥0.1 billion

Reforming the operation and management of accommodation facilities
and revitalizing venture businesses and traditional industries to makeJapan a country built on tourism

SBI AI & Blockchain Fund

¥1.0 billion

Increasing the corporate value of companies targeted for investment tohelp form alliances with promising ones in Japan and abroad and develop
new technologies and services

Nanto Cross-Border VC Investment Partnership

US$20 million

Investing in Soraa, Inc. and Soraa Laser Diode Inc., both headquartered in
California, USA

Sozo Ventures II-S,L.P.

US$5 million

Investing in advanced US venture businesses aiming at global businessdevelopment to promote alliances between such venture businesses andJapanese companies

Names of investment funds23

2. Sales Reform (2) Increase Retail Loans (i) Retail Business Loans◆The balance of retail business loans exceeded ¥1 trillion.
◆Stepping up approaches to medium-risk customers based on business practicality assessments in an effort to improve
profitability<Balance of retail business loans>(¥ billion)<Portfolios by rating>

200.0

September of FY2016
September of FY2017
September of FY2018(¥ billion)

1,029.9

Promote tobuild uploans

1,000.0

969.0

100.0

938.4

800.0

0.0
September 30,
2016

September 30,
2017

September 30,
2018

1

2

3

4

5-1

6-1

6-2

Reversal ofyields

7

8-1

8-2

(%)

Higher yields for lower credit ratings

Loan programs based on business practicality assessments◆ “Nanto Long-term Support”
 Long-term loan program (10 to 20 year loan period) forsmall to medium-sized businesses
 Improving fund management by shifting to super-longfinancing<Results>

Number signed

18

Amount signed¥3.04 billion

Average interest rate

2.88%

*September 2017-September 2018

◆Initiatives for short-term continuous loans
 Working actively for financial rebalancing commensurately
with fund uses in order to ensure stable funding◆“Nanto Vitality Creation Support Fund”
 Meeting loan needs without relying<Results>
excessively on financial data,
security or guarantees
Number signed*Expanding efforts to cover the entire
financial support

Amount signed

Average interest rate330
¥6.16 billion

2.55%*October 2015-September 201824

2. Sales Reform (2) Increase Retail Loans (ii) Osaka Strategy◆ Focusing on acquiring new corporate clients and granting business loans to them and at the same time stepping up efforts toprovide solutions making the most of relationships that have hitherto been established◆ Forming teams to promote transactions with corporate owners to focus on sales for individuals centered on such transactions<Number of newly-acquired
retail business customers><Branch layout (21 in total)>
Esaka Branch

500

Shin-Osaka Branch
Amagasaki Branch

Daito Branch

Osaka Kita
BranchOsaka Branch
Eiwa Branch
HiranoBranch

Sakai Branch

300(¥ m illion)

382

Ishikiri
BranchOsaka Higashi
BranchOsaka Chuo OfficeTezukayama Branch

446(Entities)<Corporate solutions business-related income>

218

311

YoshidaBranchWakaeiwata
Branch86

Yao Branch

Habikino Branch

Hatsushiba Branch

00

FY2016
1H

Izumi Branch

FY20171H

FY20181H<Balance of retail business loans>
Kawachinagano Branch

Izumisano Branch*

FY20171H

FY20181H<Balance of housing loans>

400.0

250.0

(¥ billion)(¥ billion)

Branches with an L Plaza base

368.7
<Number of staff allocated>
Sale branches (21)293

Corporate sales office3

L Plaza (housing loans)

14

Total

310

231.8

¥17.7 billion transferred to thewholesale side of the Bank
(April 3, 2017)

218.4
325.1

207.4

313.7
300.0

September
30, 2016

September
30, 2017

September
30, 2018

200.0

September
30, 2016

September
30, 2017

September
30, 2018

25

2. Sales Reform (2) Increase Retail Loans (iii) Personal Loans◆Working to maintain balances and yields and at the same time increasing customer convenience and reducing clerical workload
by achieving greater operational efficiency<Housing loans balance(average balance)>

1,000.0

Y/Y change+¥39.8billion963.9(¥ billion)

924.1

Secure profitability◆ With strictly controlled interest rates and increased efforts to add
high-value-added group credit life insurance, fixed mortgage rates
continue to recover.

890.0

800.0

FY2016
1H

Improve efficiency of business operations

FY20171H

FY20181H◆ Consolidate sales bases of housing loans and streamline operations◆ In the second half of FY2018, housing loans examination support
systems will be deployed, reducing the time spent on administrative
processing by 40% (which is the equivalent of reducing staff by 25
employees)

Launch and expand comprehensive Internet
banking services<Consumer loans balance (average balance)>
Y/Y change+¥0.8 billion

25.0

◆

(¥ billion)

23.5

22.6
21.4
20.0

FY2016
1H◆

Launch comprehensive Internet banking services where the entire
process from application to contract is conducted on the Internet(from April 2018)
At the same time, deploy examination support systems, andcentralize examination work to a specialized department at
headquarters

Application
for web
services

FY20171H

FY20181H* Balance of card loans as of the end of September 2018(period-end balance): ¥13.5 billion

Examination
supportsystems

Electronic
agreement

No need to visit a bank office◆ Internet services are also applied to types of loans for a specificpurpose in addition to credit card loans (from June 2018)26

2. Sales Reform (3) Channel and Sales Structure◆Nanto has decided to introduce a block/area sales system to ensure sales and store arrangements that suit markets◆Expanding services in non-face-to-face sales to strengthen points of contact with customers
Introduction of a block/area sales system

Stepping up efforts for non-face-to-face sales◆In April 2019, as a decrease in the population and intensifying
competition with other banks are expected, the Bank plans to
introduce a block/area sales system to respond to changing market
needs and achieve customer-oriented sales of higher quality.
◆The bank aims to establish a system that urges employees atworksites to think on their own initiative and assume responsibility
for actions they take. This system is positioned as the most importantmeasure for awareness reform and is a goal that the Bank is working
to achieve in its medium-term management plan.
◆ Under the concept of full banking in each area rather than at eachbranch, Nanto plans to change store types and reorganize stores toensure efficient, strategic store operation.

<Store reorganization and store type change>

FY2016FY2017FY2019 (Plan)

Store reorganizationand store type change(cumulative results)

6 branches

14 branches

Approx. 30
branches

Number of staff
members reduced

1630

Approx. 90

Assigning excess personnel generated through store
reorganization to sales operations

Number of visitors to branches and that of
As exemplified by the fact that
ATM uses (Indexing numbers with those forthe number of visitors to
FY2013 as 100)
branches has fallen by 20%
during the past four years, pointsof contact with customers
through face-to-face sales are on
100
100 96.8
the decrease.
79.7
On the other hand, non-face-toface transactions such as online
applications for unsecured loans,
Number of visitors to Number of ATM uses
branches
which account for about 90% of
FY2013
FY2017the total, are on the increase.
<Increasing non-face-to-face points of contact with customers and working to
improve convenience at such points>
 Initiatives to open online branch Acquiring transactions with Nara fans, etc. nationwide
Sales Considering how to utilize such branch for regional
channelrevitalization such as attracting people to Nara Prefecturedevelopment
 Increasing convenience through transactions withoutbankbooks
 Enhancing smartphone applications
 Introduction of “Wallet+”Service Expanding functions such as account balance inquiries
expansion
 “Fully online loan application system” for unsecured loans All processes, from applications to contracts, can becompleted without visiting a branch Using smartphones effectively to grasp the intentions of customers
and to step up sales for them
 Announcements on questionnaire surveys, products, and services
through short message services (SMS) have begun
More Distribution of information on promotional campaigns
effective
approaches
and other types of content through Line@ Introducing a website for specific clients
 Greater contact with employees of specific clients

Considering future initiatives to change approaches to customers
through omni-channel marketing that makes the most of behavioral
history in non-face-to-face channels

27

2. Sales Reform (4) Group Strategy◆Making the most of Nara Securities Co., Ltd., which became our wholly owned subsidiary, and lease agency business, whichbegan this fiscal year, to provide comprehensive financial services on a group-wide basis, thus increasing consolidated income<Results of Nanto Lease>

The Nanto Bank
2,874

10.0

Nara Securities Co, Ltd.

Nanto Lease Co., Ltd.

★ Bolster securities
business★ Launch lease agency
business(Cases)Number ofcustomers(¥ billion)

3,000

2,407
2,109

Nanto Investment
Management Co., Ltd.

★ Provide comprehensive
financial services⇒ Increase consolidated
incomeConsidering initiatives toenter new business domains
using group companies
effectively
Nanto Credit Guarantee
Co., Ltd.

5.0
Contract
amount
0.0

2,000
7.5
5.2

4.9

FY201 61H

FY201 71H

FY201 81H

1,000

Nanto Computer Service
Co., Ltd.
★Stepping up software sales<Results of Nanto Card Services>(¥ billion)

Number of card
program members
99

102

106

(Thousandsof users)

100

Nanto Card Services Co., Ltd.
10.0

★Raising the card-use rate
Improving commission rates
for establishments

Nanto DC Card Co., Ltd.

★Bolstering corporate cards

Amountof use0.0

10.4

FY201 61H

11.5

FY201 71H

12.5

FY201 81H

50

28

3. Clerical Operations Reform◆ Aiming at making clerical work, including office administration, efficient by completing the concentration of all sales offices’back-office operations at the headquarters◆ Drastically review administrative processes at headquarters utilizing RPA

Clerical Operations of Branches
Measures

FY2017FY2018FY2019

 Make branches a place where thestaff are able to focus on sales
Start
deployment attrial branches

Deploy ATMs atbanking windows
Front-end
administrative
processes
Utilize tablets

Finished deploying at investment trust business(from 2015)
Completedroll-out at all the
branches

Centralization toheadquarters
Back-end
administrative
processes
Document control
centerScheduled tobe utilized invariousregistrations

Centralization of
documents of all
sales offices

Start
operations

Reduce clerical staff◆ Sales office clerk/bank teller
March
2016

March
2017

March 2018

March
2022
plan

470

396

371

230

Y/Y
change

-74

-25

-141

Start responding to document inspection requests from tax offices, etc.

Clerical Operations at Headquarters◆ With its 54 robots in operation, RPA, introduced in October 2017, reduced about 5,000 hours of operations annually→ It will be applied to a wider range of operations◆ Carry out radical overhauls aimed at reducing various meetings and regular reports
 Transformation to a more productive◆ Promote faster decision-making by deploying electronic approval systems

organization

29

4. Regional Revitalization◆Provide support for measures and policies of local public entities by leveraging the Bank’s expertise as a local financial institution◆Building a new tourism business model under the leadership of the Tourism Strategy Office, which was established in October 2017

Collaborating with Local Public Entities★ Concluded partnership agreements with 21 local governments and are working on specific measures
Local governments the Bank has concluded partnership agreements with(date of signing agreement)
Nara Prefecture (October 2008), Nabari City (September 2015), Sakurai City (March 2016), Oji Town (March 2016),
Gose City (April 2016), Kashiba City (July 2016), Kawakami Village (August 2016), Ando Town (August 2016),
Heguri Town (August 2016), Koryo Town (October 2016), Ikaruga Town (October 2016),
Yoshino Town (November 2016), Shimoichi Town (February 2017), Yamatokoriyama City (March 2017),
Tenri City (March 2017), Gojo City (April 2017), Kanmaki Town (April 2017), Shimokitayama Village (June 2017),
Kamikitayama Village (June 2017), Ikoma City (August 2017), Nara City (April 2018)<Major initiatives in the first half of FY2018>
Partner

PeriodDetails

Nara City

April
2018

◆We concluded the Agreement on Cooperation in Utilizing Historical Buildings in Nara City (three-party agreement among
The Nanto Bank, Nara City, and NOTE Nara Co., Ltd.), thus stepping up initiatives for town development making the most of
historical buildings such as old private houses through public-private partnership.

Ikoma City

May
2018

◆We established the Platform to Promote Distribution of Vacant Houses in Ikoma (working with Ikoma City and sevenorganizations, including the city’s real estate distribution group, to promote distribution of vacant houses located in the city
through markets).

Ikoma City

July
2018

◆We helped Ikoma City, Ikoma Civic Power., Ltd., and NTT DOCOMO, Inc. to enter into an agreement among them tocooperate in promoting an environmental model city. (The three-party agreement was concluded through our good offices.)

June–August 2018

◆We hosted meetings to study the Regional Economy and Society Analyzing System (RESAS)(Kashiba City, Koryo Town, Uda City, Soni Village, Mitsue Village, Tawaramoto Town, Kawanishi Town, and Miyake Town)★ We received a certificate of appreciation from the METI Kansai Bureau of Economy,
Trade and Industry in July 2018.
The Kansai Bureau favorably evaluated our initiatives for industrial promotion andregional revitalization.

30

4. Regional Revitalization
Tourism Promotion★ Create Nara fans and aim for tourism from which the entire prefecture can generate revenue
Started providing business matching
opportunities in tourism industries

Utilized tourism revitalization fund
Fund nameNara Prefecture Tourism Revitalization
Investment Limited Business Partnership

Total amount¥1.0 billion

Objective

Stimulate demand for accommodation in theprefecture by improving the accommodation
environment in the tourism industry and increase
tourism consumption by revitalizing tourism
utilizing attractive local resources, etc.

The Nanto Bank, Ltd.
Tourism Revitalization Mother Fund Investment
Membership
Business Limited Partnershipcomposition
Nanto DC Card Co., Ltd.
RD Tourism Solutions Co., Ltd.

★ Four results for investments in tourismrelated companies◆Referring clients to tourism-related business operators such as DMOs and travel agencies(10 clients were referred) and receiving commissions if they were matched successfully
The first partnership agreement was made with: Nara Prefecture Visitors' Bureau★ Excavate hidden tourism resources in the area
★ Boost profitability by building collaborative relationships among
the Bank, our business partners and tourism-related business
operators

Concluded an agreement with West Japan Railway
Company to cooperate in regional revitalization.
◆The Bank works with JR West to:(1) Sell the prefecture’s specialties through cross-border EC sites (online shopping sites foroverseas consumers)(2) Host publicity events (such as advertising and sale of specialties) for various areas of theprefecture at JR West’s stations(3) Develop attractive towns mainly around JR West’s stations

Revitalization of Forestry Business★ Promote utilizing materials produced in Nara Prefecture and support expanding sales channels<Major initiatives in the first half of FY2018>
Holding new recruit training programs in the Yoshino area (in April 2018)(Shimoichi Town, Kurotaki Village)◆ In order to deepen the understanding of forestry and timber-related industries,
incorporated a forestry training program in the curriculum and gave lectures on andconducted study tours to see thinning work, etc.

Hosting a meeting for wood business negotiations in the Osaka area(in August 2018)◆ Providing opportunities for business negotiations between business operators from the(co-sponsored with Nara Prefecture and the Nara Prefecture
Federation and our clients in the Osaka area
Federation of Timber Cooperatives)
Holding classes to develop wood craftsmen in Nara (seminars for the◆ Organizing seminars for employees with a team of workers engaged in forestry inBank’s employees) (in September 2018)
Kurotaki Village who cooperated in regional revitalization as their instructors(in cooperation with Kurotaki Village)31

In this material, we refer to the future performance of the Bank.
However, please be aware that these contents do not guarantee our future performanceand it may change due to the unexpected risks and uncertainties in the operating
environment.

[Contact, if any]
The NANTO BANK, LTD. Corporate Planning DivisionTEL:0742-27-1552

FAX:

0742-20-3614

E-mail:ir-souki@nantobank.co.jp

URL:

http://www.nantobank.co.jp/

THE NANTO BANK, LTD.