Fukuoka Financial Group, Inc. · TSE:8354
Fukuoka Financial — Investor Presentation (May 2023)
63 slides from Fukuoka Financial's investor presentation, May 23, 2023
Slide 1: Investor Meeting
Investor Meeting May 23, 2023 Fukuoka Financial Group
Slide 2: Contents
Contents Part I: Management Strategy Part II: Financial Results and Earnings Projections (Reference) Basic Management Approach 4, 5 Summary of Financial Results for FY2022 27 Top-Line and Bottom-Line Results for FY2022 28 FFG’s Human Capital Management 6 Earnings Projections for FY2023 29
Slide 3: Part I: Management Strategy
Part I: Management Strategy Fukuoka Financial Group
Slide 4: Three Focal Points
Three Focal Points 1. Be thoroughly customer-focused 2. Bring out the vitality of people and the organization 3. Continue to increase profits 4
Slide 5: Corporate and Individual (Employee) Sustainability
Corporate and Individual (Employee) Sustainability Corporate purpose: Pursuit of raison d’être (virtuous business cycle) Purpose of individuals (employees): Self-actualization —Solving stakeholder issues while continuing to generate profits— —Contributing to others while growing as an individual— Co
Slide 6: FFG's Human Capital Management
FFG’s Human Capital Management Investment in various measures based on the human resources strategy (= investment in human resources) generates earnings through management strategies, which are channeled to shareholder returns, growth investment (business, digital, etc.), and further investment in
Slide 7: Business Environment Surrounding FFG_Kyushu Economy
Business Environment Surrounding FFG_Kyushu Economy In FY2023, the Kyushu economy is forecast to continue recovering, supported by pent-up demand for travel and healthy capital investment. This is despite the impact of soaring energy prices and rising commodity prices. On the other hand, new bankr
Slide 8: Business Environment Surrounding FFG_Business Opportunities (Topics)
Business Environment Surrounding FFG_Business Opportunities (Topics) Corporate business opportunities Consumer business opportunities Capital investment aimed at the revival of “Silicon Island Kyushu” is New NISA scheme has triggered momentum in asset building “from savings to investment” picking up
Slide 9: FY2022 Overview of Financial Results and FY2023 Earnings Projections
FY2022 Overview of Financial Results and FY2023 Earnings Projections FY22 FY23 FY2022 financial results [Unit: \ bil.] Results YoY chg. Projected YoY chg. Core gross business profit 215.2 2.2 222.0 6.9 ▶ Core business profit (3 banks total): YoY chg. +8.3 billion yen Net interest income 186.4 1.6 19
Slide 10: Growth of Core Business
Growth of Core Business Steadily expanded business scope–the foundation for future earnings–through past efforts including the effects of measures in the 6th Medium-Term Management Plan. In FY2023, will steadily proceed with “transformation of the existing business model” centered on the DX stra
Slide 11: Response to Environmental Changes and Issues_Market Operation
Response to Environmental Changes and Issues_Market Operation In FY2022, reshuffled foreign bond portfolio. Yield on foreign bonds improved and unrealized gains (losses) after considering hedges turned positive. Although unrealized losses on domestic bonds have increased due to rising yen intere
Slide 12: Minna Bank (Review of FY2022, Issues)
Response to Environmental Changes and Issues_Minna Bank (Review of FY2022, Issues) In FY2022, Minna Bank’s second year since opening, we made progress in building a foundation for profit generation. In terms of key figures, both the number of accounts and the balance of loans continued to trend up
Slide 13: Minna Bank (FY2023 Priority Initiatives (BaaS Business))
Response to Environmental Changes and Issues_Minna Bank (FY2023 Priority Initiatives (BaaS Business)) In FY2023, we will expand our customer base driven by the BaaS business and proceed to build an earnings base aimed at making the business profitable. Leveraging the strengths of Minna Bank, we
Slide 14: Minna Bank (Target Metrics and Future Outlook)
Response to Environmental Changes and Issues_Minna Bank (Target Metrics and Future Outlook) Review figures based on current situation. Based on current results for B2C, in addition, strengthen acquisition of B2B2C customers by promoting BaaS. Overall business is expected to be profitable in FY20
Slide 15: Transformation of the Existing Business Model
Progress of the Medium-Term Management Plan, etc._Transformation of the Existing Business Model We will enhance customer satisfaction and achieve differentiation from competitors by coordinating measures in order to reinforce our ability to provide solutions. Earnings effect of +4.5 billion yen Ef
Slide 16: Digital (Banking Apps for Retail Customers and Portal Site)
Progress of the Medium-Term Management Plan, etc._Digital (Banking Apps for Retail Customers and Portal Site for Corporate Customers) Banking app for retail customers: Scheduled for July 2023, Release 1 will implement basic functions, such as balance inquiries and fund transfer. Portal site for
Slide 17: Business Reforms / Sales Reforms
Progress of the Medium-Term Management Plan, etc._Business Reforms / Sales Reforms In terms of business reforms, the Bank of Fukuoka is developing a “new branch format” that makes over-the-counter operations self- service and cashless. In terms of sales reforms, we offer sophisticated solutions
Slide 18: Strengthening Strategic Subsidiaries / New Corporate Business
Progress of the Medium-Term Management Plan, etc._Strengthening Strategic Subsidiaries / New Corporate Business We are improving the services of our strategic subsidiaries and enhancing solutions for communities/customers throughout FFG. At the same time, we are expanding our own business profit.
Slide 19: Capacity to Implement Strategies (Minna Bank × Transformation)
Improvement of Corporate Value_Capacity to Implement Strategies (Minna Bank × Transformation of the Existing Business Model) Minna Bank (searching for the future) and transformation of the existing business model (deepening) will complement each other and create synergies. We will continuously c
Slide 20: Outlook for Profit Growth
Improvement of Corporate Value_Outlook for Profit Growth Despite the downward impact on earnings associated with changes in the business environment, we expect to achieve our projections for the final year of the Medium-Term Management Plan by building up the sales division, including market portf
Slide 21: ROE and Cost of Shareholders' Equity
Improvement of Corporate Value_ROE and Cost of Shareholders’ Equity Under the Long-term Vision, the target year of which is 2030, we aim to realize a ROE that exceeds the cost of shareholders’ equity through further profit growth achieved by realizing the effects of the growth investments made sin
Slide 22: Capital Policy (Basic Policy)
Improvement of Corporate Value_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. FFG consolidated capital adequacy ratio Capital policy Capital adequacy ratio at the end
Slide 23: Business Integration with the Fukuoka Chuo Bank
(Reference 1) Business Integration with the Fukuoka Chuo Bank A share exchange agreement (final agreement) was signed with Fukuoka Chuo Bank on March 14. We will step up preparations ahead of the business integration on October 1. Basic policy for business integration Schedule Purpose of Contribut
Slide 24: Future Vision for FFG through DX
(Reference 2) Future Vision for FFG through DX In the future, we will realize a business model of value co-creation in which local players are connected. Use of administrative services / collaborative research with universities Use of administrative services Local governments / universities Admini
Slide 25: Domestic Interest Rate Sensitivity
(Reference 3) Domestic Interest Rate Sensitivity Changes in policy, such as revision of the yield curve control (YCC) and lifting of negative interest rates, will have a positive impact on the net interest income of FFG’s domestic divisions. FFG’s balance sheet (image) Breakdown of loans, deposits
Slide 26: Part II: Financial Results and Earnings Projections (Reference)
Part II: Financial Results and Earnings Projections (Reference) Fukuoka Financial Group
Slide 27: Summary of Financial Results for FY2022
Summary of Financial Results for FY2022 Profit & loss (3 banks total) (Unit: ¥ bil.) Profit & loss (FFG consolidated) 3 banks non- Bank of Fukuoka Kumamoto Bank Juhachi-Shinwa Bank FY22 [Compared to the projection YoY chg. consolidated total (non-consolidated) (non-consolidated) (non-consolidated) r
Slide 28: Top-Line and Bottom-Line Results for FY2022
Top-Line and Bottom-Line Results for FY2022 Core business profit increased year-on-year due to an increase in profit from loans to SMEs and insurance, etc. and a decrease in overhead expenses due to the effects of the Juhachi-Shinwa Bank integration, etc. Consolidated net income decreased year-o
Slide 29: Earnings Projections for FY2023
Earnings Projections for FY2023 Profit & loss(3 banks total) (Unit: ¥ bil.) Profit & loss(FFG consolidated) 3 banks non- Bank of Fukuoka Kumamoto Bank Juhachi-Shinwa Bank consolidated total P:FY23 YoY chg. (non-consolidated) (non-consolidated) (non-consolidated) Projected YoY chg. Projected YoY chg.
Slide 30: Top-Line and Bottom-Line Projections for FY2023
Top-Line and Bottom-Line Projections for FY2023 Core business profit is projected to increase 4.1 billion yen year-on-year to 110.0 billion yen, driven by an increase in loans to SMEs and interest on securities. Consolidated net income is projected to increase 29.8 billion yen year-on-year to 61
Slide 31: Net Interest Income
Net Interest Income Net interest income (3 banks total) Domestic deposit loan gross margin (3 banks total) * Domestic loans... Excluding loans to FFG and Government (¥ bil.) * Domestic loans... Excluding loans to FFG and Government (%) * Domestic funds... Domestic deposits + CDs * Domestic funds...
Slide 32: Total Average Loan Balance
Total Average Loan Balance Loans (by bank) Loans (by segment) * Excluding loans to FFG and Government (annual rate) (¥ bil.) * Excluding loans to FFG and Government (annual rate) (¥ bil.) 3 banks 14,942.4 14,732.3 14,942.4 total 14,515.5 14,732.3 3 banks total 14,515.5 (1.4%) (1.4%) (1.5%) (3.7%) (1
Slide 33: Total Average Fund Balance
Total Average Fund Balance Deposits and CDs (by bank) Deposits and CDs (by segment) (Annual rate) (¥ bil.) (Annual rate) (¥ bil.) 20,990.6 20,724.6 20,990.6 3 banks 20,724.6 3 banks total 19,999.0 (1.3%) total 19,999.0 (1.3%) (3.6%) (3.6%) (6.4%) (6.4%) 283.3 247.6 275.4 (-12.6%) International (2.9%
Slide 34: Securities
Securities Securities portfolio (FFG consolidated) Bond duration & materiality test reference value (¥ bil.) * Bond duration: After considering hedges (Years) 159.7 6.52 6.07 69.9 -10.2 5.74 Unrealized gain (loss) 4,023.6 3,850.9 Domestic bonds FFG consolidated 3,760.0 3.0 (-172.7) 3.37 1.1 Minna 2.
Slide 35: Non-Interest Income
Non-Interest Income Non-interest income (3 banks total +FFG Securities) (Unit: ¥ bil.) Asset management product sales (Unit: ¥ bil.) * Excluding gains (losses) on bonds * Figures for FFG Securities are the total sales of investment trusts and bonds FFG total 32.1 32.2 31.3 FFG total 458.1 439.6 473.
Slide 36: Overhead Expenses
Overhead Expenses By category / OHR* * OHR = Overhead expenses / Gross business profit * FY22 only: Figures in Unit: ¥ bil. parentheses ( ) exclude cut losses on foreign bonds 200.0 68.4% 72.6% * (60.8%) Consolidated OHR 64.6% 70.0% 60.4% 61.8% 60.7% 3 banks total OHR * (51.5%) 56.3% 60.0% 3 banks t
Slide 37: Credit Cost / Non-Performing Loans
Credit Cost / Non-Performing Loans Credit cost (3 banks total) (Unit: ¥ bil.) Non-performing loans & ratio (3 banks total) (Unit: ¥ bil.) 1.5 3.1 6.0 Disclosed NPL ratio 1.79% 1.82% 1.67% 3 banks total (Credit cost ratio) * Excluding loans to Government, etc. (1bp) (2bp) (4bp) Total 311.5 308.3 301.
Slide 38: Part III: Sustainability Initiatives (Reference)
Part III: Sustainability Initiatives (Reference) Fukuoka Financial Group
Slide 39: Support for SDGs
Working Together to Achieve Sustainability for our Customers_Support for SDGs We are actively developing support for SDGs that is provided to customers based on the Sustainable Scale Index. We began offering FFG main business support loans to support local companies in their main business and to
Slide 40: Addressing Climate Change
Promoting Sustainability in FFG_Addressing Climate Change We have positioned climate-related risks as particularly important risks for management at FFG. We are promoting reductions of our own CO2 emissions, and we are strengthening disclosure in line with the disclosure framework in the TCFD reco
Slide 41: Community Contribution Activities
Contributing to the Sustainability of Local Communities_Community Contribution Activities Community contribution activities beyond the framework of financial business and helping to improve financial literacy are important roles for regional financial institutions, and we are actively engaged in t
Slide 42: Promotion of DE&I
Respect and Support for Diverse Human Resources_Promotion of DE&I For employees to not only be diverse but also to play an active role by making the most of their individuality (inclusion), appropriate and fair management and support (equity) are needed which take into account their various backgr
Slide 43: Part IV: FY2022 Financial Results_Figures (Reference)
Part IV: FY2022 Financial Results_Figures (Reference) Fukuoka Financial Group
Slide 44: 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 loans to Government * Excluding loans to Government 9,361.0 9,627.6 9,018.2 1,
Slide 45: Average Balance of Loans (by Industry)
Average Balance of Loans (by Industry) Mar. 31, 2023 Change from Mar. 31, 2022 3 banks total Fukuoka Kumamoto Juhachi-Shinwa 3 banks total Fukuoka Kumamoto Juhachi-Shinwa Classification by industry % % % % Domestic loans (excluding the special 17,827.5 100.0% 11,635.3 100.0% 1,982.2 100.0% 4,209.8 1
Slide 46: 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) 13,127.8 1,613.9 1,643.2 5,670.3 Average deposit balance 12,591.3 1,545.0 5,518.4 5,301.6 by customer segment 11,748.0
Slide 47: Interest Rates on Loans (by Segment)
Interest Rates on Loans (by Segment) 3 banks total * Excluding loans to Government, etc. (%) 1.70 Retail 1.66 1.62 1.58 1.56 1.54 1.06 1.05 1.02 Loan overall 1.01 1.00 1.00 Corporate 0.90 0.90 0.89 0.88 0.88 0.88 Public 0.39 0.36 0.33 0.31 0.31 0.31 1H/FY20 2H/FY20 1H/FY21 2H/FY21 1H/FY22 2H/FY22 47
Slide 48: 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 1.90 1.8
Slide 49: Breakdown of Loans and Deposits & CDs by Type
Breakdown of Loans and Deposits & CDs by Type Domestic loans (as of Mar. 31, 2023) Domestic funds (as of Mar. 31, 2023) 3 banks Juhachi- 3 banks Juhachi- total Fukuoka Kumamoto Shinwa total Fukuoka Kumamoto Shinwa Based on short-term Interest prime rate 22.9% 16.7% 35.2% 33.2% 62.0% 62.5% 63.6% 60.1
Slide 50: Securities (by Bank)
Securities (by Bank) Bank of Fukuoka (consolidated) Kumamoto Bank Juhachi-Shinwa Bank Unrealized 135.6 56.6 gain (loss) 68.5 12.9 32.8 Securities balance 8.1 2,677.6 2.5 1,247.2 1,183.9 1,187.2 2,446.7 2,451.4 0.5 354.6 -3.4 105.6 147.4 193.8 Other 294.9 353.0 155.5 618.3 155.9 146.5 181.0 246.7 For
Slide 51: 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 21.9 22.2 1.3 1.7 4.9 4.8 Non-interest income 1.0 3.7 18.3 6.3 5.7 0.6 0.6 1.8 1.8 0.6 0.1 0.0 Others 4.8 0.1 2.1 0.1 5.2 Domestic 5.2
Slide 52: Overhead Expenses / Credit Cost (by Bank)
Overhead Expenses / Credit Cost (by Bank) Bank of Fukuoka Kumamoto Bank Juhachi-Shinwa Bank 51.2% 81.9% 46.7% 70.3% 66.3% 71.2% 44.3% 61.1% 66.3% Overhead expenses & Core OHR 40.7 68.4 67.0 64.9 13.3 13.1 35.3 12.5 3.8 31.9 6.7 core OHR Tax 6.4 6.1 2.7 0.9 0.9 0.9 2.5 17.7 General 30.3 29.3 27.9 6.0
Slide 53: Non-Performing Loans / Capital Adequacy Ratio (by Bank)
Non-Performing Loans / Capital Adequacy Ratio (by Bank) Bank of Fukuoka Kumamoto Bank Juhachi-Shinwa Bank 1.62% 1.59% 2.49% 1.58% Non-performing loans & NPL ratio 2.08% 2.06% 2.11% 1.81% 1.85% 184.0 185.6 186.3 88.0 39.4 38.2 84.6 36.2 78.6 67.4 ratio Substandard 65.6 72.2 14.0 11.8 32.4 30.1 9.5 34
Slide 54: Part V: Kyushu Economy (Reference)
Part V: Kyushu Economy (Reference) Fukuoka Financial Group
Slide 55: Market Share
マーケットシェア Oita Pref. Fukuoka Number of business Number of business Population Loans Deposits Population Loans Deposits Pref. establishments establishments Kitakyushu Bank 23.9 41.8 1.4 trillion yen 3.6 8.6 5,030,000 206,000 1,120,000 50,000 trillion yen trillion yen Bank of Fukuoka trillion yen trill
Slide 56: Economic Trends
Economic Trends Bank of Japan’s Tankan Business conditions D.I. 30 20 Fukuoka * Fukuoka region: Fukuoka Prefecture plus Saga Prefecture, excluding Kitakyushu 10 0 30 -10 Projection Projection -20 Fukuoka region* -30 Kitakyushu Japan 20 -40 18/3 19/3 20/3 21/3 22/3 23/3 30 10 20 Kumamoto 10 0 0 -10 P
Slide 57: Industrial Production Trends
Industrial Production Trends Industrial production index (FY2015 = 100) [Kyushu] Main industry trends (Million pieces) Integrated circuits (%) 115 1,000 50 40 800 110 30 Japan 600 20 10 105 400 Quantity 0 YoY chg. (right axis) -10 100 200 -20 0 -30 18/3 19/3 20/3 21/3 22/3 23/2 95 Passenger cars (Th
Slide 58: Capital Investment / Housing Investment
Capital Investment / Housing Investment Capital investment: Bank of Japan’s Tankan (YoY change) Housing starts (Thousand) (%) 1,200 20 30 Projection 1,000 10 Estimate Japan 800 0 Japan 20 600 -10 400 -20 10 200 Number of houses -30 YoY chg. (right axis) 0 -40 0 17 18 19 20 21 22 (Thousand) (%) 120 2
Slide 59: Land Price Trends
Land Price Trends Volatility of standard land prices (%) <Ministry of Land, Infrastructure and Transport: 2022 Outline of Land Price Surveys Conducted by Prefectural Governments> Major cities in Fukuoka Pref. (%) ○ Japan: There have been increases for the first time in 2 years for the average of all
Slide 60: Corporate Bankruptcies
Corporate Bankruptcies Number of bankruptcies and total liabilities (¥ bil.) (Number) 20 200 50 Fukuoka (¥ bil.) Left axis: Total liabilities (bar graph) (Number) Right axis: Number of bankruptcies (line graph) 15 150 40 16,000 1,600 900 10 30 14,000 1,400 800 100 20 12,000 1,200 5 700 50 10 Japan 1
Slide 61: Loans
Loans (%) Rate of increase of bank loans (YoY change, monthly) 8 (%) 6 Fukuoka (%) 8 4 4.4 2 0 -2 Japan 6 -4 13/3 15/3 17/3 19/3 21/3 23/3 8 4.0 6 Kumamoto 4 4 3.9 3.4 2 0 -2 2 -4 13/3 15/3 17/3 19/3 21/3 23/3 8 Kyushu 6 0 4 Nagasaki 2 0 0.9 -2 -4 -2 13/3 15/3 17/3 19/3 21/3 23/3 -6 13/3 15/3 17/3 1
Slide 62: Deposits
Deposits (%) 12 Rate of increase of bank deposits (YoY change, monthly) 10 8 Fukuoka (%) 6 12 4 2 2.3 0 10 Japan 13/3 15/3 17/3 19/3 21/3 23/3 12 8 10 8 Kumamoto 6 6 4 2 2.8 0 4 3.6 -2 13/3 15/3 17/3 19/3 21/3 23/3 2 2.3 10 Kyushu 8 Nagasaki 6 0 4 2 1.2 -2 0 13/3 15/3 17/3 19/3 21/3 23/3 -2 13/3 15/
Slide 63: 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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