FY2019
Earnings Results Briefing

June 1, 2020

Summary of FY2019 Earnings Results and Numerical Plan
for FY2020

New Medium-term Management Plan

Impacts of the Novel Coronavirus Pandemic

4

Introduction

18

Summary5Long-term Management Plan “Vision 2027: Plan for Creating the Future Together” as
the Assumption

19

Change in Interest Income

6

Review of the Previous Medium-term Management Plan

20

Major Accounts (1) Deposits & Assets in Custody

7

Positioning of the New Medium-term Management Plan “Plan for Creating the Future
Together: Stage II”

21

Major Accounts (2) Loans

8

Five Pillars: the Main Features of the New Plan

Major Accounts (3) Securities

9

I. Enhance initiatives for regional revitalization and the SDGs

24–25

Fees and Commissions

10

II. Deepen customer-oriented sales activities

26–30

Corporate Solution-related Earnings

11

III. Vitalize organizations

31–33

Revenues Related to Assets in Custody

12

IV. Enhance digitalization strategy

Expenses

13

V. Establish sustainable growth models

35–36

Credit Cost Trends/Non-performing Loans

14

Key Performance Indicator (KPI) for the Plan

37

Capital Adequacy Ratio

15

Numerical Plans

38

Earnings Forecast and Shareholder Return Policy

16

Image of Profit Growth in Three Years

39

22–23

34

For inquiries regarding this document, please contact:
Management Planning Department, The Chugoku Bank, Ltd.
Shimizu and Matsuo
TEL: +81-86-234-6519; FAX: +81-86-234-6582

Email: souki01@chugin.jp

2

Summary of FY2019 Earnings Results
andNumerical Plan for FY2020

Impacts of the Novel Coronavirus Pandemic
The ongoing novel coronavirus pandemic has had devastating effects on domestic and regional economies and weare also likely to suffer serious impact on the future financial results of the Chugoku Bank Group.
At present, all possible impacts are not taken into consideration in the numerical plan for FY2020 due to difficulties
of reasonably estimating all such impacts. However, we have disclosed the matters calculated on certain
assumptions.
Matters currently included in the numerical plan for FY2020
Part of credit expenses
The Chugoku Bank Group, as a whole, has been supporting its customers who are suffering under the impact of the novel
coronavirus infectious disease. With a policy of proactively meeting customers’ funding needs, we expect that outstanding
lending at the end of the current fiscal year will significantly exceed the planned value set at the beginning of the fiscal year.
Therefore, we have included the increase in the general provisions for doubtful receivables arising from the increase in
outstanding lending in the numerical plan for FY2020.

We have not included some matters in the numerical plan due to the difficulties of reasonably estimating thedegree of the impacts, the period of the impacts and potential countermeasures and for other reasons. However,
we have identified the risks and impacts listed below, and we will make disclosures of other matters as soon asreasonable estimates become possible or we can accurately determine the scale of the impacts.
Principal matters currently not included in the numerical plan for FY2020• Negative impacts on net interest income and fees and commissions due to reduction of our operations and the decreased
economic activities of our business partners, etc.
• Positive impacts on net interest income resulting from the increase in funding needs of our business partners• Decreases in expenses (personnel costs and property expenses) and investments due to reduction of our operations, etc.
• Increases mainly in provisions for doubtful receivables due to economic deterioration and worsening of the businessperformance of our business partners

4

FY2019 Earnings Results – Summary –(100 million yen)[Consolidated]
Consolidated recurring profit
Net income attributable to owners of parent

FY2016FY2017FY2018FY2019YoY (%)
vs. Plan* (%)
-62
-26
-42
-13

316
203

309
212

236
161

174
119

820
677
152
-9
548
66.9

795
662
146
-12
556
69.9

770
630
148
-8
542
70.3

747
582
158
6
540
72.2

-23
-48
10
14
-2
1.9

1
-6
4
3
-9
-1.4

271
265

239
222

228
217

207
206

-21
-11

10
13

Credit expense (- is reversal (profit))
Bond sales gains/redemption
Equity sales gains/redemption
Other

-2
-20
43
-7

-17
-24
44
2

41
11
14
6

56
-5
0
7

15
-16
-14
1

-1
-18
-16
-3

Recurring profit
Extraordinary gain/loss
Net income

289
-4
190

279
-1
194

219
-2
153

154
-6
108

-65
-4
-45

-26
-2
-13

[Non-consolidated]Core business gross profit
Interest income
Fees and commissions
Other operating income
Expenses (-)
OHR (%)
Core business net profit
Excluding profit/loss on cancellation of investment trusts* Forecast published on Nov. 8, 2019

• Core business net profit decreased by 2.1 billion yen year on year due to the decline in net interest income mainly resulting from thedecrease in interest on Japanese yen-denominated securities. It was 1 billion yen more than the previously released profit forecast
principally reflecting a decrease in fees and commissions and a reduction in expenses.
• Recurring profit decreased by 6.5 billion yen year on year due to the increase in credit expenses and the decrease in securities-related
profits.as a result of weaker market conditions.

5

FY2019 Earnings Results – Change in Interest Income –[Loan yield][Factors behind changes in interest income] Yen-based (-3,100 million yen year on year)• Loan interest: -200 million yen yoy• Securities interest: -2,700 million yen yoy• Decrease indeposit interest: +100 million yen yoy(100 million yen)7

 Foreign currency-based (-1,700 million yen
year on year)• Loan interest: -600 million yen yoy• Securities interest: +600 million yen yoy• Increase in foreign
currency procurement: +1,200 million yen yoy

Yen loan yield

-6

1.08

1.04

1.01

1.03

0.95

0.89

0.86

0.84

FY2017FY2018FY2019FY2016

- 21

0.95

0.82

-2

1 -7

7

-1

- 3

-4.8 billion

- 9

(%)

1.24
1.17
1.10

582

0.97

1.03
0.95

0.92
0.85

0.95

0.95

0.90

0.75
0.84
0.73

Securities yield
Foreign currency otherForeign currency
procurement

Foreign currency depositinterest

Foreign currency
securities yield

Foreign currency average
securities balance

Foreign currency loanyield

Foreign currency averageloan balance

Yen other

Yen deposit interest

Yen securities yield

Yen average securities
balance1.20-4* (Real) Net interest income posted a decrease of 3.0 billion yen
reflecting a decrease in foreign currency procurement costwhich is included in other operating income (a decrease of
3.1 billion yen in Japanese yen plus an increase of 0.1 billion
yen in foreign currencies).
Yen loan yield

FY2020
Plan[Securities yield]

FY20191

Yen average loan balance

Loan yield

-9

630

FY2018(%)

Yen securities yield
Yen securities yield (excl. investment trust redemption gain)
FY2016FY2017FY2018FY2019FY2020Plan• Yen interest income

Decreased by 3.1 billion yen year on year mainly due to the decrease in interest on securities arising from theprolonged negative interest-period.
• Foreign currency interest income
Decreased by 1.7 billion yen year on year mainly due to the decline in investment yields.
* (Real) Net interest income posted a year-on-year decrease of 3.0 billion yen considering a decrease in foreign currency procurement cost which isincluded in other operating income.

6

Major Accounts (1) – Deposits & Assets in Custody –[Average balance of deposits and assets in custody](100 million yen)

75,000Total assets incustody(Deposits + NCD)
Financial instrument
intermediary services
Public bonds
Insurance

65,000Investment trusts
Other
Deposits + NCD

72,972(63,044)
2,045
2,880
3,464
1,539
4,096

+1.5%

74,370(64,577)

77,095(67,155)

2,927

2,927

3,711

3,471
1,444

Domestic corporateclients
Deposits + NCD

14,724

1,377

1,370

5,234

4,651

4,920

3,914

15,475

15,96045,00016,459+3.4%

17,030

+1.8%

+1.8%
Domestic privateclients
Deposits + NCD

4,239

4,070

1,401

80,262(70,264)
1,529
2,849

2,820

+3.1%

55,00078,270(68,260)
1,749

1,901

1,951

+2.5%

45,187

46,27447,15047,99944,224FY2016FY2017FY2018FY2019FY2020Plan

35,000* Financial instrument intermediary services are based on the average balance of the acquisition value. Public bonds are based on the value of the average balance.
Insurance is based on the average balance taking into account cancellations. Investment trusts are based on the average balance of net assets.

• Both private and corporate client deposits and NCD are growing steadily due to the stable payment pipes (e.g. salary payment,
pensions) and robust corporate earnings.
• In assets in custody, insurance has grown significantly due to the enhanced sales activities based on consulting services centering onlife plan support activities.

7

Major Accounts (2) – Loans –+1.6%[Average loan balance](100 million yen)

45,51850,00042,324
Hong Kong Branch

Loans from the
Headquarters *3

Local government
loans

20,000

+4.5%
+6.4%

Personal loans

Urban
Development *2

47,344

48,116218

233

49,498
295
+2.4%

+3.7%

141

40,00030,000167+2.8%

10,523

9,882

11,704

11,41911,006+5.3%+18.1%

3,833

4,596

4,840

5,720

4,952

5,055

4,932

4,770

4,605

6,209

5,844

5,730

7,170

6,699

2,045

+2.0%

+3.0%

10,000Local
Development *1

18,131+6.1%

19,237+5.9%

20,38021,00821,441FY2018FY2019FY2020Plan

0FY2016FY2017*1 Local development: Regions other than Tokyo and Osaka *2 Urban development: Tokyo and Osaka *3 Loans from the Headquarters: Non-Japanese customers and SF centers• In FY2019, the annual growth rate of total loans was +1.6%, due to well-balanced efforts to increase loans, mainly local development and personalloans.
• In FY2020, we will endeavor to compensate for the decrease in interest on securities by loans from the Headquarters while continuing to focus on
local development loans, etc.
We will proactively respond to the funding needs of customers who have been impacted by the corona disaster.

8

Major Accounts (3) – Securities –[Average balance of securities]
23,456(100 million yen)

20,000-407

Others *1

139

Equities

977

Investment
trust

1,411

Foreign currency
bonds *2

[Appraisal profit and loss]+515

23,56423,049

165
1,000

160
916

1,900

1,508

2,845

End of Mar.
2019

End of Mar.
2020

Year on year

1,341

898

- 443

Held to maturity

4

3

-1

Other securities

1,337

895

- 442

Of which, stock

532

364

- 168

Of which, investment
trusts

353

216

- 137

22

23

1

423

304

- 119

(100 million yen)Total

Of which, foreign currency-

3,107

4,000

denominated bonds

Of which, bonds[Duration of bonds]
6.3
5.5

5.1
Bonds

18,084-726

17,358-858

16,500

5.0
4.1

3.7

Bonds
Foreign currency bonds

End of Mar. 201910,000FY2018*1: Investment partnerships*2: Including investment trusts in foreign currencies

FY2019FY2020Plan

End of Mar. 2020

End of Mar. 2021
Plan

• In FY2019, the balance decreased due to suppressed reinvestments of redeemed Japanese yen-denominated bonds.
• In FY2020, we plan to consider investment timings for equity-type assets and foreign currency-denominated bonds by focusing on themarket environment and risk/return outlook.

9

Fees and Commissions[Fee and commission (revenue) trends]
-142

+971

(Million yen)

15,857
15,214
14,61015,00014,886+92

Assets in custody*

10,000

5,000

4,221

4,287

4,467

2,459

Remittance/collection fees

Other

+50

4,517

4,375
+982

Investment banking
operations

15,715

3,074

-342

2,732

2,025

2,092

5,174

5,141

5,139

5,155

5,292

3,360

3,157

3,280

3,161

3,174

FY2016FY2017FY2018FY2019FY2020Plan

0* Four products in custody (investment trusts, insurance, public bonds and financial instrument intermediary services) + inheritance-related business• In FY2019, fees and commissions increased by 971 million yen year on year mainly due to the increases in revenues from assets incustody and investment banking operations.
• In FY2020, we will continue to enhance our proposal capability for customers centering on assets in custody and investment banking
operations.

10Corporate Solution-related Earnings[Breakdown of loans from the Headquarters](Trend of the actual results)[Trend of revenue from solutions for corporate customers](Interest income, fees and commissions, other operating income)+493(Million yen)

7,377
6,411
Other fees

6,000
Investmentbanking

4,000

490

856

Other investmentbanking

301
366

370
174

404

Intermediary fees

642

1,018

+274

+304

180
400
422

611

740

640

430

499

1,140

18%
57%

Marketable
loans

10%

31%

19%
6%

21%
CLO

Loan interest*(SF center, nonJapanese customers)

459.6
383.3
4,968
3,837

38%
Project
asset loans

572.0

837

Fees on syndicatedloans

Corporate
loans[Trend of average balance of loans from the Headquarters](Billion yen)

1,322

(M&A, consulting, etc.)

Fees on corporate
bonds

2,000

591

651

Fees on derivatives

366
352

As of March 31, 2020

As of March 31, 2017
8,280

7,870

8,000

+410

4,076

Average balance
in non-Japanese

142.6

484.0
139.7

125.6

3,244
Average balance
in SF center

155.6

257.7

317.0

344.3

FY2018FY2019416.4

0* SP earnings in foreign
currency-denominatedloans

FY2017FY2018FY2019FY2020Plan

FY2017• In FY2019, corporate solution-related earnings increased steadily to which robust growth mainly in intermediary fees and fees on
syndicated loans contributed.
• In FY2020, we will provide optimum solutions that fit customers’ needs, and conduct lending from the Headquarters while limiting
excessive risk taking by paying attention to changes of the market environment.

FY2020Plan

11

Revenues Related to Assets in Custody[Revenues related to assets in custody](Million yen)Group total(bank parent)

6,000

Group
subsidiaries(securities, assets)

Fees on inheritancerelated business

4,000Bank parent

2,000

6,713
(4,221)

7,244(4,287)

6,745(4,517)

6,539(4,467)

6,435(4,375)

2,957
2,491

4
1,346

Municipal bonds

206

28

55
970

1,620

+53

101

+11

119

130

1,023

1,086

128

83
+131

74
1,929

1,505

2,228

2,072

2,060
+64

Financial instrument
intermediary services

Life insurance

+206
(+50)

+104
(+92)

-332

1,597

1,728

1,599

1,490

FY2019FY2020
Plan

1,201
+282

Investment trusts

1,160

1,362

1,317

FY2016FY2017FY20180• In FY2019, revenues related to assets in custody grew year on year reflecting robust sales of investment trusts and fees on inheritancerelated business on which we have focused.
• In FY2020, considering the uncertainties of the market environment, we will endeavor to provide careful follow-up services to customers,
and enhance customer-oriented sales activities based on consulting services.

12Expenses[Expense trends](100 million
yen)

548

556

31

36

Other property
expenses

123

122

Deposit insurance
premium

24

System expenses

Personnel costs(Retirement benefit
expense portion)

Taxes

500

400

+8

-2

600

542

540

548

31

30

32

121

120

120

21

20

20

21

74

87

90

295

289

278

(4)

(7)

(5)

(10)

(13)

FY2016FY2017FY2018FY2019FY2020
Plan

300

-1

-3

87

+3

90

200

100

+4

282

+1

283

0

• In FY2019, while personnel costs increased mainly due to the increase in retirement benefit expense, total expenses decreased on a
year-on-year basis reflecting the reduction in system expenses.
• In FY2020, we will further enhance cost management although it is expected that system improvement projects will increase and that
retirement benefit expense will also grow.

13

Credit Cost Trends/Non-performing Loans[Credit cost trends](100 million yen)

Other credit costs
General provisions for doubtful receivables
Individual provisions for doubtful accounts
56
41
1[Non-performing loan (NPL) trends]* We do not implement partial direct write-offs.

63

0
23

(100 million yen)

31

NPL ratio* NPL ratio after partial
direct write-offs

1.50%

1.40%

1.44%

[値]

1.14%

1.18%

719

693

729

200

229

29
32
0
-0
-17

-17

FY201732

10
Calculation method of general provision for doubtfulreceivables:• Estimated loss ratio is calculated based on actual loan loss ratiosof three 3-year relevant periods, each of which is moved one year
forward.
• Estimated loss ratio is taken from the higher of either “the averageof three relevant periods” or “the average of the most recent two
relevant periods.”• “Performing loans” and “Loans requiring attention I” are adjusted
considering the average number of remaining years of loans.

FY2018FY2019Substandard

163

Doubtful

347

279

281

Bankrupt

209

213

218

FY2017FY2018FY2019FY2020Plan* Other credit costs = Loan loss write-offs, specific foreign borrowers, provisions for loss on claim sales, loss on claim sales• In FY2019, credit cost increased on a year-on-year basis mainly due to individual provisions for doubtful accounts.
• In FY2020, we assume that general provisions for doubtful receivables will increase on the back of the impact of the novel coronavirus
infectious disease.
While the impact of the novel coronavirus is not included in the individual provisions for doubtful accounts, the plan for FY2020 has been
designed conservatively based on the recent upward trend.

14Capital Adequacy Ratio[Capital adequacy ratio trends][Capital adequacy (consolidated)](%)

FY2018FY2019(100 million yen)

14.0

13.22

12.88
12.87

12.0

Total equity

Consolidated capital adequacy ratio

12.56
Non-consolidated capital
adequacy ratio

13.04

5,267

5,021

-246

5,265

5,019

-246

40,86738,485-2,382Credit risks

39,28036,937-2,343Operational risks

1,586

1,547

-39

Of which, Tier 1, includingcommon shares
Risk weighted assets, etc.

12.70

YoY

[Other Basel regulations]
FY201810.0
End of Mar. 2018

End of Mar. 2019

End of Mar. 2020

FY2019<Regulatory
standards>

Consolidated leverage ratio

6.20%

5.99%

3% or more

Consolidated liquidity coverage ratio(LCR)

151.7%

165.3%

100% or more

Consolidated stress test (IRRBB)

4.5%

3.6%

15% or less

• The total capital adequacy ratio improved to 13% on a consolidated basis mainly due to a decrease in risk weighted assets of securities
despite a decline in total equity resulting from the decrease in valuation difference on available-for-sale securities.

15

Earnings Forecast and Shareholder Return Policy[Planned dividend payment for FY2019][Earnings forecast]Year-end dividend: 11 yen per share (Annual dividend: 22 yen per share)* Only some matters (an increase in credit expenses on the assumptionof an increase of loans) are included in the impact of the COVID-19.

(as initially planned)[Shareholder return policy for FY2020]

Consolidated(Billion yen)

FY2019FY2020

ActualPlan

YoY

Consolidated recurring profit

17.4

16.7

- 0.7

Consolidated net income

11.9

11.1

- 0.8

The planned total payout ratio calculated by the sum of dividends andshare buybacks will be around 35%.
The shareholder return based on net income will be changed from a nonconsolidated basis to a consolidated basis effective FY2020.
The annual dividend will be 22 yen per share. (Of which, the interim
dividend will be 11 yen per share.)Non-consolidated(Of which, stable dividend will be 18 yen per share.)

Core business gross profit

74.7

73.2

- 1.5

Interest income

58.2

56.6

- 1.6

Fees and commissions

15.8

15.7

- 0.1

(Billion yen)

Other operating income

0.6

0.8

0.2

Expenses

54.0

54.8

0.8

Dividend per share(Interim dividend per share)

Core business net profit

20.7

18.3

- 2.4

Net income*

Credit expense

5.6

6.3

0.7

Securities-related gains

- 0.5

2.3

Other

0.7

Recurring profit
Net income

Non-consolidated basis

Consolidated basis

FY2018FY2019FY202022 yen(10 yen)

22 yen(11 yen)

22 yen(11 yen)

(1)

15.3

10.8

11.1

Total dividends

(2)

4.1

4.1

4.1

2.8

Payout ratio(2)/(1)

27.1%

38.2%

37.2%

0.3

- 0.4

Share buybacks

(3)

1.4

-

15.4

14.7

- 0.7

Total amount of profit return(2)+(3)

5.5

4.1

10.8

10.0

- 0.8

Total payout ratio((2)+(3))/(1)

36.2%

38.2%

Consolidated
total payout
ratio: Estimatedat approx.
35%.

* Share buyback as a factor in calculating payout ratio is based on buybacks during one
year from the general meeting of shareholders.

• We will return profit to shareholders at a rate of 35% of consolidated net income (net income attributable to owners of parent).

16

New Medium-term Management Plan

Plan for Creating the Future Together:
Stage II
(April 2020 to March 2023)

Introduction• In March 2017, we formulated a Long-term Management Plan (Vision 2027: Plan for Creating the Future Together), launching a
Medium-term Management Plan (Plan for Creating the Future Together: Stage I). Subsequently, we promoted structural reforms
centering on hardware aspects with the aim of expanding the opportunities to visit customers and improving the convenience ofservices. Concurrently, we endeavored to improve our services in fields other than the financial sector such as enhancement ofconsulting functions, entry into personnel recruitment service, and testamentary trust business.
• In April 2020, the Medium-term Management Plan (Plan for Creating the Future Together: Stage II) will start. We are in a criticalstage at the halfway point of the Long-term Management Plan. In formulating the plan, we carefully considered, getting back tobasics, asking to ourselves what is the ideal image of a future regional bank, what we should do for the regional community, andwhat we should do to be selected by, and win trust of, customers. We believe that it is our mission as the leading regional bank toenhance “the initiatives for regional revitalization and the SDGs” toward the realization of a sustainable regional community.
We are aware that a severe economic environment is expected for the future. We will get even closer to regional customers
expecting that our domestic and overseas networks that the Group has built to date will be fully utilized and that a wide scopeof services beyond the border of financing will be also used by many people.
• In Stage II, we will endeavor to enhance the human resources and organizational capability of the Group in order to improvethe capability of solving regional and customers’ issues. We will also implement many reforms ranging from strategies,
organizations, systems to structures. For corporate customers, we will build a system under which solutions can be developed by
one-stop and speedy measures. Concurrently, for retail customers, we will establish a system under which customers may
experience comprehensive lifelong services including non-financial services through a wide scope of services and channels. In
order to realize this sales system, we will conduct a drastic review of the “Human resource system, Training system, andPerformance award system, etc.” In the next three years, we expect to establish business models that will enable us todevelop together with regional community, which will lead to further growth at the next final stage.
• The Chugoku Bank Group will continue its efforts to become “A bank group to create new value together, addressing various
issues of regions and customers beyond the border of finance.” We will evolve into a bank group that grows by taking
changes in the environment as opportunities, responding to such changes flexibly, and with no fear of constant change.
Sadanori Kato
President18

Long-term Management Plan
“Vision 2027: Plan for Creating the Future Together” as the Assumption• In March 2017, we formulated and announced our 10-year Long-term Management Plan “Vision 2027: Plan for Creating the
Future Together” based on our long-term vision to “Create with Our Community, Customers and Employees a Rich Futurethat We Can All Share” with the aim of establishing sustainable business models by overcoming the decrease in populationand lower profitability.
Corporate Principles

Remain firm in self-driven sound management to develop in step with regional society
by winning unwavering trust and providing superior comprehensive financial services

Corporate Vision

A bank that is “chosen” and “trusted” by regional customers

Long-term Vision

Create with Our Community, Customers and Employees a Rich Future that
We Can All Share

[Framework for achieving the long-term vision]

Initiatives for creating a rich future— Improve the quality of the services we provide— Increase opportunities to provide services

Initiatives to create the foundation of management— Enhance our capabilities to provide services— Reform the mindsets of individuals and corporate and organizational
culture19

Review of the Previous Medium-term Management Plan: KPIs, etc.
• While the results of the process items in sales activities such as overall points of the Life Plan Support activities and of the
Local Promotion Project, as well as volume items such as the average balance of local development loans and the balance of
personal loans almost achieved the goals, the profit items fell short of the plan due to the deteriorated external environment
such as prolonged period of negative interest rates and the increase in credit expenses.
KPIs as indicated in the previous Medium-termManagement Plan
Net income attributable to owners of parent(Consolidated net income)Consolidated total capital adequacy ratio(Basel III disclosures)Consolidated ROE (Return on Equity)

Overall points of the Life Plan Support
Individual
KPIs

Average balance of the five products incustody
Balance of personal loans (Results andplan show the average balance)
Customer satisfaction*1

Corporate
KPIs

Overall points of the Local Promotion
Project
Average balance of local development
loans
Customer satisfaction*1

FY ended March2017 Results

FY ended March
2020 Targets(at the announcement of theprevious Medium-term Management
Plan)

FY ended March
2020 Results

Plan for Creating the
Future Together(Targets for FY ending
March 2027)¥20.3 billion¥16.0 billion¥11.9 billion¥30.0 billion

13.38%

12% remaining stable13.04%

12% remaining stable

3.9%

–

2.2%

5% or more–

Sustainableimprovement

Achieve internal goals

Sustainableimprovement¥992.8 billion¥1,100.0 billion¥1,045.3 billion–¥987.3 billion¥1,100.0 billion¥1,141.9 billion¥1,400.0 billion–

Sustainableimprovement

Sustainableimprovement

Sustainableimprovement

Approx. 10,000 points

15,000 points

25,381 points

20,000 points¥1,813.1 billion¥2,000.0 billion¥2,100.8 billion¥2,400.0 billion–

Sustainableimprovement

Sustainableimprovement

Sustainableimprovement*1: Total of the answers “Satisfied” and “Almost satisfied” in the customer questionnaire

20Positioning of the New Medium-term Management Plan
“Plan for Creating the Future Together: Stage II”• Based on the achievements of the structural reforms (strategic investments and improvement of efficiency and enhancementof sales capabilities through BPR measures) under the previous Medium-term Management Plan, we will establish “ourproprietary business models” which can quickly respond to changes of the external environment and can develop
together with local community.
• To that end, we will strengthen our organizational power and human resources development under the new Medium-term
Culmination ofManagement Plan.
FY2017

3 years

FY20203 years

FY20234 years

our efforts
FY2026Long-term Management Plan “Vision 2027: Plan for Creating the Future Together”
New Medium-term Management Plan
“Plan for Creating the Future Together:
Stage II”

Previous Medium-term Management Plan
“Plan for Creating the Future Together: Stage I”

Enhance hardware
aspects

Thoroughstructural reform

Enhance software aspects(organizations and human resources)

Develop sales
personnel and time
for sales activities

Establish business models for growth
I. Enhance initiatives for regional
revitalization and the SDGs*

Teller operation reforms

Sales activity reforms

Loans

Headquarters

Concentration and improvement of efficiency ofloan business at the Headquarters

Streamline the Headquarters
operations and promote work
style reforms

Five Pillars

Sales branches

Domestic exchange & counter reception

Sales“Plan for Creating the Future
Together: Stage III”

II. Deepen customer-oriented sales
activities

III. Vitalize organizations
IV. Enhance digitalization strategy
V. Establish sustainable growth models

Establish businessmodels that growtogether with local
community
The Chugoku Bank
Group will become theregional platform
SDGs: The term stands for Sustainable
Development Goals which were adopted
by the United Nations member states in
September 2015 as the common goals of
the international community.

21

Five Pillars: the Main Features of the New Plan
– Initiatives for the Realization of the Corporate Principles and the Long-term Vision –The Chugoku Bank Group will

create new value by addressing
various challenges of customers
from the regional community.

Corporate Principles

Corporate Vision

Long-term Vision
Create with Our Community, Customers and Employees a Rich Future that
We Can All Share<Prerequisites>
Development together withthe regional community
Practice customer-oriented
sales activities

Enhance initiatives forregional revitalizationand the SDGs
[Regional
community]

Act on Chuginno-kokoro(Philosophy of
Chugoku Bank)<Changes in internal environment>
Foster a stronger sense of unity inthe organization

Deepen customeroriented sales
activities[Customers]

Five pillars

Vitalizeorganizations[Employees]

Develop specialist staff members<Changes in external environment>
Further digitalization
Decrease in net interest income

Enhance digitalization
strategy

Establish sustainablegrowth models

Card loans and apartment loans facing headwinds

Advance to a comprehensive service bankcentering on financing
22

Five Pillars: the Main Features of the New Plan
– Towards the Creation of a Rich Future with Our Community, Customers and Employees –Strategy

Message to theregional community
Message tocustomers(individual andcorporate)

Strategies considering
the external environment

Message toemployees

Response todigitalization

Response tochanges in themarketenvironment

What

How

Enhance initiatives forregional revitalizationand the SDGs

Provide solutions to regional issues
Create new businesses
Contribute to achieving the SDGs

(1) Create opportunities for joint works of creation– Provide regional platforms– Return our know-how– Collaborate with different industries(2) Implement “Chugin’s Declaration of Support for the SDGs”– Solve social and environmental issues through business(3) Countermeasures against major disasters and new
infectious diseases

Deepen customeroriented sales
activities

Solve issues
Provide new value
Support for realizing dreams(1) Enhance unified sales activities of sales branches and the
Headquarters(2) Expand services(3) Enter new business domains(4) Maximize Group synergy

Vitalize organizations

Improve fulfillment in work
Help achieve self-fulfillment andgrowthEnhance the sense of unity in theorganization(1) Reform the human resource system(2) Review the training system (from product sales to problem solving)(3) Review the performance award system (change to goal setting by
the individual)(4) Establish a block sales system (delegation of authority)(5) Improve the career challenge system(6) Enhance the functions of the planning section (management andsales)(7) Increase joint projects of sales branches and the Headquarters

Enhance digitalization
strategy

By leveraging digitalization,– Improve efficiency– Increase contact points withcustomers– Create new customer experience(1) Improve personal applications(2) Open a portal site for corporate customers(3) Digitalize the Headquarters operations

Establish sustainablegrowth models

Increase fees and commissions
Reduction of OHR→ Realize the growth scenario(1) Secure stable revenues from the main business(2) Fundamental review of costs(3) Appropriate Headquarters operation according to theexternal environment(4) Enhance the ALM function23

I. Enhance initiatives for regional revitalization and the SDGs

Enhance Initiatives for Regional Revitalization and the SDGs
• We will establish business models that develop together with regional community by using know-how, information andnetworks cultivated in the Group and the TSUBASA Alliance, etc.
Issues of the local community<Regional
community>

Nationwide
TSUBASA
Alliance(1) Create future cities
Company University(3) Create new value
through cooperation
Financial
institution

Decrease in

The Partnership for
Okayama Local
Businesses

Municipal
government

The Chugoku BankGroup

Financial functions,know-how, information,
networks

Different
industries(2) Return our know-how to local customers

Overseasbusiness
base

Individuals

Companies

Create value and Decrease in companies
solve problems by population
IntenseResponses
toconcentrationinutilizing our resources
novel infectious
diseases andmajor disasters

the Tokyo
Metropolitan area

(1) Create future cities• Create opportunities for joint works of creation• Differentiation as the core place for starting a newenterprise• Regional trading companies, Setouchi DMO• Contribute to achievement of the SDGs

(2) Return our know-how to local customers• Digitalization and consulting on BPR• External sales of the indirect functions of the Headquarters(3) Create new value through cooperation• TSUBASA Alliance• The Partnership for Okayama Local Businesses• Cooperation with different industries

24

I. Enhance initiatives for regional revitalization and the SDGs

Chugin’s Declaration of Support for the SDGs
• Under the long-term vision of the Long-term Management Plan “Create with Our Community, Customers and Employees aRich Future that We Can All Share,” the Chugoku Bank Group hereby declares that it will take initiatives for the social andenvironmental issues of the regional community as shown below, with the aim of contributing to the achievement of the SDGs
through its business activities and realizing sustainable growth together with regional communities.

Priority issues

Principal initiatives (including plans)

Regional
economy andsociety

Contribute to vitalizing theregional economy andcommunity• Advance local promotion activities• Increase solutions• Support start-ups• Attract more foreign tourists, promote migration and settlement

Aging society

Support a secure and safe
life for the elderly• Respond to needs for lifetime asset management andadministration• Provide support for asset succession• Provide support for medical/nursing care providers

Financialservices

Provide financial services
for a better life

• Promote systematic asset formation using NISA, etc.
• Provide support for a wide range of people qualified for student
loans, senior loans, etc.
• Implement financial literacy education

Promote diversity andwork style reforms• Improve motivation of female workers and career formation on a longterm basis• Vitalization through expanding the working fields for diversified humanresources• Promote work style reforms• Chugin’s nursery project

Diversity

Environmental Contribute to preserving apreservation sustainable environment

Corresponding goals• Promote initiatives for the renewable energy business• Provide support for environment-related businesses• Reduce environmental burden (by limiting the use of paper, etc.)• “We want to protect Setonaikai” project * Priority issues are the same as those indicated in the “TSUBASA SDGs Declaration” (established on May 22, 2019).

25

II. Deepen customer-oriented sales activities

Shift from “Asset Management/Loan Business” to “Consulting Services for
Individual and Corporate Customers”• To date, the division of roles has been implemented by function between asset management and loan business. During the current period of the
new plan, we will shift such role-sharing to customer-oriented role-sharing for individual and corporate customers with the aim of demonstrating ouradvanced capability for solution of a wide range of issues of our customers.
• We will address any possible issues associated with internal cooperation arising from the change of division of roles to ones dedicated to individualand corporate customers under the management of administrators by proactively conducting bidirectional sharing of information.
Customer-oriented
division of roles

Individual
Enhance services and pursuit ofproposal capability for individual
customers

Concerns of
insufficient
cooperation

Corporate
Pursuit of expertise in service andproposal capability for corporate
customers

Compensate with mutual
sharing of information
ExampleStart-up by an individual(including apartment management)

Management byadministrators

ExampleCorporate owner,
work area

Sophistication of capability to solve problems is indispensable in each field of individual andcorporate customers in order to continue to meet customers’ expectations.
Changes in external environment
Rising levels of demand from customers
Declining fees for products in custody

Diversifying and sophisticating customer needs

Prolonged period of low interest rates
26

II. Deepen customer-oriented sales activities

Deepen Life Plan Support Activities (Solutions for Individual Customers)
Major strategy

Lifelong life plan support + Enhance service menu + Enhance approaches to asset forming generation[Personal loans by age / Balance of five products in custody]
Balance of personal loans

Balance of five
Asset management / products in custodyasset succession

Loans

Total planning service
Enhance sales for asset forming generation topre-seniors

Asset forming generation
EnhanceEnhanceEnhance

Infrastructure

Non-financial
service*(tentative)

Installment investment trust

iDeCo
NISA
Automobile loan
Card loan
Free (untied) loan

Job search seminar

Holiday opening of sales
Face-to-face sales (at sales branches and the Headquarters)
branches
Assets-in-custody sales ⇒ Life Plan Support(to be systematized)
FA / PB

Account transfer

Marriage

Getting a job

Junior NISA

Asset succession generation

Cross-selling according to life plans(Enhance connections)Non-face-to-face sales (through smartphones, websites and call center)Bank transfer of salaryTime deposit

Seniors

Work area

CreditOpening of an accountChildbirth

Procurement Operation

Financial services

ChannelHousing Loan Center / Life Planning
CenterPre-seniors

Insurance
Housing loan
Student loan

Cross-industrial
Exchange
Planning of formal
marriage interviews

Nursing care forsick children
Support for
Support for working
multiple jobs
child rearing

Asset succession/
inheritance

Asset management

Death

Juniors

Retirement(Life plan service planning)

Enhance face-to-face consulting

Asset transfer
Pruning ofgarden trees

Disposal of
unnecessary items
Total support for the preparation
for the end of life

Total support for nursing care

Proposal and planning of travel* Provision of non-financial services including business matching is under consideration.

27

II. Deepen customer-oriented sales activities

Deepen Local Promotion Activities (Solutions for Corporate Customers)
Major strategy

Realize speedy solutions and provide a wide range of services through the unified sales activities of the
Headquarters and sales branches

Image of strategy

Enhance relationships
Customers
Risk-taking
ExpandNeeds becoming
apparent• Fund for fiscal
year

Furtheradvancingin thebusinesses

Sales
branches

Unified operations

Business succession
Research & Consulting
Mutual cooperation

Mutual cooperation Mutual cooperation Mutual cooperation
Enhance

Person in charge of loan
support(Advanced business feasibility study)

Loan Dept.

Finance• Growth fund
• M&A
• Conversion into aholding company

Personnel
placement

Potential needs

Increase
personnel for
supportManager in charge of Relationship Management (RM) services

Solution Sales Division

Businessmanagement

Generate demand for funds linked
to the provision of solutions

Consider thebasis ofproposals

Joint sales + Support for comprehensive
proposals

ExpandSupport system

EnhanceBusinessfeasibility study

Volume of fund supply

Enhance

Consulting
Asia Deskcompany /Regional trading
International Dept.
company

Groupcompanies

New business domains under consideration
I. Launch a personnel placement business

IV. Expand business consulting services

VII. Real estate redevelopment contributing to regional
revitalization

II. Establish a consulting company

V. M&A as legal liquidation procedures

VIII. Enhance the use of funds

III. Establish a regional trading company

VI. Overseas M&A

28

II. Deepen customer-oriented sales activities

Branch Office Strategy: Towards Both the Improvement of Efficiency and Customer Convenience• Customer convenience and manned branches in which customer services are provided will be maintained, and cost reduction will be pursued in all
branch operations by operating new types of branches such as micro-branch*1 while further aggregating the conventional-type branches such as
full-banking branches.
• In considering branch office strategy, we will establish optimum branch office networks based on the current status of our bank as a whole and thebranch office network in each area as well as the opinions of the chief of each block and business base, also paying attention to the characteristics
of each area and the relationships with the regions and customers.

Image of future branch officedevelopment

Number of mannedbranch offices*2*1 “Micro-branch,” a new-type branch office

Stage I

(Of which, full-banking type): Full-banking type
: Retail-banking type
: Micro-branch, etc.

Stage II

Integration/abolishment of high-cost branch offices• Integration/abolishment ofbranch offices andconverting into retailbanking branches• A trial of opening new-type
branches such as microbranches (approx. 7 to 8
branches)

Stage III

Increase contact points

Decrease by five branches(Decrease by sevenbranches)

155
(121)

Consultation
counter
Reception

Realize both the improvement of efficiency of the branch office
networks and customer convenience by limiting operations only tosome work including consultation counters and necessary procedures.
Not only the refurbishment of the existing
branch offices but also opening as atenant of commercial facilities are underconsideration.

Decrease by 10
branches(Decrease by
seven branches)

145
(114)

• Increase new-type
branches such as microRealize both further
branches to expand
manned points for customer improvement of efficiency
and maintenance ofservices
contact points

Videophone
consulting
serviceKeypoints• Secure a system for providing the existing services at a lower costby integrating high-cost branch office functions.
• Maintain customer convenience and manned business bases bypromoting new-type branch offices such as micro-branches.
• As to branch office strategy, establish branch office networks
according to the characteristics of each area considering theopinions of the chief of each block and business base.

*2 The above-mentioned number of manned branch offices include special offices and excludes
overseas offices and overlapped number of branch-within-a-branch offices. Therefore, thenumber of offices differs from the number filed with the relevant authorities.

29

II. Deepen customer-oriented sales activities

Maximize Group Synergy
Major strategy

Maximize Group revenues by providing comprehensive services + Strategic personnel allocation• Maximize Group synergy by redefining the Group companies from the Bank’s related work to part of the lineup of the Bank’s comprehensive
services.
• We will proactively utilize our management resources for the enhancement of sales power, planning function and new business fields byreallocating current employees of the Bank.

Current status

FutureBank

Bank’s customeroriented operation

Banking business as
part of comprehensive
services

Bank

Unifiedoperations ascomprehensive
services

Group company A

Mutualcooperation

Enhance

Group company A

•
•
•
•
•

Improve profitability
Rejuvenate the organizations
Enhance governanceGroup strategy with uniformity
Unified operation of humanresource management

The company’s
own customers

Strategic personnel Enhanceallocation

Group company B

Measures• Low profitability• The personnel of the organization
are getting older. (Most of them are
reemployed after retirement.)• The Bank-Group company strategy
is decentralized.

Purposes

Challenges

Related services of the Bank’s businessBank’scustomers

Develop new
business domains• Enhance planning functions; Develop new business domains• Proactive and strategic personnel allocation (on loan) from the
Bank• Verify the effect of investing in human resources• Formulate the unified Group management strategy of the Bankand the subsidiaries; and implement a fundamental review ofthe organizational system

30

III. Vitalize organizations

Human Resource System Reform: A System Aimed to Realize Diversity• Pursue a comfortable workplace, respect voluntary efforts of individuals, and realize clear treatment according to the achievements and duties bysteadily implementing human resource system reforms including the integration of career-track and non-career-track courses, and theestablishment of a specialist course.

Concept

Image of people required

Human resource system to develop unique and highly motivatedemployees who can play active roles regardless of gender and age

Human resources who can demonstrate their strengths andcharacter in the work domain with specialist capabilities

External
environment
Changes in the
management
environment• Deterioration of profit
environment• Difficulty in securing
human resources
Responses torevision of laws
• Act on Stabilization of
Employment of Elderly
Persons• Equal pay for equalvalue of work
Changes in thesense of working• Diversity• Work-life balance

Two Main Pillars of the Revision to the Human Resource System(1) Flexible work system applicable to various life
stages from joining the Bank to retirement(2) Career courses in which individual capabilities can be demonstrated
to the maximum(Enhance specialist capabilities in retail sales and corporate sales)• Abolish the early retirement system at age of 55• Optional transfer system requiring a change ofresidence• Integration of the human resources courses (career-track andnon-career-track)• Establish a specialist course, and provide multiple careerpaths• Review the business staff system

Flexible work system; Improvement of motivation

Human resource development







Introduce flextime systems
Implement trial teleworking
Lift the ban on engaging in a side business
Expand the system for leave of absence andreinstatement
Review various allowances Consider the human resource development
project on a cross-sectional basis
 Enhance the development of the middlemanagement positions
 Specialists development program New human resource development program

Internal
environment
Change of theimage of people
required
Advancement of financial
digital transformation (DX)and business process reengineering (BPR)

Problems in thecomposition of
personnel
Issues of thehuman resource
systemIssues of the operationof the human resource
systemConcerns over
employeesatisfaction

31III. Vitalize organizations

Review of Evaluation System (Performance Award System)• We will renew the conventional performance award system, and revise the system under which each branch office will voluntarily formulate goals
in FY2022 and thereafter.
Management
by objectives
throughexternal
motivation

Adverse effects resulting from the recent
performance award system
The sales activities focused on certain types ofInward way of business and revenue items and were conducted
thinking for sales from the viewpoint of the banking industry.

Measures

Evaluation basedon the local
promotion activities

Management
by objectives
throughinternal
motivation

Establish the Bank’s overall sales promotion
systems by utilizing a performance award system asa tool for raising employees’ motivation.
Management by objectives applying the carrot andstick technique

Solution of customers’issues and the processactivities are evaluated.

Processes arealso converted
Results
into numericalvalues.
Amid diversified customer needs and financial services, thesystem under which employees compete for work only inthe established rules has become unfit for both customers
and employees at branch offices.

Management by objectives by encouraging branch
offices and each employee to raise spontaneous
motivation to contribute to customers, company
and society

 Each branch office will formulate its own policy and goals for sales activities taking
into consideration what to do in light of the current status of the branch office, rather
than following the goals set by the Headquarters.
 According to the model system to pursue, the revisions of the performance award systemand the methods of setting goals of branch offices and evaluation will be considered.

Schedule for system revisions
Up to FY2019
Performance
award

Subject ofsetting goals

FY2020

FY2021

Renovation
Headquarters

Headquarters

FY2022

Establish autonomous sales systems

TrialsThe model
we should
pursueHeadquarters

Branch office
Branch office

In FY2020, the Headquarters will set goals. In FY2021, a trial will be implemented for branch
offices to set goals based on the goals set by the Headquarters as guidelines. In FY2022 andthereafter, branch offices will set goals of their own.

32

III. Vitalize organizations

New Measures for the Activation of Organizations
We pursue the establishment of more community-based sales
systems by increasing the authority of the General Manager ofthe Region and the Chief of the Block (Chief of area) informulating the area strategies, etc.

Transfer ofauthority to theChief of the Block[To date: Top-down style]

Goal setting, performance
award and evaluation

Area and branch
office strategy

Headquarters

The Headquarters-driven formulation andmanagement of strategies and plans
General Manager ofthe Region
Chief of the Block

Affiliated branch

General Manager ofthe Region
Chief of the Block

Affiliated branch

Place importance on
bidirectional dialogues
General Manager ofthe Region
Chief of the Block

We encourage motivated employees to pursue a challenge
under career challenge systems such as the in-house
recruitment system for Branch Manager positions and the inhouse venture system.

In-house recruitment system for
Branch Manager positions

 We will select employees who are willing to contribute to the regional community
through management of a branch, and provide opportunities to play an activerole while encouraging their challenging spirit.

General Manager ofthe Region
Chief of the Block

Affiliated branch

Review the Headquarter-driven system of goal setting, formulation ofstrategies and planning[In the future: Bottom-up style]Enhance the career
challenge systems

Headquarters

The Block-driven formulation ofstrategies and planning
Goal setting, performance
Area and branchaward and evaluation
office strategies

In-house venture system
 We will call for ideas of new businesses and encourage a creative corporate
culture.
 We will provide growth and self-fulfillment opportunities to an employee who has
ideas for a promising new business by appointing him/her as the person
responsible for the business.

Plans that contribute to regional
revitalization
Affiliatedbranch33

IV. Enhance digitalization strategy

Enhance Digitalization Strategy
Vision of Digitalization Strategy
We pursue “A comprehensive services business that is closely related to various aspects of customers’ lives and businesses” which
provides the most powerful energy to the region in Japan.

Concept of retail DX*

Concept of corporate DX*

Create a rich daily life and life with various types of customers
together by expanding the scope beyond financing.

Become a true business/management partner to support growth andreconstruction of customer’s business through our support with funds,
human resources, materials and information.

Overall policy

Overall policy• Digitalization service• Minimize the existing branch offices and
ATMs• Digitalize and centralize clerical work
• Promote digital technologies to
employees• Provide joint platforms for creation• Expand the contact points of real anddigital• Establish joint operation schemes• Create new roles for employees• One-stop digitalized service• Improve the platforms• Digitalize inspections, etc.
• Promote professionalism for supporting
digitalization• Expand support for decision-making• Deepen the consulting business• Improve simulation tools• Establish a specialist group dedicatedto consultation

Overall policy of the
Headquarters DX*• Automatize data aggregation operations• Automatize various operations• Multi-dimensional analyses based on
multi-purpose data
• Realtime information provision• Provide our know-how to customers• Provide our know-how to other banks toshare* DX stands for digital transformation which is a concept to fundamentally change the scope of business and services provided tocustomers by using IT.

34

V. Establish sustainable growth models

Establish Sustainable Growth Models: Cost Reduction Goals• In the new Medium-term Management Plan, we endeavor to establish sustainable growth models by not only enhancing profitability but also
reviewing the fundamental cost structure.
• The reduction of expenses will be achieved on a medium- to long-term basis through the improvement of productivity and efficiency of
personnel (work) and organizations while securing the framework for strategic investments.

Cost reduction goals

Total of three items:
Decrease of ¥3.2 billion

System expenses
FY2019FY2022

Reduction policy during the Medium-termManagement Plan period¥8.7 billion¥6.7 billion

The cycle of BPR investments came to an end, and theamortization relating to TSUBASA is completed, resulting in adecrease of ¥2.0 billion.

FY2019FY2022

Reduction policy during the Medium-termManagement Plan period¥14.0 billion¥14.0 billion

The level of property expenses will be maintained while
increasing strategic investments.

FY2019FY2022

Reduction policy during the Medium-termManagement Plan period¥28.2 billion¥27.0 billion

Personnel cost will decrease by ¥1.2 billion reflecting natural
decrease in personnel due to higher productivity andreduction of new employment.

Other property expenses

Personnel costs

35

V. Establish sustainable growth models

The Headquarters’ Asset Management• In the first half of the plan, fees and commissions and non-financial revenues, etc. in the nurturing period will be covered by expanding
the balance of the Headquarters’ asset management such as structured finance (SF) including marketable loans and non-Japanese loans
applying the margin in our fund procurement.
• We plan to decrease the balance of marketable loans in the second half of the new Medium-term Management Plan according to the expansionof fees and commissions and non-financial revenues, etc.
• Capital adequacy ratio will be maintained at a stable level of 12%, balancing between profitability and soundness.

[Top priority issue is to secure stable revenue
by means of (1) to (3) below.](1) Realize high-value added sales activities based on theissues of regional customers(2) Develop and enhance new business domains(3) Reduce costs at the Headquarters and branch offices¥4,070.0
billion¥4,070.0
billion

1,660.0

1,560.0

1,510.0

410.0

440.0

460.0

271.7
304.8

380.0

400.0

410.0

1,070.8

1,000.0

930.0

880.0

300.0

370.0

440.0

340.0

350.0

340.0

FY2019FY2020

FY2021

Securities¥17.8 billion¥15.8 billion¥14.7 billion¥13.9 billion

Urban development andlocal government loans¥3.6 billion¥3.4 billion¥3.1 billion¥2.8 billion

SF and nonJapanese¥4.0 billion¥5.0 billion¥5.9 billion¥6.3 billion

Total¥25.4 billion¥24.1 billion¥23.6 billion ¥23.0 billion

Total capital
adequacy ratio

13.04%

Balance of the Headquarters’ asset
management (at end of period, Billion yen)

Clarify the positioning of strategies in the Medium-term Plan

¥4,120.0
billionTotal (Balance at
end of period)
Bonds inJapanese yen
Foreignbonds
Stock,
investment
trusts, etc.

* The reduction of balance will come into view if the above-mentioned
measures (1) to (3) contribute to revenues at an early stage.

Increase in the balance ofthe Headquarters’ asset
management

Also implement theenhancement of the ALM
function

1,768.5

Urban development andlocal government loans

SF and nonJapanese(Corporate/profile, etc.)

SF and nonJapanese(marketable loans)

243.3
258.5

FY2022
Net interest income*[The shortfall of revenue will be covered by SF and non-Japanese.]¥3,917.6
billion(the final year of theMedium-term Plan)

Maintained at a stable level of 12%* Calculated on an interest income basis for the Japanese currency-denominatedloans while on an SP basis for foreign currency-denominated loans.

36Key Performance Indicator (KPI) for the Plan
• The value we can provide to each stakeholder is set as a new KPI.
• The improvement of population in the region (Eastern Setouchi Economic Zone*1) and GDP is targeted on a long-term basis through theachievement of KPIs for each stakeholder.

Stakeholder

New KPI

Results in
FY2019Continuous
improvement

Number of projects to address regional issues
that contributed to the SDGs

Regional
community(1) Total of the number of startups for which we provided
support*2 and the number of companies for which we
provided support in business succession*3

Total of 3 years:
200 customers
Continuous
improvement(2) Activities contributing to theimprovement of financial literacy*4

Customer satisfaction*5 (individuals)

Continuous
improvement

Continuous
improvement

Customer satisfaction*5 (corporate)

Continuous
improvement

Continuous
improvement

Labor share in core business net profit before
payment of personnel cost*6

57.6%

54% or more

Net income attributable to owners of parent¥11.9 billion¥15.0 billion

Consolidated total capital adequacy ratio(Basel III disclosures)

13.04%

Maintained stably
at 12%

Customers

Employees

Shareholders, etc.
(All stakeholders)

Final year of theMedium-term Plan
(FY2022)*1: Eastern Setouchi Economic Zone includes Okayama
Prefecture, Kagawa Prefecture, the eastern part ofHiroshima Prefecture (Bingo region), and the westernpart of Hyogo Prefecture (Harima region).
*2: Number of startups for which we provided support
means the number of supported customers that started
business through our events for startup support.
*3: Number of companies for which we provided support inbusiness succession means the number of entrusted
contracts for business succession consulting services.
*4: Activities contributing to the improvement of financial
literacy means the number of events and study
meetings held for the improvement of financial literacy
and business skills, etc.
*5: Customer satisfaction represents the number of answers
indicating “Satisfied” or “Almost satisfied” in thecustomer questionnaires.
*6: Labor share in core business net profit before paymentof personnel cost is calculated by dividing personnel
cost by (Core business net profit + Personnel cost).

37

(Reference) Numerical Plans• We expect that sustainable growth will be achieved by realizing each strategy and reversing the trend of declining profit during the period of
the Medium-term Management Plan.

Core business net profit¥30.0 billion¥25.0 billion¥23.1 billion¥27.1 billion¥20.0 billion¥23.9 billion¥22.8 billion¥20.7 billion¥15.0 billion

Consolidated recurring profit¥30.0 billion¥31.6 billion

Both customer satisfaction and profits will turnupward by completing the structural reforms.

¥30.9 billion¥22.2 billion¥25.0 billion¥20.0 billion¥23.6 billion¥17.4 billion¥15.0 billion

Consolidated net income attributable to owners of parent¥25.0 billion¥20.0 billion¥15.0 billion¥10.0 billion¥20.3 billion¥21.2 billion¥16.1 billion¥11.9 billion¥15.0 billion

FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

FY2023

FY2024FY2025

FY202638

(Reference) Image of Profit Growth in Three Years• As to the decrease in net interest income from securities on the back of the prolonged period of negative interest rates, we will cover therevenues by improving the asset management of the Headquarters on structured finance (SF) and non-Japanese loans as well as the additionof fees and commissions and non-financial revenues, etc. At the same time, we will implement thorough cost reductions in property expenses
and personnel cost, etc.
• We plan to increase net income attributable to owners of parent by 3.1 billion yen in the final year due to the contribution by growth of theGroup companies.

+¥0.8 billion
Results for
FY2019Net income attributableto owners of parent¥11.9 billion

WholesaleHeadquarters’ asset
relatedmanagement*
revenue+¥0.7+¥1.4 billion
billion* Excluding revenue

Cost reduction+¥3.2 billion

from securities¥2.0
billion¥3.9
billion¥0.3
billion¥0.2
billion¥0.6
billion¥0.7
billion¥0.8
billionChange in non-consolidated corebusiness net profit
Change in consolidated recurring profit
Change in net income attributable toowners of parent¥2.2
billion¥1.2
billion¥1.5
billion¥0.8
billion¥1.7
billionPlan forFY2022¥15.0 billion
Net income attributableto owners of parent

Retail-related
revenue+¥2.5 billion+¥4.8 billion+¥3.1 billion

39This material contains forward-looking statements. These statements do not guarantee our future businessperformance and include risks and uncertainties. It should be noted that future performance may differ from the targets
mentioned herein due to changes in the management environment and other factors.