Nanto Report Integrated Report
Fiscal year ended March 2024
Management Philosophy
- We conduct sound, efficient management.
- We provide superior comprehensive financial services.
- We pursue efforts to promote regional development.
- We seek an identity as a trustworthy bank with strong customer appeal.
Management Vision
"Vitality Creation Bank"
Our mission as a regional financial institution is to contribute to the growth and development of our region and customers. Maximizing all our management and staff capabilities, and creating new value unique to the Nanto Bank Group, we are reinforcing our position as the banking group of choice for customers throughout our region.
Editorial policy
Compiled in pursuit of further understanding among stakeholders of the Nanto Bank Group's strategies for creating sustainable value in the medium-to-long term, this Integrated Report was edited in compliance with the IFRS Foundation's "International Integrated Reporting Framework."
The specific purpose of its creation is to illuminate the path to achievement of our Management Plan, "Nanto Mission and Objectives for the Next 10 Years."
For detailed financial information, please refer to the separately published "Disclosure Supplement."
Scope of coverage
The Report presents key information concerning the Nanto Bank Group's management strategies, business model, business conditions, valued stakeholders, primary risks and opportunities, performance and outlook, and governance.
Covered period
April 1, 2023 ~ March 31, 2024
Date issued
July 2024
Precautions concerning future predictions
This report contains forecasts and statements concerning the future prospects for the Nanto Bank Group's business strategies and financial condition. These forecasts and statements involve risks and uncertainties stemming from their dependence on future events. Please be aware that the actual results may differ materially from those foreseen by the Nanto Bank Group.
About Nanto Bank | Nanto Group Corporate | Practicing Sustainable | Local Market |
Value Enhancement | Management | Revitalization | |
Strengthening | Control of Net Assets | Governance | Consolidated Financial |
Profitability | Statements | ||
CONTENTS
About Nanto Bank
Information Highlights | 2 |
President's Message | 4 |
90th Anniversary | 10 |
Board of Directors' Opinion Exchange | 12 |
Progress under the Management Plan | 16 |
Nara Prefecture's Challenges and Potential | 18 |
Roundtable Discussion
Reinforcing the Group's earning power and enhancing its corporate value through consulting sales
Supporting Customers' Efforts to Increase Corporate Value
Stabilization of Market Sector Earnings DX strategy
Dialogue
Basis for creation and presentation
48
52
54
56
The Group's Materialities | 20 |
Value Creation Process | 22 |
Nanto Group Corporate Value Enhancement
Management and Action Plans | 26 |
Practicing Sustainable Management
New Nanto Bank app designed to generate | 60 |
new customer contacts | |
Message | 63 |
No One Left Behind DX | |
~Solving issues in depopulated areas~ | |
Control of Net Assets | 64 |
Governance
Cultivating "Unconventional" Human Resources | 28 |
Sustainability Initiatives | 32 |
Local Market Revitalization
Regional Issue Resolution | 38 |
Roundtable Discussion | |
Contributing to regional economic and | 41 |
social development through support for |
entrepreneurs who aspire to solve social issues
Corporate Governance
Corporate Governance | 66 |
Executive Officers | 72 |
Roundtable Discussion with Audit Committee Members | 74 |
Toward more advanced internal auditing | |
Risk Management System Enhancement | 78 |
Stakeholder Engagement | 82 |
Overview of the Nanto Bank Group | 86 |
Strengthening Profitability | Consolidated Financial Statements | |
Supporting Customers' Asset Accumulation
Supporting Customers' Efforts to Increase Corporate Value
Compiling the Nanto Report
44
46
Consolidated Financial Statements | 88 |
Independent Auditors' Report | 128 |
Capital Management | 134 |
Icons representing the eight categories of content advocated by the IFRS Foundation's "International Integrated Reporting Framework" have been employed to further clarify understanding of the Nanto Bank Group's corporate culture.
Organizational overview and external environment
What is the nature of the operating environment, and how is the Bank organized to respond?
Risks and opportunities
The real risks and opportunities affecting our ability to create value in the short, medium and long term, and ways of dealing with them.
Outlook
What are the challenges and uncertainties for executing strategies, and how might they impact the Bank's business model and future performance?
Governance
How does the governance structure ensure short-, medium- and long-term value creation?
Business model
What is the business model, and how resilient is it?
Nanto Bank Profile (as of March 31, 2024)
Established: | June 1, 1934 |
Headquarters: | 16 Hashimoto-cho, Nara, Japan |
Capitalization: | ¥37,924.15 million |
Strategies and resources allocation | Basis for creation and presentation |
How were the contents of the Report quantified and | |
What are our goals, and how do we plan to reach them? | |
evaluated, and how were they selected? | |
Performance
To what extent is the Bank achieving its strategic objectives, and what is the effect on capital?
Nanto Bank Co., Ltd. was established on June 1, 1934 through a merger of Sixty-eight Bank Co., Ltd., Yoshino Bank Co., Ltd., Yagi Bank Co., Ltd. and Gose Bank Co., Ltd.
Today, the Bank and its Group offer comprehensive financial services, including leasing, trusts, securities and consulting, in addition to the banking business (deposits, loans, exchange, etc.), with Nara prefecture and the surrounding region as its primary base of operations.
Nanto Report 2024, the integrated report of Nanto Bank 1
About Nanto Bank
Information Highlights
Fiscal Year Ending March 31, 2024 Financial Highlights
Net Income | (Consolidated) | (Non-consolidated) |
12.0 billion yen | 11.8 billion yen |
Consolidated | Non-consolidated | (Billion yen) |
11.8 11.8 | 12.0 11.8 | |
4.7 | 4.7 |
Profit / loss on transactions | (Consolidated) | ||||||||||
with customers | 8.0 billion yen | ||||||||||
Consolidated | Non-consolidated | ||||||||||
Profit / loss on customer services = | |||||||||||
Profit from main businesses (loans / | |||||||||||
commission business) | 5.8 | ||||||||||
= Average loan balance x deposits | |||||||||||
/ loan yield difference + profit from | |||||||||||
service transactions - expenses | 4.3 | ||||||||||
1.8 | |||||||||||
0.6 | |||||||||||
(Non-consolidated)6.3 billion yen
(Billion yen)
8.0
6.3
FY2022 | FY2023 | FY2024 |
FY2022 | FY2023 | FY2024 |
Although net interest income turned downward in fiscal 2023, consolidated net income grew by 7.3 billion yen from the previous year to 12.0 billion yen, boosted by an increase in net fees and commissions, gains/losses on bond transactions, gains/losses on stock transactions, and lower credit-related expenses.
Capital adequacy ratio 10.77 % 10.46 % | ||||
(Consolidated) | (Non-consolidated) | |||
Consolidated | Non-consolidated | (%) | ||
10.77 | ||||
9.60 | 9.25 | 10.46 | ||
9.29 | 8.95 | |
FY2022 | FY2023 | FY2024 |
Consolidated net business profit on customer service operations increased by 2.1 billion yen from the previous year to 8.0 billion yen, as increases in interest on loans and bills discounted and net fees and commissions more than offset an increase in operating expenses.
ROE | (Consolidated) | (Non-consolidated) | ||
4.28 % | 4.38 % | |||
Consolidated | Non-consolidated | (%) | ||
4.25 | 4.38 | |||
4.09 | 4.28 |
1.79
1.72 |
ROE= | Net income | ×100 | |
[Starting net assets (excluding stock acquisition rights) + | |||
Ending net assets (excluding stock acquisition rights)] ÷ 2 | |||
FY2022 | FY2023 | FY2024 |
ROA | (Consolidated) | (Non-consolidated) | ||
0.18 % | 0.16 % | |||
Consolidated | Non-consolidated | (%) | ||
0.27
0.25 | 0.21 | 0.18 |
0.20 | 0.16 | |
ROA= | Core business net income | ×100 | ||
Average balance of total assets - Average balance of payments received | ||||
FY2022 | FY2023 | FY2024 |
OHR | (Consolidated) | (Non-consolidated) | ||
76.8% | 77.5 % | |||
Consolidated | Non-consolidated | (%) | ||
77.5
72.576.8
68.1 | 72.5 |
67.8 | OHR= | Expenditures | ×100 | ||
Gross profit from core | business | ||||
FY2022 | FY2023 | FY2024 |
The capital adequacy ratio was 10.77% on a consolidated basis and 10.46% on a non-consolidated basis.
* From March 31, 2024, the Bank changed its credit risk measurement method from the Standardized Method to the Fundamental Internal Rating Method.
Both ROA and OHR decreased from the previous year due to a downturn in core business profit stemming from lower interest and dividends on securities, higher expenses, and a decrease in other net operating income. ROE increased, on the other hand, due to upturns in net business profit and net income.
Loan balance | (Non-consolidated) |
4,194.4 billion yen |
SMEs | Housing loans | Municipal governments | Others | (Billion yen) |
3,892.5 | 3,966.6 | 4,194.4 | ||
754.8 | 796.1 | 953.8 | ||
602.7 | 569.5 | 530.9 | ||
1,088.3 | 1,127.0 | 1,158.9 | ||
1,446.5 | 1,473.8 | 1,550.7 |
Year ended | Year ended | Year ended |
March 2022 | March 2023 | March 2024 |
Balance of deposits | (Non-consolidated) |
5,809.5 billion yen |
Individuals | Corporations | Municipal government funds, etc. (Billion yen) |
5,659.5 | 5,727.6 | 5,809.5 |
306.5 | 297.4 | 278.1 |
1,102.0 | 1,102.7 | 1,135.0 |
4,250.8 | 4,327.4 | 4,396.3 |
Year ended | Year ended | Year ended |
March 2022 | March 2023 | March 2024 |
Loans and bills discounted increased by 227.7 billion yen from the previous fiscal year to 4,194.4 billion yen, driven mainly by loans to small and medium-sized enterprises and housing loans.
Deposits totaled 5,809.5 billion yen, an upturn of 81.8 billion yen from the previous fiscal year, mainly reflecting growth in retail deposits.
*For detailed financial information, please refer to the separately published "Disclosure Supplement."
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About Nanto Bank | Nanto Group Corporate | Practicing Sustainable | Local Market | Strengthening |
Value Enhancement | Management | Revitalization | Profitability | |
Non-financial Highlights (non-consolidated)
Environment
Rate of CO2 emissions
reduction
(FY2013 FY2023)
-48.5%
(Emissions for scopes 1 and 2)
(Increase of 0.5 point from
the previous year)
*Electricity consumption decreased from the previous year, but emissions rose due to an increase in the emission coefficient.
Society
(End March 2024)
Percentage of
female executives
(Section manager and above)
16.0%
(Increase of 1.2 point from
the previous year)
Governance | Number/ | ||
ratio of outside directors | |||
(As of June 27, 2024) | |||
Chairman | Female | ||
In-house | |||
Outside |
5 (41.6%)
Control of Net Assets | Governance | Consolidated Financial | |
Statements | |||
Organizational | Governance | Performance | |
overview and external | |||
environment |
CO2 reduction through
renewable energy-related loans
(FY2023)
Approx. 60,000tons CO2
(Number of loan transactions/ amount: 4 loans/3.6 billion yen)
Number of certified personnel participating in vitality creation*
693
Percentage of employees 30.7%
(Increase of 92 from the previous year)
(Increase of 4.3 points)
*Applied information engineer, SME management consultant, real estate consultant, FP level 1, bookkeeping level 2, and equivalent or higher qualifications
Cross-shareholding
March 31, 2015 | March 31, 2024 |
Percentage in net assets (market value)
38.3% 27.5%
Book value*
51.5billion yen | 28.4billion yen |
Number of issuers*
129 75
*Listed stocks only
Nanto Report 2024, the integrated report of Nanto Bank 3
About Nanto Bank
President's Message
"Unconventional Human Resources" nurtured within our Group maximize Its Corporate Value
President (Representative Director)
Takashi Hashimoto
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About Nanto Bank | Nanto Group Corporate | Practicing Sustainable | Local Market | Strengthening | Control of Net Assets | Governance | Consolidated Financial | |||
Value Enhancement | Management | Revitalization | Profitability | Statements | ||||||
Organizational | Governance | Business | Risks and | Strategies | Performance | Outlook | ||||
overview and external | model | opportunities | and resources | |||||||
environment | allocation |
Introduction
The Nanto Bank Group's business environment continues to confront concerns with such geopolitical risks as the situations in Ukraine and Palestine on the global stage as well as with such challenging developments as the historic depreciation of the yen against the U.S. dollar, rising stock prices, worsening labor shortage, cost of living increase and changes in monetary policy such as the lifting of the negative interest rate policy and removal of yield curve controls in the Japanese market. Accompanying these factors, the normalization of social and economic activities stemming from the end of the coronavirus pandemic are accelerating, and formidable trends such as digitalization and concern with environmental issues are advancing at a faster pace than ever.
It was against this backdrop that Nanto Bank celebrated its 90th anniversary on June 1, 2024. We wish to take this opportunity to express our sincere gratitude to our stakeholders for their warm support and patronage over the years.
Throughout our long, nine-decade history, we have remained committed to our Management Philosophy, which exhorts us to "pursue efforts to promote regional development" and "seek an identity as a trustworthy bank with strong customer appeal." We are responding by working to achieve what we can do, and what we alone can do, step by step. For the Nanto Bank Group to continue to be selected and relied on by local residents over the next 10 to 20 years, however, we must continue to demonstrate the significance of our presence in the community by "exceeding the expectations" of our stakeholders as officers and employees of the Nanto Bank Group.
We have produced this Integrated Report to serve as a tool for deepening dialogue with our stakeholders by illuminating the role the Nanto Bank Group intends to play in the region and the future it seeks to realize.
Nanto Report 2024, the integrated report of Nanto Bank 5
About Nanto Bank
President's Message
Progress under the Management Plan
Guided by an awareness that "sustainable Group growth can be achieved only with regional development," the Nanto Group has been working since April 2020 to realize its Management Plan, "Nanto Mission and Objectives for the Next 10 Years." The Mission has three guiding objectives: "Pursuit of regional development, cultivation of vitality- creating human resources, and enhancement of profitability," and three concrete goals: an increase of Nara prefecture's GDP, development of management talent, and improvement of ROA.
We achieved a return to profitability in our
"customer service business," which had been in the red for many years, three years ahead of schedule in FY2021. In December 2021, we set a new interim target of 3 billion yen in non-consolidated profit from transactions with customers, and we are now working to establish a stable earnings base to achieve this goal.
Trends in net income (consolidated)
(Billions of yen)
11.8 | 12.0 | 13.0 | |||
10.8 | |||||
Planned | |||||
4.7 | |||||
3.1 | |||||
2019 | 2020 | 2021 | 2022 | 2023 | 2024 (Fiscal year) |
Trends in profit from customer transactions (consolidated)
(Billions of yen)
8.0 | ||
5.8 | 6.4 | |
1.8 | Planned | |
0.3 | ||
-3.2 |
Consolidated net profit from transactions with 2019 2020 2021 2022 2023 2024 (Fiscal year) customers registered 12.0 billion yen and profit from customer service operations 8.0 billion yen for the fiscal year ended March 31, 2023, a result evidencing steady improvement of the Group's earnings structure.
This year marks the final fiscal year of the interim targets set by the current 10-year Management Plan, and it is strategically positioned as a year that will serve as the foundation for a revised plan for the second 5-year half. We are responding with continued efforts to enhance the Nanto Bank Group's corporate value.
Exceeding Stakeholders' Expectations
The Nanto Bank Group's Management Plan, "Nanto Mission and Objectives for the Next 10 Years," calls for an increase in Nara Prefecture's GDP and adheres to the idea that prefectural development is an appropriate role for the Nanto Bank Group to play as a regional financial institution.
In its efforts to contribute to regional development, the Group maximizes the use of its unconventional human resources and other management capital to provide added value by solving the problems facing our customers and local communities. To ensure customers' continued selection of the Group in the future, we must "exceed the expectations" of our stakeholders, including our shareholders, customers, regional community residents, and employees.
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About Nanto Bank | Nanto Group Corporate | Practicing Sustainable | Local Market | Strengthening | Control of Net Assets | Governance | Consolidated Financial | |||
Value Enhancement | Management | Revitalization | Profitability | Statements | ||||||
Organizational | Governance | Business | Risks and | Strategies | Performance | Outlook | ||||
overview and external | model | opportunities | and resources | |||||||
environment | allocation |
Becoming a corporate group that encourages employees to maximize their abilities and value
Enhancing the corporate value of the Nanto Bank Group will require a "reformation of awareness" among our executives and general employees. For the Group to achieve sustainable development,
it will be essential that each of us be prepared to "think and act independently," which means determining, implementing, and achieving results proactively.
Our responses to this need have included proactively transferring employees outside the
Bank to businesses in other categories and recruiting career professionals with the aim of fostering a spirit of challenge in our employees and breaking with the conventional approach of simply following precedents and fearing change. Career employee recruitment has never been a part of the Group's culture, but 27 employees (as of March 31, 2024), including executives, are currently working actively in this area.
This year, we introduced a new award for "initiatives worthy of unconventional human resources." Many members of our staff have responded by becoming active in areas beyond the scope of conventional bank employees, which we consider to be one of our accomplishments. We believe that diversification of human resources is an important factor for the development of our region and our Bank that will lead to "changes in the mindsets" of our officers and employees.
In April of this year, moreover, we revised our personnel system with the aim of attracting a diverse workforce without regard to gender or age.
The former personnel system was inflexibly seniority-based and characterized by substantial gender-based wage differences. These wage differences fell into three categories: career-track positions, specified positions, and clerical positions, with most of the first positions held by men and the second and third positions held by women. This issue has now been resolved by integrating the career-track and specified positions.
As concerns the seniority system, a minimum number of years of experience was set for promotion according to employee qualifications. The number of years for promotion to section manager was predetermined, for example, and no promotion was possible until a certain age. This requirement of a minimum period of employment has now been abolished, however, and replaced by a new system in which employees are evaluated according to their abilities rather than their age.
This renovation of our personnel system may seem only natural to other companies, but we see it as a first step toward sustainable development of the Nanto Bank Group by significantly altering perceptions of the roles of its executives and employees.
Remaining necessary to our customers
To remain necessary to our customers will mean continuing our efforts to know them better and respond to their changing issues and needs. As digitalization spreads to more and more aspects of daily life, we see the attitudes of customers who rely on financial institutions changing markedly as well. Customers are increasingly using smartphones and other digital devices to experience a wide variety of highly
Nanto Report 2024, the integrated report of Nanto Bank 7
About Nanto Bank
President's Message
convenient services, and using their experience as a yardstick to judge the quality of services offered and evaluate their benefits.
Since the digital native generation will account for approximately 60% of the working population by 2030, we must change to meet the needs of younger generations in addition to those of our traditional customers.
In April, we released a new banking application we developed to enable customers to access the same services as at the bank counter comfortably with their smartphones from wherever they happen to be. This new app features state-of-the-art security with improved identity verification accuracy and uses biometrics and facial recognition for various services. Since its release, we have received a constant flow of feedback from customers on ways to improve the convenience of our services further. We take these issues seriously and are pursuing efforts to refine our services with maximum speed.
A customer survey on the "Financial Services You Want from Nanto Bank" conducted last year, meanwhile, found that many of our customers who work during the daytime wanted "consultations on holidays" and "online consultations," which are face-to-face individual consultations reflecting their lifestyles. In order to respond to customers' requests for consultations on asset formation, in October last year we began offering NISA and iDeCo consultations at "Hoken no Madoguchi @ Nanto Bank" counters located in commercial facilities, and "online consultations" for customers who are unable to visit our branches.
We will continue to provide services that exceed customer expectations by accurately grasping customer needs and thoroughly pursuing CS improvements.
Remaining necessary to regional community members
To remain necessary to our regional community will require us not only to enhance and improve our services by incorporating feedback from our customers, but also to revitalize our regional economies and contribute to our local communities.
The aging of the region's farmers, increasing trend toward farmland abandonment, and low level of spending by day-trip tourists compared to neighboring prefectures are just a few examples of the issues facing our region that cannot be resolved simply by solving the problems of individual customers.
For the direct resolution of these issues, we will not only support our customers, but will also strengthen ties with our local communities by working proactively toward the creation of local businesses.
This fiscal year, we are focusing on fostering entrepreneurs who aspire to solving local social issues, in particular, while also working to create new businesses.
Meanwhile, we are working proactively to support and brand businesses that take advantage of Nara Prefecture's unique resources and traditional industries, such as its historical heritage, cultural assets, shrines and temples, local sake, Yamato vegetables, and timber.
These efforts to revitalize the region may not be immediately visible in large numbers, but we believe they are an indispensable part of our mission as a regional financial institution.
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