Principal Questions and Answers
Small Meeting for the Financial Year Ending 31 March 2024 (4 June 2024)

QAlthough it has become difficult to forecast the outlook for domestic and international interest
rates, where do you expect interest rates to head in the future?
A ･It is not impossible to say that the policy rate could rise to 2%, given BOJ Governor Ueda's
statement that the neutral rate is 2%. Nevertheless, the Bank's interest rate scenario assumes a
policy rate of 0.50% and a long-term interest rate of 1.25% in the first half of FY25. Anythingbeyond that is difficult to assume, so it has been left aside. Although the outlook for interest rates
is difficult to predict, targets such as 8% ROE in the next medium-term management plan ("midterm plan") are set based on this more likely interest rate scenario.
･In addition, if interest rates rise faster than expected, valuation losses on yen bonds will increase.
However, we do not expect valuation losses to be a major problem because we have alreadysignificantly reduced our yen bond position, and our yen bond holdings will be redeemed in due
course. Loans should be closely monitored for defaults due to the increasing interest rate burden.
On the other hand, the rise in interest rates has many positive aspects and has a significant
impact on net interest income, including increased carry on yen bonds and higher interest income
on loans.
･There is no problem with the dollar, as the loans are mainly at floating rates and the spreads aresecured. For foreign bonds, the strategy is to wait for interest rate cuts while preserving a steadyinterest margin, mainly through Ginnie Mae bonds with some currency-swap funding. The Bank's
scenario assumes that the FF rate will reach 3% around FY27 after gradual rate cuts. Interest
rate cuts have been slower than expected, but foreign bonds are not at a stage where they willsoon be in the reverse margin. If interest rates have not fallen at the time of the currency-swap
rollover, another possible treatment would be to sell foreign bonds.

QThe return to positive interest rates will mean a return to an era in which it is possible to increase
earnings risk-free. Please tell us whether this will narrow the earnings gap between your bankand other banks that you have been able to differentiate from in the past, or whether your bankwill continue to be able to differentiate itself from other banks.
A ･If interest rates return to positive territory, the BOJ's current account and Ministry of Financeloans will enable banks to secure interest margins risk-free. Although that will be an opportunity
for banks that have struggled to generate profits due to weak demand for funds, it is hardly anarea in which they can differentiate themselves. In order to be valued by investors, the Bank islooking to differentiate itself by establishing separate areas of strength.
･In domestic business, the Bank has an adequate operational base and is chasing leading banks
in cross-border loans ("XB") and structured finance ("SF"), on which the Bank is focusing, and isworking towards achieving the balance plan set out in the next medium-term management plan.
For SMEs, the Bank not only relies on interest income but also promotes the sale ofcomprehensive consultancy services to improve RORA. The Bank aims to demonstrate its
expertise in these growth areas and to differentiate itself from other banks based on suchstrengths.

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QThe capital allocation shown in the IR seems to result in a shareholder return of more than 50%,
but are there any plans to change the return policy in the future?
A ･The Bank's plans show each allocation of profit levels, risk-taking, and shareholder returns so as
to achieve a Core CET1 ratio in the range of 10.5% to 11.5% by the end of March 2028. The plan
envisages an increase in the core CET1 ratio of 4.4% due to the build-up of profits and a decreaseof 2.4% due to shareholder returns, which, as per your question, projects a shareholder return
ratio of greater than 50%.
･The Bank is aware of some voices that call for a change in its policy on returns because theBank's plan shows such a target level. Rather than change the return policy, however, we would
first like to make a firm commitment to the profit growth outlined in the plan. We have also
developed balance plans to support profit growth on a realistic basis. Neither SME's growth nor
a significant increase in XB/SF is a stretch plan. We hope to provide some reassurance by firstadhering to the guidance and then increasing returns accordingly. Regarding the shareholder
return methodology, we consider the balance between dividends and share buybacks by taking
the dividend levels of peer banks and share price performance into account.

Q

The Bank's interest rate scenario seems to assume a policy rate of 0.50% from April 2025. To
what extent do you expect profits to increase for the fiscal year ended March 31, 2026, becauseof the rate hike?
A ･Only deposits and loans are included in the interest rate sensitivity analysis in the Sourcebook.
Deposits and loans are expected to show a net gain of 2.8 billion yen. After net interest paid on
BOJ borrowings, interest on BOJ current-account deposits is expected to amount to 2.7 billion
yen for the fiscal year ended March 31, 2026. With long-term interest rates currently above 1%,
the Bank has also started buying yen bonds, albeit in small amounts. If around 100 billion yen
can be managed at an average of 1% while building a laddered portfolio going forward, areasonable increase in profits can be expected.

QDo you expect the share of term deposits to increase as in the past when interest rates turnpositive? Are you also considering actively promoting term deposits to attract more funds?
A ･Historically, the share of term deposits was high, but the long period of low interest rates has
reduced the incentive for term deposits, and the share of savings deposits has been steadily
increasing. As interest rates move into positive territory, it will be interesting to see how muchsavings deposits will be transferred to term deposits, but if the policy rate rises to around 0.50%,
there is little incentive, and a significant move would be unlikely. There is some historical data
showing a shift towards fixed-rate instruments when the policy rate rises to around 1.0%, but thecurrent diversification of financial instruments makes it difficult to predict whether the trend would
be the same as in the past.
･As far as deposit rates are concerned, the interest rate structure and pass-through rates should
be set to ensure profitability because branches are operated with infrastructure costs, such ascounter operations. Therefore, the Bank does not intend to promote term deposits by competingwith other banks on interest rates to increase the balance.

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Q

What is the strategy to strengthen the profitability of Group companies like Leasing andSecurities?

A ･The reality is that neither the leasing nor the securities group companies have made full use of
their functions.
･In the leasing business, the company has not been able to offer leasing proposals from the same
perspective as loan proposals in response to clients' needs for equipment for new business,environmental initiatives, and labor-saving and productivity-enhancing operations. In fact, Gungin
Leasing's outstanding lease balance has hovered around 70–75 billion yen for a long time, andwe hope to lift this to 90 billion yen this fiscal year and 110 billion yen in the final fiscal year (endingMarch 2028) of the next mid-term plan. Given that the Bank has about 1 trillion yen in equipment
financing for SMEs, this is not an unreasonable plan. The product range is complete, including
car leases that include maintenance and administration, and it is now a matter of ensuring thatpotential demand is met.
･Regarding the securities business, the Bank, unlike the major players that have a full range ofproducts and services, considers it to be exclusively a retail asset management business basedon the Bank's deposits. The Bank considers it important to ensure that clients receive theprofessional propositions that only a securities firm can offer, rather than to do something special.
In the case of banks, proposal quality can vary, depending on the experience of the staff in eachbranch. Therefore, after clarifying the client segments, the Bank is gradually introducing Gungin
Securities to bank clients. While the bank has 5.7 trillion yen in retail deposits, it has about 400
billion yen in mutual funds outstanding, so there is considerable room for making proposals. TheBank intends to strengthen its profitability by meeting the diverse needs of its clients through thepractice of asset management-type sales and cooperation between the Bank and its securities
arm.
QAre there any risks in promoting XB/SF, such as narrowing spreads or increased credit risk due
to competition?
A ･The target balance for XB/SF to be achieved by the end of March 2028 is 600 billion yen, whichis less than 10% of the total lending of 7,410 billion yen. Many major banks and leading regionalbanks have even higher percentages, so our target is not unreasonable.
･Regarding XBs, the number of deals has been built up by region by spreading across Asia, North
America, the Middle East, Europe, and others. Sectors served include financial institutions andoil and resource trading companies. The Bank has expertise in overseas deals, mainly throughstaff who have worked in the New York office, and has a long track record in dealing with XBs.
Most SF's deals take place in the renewable energy, property, infrastructure, and data center
sectors, and the company has recently started to work on a wide range of deals, including marineprojects.
･The credit quality of customers in both XB and SF is very high and the Bank's internal ratings are
generally A3 or higher. Most of them are senior tranche class, including those guaranteed byNEXI (Nippon Export and Investment Insurance) although some such as Vietnam, etc., are rated
A4 or lower. The Bank is targeting a RORA of 1.0% on the senior tranche but will also consider
working on the mezzanine tranche in the future. In such cases, we also intend to conduct stresstests and manage them prudently with limited exposure. We will increase our headcount to meet
our targets and work hard on promotion and risk management.
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Q

With interest rates in positive territory, will the focus on net interest income lead to a decline in
the promotion of non-interest business profit?
A ･Regarding the promotion of non-interest business profit, one of the evaluation items in branchassessments includes a question of whether advisory sales are carried out based on a full-service
approach to clients, and front-line staff are aware of the need to promote non-interest businessprofit.
･The target for non-interest business profit is 32 billion yen for the year ending 31 March 2028.
For the current financial year, the Bank is targeting 26 billion yen, and believes that there is ample
room for upward movement. As we monitor current progress, we will also consider increasing thetarget income level.

Q Is there any chance of female employees being appointed as directors in the near future after
starting their careers at your bank?
A ･In June this year, the new personnel system was changed to a job-based system of employment.
In April, two women were appointed as General Managers in line with the new personnel system.
In the past, there were restrictions on holding the position of general manager without certain
qualifications, but the new personnel system makes it possible for people in their 40s to bepromoted to executive officer positions and the like. Over a period of five to six years, it is possiblethat the first woman will be appointed as an Executive Officer.

QYour bank seems to be planning to increase lending to SMEs in the Keihin region. How muchare you planning to invest?
A ･The network of branch offices in the Keihin area is already very well developed. In terms ofhuman resources, a structure has been put in place for both promotion and management, withfive additional Liaison Officers and six Loan Officers deployed in April. However, they have been
instructed not to promote it excessively, and will be, for example, increasing the balances ofprojects with large lot sizes. Because in the past we have had bitter experiences in the Keihin
region when credit costs increased after a significant increase in loan balances, we prioritize
increasing the number of loan staff and improving the credit management system before stepping
up promotional activities.

Q With corporate deposits on the rise, do you have incentives in place to encourage them?
A ･In the profitability assessment sheets that banks use, a settlement rate is set for deposits, andthe difference between the deposit interest rate and the settlement rate is returned and assessed
as income in accordance with earned deposits.
･Deposits were not sufficiently promoted to key clients in the past, but the balance of corporate
deposits has increased owing to increased deposit initiatives in line with the proportion of loans.
After a long period of lending-focused promotion, we want to make people aware that both
deposits and lending are important, and we will work toward attracting and increasing deposits inthe future.

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Q

Now that your bank's share price has risen significantly, are you going to continue to consider
buying back shares?
A ･Given that the Bank's P/B ratio has not yet reached 1x and is theoretically undervalued, sharebuybacks should be considered in a flexible manner. The Bank regards share buybacks as aneffective way to return profits to shareholders, as they also have the effect of boosting the shareprice. That said, it is also important to balance this with dividends. EPS has increased every year,
and we would consider increasing the dividend accordingly.
Thank you.

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