77 Bank, Ltd. · TSE:8341
77 Bank — The 77 Bank — H1 FY2023 Earnings Presentation
67 slides from 77 Bank's earnings presentation, Dec 5, 2023
Slide 1: Results for the First Half of Fiscal Year Ending March 31, 2024
Results for the First Half of Fiscal Year Ending March 31, 2024 IR Presentation Materials were prepared for the Bank’s presentation of its results for first half of the fiscal year ending March 31, 2024 held on December 5, 2023. December 5, 2023
Slide 2: Table of Contents
Table of Contents 1. First Half Financial Summary … 2 2. Projected Performance … 12 3. The 77 Bank Group’s Value Enhancement … 17 4. Business Strategy … 26 5. References … 64 The 77 Bank, Ltd. | First Half of Fiscal Year Ending March 31, 2024 1
Slide 3: First Half Financial Summary
First Half 01 Financial Summary The 77 Bank, Ltd. | First Half of Fiscal Year Ending March 31, 2024 2
Slide 4: Summary of Profits and Losses
Summary of Profits and Losses YoY change FY2022 1H FY2023 1H Non-consolidated Amount % (Unit: JPY bn, %) Gross operating income 42.6 45.3 2.7 6.2 Results for the first half of FY2023 In addition to an increase in interest Interest income 39.0 47.7 8.7 22.1 income, factors such as a decrease in Fees
Slide 5: Interest Income
Interest Income Interest income increased due in part to an increase in loans and bills discounted and higher yields on loans and bills discounted and investment securities YoY change Change factors in interest income FY2022 1H FY2023 1H Factors in investment (Unit: JPY bn, %) Amount % (Unit: JPY bn
Slide 6: Deposits
Deposits Both retail and corporate deposits increased, mainly within Miyagi Prefecture YoY change Deposits by region (average balance) FY2022 1H FY2023 1H (Unit: JPY bn, %) Amount % (Unit: JPY bn) Deposits and certificates of deposits (average balances) 8,864.3 8,950.1 85.8 0.9 8,864.3 8,842.8 8,950
Slide 7: Loans and Bills Discounted
Loans and Bills Discounted Corporate loans and housing loans increased in Miyagi Prefecture and the rest of the Tohoku region FY2022 1H FY2023 1H YoY change Corporate loans (yen-denominated/average balances) (Unit: JPY bn, %) Amount % (Unit: JPY bn) Loans and bills discounted 5,346.6 5,591.2 244.6 4
Slide 8: Investment Securities (1)
Investment Securities (1) Total gains from investment securities increased due to an increase in interest and dividends on investment securities Balance of investment securities (on an amortized cost base) Total gains (losses) from investment securities (Unit: JPY bn) YoY change FY2022 1H FY2023 1H
Slide 9: Investment Securities (2)
Investment Securities (2) Valuation gains increased for stocks, investment trusts, etc. and held steady for investment securities overall Yen-denominated bonds balance by remaining Gains (losses) from evaluation of investment securities period/modified duration (Unit: JPY bn) End-Sept. 2022 End-Mar.
Slide 10: Fees and Commissions
Fees and Commissions Fees and commissions from corporate clients increased due to an increase in business matchings, M&As, etc. YoY change Fees and commissions from corporate clients FY2022 1H FY2023 1H (Unit: JPY bn) (amount) (Unit: JPY bn) Fees and commissions A 9.2 9.6 0.4 1.6 Syndicate 1.3 1.3 F
Slide 11: Expenses
Expenses Despite an increase in systems-related expenses, core OHR improved thanks to an increase in core gross operating income YoY change FY2022 1H FY2023 1H (Unit: JPY bn) (amount) Core OHR Expenses 23.5 24.4 0.9 Core OHR (Unit: JPY bn) 55.80% 52.92% Personnel expenses 12.8 12.8 0.0 Core gross 50
Slide 12: Credit-related Expenses
Credit-related Expenses Credit-related expenses decreased thanks to gains on reversal of reserve for loan losses YoY change FY2022 1H FY2023 1H Credit-related expenses (Unit: JPY bn) (amount) (Unit: JPY bn) 56.9 Credit-related expenses 2.6 (1.1) (3.7) Provision of general reserve for loan (1.0) - 1.
Slide 13: Projected Performance
02 Projected Performance The 77 Bank, Ltd. | First Half of Fiscal Year Ending March 31, 2024 12
Slide 14: Summary of Profits and Losses
Summary of Profits and Losses FY2023 YoY change FY2024 FY2022 Non-consolidated (Forecast) Amount % (Simulation) (Unit: JPY bn, %) Gross operating income 78.9 83.6 4.7 6.0 88.1 Interest income 78.6 91.3 12.7 16.1 92.1 Fees and commissions 12.2 11.9 (0.3) (2.5) 12.3 Other operating income (11.9) (19.6
Slide 15: Interest Income
Interest Income FY2023 YoY change FY2024 FY2022 (Unit: JPY bn, %) (Forecast) Amount % (Simulation) Interest income 78.6 91.3 12.7 16.2 92.1 (Reference) Level of yields and interest rates used Investment income 79.8 93.4 13.6 17.0 94.4 as the basis for the forecast, etc. (Interest on loans and FY2023
Slide 16: Investment Securities
Investment Securities Balance of investment securities (average base) Total gains (losses) from investment securities (Unit: JPY bn) FY2023 YoY change FY2024 FY2022 (Unit: JPY bn, %) (Forecast) Amount (Rate) (Simulation) 3,018.4 Interest and dividends on 32.0 41.2 9.2 40.5 2,927.8 2,959.1 investment
Slide 17: Expenses
Expenses FY2023 YoY change FY2024 FY2022 (Unit: JPY bn) (Forecast) (amount) (Simulation) Expenses 48.5 49.3 0.8 49.8 Personnel expenses 25.5 25.6 0.1 25.2 Non-personnel expenses 19.8 20.4 0.6 21.0 Tax 3.2 3.3 0.1 3.6 Core OHR (Unit: JPY bn) Core OHR 56.55% (Unit: %) 54.53% Core gross 53.80% Core OHR
Slide 18: The 77 Bank Group's Value Enhancement
The 77 Bank 03 Group’s Value Enhancement The 77 Bank, Ltd. | First Half of Fiscal Year Ending March 31, 2024 17
Slide 19: Background of Revisions to Financial Targets of Vision 2030
Background of Revisions to Financial Targets of “Vision 2030” Given the substantial changes to the external environment and other factors since “Vision 2030” was formulated, and our progress on “Vision 2030,” we revised the financial targets Changes in economic environment, etc. Changes in external
Slide 20: Revising Financial Targets and Setting ROE Target
Revising Financial Targets and Setting ROE Target We seek to improve returns on capital by achieving “Vision 2030,” specifically by raising financial targets for FY2030 and setting a new ROE target Our target form in “Vision 2030” FY2021 FY2022 FY2023 FY2030 FY2030 Results Results Target Vision Init
Slide 21: Improving Our Income Level
Improving Our Income Level Striving to further raise our net income level by increasing our top line, improving productivity, etc. Net income (consolidated) increase concept Top customer satisfaction strategy JPY ( 3.5 ) bn JPY 9.0 bn Increase in credit- Interest on loans and bills discounted relate
Slide 22: Improving Returns on Capital (Analyzing/Evaluating the Current Status)
Improving Returns on Capital (Analyzing/Evaluating the Current Status) The current ROE is less than capital costs; PBR is less than 1.0x We will achieve the new ROE target in pursuit of a PBR of greater than 1.0x in the future ROE (consolidated) 8.00% 7% or more Capital cost level 6.00% 4.92% 4.06%
Slide 23: Improving Returns on Capital (Solutions for the Future)
Improving Returns on Capital (Solutions for the Future) Striving to improve PBR by boosting returns and profitability on risk assets and properly controlling capital adequacy Approach to improving PBR Strengthen profitability ✔ RORA-focused measures to strengthen loans and bills discounted ✔ Measure
Slide 24: Preservation of Soundness
Preservation of Soundness Set a capital adequacy ratio target of roughly 10% (10%–10.5%) to prepare for emergencies Implement proper capital control by setting the management range during the plan Capital adequacy ratio (consolidated) concept Return of profits Net income to shareholders Management r
Slide 25: Revision of Policy of Return of Profits to Shareholders
Revision of Policy of Return of Profits to Shareholders Revising the Policy of Return of Profits to Shareholders by raising the dividend payout ratio to at least 35% of net income attributable to owners of the parent by FY2025 and considering responsive acquisition of treasury shares Policy of Retur
Slide 26: Reducing Cross-Shareholdings
Reducing Cross-Shareholdings Continuing to reduce cross-shareholdings with a target of ratio to consolidated net assets of less than 10% Actions taken to reduce cross-shareholdings 17.4% (Unit: tickers, JPY bn) Ratio to consolidated net assets 14.0% 13.2% (market value basis) 11.3% Number of tickers
Slide 27: Business Strategy
04 Business Strategy The 77 Bank, Ltd. | First Half of Fiscal Year Ending March 31, 2024 26
Slide 28: Vision 2030
“Vision 2030” The 77 Bank, Ltd. | First Half of Fiscal Year Ending March 31, 2024 27
Slide 29: Vision 2030 – Purpose of Formulation and Background
“Vision 2030” – Purpose of Formulation and Background – The The 77 Bank, Ltd. | First Half of Fiscal Year Ending March 31, 2024 28
Slide 30: Vision 2030 – Our Target Form
“Vision 2030” – Our Target Form – ® The 77 Bank, Ltd. | First Half of Fiscal Year Ending March 31, 2024 29
Slide 31: Vision 2030 – The 77 Bank Group Direction
“Vision 2030” – The 77 Bank Group Direction – The 77 Bank, Ltd. | First Half of Fiscal Year Ending March 31, 2024 30
Slide 32: Vision 2030 – Basic Strategies to Achieve Our Target Form
“Vision 2030” – Basic Strategies to Achieve “Our Target Form” – ® The 77 Bank, Ltd. | First Half of Fiscal Year Ending March 31, 2024 31
Slide 33: Initiatives for Finance & Consulting
Initiatives for Finance & Consulting Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Providing finance & consulting services to help clients enhance their corporate value Finance & Consulting Enhance corporate Improve Finance
Slide 34: Strengthening of Consulting Sales
Strengthening of Consulting Sales Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Actively questioning and providing solutions to clients to form the foundation of consulting sales Number of contacts Number of corporate loan
Slide 35: Spread of Consulting Sales
Spread of Consulting Sales Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy The number of all types of contracts closed has increased thanks to the spread of consulting sales Measures for structured finance Measures for fees a
Slide 36: Expansion of Business Base
Expansion of Business Base Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy We have expanded the fields we actively operate in by utilizing our network of branches, our overseas network, local information network, and more Ser
Slide 37: Support for Local Clients' Issue-Solving (1)
Support for Local Clients’ Issue-Solving (1) Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Expanding our business domain and providing optimal solutions to resolve the issues of local communities Establishment of 77 Insuran
Slide 38: Support for Local Clients' Issue-Solving (2)
Support for Local Clients’ Issue-Solving (2) Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Establishment of 77 Partners (December 2021) Establishment of 77 Human Design (August 2022) Providing hands-on support through maj
Slide 39: Support for Local Clients' Issue-Solving (3)
Support for Local Clients’ Issue-Solving (3) Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Establishment of Tohoku Healthcare Support (April 2023) Establishment of 77 Digital Solutions (May 2023) Formed a healthcare fund
Slide 40: Group Business
Group Business Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Establishing Group business (including new business) as the third pillar of income for the 77 Bank Group List of Group companies Enhancement of human interactions
Slide 41: Operations That Put Customers First
Operations That Put Customers First Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Providing optimal solutions by accurately understanding what customers need Formulation of Retail Sales Policy Retail Sales Policy We will co
Slide 42: Expanding Customer Contact Points
Expanding Customer Contact Points Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Strengthen recurring revenue by contributing to customer asset formation, etc. Expanding product offerings Sales commissions of assets in custo
Slide 43: Rebalancing of Management Resources
Rebalancing of Management Resources Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Shifting personnel members created and other management resources to strategic fields Approach to rebalancing management resources Core OHR (
Slide 44: Branch Strategy
Branch Strategy Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Transitioning to branches within branches in consideration of characteristics of markets, local circumstances, etc. Transitioning to branches within branches N
Slide 45: Initiatives for Paperwork-Free
Initiatives for Paperwork-Free Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Creating personnel capable of contributing to improving income by promoting paperwork-free Status of initiatives for paperwork-free Personnel Oper
Slide 46: Utilization of Digital Technology
Utilization of Digital Technology Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Starting demonstration tests for using generative AI for digital technology reforms for the banking business Digital technology reforms for the
Slide 47: Expansion of Non-Face-to-Face Channels
Expansion of Non-Face-to-Face Channels Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Improving usage rates by enhancing the functions of non-face-to-face channels, etc. Enhancing the functions of non-face-to-face channels
Slide 48: Regional Vitalization
Regional Vitalization Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Defining four domains as key items of implementation for regional vitalization Regional vitalization mission The 77 Bank Regional Vitalization Mission: Str
Slide 49: Support for Founding and Cultivating New Businesses
Support for Founding and Cultivating New Businesses Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Providing information on a regular basis and support tailored to each stage Providing 77 Founding Support Package Held a 77 s
Slide 50: Miyagi Wide-area PPP Platform
Miyagi Wide-area PPP Platform Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Strengthening collaboration with local governments and others through the Miyagi Wide-area PPP Platform Formation of the Miyagi Wide-area PPP Platf
Slide 51: Promotion of Urban Development Projects (1)
Promotion of Urban Development Projects (1) Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Proactive involvement in regional projects for new development, etc. NanoTerasu, the next-generation synchrotron radiation facility
Slide 52: Promotion of Urban Development Projects (2)
Promotion of Urban Development Projects (2) Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Establishing a project team to respond to expansion by semiconductor companies Expansion by semiconductor companies SBI Holdings, I
Slide 53: Spotlight: Sustainability Initiatives
Spotlight: Sustainability Initiatives Solving important issues (materiality) as a Group in keeping with the philosophy of the Bank Creed Initiatives to date Formulated “Vision 2030” Endorsed the “TCFD Identified the “77 Bank Group’s materiality” Established the “Environmental Policy” recommendations
Slide 54: Spotlight: Promoting Sustainability
Spotlight: Promoting Sustainability Identifying materiality in pursuit of strengthening sustainability initiatives Identified materiality 1. Revitalization of Miyagi and Tohoku We will lead the revitalization of Miyagi and Tohoku through building of regional economic ecosystems by multi-faceted indu
Slide 55: Spotlight: Spread of Sustainability
Spotlight: Spread of Sustainability Spreading sustainability throughout the region through solutions to regional issues as well as seminars Joined the “ESG Regional Finance Promotion Program” Held a 77 SDGs seminar Joined the “2023 ESG Regional Finance Promotion Program” In November 2023, as one
Slide 56: Spotlight: Carbon Neutrality Initiatives
Spotlight: Carbon Neutrality Initiatives Strengthening initiatives for achieving carbon neutrality by FY2030 Achieving carbon neutrality In April 2023, revised our existing target and announced our goal to achieve carbon neutrality by FY2030 (Unit: t-CO2) CO₂ emissions (Existing target) CO₂ rate o
Slide 57: Our Efforts for Human Capital Management
Our Efforts for Human Capital Management Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Establishing various policies in the 77 Bank Group to increase the value of human capital The 77 Bank Group’s human capital management “
Slide 58: Corporate Culture Reform
Corporate Culture Reform Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Developing bank employees who are ambitious and seek to create a path to the future Implementation of personnel system reform Holding of business planni
Slide 59: Reinforcement of Human Resource Development
Reinforcement of Human Resource Development Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Strengthening investment in human resource development by supporting training and independent learning, etc. Development of specialis
Slide 60: Promotion of Diversity
Promotion of Diversity Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Promoting diversity, equity, and inclusion for active participation of diverse human resources Proportion of female managers Joining in the Baby First mov
Slide 61: Development of Work Environment
Development of Work Environment Top customer Double Regional growth Corporate culture satisfaction productivity strategy reform strategy strategy strategy Promoting well-being by developing work environments and allowing more flexible work styles Promotion of health and productivity management Initi
Slide 62: Strengthen Financial Foundation (Key Factors)
Strengthen Financial Foundation (Key Factors) FY2022 FY2023 1H FY2023 FY2030 Results Results Target Vision Net income JPY 25.1 bn JPY 17.7 bn JPY 27.0 bn JPY 45.0 bn (consolidated) [of which credit-related expenses] [JPY 1.2 bn] [JPY (1.1) bn] [JPY 1.5 bn] [JPY 5.0 bn] Capital adequacy ratio 11.23%
Slide 63: Progress Status of KPI (Let's Try!)
Progress Status of KPI (Let’s Try!) FY2022 FY2023 1H FY2023 FY2030 Results Results Target Vision Proportion of companies in Miyagi 56% 56% 57% 62% Prefecture whose main bank is the 77 Bank Number of corporate lending clients 1.21x 1.25x 1.23x 1.5x outside Miyagi Prefecture (Vs. FY2020) Proportion of
Slide 64: Governance
Governance Balance and diversity of knowledge, experience, and abilities across the Board of Directors Skills matrix Ratio of Outside Directors Ratio of Outside Directors 50% (8/16 persons) Ratio of female Directors Ratio of female Directors 12.5% (2/16 persons) Note: “◎” is marked for the skills an
Slide 65: References
05 References The 77 Bank, Ltd. | First Half of Fiscal Year Ending March 31, 2024 64
Slide 66: Management Environment
Management Environment Potential of Miyagi Prefecture (Unit) Miyagi Prefecture (Reference) Tohoku region total Total area (km2) 7,282 66,948 Population (thousand people) 2,268 8,519 (thousand Number of households households) 1,023 3,501 Gross prefectural product (nominal) (JPY bn) 9,829.4 35,158.7 N
Slide 67: This is a Japanese-English translation of the presentation material for your convenience. In the
This is a Japanese-English translation of the presentation material for your convenience. In the case that there is any discrepancy between the Japanese and English versions, the Japanese version is assumed to be correct. Please note that the projections described in this document do not guarantee f