Fukuoka Financial Group, Inc. · TSE:8354
Fukuoka Financial — Investor Presentation (November 2023)
60 slides from Fukuoka Financial's investor presentation, Nov 29, 2023
Slide 1: Investor Meeting
Investor Meeting November 29, 2023 Fukuoka Financial Group
Slide 2: Contents
Contents Part I: Management Strategy Part III: Contributing to Sustainable Local Communities (Reference) Point 1: Business Foundations_Strong Kyushu Economy 5 SX Support for Clients_Supporting Sustainability Management 35 Point 1: Business Foundations_Customer Base/Business Opportunities 6 S
Slide 3: Part I: Management Strategy
Part I: Management Strategy Fukuoka Financial Group 3
Slide 4: Structure of Today's Presentation
Structure of Today’s Presentation FFG’s Management Strategy (key points) i. Business Foundations ii. Rising Domestic Interest Rates iii. Unique Growth Strategy iv. Value Creation Story 4
Slide 5: Point 1: Business Foundations_Strong Kyushu Economy
Point 1: Business Foundations_Strong Kyushu Economy Kyushu’s economy is performing well across all indicators compared to the national economy. Kyushu’s gross regional product (GRP) (+1.6%) will exceed the national GDP (+1.1%). * Capital investment and private consumption account for 70% of Kyushu
Slide 6: Point 1: Business Foundations_Customer Base/Business Opportunities
Point 1: Business Foundations_Customer Base/Business Opportunities FFG’s core businesses (deposits, loans, asset management) are expected to maintain growth trend, backed by the strong Kyushu economy and a solid customer base. FFG’s solid customer base Business opportunities surrounding FFG *Compa
Slide 7: Point 2: Rising Domestic Interest Rates_Impact on Net Interest Income
Point 2: Rising Domestic Interest Rates_Impact on Net Interest Income Impact of rising yen interest rates on net interest income is estimated at about 8 billion yen per year. Yen balance sheet Impact of rising yen interest rates on net interest income Yen portfolio: 28.7 trillion yen Increase in
Slide 8: Point 2: Interest on Deposits and Loans, and Domestic Bond Investment
Point 2: Rising Domestic Interest Rates_Interest on Deposits and Loans, and Domestic Bond Investment Interest on deposits and loans is entering a recovery phase. Negative goodwill will be used effectively for unrealized losses on yen bonds (to secure future earnings). Unrealized gains (losses) on
Slide 9: Point 3: FFG's Growth Strategy_Transformation of the Existing Business Model
Point 3: FFG's Growth Strategy_Transformation of the Existing Business Model Steady progress made in each measure. We will achieve differentiation from our competitors by reinforcing our ability to provide solutions through coordination of measures. Progress of 7th Medium-Term Management Plan meas
Slide 10: Point 3: FFG's Growth Strategy_Minna Bank
Point 3: FFG's Growth Strategy_Minna Bank We will proceed with efforts to make the business profitable in FY2027, while addressing various issues and implementing new measures. Number of accounts: Maintaining upward trend, BaaS: Partnerships are growing expected to be on par with FY2023 plan Partn
Slide 11: Overview of FY2023 Interim Financial Results and Full-Year Earnings Projections
Overview of FY2023 Interim Financial Results and Full-Year Earnings Projections Core business profit * Fukuoka Chuo Bank (FCB) to start contributing to FCB (excluding Integration (4 banks total) earnings from 2H FY2023 onward YoY chg. YoY chg. YoY chg. Unit: \ bil. 1H 2H FY2023 integration) factors
Slide 12: Achievement of FY2024 MTMP Targets_Net Income
Achievement of FY2024 MTMP Targets_Net Income Strong core business earnings, the realization of growth investments, rising domestic interest rates, and other factors make it highly probable that we will achieve our medium-term management plan targets. In the next medium-term management plan, we
Slide 13: Capital Policy (Basic Policy)
Capital Policy (Basic Policy) We will strive to manage capital in a way that balances shareholder returns with growth investments based on the premise of maintaining soundness. Capital policy Capital adequacy ratio While maintaining soundness, we aim to manage capital in a way that About 12% Bas
Slide 14: FFG's Vision for the Future
FFG's Vision for the Future The future society that FFG is aspiring for is economically, materially, and spiritually enriched local communities. The sustainable society we To realize such a society, we believe that among the various environmental changes, aim to create the social issues (material is
Slide 15: FFG's Value Creation Story_Dashboard
FFG’s Value Creation Story_Dashboard Strategies and KPI tactics KPI Business activities Improvement of ROE KGI (FY2024: 6%) Transformation of the existing business model (FY2027: 8%) (Future target level: 10%) Taking on the challenge of new businesses KPI KPI Value provided Material issues Busin
Slide 16: (Reference) Initiatives for Improving Corporate Value
(Reference) Initiatives for Improving Corporate Value FFG Integrated Report 2023 (P.20) Overview of initiatives to improve corporate value Transformation of the existing Sales divisions: Improve ROE through transformation of the business model existing business model (1) Improvement of ROE • Eff
Slide 17: (Reference) Human Capital Management_FFG's Human Resources Strategy
(Reference) Human Capital Management_FFG's Human Resources Strategy Pillars of FFG’s human resources strategy are “building of a human resources portfolio to realize its business strategies” and “improvement of employee engagement.” Underlying these pillars are “DE&I” for individuals to exercise
Slide 18: (Reference) Human Capital Management_Building of a Strategic Human Resources Portfolio
(Reference) Human Capital Management_Building of a Strategic Human Resources Portfolio and Improvement of Employee Engagement We employ, train and appropriately place diverse human resources to build a strategic human resources portfolio to realize our business strategies. Improvement of employe
Slide 19: (Reference) Human Capital Management_DE&I・organizational culture
(Reference) Human Capital Management_DE&I・organizational culture Aiming to be a vibrant organization where diverse individuals are independent and motivated, we have worked to promote diversity, equity and inclusion (DE&I) and to foster an organization culture that ensures psychological safety. Pr
Slide 20: (Reference) Business Integration with the Fukuoka Chuo Bank
(Reference) Business Integration with the Fukuoka Chuo Bank Basic policy on business integration / integration Target metrics of Fukuoka Chuo Bank synergies To be consolidated FY2022 1H results 2H planned FY2023 Fukuoka Chuo Further evolution of its role as a “financial institution results revised p
Slide 21: (Reference) Credit Cost Status
(Reference) Credit Cost Status Maintain substantial provisions to handle upward swing of credit cost. Absorb increase by taking advantage of the benefits of higher domestic interest rates. Corporate bankruptcies (Kyushu and Okinawa) Credit cost (FFG) * Excluding FL provision, system changes 600 ba
Slide 22: Part II: Financial Results & Earnings Projections (Reference)
Part II: Financial Results & Earnings Projections (Reference) Fukuoka Financial Group 22
Slide 23: Summary of Interim Financial Results for FY2023
Summary of Interim Financial Results for FY2023 Profit & loss (3 banks total) Profit & loss (FFG consolidated) (Unit: ¥ bil.) 3 banks non- Juhachi-Shinwa Interim consolidated Bank of Fukuoka Kumamoto Bank Fukuoka Chuo Bank [Compared to the projection of YoY chg. Bank (non- results total (non-consoli
Slide 24: FY2023 Interim Results (Top-Line and Bottom-Line)
FY2023 Interim Results (Top-Line and Bottom-Line) Core business profit increased 2.1 billion yen year-on-year due to an increase in Sales Division earnings, such as loans to SMEs and investment trusts, as well as an upward swing in interest on securities, etc. Consolidated net income was kept at
Slide 25: Summary of Earnings Projections for FY2023
Summary of Earnings Projections for FY2023 Profit & loss (4 banks total) Profit & loss (FFG consolidated) (Unit: ¥ bil.) 4 banks non- Juhachi-Shinwa Full-year consolidated Bank of Fukuoka Kumamoto Bank Fukuoka Chuo Bank [Compared to the projection of YoY chg. Bank (non- May 2023] projection total (n
Slide 26: Full-Year Earnings Projections for FY2023 (Top-Line and Bottom-Line)
Full-Year Earnings Projections for FY2023 (Top-Line and Bottom-Line) As in the first half of the year, full-year core business profit for FY2023 is projected to increase 8.3 billion yen year-on-year to 114.1 billion yen due to an increase in net interest income, etc. Consolidated net income is p
Slide 27: Net Interest Income
Net Interest Income Net interest income (3 banks total) (Unit: ¥ bil.) Domestic deposit loan gross margin (3 banks total) (Unit: %) * Domestic loans... Excluding loans to FFG and Government * Domestic loans... Excluding loans to FFG and Government * Domestic funds... Domestic deposits + CDs * Domest
Slide 28: Total Average Loan Balance
Total Average Loan Balance Loans (by bank) (Unit: ¥ bil.) Loans (by segment) (Unit: ¥ bil.) * Excluding loans to FFG and Government * Excluding loans to FFG and Government Banks total 14,629.4 14,835.8 15,094.0 15,535.2 Banks total 14,629.4 14,835.8 15,094.0 15,535.2 (annual rate) (1.4%) (1.6%) (3.2
Slide 29: Total Average Fund Balance
Total Average Fund Balance Deposits and CDs (by bank) (Unit: ¥ bil.) Deposits and CDs (by segment) (Unit: ¥ bil.) Banks total 20,813.2 20,635.5 21,096.2 21,474.1 Banks total 20,813.2 20,635.5 21,096.2 21,474.1 (annual rate) (4.5%) (2.7%) (1.3%) (4.1%) (annual rate) (4.5%) (2.7%) (1.3%) (4.1%) Fukuok
Slide 30: Securities
Securities Securities portfolio (FFG consolidated) Bond duration & materiality test reference value Unrealized (Unit: ¥ bil.) * Bond duration: After considering hedges gain (loss) (After considering 6.94 hedges) 69.5 -54.9 7.8 -3.1 6.52 Unrealized 6.07 Domestic bonds gain (loss) (Before considering
Slide 31: Non-Interest Income
Non-Interest Income Non-interest income (banks + FFG Securities) (Unit: ¥ bil.) Asset management product sales (banks + FFG Securities) (Unit: ¥ bil.) * Excluding gains (losses) on bonds * Figures for FFG Securities are the total sales of investment trusts and bonds FFG total 18.0 14.8 14.9 17.1 FFG
Slide 32: Overhead Expenses
Overhead Expenses * OHR = Overhead expenses / Gross business profit By category / OHR* (Unit: ¥ bil.) Consolidated OHR (Figures in parentheses ( ) exclude (YoY chg.) 72.6% (60.8%) 67.6%(-5.0%) cut losses on foreign bonds) 3 banks total OHR 61.8% (51.5%) 57.5% (-4.3%) 115.2 (+5.9) 109.3 59.8 (+5.9) 5
Slide 33: Credit Cost / Disclosed NPL Ratio
Credit Cost / Disclosed NPL Ratio Credit cost (3 banks total) (Unit: ¥ bil.) Disclosed non-performing loans & ratio (FFG consolidated) (Unit: ¥ bil.) ■ Changes in credit cost 6.0 ■ Changes in disclosed non-performing loans & ratio 2.6 1.2 Disclosed NPL 1.86% 1.85% 1.71% 1.68% 3 banks total 0.1 ratio
Slide 34: Part III: Contributing to Sustainable Local Communities (Reference)
Part III: Contributing to Sustainable Local Communities (Reference) Fukuoka Financial Group 34
Slide 35: SX Support for Clients_Supporting Sustainability Management
SX Support for Clients_Supporting Sustainability Management Based on the Sustainable Scale Index—FFG’s unique ESG/SDGs scoring model service—we are promoting efforts for clients to achieve transformation to sustainability- focused management (SX) through sustainability management support in the fo
Slide 36: SX Support for Clients_Financial Services
SX Support for Clients_Financial Services We are developing various sustainability finance products that will lead to the sustainable growth of clients. In July 2023, we began handling positive impact finance. Sustainability-related products (selected products) (FFG) Positive impact finance (PIF)
Slide 37: Regional Revitalization
Regional Revitalization In cooperation with industry, government, and academia, we are actively working to resolve regional issues, create new business opportunities, and expand sales channels, with the aim of contributing to regional growth in a way that is only possible for FFG with its long-sta
Slide 38: Realizing SX at FFG_Financial and Economic Education, Collaboration with External Organizations
Realizing SX at FFG_Financial and Economic Education, Collaboration with External Organizations Helping to promote and improve financial literacy in local communities is an important role for regional financial institutions, and we engage in this role actively. In collaboration with external org
Slide 39: Realizing SX at FFG_Initiatives for TCFD Recommendations
Realizing SX at FFG_Initiatives for TCFD Recommendations FFG has positioned addressing climate change as a key strategic management issue and is united in its efforts to transition to a decarbonized society. For the first time, we have calculated greenhouse gas emissions for our investees and bo
Slide 40: Part IV: FY2023 Interim Financial Results_Figures (Reference)
Part IV: FY2023 Interim Financial Results_Figures (Reference) Fukuoka Financial Group 40
Slide 41: Average Balance of Loans (by Bank)
Average Balance of Loans (by Bank) Bank of Fukuoka (domestic, non-consolidated) Kumamoto Bank (domestic, non-consolidated) Juhachi-Shinwa Bank (domestic, non-consolidated) * Excluding loans to Government, etc. * Excluding *劣後受益権除くloans to Government * Excluding *劣後受益権除く loans to Government 9,708.6 9
Slide 42: Average Balance of Loans (by Industry)
Average Balance of Loans (by Industry) Sep. 30, 2023 Change from Mar. 31, 2023 3 banks total Fukuoka Kumamoto Juhachi-Shinwa 3 banks total Fukuoka Kumamoto Juhachi-Shinwa % % % % Domestic loans (excluding the special 18,326.6 100.0% 11,778.8 100.0% 2,399.3 100.0% 4,148.4 100.0% 499.1 143.5 417.1 -61
Slide 43: Average Balance of Deposits & CDs (by Bank)
Average Balance of Deposits & CDs (by Bank) Bank of Fukuoka (domestic, non-consolidated) Kumamoto Bank (domestic, non-consolidated) Juhachi-Shinwa Bank (domestic, non-consolidated) 13,174.8 13,080.5 13,416.5 13,274.1 1,661.2 1,669.1 5,714.5 5,774.4 5,742.0 1,641.0 1,645.5 5,625.9 Average deposit bal
Slide 44: Interest Rates on Loans (by Segment)
Interest Rates on Loans (by Segment) 3 banks total * Excluding loans to Government, etc. (%) 1.62 1.58 Retail 1.56 1.54 1.53 1.51 1.02 1.01 1.00 1.00 0.99 0.99 Loan overall Corporate 0.89 0.88 0.88 0.88 0.87 0.87 Public 0.33 0.31 0.32 0.33 0.31 0.31 1H/FY21 2H/FY21 1H/FY22 2H/FY22 1H/FY23 P:2H/FY23
Slide 45: Interest Rates on Loans and Deposits & CDs (by Bank)
Interest Rates on Loans and Deposits & CDs (by Bank) Bank of Fukuoka (domestic, non-consolidated) Kumamoto Bank (domestic, non-consolidated) Juhachi-Shinwa Bank (domestic, non-consolidated) * Excluding loans to Government, etc. * Excluding loans to Government * Excluding loans to Government 1.74 1.7
Slide 46: Breakdown of Loans and Deposits & CDs by Type
Breakdown of Loans and Deposits & CDs by Type Domestic loans (as of Sep. 30, 2023) Domestic funds (as of Sep. 30, 2023) 3 banks Juhachi- 3 banks Juhachi- total Fukuoka Kumamoto total Fukuoka Kumamoto Shinwa Shinwa Based on short-term prime rate 23.9% 16.1% 46.0% 32.0% Interest 62.3% 62.9% 64.4% 60.3
Slide 47: Securities (by Bank)
Securities (by Bank) Bank of Fukuoka (consolidated) Kumamoto Bank Juhachi-Shinwa Bank *15年変国は、12/9末まで理論値採用 *15年変国は、12/9末まで理論値採用 Unrealized gain (loss) 32.8 68.5 12.9 -32.5 -8.3 8.1 -54.9 -22.6 Securities balance 0.5 2,677.6 2,748.9 2,764.6 -3.2 1,423.9 -3.4 2,451.4 -7.4 1,210.7 1,247.2 Other 345.7 3
Slide 48: Non-Interest Income / Asset Management Product Sales (by Bank)
Non-Interest Income / Asset Management Product Sales (by Bank) Bank of Fukuoka Kumamoto Bank Juhachi-Shinwa Bank * For all 3 banks, excluding gains (losses) on bonds 1.1 2.4 12.5 0.2 2.6 1.6 Non-interest income 0.6 1.1 2.2 10.8 11.2 0.3 0.3 0.3 0.3 0.0 0.9 0.9 0.8 Others 2.8 9.7 0.0 0.9 0.1 3.2 3.5
Slide 49: Overhead Expenses / Credit Cost (by Bank)
Overhead Expenses / Credit Cost (by Bank) Bank of Fukuoka Kumamoto Bank Juhachi-Shinwa Bank 43.0% 45.7% 42.1% 44.4% 62.7% 64.6% 68.2% 64.6% 65.9% 59.5% 60.7% 58.7% Core OHR Overhead expenses 32.9 33.1 33.9 32.0 & core OHR 3.3 16.3 15.6 16.0 16.0 Tax 3.3 2.8 3.5 6.3 6.3 6.3 6.6 1.5 1.0 1.4 1.2 0.5 0.
Slide 50: Non-Performing Loans / Capital Adequacy Ratio (by Bank)
Non-Performing Loans / Capital Adequacy Ratio (by Bank) Bank of Fukuoka Kumamoto Bank Juhachi-Shinwa Bank 1.68% 1.59% 1.58% 1.60% 2.01% NPL ratio 1.81% 2.06% 2.08% 1.45% 1.45% 1.85% 1.95% Non-performing loans 193.9 186.3 187.8 187.5 39.2 82.5 81.7 84.0 36.2 35.2 34.8 78.6 74.1 & ratio Substandard 67
Slide 51: Part V: Kyushu Economy (Reference)
Part V: Kyushu Economy (Reference) Fukuoka Financial Group 51
Slide 52: Market Share
Market Share Number of business Loans Deposits Number of business Fukuoka Population Oita Pref. establishments Population establishments Loans Deposits Pref. Kitakyushu Bank 23.9 41.8 3.6 8.6 5,030,000 206,000 1.6 trillion yen 1,120,000 50,000 trillion yen trillion yen Bank of Fukuoka trillion yen t
Slide 53: Economic Trends
Economic Trends 30 Bank of Japan’s Tankan: Business conditions D.I. 20 10 Fukuoka * Fukuoka region: Fukuoka Prefecture plus Saga Prefecture, excluding Kitakyushu 0 30 ▲- 10 Projection ▲- 20 Fukuoka 福岡地方※ Projection region * ▲- 30 北九州 Kitakyushu 20 ▲- 40 Japan 18/9 19/9 20/9 21/9 22/9 23/9 10 30 20 K
Slide 54: Industrial Production Trends
Industrial Production Trends Industrial production index (FY2015 = 100) [Kyushu] Main industry trends Integrated circuits (Million pieces) (%) 115 1,000 50 40 800 30 110 Japan 600 20 10 105 400 Quantity 生産数量 0 前年比(右軸) YoY chg. (right axis) ▲ - 1010 200 100 ▲ - 2020 0 ▲ - 3030 18/9 19/9 20/9 21/9 22/
Slide 55: Capital Investment / Housing Investment
Capital Investment / Housing Investment Capital investment: Bank of Japan’s Tankan (YoY change) Housing starts (Thousand) (%) Projected forecast 1,200 20 30 1,000 10 800 0 Japan Japan 20 As of 600 Sep. ▲ - 1010 400 ▲ - 2020 10 戸数 of houses Number 200 ▲ - 3030 前年比(右軸) YoY chg. (right axis) 0 ▲ - 4040
Slide 56: Land Price Trends
Land Price Trends Volatility of standard land prices (Average change from previous year: %) <Ministry of Land, Infrastructure and Transport: 2022 Outline of Land Price Surveys Conducted by Major cities in Fukuoka Pref. (Average change from previous year: %) Prefectural Governments> ○ Japan: There ha
Slide 57: Corporate Bankruptcies
Corporate Bankruptcies Number of bankruptcies and total liabilities (¥ bil.) (Number) (¥ bil.) Left axis: Total liabilities (bar graph) 200 20 50 (Number) Fukuoka 16,000 1,600 Right axis: Number of bankruptcies (line graph) 900 150 15 40 14,000 30 1,400 800 100 10 12,000 20 1,200 700 50 5 10 Japan 1
Slide 58: Loans
Loans (%) Rate of increase of bank loans (YoY change, monthly) 8 6 Fukuoka (%) (%) 4 3.4 8 2 0 ▲ - 2 Japan ▲ - 4 6 13/9 15/9 17/9 19/9 21/9 23/9 8 6 Kumamoto 4 4.0 4 3.8 2 2.7 0 ▲- 2 2 ▲- 4 13/9 15/9 17/9 19/9 21/9 23/9 8 Kyushu 6 4 Nagasaki 0 2 0 0.0 ▲2 - ▲- 4 ▲- 2 ▲- 6 13/9 15/9 17/9 19/9 21/9 23/
Slide 59: Deposits
Deposits (%) 12 Rate of increase of bank deposits (YoY change, monthly) 10 8 Fukuoka (%) 6 12 4 2 2.4 10 0 Japan 13/9 15/9 17/9 19/9 21/9 23/9 12 8 10 8 Kumamoto 6 6 4 1.3 2 0 4 3.9 ▲- 2 13/9 15/9 17/9 19/9 21/9 23/9 2.3 10 Kyushu 2 8 6 Nagasaki 4 0 2 3.0 0 ▲- 2 ▲- 2 13/9 15/9 17/9 19/9 21/9 23/9 13
Slide 60: Contact for further inquiries
Contact for further inquiries: Public Relations Group, Corporate Planning Division Fukuoka Financial Group Phone: +81 - 92 - 723 - 2255 Email: ffg-ir@fukuoka-fg.com Website: https://www.fukuoka-fg.com This document has been prepared solely for the purpose of providing information and does no
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