INTEGRATED | |
REPORT | |
2022 | Year ended March 31, 2022 |
The Hyakujushi Bank, Ltd.
Overview of The Hyakujushi Bank
The Bank's Operational Foundation
Whereas the Bank's home location of Kagawa Prefecture may be Japan's smallest prefecture in terms of size, it boasts comfortable living conditions with few natural disasters, blessed with a warm climate, overlooking the calm Seto Inland Sea with its beautiful archipelago scenery.Takamatsu is Shikoku's regional hub, featuring the local branches of many central government agencies and companies, in addition to being the seat of the prefectural government.The region boasts convenient access to the Tokyo metropolitan area, as well as abundant natural scenery and urban functions withina compact area.
Fundamental data on Kagawa Prefecture
Japan | Kagawa | Ranking | Kagawa Prefecture | ||||||||||
Area (km²) | 377,976 | 1,876 | 47th | ||||||||||
Population (thousand) | 126,140 | 950 | 39th | ||||||||||
Per capita GDP (thousand yen) | 4,473 | 4,007 | 24th | Tokushima Prefecture | |||||||||
Averagebankbalanceperhousehold(thousandyen) | 13,953 | 17,510 | 4th | Ehime | |||||||||
Active job openings-to-applicants ratio | 1.10 | 1.33 | 4th | Prefecture | |||||||||
* Source: "Kagawa from the Perspective of 100 Indicators 2022" Kagawa Prefecture | |||||||||||||
Feature | |||||||||||||
1 | Industrial structure adapts well to change | ||||||||||||
Home to factories of Japan's top-ranking corporations engaged in fields that | addition, many food-related companies handling frozen foods, seasonings, | ||||||||||||
include construction machinery, automotive components, and electrical | and other such products have operations there. | ||||||||||||
machinery, Kagawa Prefecture attracts a large number of such companies' | As such, Kagawa Prefecture tends to be resilient to economic shocks due | ||||||||||||
partner enterprises equipped with sophisticated core manufacturing tech- | to its well-balanced industrial structure not skewed toward any particular | ||||||||||||
nologies mainly in those fields.The prefecture also hosts large factories that | industry. Another distinctive feature of Kagawa is its many niche leaders | ||||||||||||
handle basic materials such as chemicals and non-ferrous metals, mainly | that are active in numerous specialized market segments. | ||||||||||||
located in industrial zones situated in the prefecture's coastal region. In | |||||||||||||
Feature | |||||||||||||
2 | Transportation and logistics hub | ||||||||||||
Kagawa Prefecture serves as a gateway to Japan's Shikoku region. It is accordingly equipped with an extensive regional transportation network that includes Seto Ohashi Bridge, Shikoku Odan Express- way,Takamatsu Airport, andTakamatsu Port.The prefecture features convenient transport access to theTokyo metropolitan area and the Kansai region, and occupies a key position in transport networks connecting Shikoku and Honshu. In addition,Takamatsu Airport aims to be the leading international airport in the Shikoku-Seto Inland Sea region, progressively transforming into a base for several low- cost carriers from Asia and elsewhere.
Number of ships enteringTakamatsu Port (overseas + coastal) | ||
No. 10 in Japan | ||
34,820ships | No. 1 in Shikoku | |
(2019) | ||
*Source: Ministry of Land, Infrastructure,Transport and Tourism website
Feature
3 Development of information and communications-related industries
Kagawa Prefecture is working to foster the development of information and communications-related industries. In November 2020, it launched the Setouchi-i- Base, a facility for developing human resources and generating business models in information and communications-related fields, featuring a co-working space and 5G-equipped communications environment, to support aspiring young entrepreneurs as well as businesses that are eager to utilize ICT.
The Bank actively cooperates with this initiative, dispatching instructors to seminars held at the Setouchi-i-Base, and making efforts to provide a broad range of its customers with related information.
01 The Hyakujushi Bank, Ltd . Integrated Report 2022
The Hyakujushi Bank, Ltd. and Consolidated Subsidiaries
Consolidated Financial Highlights
Thousands of | ||||||
U.S. dollars | ||||||
Millions of yen | (Note 1) | |||||
For the years ended or as of March 31 | 2022 | 2021 | 2020 | 2019 | 2018 | 2022 |
FOR THEYEAR: | ||||||
Total income | ¥73,147 | ¥68,989 | ¥76,895 | ¥77,292 | ¥80,890 | $597,655 |
Total expenses | 58,108 | 63,877 | 65,928 | 68,477 | 65,775 | 474,777 |
Profit before income taxes | 15,039 | 5,111 | 10,966 | 8,814 | 15,114 | 122,877 |
Income taxes-current | 1,705 | 3,402 | 3,518 | 3,565 | 3,720 | 13,930 |
Income taxes-deferred | 1,631 | (855) | (266) | (450) | 807 | 13,326 |
Profit attributable to non-controlling | ||||||
interests | - | - | - | 115 | 359 | - |
Profit attributable to owners of parent | 11,702 | 2,565 | 7,715 | 5,584 | 10,227 | 95,612 |
ATYEAR-END: | ||||||
Loans and bills discounted | 3,159,889 | 3,035,782 | 2,847,316 | 2,825,869 | 2,833,526 | 25,818,195 |
Securities and trading account securities | 1,274,877 | 1,272,956 | 1,259,734 | 1,046,956 | 1,031,025 | 10,416,512 |
Foreign exchange assets | 6,236 | 9,429 | 9,793 | 5,750 | 6,997 | 50,951 |
Other assets | 1,306,258 | 1,057,396 | 837,097 | 1,017,044 | 905,507 | 10,672,914 |
Total assets | 5,747,266 | 5,375,569 | 4,953,946 | 4,895,624 | 4,777,061 | 46,958,624 |
Deposits and negotiable certificates of | ||||||
deposit | 4,632,815 | 4,525,292 | 4,155,267 | 4,044,109 | 4,053,820 | 37,852,888 |
Foreign exchange liabilities | 321 | 1,341 | 296 | 352 | 241 | 2,622 |
Other liabilities | 829,786 | 557,229 | 548,544 | 564,580 | 419,385 | 6,779,851 |
Total liabilities | 5,462,929 | 5,083,870 | 4,704,115 | 4,609,048 | 4,473,454 | 44,635,419 |
Common stock | 37,322 | 37,322 | 37,322 | 37,322 | 37,322 | 304,943 |
Capital surplus | 30,486 | 30,486 | 30,486 | 30,486 | 30,486 | 249,088 |
Retained earnings | 183,444 | 173,620 | 173,374 | 167,615 | 164,359 | 1,498,847 |
Treasury stock | (2,030) | (2,071) | (1,999) | (2,041) | (2,096) | (16,586) |
Total stockholders' equity | 249,223 | 239,357 | 239,184 | 233,382 | 230,072 | 2,036,301 |
Net unrealized gains on other securities, | ||||||
net of taxes | 25,891 | 42,595 | 15,048 | 47,822 | 49,722 | 211,545 |
Net deferred gains (losses) on hedging | ||||||
instruments, net of taxes | 2,611 | 2,720 | (7,447) | (1,121) | (39) | 21,333 |
Revaluation reserve for land | 7,927 | 7,928 | 7,976 | 8,540 | 8,741 | 64,768 |
Remeasurements of defined benefit plans | (1,339) | (945) | (4,971) | (2,109) | 4,984 | (10,940) |
Total accumulated other comprehensive | ||||||
income | 35,091 | 52,299 | 10,605 | 53,131 | 63,408 | 286,714 |
Share subscription rights | 21 | 41 | 41 | 61 | 124 | 171 |
Non-controlling interests | - | - | - | - | 10,000 | - |
Total net assets | 284,336 | 291,699 | 249,831 | 286,576 | 303,606 | 2,323,196 |
Total liabilities and net assets | ¥5,747,266 | ¥5,375,569 | ¥4,953,946 | ¥4,895,624 | ¥4,777,061 | $46,958,624 |
Notes: 1. Yen figures have been rounded, omitting numbers below the million mark, in accordance with the Japanese Commercial Code and the common accounting practice in Japan.
2. U.S. dollar amounts represent translations of Japanese yen at the exchange rate of ¥122.39 to US$1.00 on March 31, 2022.
Attention regarding forward-looking statements
The reader is advised that this report contains forward-looking statements, which are not statements of historical fact but constitute estimates or projections based on facts known to the Bank's management as of the time of writing. Actual results may therefore differ substantially from such statements.
The Hyakujushi Bank, Ltd . Integrated Report 2022 02
Strategy for value co-creation
Hyakujushi Group's Value Creation Process
Key challenges
Achieving a decarbonized society, and diversity
and inclusion
Shrinking local economy due to declining population
Slowdown in the local economy due to COVID-19
Customer behavioral changes due to
digital shift
Persistence
of the low-interest rate environment/entry from different industries
Accommodating work-life balance
INPUT
The Bank's strengths
Social capital
- Overwhelming market share and presence developed in Kagawa Prefecture
Share of deposits: | 48.0% |
Share of loans: | 37.7% |
• Relationship with regional companies | *1 |
Total number of business partners |
19,497 (up 632 year on year)
- Broad geographic spread
Proportion of loans to areas outside | |
Kagawa Prefecture: | 59.5% |
*1 Total companies provided with credit or other support
Human capital
- Personnel with advanced qualifications
SME management consultants 23 | |
1st grade Certified Skilled Professional | |
of Financial Planning: | 111 |
• 114 Meister system*2 | 41 |
Certified Meisters: |
*2The Bank's internal system for certifying three levels of qualification in each of seven fields related to banking services.
Intellectual capital
- Business feasibility evaluation by sharing customers' management issues
Evaluated companies: 4,628 (up 386 year on year)
• Provision of solutions to match each compa- ny's life stage
Recipients of business start-up support: 228
Recipients of sales channel development support: 615
Financial capital
- Deposits and negotiable certificates of
deposit:4.6 trillion
- Loans and bills discounted: 3.1 trillion
- Consolidated capital ratio: 9.34
-
External ratings: "A" (JCR), "A-" (R&I)
(as of March 31, 2022)yenyen%
Natural capital
- Regional environment with few natural disasters
- Warm and rich natural environment
- Transportation and logistics hub
- Abundant tourism resources
Management strategy
Business model
Sustainability management
The Hyakujushi Bank's SDGs Declaration | |
Major themes (material issues) | |
当行のマテリアリティ | |
Creation of local value | Developing the local economy |
Supporting the happiness of local residents | Creating opportunities for everyone |
Business model envisioned by the Bank
We envisage a circular model, mobilizing the Group's strengths and going beyond the realm of finance to solve various issues faced by our customers and communities,
revitalizing the local economy, and enhancing the Bank's profitability as a result.
Regional revitalization | GDP growth | |
Digitalization | Environmental conservation | |
Local government | ||
Hyakujushi | ||
Group | ||
Customer | ||
Customer | Customer | Customer |
Local community
Medium-Term Management Plan "Try Mirai (Future)!"
Key | 1 | Transformation to a | general consulting group |
2 | Development of human | resources with high market value | |
strategies | |||
3 | Structural reforms | leading to the future | |
OUTCOME
Value provided | CorporateVision | |||||||
Local and global communities | 1 | Prosper together with | ||||||
customers and communities | ||||||||
• Contribution to a low-carbon, | 2 | Create a vigorous corporate culture | ||||||
recycling society | ||||||||
Creation of industries that will | 3 | Ensure sound business management | ||||||
• bring people into the region | and enhance corporate value | |||||||
• Enhancement of local | ||||||||
Creation of local value | ||||||||
Corporate customers | |
• Continuing financial | |
intermediary function | Contribution to achieving the SDGs |
• Growth support through | |
the resolution of issues | |
• Business continuity and revitalization | |
Developing the local economy | |
Retail customers | The Hyakujushi Bank's KPIs |
• Multi-purpose, | CO2 emissions reduction |
lifetime relationships | |
Support for | Reduce 50% by FY 2030 |
• asset formation | |
• Highly-convenient services | (compared to FY 2013) |
Supporting the happiness of local residents | |
Officers and employees | Carbon-neutral |
• everyoneCreation of opportunities | by 2050 |
• Improved work satisfaction | |
• Enhanced pride and sense of mission | |
as a regional financial institution | Sustainable finance |
•A corporate culture of taking on challenges | |
500 billion yen | |
Creating opportunities for everyone | |
(total for FY 2021-FY 2030) | |
Shareholders | |
• Stable return of profits | |
• disclosureEnhanced information | Female manager ratio |
Enhancement of shareholder value | At least 30% by March 31, 2027 |
03 The Hyakujushi Bank, Ltd . Integrated Report 2022 | The Hyakujushi Bank, Ltd . Integrated Report 2022 04 |
Strategy for value co-creation
Message from the President
Initiatives to achieve a decarbonized society Environmental problems are directly linked to the earth's sustainability and are the primary challenge for sustainability initiatives. Responding to climate change risk is an especially urgent task. Almost every year, localized torrential rains due to global warming strike the Bank's local regions, causing damage to many of our customers.
We have established targets for the reduction of CO2 emissions from our own business activities towards the achievement of a decarbonized society.These include a reduction of 50% from FY 2013 levels by FY 2030, and net zero by 2050.
We have also established a target of a cumulative total of 500 billion yen in sustainable finance over a 10-year period to support our customers' initiatives, and launched the Hyaku- jushi Carbon Neutral Initiatives Support Package to provide integrated support for initiatives including CO2 emissions measurement, the introduction of energy-saving equipment, and the implementation of internal training.
We hope to contribute to achieving a decarbonized society by further developing these initiatives and extending their scope to include a local shift towards carbon neutrality.
Initiatives for diversity and inclusion
We are working to increase diversity and inclusion with an awareness of the strength that the inclusion of diverse human resources and views can bring to organizations, and how they can significantly change societies.
For example, the Bank has created workplace environments and introduced systems to support women's career development and work-family balance, and implemented measures to promote diverse working styles. As a result, as of March 31, 2022, 25.1% of our managers were women, far exceeding the national average of 14.6%*.We will continue to engage in creating workplace environments that provide opportunities for everyone, regardless of gender, and plan for at least 30% of all our managers to be female by March 31, 2027.
- Ministry of Health, Labour and Welfare, Basic Survey of Gender Equality in Employment Management 2020
We are also endeavoring to respond to the diverse needs of our customers. For housing loans, we expanded the scope of those eligible for joint and several obligations, for example, to include same-sex partners.We hope to deepen our insight and understanding to further enhance our LGBT inclusion initiatives.
Medium-term management plan "Try Mirai (Future)!"
Yujiro Ayada, President
Foreword
The "Try Mirai (Future)!" medium-term management plan, our current business strategy aimed at practicing sustainability management, ended its second year with progress on track.
Under this plan, we have set forth the vision of being a general consulting group that co-creates the future of customers and communities.We aspire to work, unconstrained by the framework of finance, to resolve any issues faced by our local
Initiatives for regional revitalization
It is anticipated that a shrinking population, in conjunction with a declining birthrate and aging population, is likely to substantially affect the Bank as well as local economic growth in Kaga- wa Prefecture, which serves as the primary base of the Bank's operations, with some forecasts pointing to a decline of almost 30% in the working age population over the next 30 years.
I sincerely thank you for your continued patronage of the Hyakujushi Bank.
FY 2021 brought the continuation of unstable economic conditions with numerous issues emerging at once, including geopolitical risks, rising interest rates overseas, and the depreciation of the Japanese yen, in addition to the COVID-19 pandemic. In this external environment, we worked together with our customers, endeavoring to build deeper relationships
of trust through initiatives to address issues in partnership with them. As a result, our performance for the fiscal year ended March 31, 2022 recovered significantly, and we recorded an increase in both income and profit for the first time in six years. I am deeply grateful to our customers, shareholders, employees, and all our other stakeholders, as this would not have been possible without your warm support.
customers.We believe that this vision will have three effects on the Bank.
The first effect is that, by working together to resolve issues, we will be able to build strong relationships of trust with customers, leading to deeper and longer-lasting business relationships.
The second effect is that the Bank will be reborn with a lean earnings structure, resilient to factors such as the level of interest rates in the market environment, by transitioning from a business model centered on interest income and increasing
The Bank has been working with local government authorities on initiatives to revitalize the local region, such as supporting tourism development and entrepreneurship and uncovering local resources.With the local economy left reeling by the COVID-19 pandemic, we believe that we must further strengthen our engagement with the region.
To this end, in FY 2021, we carried out a regional revitalization survey of the eight cities and nine towns in Kagawa Prefecture to discover the existing challenges and needs of each local government.We intend to offer various suggestions and
Practicing sustainability management
The business environment surrounding the Bank is undergoing | Since making The Hyakujushi Bank's SDGs Declaration in |
rapid and dramatic changes. Factors that increase future uncer- | 2019, we have worked to address various issues associated with |
tainty such as the COVID-19 pandemic and climate change | the environment, society, and the local economy, practicing |
risk, in particular, are increasing every year. As a regional | sustainability management linked to the Bank's own growth. |
financial institution, the Bank must engage in addressing the | |
issues resulting from these factors. | |
the proportion of profit from fees and commissions.
The third effect is that the creation of diverse opportunities for taking on challenges, and the increase in occasions to make customers happy, will give our employees satisfaction and pride in their work, revitalizing the organization.
Over the past two years, we have made substantial progress on initiatives to realize this vision.
engage in a range of initiatives based on the results of this survey, with the concept of designing the region ourselves.
Initiatives for corporate customers
We aim to resolve the various issues that trouble business managers and grow together with our corporate customers.To this end, we are engaged in building connecting consultancy
05 The Hyakujushi Bank, Ltd . Integrated Report 2022 | The Hyakujushi Bank, Ltd . Integrated Report 2022 06 |
Strategy for value co-creation
Message from the President
services to extend our support for customers beyond one-off assistance, and engage in a process of dialogue, sharing chal- lenges, and supporting implementation to link to the provision
customer contact points. In addition to embarking on the joint development of a new banking app, we also fully renewed our account opening app to enable customers to open accounts
Strengthening governance
of support in other fields.
In FY 2021, we identified five areas where customer needs were especially high (business management and revitalization, business continuity, ICT, human resources, and overseas sup- port) and focused on strengthening our support in these areas. We went on to establish the new Consulting Division in April 2022, consolidating the corporate consulting functions that had previously been spread between different Head Office divisions.
Initiatives for retail customers
more safely and simply.We increased the number of locations where customers could make inquiries on bank holidays, while also forming a new private banking team within the Head Office, establishing a framework to undertake asset management for wealthy customers.
Consulting services that only a regional financial institution can offer
In promoting these consulting initiatives, we cannot hope to win the support of our customers if we simply mimic regular
To maintain the soundness of the Bank's operations as we address new challenges and strive for growth, it is crucial that we ensure clear roles, chains of command, and accountability, and appropriately manage risks. It is also important for corporate growth that we construct mechanisms to reflect diverse views.
In FY 2021, we established the Sustainability Committee, under the supervision of the Bank's Board of Directors, to engage in the cross-organizational discussion of initiatives
related to the enhancement of environmental and community sustainability. And for the systematic development of management personnel, we identified the skills and expertise required to serve as a member of the Bank's Board of Directors in light of factors such as business strategy and the internal and external environments.These skills and expertise were reflected in the Bank's successor training policy. Free discussion sessions were also held with Outside Directors to facilitate fuller discussion on changes in the business environment.
We aim to support our retail customers to enable them to live in security, without anxiety for the future.We are therefore endeavoring to build and maintain systems to provide diverse
consulting companies, providing the same sort of services as them. Instead, we aim to draw on the trust, connections with people, and information that we have acquired throughout the
Conclusion
and relevant services and information at appropriate times throughout our customers' lives.
In FY 2021, we formed a strategic business alliance in the digital field with Resona Holdings, Inc., to expand our
Bank's long history, and leverage our advantage in the provision of financial services as well, to support the growth of the local community and our customers in new ways that only a regional financial institution can offer.
FY 2022 is the final year of the "Try Mirai (Future)!" medium-term management plan.We will work even harder to support the growth of our customers, and we hope to create their future, and the future of the region, together with them.
The speed of change in the business environment is increasing exponentially, and the outlook is uncertain. However, the
core of its sustainability management, and this remains unaltered through the changing times.We will boldly take on new challenges so that we can continue to build strong relationships of trust with our customers.
I sincerely thank you and humbly request your continued support and patronage of the Bank.
Initiatives for human capital
The Bank's greatest strength is its outstanding human resourc- | specialist knowledge, as appropriate, to secure more special- |
es. However, we will not be able to make full use of this | ized human resources.This has resulted in higher motivation |
strength unless we recruit and train personnel flexibly to | for self-development among the Bank's employees, including |
match the changing times and business environments. | many employees attempting to obtain difficult qualifications |
We are continually reviewing the Bank's training system to | such as Certified Skilled Professional of Financial Planning and |
develop personnel who possess the advanced knowledge and | Small and Medium Enterprise (SME) Management Consultant. |
skills needed to resolve the challenges faced by customers and | We expect these human resources to generate innovation |
local communities. | within the organization, and provide new value to local com- |
We also engage in the placement of trainees with outside | munities and customers. |
entities and the mid-career recruitment of personnel with | |
Initiatives for digital transformation (DX)
Bank's strong relationships of trust with customers lie at the
The power of digital technology is indispensable for enhancing the sustainability of local communities, customers, and the Bank. In this context, we believe it is vital not simply to aim for the adoption of new systems, but to find ways to use these changes as opportunities to transform the organization's own business model and generate new value.
In the ICT consulting that we provide to corporate custom- ers, we practice accompanied ICT consulting services that go beyond simply proposing the adoption of new systems to offer services from work-flow diagnosis and improvement proposals to post-adoptionfollow-up. For our retail customers, we established the new Digital Strategy Office in April 2022 to analyze past transaction data and customers' behavioral traits
for the purpose of conducting digital marketing, which enables us to offer proposals at appropriate times and through appropriate means; we are now establishing a framework and training personnel accordingly. Moreover, we are using digital technology to reform our own operational processes so as to free up time and personnel for supporting customers resolve their challenges.
Going forward, we also hope to contribute to community -wide DX through coordination with local government authorities, to achieve administrative DX (the digital transformation of government services to enhance the convenience of citizens).
07 The Hyakujushi Bank, Ltd . Integrated Report 2022 | The Hyakujushi Bank, Ltd . Integrated Report 2022 08 |
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