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Investor Relations Meeting
Presentation Material
November 2018
Table of Contents
I. Summary of Financial Report for the Six
Months Ended September 30, 2018
II. Management Strategies
1. Summary of Earnings for the Six Months Ended
September 30, 2018
2. Interest Income
3. Average Loan Rate for New Loans to Corporate
Borrowers by Region
4. Deposits and Loans
5. Securities
6. Redemptions of Yen-denominated Bonds/ Interest Rate Risk
7. Net Fees and Commissions
8. Credit Costs and NPLs
9. Earnings Forecasts for FY2018
10. Income from Services for Customers
1. Long-term Targets
2. Basic Strategies
3. Enhancing the Competitiveness of Regional Industries—
Improving the Corporate Value of Our Clients
4. Implementing Relationship Banking (Case Study)
5. Enhancing the Competitiveness of Regional Industries—
Support by Industry and Business Category
6. Enhancing Measures for Medium-risk Borrowers (in Shimane
and Tottori)
7. Strategies by Region (Sanyo, Hyogo, Osaka)
8. Upgrading Consulting Services for Individual Customers
9. Enhancing Individual Loan Business
10. Loans for Investment Property
11. Credit Card Business
12. Gogin’s Structural Reform Project
13. Personnel Strategy to Keep Each Employee Highly Motivated
14. Orchestrating the Comprehensive Power of the Group
15. Capital Policy and Shareholder Return
16. ESG (Environment)
17. ESG (Society)
18. ESG (Governance)
I. Summary of the Financial Report
for the Six Months Ended
September 30, 2018
3
1. Summary of Earnings for the Six Months Ended September 30, 2018
Summary of Earnings (Non-consolidated) Summary of Earnings (Consolidated)
Net interest income
Decreased by 300 million yen year on year due to a fall in interest and
dividends received on securities, although interest on loans increased for the
first time in 10 years reflecting an increase in the balance of loans.
Credit costs
Gains (losses) on securities
Net fees and commissions
Increased by 1.3 billion yen year on year due to an addition of 1.8 billion yen in
accordance with a partial revision of the criteria for provision in the future.
The net loss related to bond transactions increased by 2.5 billion yen year on
year due to a rise in loss on sales, as we systematically sold U.S. treasury
securities with low yields.
Gains on stocks expanded by 2.8 billion yen year on year due to sales of ETF,
etc.
Remained almost flat as in the same period last year, which is attributable
to an increase in commissions relating to business support, despite a slight
decrease in commissions relating to assets under management.
Financial Highlights for Six Months Ended September 30,
2018 (Non-consolidated)
(Billion yen)
Six months
ended
September
30, 2017
Six months
ended
September
30, 2018 YoY change
Gross banking profit 28.3 (3.0) 25.2
Net interest income 26.7 (0.3) 26.3
Net fees and commissions 2.9 (0) 2.9
Net loss related to bond
transactions (1.5) (2.5) (4.0)
Gross core banking profit 29.8 (0.5) 29.3
Expenses 18.6 0 18.7
Personnel expenses 9.0 0.1 9.2
Non-personnel expenses 8.2 (0) 8.1
Transfer to the general loan
loss reserve (1) - 0.8 0.8
Net banking profit 9.6 (3.9) 5.6
Adjusted net banking profit 9.6 (3.1) 6.4
Net core banking profit 11.1 (0.6) 10.5
Nonrecurring gains 0.5 2.9 3.5
Bad debt disposals (2) 0 0.4 0.5
Gains on reversals from
loan loss reserve (3) 0 (0) -
Gains on stocks 1.1 2.8 4.0
Ordinary profit 10.2 (1.0) 9.1
Extraordinary profit (loss) (0) (0) (0)
Net income (loss) 7.1 (0.9) 6.2
Credit costs (1)+(2)-(3) 0 1.3 1.3
(Billion yen)
Six months
ended
September
30, 2017
Six months
ended
September
30, 2018 YoY change
Ordinary income 47.7 2.4 50.1
Ordinary profit 10.5 (0.8) 9.6
Profit attributable to owners of parent 7.3 (0.6) 6.6
A
B
C
D
E
A
B
E
C D
4
16.8 16.3 16.2 16.3
12.3 13.2 13.5 11.7
1.9 1.7 1.6 3.0
(2.4) (2.4) (2.3) (2.8) (0.8) (1.5) (1.0)
27.2 27.2 26.7 26.3
(5.0)
5.0
15.0
25.0
35.0
1H/FY2015 1H/FY2016 1H/FY2017 1H/FY2018
0.86% 0.81%
0.70% 0.67% 0.67%
0.4%
0.6%
0.8%
1.0%
FY2014 FY2015 FY2016 FY2017 1H/FY2018
2. Interest Income
(Billion yen) Net interest income
* Weighted average of loans
performed during the period
Net interest income Factors affecting net interest income
Yields on yen-denominated loans and securities Average loan rate for loans to new corporate customers
(yen denominated)
Remains almost
unchanged
(Million yen, %) Year-on-year
change
<Reference>
Balance
factors Yield factors Spread
Interest income (208) 702 (910) (0.03)
Of which, interest on
loans 131 960 (829) (0.05)
Of which, interest and
dividends on securities (1,745) (466) (1,278) (0.14)
Fund-raising expense 167 117 48 0.00
Of which, interest on
deposits 522 13 508 0.02
Of which, interest paid on
bond lending transactions (469) 159 (628) (0.21)
1.37%
1.22% 1.12% 1.07% 1.06%
1.25%
1.25% 1.23% 1.16% 1.14%
0.0%
0.5%
1.0%
1.5%
2.0%
FY2015 FY2016 FY2017 1H/FY2018 FY2018
Yen-denominated loansYen-denominated securities
Increased for the first
time in a decade
Drop rate has
been shrinking.
Interest on loans
Interest and dividends on
securities
Other interest income
Interest on deposits
Bond lending transactions
Other interest expenses
Foreign currency
deposits increased.
Plan
5
1.37% 1.27%
1.10% 1.01% 1.04%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
FY2014 FY2015 FY2016 FY2017 1H/FY2018
3. Average Loan Rate for New Loans to Corporate Borrowers by Region
* Weighted average of loans performed during the period
Shimane and Tottori Sanyo Region
Hyogo and Osaka Tokyo
0.67% 0.62%
0.53% 0.52% 0.53%
0.0%
0.2%
0.4%
0.6%
0.8%
FY2014 FY2015 FY2016 FY2017 1H/FY2018
0.66% 0.64%
0.56% 0.56% 0.55%
0.0%
0.2%
0.4%
0.6%
0.8%
FY2014 FY2015 FY2016 FY2017 1H/FY2018
0.40% 0.38% 0.39% 0.41% 0.45%
0.0%
0.2%
0.4%
0.6%
0.8%
FY2014 FY2015 FY2016 FY2017 1H/FY2018
Remains almost
unchanged
Drop rate has
been shrinking.
Remains almost unchanged
Upward trend
Bottomed out
Remains almost unchanged
6
2,354.3 2,379.8 2,417.9 2,451.7 2,457.6
982.1 1,032.5 1,083.8 1,109.1 1,103.5
420.9 427.1 412.9 417.7 413.2 3,757.5 3,839.6 3,914.7 3,978.6 3,974.3
0.0
1,000.0
2,000.0
3,000.0
4,000.0
FY2015 FY2016 FY2017 1H/FY2018 FY2018
Individuals Corporates Local public organizationsand financial institutions
544.4 596.0 656.7 700.4 712.8
1,404.2 1,542.1
1,658.2 1,734.9 1,752.8
515.5 534.9
563.6 566.0 552.1 2,464.2
2,673.1 2,878.6
3,001.4 3,017.8
0.0
1,000.0
2,000.0
3,000.0
FY2015 FY2016 FY2017 1H/FY2018 FY2018
Individuals Corporates Local public organizationsand financial institutions
(Billion yen)
4. Deposits and Loans
Full-year plan
(Billion yen)
Full-year plan
Deposits and NCDs (average balance) Total Loans (average balance)
Source: The Japan Financial News “Nikkin,” and the website of Japan Post Bank
* Excluding Japan Agricultural Cooperatives and the National Association of Labour Banks
Our Share of Total Deposits in Shimane and Tottori Our Share of Total Loans in Shimane and Tottori
46.5% 46.5% 46.8% 47.6%
23.0% 22.6% 22.3% 21.6%
11.4% 11.3% 11.4% 11.7%
0%
10%
20%
30%
40%
50%
15/3末 16/3末 17/3末 18/3末
当行
ゆうちょ銀
信金・信組
54.0% 54.6% 55.7% 56.2%
20.6% 20.8% 20.7% 20.8%
16.0% 15.6% 15.2% 15.5%
0%
10%
20%
30%
40%
50%
60%
15/3末 16/3末 17/3末 18/3末
当行
地銀
(除く当行)
信金・信組
65.5% 69.6% 73.5% 75.4% 75.9% * Including NCD
San-in Godo Bank
Japan Post Bank
Shinkin Banks and
credit associations
March 31,
2015
March 31,
2016
March 31,
2017
March 31,
2018
Loan deposit
ratio
San-in Godo
Bank
Regional
banks (excl.
San-in Godo
Bank).
March 31,
2015
March 31,
2016
March 31,
2017
March 31,
2018 Source: The Japan Financial News “Nikkin”
* Excluding Japan Agricultural Cooperatives and the National Association of Labour Banks
Shinkin Banks
and credit
associations
7
(2%)
0%
2%
4%
16/3期 17/3期 18/3期 18/9期
903.9 858.5 761.6 595.4
219.9 211.5 206.7
189.4
192.6 198.2 196.9
173.1
301.2 402.3 377.6
374.3
95.9 133.9
191.9
258.6
0.0
500.0
1,000.0
1,500.0
2,000.0
March 31,2016
March 31,2017
March 31,2018
September30, 2018
Government bonds Municipal bonds Corporate bonds
Foreign securities Stocks Investment trusts
11.7 11.1 9.4
4.4
2.1 1.8 1.5
0.6
1.5 1.3
1.2
0.5
6.4 8.6 9.6
3.8
1.5 1.4
1.7
0.7
1.4 2.4 2.8
1.6
24.9 26.9 26.5
23.9
0.0
10.0
20.0
30.0
FY2015 FY2016 FY2017 FY2018
Government bonds Municipal bonds Corporate bonds
Foreign securities Stocks Investment trusts
(2%)
0%
2%
4%
FY2015 7/3期 18/3期 1H/FY2018
(Billion yen)
5. Securities
FY2015 FY2016 FY2017 1H/FY2018
Government
bonds1.26% 1.27% 1.22% 1.22%
Municipal
bonds0.96% 0.85% 0.76% 0.63%
Corporate
bonds0.77% 0.72% 0.62% 0.55%
Foreign
securities2.36% 2.32% 2.28% 2.14%
Stocks 3.82% 3.49% 4.60% 4.07%
Investment
trusts, etc.1.96% 2.00% 1.95% 1.49%
Total
securities1.43% 1.47% 1.48% 1.37%
3.0
U.S. treasury bond 1.3
European bonds 0.6
0.6
Foreign currency
denominated
foreign securities
Other
1628.9 1753.9
1843.3 1774.0
(Billion yen)
295.4
U.S. treasury bond 60.6
European bonds 169.7
78.8
Foreign currency
denominated
foreign securities
Other
Balance of Securities (Acquisition cost-based) Breakdown of Interest and Dividends on Securities
Yields on Securities Investment and Funding Environment for U.S. Treasury Bond
and European Bonds
Plan for
the 2H
Yield in bond investment
Yield on fund procurement in
the market
USD
FY2015 17/3期 18/3期 1H/FY2018
Yield in bond investment
Yield on fund procurement in
the market
EUR
Fund procurement
yield rose.
A spread exceeding the
coupon yield was secured
due to fund procurement at
negative interest rates.
1.45%
0.89%
Average in the 1H of FY2018
167.9
27.4
27.5
35.6
REIT
Foreign bond funds
Stock funds
Other
Results for the 1H
11.7
0.6
0.3
0.5
0.1
REIT
Foreign bond funds
Stock funds
Other
Spread
Average in the 1H of FY2018
Plan
8
6 . Redemptions of Yen-denominated Bonds / Interest Rate Risk
5.14 4.60 4.36
4.88
6.24 6.18 5.82 6.40
0.0
2.0
4.0
6.0
8.0
March 31, 2016 March 31, 2017 March 31, 2018 September 30, 2018
Duration (domestic bonds)
Duration (foreign bonds)(Year)
Duration
Composition of Redemptions of Yen-denominated Bonds (As of March 31, 2018)
Interest Rate Risk
69.1 58.8 51.3 47.5
23.2 31.4 31.1
36.4
0.0
20.0
40.0
60.0
80.0
March 31, 2016 March 31, 2017 March 31, 2018 September 30, 2018
100 BPV (domestic bonds including funds)
100 BPV (foreign bonds including funds)(Billion yen)
206.9
39.0
183.7 164.8 167.0
47.9
24.4
24.1
15.4
15.1
79.5
47.9
36.2
40.9
17.8
26.1
41.7
302.9
99.6
248.9
33.2
206.1
288.3
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 andthereafter
Government bonds Municipal bonds Others
(Billion yen) 1.29%
0.42%
1.10%
Yield
0.59%
0.71%
0.92%
(234.6 billion yen was redeemed during the 1H of FY2018.)
9
2,887
1,621 1,827
957
252
523
1,285
432
3,139
2,144
3,112
2,725
0
1,000
2,000
3,000
4,000
FY2015 FY2016 FY2017 FY2018
Bank
Gogin Securities
664
1,013 1,144
663
188
332 326
214 5
42
377
2 857
1,388
1,848 1,900
0
500
1,000
1,500
2,000
FY2015 FY2016 FY2017 FY2018
Coupon swaps
計画
合計
(Million yen)
Results for
the 1H
879
Results for
the 1H
1,389
Year-on-
year change:
–319
Year-on-year
change:
+193
1.6
0.8 0.9 0.9
0.3
0.3
0.5 0.6
0.4
0.5
0.5 0.5
1.0
0.9
0.9 0.8
3.5
2.6
2.9 2.9
0.0
1.0
2.0
3.0
4.0
1H/FY2015 1H/FY2016 1H/FY2017 1H/FY2018
Assets under management
Business support
Credit card
Others
(Billion yen)
* Credit card and other fees and commissions are net of expenses.
7. Net fees and commissions
* Expected profits for the entire periods for private placement bond
guarantee fees and coupon swaps are included.
Fees and Commissions Business Support Fees and Commissions
(Million yen)
Group’s Assets under Management Commissions
1H/FY
2018
Brokerage
commissions
(including introduction
commissions)
105
Investment trust sales
commission
(including trust fees)
305
Insurance product
sales commissions
(including renewal
fees)
547
Plan
for the
2H
1H/FY
2018
Business
matching64
Syndicate loan 246
M&A 45
Private placement
bond
commissions
218
Consulting 18
Other 69
Plan
for the
2H
Plan
Plan
10
3.4
(0.2)
0.6 1.3
(1.2) (0.5)
0.13%
(0.01)% 0.02%
0.04%
-0.1%
0.0%
0.1%
0.2%
(1.5)
0.5
2.5
4.5
6.5
FY2015 FY2016 FY2017 1H/FY2018
(Billion yen) Credit cost ratio
[Credit cost / Term-end balance of loans and bills discounted]
73.75% 79.14%
73.13% 74.67%
52.48% 51.95% 47.11% 44.45%
33.48% 24.68%
16.40% 18.57%
0%
30%
60%
90%
March 31, 2016 March 31, 2017 March 31, 2018 September 30,2018
Ratio of reserve Estimated loss rate Actual loan loss ratio
16.5 12.1 11.0 13.1
33.4 31.6 30.9 27.2
16.6 14.5 11.6 13.7
66.5 58.4
53.6 54.1
2.49%
2.02% 1.73% 1.73%
0%
1%
2%
3%
0.0
30.0
60.0
90.0
120.0
March 31, 2016 March 31, 2017 March 31, 2018 September 30,2018
Substandard loans Doubtful loansBankrupt or de facto bankrupt NPL balance ratio
(Billion yen)
8. Credit Costs and NPLs
Loans Based on the Financial Reconstruction Act
Ratio of reserve for debtors at risk of bankruptcy (Doubtful Loans) Credit Costs
Revision to Criteria of Reserve
Criteria of reserve were
revised.
1.8 billion yen was added.
Criteria of reserve
were revised.
4.5 billion yen was added.
Sufficient
reserve
Ratio of reserve for debtors at risk of bankruptcy (doubtful loans)
64.76% (before revision)
74.67% (after revision)
① Estimated loss rate at substandard debtors and debtors at risk of bankruptcy
② Expansion of application of DCF standards to borrowers at risk of
bankruptcy
Calculation period: from three periods to seven periods (Parts subject to the SME Finance Facilitation Act)
Shortage of guarantee: from 100 million yen or more to
50 million yen or more
11
9. Earnings Forecasts for FY2018
(Consolidated)
YoY changeChange from the
initial forecast for
FY2018
95.8 50.1 (0.7) 95.0 5.0 90.0
19.8 9.6 (0.5) 19.3 0.4 18.9
13.6 6.6 (0.4) 13.2 0.1 13.1
16.93% 15.62% (1.01)% 15.92% (1.43)% 17.35%
4.51% 4.27% (0.28)% 4.23% 0.04% 4.19%
YoY changeChange from the
initial forecast for
FY2018
59.6 29.3 (0.0) 59.5 1.9 57.6
Net interest income 53.1 26.3 0.0 53.2 2.0 51.2
Net fees and commissions 5.9 2.9 0.2 6.1 0.0 6.1
36.8 18.7 0.2 37.0 0.6 36.4
Personnel expenses 17.9 9.2 0.7 18.7 0.5 18.2
Non-personnel expenses 16.7 8.1 (0.5) 16.2 0.1 16.1
22.8 10.5 (0.3) 22.4 1.3 21.1
(1.6) (0.0) 1.1 (0.5) 0.2 (0.7)
0.6 1.3 2.2 2.8 0.9 1.9
13.3 6.2 (0.0) 13.2 0.4 12.8
OHR 61.75% 64.00% 0.49% 62.24% (1.07)% 63.31%
FY2018
Forecast
FY2018
Forecast
Initial
forecast for
FY2018
Initial
forecast for
FY2018
Ordinary income
1H of
FY2018(Billion yen)FY2017
Non-interest income ratio
(Billion yen)FY2017
1H of
FY2018
Profit attributable to owners of parent
Net income
ROE (Shareholders’ equity basis)
(Non-consolidated)
Ordinary profit
Gross core banking profit
Expenses
Net core banking profit
Losses on securities
Credit costs
12
(0.1)
0.6
0.0
(1.9) (1.7)
(0.8)
0.4
(0.9)
(2.0)
(1.0)
0.0
1.0
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2020
10. Income from Services for Customers
Drastic revisions to services for customers will be implemented to move into the black
in the final fiscal year of the Medium-term Management Plan.
(Billion yen)
Income from services for customers = Average balance of loans (Yield on loans –
Yields on deposits, etc.)
+ Net fees and commissions
- Operating expenses (including retirement benefit
expenses in extraordinary profit and loss)
Present issues
Improvement of loan income
Diversification of profit
sources
Measures to be taken
Increase in loan balance Loans for corporate
customers
Loans for individual
customers
Limit the decrease in yields on loans. Enhance measures for medium-risk borrowers.
Increase net fees and commissions.
Business support fees and
commission-related income
Assets in custody Credit card
Reform of cost structure Drastic review of expenses Structural reform project
Promotion of digitalization
* Yields on deposits, etc.: Actual yields corrected from foreign currency
deposits with forex contracts
0.14% (before correction) ⇒ 0.05% (after correction)
Plan
Results
for the 1H
1H of
FY2018
II. Management Strategies
14
1. Long-term Targets
Regional Issues
and Risks
San-in Godo Bank
Initiatives
Target Vision
Core business initiatives Regional contribution activities
Resilient management structure
Fundamental support
Governance Risk management Information disclosure
Boost added value for the region and customers Boost added value for San-in Godo Bank
Establish a sustainable business model to assist in making a sustainable region.
Business
opportunities
Create the future with the region and customers
Regional economic revitalization Region development and improvement
Regional environmental preservation
Population decline and aging
Regional revitalization
Labor shortages Fewer business establishments
Forest regeneration
Regional resource depletion
Productivity enhancement
Today
Issues Startup support/ Business succession
Medium-term Management Plan
Realize sustainable growth for both the region and the Bank itself by resolving issues that our region and our
customers face.
Fees, commissions
and interest
Provide sophisticated financial services
Educational and cultural initiatives
15
2. Basic Strategies
Establish business models to develop together with customers by improving customer-oriented added
value.
Jointly creating customer-oriented added value
Corporate
customer
Realize the growth of both our customers and San-in Godo Bank through our relationship banking
activities aimed at deepening our long-term business partnerships.
Provide unified services of business support and finance to improve the value added of our customers.
Pursue inter-region synergies by expanding the range of our customer base.
Individual
customer
Strive to become the main bank by enhancing convenience and expertise while considering diversifying
financial needs as business opportunities.
Enhance transactions through various channels by utilizing IT.
Establish long-term trust relationships by providing advanced consulting services.
Structural
reform
Reconstruct service infrastructure aiming to radically improve efficiency in the operational process and
enhance productivity in line with the changes in IT and customer behavior.
Cultivate specialized personnel capable of satisfying diversified and advanced customer needs.
Improve organizational operations to maximize employees’ capabilities. Human
resources
16
One-person-one-company
program
Added value improvement
activity
Enhance consulting
service
3,327 4,720
6,219 7,313
6,146
9,796
14,571
16,571
2,608
4,378
6,954
8,912
0
6,000
12,000
18,000
FY2015 FY2016 FY2017 1H/FY2018
Total number of clients whosemanagement challenges are known to us
Total number of clients’ needs which are known to us Total number of business matchingnegotiations
3. Enhancing the Competitiveness of Regional Industries
—Improvement of the Corporate Value of Our Clients Endeavor to realize both improvement of the added value of our clients and increased transactions with
San-in Godo Bank by practicing relationship banking activities.
FY2015 to FY2017
FY2018 and
thereafter
Reinforce the trust relationships with our clients.
Approximately half
of all corporate
clients
Added value improvement activity One-person-one-company program
Business consulting
・Contingency fee-type
consulting
・Support for business
plans
・Support for business
succession
・Business matching
・M&A
Financial consulting
・Financing based on
business
evaluations
・Syndicate loans
・Private placement
bonds
Number of clients we
declared to support
business: 1,218
(as of Sep. 30, 2018)
430 companies
17
A contingency fee-type consulting service agreement
was concluded based on a trust relationship
established by supporting business establishment.
4. Implementing Relationship Banking (Case Study)
Consulting by our employee stationed at the client’s office Contingency fee-type consulting service
Support for the development of the existing business domain and entry
into new businesses
Support for the establishment of solid organization systems by
improving internal organizations and developing human resources, etc.
Honda Shoten LLC
(a manufacturer of Izumo soba noodles)
Continuously implementing
business support activities such as
making proposals and follow-ups
for the solution of challenges.
1st year of foundation
Import and sale of olive oil from overseas
Plans to manufacture and process olive oil in the future
Improvement of internal organization
Food manufacturer
[Management challenges and needs]
Expansion of sales channels by
expanding the scope of business
and enhancing the brand power.
Improving the internal
organizations
Honda Shoten San-in Godo Bank
Our initiatives were highly evaluated by the client,
which requested our consulting service by a
dispatched bank employee.
A bank employee has been stationed at the
client’s office to provide paid consulting services.
Since April
2018
Since October
2018
Ryutsu Co., Ltd. (Transportation and postal service)
The
2nd
case
3rd
case
We offer support for improving sales and operating income, etc. and
receive commissions for results that were predetermined according to
the results.
The amount of commission is determined according to the degree of
difficulty of the case, and the profit of the relevant company, etc.
Contingency fee-type consulting service
Establishment of a trust
relationship
• Assisted eight negotiations as a support service for business establishment
• Our service was highly evaluated by the client, resulting in a loan made by us as the sole lender.
Cultivating needs
• Shortage of personnel for sales activities and know-how
⇒A wide range of business support including the development of new sales channels was required.
Structuring a contract
• A contingency fee was fixed by multiplying a certain ratio by the portion we contributed to net sales.
Launched in
August 2018
1st case
18
Support for higher profitability and promoting the improvement of
corporate value
5. Enhancing Competitiveness of Regional Industries
— Support by Industry and Business Category
The business establishment support program has developed steadily. We implemented revitalization measures for major
regional industries and groups of companies.
Small-scale business conventions were held.
Accommodation and tourism Food manufacturing
SAN-IN Innovation Program
Background: In the San-in region, a low rate of establishment and a high rate of exit were notable. Revitalization to energize the local economy was necessary.
Highly motivated human
resources for start-ups and
business establishments
in the region
San-in Godo Bank Outside
consultants
Labor shortage
Needs for cost reduction
Support for
・ improvement of
operation
・ introduction of IT
Case
examples
Create the seeds of business
that are “Unique to San-in”
and “Made in San-in.”
Innovative entrepreneurs
across the nation
San-in Godo Bank and
Nomura Research Institute, Ltd. Supports
Stimuli
“Gogin’s Business Convention for Food Ingredients”
in Hiroshima
Business creation session Generating business projects to develop
and deepen them into “crazy ideas.”
Commercialization support session Establishing partnerships toward the
realization of business projects
Regional support organizations including San-in Godo Bank, industry,
government, academia and media agencies support commercialization.
16 teams were
organized as of
October 18.
Ryokan and hotels
Focusing on
improvement of service
Each relevant branch office held a business convention
that met its clients’ needs. Ryokan and hotels
42 sellers from Shimane,
Tottori and Hyogo
43 buyers from
Hiroshima
Support for expansion
of sales channels
11 deals
were
concluded
Status of
progress
Final
presentations on
December 18
19
123.9 139.6 149.0
93.5 97.3 99.1
217.5 237.0 248.1
0.0
50.0
100.0
150.0
200.0
250.0
September 30,2017
March 31,2018
September 30,2018
1.リレーションシップバンキング
Business activities will be reinforced by improving our risk-taking system and for higher yields.
6. Enhancing Measures for Medium-risk Borrowers (in Shimane and Tottori)
Select target borrowers.
Fully understand the prospects and challenges of
clients through dialogues (business evaluation).
Growth and
improvement of
earnings of clients
Increase in loans
and yields
(1) Proposal for offering support for core operations
to improve added value
⇒ Supply of funds necessary for their realization
(2) Proposal for restructuring of funding structure
⇒ Designed to provide companies with an
environment where they can focus on core
operations, by eliminating concerns over
shortage of cash flow
Balance of loans to target borrowers
(Billion yen)
* Business evaluation-based loans for borrowers requiring
attention and lower-risk borrowers
Risk-adjusted gross business income (1H/FY2018)
Utilization of
proprietary loans
Setting flexible repayment
conditions
(including long-term lump-
sum repayment)
Average
interest rate
2.15% Average interest rate
Balance of loans to 2,082 target borrowers
(786)
(1,296)
Normal debtors
1.75 %
Borrowers
requiring
attention and
higher-risk
borrowers
Target borrowers: 0.62%
(Compared to average of Gogin*: +0.26%)
(September 30, 2018)
Balance
Risk-adjusted gross
business income
13.8
billion yen
1.09%
1.17%
20
Expand our customer base.
Encourage our clients to do business with Gogin as their main
bank through relationship banking activities.
Play the role of a bridge to Shimane and Tottori through business
matching, etc.
605.9 630.4 653.2 664.8
232.2 265.6 303.6 330.6 349.3
413.5 471.3 518.2 216.6
232.4 230.1
221.1
0
5,000
10,000
15,000
20,000
16/3期 17/3期 18/3期 18/9期
両県内 山陽 兵庫大阪 東京
1.リレーションシップバンキング 7. Strategies by Region (Sanyo, Hyogo, Osaka)
Average Balance of Loans for Corporate Borrowers by Region
1,404.2 1,542.1
1,734.9
353 460 570 581
1,583 1,820
1,938 1,972
1,936 2,280
2,508 2,553
0
1,000
2,000
3,000
FY2015 FY2016 FY2017 1H/FY2018
Number of corporate clients in Hyogo and Osaka
Gogin as themain bank
(Clients)
Kobe West Branch was newly opened.
The 10th branch in Hyogo
Sanyo Region
Hyogo and Osaka
(Billion yen)
We will strive to become the main bank of small- and medium-sized
enterprises based in local communities, and to pursue relationship
banking activities.
0.5 0.6 0.5 0.5 0.9
13.2 21.6
27.4
1.2
1.9
4.4
7.5
2.7
15.7
26.7
35.6
0.0
10.0
20.0
30.0
40.0
June 30,2017
September 30,2017
March 31,2018
September 30,2018
Balance of ship finance
Shimane and Tottori
Sanyo Region
Hyogo and Osaka
(Billion yen)
Develop new clients and further cultivate transactions with
existing clients.
Initiatives for loans to local industries
2,000.0
1,500.0
1,000.0
500.0
FY2015 FY2016 FY2017 1H/FY2018
Shimane
and
Tottori
Sanyo
Region Hyogo
and
Osaka
Tokyo
0.0
1,658.2
21
16.2%
19.0%
28.5%
31.9%
0%
10%
20%
30%
40%
FY2015
FY2016
FY2017
1H/FY2018
930 1,369 1,556
1,000
2,321
0
500
1,000
1,500
2,000
2,500
FY2015 FY2016 FY2017 FY2018
2プライベートバンキング部門の立上げ 8. Upgrading Consulting Services for Individual Customers
Enhance customer-oriented consulting services, and shift to a stock-based profit model.
(actual accumulation balance)
(Million yen)
Enhance Consulting Services
Enhance contacts with asset-forming customers
(on an amount basis)
Approach to a high-income class
Plan
for the
2H
Collect customer’s attribute information
using an inquiry sheet.
Make proposals to meet each customer’s
needs.
A fund wrap was introduced. (April 2018).
Make proposals on the most appropriate asset
management course based on customer needs.
Long-term management and diversified investments
⇒ Stable asset formation
Professional asset managers adjust the asset
allocation according to the environment. ⇒ Feel secure
Balance of assets under management by the Group
(Billion yen)
94.6 87.3 78.9 77.2
13.8 14.5 28.6 31.6 8.7
37.1 57.7 67.3
117.1
138.9
165.2 176.1
0.0
40.0
80.0
120.0
160.0
200.0
March 31,2016
March 31,2017
March 31,2018
September 30,2018
Brokerage of financial instruments
Gogin Securities
Balance of fund wrap
(as of September 30,
2018)
Pri
va
te A
dvis
ory
Dep
art
me
nt
Customer Total consulting from the viewpoint of
preservation of assets and asset succession
Custom-made products and services
Long-term trust relationship
Established at
the Head
Office in
November
2018 Optimal asset
allocation
Secure asset
succession
3.5 billion yen
(Total of Gogin and
Gogin Securities)
Advice provided by outside professional
partners
Cooperation with personnel in charge of
business succession of the Head Office
Plan
Contacts to busy working age groups
Accumulation-type
investment trusts
Ratio of application for
investment trusts
online
22
• Increase advertisements.
• Improve dedicated websites for
employees of partner companies
• Increase the lineup for online
application
• Trust relationships with partner
companies
⇒ Explain the products and
services by visiting the
workplaces.
55.2 61.6 66.2 68.1
11.7 13.2
14.7 15.0 15.5 15.6
16.8 17.1 82.6 90.5
97.9 100.2
0.0
20.0
40.0
60.0
80.0
100.0
March 31,2016
March 31,2017
March 31,2018
September 30,2018
Card loan (excl. education loans) Card loan (education loans)
Consumer loan
423.3 457.0 499.5 513.8
80.2 91.4
109.1 116.9 503.6 548.5
608.6 630.7
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
March 31,2016
March 31,2017
March 31,2018
September 30,2018
Shimane and Tottori Other regions
9. Enhancing Individual Loan Business
Balance of housing loans (by region) Loans to individuals
(Billion yen)
(Billion yen)
Enhance loans for employees of partner companies.
Enhance contacts with employees of partner companies
493 531 608
118,923 123,876 133,740
0
70,000
140,000
0
700
FY2016 FY2017 1H/FY2018
Number of partner companiesNumber of employees of partner companies
(Persons)
Non-face-to-face basis
(online) Face-to-face basis
Numbers of both partner companies and employees have
increased steadily.
Secure individual customers after loan transactions.
(Companies)
23
110.6 121.9 135.8 139.9 0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
March 31,2016
March 31,2017
March 31,2018
September30, 2018
10. Loans for Investment Property
Balance of loans for investment property Credit assessment and management system
Credit is assessed based on business evaluation considering
stress tolerance.
Verify the earning plan of the property by
applying stresses such as a decline of rent
income or a rise in the interest rate.
2,605.7
2,822.4
3,016.5 3,036.3
Loans for
investment
property
Loans for property to be purchased by an individual
for investment purposes or for residence.
4.2% 4.3% 4.5% 4.6%
We select loan properties based on careful credit assessments. The percentage of loans for investment
property to total loan amount remains low.
Location and
profitability
Check the income and financial assets, etc. of
the borrower that can cover the risk of
fluctuations in income from the property.
Background
assets
Conservatively assess the collateral value.
The upper limit of loans is not elevated
irrespective of the collateral price.
Preservation
Appropriate management by periodic monitoring
Enhance the management system and fiduciary duty (FY2018).
Establishment of a guideline for examination (by clarifying the key
points for examination)
Implement internal audits concerning Gogin’s internal systems.
Ensure to confirm the customer’s understanding of the business
risks.
3,500.0
3,000.0
2,500.0
2,000.0
1,500.0
1,000.0
500.0
Total loan
amount
Percentage of total loan amount
(Billion yen)
Amount of loans
for investment
property
24
964 1,051 1,064
485
0
200
400
600
800
1,000
1,200
FY2015 FY2016 FY2017 FY2018
11. Credit Card Business
Large card share in the region
⇒ Expand the infrastructure for the use of credit cards and promote their use.
Shopping amount by credit card
51.9 57.2 62.4
31.4
0.0
20.0
40.0
60.0
80.0
FY2015 FY2016 FY2017 FY2018
Corporate credit card
Income from credit cards
(Million yen) (Billion yen)
Plan for
the 2H
67.2
Affiliate stores (The Gogin Credit Co., Ltd.)
5.5 6.0 6.6
3.4
9,869 9,886 9,990 10,046
0.0
2.0
4.0
6.0
8.0
FY2015 FY2016 FY2017 FY2018
Shopping amount Number of card members
Increase shopping amounts by promoting the use of corporate credit cards. Increase the number of affiliated stores by unifying Group-wide efforts.
32.7 34.9 38.2
20.3
10,426 10,412 10,637 10,742
0.0
10.0
20.0
30.0
40.0
50.0
FY2015 FY2016 FY2017 FY2018
Net sales of affiliated stores Number of affiliated stores
(Billion yen)
Plan for
the 2H
1,196
Plan
Plan
Plan
Plan
(Billion yen)
25
12. Gogin’s Structural Reform Project
Enhancing cost management
Efforts for digitalization
17.1 16.8 16.7
8.1
16.2
0.0
6.0
12.0
18.0
FY2015 FY2016 FY2017 FY2018
(Billion yen)
Non-personnel expenses
Plan
for
the
2H
Establishment of the Digitalization Department
Alliances with FinX DIGITAL Co., Ltd. and Japan Digital Design, Inc.
Measures for
digitalization
Increase
interaction with
customers.
• The introduction of RPA enabled the reduction
of 4,100 hours of paperwork (equivalent to the
working hours of 2 employees).
• Promote BPR
• The structural reform project will reduce
paperwork by 100,000 hours (equivalent to the
working hours of 50 employees).
• Proposal list of investment trusts by AI
• Improve proposals by using tablet terminals.
• Utilization of various proposal lists created by
AI
• Increase the variety of applications online and
through apps.
• Increase dedicated websites for employees of
partner companies.
Face-to-face
channel
Non-face-to-face
channels
Actual achievements Future efforts
Trust
Convenient • Application for loans online
• Apps for opening a bank account
In-house development in the Group companies
Integration of San-in Economics & Management Institute Co., Ltd.
⇒ Establishment of the Industry Research Group
Partial in-house development of San-in Office Services
⇒ Establishment of the General Administrative Group
Integration of Gogin’s agencies ⇒ Establishment of local offices.
Cost reduction activities
Scrutiny and selection of proposed investments
Drastic revision of operations
Plan
Improve the efficiency
of paperwork.
Visualization of sales
activities
Visualization of customers
Diversification of
channels
26
Promote efficiency and cooperation.
13. Personnel Strategy to Keep Each Employee Highly Motivated
Strategic fields
Number of staff
increased (in the 1H
of FY2018)
Loan and corporate sales (Hyogo and Osaka) 8
Business support 5
Industry research 13
Private advisory 2
Transfer of system, promotion of digitalization, etc. 26
Strategic personnel relocation
Utilize expert personnel
Attended by a total of 140 interested and motivated limited-area
employees
Corporate sales training for limited-area employees
Participation by women
Held for
the first-
time
Diversified career paths
Relocated 10 employees to the finance and corporate sales
divisions (in Shimane and Tottori)
Appointment as managers
Accelerate appointment as managers
The first female general manager was appointed.
54 employees were relocated based
on strategic personnel management.
Receive
dispatched
workers.
Headquarters Group
companies
Sa
n-i
n G
od
o B
an
k
・Buyout fund
・Trust bank
・IT company
・External trade
supporting
organization
・Maritime investment
fund
Local major IT
companies
・Consulting firm
・Certified public
accountants
・Securities companies
・IT companies, etc.
Mid-career
employ-
ment
Branch offices
Sending to
trainings
Getting
know-how
17.7% 19.6% 21.3% 22.0%
25.0%
0%
10%
20%
30%
March 31,2016
March 31,2017
March 31,2018
September30, 2018
March 31,2021
Target
Percentage of female managers
27
1H of
FY2017
1H of
FY2018
YoY
change
The San-in General Lease
Co., Ltd. 232 286 54
Gogin Securities Co., Ltd. 220 (29) (249)
The Gogin Capital Co., Ltd. (5) 52 57
The Gogin Credit Co., Ltd. 9 145 136
Group
companies
14. Orchestrating the Comprehensive Power of the Group C
usto
mer
The San-in General
Lease Co., Ltd.
Gogin Securities Co., Ltd.
The Gogin Capital Co.,
Ltd.
The Gogin Credit Co.,
Ltd.
Provision of comprehensive financial services
Provide comprehensive financial services with the aim of meeting diversified customer needs by reinforcing
our cooperation among the Group companies.
Earnings of the major Group companies
Provide highly professional and one-stop services to meet customer needs.
Maximization of Group synergy
(Million yen) <Net income for the six-month period>
In-house development in the Group companies
Group company Subject
business
Purposes of
reorganization
San-in Economics &
Management Institute
Investigations
and research
To provide highly
value-added services
San-in Office Services Central
paperwork Rationalization of
operations and
promotion of efficiency Gogin’s agencies
Banking
agent
Transfer the Group companies’ businesses into Gogin in order to
improve the service content and efficiency of operations.
* The figures of the above companies were adjusted for consolidated
accounting purposes (before the offsetting).
Lease brokerage
Brokerage of
financial instruments
Introduction of funds
Introduction of
affiliated stores
Ban
k
Personnel
exchange
(to increase
expertise)
28
Profit attributable to owners of parent (shareholders’ equity basis)
Average balance of shareholders’ equity
(Average of balance at beginning and end of the term) x 100
4.64% 4.61% 4.51% 4.27% 4.23%
0.0%
2.0%
4.0%
6.0%
8.0%
FY2015 FY2016 FY2017 1H/FY2018 FY2018
15. Capital Policy and Shareholder Return
Levels of profit
(consolidated basis) (Billion yen)
1 Annual
dividend Payout ratio
Stable dividend Performance-linked
dividend
Over15.0 14 yen 16 yen 30 yen 31.2% or less
More than 14.0 to 15.0 14 yen 14 yen 28 yen 29.2% to 31.2%
More than 13.0 to 14.0 14 yen 12 yen 26 yen 29.0% to 31.2%
More than 12.0 to 13.0 14 yen 10 yen 24 yen 28.8% to 31.2%
More than 11.0 to 12.0 14 yen 8 yen 22 yen 28.6% to 31.2%
More than 10.0 to 11.0 14 yen 6 yen 20 yen 28.4% to 31.2%
More than 9.0 to 10.0 14 yen 4 yen 18 yen 28.1% to 31.2%
More than 8.0 to 9.0 14 yen 2 yen 16 yen 27.8% to 31.2%
Less than 8.0 14 yen 0 yen 14 yen 27.3% or more
ROE (Consolidated and shareholders’ equity basis)
Dividend table
Trend of shareholder return
FY2015 FY2016 FY2017 FY2018
(Estimate)
Annual dividend per
year 15 yen 15 yen 26 yen 26 yen
Payout ratio 18.00% 17.50% 30.48% About 30%
Number of shares
repurchased 1,300,000 2,250,000 - Flexibly
implemented
in response
to situations
Number of shares
of treasury stock
retired
1,300,000 2,250,000 -
Shareholder return
ratio 28.80% 30.60% 30.48%
Slightly over
30%
Plan
ROE =
29
Save the Forest! San-in Network Conference:
The “Friendship Store” system has been launched.
Assuming the role of secretariat, San-in Godo Bank takes the initiative in
expanding forest conservation activities in Shimane and Tottori by holding
events, etc.
Number of members: 52 groups (as of August 2018) (29 groups in Tottori; 23
groups in Shimane)
The 64 regional banks nationwide cooperate with each
other in exchanging information and sharing know-how
of forest conservation in their hometowns.
Established with volunteer groups and non-profit
organizations based in Shimane and Tottori as its
members
Forest conservation activities are conducted by
directors, employees and their family members in six
forests located in Shimane and Tottori.
16. ESG (Environment)
Aggressively promote proposals for carbon offsetting
• In 2009, Tottori Prefecture consulted with us about the outline of the
Offset Credit (J-VER) scheme, the acquisition of J-VER certification, and
sales promotion. We made a proposal for the scheme using our paid
business matching service.
• We are positively involved in the creation of the “Tottori Prefecture J-
VER Local Coordinator Program” (currently referred to as the “J-credit
Local Coordinator Program”). We have been certified as a “J-credit
Local Coordinator” by Tottori Prefecture, Nichinan Town of Tottori
Prefecture, and Yabu City of Hyogo Prefecture.
• Through this scheme, we endeavor to realize sustainable local
communities by disseminating the importance of environmental
conservation and methods to reduce environmental burdens through the
J-credit system.
Activities to save and grow forests to pass them on to the next generation
Support for emissions trading Forest conservation activity Since 2010 Since 2006
Clients Conclusion of the J-credit Selling
and Purchase Agreement
Compensation (Offsetting)
Inte
rme
dia
ry
Sustainable
forestation Propose
effective use
of J-credit
Initiatives by Gogin as the J-credit local coordinator
Advantages of purchasing J-credit • Offsetting CO2 emissions from
corporate activities
• Differentiation of products and services
• Improvement of the company’s image
as one that positively addresses
environmental and social issues
Advantages of selling J-credit • Using the revenue from J-credit for forest
maintenance
• Establishment of a network with
companies with high environmental
awareness
• Publicity and dissemination of the creation
of sustainable and healthy forests
Certify the J-credit
local coordinator Introduce
companies
considering
using
J-credit
Municipal
governments, etc.
San-in Godo Bank
San-in Godo Bank’s forest conservation activities: Three pillars
(GOGIN GREEN PROJECT)
Gogin Forests of
Hope:
Save the Forest! San-
in Network
Conference:
A group of volunteer
regional banks for
saving forests:
The “Friendship Store” system was launched as a revitalization
measure for the activities of the members amid various challenges
including “aging members,” and “lack of contact with local
communities” after more than 10 years of establishment.
■Purpose:
A sales branch that is closest to the member will be the office in charge.
Through mutual cooperation and friendship, the purposes of the
Conference’s activities and the importance of the forest conservation
activities will be promoted to the residents of Shimane and Tottori, thereby
raising consciousness of environmental conservation including that of
forests, etc.
■San-in Godo Bank’s specific initiatives:
・ Cooperation with the member’s public relation
activities
・ Cooperation with participation in events, etc.
held by members
Total quantity offset by our intermediary: 2,555 t-CO2 As of November 21, 2018
30
17. ESG (Society)
Gogin Challenged
Matsue (Since September 2007)
Gogin Challenged
Tottori (Since September 2017)
• People with intellectual disabilities work in specific jobs.
• Supports the employment of people with disabilities in
communities based on “Yumeiku Work Support Services”
• Mainly mentally challenged people and people with
developmental disorders are hired.
• By engaging in clerical work at our bank, they can
expand the future scope of their work.
Number of employees: presently, 6. ⇒ To be
increased to approx. 20.
Cultivating human resources capable of making decisions from a broad
perspective with cogitative and visionary functions.
Supporting the independence of people with disabilities by positively
employing them.
• Operated by the Gogin Shimane Cultural Promotion Foundation
• Aiming at cultivating highly motivated human resources capable of
participating in future society.
• The third generation students entered the school in April 2018.
Supporting the independence and participation
in society of people with disabilities Operation of a private school “Shofukan” Since 2007 Since 2012
Company benefit-type private
placement bonds
Private placement bonds contributing to the local community together with our clients
Donations are given under the joint signature of the
issuer and Gogin to a group designated by the issuer. Donation-type private placement
bonds
Donation to educational
organizations-type
Books and sports gear, etc. are presented to educational
organizations.
Regional revitalization-
type
Activity funds are donated to non-profit organizations, etc. engaged in
solving local issues in Shimane and Tottori.
Sports promotion-type Activity funds are donated to local sports teams.
251
11
24
22.2 billion yen
0.8 billion yen
2.1 billion yen
Total number of
issues
Total amount of
issuance
15 1.2 billion yen The issuer of private placement bonds provides subsidies for the hotel expenses
of tourists who use the subject ryokan and hotels in Shimane and Tottori.
Since 2018
Since 2015
Since 2017
(as of October
2018)
Support the improvement of company benefits of our clients.
Increase the value added of the accommodation and tourism
businesses as the main industry of Shimane and Tottori.
31
18. ESG (Governance)
Enhancing our corporate governance system with the aim of responding to stakeholders’ expectations
and realizing the sustainable improvement of our corporate value
Establishment of nominating and compensation committees Governance system
For the purpose of improving the effectiveness of corporate
governance, voluntary “Nominating and Compensation
Committees” were established as consultative bodies to the
Board of Directors. (June 2018)
(1) Highly transparent and objective process of selecting
directors and officers
(2) Compensation system for directors and officers as an
incentive to improve corporate value
Purposes
Discussing matters
Selection of candidates for directors, corporate auditors and
executive officers, selection of directors with special titles,
and compensation of directors, etc.
Composition of the Committee
Chairperson No. of Outside
Directors
No. of Inside
Directors Total
Outside
Director 3 2 5
Board of Directors (Directors)
⇒ “Decision-making function concerning management”
and “supervisory function of execution of operations”
Executive Officer ⇒ Function of business execution
Separation of functions by introducing an executive officer system
Sufficient number of directors for holding full discussions
Structure of four executive officers contending with four
non-executive officers(*)
* Chairman of the Board (Chairperson) + three Outside
Directors
System for revitalizing the Board of Directors
Compensation of fixed amount (an incentive for stable
management)
Performance-based compensation (an incentive for higher
performance)
Stock-linked compensation (an incentive for improving
medium- to long-term shareholder value)
Highly transparent compensation system for directors
Forward-looking statements are including in this material. These statements do not
provide a guarantee of the San-in Godo’s future performance, and actual results are
subject to risks and uncertainties. Please note that future performance may differ
from the views presented herein owing to changes in the operating environment and
other factors.
For inquiries relating to this material,
please contact:
Planning Group
Management Planning Development
The San-in Godo Bank, Ltd.
Phone: +81-852-55-1020
Fax : +81-852-27-3398
Email: [email protected]