Fukuoka Financial Group, Inc. · TSE:8354

Fukuoka Financial — Investor Presentation (October 2016)

62 slides from Fukuoka Financial's investor presentation, October 2016

  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 2016

  2. Slide 2: Contents

    － To be your Bank of choice － Contents Part Ⅰ FFG Growth Strategies Part Ⅱ About Fukuoka Financial Group Page Page 4. An Overview of FFG 23. Corporate Data 5. History of FFG 24. Stock Data 6. Improving Profit Structure 25. Market Share of Subsidiary Banks 7. Changes in Business Results 8. Feature of

  3. Slide 3: Contents

    － To be your Bank of choice － Contents Part Ⅳ Financial Data Part Ⅴ Our Mother Market “ Kyushu ” Page Page 34. Financial results for FY2015 53. Potential of our Local “Kyushu” 35. Projections for FY2016 54. Financial Map of Kyushu 36. Transition of Top Line / Bottom Line 55. Inbound effect on Kyushu

  4. Slide 4: Part I: FFG Growth Strategies

    － To be your Bank of choice － Part I FFG Growth Strategies 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 “Multiple Brands/Single Platform” management style best suited to the integration of Japanese regional banks.  Company Outline

  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 an nine-year period since management integration. Preparation for growth Switch to Switch to growth trends stable earnings structure Phase Run-up

  7. Slide 7: Improving Profit Structure

    － To be your Bank of choice － Improving Profit Structure  Improve profit structure by increasing management efficiency through the construction of a single platform Changes in Personnel Organization 68.0% OHR Planning & 62.5% Planning & management management 58.9% 57.8% Total staff services 57.3% 5

  8. Slide 8: Changes in Business Results

    － To be your Bank of choice － Changes in Business Results  Consolidated net income showed a consecutive increase in profit for five terms and stood at a record high for four consecutive terms under a harsh business environment with ultra-low interest rates, as a result of improvements in profit str

  9. Slide 9: Feature of Kyushu Economy

    － To be your Bank of choice － Feature of Kyushu Economy Well-Balanced Industry Grouping Industries in Kyushu Scale of Kyushu Economy 10% share GDP 44 trillion yen 9％ ＊ in Japan ＊ Population 13.2 million 10％ Business North ＊ Passenger Car 620 thousand 10％ (thousand vehicles) establishments ＊Share in

  10. Slide 10: Potential of Fukuoka Metropolitan Area

    － To be your Bank of choice － Potential of Fukuoka Metropolitan Area Number of Foreign Nationals Entering Kyushu (thousand people) 4,000 3,500 その他 Entry at Port of Hakata +2.106 million people  There was about a 70% increase in the number of foreign people entering Entry at Fukuoka Airport (+290％)

  11. Slide 11: Impact of the Kumamoto Earthquake

    － To be your Bank of choice － Impact of the Kumamoto Earthquake  There were significant local impacts immediately following the Kumamoto Earthquake, but a recovery is currently underway.  Even when looking at trends in production and consumption, the impact on Fukuoka is limited. Number of Foreign

  12. Slide 12: FFG's Growth Potential

    － To be your Bank of choice － FFG’s Growth Potential  Although FFG holds the top market share in Kyushu, there is still significant room for development. Kyushu’s Financial Market Japan Post Bank FFG Saving unions 16% FFG 20% 18% 24% Mega banks 8% Deposits Loans Saving unions Local banks 21% 37% Lo

  13. Slide 13: FFG's Long-term Vision

    － To be your Bank of choice － FFG’s Long-term Vision  We have positioned the next decade as a stage of “evolution” in which we take up the challenge in new, isolated areas anticipating and adapting to various changes amid a rapidly changing business environment.  Achieve a sustained strong competi

  14. Slide 14: Management Strategy Options

    － To be your Bank of choice － Management Strategy Options  Amid a tough business environment, in order to support the local economy and achieve sustainable growth, regional financial institutions need to implement the optimal strategy from a variety of strategy options.  FFG has implemented a numb

  15. Slide 15: Fifth Mid-Term Management Plan: Aiming to be the Best Regional Bank

    － To be your Bank of choice － Fifth Mid-Term Management Plan: Aiming to be the Best Regional Bank  We have launched Fifth Mid-Term Management Plan in this April.  Setting four types of evolution as our basic strategies which are business model, human resources, group total power and brand power, w

  16. Slide 16: Build up Earnings from Loans

    － To be your Bank of choice － Build up Earnings from Loans  Build up loans in the Kyushu region by about 1 trillion yen over 3 years, by expanding integrated services across Kyushu and by strengthening consulting services for business owners  Both net interest income and domestic interest on loans

  17. Slide 17: Reform of Earnings Structure

    － To be your Bank of choice － Reform of Earnings Structure  FFG is working to reform its earnings structure based on three pillars: “emphasizing the profitability of loans,” “increasing non- interest income,” and “stabilizing the consolidated revenue base,” as it aims to simultaneously improve ROE

  18. Slide 18: Expansion of Asset-Management Business

    － To be your Bank of choice － Expansion of Asset-Management Business  Shift to “asset-management business” operation style that is not limited within mere operational support, but can also respond to diversified financial needs (from asset formation to security, management, protection, and inherita

  19. Slide 19: Securities

    － To be your Bank of choice － Securities  Promotion of risk control with the flexible use of operational and funding instruments in order to control fluctuations in earnings due to rising and falling interest rates. Securities balance/unrealized gains (end of March 2016) Key Policy Initiatives Bala

  20. Slide 20: iBank Concept

    － To be your Bank of choice － iBank Concept  We create the ecosystem which connects consumers, business partners and community/ local governments within their operat ing region.  Key objective is to link potential consumers to local companies by grasping the potential needs of customers and stimul

  21. Slide 21: 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 en

  22. Slide 22: Projections for FY2016

    － To be your Bank of choice － Projections for FY2016  FFG plans to achieve a core business profit of 71 billion yen and a net income of 40 billion yen in FY2016.  The first quarter result was off to a good start with a progression rate of 36% for net income. Actual Planned Actual (¥ bil.) 《Changes

  23. Slide 23: Part II: About Fukuoka Financial Group

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

  24. Slide 24: Corporate Data

    － To be your Bank of choice － Corporate Data  Corporate Governance As of June 30, 2016 【Senior Management】 General Meeting of Masaaki Tani Takashige Shibato Audit & Supervisory Shareholders Board 3 FFG Chairman FFG President Group Compensation & (2 external members) Nominating Advisory Bank of Fuku

  25. Slide 25: Stock Data

    － To be your Bank of choice － Stock Data as of March 31, 2016  Share Information  Major Shareholders （thousands of shares） Type1 Major Shareholders Shares held Ratio* Common stock preferred stock Japan Trustee Services Bank,Ltd.（Trust account) 60,995 6.94% Number of 1,800,000,000 18,878,000 The Ma

  26. Slide 26: 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 18 bank Shinwa 32.2% 45% 30% 35% Bank 40% 33.9% 30% Share of loans 25% 35% Nishi-nippon City Bank 30% 25% 20% Savings Unions Kumamoto Bank M

  27. Slide 27: Part III: Projected Figures of Fifth Mid-Term Management Plan

    － To be your Bank of choice － Part Ⅲ Projected Figures of Fifth Mid-Term Management Plan

  28. Slide 28: Projected Figures (1)

    － To be your Bank of choice － Projected Figures （１） （bil. yen) FFG Bank of Fukuoka 80 64.2 100 61.4 57.5 59.9 60 45.6 43.0 45.6 42.2 40 80.0 80 76.4 20 74.8 0 71.0 FY15 FY16(P) FY17(P) FY18(P) Kumamoto Bank 60 Core business profit 10 （3 banks total） 8 6.9 6.6 6.4 5.3 44.7 45.0 6 5.0 3.8 3.8 40.0 42.

  29. Slide 29: Projected Figures (2)

    － To be your Bank of choice － Projected Figures （２） FY2015 FY2018 (P) Change in 3 years 3 banks 3 banks 3 banks (bil. Yen) total Fukuoka Kumamoto Shinwa total Fukuoka Kumamoto Shinwa total Fukuoka Kumamoto Shinwa Gross business profit 178.9 129.5 20.8 28.7 186.5 136.1 20.6 29.7 +7.6 +6.7 -0.2 +1.0 N

  30. Slide 30: Loans

    － To be your Bank of choice － Loans （bil. yen） Average balance of loans (3 banks total) 3 year average +3.9％ ※Excluding loans to FFG and subordinated beneficial interests 8,774.7 Increase in Fifth Mid-Term 7,834.4 8,209.0 8,498.1 268.8 Increase in ABC Plan II 283.0 Management Plan International 257.

  31. Slide 31: Deposits & CDs

    － To be your Bank of choice － Deposits & CDs （bil. yen） Average balance of deposits & CDs (3 banks total) 3 year average +2.4％ 9,759.1 9,966.1 Increase in Fifth Mid-Term 9,291.9 9,487.7 108.7 Increase in ABC Plan II International 116.0 108.7 108.7 464.9 Management Plan 491.3 3 year507.6 +1,611.1 Pub

  32. Slide 32: Major Products

    － To be your Bank of choice － Major Products Housing loans execution （bil. yen） （bil. yen） Consumer loans balance Fifth Mid-Term ABC Plan II Increase in ABC Plan II Increase in Fifth Mid-Term Management Plan Total ¥977.1 bil. +¥79.9 bil. Management Plan +¥158.7 bil. PlanTotal ¥819.5 bil. 350.0 Total

  33. Slide 33: Credit Cost

    － To be your Bank of choice － Credit Cost Credit cost (3 banks total) （bil. yen） Fifth Mid-Term ABC Plan II Management Plan Average 1bp Average 4bp 11.0 Strengthened reserve for obligors 3 banks 8.2 with risk level ranked as needing （Credit cost 7.1 attention or higher 9.0 ratio） （8bp） (changed from

  34. Slide 34: Part IV: Financial Data

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

  35. Slide 35: Financial results for FY2015

    － To be your Bank of choice － Financial results for FY2015 Profit & Loss (3 banks total) (¥ bil.) 3 banks non- Kumamoto Bank Bank of Fukuoka Shinwa Bank consolidated total (non-consolidated) (non-consolidated) (non-consolidated) Point1 Net interest income increased (the first time since FFG’s establ

  36. Slide 36: Projections for FY2016

    － To be your Bank of choice － Projections for FY2016 Profit & Loss (3 banks total) (¥ bil.) Profit & Loss (By bank) 3 banks non- (¥ bil.) Bank of Fukuoka Kumamoto Bank Shinwa Bank consolidated total (non-consolidated) (non-consolidated) (non-consolidated) Core business profit Bank of Fukuoka Net inc

  37. Slide 37: Transition of Top Line / Bottom Line

    － To be your Bank of choice － Transition of Top Line / Bottom Line Top Line（Core business profit）(YoY Chg.) Bottom Line（Consolidated net income）(YoY Chg.) Core Business profit ＋2.2 Non-interest income：＋2.0 Net interest income：＋0.4 （Exclude Bond-related income） Profit on sale of bond +2.3 Profit on s

  38. Slide 38: Loans (By Bank)

    － To be your Bank of choice － Loans (By Bank) Bank of Fukuoka Kumamoto Bank Shinwa Bank * Excluding loans to FFG * Excluding subordinated beneficial interests * Excluding subordinated beneficial interests 7,576.8 1,078.7 1,391.1 1,439.4 1,370.7 7,096.9 1,026.6 1,276.0 Average loan balance 6,759.5 97

  39. Slide 39: Loan Portfolio (Classified by Industry)

    － To be your Bank of choice － Loan Portfolio (Classified by Industry) (¥ bil.) Mar. 31, 2016 Change from Mar. 31, 2015 Total Fukuoka(BOF) Kumamoto(KMB) Shinwa(SWB) Total BOF KMB SWB Domestic Loans 10,821.2 100.0% 8,260.6 100.0% 1,095.3 100.0% 1,465.2 100.0% 511.0 497.3 12.5 1.1 Classification by ind

  40. Slide 40: Deposits & CDs (By Bank)

    － To be your Bank of choice － Deposits & CDs (By Bank) Bank of Fukuoka Kumamoto Bank Shinwa Bank 9,175.9 8,764.9 1,320.0 1,329.4 2,249.5 2,245.1 8,456.6 498.7 2,171.2 Average deposit balance 8,004.2 492.0 1,244.1 7,724.3 539.8 104.7 66.3 2,012.1 by customer segment 1,112.6 1,149.5 1,944.4 317.1 285.

  41. Slide 41: Interest Rates (Domestic loan)

    － To be your Bank of choice － Interest Rates (Domestic loan) 3 banks total （％） 2.30 Retail 2.22 2.13 2.04 1.97 1.90 1.83 1.80 1.78 1.79 Loan 1.75 Overall 1.69 1.63 Corporate 1.59 1.65 1.52 1.59 1.46 1.41 1.53 1.37 1.45 1.31 1.29 1.40 Public 1.32 1.28 1.24 1.22 1.20 1.20 1.14 1.16 1.11 1.12 1.07 1.02

  42. Slide 42: Interest Rates (By Bank)

    － To be your Bank of choice － Interest Rates (By Bank) Bank of Fukuoka Kumamoto Bank Shinwa Bank Interest rates on loans 2.46 2.23 2.28 2.21 Retail 2.06 2.11 2.02 1.97 1.91 2.18 1.85 1.93 1.80 1.78 1.87 1.79 1.64 2.12 1.98 1.72 1.53 1.69 1.61 Overall 1.95 1.82 1.42 1.48 1.80 1.74 1.76 1.39 Corporate

  43. Slide 43: 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, 2016) Domestic Deposits (As of Mar. 31, 2016) 3 banks Bank of Kumamoto Shinwa 3 banks Bank of Kumamoto Shinwa total Fukuoka Bank Bank total Fukuoka Bank Bank Based on short- 7.9% 7.5%

  44. Slide 44: Securities

    － To be your Bank of choice － Securities Securities portfolio Bond duration & Outlier Ratio (¥ bil.) (years) *FFG consolidated 209.4 148.5 Domestic Bonds Unrealized 4.67 gain(loss) 102.6 3.98 4.07 3,291.4 3.8 131.1 （+176.6） 3,114.8 Foreign Bonds （+454.9） 297.2 271.7 3.00 3.07 2.88 2.97 FFG 2,659.9 7

  45. Slide 45: 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.） 29.3 536.0 27.5 （+18） 507.7 （+28.3） 3 banks Total 25.6 (+1.9） （YoY Chg.） 380 24.3 3.0 （+80.6） (+1.3) 3.2 40.9 (+1

  46. Slide 46: Overhead Expenses

    － To be your Bank of choice － Overhead Expenses By Category / OHR (3 banks total) FY15 Factor of Increasing and Decreasing (YoY Chg.) 140 （¥ bil.） ＋2.0 （¥ bil.） （▲0.7％） 57.4% 57.4% 60% Personnel General Tax Core OHR 56.8% 56.7% Expenses Expenses 120 ＋0.6 (1.5) ＋1.0 3 banks total （YoY Chg.） 100.9 （+0

  47. Slide 47: Credit Cost & NPL

    － To be your Bank of choice － Credit Cost & NPL Credit Cost (3 banks total) Non-Performing Loans & Ratio (3 banks total) (¥ bil.) (¥ bil.) Strengthened reserve for obligors with risk level ranked as needing attention or higher (Changed from 1-year to 3-year default rate) 13 3 banks Impact = ¥13.8 bi

  48. Slide 48: 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 : 75.5% March 31, 2016 ( ) : March 31, 2015 (¥ bil.) Reserved ratio for Reserved ratio for Covered Collateral Uncovered cl

  49. Slide 49: 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 : 77.2% March 31, 2016 ( ) : March 31, 2015 (¥ bil.) Reserved ratio for Reserved ratio for Covered Collateral Uncovered Clai

  50. Slide 50: 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 : 82.1% March 31, 2016 ( ) : March 31, 2015 (¥ bil.) Reserved ratio for Reserved ratio for Covered Collateral Uncovered claims

  51. Slide 51: Capital Adequacy Ratio

    － To be your Bank of choice － Capital Adequacy Ratio Capital adequacy ratio (FFG consolidated) Breakdown of the capital (¥ bil.) (FFG consolidated) Basel II Basel III Mar, 31 (¥ bil. %) Items 2016 800 Fundamental items 687.6 Capital stock (Common stock) 620.7 700 Capital adequacy Reserves 6.6 12.26

  52. Slide 52: Consolidated Balance Sheets

    － To be your Bank of choice － Consolidated Balance Sheets （￥bil.） Mar.31,2015 Mar.31,2016 Comparison Mar.31,2015 Mar.31,2016 Comparison Loans and bills discounted 10,213 10,707 ＋493 Deposits and NCD 12,682 12,983 ＋300 Domestic floating Domestic short-term loan 1,648 1,669 ＋21 deposits 7,279 7,563 ＋2

  53. Slide 53: Part V: Our Mother Market "Kyushu"

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

  54. Slide 54: Potential of our local "Kyushu"

    － To be your Bank of choice － Potential of our local “Kyushu”  New sources of growth are emerging in Kyushu, and there is ample opportunity for the island to develop markets overseas, mainly in other parts of Asia.  FFG’s development is tied to the economic development of Kyushu. Global GDP Rankin

  55. Slide 55: 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 Deposits Oita Population business deposits establishments establishments pref. 5,060,000 233,000 32.7 The Bank of Kitakyushu Bank pref. 1,180,000 58,000 7.1 people

  56. Slide 56: Inbound effect on Kyushu

    － To be your Bank of choice － Inbound effect on Kyushu The number of Foreign travelers entering Kyushu The number of foreign cruise port call to Kyushu （thousand） （times） 3,000 600 2,500 500 Other Kagoshima 2,000 400 Nagasaki Hakata 1,500 300 1,000 200 500 100 0 0 03 04 05 06 07 08 09 10 11 12 13 14

  57. Slide 57: Industrial Production Trends

    － To be your Bank of choice － Industrial Production Trends Industrial production index （2010＝100） Integrated Circuits 120 (%) （million pieces） 1,000 40 900 Quantity 30 800 YoY Chg. 110 700 20 【 600 Japan Kyushu 500 10 400 0 300 100 200 -10 】 100 0 -20 14/1 14/4 14/7 14/10 15/1 15/4 15/7 15/10 16/1 1

  58. Slide 58: Land Price Trends

    － To be your Bank of choice － Land Price Trends Volatility of standard land prices in major cities in Fukuoka Pref. Volatility of standard land prices Residential land Commercial land <Published Land Prices for 2015> 2015 2016 2015 2016 (Unit: %) Fukuoka City 2.2 2.8 3.8 5.9 Residential land Commerc

  59. Slide 59: Corporate Bankruptcies

    － To be your Bank of choice － Corporate Bankruptcies (¥bil.) (Number) Left Axis ：The total debts / Bar graph 20 50 Right Axis：The number of bankruptcies / Line graph (¥bil.) (Number) 40 15 Fukuoka 1000 950 30 900 10 20 800 850 5 10 800 Japan 600 0 0 750 14/1 14/7 15/1 15/7 16/1 16/7 700 400 650 (¥bi

  60. Slide 60: Loans

    － To be your Bank of choice － Loans Rate of increase of Bank Loans （YoY Change, Monthly) 8.0 3.7 (%) 6.0 6.0 4.0 Fukuoka 2.0 0.0 4.2 4.0 ▲ 2.0 ▲ 4.0 09/1 10/1 11/1 12/1 13/1 14/1 15/1 16/1 Japan 2.3 8.0 2.0 6.0 5.5 Kumamoto 4.0 2.0 0.0 0.0 ▲ 2.0 ▲ 4.0 09/1 10/1 11/1 12/1 13/1 14/1 15/1 16/1 ▲ 2.0 8.

  61. Slide 61: Deposits

    － To be your Bank of choice － Deposits Rate of increase of Bank Deposits （YoY Change, Monthly) 6.0 (%) 5.0 7.0 4.0 3.4 Fukuoka 3.0 2.0 6.0 5.6 1.0 0.0 ▲ 1.0 Japan ▲ 2.0 5.0 09/1 10/1 11/1 12/1 13/1 14/1 15/1 16/1 10.0 9.4 9.0 4.0 8.0 Kumamoto 7.0 6.0 5.0 4.0 3.0 3.8 3.0 2.0 1.0 0.0 ▲ 1.0 2.0 ▲ 2.0 0

  62. Slide 62: Forward-Looking Statements

    － To be your Bank of choice － Forward-Looking Statements 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 questio

Fukuoka Financial Group — Investor Presentation (October 2016) on 6ix