THE NANTO BANK, LTD.

Information Meeting
May 31, 2019

The NANTO BANK, LTD.

Takashi Hashimoto, President

Profile of the Nanto Bank(as of March 31, 2019)

1. Founded

June 1, 1934

2. Location of head office

16 Hashimoto-cho, Nara City

3. Capital¥37,924 million

4. Number of employees

2,551

5. Number of offices

140 (Nara Pref. 92, Osaka Pref., etc. 21, Kyoto Pref. 15, Wakayama Pref. 8,
Mie Pref. 3, Tokyo 1)2 (representative offices in Hong Kong and Shanghai)

6. Total assets¥5,782.2 billion

7. Deposits outstanding¥4,939.1 billion

8. Outstanding loans¥3,405.2 billion

9. Capital adequacy ratio

Non-consolidated: 9.40%
Consolidated: 9.75%

10. Market share in Nara Prefecture

Loans: 49.6%
Deposits: 49.2%* The share of loans is shown after deducting anamount of partly direct write-offs.
* Total number of ordinary banks, trust banks andShinkin banks in Nara Prefecture (excluding
agricultural cooperatives and Japan Post Bank)(Head Office)
THE NANTO BANK, LTD.

We would like to convey the following items today.
I.

Progress of Medium-Term Management Plan
Pages 2 to 3

II. “Recognition of Issues” Based on Efforts in thePrevious Term
Pages 4 to 11
III. Action Items for This Term
Pages 12 to 19
IV. Business Forecasts and Dividends
Pages 20 to 21
THE NANTO BANK, LTD.

1

I. Progress of Medium-Term Management Plan

THE NANTO BANK, LTD.

2

I. Progress of Medium-Term Management Plan (1) Progress of Key Target Metrics◆The biggest factor responsible for the unfavorable progress of key target metrics is that “an index of sales is below
the target.”
FY2016FY2017Full year

Full year

FY2018Full year

Y/Y change

FY2019 target

Y/Y change

OHR

74.45%

77.03%+2.58%

85.70%+8.66%

Less than 70%

Non-interest income
ratio

10.40%

10.83%+0.43%

13.85%+3.01%

20% level

Capital adequacy ratio

9.19%

9.64%

+0.45%

9.40%-0.23%

Approx. 10%

ROA

0.24%

0.20%

-0.03%

0.11%-0.09%At least 0.3%

ROE

4.88%

4.90%

+0.01%

4.01%-0.88%At least 5%

OHR

ROE

◆OHR= Expenses / Core gross business profit◆ROE= Net income / Net assets<Core gross business profit><Expenses>(¥ billion)(¥ billion)<Net income>(¥ billion)(¥ billion)

53.9
12.1

52.4
40.1

40.3

12.8
11.1

39.7

40.0

50.0

<Net assets>(average balance)

248.2

261.6

FY2016FY2017

277.7

250.0

10.0

46.3

30.0

FY2016FY2017

THE NANTO BANK, LTD.

FY201840.0

FY2016FY2017FY20180.0

0.0
FY2016FY2017FY2018FY20183

II. “Recognition of Issues” Based on Efforts
in the Previous Term

THE NANTO BANK, LTD.

4

II. “Recognition of Issues” Based on Efforts in the Previous Term

(1) Profitability[1] Revenue and Expenditure of Main
Business Deficit(i) Lower Yield of Loans(ii) Non-achievement of Targets ofProfit Generated from Services(iii) Excessive Costs[2] Decreasing Investment Profit ofSecurities(2) Problems on Organization Management
THE NANTO BANK, LTD.

5

II. Recognition of Issues (1) Profitability [1] Revenue and expenditure of main
business (profit/loss of customer services) deficit◆There have been revenue and expenditure deficits of profit/loss of customer services (main business) 11 years in a row.

Profit/loss of Customer Services◆Profit /loss of customer services = Average balance of loans (Yields for loans - Yields for deposits)+ Fees and commissions - Expenses
80.0(¥ billion)

+1.5

7.8

51.9

0.0

-11.3

-46.9

Interest on loans

6.3

53.9

-11.1

-50.2

-1.0
-80.0

FY2007

THE NANTO BANK, LTD.

FY2008

6.0

50.9

-8.3

-49.2

6.2

46.3

-5.8

-49.6

5.5

43.5

5.6

Interest on deposits

5.7

Fees and commissions

Expenses

6.2

6.1

5.3

5.3

6.0

41.1

38.5

36.5

34.7

32.4

30.9

30.5

-4.4

-3.4

-3.1

-2.6

-2.4

-1.2

-0.7

-0.6

-45.1

-43.2

-40.1

-39.7

-49.5

-44.9

-40.3

-47.5

-3.5

-4.9

-3.8

FY2016FY2017FY2018

-4.9

-0.5

-4.7

-3.8

-2.9

-4.1

-4.7

FY2009FY2010FY2011FY2012FY2013

FY2014FY2015

6

II. Recognition of Issues (1) Profitability [1] Revenue and expenditure of main
business deficit (i) Lower yield for loans◆Lower yield for loans and decreasing interest on loans due to a continuous low interest rate environment
Yield for Loans
(%)
1.50

1.22

1.11

0.99

0.93

0.90

0.09

0.07

0.06

0.06

-0.04

0.05

0.04

-0.07

FY2015FY2016FY2017FY2018

1.00
Yields of our
loans

0.40

0.50

10-year JGBs

0.00

0.17

3-month TIBORs-0.50
FY2014* The interest rates of 10-year JGBs and 3-month TIBORs are on the final business day of each fiscal year.

Balance and Interest on Loans<Outstanding loans>
3,500.0(¥ billion)

3,088.7

3,198.1

3,262.3<Interest on loans>

3,340.8

3,405.2

40.0(¥ billion)

36.5

34.7
32.4

3,000.0

30.9

30.5

FY2017FY201830.02,500.0

20.0
March 31,2015

THE NANTO BANK, LTD.

March 31,2016

March 31,2017

March 31,2018

March 31,2019

FY2014FY2015FY2016

7

II. Recognition of Issues (1) Profitability [1] Revenue and expenditure of main
business deficit (ii) Non-achivement of targets of profit generated from services◆ The targets of Medium-Term Management Plan have not been achieved because invested resources were not effectively
used due to insufficient market analysis and narrowing down of targets.
Fees and Commissions

10.0

Targets of Medium-Term
Management Plan

8.9(¥ billion)

6.2 6.2

6.4 6.1

7.6

7.1

6.6

6.0

5.3

Results

5.3

5.0

0.0

Referencevalue

FY2014FY2015Previous Medium-Term
Management Plan

FY2016FY2017FY2018Present Medium-Term
Management Plan

Average value insame-scaleregional banks

FY2018*Average value in 10 banks of 64
first-tier regional banks that areclose to our bank in the total amountof deposits and loans

THE NANTO BANK, LTD.

8

II. Recognition of Issues (1) Profitability [1] Revenue and expenditure of main
business deficit (iii) Excessive costs◆An appropriate level of profit corresponding to costs has not been secured due to low productivity per person per office.
Number of Personnel per Office

Balance of Loans per Office

25

35,000(People)(¥ million)

18

24,20916

15

Reference
value

Referencevalue

Average value in regionalbanks

Average value in banks ofwhich profit/loss of customer
services are profitable0

Our bank

Referencevalue

Average value in regional banks Average value in banks of which
profit/loss of customer services
are profitable

Core Net Business Profit per Person

Core Net Business Profit per Office
185

200

26,816

Referencevalue

0
Our bank

32,432(¥ million)

15.0(¥ million)

11.2
124
7.7

87

Reference
value

Reference
value

4.7

Reference
value

Reference
value

0

0.0
Our bank

Average value in regionalbanks

Average value in banks ofwhich profit/loss of customer
services are profitable

Our bank

Average value in regional Average value in banks ofbankswhich profit/loss of customer
services are profitable* The reference values are calculated based on financial results for the fiscal year ended March 2018 of 64 firsttier regional banks (of which profit/loss of customer services of 29 banks are profitable).
THE NANTO BANK, LTD.

9

II. Recognition of Issues (1) Profitability [2] Decreasing investment profit of securities◆ The balance of securities have decreased due to redemption of national bonds and sale of foreign bonds in preparation for future interest-rate increase.
◆ Interest on securities have decreased significantly compared to the previous year because of losses arising from the precautionary cancellation of
investment trusts which included unrealized losses.

Balance of Securities(¥ billion)
1,500.0

0.0

Y/Y Change-¥93.1 billion

1,629.9226.2

1,386.1
271.1

265.9

77.7
63.8
167.1

1,007.7

25.0(¥ billion)

1,479.3

63.6
66.3

1,000.0

500.0Interest on Securities

437.6

3.6
2.4

Investment trusts(+¥166.5 billion)
Equities(-¥1.7 billion)

75.9
99.9
81.7

Euro-denominatedbonds(+¥36.0 billion)

690.8

US dollardenominated bonds(-¥85.4 billion)

899.3

March 31,
2018

19.5
4.5
2.6

Investment trustrelated profit and
loss

14.0
2.8
Stock
dividends

14.3
0.0

Yen bonds(-¥208.5 billion)
March 31,
2017

20.3

12.3

11.2
Interest on
bonds

FY2016FY2017FY2018<Investment trust-related profit and loss>

March 31,2019

8.0(¥ billion)

Yield of Securities

0.8
2.8

1.50
(%)

1.00

0.0
1.16

1.24

FY2016FY2017

Dividends

4.1

3.3

FY2017FY2018

-6.2

0.98

0.50
FY2018-8.0

THE NANTO BANK, LTD.

FY2016

0.4

Profit and loss
arising fromcancellation* If investment trust-related profit andloss figures are negative, it wasrecorded as “Loss on redemption ofbonds including national bonds,” notas “Interest on securities.”10II. Recognition of Issues (2) Problems on Organization Management◆ Having worked on “Four Reforms” (consciousness, sales, clerical operations and expenses) toward businessmodel reform, we still have not destruct our corporate culture such as “following the precedent,” “avoiding
trouble” and “lack of sense of ownership.”◆ We need to implement further “Consciousness Reform” because there still remains sectionalism in our bank andit is not clear where responsibility lies.
It is necessary to change our behavior to
implement Consciousness Reform.

Previous Efforts

FY2017To be a bank that can create vitality
not only in our bank but also inregions
To establish our own corporate cultureof improvement through the concept of
5S such as improvement andcleanliness as deployed in consultation
with a subsidiary of a large
manufacturer.

THE NANTO BANK, LTD.

（意識変革討議より抜粋）

FY2018FY2019To unify and change our bank
To change our bank into anorganization where act spontaneously
and are responsible for our behavior
from an organization where the senseof ownership is low, by reviewing
conventional wisdom and stereotypes.

To be a bank that can create new value
Creating and providing added value that only The
Nanto Bank can think of will build the future of regions
and customers.
To be a bank that is chosen by regions andcustomers.

11III. Action Items for This Term

THE NANTO BANK, LTD.

12

III. Action Items for This Term (1) Establishing a Consultative Sales—Necessity for the Future—◆Our present sales style, a “Bank-Oriented” and an “Order-Taker”, is not sustainable for our future continuous growth.
Starting this fiscal year, we will transform our sales style to consultative sales that provides solutions to customers’
real problems.
 “Bank-Oriented” sales(sales target attainment type)

Limitations of present
sales style

 “Order-Taking” sales

Establishing newsales style
Implementation of consultative
sales unique to our bank “Customer-Oriented” sales(regional contribution)

 “Proposal-Based” sales

Cooperation among offices, head office,and external affiliate institutions

Sharing common understandings of issues
to be resolved

Formulating
hypotheses,
Identifying
issues

Sharing common understanding of essential
points to the issues

Gathering
information

Ongoingcommunication

Approach,Interview

THE NANTO BANK, LTD.

Planning solutions utilizing menus obtained
outside and inside our bank

Proposing solutions tocustomers

Regional development/
Expanding our business

Executing Consultative Sales

Growth of customers/
Building relationships of trust

Identifying Customers’ Real Needs

13

III. Action Items for This Term (1) Establishing a Consultative Sales—Increasing profit from services—◆Under the current situation where the interest on loans is not expected to significantly increase, we will focus on increasing profit fromservices for individuals and corporations based on our consultative sales.

Fees and Commissions<Sales profit of deposit assets>
4.0

Fees and commissions(¥ billion)

Expenses(¥ billion)

2.8
0.07

10.0
5.0

9.6

10.7

9.6

2.0

11.3

-4.3

-4.6

-4.6

-5.0
FY2016FY2017FY2018FY2019(forecast)

6.7

6.0
5.3

0.21

0.78

1.17

financial productintermediation

Life insurance

0.0

1.55

1.71

1.54

FY2016FY2017FY2018Investment
trust

FY2019(forecast)<Corporate solutions business-related income><Fees and commissions>(¥ billion)

2.6
0.10

3.4

(excluding corporateowned life insurance)

0.0

-4.3

1.17

2.9

2.0
(¥ billion)

5.3

5.0

1.27
1.0

1.33

0.84
0.49

* Total amount of income
from M&A advisory
service, businesssuccession support,
private placement
bonds, leaseintermediary service,syndicate loans, foreignexchange-related
profits, businessmatching and corporate
insurance

0.0
FY2016FY2017FY2018FY2019(forecast)

0.0

THE NANTO BANK, LTD.

FY2016FY2017FY2018FY2019(forecast)14III. Action Items for This Term (1) Establishing a Consultative Sales—Increasing profit from services—◆Consumer business unit—Providing high-quality financial services in collaboration with the banking, trust andsecurities businesses◆Corporate business unit—Providing consulting functions corresponding to each customer’s growth stage
Consumer Business Unit

Providing solutions of securities and trusts focusing on customers over 50 years old accounting for 75% of our deposits(¥ billion)<Balance of deposits by age>

800.0
Bankingbusiness

600.0

75% of ourdeposits

400.0

Supporting the upper classwith one-stop service

200.0
0.0

Securities business(Nanto Mahoroba
Securities Co., Ltd.)80 years
0–10
10–20
20–30
30–40
40–50
50–60
60–70
70–80
years old years old years old years old years old years old years old years old old andoverCorporate Business Unit
ProfitTrust business

Bolstering the consulting function for companies at a maturity stage<Life cycles of companies>
Second founding for aDeveloping
new business

Expanding suppliers
and markets

new growth stage
Providing consulting functions
corresponding to real needs

Time

Founding stage

THE NANTO BANK, LTD.

Growth stage

Maturity stage

Decline stage

Business
succession

M&A etc.

15

III. Action Items for This Term (2) Establishing Securities Investment Management—Optimizing Our Portfolios—◆ Maximizing profits for the period by using acceptable risk assets and interest rate risk quantity◆ Stabilizing profits by utilizing portfolio rebalancing and strategy
Investment Management Policy
Investment principles■ Utilizing diversified investment to pursue medium- and long-term stable profits and asset buildup
 Diversifying portfolio risks  Building high-quality portfolios based on the medium- and long-term perspectives
Medium- and long-term direction of portfolios■ Securing stable profits of 1% or more by well balancing self-managed investment and outsourcing investment through investment trusts
Investment management policy for FY2019<Bonds>Investment in bonds in foreign currency with high spread of investment and funding in addition to reinvesting a part ofredeemed bonds in yen currency<Stocks>
Increase in European stocks with high expected profit<Investment trusts> Reinforcement of rebalance considering investment results
Average balance<Results for FY2018>Euro denominatedbonds/stocks
74.5
US dollardenominatedbonds/stocks
146.2
Yen stocks
56.2

Investment trusts
359.1

Total
1,434.4(¥ billion)<Plan for FY2019>
Euro denominatedbonds/stocks
116.0
US dollar-denominatedbonds/stocks
95.1
Investment trusts
558.4
Yen stocks
62.6

Total
1,510.1

Interest etc.

(¥ billion)<Results for FY2018>Euro denominatedbonds/stocks
0.9
US dollardenominatedbonds/stocks
4.5<Plan for FY2019>
Euro denominatedbonds/stocks
1.3

Yen bonds
5.6

US dollardenominatedbonds/stocks
3.3

Total
14.0

Investment trusts
5.6

Total
17.0
Yen stocks
2.6

Yen bonds
798.2

THE NANTO BANK, LTD.

Yen bonds
677.9

Yen stocks
2.8

Yen bonds
4.1

16

III. Action Items for This Term (3) Reducing Costs by Integrating and Closing Offices◆ Non-personnel expenses have been reduced through reviewing office styles and ATM networks, etc.
◆ We will take one step further towards the integration and closing of our offices for further cost reductions to respond to radical
changes in the financial environment.
◆ Specifically, the number of our offices will be reduced by about 20% without reducing the convenience of customers and ourservices as much as possible.
 The details will be announced this fall.

Results
Review of Office Networks■Review of our office networks corresponding to markets
Execution of efficient office management

Kyoto block

Conversion to a sub-branch

1 branch[Number of reviewed offices]
FY2016

Cumulative
results

FY2018Branch in Branch (including offices closed)

3 branches

Branch in Branch(including offices closed)
Change to offices specializing in
consumer businessChange to offices specializing in consumer business6 branches

Conversion to a sub-branch

1

1

0

2

Business hour change

0

1

0

1

Total

6

8

2

16

North Nara block

Osaka block

FY2017

Conversion to a sub-branch

1 branchMiddle Nara block
Change to offices specializing in consumer business

3

1

0

4

2

5

2

9

3 branches

Review of ATM Networks
South Nara /Wakayama block
Branch in Branch(including offices closed)
Business hour change

1 branch
1 branch■Realization of our new ATM networks including joint ATMs with
Seven Bank, Ltd. to achieve both maintaining customer
convenience and reducing ATM management costs[Number of reduced ATMs](ATMs)FY2016* Number of the reviewed offices by block(Period: FY2016–FY2018)

THE NANTO BANK, LTD.

FY2017

Cumulative
results

FY2018ATM inside office

-3

1

-28

-30

ATM outside office
Total

2
-1

-1
0

-5
-33

-4
-34

17

III. Action Items for This Term (4)-[1] Appointment of New Executive Officers and Four
Headquarters Structure◆ Shift to a structure that makes each division’s responsibility and role clear and enables swift and well-controlled business management◆ Acceleration of the reform by appointing an external person as a full-time executive officer for the first time

Business Planning & Promotion Headquarters

Management Headquarters

General Secretariat

Corporate Planning Division

Compliance Management
Division

Risk Management Division

Business Support DivisionCorporate Business
Division

Personal Business Division

Private Banking Division

Public Institutions & Regional
Vitality Creation Division

Osaka Regional
Headquarters

Sales Headquarters

Corporate Strategy Headquarters

Corporate Planning Division

Digital Strategy Division

Risk Management Division

Operations Planning Division

Personnel Planning Division

Legal Planning Division

Credit Analysis Division

General Affairs Division

Operations Concentration
Division

North Nara Block
Headquarters

Middle Nara Block
Headquarters

South Nara /Wakayama
Block Headquarters

Kyoto Block Headquarters

Osaka Block Headquarters

Solution Business Division

Financial Investment Division(Tokyo Main Office)Internal Audit Division

THE NANTO BANK, LTD.

Credit Analysis Division

Financial Investment
Division

Operations Support Division

Systems Division

Personnel Division

General Affairs DivisionInternal Audit Division

Investment Management
Headquarters◆ Establishing four headquarters
where Managing Executive
Officers are appointed as“Director-General” anddeployment of divisions
corresponding to their roles
and functions under each“headquarters”◆ Appointment of an external
person as Director-General of
the Corporate Planning &Promotion Headquarters who
is a professional management
reformer and has an intimate
knowledge of financial
administration

18

III. Action Items for This Term (4)-[2] Establishing Block/Area Business System◆ Dividing a business area into five blocks and dividing a block into some areas by administrative district and industry under the Block/Area Business
System◆ Forefronts of business and organizations near thereto have responsibilities and authority from decision of business strategy and numerical targets tohuman resource development.

Block/Area Business System (5 blocks, 18 areas)
Achieving Customer-oriented and High-quality Services
Kyoto block
2 areas, 11 branches,
4 sub-branches■Developing customer-oriented business activities
by assigning the decision of business strategy to
the forefronts

North Nara block
7 areas, 32 branches,
11 sub-branches■Providing high value-added services by putting
sales people into one place and developing highly
specialized human resources

Osaka block
21 branches

Middle Nara block
7 areas, 31 branches,
7 sub-branches

Low-cost Management by Efficient Office Management

South Nara/Wakayama block
2 areas, 14 branches,
3 sub-branches, 2 agencies

THE NANTO BANK, LTD.

■ Integrated management of each branch located inan “Area” based on the concept of provision of fullbanking service as an “Area”

19IV. Business Forecasts and Dividends

THE NANTO BANK, LTD.

20

IV. Business Forecasts and Dividends◆ “Core net business profit” is planned to increase to 9.6 billion yen, up 3.0 billion yen compared to the previous year due to anincrease in interest on securities and fees/commissions.
◆ Consolidated ordinary profit is planned to increase to 13.3 billion yen, up 2.5 billion yen compared to the previous year.

Consolidated Full-year Business Forecasts for FY2019

Business Forecasts for the Full Year of FY2019<Core net business profit forecast>(¥ billion)(¥ billion)

9.6
FY2019Core net business profit
forecast

ExpensesFees and commissions

Interest on securities

Core netbusiness profit

Interest on loans

FY2018Financing cost

6.6 -0.3

Other operating income*+2.9 +0.1+0.7 +0.2 -0.6

+3.0

FY2018FY2019results(forecast)1

Consolidated ordinary profit

10.7

13.3

+2.5

2

Profit attributable to owners of parent

11.1

9.0

-2.1

Shareholder Returns
The basic policy is to continue stable dividends.
Execution of a commemorative dividend for our 140th year of business for theyear ended March 2019
Planning to continue an ordinary dividend of 80 yen per year for the year ending
March 2020

<Dividend per share>

100
(Yen)

Commemorative dividend for 140th
year of business of 10 yen*Excludes gains/losses on bonds (JGBs, etc)

80(¥ billion)
FY2018FY2019results(forecast)

Y/Y change

Compared to theMedium-Term
Management Plan

Net income

6.6
5.8
10.2
11.1

9.6
10.0
13.2
9.2

+3.0
+4.2
+2.9
-1.8

-7.2
-6.8
-6.6
-5.2

Credit cost (*)

1.4

1.6

+0.2

+0.1

1

Core net business profit

2

Net business profit

3

Ordinary income

4
5

Y/Y change* (Net transfer to general provision for possible loan losses + Disposal of non-performing loans) - Bad debt recovered - Reversal of allowance
for loan losses

70

70

70

70

FY2014FY2015FY2016FY201780

60
50
FY2013

FY2018FY2019(forecasts)

THE NANTO BANK, LTD.

21

In this material, we refer to the future performance of the Bank.
However, please be aware that these contents do not guarantee our future performance and 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/