April 11, 2022 – Chiba Bank IR Day Main Questions and Answers[DX Strategy]

Q. It is planned that transactions in the opening of investment trust accounts and app loans

Q. There is a ¥7,500 difference in revenue per person between digital and non-digital

will begin in February 2023. Can I think that the profitability of digital customers will

customers, and please tell us some specifics the background behind this.

increase significantly when these starts? Also, are there analyses that calculate not only

A. Customers' profitability varies widely depending on the products they use, including

customer acquisition costs, but also real net business income, taking into account the

mortgages, consumer loans, investment trusts, credit and debit cards. Analysis of app

expenses of the head office, digitally and non-digitally?

penetration for each product reveals that while the penetration rate for all active accounts

A. We expect app loans to become a driver of the expansion of unsecured loans in theis around 17%, the penetration rate for mortgages borrowers is around 32% and for card

prefecture. We believe it will generate a reasonable amount of net interest income andloan borrowers is around 25%. This high rate of app penetration among customers using

will be a tool to increase the profitability of digital customers. In addition, it is extremely

highly profitable products is the background to the difference in profitability.

difficult to calculate net business income taking expenses into account, and while it is
not measured at this time, we intend to grasp it quantitatively in the future.

Q. Please tell us the results and issues that have been identified in the DX Human Resources
Strategy initiatives.

Q. Regarding the contact rate of 22% by returning lists to the branches, is it thought that theA. One achievement was that the goal of 1,000 DX-based personnel was achieved ahead ofcontact rate can be further raised in the future? Are you seeing an upward trend inschedule. Our employees recognize the importance of DX in financial services,transactions and revenues for the customers you are able to contact?

confirming that there is a tremendous increase in interest in DX across the bank as aA. Only about nine months have passed since the start of lists return, and the number of lists

whole. We also feel that the successful integration of external human resources hired indelivered is still limited. The contact rate is increasing through the distribution of lists,

mid-career and the human resources being trained internally is also fruitful.

and we think that it will be increased depending on ideas and wisdom in the future as

On the other hand, the issue is the establishment of a development system forwell.

specialist human resources. Training programs, etc. are prepared, but it is necessary to
conduct trials and verification of effects from now. Efforts to support customers' DX also

Q. Are cross-selling via apps seen other than transfer?

need to be further strengthened in the future for providing ICT consulting and productA. Currently, the services for which revenues are recorded directly from apps are

explanations of apps and portal to customers. For the personnel of branches, a training"remittance" and "bar code receiving agent services for taxes and public money," which

system separate from the specialized department of the head office is being considered.

was launched in November last year. Regarding receiving agent services for taxes andpublic money, we are considering implementing a major apps campaign to coincide withthe car tax collection in May. Cross-selling is expected to gradually increase due to1

lifestyle-related services that will begin in the future. With regard to mortgages,

Q. Please tell us about the definition and figures for the value of potential in sales personnel.

automobile loans, education loans, and credit and debit cards, we are aiming to increase

A. It is currently under consideration, but is based on the bank's own skill check sheet, whichcross-selling while standing upstream in the commercial distribution and making

is utilized for understanding the skills of individual employees. We are thinking of

personalized proposals.

adding experiential and working factors to this. On this basis, we are considering adding
factors to improve operational efficiency to determine the value of potential.

Q. What strengths will be leveraged in the advertising business? Please tell us about future
profit opportunities and timing.

Q. It is thought that the use of bank accounts is shifting from traditional banks to digital

A. At present, a push notification from the Chiba Bank official LINE is being carried out onbanks. Is the number of accounts and ratio, used as a main bank declining at Chiba Bank?

a trial basis for customers passing near Chiba-Ekimae Branch. If any corporate customers

Does the promotion of apps contribute to attracting business, such as increasing the usage

are interested in it, we would be willing to offer this for them. We are exploring ways torate of services?

expand its advertising business on a large scale, such as using statistical data and

A. As we lowered our transfer fees in November last year, it closely monitored the impact.

collaborating with advertising companies. We believe that there are significant business

However, the impact of the increase in the number of transfers exceeded the impact, andopportunities, and we intend to grow this business significantly as one of our new

as a result, the overall transfer fees also increased. We think that we are able to meet thebusinesses.

needs of our customers by providing all financial services in the hands, as evidenced by
the fact that customers who had not made transfers at our bank until now, but started

Q. Please tell us in detail what services will be offered for BaaS's business.

using transfers at our bank on the occasion of the application, accounted for 44% of app

A. For example, we are considering providing services to corporate customers of developertransfers. We believe that moving to lifestyle-related services, which lie ahead of thewith customer base in Chiba Prefecture. We will incorporate our financial services andproviding financial services, will be a major differentiating factor. By being upstream inlifestyle-related services platforms into the functions offered by each corporation andthe purchasing process, we can create opportunities for customers who have not used ourprovide offer them to their respective customers. In addition to developer customers,

products to date. Regarding Chibagin Market, the company is now in Step1 phase ofvarious deployments, such as universities and workplace, can be considered. Currently,"regional products." By expanding this phase to "lifestyle-related services," such as cars,

we are discussing in specific terms while talking with businesses. With regard to

housing, nursing care, healthcare, and educational services, the company is confident that

customers base they are holding, as corporate customers are thinking about how to

it will be able to steadily increase its engagement with customers.

approach them in order to invigorate transactions in the future, we believe that there are

In addition, the gross profit of 0.8 million customers, who account for 70% of thebusiness opportunities.

gross profit of individual customers, is increasing, and we believe that the promotion ofapps is also contributing to this.
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[Sustainability]

Q. Are consulting services for decarbonization possible only with the current resources of

Q. It is expected that CO2 emissions of the listed company loan portfolio will be partially

the Chiba Bank Group? Please tell us if you have a vision for the areas in which you aredisclosed. How are schedules, coverage, and disclosure methods considered at this time?

partnering with outside companies, such as whether you will be producing these in-house

Are emissions in sectors of high importance analogized or are emissions data obtained?

in the future, and what aspects you think are lacking.

A. SCOPE3 discussion has just begun, and only a small portion of the calculation has been

A. Although the corporate sector has conducted considerable research, we recognize that it

made within our bank. The Chiba Bank Group does not have any issues in calculating

is still insufficient. For this reason, we would like to proceed with initiatives on a case-

SCOPE1, which is the part directly emitted by the Group, and SCOPE2, which is the partby-case basis with the help of partners and consultants. The Bank will provide

indirectly emitted by the Group. However, we recognize that it is extremely difficult tocomprehensive advisory services as the entrance, we will respond to individual

calculate SCOPE3 Category 15. There are still only a few large domestic companies that

consultations for the time being in collaboration with various partners. We hope tohave published their own SCOPE1 and 2, so we start by totaling the theoreticallyaccumulate know-how, eventually turn it into in-house production, and quickly put incalculated results. We would like to confirm the calculation logic for the emissions thatplace a system that will enable the entire the Bank Group to receive it.

large companies are calculating on their own, and for downstream companies, we would
like to propose a measurement method by educating each company about the importanceQ. Please provide specific examples of how you are working with borrowers that are subjectof this measurement. We partner with a specialized measurement company to calculate

to transition risk.

emissions now, but in the future, we would like to accumulate this know-how and bring

A. Chiba Prefecture is a region with various industrial clusters including coal and steel. In

it in-house.

this context, large corporations each have their own plans, but we believe that it is ourbank to support the second and third subcontractors under these companies, and we

Q. Regarding the amount of emissions in the investment and loan portfolio, which industries

would like to proceed with the movement toward decarbonization, its measurement, andare relatively large at the Chiba Bank, and does it anticipate that the transition strategy

measures toward carbon neutrality one by one. With regard to disclosing information

will need to be urgently implemented?

based on TCFD's recommendations, we plan to add the steel sector to the sector to be

A. In Chiba Prefecture, there is Keiyo Industrial Area, where industries that emit greenhouse

analyzed for the risk of transition. Regarding steel, we will work with it while studying

gases such as coal, petroleum, other chemicals, and steel are concentrated. Large

measures to reduce emissions, such as the hydrogen-reduced steelmaking method. About

companies will follow the policies of the government, etc., and we would like to follow

chemical sector, on the other hand, we feel that the breadth of its products is so broad

up closely with them. Many of these downstream companies are our main customers,that it is difficult to analyze this sector. First, this fiscal year will be the steel sector, andand we believe that our task is to support their efforts to fulfill their social responsibilities.

from next year onwards, we will continue to analyze a broader range of sectors. At thesame time, we believe it is important for customers to understand the need for transition.
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We believe that this is an issue that the Bank, as a financial institution that faces them indecide on initiatives in anticipation of external announcement effects.

close proximity on a daily basis, will discuss on a daily basis.

Analyzing SDGs Friends Loans, more than a year since service was launched,around 800 of the approximately 5,000 borrowers who have made loans by March have

Q. In which sectors believe the hurdle is high in measuring transition risk?

started new loan transactions using this product as an opportunity, which can be said to

A. The chemical sector is considered one of the most difficult areas due to the breadth of its

be leading to the acquisition of new borrowers. In addition, there are a total of aroundproducts. If chemicals can be resolved to some extent, the majority will be developed in

850 billion outstanding loans to customers who have made SDGs Friends Loans,the case of Keiyo Industrial Area. In addition, the cement industry, for example, is a

including loans not related to SDGs, but when compared to September 2020, prior to thesector that is difficult to analyze.

start of handling SDGs Friends Loans, the total outstanding balance increased by around160 billion, indicating that they are contributing not only as transfers but also as a net

Q. Regarding the measurement of SCOPE 3, what do you think is the ratio between thosebalance increase.

who can provide disclosed values and those who Chiba Bank needs to get into?
A. Many enterprises in Keiyo Industrial Area have built parent-subsidiary relationships withlarge enterprises, and we believe that there are a reasonable number of enterprises thatcan provide disclosed values. We estimate that only 30-40% can provide disclosed values,
and for the remaining 60%, we need to discuss the measurement and disclosure ofgreenhouse gas emissions together with our customers. In addition to helping customers
understand these needs, it is also useful to incentivize customers to offer preferential
interest rates based on the achievement of KPIs set by offering SDGs related products. It
is also crucial that not only banks but also the region as a whole enhance momentum
through the use of the Chiba SDGs Promotion Network.
Q. What is the profitability of sustainable finance? Please also tell us your outlook onwhether it will contribute not only as a transfer from existing loans, but also as a balance
increase.
A. The rate is more or less the same as that of existing loans. Many customers not only
expect lower yields on sustainability-linked loans when KPIs are achieved, but also4[Outside Directors Discussion Meeting]executives expressing their opinions in response.

Director Tashima "DE&I"

The second change is part of the quality of the discussion. At the time of myI assume that the reason I was asked to become an outside director at the time of

appointment, the Board of Designated Directors was mainly concerned with detailed,

my appointment in 2015 was that at that time, I was a member of the Financial System

individualized proposals unique to financial institutions, and the important proposals

Council and the Labor Policy Council, which was helpful in advancing management

discussed by the Board of Designated Directors were approved by the Board of Directors.

from the customer's perspective and DE&I. In 1986, the Bank produced the first female

Today, the committee devotes more time to monitoring medium- and long-term strategies

general manager of branch in the banking industry and is an advanced company in theand the allocation of management resources such as people, goods, and money. At thefinancial industry. Promoting diversity is considered a management strategy forsame time, the board is now operating in a way that allows for a greater separation

sustainable growth. We are actively promoting initiatives such as supporting the balance

between agenda items that require deeper discussion and other agenda items.

between work and family, supporting women's continued work, promotion support, work

The third change is the enhancement of discussion and information exchange

style reforms, creating an organization to promote women's active participation, andoutside the board. For topics that do not fall within the framework of the Board ofeliminating the uncertainty bias and the awareness of gender roles. These activities have

Directors, or which should be discussed freely or over time, separate frameworks arealso been highly evaluated by external parties. By driving the regional banks with theestablished in the form of off-site meetings, such as the Board of Directors Information

alliance banks, we are also actively spreading DE&I to other banks and playing a leading

Exchange Meeting. Corporate governance is an extremely broad issues, and there are therole, and I think it can be extremely highly evaluated. We intend to continue these efforts

other challenges. However, even looking only at the points I have just mentioned, I

even stronger in the future.

recognize that we are making considerable efforts to strengthen governance.

Director Takayama "Governance"

Director Kiuchi "Response to Changes in the Financial Environment"

In the seven years since 2015, when I became an outside director of the Bank, I

I took office in June two years ago and. the impression of being reliable is strongest

think there has been a shift from formality to substance in many companies in terms offor the Bank. Specifically, the Bank is strong on the defensive, with a low expense ratio

governance, but at the same time, we feel that our board, which is at the heart of corporate

and sufficient equity capital. On the other hand, the Bank is also strong on the offensive,

governance, has changed in substance.

and I believe that its alliance strategy and digital strategy are two of its pillars. I think

The first is the change in the composition ratio of outside directors. At the time ofthis balance between defensive and offensive is very good, and that this is why we have

my appointment, the Board of Directors, which was held in a large room with a solemn

a relatively high reputation in the stock market.

atmosphere, has now become a compact and easy-to-discuss atmosphere. Discussions

Currently, the financial environment is undergoing major changes, and it ishave been revitalized, with outside directors proactively asking questions and internal

necessary both to firmly control risks and to proactively utilize them as profit
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opportunities. In the U.S., interest rates are expected to rise at a pace not seen in recent

elements of ESG evaluation into compensation is also a challenge.

years, and there are risks that cannot be considered during the conventional U.S.

The third point is the medium-to long-term story, but it is desirable to consider themonetary tightening phase, and the situation may change significantly even during theideal institutional design in the future as well. While the Bank is a company with Audit

current fiscal year. Domestically, too, we believe there will probably be an increase in& Supervisory Board, it is not uncommon for regional banks to have a company withinterest rates. At the same time as being risky, we need to consider this as a profit

audit & supervisory committee. I am keenly aware of the merits of having experience atopportunity and work on it from both perspectives. The next medium-term management

other companies. Personally, if the Bank maintains Audit & Supervisory Board, I thinkplan, which begins in fiscal year 2023, is closely related to this change in the financial

it may be possible to increase the number of outside directors a little more.

environment. The Bank of Japan's regime will change next spring, and the terminationof negative interest rates could be considered. However, I believe that Japan's low interest

Q. Please tell us what kind of discussion has been made regarding the change of president

rate environment itself will not change even if the negative interest rate environment

last year from quantitative and qualitative perspectives.

changes. I do not anticipate a significant improvement in net interest income. Without

A. (Director Takayama) The appointment of President has been examined after a sufficient

expecting these policy changes, we need to steadily expand non-financial services based

period of time, and the Nomination, Compensation, and Corporate Advisory Committee

on our strategy of increasing fee income and digitization.

is recognized to have played an extremely large role. First, there is a discussion of thepersonnel requirements required of the president's successor, and the personnel

Q. Please tell us about the current situation, what issues are facing governance, and what

requirements are determined based on the points of decision-making ability, a sense of

direction should be taken in the future.

balance, and the power to drive people and the organization. At the same time, based on

A. (Director Takayama) The first is in the process of strengthening the integrated businessthird-party evaluations of external specialist organizations, the Bank listed up a few

management system in the field of group governance by adopting a group chief officer

potential candidates. On that basis, the Bank have asked the personnel to experiencesystem at present. Some group companies are non-financial companies, and it is expectedvarious tasks, monitor them firmly, and determine their suitability. Ultimately, thethat we will continue to expand including new businesses. In the case of business-related

President submitted a proposal to the Nomination, Compensation, and Corporatecompanies, there are many risks that are unique to the industry and business, so they

Advisory Committee discussed the results up to the present time and proposed themust adopt a system that is different from the risks of the financial perspective. We

proposal to the Board of Directors. The selection process is considered to have been wellbelieve it is important to strengthen a series of mechanisms for identifying, selecting,secured and reasonable.

evaluating, responding to, and monitoring all risks, including those of group companies.
Second, while we recognize the introduction of restricted stock awards in

Q. From the market's point of view, it seems to be a consensus that the Chiba Bank are theexecutive compensation plans as a significant improvement, how to incorporate the

top banks of regional banks, but even so, the PBR is only 0.4 units. Please tell us,
6strategically, whether there are breakthroughs that enhance the valuation of these stock

A. (Director Tashima) First of all, there is a good example of a woman's supervisor gaining

markets.

trust by providing detailed guidance to her subordinates, thereby motivating her

A. (Director Kiuchi) I became a director of the Bank two years ago, and I feel that the Board

subordinates. In terms of relationships with customers, they have gained trust through aof Directors has been discussing matters more enthusiastically than originally imagined,

sales stance that is closely aligned with customers, which has led to long-term businessand that there is a sense of speed. As it responds to the new challenges, what it wastransactions.

discussing last month is already realizing this month, so I evaluate it as much more

Regarding DE&I, we have a very high reputation, and while there is no

flexible and creative than the image of the bank that it had originally envisioned. Even

subordination compared to other companies, it is a reality that there are the samefor the Bank, which has gone to such a great effort, the valuation of the stock price isconcerns as other companies. The existence of uncertainty bias within the organization

relatively good, but not good on the whole. As long as we remain in the banking sector,

has kept a strong sense of gender division of roles. It is necessary to continue to makeit is extremely difficult for us to raise our assessment significantly, and I feel again thatefforts in the future, although it is taking measures such as providing mentors, conducting

banking is difficult. Although interest rates have been rising recently, the future potentialtraining, and conducting training for male supervisors in order to eliminate them. As forof a business model that relies solely on net interest income is not high, I think that thisfemale employees, we do not have an abundance of female employees who can be

is temporary. Therefore, it is important to expand services in the non-financial portion. It

promoted to executive positions in the future. We need to develop more and more female

is necessary for regional financial institutions to expand their businesses while competing

employees who are enthusiastic about their work, want to be pillars of support for thewith other types of businesses by maximizing their credibility from the region, which isBank, and have the desire to be promoted to executive positions. I hope that we cantheir strength, and their depth of information on enterprises. It is important not only to

encourage more female employees to take an active role in the company by arousing

provide financial services related to life events, but also to pick up the various needs oftheir enthusiasm or by increasing the number of excellent female bankers hired fromdaily life, provide services and solutions for them, and receive high compensation foroutside the company through mid-career recruitment.

them. The Bank believes that expanding non-financial services with the Chibagin app asEnd

the core and developing it into a super app, will ultimately be a point at which it canobtain a different dimension of evaluation from the current situation in the stock market.
Q. I recognize that DE&I of the Chiba Bank has already been highly evaluated, but wewould like to know of any specific examples where DE&I has been utilized inmanagement decisions. Also, what do you think is necessary to take it a step further as arole model?
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