The Hyakugo Bank, Ltd. First Section of TSE and First Section of NSE - PowerPoint PPT Presentation

The Hyakugo Bank, Ltd. First Section of TSE and First Section of NSE (8368) INFORMATION MEETING Presentation for FY2019 Financial Results June 11, 2020

Table of Contents Organizational/Personnel Innovation Profit-Making Power in Operating Region: Changes in Heisei Era Branch Strategy ........................................................ 28 Profit-Making Power in Operating Region: .......................... 4 IT & Digital Innovation Changes in Heisei Era ...................................... 29 Mobile Strategy Outline of Financial Position Operations and Branch Digital ................................... 30 Transformation Strategy 6 – 15 Outline of Financial Position ....................................... Initiatives for ESG/SDGs The Hyakugo Bank Group SDGs Policy ............. 32 FY 3/2021 Forecasts (published figures) .......................... 16 ESG/SDGs Loans, Hyakugo SDGs Private ............. 33 Placement Bonds Medium-term Management Plan 34 – 37 Environment, Society, and Governance ..................... “KAI -KAKU 150 1st STAGE — Gateway to the Future" Numerical Targets (General) .......................................... 18 Appendix Challenges and Solutions for FY2020 Business Plan ....... 19 Deposits and Loans ...................................... 39 Profit Structure Innovation Deposits (including negotiable certificates of deposit), .... 40 Depository Assets Strengthening Loan Income (General) .......................... 20 ........................................................................ Loans 41 Strengthening Loan Income (Loans to Medium-sized Companies and SMEs) .......... 21 ................................................... 42 Risk-monitored Loans Strengthening Loan Income ........................................ 43 Integrated Risk Management ...................................... 22 (Housing Loan Strategy) Outstanding Nonperforming Loans by 44 ......................... Strengthening Loan Income Disclosure Standard and Coverage ...................................... 24 (Unsecured Loan Strategy) Trends of Debtor Classification ..................................... 45 Strengthening Fees and Commissions 25 .................... Hyakugo Bank’s Credit Policies ..................................... 46 (Corporate Solutions Fees) Mie Prefecture’s Shares of Deposits and Loans Strengthening Fees and Commissions ............. 47 ....................... 27 (Depository Assets-related Fees) Group Companies ........................................................ 48 2

Profit-Making Power in Operating Region: Changes in Heisei Era

Profit-Making Power in Operating Region: Changes in Heisei Era Changes in the economic power or “profit -making Mie, a leading “industrial prefecture” in Japan power” in Heisei era Product 1989 (Heisei 1) 2018 (Heisei 30) Mie Prefecture Aichi Prefecture shipment Ranked 9 th in Japan Ranked 14 th in Japan volume, etc. Total population (Unit: 1,000 persons) Compositions of output in Mie Prefecture, * The Censuses of Manufacturers (1989, 2018) 4th by economic activity 22nd Agriculture, forestry and fisheries Manufacturing Construction Whole sale /Retail Transportation Telecommunication Other services Other 4th 7,506 24th 1,808 Manufacturing Mie 6,649 1 4 8 5 2 10 31 1,782 39 Prefecture Manufacturing in Mie has twice as large a share 1989 (Heisei 1) 2016 (Heisei 28) 1989 (Heisei 1) 2016 (Heisei 28) as the national average Gross prefectural product (Unit: billion yen) National Manufacturing 1 (nominal) 6 14 5 5 14 34 2nd average 21 19th 3rd 39,409 22nd 8,220 28,045 5,426 0% 20% 40% 60% 80% 100% Source: Compositions of Gross Prefectural Output by Economic Activity (FY2016) Compositions of product shipment volume in Mie Prefecture, by industry 1989 (Heisei 1) 2016 (Heisei 28) 1989 (Heisei 1) 2016 (Heisei 28) Sales of transport equipment Prefectural income per capita (Unit: 1,000 yen) Ranked 8 th in Japan 2nd 9th Transport 2nd equipment 3,633 Three industries account for Other 42% 20th 3,155 23% 60 % of the total product 3,325 2,590 Shipment volume of chemical Electronic shipment volume. and allied products device Ranked 11 th in Japan equipment Ranked 1 st in shipment volume of 1989 (Heisei 1) 2016 (Heisei 28) 1989 (Heisei 1) 2016 (Heisei 28) 19% Chemicals, electronic components and device petroleum * Prepared by Hyakugo Bank based on the Cabinet Office, “Annual Reports on Prefectural Accounts, FY2006– electronic circuits and coal FY2016) (2008SNA, Benchmark year = 2011) and “Annual Reports on Prefectural Accounts, FY1975– 16% FY1999) (1968SNA, Benchmark year = 1990). Source: The 2018 Census of Manufacturers 4 * Comparisons of 1989 and 2016. The ranks are for Mie and Aichi prefectures among all the 47 prefectures.

Outline of Financial Position

Outline of Summary of Financial Results Financial Position  Gain posted from revisions of the retirement benefit scheme to extraordinary gains caused net income to increase 5.6% year-on-year. Year-on- (Unit: million yen) FY 3/19 FY 3/20 year Impact of the outbreak of COVID-19 (1) 55,131 57,140 2,008 Gross operating income Year-on-year 49,388 49,095 (292) Interest income (Unit: million yen) comparison with Credit costs the financial results 9,300 9,591 291 Fees and commissions 812 FY 3/19 (3,556) (1,547) 2,008 Other operating income +1,075 Of which, gain and loss from FY 3/20 1,888 (2) 70 2,572 2,501 government bonds and other bonds Provision of general allowance Gain and loss from stocks and other securities (3) (574) 85 660 for loan losses FY 3/19 1,665 (4) Expenses 40,987 41,295 308 Net operating (2,977) (1) − (3) − (4) 14,718 15,758 1,039 FY 3/20 (1,312) income Core net operating (1) − (2) − (4) 14,073 13,272 (801) income • Net operating income increased due mainly to increases in other Core net operating income (excluding gain and 12,675 12,570 (105) loss from cancellation of Investment trusts) operating income • Direct adverse effects of COVID-19 such as bad debt loss are minimal. Non-recurring gain and loss 304 (2,613) (2,918) However, as the bank performed stricter self-assessment of assets in Of which, disposal of bad (5) 1,387 1,802 415 preparation for an uncertain future, the amount of provision allowance debts for loan losses increased. This increased credit cost by 1,075 million yen Gain and loss from stocks and 1,665 (1,312) (2,977) year-on-year other securities • The stock markets plunged in response to the outbreak of COVID-19. 15,023 13,144 (1,878) Ordinary income This caused the bank to record 1,871 million yen of losses on devaluation of stocks and other securities. Accordingly, gain and loss (177) 2,167 2,344 Extraordinary gain and loss from stocks and other securities dropped by 2,977 million yen year-on- Net income before income taxes 14,845 15,311 465 year • Ordinary income dropped but net income increased due to gain from Net income 10,766 11,371 605 revisions of the retirement benefit scheme (3) +(5) Credit costs 812 1,888 1,075 6

Outline of Interest Income Financial Position  A decrease in interest on JPY denominated bonds contributed to a decrease in interest income of 0.6% year-on-year. Factors behind increase/decrease in interest income (Unit: million yen) FY 3/19 FY 3/20 Year-on-year <Head office and all branches (including domestic and international (Unit: million yen) Interest income 49,388 49,095 (292) operations departments)> Loans Deposits Securities Total interest income 54,044 55,350 1,305 +74 +931 +856 Loan interest 34,089 35,020 931 Other Increases in +2,812 foreign Interest and dividends +1,479 18,791 19,647 856 currency on securities expenses, +97 etc. Other 1,164 682 (481) (1,881) (22) Interest expenses 4,657 6,254 1,597 (623) Yield factor Interest on deposits 999 925 (74) factor Average balance (2,154) Yield on loans Other 3,657 5,329 1,672 49,388 (head office and all branches) 49,095 1.05%  0.99% Deposit-loan yield margin (domestic operations departments) (0.06)p Loans Deposits 1.15% 1.05% ( 292 ) million yen 1.00% 0.91% 0.86% 1.10% FY 3/19 FY 3/20 1.02% 0.98% 0.90% 0.85% Historical overall profit margin <Head office and all branches (including domestic 0.05% 0.03% 0.02% and international operations departments)> 0.01% 0.01% Returns on securities investments 0.22% 0.22% (domestic operations departments) 1.05% 1.03% 0.14% 1.02% 0.95% 0.08% 0.94% 0.08% FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/20 FY 3/16 FY 3/17 FY 3/18 FY 3/19 FY 3/20 7