Fukuoka Financial Group, Inc. · TSE:8354

Fukuoka Financial — Investor Presentation (October 2017)

57 slides from Fukuoka Financial's investor presentation, October 2017

  1. Slide 1: Investor Meeting - FFG Growth Strategies

    － To be your Bank of choice － － To be your Bank of choice － Fukuoka Financial Group Investor Meeting － FFG Growth Strategies － October 2017

  2. Slide 2: Contents

    － To be your Bank of choice － Contents Part I Opening Presentation Part II Fukuoka Financial Group Page Page 4. An Overview of FFG 21. Corporate Data 5. History of FFG 22. Stock Data 6. Improving Profit Structure & Changes in Business 23. Market Share of Subsidiary Banks Results 7. FFG Growth Strate

  3. Slide 3: Contents

    － To be your Bank of choice － Contents Part III Financial Data Part IV Our Mother Market “ Kyushu ” Page Page 25. Financial Results for FY2016 46. Potential of Our Local “Kyushu” 26. Projections for FY2017 47. Feature of Kyushu Economy 27. Transition of Top Line 48. Potential of Fukuoka Metropolitan

  4. Slide 4: Part I Opening Presentation

    － To be your Bank of choice － Part I Opening Presentation Fukuoka Fukuoka Saga Oita Nagasaki Kyushu Kumamoto Sasebo(Nagasaki) Miyazaki Kumamoto Kagoshima

  5. Slide 5: An Overview of FFG

    － To be your Bank of choice － An Overview of FFG  FFG is a total financial group that includes 3 regional banks based in Kyushu and a securities company.  Established the “Single Platform / Multiple Brands” management style best suited to the integration of Japanese regional banks.  Company Outli

  6. Slide 6: History of FFG

    － To be your Bank of choice － History of FFG  Achievement of steady growth, including business expansion, while gradually progressing through phases over ten-year period since management integration. Preparation for growth Switch to Switch to growth trends stable earnings structure Phase Run-up Pha

  7. Slide 7: Improving Profit Structure & Changes in Business Results

    － To be your Bank of choice － Improving Profit Structure & Changes in Business Results  Improve profit structure by increasing management efficiency through the construction of a single platform  Consolidated net income showed a consecutive increase in profit for five terms from FY11 to FY15 and s

  8. Slide 8: FFG Growth Strategy

    －To be your Bank of choice－ FFG Growth Strategy  Evolve business model in a rapidly changing business environment, to achieve a sustained strong competitive edge and potential for growth.  Under the Fifth Mid-Term Management Plan, achieve a virtuous cycle of “contribution to regional economic deve

  9. Slide 9: Second Year of Fifth Mid-Term Management Plan: Initiatives for Structural Reform

    －To be your Bank of choice－ Second Year of Fifth Mid-Term Management Plan: Initiatives for “Structural Reform”  Prolonged low interest rates and greater competition are continuing to place downward pressure on interest on loans and interest on securities (core components of banking earnings).  To

  10. Slide 10: Consulting Services

    －To be your Bank of choice－ Consulting Services  Provide a one-stop service satisfying all the needs of business owners, who are the decision-makers for both corporate and individual transactions.  Expand both corporate and individual transactions by means of Group-wide efforts and by training spe

  11. Slide 11: Expansion of Asset-Management Business

    －To be your Bank of choice－ Expansion of Asset-Management Business  Expand “asset-management” business that meets diverse customer needs, through integrated Group banking, securities and insurance operations.  Strive to increase balance of assets under management by improving products and services

  12. Slide 12: Building up Consumer Loans

    －To be your Bank of choice－ Building up Consumer Loans  Steadily built up balance of consumer loans almost to plan, by introducing new products (online-only products and group credit life insurance products) and by utilizing non-face-to-face channels.  Strive to further increase balance of consume

  13. Slide 13: Securities

    －To be your Bank of choice－ Securities  To prepare for interest rate rise (mild inflation) in medium to long term, proceed to diversify revenue sources away from focus on Japanese-yen fixed-rate bond investments. 1. Yen-bond operations • Keep under control fixed-rate bond investments at low interes

  14. Slide 14: iBank Business

    －To be your Bank of choice－ iBank Business  iBank—new smartphone money service—launched in July 2016  User base is in very good shape, with downloads topping 200,000 Downloads top 200,000! Jul 2016 Jul 2016 Oct 2016 Debut Debut Debut Information content Money management app Cash-like payment card

  15. Slide 15: FinTech Initiatives: Accelerating Innovation

    －To be your Bank of choice－ FinTech Initiatives: Accelerating Innovation  Promote innovation actively using ICT, such as reform of channels, more sophisticated marketing and reform of business processes.  Realize profit expansion by creating new businesses and services inconceivable in the convent

  16. Slide 16: Financial Results for FY2016 & Projections for FY2017

    － To be your Bank of choice － Financial Results for FY2016 & Projections for FY2017  FFG plans to achieve a core business profit of 73.2 billion yen and a net income of 49 billion yen in FY2017.  The first quarter result was on track with a progression rate of 25% for net income. Actual Planned Ac

  17. Slide 17: One-time Goodwill Amortization #1

    －To be your Bank of choice－ One-time Goodwill Amortization #1  Prolonged low interest rates had not been anticipated at time of business integration. Last year's introduction of negative interest rates in particular has led to considerable change in the earnings environment for financial institutio

  18. Slide 18: One-time Goodwill Amortization #2

    －To be your Bank of choice－ One-time Goodwill Amortization #2  Goodwill had previously been amortized on straight-line basis. But amortizing goodwill all at once will eliminate the burden of amortization in the future, and stabilize profit levels from next fiscal year.  Except for a temporary defi

  19. Slide 19: One-time Goodwill Amortization #3

    －To be your Bank of choice－ One-time Goodwill Amortization #3  Business performance of Kumamoto Bank and Shinwa Bank have greatly improved since business integration.  Benefits of business integration over 10-year period following integration (net income of both banks plus Group profits (tax effec

  20. Slide 20: ROE & Shareholder Returns

    －To be your Bank of choice－ ROE & Shareholder Returns  FFG aims to improve capital efficiency in the mid- and long-term by achieving reform in earnings structure and expanding our business base.  Shareholder returns shall be conducted based on the balance between securing capital adequacy and enha

  21. Slide 21: Part II Fukuoka Financial Group

    － To be your Bank of choice － Part II Fukuoka Financial Group

  22. Slide 22: Corporate Data

    －To be your Bank of choice－ Corporate Data  Corporate Governance As of June 30, 2017 【Senior Management】 General Meeting of Masaaki Tani Takashige Shibato Shareholders Audit & Supervisory FFG Chairman FFG President Group Compensation & Board 3 Photo Nominating Advisory (2 external members) Bank of

  23. Slide 23: Stock Data

    －To be your Bank of choice－ Stock Data Share Information Major Shareholders as of March 31, 2017 （thousands of shares） Major Shareholders Shares held Ratio* Common stock Japan Trustee Services Bank,Ltd.（Trust account) 56,534 6.57 Number of The Master Trust Bank of Japan,Ltd.(Trust account) 52,929

  24. Slide 24: Market Share of Subsidiary Banks

    －To be your Bank of choice－ Market Share of Subsidiary Banks Fukuoka Prefecture Kumamoto Prefecture Nagasaki Prefecture 35% 50% 40% Bank of Fukuoka Higo bank 32.7% 45% 35% 30% Shinwa 40% Bank 30% 18 bank 33.6% Share of loans 25% 35% Nishi-nippon City Bank 30% 25% 20% Savings Unions Savings Unions Ku

  25. Slide 25: Part III Financial Data

    － To be your Bank of choice － Part III Financial Data

  26. Slide 26: Financial Results for FY2016

    －To be your Bank of choice－ Financial Results for FY2016 Profit & Loss (3 banks total) (¥ bil.) Point1 Net interest income is almost the same 3 banks non- Kumamoto Bank as the previous year. Bank of Fukuoka Shinwa Bank consolidated total (non-consolidated) (non-consolidated) (non-consolidated) 【Comp

  27. Slide 27: Projections for FY2017

    －To be your Bank of choice－ Projections for FY2017 Profit & Loss (3 banks total) Profit & Loss (By bank) (¥ bil.) (¥ bil.) Bank of Fukuoka Core business profit 3 banks non- Bank of Fukuoka Kumamoto Bank Shinwa Bank Net income consolidated total (non-consolidated) (non-consolidated) (non-consolidated

  28. Slide 28: Transition of Top Line

    －To be your Bank of choice－ Transition of Top Line Top Line（Core business profit）(YoY Chg.) Core Business profit ▲5.0 Core Business profit ＋1.8 Net interest income ：▲0.3 Non-interest income ：▲3.1 Net interest income：＋0.2 Non-interest income：＋3.4 （ Exclude Bond-related income） （Exclude Bond-related i

  29. Slide 29: Transition of Bottom Line

    －To be your Bank of choice－ Transition of Bottom Line Bottom Line（Consolidated net income）(YoY Chg.) (Exclude One-time Goodwill Amortization) Before taxes：▲8.8 Before taxes：▲0.0 ＋9.0 49.0 Profit on sale of bond ▲0.1 Profit on sale of stock ▲0.3 ＋3.9 ▲6.6 One-time Goodwill Amortization No Amortizati

  30. Slide 30: Loans

    －To be your Bank of choice－ Loans Loans（Domestic + International） Loans by customer segment ※Excluding loans to FFG and Government （¥ bil.） ※Excluding loans to FFG and Government （¥ bil.） （annual rate ） （annual rate ） 11,196.3 11,196.3 10,757.6 10,361.1 （3.8%） （4.1%） 10,757.6 （4.1%） （6.5％） 10,361.1

  31. Slide 31: Loans (By Bank)

    －To be your Bank of choice－ Loans (By Bank) Bank of Fukuoka Kumamoto Bank Shinwa Bank * Excluding loans to FFG, Government * Excluding subordinated beneficial interests * Excluding subordinated beneficial interests 7,898.4 1,117.4 1,463.0 7,576.8 1,078.7 1,391.1 1,439.4 7,096.9 1,026.6 1,370.7 Avera

  32. Slide 32: Loan Portfolio (Classified by Industry)

    －To be your Bank of choice－ Loan Portfolio (Classified by Industry) Mar. 31, 2017 Change from Mar. 31, 2016 Total Fukuoka(BOF) Kumamoto(KMB) Shinwa(SWB) Total BOF KMB SWB Domestic Loans 11,554.9 100.0% 8,925.3 100.0% 1,146.5 100.0% 1,482.9 100.0% 733.7 664.7 51.2 17.7 Classification by industry Manu

  33. Slide 33: Deposits & CDs

    －To be your Bank of choice－ Deposits & CDs Deposits & CDs（Domestic + International） Deposits & CDs by customer segment （ annual rate） （¥ bil.） （annual rate ） （¥ bil.） 13,328.1 13,793.1 13,793.1 12,882.2 （3.5%） 13,328.2 （3.5%） 3 banks 12,448.6 （3.5%） （3.5%） 154.9 12,882.2 （3.5%） total 160.3 3 banks 1

  34. Slide 34: Deposits & CDs (By Bank)

    －To be your Bank of choice－ Deposits & CDs (By Bank) Bank of Fukuoka Kumamoto Bank Shinwa Bank 9,440.3 1,429.7 2,249.5 2,245.1 2,297.9 Average deposit balance 9,175.9 2,171.2 8,764.9 1,320.0 1,329.4 by customer segment 8,456.6 566.7 1,244.1 55.9 2,012.1 293.1 8,004.2 498.7 66.3 317.1 285.7 492.0 1,1

  35. Slide 35: Interest Rates (Domestic Loan)

    －To be your Bank of choice－ Interest Rates (Domestic Loan) 3 banks total （％） 2.13 Retail 2.04 1.97 1.90 1.83 1.80 1.78 1.79 1.78 1.78 Loan 1.63 Overall 1.59 1.52 Corporate 1.46 1.41 1.53 1.37 1.45 1.31 1.29 1.23 1.40 1.32 1.21 Public 1.28 1.20 1.22 1.14 1.16 1.11 1.12 1.07 1.06 1.02 1.01 0.97 0.92 0

  36. Slide 36: Interest Rates (By Bank)

    －To be your Bank of choice－ Interest Rates (By Bank) Bank of Fukuoka Kumamoto Bank Shinwa Bank 2.06 2.11 2.28 Retail 2.02 1.97 1.93 1.94 Interest rates on loans 1.91 1.87 1.79 1.80 1.78 1.77 1.98 1.72 1.69 1.61 1.95 1.82 1.66 1.53 1.48 Overrall 1.42 1.80 1.74 1.33 1.39 1.66 1.62 1.63 1.31 Corporate

  37. Slide 37: Breakdown of Loans and Deposits & CDs by Interest Rate

    －To be your Bank of choice－ Breakdown of Loans and Deposits & CDs by Interest Rate Domestic Loans (As of Mar. 31, 2017) Domestic Deposits (As of Mar. 31, 2017) 3 banks Bank of Kumamoto Shinwa 3 banks Bank of Kumamoto Shinwa total Fukuoka Bank Bank total Fukuoka Bank Bank Based on short- term prime r

  38. Slide 38: Non-interest Income

    －To be your Bank of choice－ Non-interest Income Non-Interest Income (3 Banks & Fukuoka Securities Total) Asset Management Products Sales ※Excluding profit(loss) on bond （¥ bil.） （¥ bil.） 29.8 FFG Total 536.0 3 banks Total 29.3 （+4.3） 512.3 27.6 25.5 （YoY Chg.） （+28.3） （YoY Chg.） (+1.8) 450 (▲3.8） （+

  39. Slide 39: Overhead Expenses

    －To be your Bank of choice－ Overhead Expenses By Category / OHR (3 banks total) FY16 Factor of Increasing and Decreasing (YoY Chg.) Personnel General （¥ bil.） Expenses Expenses Tax （¥ bil.） 1,400 ＋0.2 ＋0.4 ＋1.0 58.7% 58.5% Core OHR 56.8% 57.4% 57.4% 56.7% 60% Strategic costs+0.6 ＋1.0 101.5 ＋0.3 ▲0.5

  40. Slide 40: Credit Cost & NPL

    －To be your Bank of choice－ Credit Cost & NPL Credit cost (3 banks total) Non-Performing Loans & Ratio 不良債権残高・比率 (3 banks total) （３行合算） 120 （¥ bil.） * After partial write-off (¥ bil.) 3 banks 8.2 （Credit cost （8bp） 100 ratio） Ratio 80 5.0 2.49% 2.34% 2.17% 1.97% Shinwa 4.0 （4bp） 60 Total ▲1.6 0.8 24

  41. Slide 41: Status of Reserves & Coverage: Bank of Fukuoka

    －To be your Bank of choice－ Status of Reserves & Coverage： Bank of Fukuoka Under Watch Obligors Covered ratio for claims disclosed pursuant to the Financial Reconstruction Act ：77.1％ March 31, 2017 ( ) : March 31, 2016 (¥ bil.) Reserved ratio for claims Reserved ratio for Covered Collateral Uncover

  42. Slide 42: Status of Reserves & Coverage: Kumamoto Bank

    －To be your Bank of choice－ Status of Reserves & Coverage： Kumamoto Bank Under Watch Obligors Covered ratio for claims disclosed pursuant to the Financial Reconstruction Act ：76.3％ March 31, 2017 ( ) : March 31, 2016 (¥ bil.) Reserved ratio for Reserved ratio for Covered Collateral Uncovered claims

  43. Slide 43: Status of Reserves & Coverage: Shinwa Bank

    －To be your Bank of choice－ Status of Reserves & Coverage： Shinwa Bank Under Watch Obligors Covered ratio for claims disclosed pursuant to the Financial Reconstruction Act ：78.9％ March 31, 2017 ( ) : March 31, 2016 (¥ bil.) Reserved ratio for Reserved ratio for Covered Collateral Uncovered Uncovere

  44. Slide 44: Capital Adequacy Ratio

    －To be your Bank of choice－ Capital Adequacy Ratio Breakdown of the capital (¥ bil.) Capital adequacy ratio (FFG consolidated) (FFG consolidated) (¥ bil. %) Mar, 31 Items 650 2017 Fundamental items 609.1 Capital stock (Common stock) 557.5 600 Reserves 2.7 Subordinated debt 30.0 Revaluation reserve f

  45. Slide 45: Consolidated Balance Sheets

    －To be your Bank of choice－ Consolidated Balance Sheets （￥bil.） Mar.31,2016 Mar.31,2017 Comparison Mar.31,2016 Mar.31,2017 Comparison Loans and bills discounted 10,707 11,428 +722 Deposits and NCD 12,983 13,208 +225 Domestic floating Domestic short-term loan 1,669 1,890 +221 deposits 7,563 8,125 +56

  46. Slide 46: Part IV Our Mother Market Kyushu

    － To be your Bank of choice － Part IV Our Mother Market “Kyushu”

  47. Slide 47: Potential of Our Local Kyushu

    －To be your Bank of choice－ Potential of Our Local “Kyushu” Potential for Kyushu’s economy Global GDP Ranking (2016) ($ bil.) Austria 437  GDP ¥ 43.9 trillion (9%) Same economic size Iran 425 as Thailand  Population: 13.17 million (10%) Thailand 405  Businesses: 600,000 (10%) Kyushu 398 Colombia

  48. Slide 48: Feature of Kyushu Economy

    －To be your Bank of choice－ Feature of Kyushu Economy Well-Balanced Industry Grouping Industries in Kyushu Passenger Car (thousand vehicles) 1,463 North 1,344 1,296 1,351 1,351 14.7% 14.6% 14.7% Center of “ Car Island ” 13.9% (Share in Japan ％) 13.3%  Number of Passenger Cars produced in Kyushu is

  49. Slide 49: Potential of Fukuoka Metropolitan Area

    －To be your Bank of choice－ Potential of Fukuoka Metropolitan Area Number of Foreign Nationals Entering Kyushu Land price in Fukuoka metropolitan area  The number of foreign people entering Japan through Kyushu has (thousand people)  Fukuoka city's land price increase rate greatly exceeds the nati

  50. Slide 50: FFG's Growth Potential

    －To be your Bank of choice－ FFG’s Growth Potential Kyushu’s Financial Market FFG Saving unions Japan Post Bank FFG 16% 17% 20% 24% Deposits Loans Saving unions Local and 21% Mega banks Local and 43% Mega banks 59% Kyushu JPY 78.6 trillion Kyushu JPY 40.0 trillion FFG JPY 12.8 trillion FFG JPY 9.5 tr

  51. Slide 51: Financial Map of Kyushu

    －To be your Bank of choice－ Financial Map of Kyushu (Regional Bank & Regional Bank Ⅱ) Number of Number of Fukuoka Population business Loans Deposits Population business Loans Deposits pref. Oita pref. establishments Kitakyushu Bank establishments 5,060,000 19.7 33.3 The Bank of 1.2 trillion yen 233,

  52. Slide 52: Industrial Production Trends

    －To be your Bank of choice－ Industrial Production Trends Industrial production index（2010＝100） Integrated Circuits （ million pieces ） （％） 120 1,000 50 Quantity 40 800 YoY Chg. 30 600 20 110 【 10 Japan Kyushu 400 0 ▲ 10 200 100 ▲ 20 】 0 ▲ 30 15/5 15/11 16/5 16/11 17/5 Main Industry trends 90 Passenge

  53. Slide 53: Land Price Trends

    －To be your Bank of choice－ Land Price Trends Volatility of standard land prices ＜ Ministry of Land, Infrastructure and Transport: 2017 Outline of results of land prices survey ＞ Volatility of standard land prices in major cities in Fukuoka Pref. ○ In the national average, the average for all uses i

  54. Slide 54: Corporate Bankruptcies

    －To be your Bank of choice－ Corporate Bankruptcies Number of bankruptcies and total liabilities transition (¥ bil.) (Number) Left Axis ：The total debts / Bar graph 10 50 (¥ bil.) Right Axis：The number of bankruptcies / Line graph Fukuoka (Number) 8 40 1,600 900 Takata 6 30 1,400 Corporation 4 20 1,5

  55. Slide 55: Loans

    －To be your Bank of choice－ Loans 8 （％） Rate of increase of Bank Loans （YoY Change, Monthly) 6 6 4.3 Fukuoka 4 2 0 4 4.1 ▲2 Japan ▲4 3.3 09/5 10/5 11/5 12/5 13/5 14/5 15/5 16/5 17/5 8 6.5 2 6 Kumamoto 4 2 0 0 ▲2 ▲4 09/5 10/5 11/5 12/5 13/5 14/5 15/5 16/5 17/5 Kyushu ▲2 8 6 4 3.3 Nagasaki 2 ▲4 0 ▲2 ▲

  56. Slide 56: Deposits

    －To be your Bank of choice－ Deposits Rate of increase of Bank Deposits （YoY Change, Monthly) 6 （％） 10 4 4.2 Fukuoka 9 2 0 8 Japan ▲2 7 09/5 10/5 11/5 12/5 13/5 14/5 15/5 16/5 17/5 12 6 10 5.6 Kumamoto 8 5 6 4 4.7 3.9 4 2 0 ▲2 3 Kyushu 09/5 10/5 11/5 12/5 13/5 14/5 15/5 16/5 17/5 2 6 Nagasaki 4 1 2 1

  57. Slide 57: Thank you / Forward-looking statements and contact

    － To be your Bank of choice－ Thank you for your time today for our presentation. We need to remind you of the risks involved in forward-looking statements as a legal requirement. The statements in this presentation, including certain statements made in response to questions, regarding FFG’s projecte

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