IR Presentation Results for First Half of Fiscal Year Ending March … · 2019-09-04 · First Half of Fiscal Year Ending March 31, 2019 I. Financial Summary II. Measures under the

IR Presentation Results for First Half of Fiscal Year Ending March 31, 2019

December 4, 2018Materials were prepared for the Bank’s presentation

of its results for the first half of fiscal year ending

March 31, 2019 held on December 4, 2018.

First Half of Fiscal Year Ending March 31, 2019

I. Financial Summary II. Measures under the Medium-term Management Plan

III. Projected Performance

Contents

Summary of profits and lossesInterest incomeLoans and bills discountedDeposits and certificates of depositsSecuritiesAssets in custodyCredit-related expenses/credits disclosed under the Financial Reconstruction Law/capital adequacy ratio

Business Model of The 77 BankKey StrategiesKey Strategy 1: Growth strategy

—Strengthening of profitability—Key Strategy 2: Regional economy vitalization strategy

—Enhancement of value of the region—Key Strategy 3: Productivity enhancement strategy

—Effective and efficient allocation of resources—Key Strategy 4: Governance strategy

—Strengthening of governance for sustainable growth—Progress of targets / KPIs

Projected performance for FY2019Quantitative plan

1213

14

21

22

2326

2829

1

345679

10

I. Financial Summary

2

Core operating income decreased because of a decrease in interest income due to a decrease in dividends on securities despite an increase in interest on loans.

(JPY bn, %)

Summary of profits and losses(Non-consolidated)

1HFY2018

1HFY2019

YoY changeIncrease/decrease

Rate of change %

Gross operating income 35.9 35.3 (0.6) (1.6)

[Core gross operating income] [ 37.9 ] [ 37.2 ] [ (0.7) ] [ (1.9) ]

Interest income 34.9 33.9 (1.0) (2.9)Fees and commissions 4.6 4.8 0.2 6.4Other operating income (3.6) (3.4) 0.2

Gains (losses) on bonds (2.0) (1.9) 0.1

Gains (losses) on forex transactions (1.0) 0.2 1.2

Gains (losses) on derivatives (0.5) (1.7) (1.2)

Expenses 26.6 26.3 (0.3) (0.7)Operating income before provision of general reserve for possible loan losses 9.3 9.0 (0.3) (4.2)

[Core operating income] [ 11.3 ] [ 10.9 ] [ (0.4) ] [ (4.5) ]Provision of general reserve for possible loan losses — — —Operating income 9.3 9.0 (0.3) (4.2)Special income and losses 5.5 6.9 1.4Bad debt disposals (-) 0.3 0.3 0.0Gains on reversal of reserve for possible loan loss 3.7 1.5 (2.2)

Gains (losses) on stocks 0.4 3.0 2.6Gains (losses) on investments in money held in trust 1.4 2.5 1.1

Ordinary income 14.8 15.9 1.1 7.7Extraordinary income — 0.9 0.9Extraordinary loss 0.3 0.2 (0.1)Income taxes (incl. deferred taxes) 3.2 2.8 (0.4)Net income 11.3 13.8 2.5 21.8

Credit-related expenses (3.4) (1.2) 2.2

<Core operating income>

<Ordinary income>

Ordinary income increased because securities-related income increased, despite a decrease in gains on reversal of reserve for possible loan losses.

1H FY2018 1H FY2019

Ordinary income 16.0 16.1Net income

attributable to owners of the

parent

12.1 13.3

Summary of profits and lossesI. Financial Summary

3

○ Consolidated Performance (JPY bn)

<Net income>

Net income increased because of gains on liquidation of subsidiaries associated with the liquidation of two consolidated subsidiaries recorded under extraordinary income.


Interest income decreased JPY 1.0 billion year-on-year due to decreased dividends on securities as a result of a decrease in gains on cancellation of investment trusts, despite an increase in interest on loans and bills discounted.

+0.8

(0.4) (0.7) (0.5)(0.0) (0.2)

4

<Change factors in interest income>

1H FY2018Interest income34.9

Factors in loans +0.4

1H FY2019 Interest income33.9

(JPY bn)

Average balances

Yield YieldAveragebalances

Averagebalances

<1H FY2019 summary>

Interest income

Factors in deposits (0.2)

(JPY bn)

1HFY2018

1HFY2019

FY2019(Plan)YoY change YoY change

Interest income 34.9 33.9 (1.0 ) 65.5 (4.1 )

Investment income 36.4 35.6 (0.8 )[Interest on loans and bills discounted] 20.6 21.0 0.4

[Interest and dividends on securities] 15.7 14.5 (1.2 )

Fund procurement costs 1.5 1.7 0.2

[Interest on deposits] 0.6 0.8 0.2

(JPY bn)

Major accounts(average balances)

1HFY2018

1HFY2019 YoY change

Loans and bills discounted 4,445.7 4,625.3 179.6

Securities 3,105.6 2,969.7 (135.9 )Deposits and certificates of deposits 7,777.5 7,818.0 40.5

(%)

Interest rates/Interest margin

1HFY2018

1HFY2019 YoY change

Loans and bills discounted interest rate 0.92 0.90 (0.02 )

Securities interest rate 1.00 0.97 (0.03 )

Interest rate on deposits 0.01 0.01 0.00

Interest rate spread 0.86 0.83 (0.03 )

Net interest margin 0.19 0.16 (0.03 )(Note) YoY change is a point difference.

<Reference> Trends of market interest rates (%)1H FY2018 1H FY2019 YoY change

JPY TIBOR (3 months) 0.06 0.07 0.01

5-year JGBs (0.10 ) (0.09 ) 0.01

10-year JGBs 0.04 0.07 0.03

Yield

Factors in securities (1.2)

(Note) YoY change is a point difference.

First Half of Fiscal Year Ending March 31, 2019I. Financial Summary

3,154.4 3,208.8 3,348.9 3,377.0

2,174.7 2,223.0 2,340.4 2,365.0

1,000.0

2,000.0

3,000.0

City banks

Trust banks

Regional banks

Second-tier regional banks

Shinkin banks

Other

Loans and bills discounted

● Loans and bills discounted balances by region

(JPY bn)

● Share in the loans in Miyagi Pref. (end of Sep. 2018)

77 BANK

* Excludes agricultural and fishery cooperatives

(Immediately after the earthquake)

Tohoku region

Miyagi Pref. Sendai City

+5.2%

YoY growth

+6.3%

3,368.6 3,428.63,578.1

2017/3 2017/9 2018/3 2018/9

3,615.9

5

0

(JPY bn, %)

Loans and bills discounted(average balances)

1HFY2018

1HFY2019

FY2019 (Plan)YoY change YoY change

Loans and bills discounted 4,445.7 4,625.3 4.0 4,636.1 3.1

Corporate loans 2,757.2 2,850.1 3.3[Excl. spread loans] 1,625.1 1,736.8 6.8[Spread loans] 1,132.1 1,113.3 (1.6 )Retail loans 1,034.4 1,110.5 7.3[Housing loans] 986.4 1,057.4 7.1Loans for local governments 654.1 664.7 1.6

<1H FY2019 summary>Average balances increased 4.0% year-on-year on average due to an increase chiefly in corporate loans centered in SMEs, and in retail loans centered in housing loans, and the term-end balance increased 3.8%.

2,070.8

2,787.1 2,809.7 2,861.82,903.5

759.4

1,014.4 1,060.1 1,101.41,122.7

675.6

648.8 633.6 663.9 650.3

0.0

1,000.0

2,000.0

3,000.0

4,000.0

Corporate Retail Public, etc.(JPY bn)

3,505.8

● Loans and bills discounted balances

4,450.3 4,503.4+2.6%

YoY growth

+5.9%

+3.3%

2011/3 2017/3 2017/9 2018/3

4,627.1 4,676.5

2018/9

42.9%


+3.8%

+5.4%

City banks

Trust banks

Regional banks

Second-tier regional banks

Shinkin banks

Other

Deposits and certificates of deposits

3,778.04,764.2 4,830.0 4,900.2 4,944.6

1,378.7

1,745.2 1,794.7 1,805.9 1,787.2479.7

1,312.0 1,126.9 1,258.2 1,034.8

0.0

2,000.0

4,000.0

6,000.0

8,000.0

Retail Corporate Public, etc.(JPY bn)

5,636.4

● Deposits and certificates of deposits balances

7,821.4 7,751.6

● Share in deposits in Miyagi Pref. (end of Sep. 2018)

* Excludes Japan Post Bank and agricultural and fishery cooperatives

54.7%

(8.1)%

YoY growth

(0.4)%

+2.3%

● Providing convenience to expand the customer base

7,964.3

(JPY bn, %)Deposits and certificates of

deposits(average balances)

1HFY2018

1HFY2019


Deposits and certificates of deposits 7,777.5 7,818.0 0.5 7,760.5 0.0

Retail deposits 4,812.1 4,934.6 2.5

Corporate deposits 1,796.9 1,820.7 1.3

Public deposits 1,129.2 1,010.8 (10.4 )

・ Introduction of biometric authentication function in IB (Launched in Sep. 2018)

・ Enabled log in using biometric authentication when using online banking on a smartphone in order to strengthen security and improve convenience.

7,766.6

6

<1H FY2019 summary>Average balances increased 0.5% year-on-year, due to increases in retail and corporate deposits, despite a decline in public deposits. The term-end balance increased 0.1%.

77 BANK

・ Expansion of hours handling instant transfers and instant deposits(Launched in Oct. 2018)

・ Expanded hours handling instant transfers and instant deposits in line with expansion of operating hours for the Zengin System.Instant transfers: The Bank’s ATMs, direct service, EB serviceInstant deposits: Ordinary deposit accounts, savings deposit accounts, current deposits


(Immediately after the earthquake)

2011/3 2017/3 2017/9 2018/3 2018/9

+0.1%

(JPY bn)

End-Mar. 2017

End-Mar. 2018

End-Sep. 2018

Gains (losses) from evaluation end-Sep. 2018

Change from end-Mar. 2018

Changefrom end-Mar. 2018

Securities 3,242.6 3,126.0 3,068.2 (57.8) 171.6 8.8)Bonds 3,091.6 2,966.5 2,906.9 (59.6) 78.1 5.1)

National gov. bonds 1,225.5 988.5 856.3 (132.2) 8.4 (2.5)Local gov. bonds 246.9 381.9 449.5 67.6) 3.1 (1.4)Corporate bonds 983.2 960.2 949.3 (10.9) 7.8 (2.1)

Others 636.0 635.9 651.8 15.9) 58.8 11.1)Investment trusts, etc. 414.7 461.9 478.6 16.7) 61.1 11.7)Foreign bonds 221.3 174.0 173.2 (0.8) (2.3) (0.6)

Stocks 151.0 159.5 161.3 1.8) 93.5 3.7)

Securities

● Composition ratio by type (on an amortized cost base)

● Yields and modified duration of yen-denominated bonds*Yen-denominated bonds other than investment trusts

<1H FY2019 summary>

2.703.23 3.07 3.09 3.11

0.47 0.44 0.44 0.42 0.40 0.0

1.0

2.0

0.0

1.0

2.0

3.0

4.0

2015/3 2016/3 2017/3 2018/3 2018/9

Modified duration Yield (%)

End-Mar. 2017

End-Mar. 2018

End-Sep. 2018

End-Mar. 2019 (Plan)

National gov. bonds 39.2% 33.0% 29.3% 25.1%

Local gov. bonds 7.9% 12.7% 15.4% 18.5%Corporate bonds 31.4% 32.1% 32.5% 33.1%

Others 19.2% 19.9% 20.5% 21.0%Investment trusts, etc. 12.0% 13.9% 14.4% 14.9%Foreign bonds 7.2% 6.0% 6.1% 6.1%

Stocks 2.3% 2.3% 2.3% 2.3%

7

○ Decrease in balance of marketable securities owing to suppressed reinvestment of yen-bond redemptions, mainly for national gov. bonds

○ Secured revenue opportunities by flexible trading

○ Continuation of portfolio rebalancing taking market trends into consideration・ Reinvest in yen-bond management guided by interest-rate risk・ Expansion of revenue sources through diversified investment using

investment trusts・ Implementation of replacement transactions of foreign bonds and

stocks, etc.


● Balance of securities (based on market value)

19.9 19.9 22.8 22.7 22.5 25.017.1

10.9 8.4

10.0 14.719.4 15.9 15.7

18.9

13.99.9

7.8

(20.0) (16.3)

10.8 24.8

64.2 38.9

42.147.7 58.8

23.5 18.2

36.8

50.6

80.3

63.8 78.6 89.893.5

0.0

50. 0

100 .0

150 .0

200 .0

National gov. bonds Local gov. bondsCorporate bonds OthersStocks

8

● Gains (losses) from evaluation of securities

(JPY bn)(JPY bn)

<Balance since the earthquake>○ Increased balance mainly of national gov. bonds while focusing on trends in

public deposits together with liquidity and soundness of assets since the earthquake

○ Carried out rebalancing through reinvestment of redemptions by suppressing reinvestment of national gov.-bond and other redemptions taking into account trends in fund positions and market trends

Nikkei Average (at term-end) 9,755 10,084 12,398 14,828 19,207 16,759 18,909 21,454 24,12010-year JGBs(at term-end) 1.255 0.985 0.560 0.640 0.400 (0.050) 0.065 0.045 0.125

<Marketable securities trading structure>

○ Strengthen ability to structure deals and ability to respond to market fluctuations by enhancing research and analysis capabilities

○ Strengthen trading and risk management structure through HR development using external institutions, etc.

3,601.9 3,500.03,326.8

3,086.42,963.3 2,896.5

1.6 1.61.1 0.6 0.9

5.5

4.54.5

3.1

Total gains (losses) from evaluation of securities

35.0 38.1

90.9

114.6

183.6

152.1 156.2162.8

171.6

(JPY, %)

First Half of Fiscal Year Ending March 31, 2019I. Financial Summary Securities

2018/32017/32016/32015/32014/32013/32012/3 2018/92011/3

National gov. bonds Corporate bondsStocks

Local gov. bonds Others

67.869.772.4

61.4

62.162.2

61.5

67.0

70.4

National gov. bonds OthersSecurities total

Local gov. bondsStocks

Corporate bondsPublic deposits, etc.

2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2018/92011/3(JPY bn)

Securitiestotal 2,083.0 2,811.4 3,312.0 3,601.9 3,500.0 3,326.8 3,086.4 2,963.3 2,896.5

Public deposits, etc. 479.7 1,342.8 1,835.6 1,819.6 1,711.7 1,638.1 1,312.0 1,258.2 1,034.8

3,312.0

2,811.4

2,083.0

● Balance of marketable securities (on an amortized cost base)

506 559416 438

343

328 223

312 319405

92 154

5589 56

268

435330

0

500

1,000

2016/上 2016/下 2017/上 2017/下 2018/上

Sales of assets in custody

1H FY2018

1H FY2019


Sales in 77 Bank 42.8 39.7 (7.2) 114.0 24.7

Investment trusts 13.0 9.7 (25.3)

Insurance 17.5 18.1 3.40

Structured bonds, etc. (brokerage) 9.1 9.0 (1.0)

Public bonds 3.2 2.9 (9.3)

Sales in 77 Securities 19.1 21.7 13.60

Total 61.9 61.4 (0.8)

･ Investment trust sales and balance decreased as the net asset values remained high reflecting the bullish market trend.

Assets in custody

(JPY bn)

● Balance of assets in custody

(JPY mn)

● Sales commissions of assets in custody

1,149

Operating revenue of 77 Securities

Public bonds

InsuranceInvestment trusts

944 9541,068

1,291

･Despite persisting scheduled rate reduction, insurance sales and balance increased centering on foreign-currency denominated insurance products.

Sales in 77 Securities(After deduction of sales

from bank brokerage)

1H FY2018

1H FY2019

Stocks, etc. 3.4 4.0Investment trusts 2.0 2.7Structured bonds, foreign bonds, etc. 13.7 15.0

Total 19.1 21.7

(JPY bn, %)

(JPY bn)

Public bondsInsuranceInvestment

trustsForeign currency deposits (excluding deposits by financial institutions and offshore accounts)

Structured bonds, etc. (brokerage)

77 Securities

615.6606.2618.1616.6645.3

23.717.4

15.814.3

21.114.2

18.1

19.5

16.0

14.9

<1H FY2019 summary>

1H FY2019

18.6

9

･ Income increased 7.5% year-on-year including the commissions, etc. from 77 Securities.

1617

14 10 13

33.2 48.2

2016/9 2018/92018/32017/92017/3

* Plan for the Bank (non-consolidated)

Structured bonds, etc.(brokerage)


1H FY2017 2H FY2017 1H FY2018 2H FY2018

26.0 29.039.9 38.9

32.5 31.8 33.3 27.6 28.1 28.2

52.156.5

96.7

77.1

73.4 74.7 68.2

59.0 58.050.7

27.0

27.3

37.6

28.1

28.818.3

14.8

19.113.4

16.5

0.0

50.0

100.0

150.0

0.7

56.9

8.8 (1.4) (0.7) (3.8) (6.2) (1.6) (2.3) (1.2)0.02

1.64

0.24

(0.03) (0.01)(0.08) (0.14)

(0.03) (0.05)(0.02)

(0.3)

0.0

0.3

0.6

0.9

1.2

1.5

1.8

(10.0)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Credit-related expenses/credits disclosed underthe Financial Reconstruction Law/capital adequacy ratio

(JPY bn)(JPY bn)

● Credits disclosed under the Financial Reconstruction Law and reserve for possible loan losses ● Credit-related expenses and credit-related expense rate trends

Credit-related expense rateCredit-related expenses

Credit-related expenses Credits disclosed under the Financial Reconstruction Law

10

(%)

FY2018FY2017FY2016FY2015FY2014FY2013FY2012 1H FY2019FY2011FY2010

2018/32017/32016/32015/32014/32013/32012/3 2018/92011/32010/3

Capital adequacy ratio (JPY bn, %)End-Mar. 2017 End-Mar. 2018 End-Sep. 2018

Capital adequacy ratio (non-consolidated/domestic standards) (a/b) 10.48 10.18 10.29Capital (a) 373.4 383.6 395.7

[Core capital: instruments and reserves] 373.5 383.7 395.8[Core capital: regulatory adjustments] 0.1 0.1 0.1

Risk assets (b) 3,561.6 3,767.7 3,842.5

<1H FY2019 summary>The capital adequacy ratio increased 0.11 points from the end of March 2018 due to an increase of JPY 12.1 billion in capital as a result of accumulating internal reserves, despite an increase in risk assets due to an increase in loans and bills discounted, etc.

174.2

144.0134.7

124.8116.3

105.7 99.5 95.4

112.8105.2

43.0

95.6100.7

89.284.4

76.068.1 64.0

56.9 55.1

3.00% 3.16%

4.71%

3.77%3.31%

2.91% 2.63%2.35% 2.12% 2.01%

Mar. 11, 2011Great East Japan

Earthquake

Loans to bankrupt and quasi-bankrupt

Doubtful loans

Substandardloans

Reserve for possible loan losses

Ratio of credits disclosed under the Financial Reconstruction Law


Mar. 11, 2011Great East Japan

Earthquake

II. Measures under the Medium-term Management Plan

11

Japan

Economy and market● Declining birthrate and aging

population, and a decrease in population

● Increase in business discontinuance and a decline in industry due to a lack of successors

● Lack of labor due to population outflow to large cities

Finance● Decrease in the volume of deposits

and loans● Prolongation of a low interest rate

environment● Decrease in revenue opportunities

through the emergence of other business formats and FinTech companies

● Advance of management integration and restructuring of branches and personnel

● Increasing difficulty in securing human resources due to a deterioration of bank performance

Economy and market

Finance

Business model

Further enhance the degree of customer satisfaction and confidence in the Bank through consulting offering the optimum solutions by identifying customers’ needs and issues. Moreover, enhance profitability and employee satisfaction through these initiatives.

Growth strategy—Strengthening of profitability—

Key Strategy 1

“For The Customer ＆ For The Future”—Best Consulting Bank Project—

3 years [from April 1, 2018 to March 31, 2021]

Regional economy vitalization strategy—Enhancement of value

of the region—

Key Strategy 2

Key Strategy 3

Productivity enhancement strategy—Effective and efficient allocation of resources—

Governance strategy—Strengthening of governance for sustainable growth—

Key Strategy 4

Growth and development of regional society and customers

Establish a robust business foundation that is not susceptible to the external environment

Miyagi Prefecture

Competitive advantages of The 77 Bank

High share in the region

Credibility with our business partners

Earthquake reconstruction support track

record

Management resources of The 77 Bank

Abundant human

resourcesInformation networks

Collective strength of the Group

Bank image sought by The 77 Bank

“Best Consulting Bank” that responds to customers’ needs by offering the optimum solutions

Business Model of The 77 BankII. Measures under the MTMP

12

External environment

Medium-term Management Plan


● Development of the regional economy and society through progress in earthquake reconstruction

● Changes in industrial structure due to the integration of manufacturing industries

● Expansion of city functions (acceleration of concentration around Sendai in the Tohoku region)

● Intensified competition with regional banks in Tohoku, etc.

● Enhance the satisfaction of every stakeholder

● Sustainable growth through the strengthening of the earnings base

● Contributions to regional society and customers through consulting sales

Key Strategies

13


Based on the recognition that the “high-cost, low-profit model” is the largest issue, promote consulting-based sales throughout the Group to enhance customer satisfaction with the Bank and the Bank’s profit.

Also, strengthen the channel strategy to expand customer contact points.

(1) Establish systems and structures for strengthening consulting capabilities• Revise the HQ’s organizational structure to strengthen support systems

for corporate offices• Establishment of a region support team consisting of HQ liaison

personnel• HR development to enhance consulting capabilities

(2) Strengthen consulting-based sales capabilities throughout the Group• Strengthen corporate sales capabilities

• Continuous efforts to rebalance loan assets• Strengthening of corporate sales through initiatives for business

evaluation• Efforts to increase non-interest income, centering on fees and

commissions from corporate clients• Strengthening of overseas business support• Cultivation of opportunities by utilizing information

• Strengthen retail sales capabilities• Greater promotion of consumer loans• Strengthening of capabilities to sell assets in custody• Increase of assets in custody and consumer loans by corralling mass

customers, younger customers, and the asset formation clientele(3) Strengthen the channel strategy utilizing IT and FinTech

• Strengthening of collaboration with MEJAR participating banks(4) Promote sophisticated management of securities

(1) Continue earthquake recovery support (2) Contribute to regional revitalization(3) Strengthen relations with regional public bodies(4) Strengthen support for corporate rehabilitation and business reform

(1) Make effective investment in light of sales measures(2) Continue business reform(3) Promote working style reform(4) Optimize allocation of human resources and promote strategic utilization

Growth strategy—Strengthening of profitability—Key Strategy 1

Regional economy vitalization strategy—Enhancement of value of the region—Key Strategy 2

Governance strategy—Strengthening of governance for sustainable growth—

(1) Enhance and strengthen governance

• Vigorously address ESG-related issues

(2) Establish brand strategy

(3) Enhance shareholder value

Key Strategy 4

Key Strategy 3Productivity enhancement strategy —Effective and efficient allocation of resources—

II. Measures under the MTMP

Continue efforts to rebalance loan assets and strengthen promotion of consumer loans

Key Strategy 1: Growth strategy —Strengthening of profitability—

● Outstanding balance of corporate loans (at term-end)

○ Rebalancing of loan customers and regions・ Shift from Tokyo, Nagoya and Osaka to the local market

(throughout Tohoku area)

Progress: 98.1%

1,122.7 1,144.0 1,174.0 1,201.0

1,101.41,014.4

2017/3 2020/3 Plan2019/3 Plan2018/92018/3 2021/3 Plan

Consumer loansUnsecured loans Others

1,122.01,106.01,084.01,068.91,048.9

968.8

48.3

54.5

66.0

46.5

38.7

76.0

5.5 5.5 2.06.06.93.0

Housing loans

・ Identify funding demand throughout Tohoku area

● Outstanding balance of consumer loans (at term-end)

○ Unsecured loans・ Identify potential deals utilizing big data analysis

・ Capture loan deals through cross-selling with housing loans

Progress: 99.4%

2,000.0

1,000.0

3,000.0

Corporate loans In Miyagi Pref. In Sendai City

2017/3 2020/3 Plan2019/3 Plan2018/92018/3 2021/3 Plan

3,040.02,941.0

2,861.02,844.22,796.0

2,707.7

1,910.01,830.01,764.01,716.61,698.91,602.4

1,370.01,310.01,282.01,245.71,223.31,136.5

(JPY bn)(JPY bn)

14

(JPY bn)

・ Practice proactive risk-taking based on business evaluation(Number of business evaluation customers)


End-Mar. 2017 End-Mar. 2018 End-Sep. 2018

1,776 3,255 4,168


○ Housing loans・ Identify potential deals by strengthening ties with home builders

・ Capture loan deals by segmentation of guarantee rates(introduction of central credit screening system)

1,000.0

500.0

80.0

60.0

40.0

20.0

100.0

302.1

384.2

463.8

537.1559.1

40.7

113.0122.0165.8

111.8

12,356

11,593

9,6479,895

0.0

200.0

400.0

600.0

800.0

0

5,000

10,000

Executed amountBalance of loans (term-end)Number of rental housing starts in Miy agi Pref .

Initiatives for apartment loans● Executed amount and outstanding balance of apartment loans

○ Overview of Miyagi Prefecture real estate market

○ Measures for apartment loans

・ Rental housing starts based on actual demand backed by earthquake recovery

・Implementation of appropriate entry screening

(JPY bn)

15

(No. of houses)

FY2010 FY2011 FY2012 FY2013 FY2014

4,592 4,574 3,965 7,527 12,516

FY2015 FY2016 FY2017 FY2018 1H FY2019

12,356 11,593 9,895 9,647 4,551

<Number of rental housing starts in Miyagi Prefecture>

・ Land price trends backed by robust real estate transactionsBenchmark land prices for both commercial and residential land increased for six consecutive yearsCommercial land: +4.7% YoY Residential land: +0.9% YoY

1H FY2019FY2018FY2017FY2016FY2015

・Initiatives to strengthen risk management

Verifying the validity of investment purpose and income estimates(Asset background, investment experience, location, personal funding, etc.)Appropriate screening with stresses set for each loan(Drop in rent fluctuation rate, decline in occupancy rate, increase in loan interest rate, etc.)

Thorough middle management over operating status, etc.

Strengthening of risk management through consolidation and digitalization of middle management results

(Source: Miyagi Prefecture)

First Half of Fiscal Year Ending March 31, 2019Key Strategy 1: Growth strategy —Strengthening of profitability—II. Measures under the MTMP

(at term-end)

Executed amountBalance of loans (term-end)Number of rental housing starts in Miyagi Pref.

Efforts to increase income other than interest income

16

Syndicated loans and commitment lines・ Growth of arrangement fees and commissions for large-scale project

finance related to solar power generation and for syndicated loan deals for corporate clients

M&A・ Accumulation of M&A by increasing dedicated personnel and through

cooperation with external experts(1H FY2019 results: M&A advisory contracts concluded with 13 clients)

Manager insurance・ Accumulation of results by capturing business succession needs and

increasing dedicated personnel

Privately placed corporate bonds・ Expansion of eligible clients by revising the minimum issue price and the bond criteria・ Active promotion of donation-type privately placed corporate bonds (1H FY2019 results:

63 deals)

Business matching・ Expanding partners (99 partners as of Sep. 30, 2018)・ Accumulating results mainly for referrals of construction contractors

and consulting firms

○ Strengthen sales promotion structure

・ Organized “Region Support Team” comprising HQ liaison personnel in April 2018 with the aim of strengthening cooperation between HQ and corporate offices. Corporate offices have been categorized into six areas within Miyagi Prefecture and assigned personnel to each area.

○ Strengthen coordination between HQ and corporate offices

● Fees and commissions from corporate clients

(JPY mn)

Progress: 56.7%

624

1,100

1,350

1,850

642

400

Privately placed corporate bonds

Manager insurance

M&ABusiness matchingSyndicated loans, commitment lines

466883

4984

87

75

FY2017 FY2020 PlanFY2019 Plan1H FY2019FY2018 FY2021 Plan

1,500

1,000

2,000

500

114

400

300

400

250

500

102

244

122

319

264


Key Strategy 1: Growth strategy —Strengthening of profitability—

・ Carried out organizational changes in April 2018 aimed at enhancing the sales promotion structure, and increased sales personnel from approx. 40 to approx. 60.

・ Plan to increase sales personnel to approx. 80 by 2020 to further strengthen consulting capabilities.


Strengthen sales of assets in custody● Balance of assets in custody of the Group (at term-end)

○ Strengthening sales structure for assets in custody○ Bank-brokerage partnership

Expand businesses with asset formation clientele

Investment trusts, NISA, etc.

77 BankPartnership

Accommodate the needs of rich clienteleStocks, investment trusts, structured bonds, etc.

77 Securities

Client referralsInformation coordinationHR exchange

○ Initiatives for asset formation clientele

17

・ Strengthen sales of assets in custody across the Group through bank-brokerage partnership

(JPY bn)

Progress: 96.1%

616.6 606.2 615.6682.0

640.0

740.0

22.0

16.019.5

18.114.215.8

17.4

2017/3 2020/3 Plan2019/3 Plan2018/92018/3 2021/3 Plan

600.0

300.0

129.0

86.0

55.0

95.0

353.0

92.8

123.3

48.2

315.8

97.1

133.8

33.2

309.8

108.6

174.7

300.1


Public bonds


77 Securities

● Sales commissions of assets in custody

(JPY mn)

Progress: 45.9%

1,149

2,500

3,2003,500

2,359

1,898

24144

1356

33


2,000

1,000

3,000


Public bonds

1,100

1,200

1,000

200

330

405

343

703

631

855

247

552

1,065

・ Launch of online insurance (Oct.)

・ Identify potential deals utilizing big data analysis

・ Launch of deposit accounts based on non-profit trust agreements (Oct.)

・ Number of contracts for savings-type assets in custody increased by 7,177 (fiscal year target: 11,000)

Operating revenue of 77 Securities

Foreign currency deposits (excl. financial institutions and offshore accounts)



<The Bank’s overseas network>

18

Strengthen overseas business support

● Number of overseas business support cases

Progress: 58.8%(Cases)

○ Main initiatives for overseas business support

・ Proposals for use of businesses providing cross-border e-commerce functions (25 cases)

・ Proposals for use of institutions related to technical intern trainees (26 cases)

・ Began deployment of bank staff to Vietnam (Apr.)


765

1,300 1,400 1,5001,290

712

1,000

500

2,000

MTMP target cumulative total for 3 years:4,200 cases

・ Concluded cooperation agreement with Sendai Chamber of Commerce and Industry regarding overseas business support (Oct.)

Support for overseas units 28, Support for marketing channel expansion and procurement 127, Information provision, etc. 610

・ Held business meetings in Thailand and China (business meetings for approx. 300 matches provided)

First Half of Fiscal Year Ending March 31, 2019Key Strategy 1: Growth strategy —Strengthening of profitability—

Asia Business Support Dept.(established March 2011)

ShanghaiRepresentative Office(opened July 2005)

China/Hong Kong ASEAN regionSingapore

Representative Office(opened May 2016)Fund procurementMaterials

procurement

Provision of localinformation

Support for overseas units

Trading

Marketing channel expansion


Bank staff deployed overseas:14 Overseas partner financial institutions: 11Other partner institutions in Japan and overseas: 18

The Bank of East Asia (April 2017)

Strengthen the Group’s comprehensive capabilities・ Implementation of highly specialized research studies related to regional

economy and industry trends・ Provision of effective consulting services aimed at resolving client issues

Clients (retail customers, corporate clients,

municipal governments)

Provision of integrated financial services as a

Group

Improving customer satisfaction/Group profitability

19

○ Establishment of 77 Research and Consulting Co., Ltd. (Jul. 2018)

・ Works together with the entire Group to respond to diversifying asset management needs and support asset building for customers

・ Provides growth money to companies in various life stages

Jul. 2016 Establishment of 77 Securities Co., Ltd. (* Started operation in Apr. 2017)

Jul. 2016 Establishment of 77 Capital Co., Ltd.

<Past initiatives>

Nov. 2016 Conversion into wholly-owned subsidiaries

・ Accelerate and enhance the efficiency of management and strengthen governance

・ Enhance consolidated profits, return profits effectively through flexible dividends

Membership organization management

A service which a fee-charging membership organization is established, and members are provided with information on regional economy and corporate information as well as employee education services

Research studiesA service which conducts contracted research based on bid information released by municipal governments, and independent research on regional economy and industry trends, as well as distribution of information

ConsultingA service which provides advice and planning based on analysis and diagnosis of management issues faced by client companies, as well as support for the execution of measures in response to such issues

Mar. 2018 Dissolution of two administrative subsidiaries

Sep. 2018 Dissolution of one IT-system subsidiary

Client companies/ Municipal

governments, etc.

Diverse needs

･ Business succession･ M&A･ Formulating business

strategy･ Organization and HR･ Marketing･ Financial advice

etc.

Corporate offices

HeadquartersBusiness Evaluation Meeting

Business Promotion Div. / Consulting Promotion Div. / Regional Development Promotion Div. / Credit

Supervision Div. / Treasury Administration & International Div.

Consulting Promotion Div.HQ liaison (Region Support Team)

Regional Development Promotion Div.Regional Vitalization Promotion Desk

Capturing and

identifying needs

Conveying needs and information

77 Research and Consulting Co., Ltd.

Providing contracted research and consulting services

Sharing information and considering deals

(Supporting companies)Nomura Research Institute, Ltd., Mitsubishi Research Institute, Inc., Attax Business Consulting, Inc.,es Networks Co., Ltd., Grant Thornton Yamada & Partners, Yamada Consulting Group Co., Ltd., etc.

Collaboration (business tie-ups, business outsourcing, etc.)

Information gathering

77 Group

77 Capital

77 Research and Consulting

77 Lease77 Bank

77 Securities

77 Card77 Shin-Yo Hosyo


Payment/remittance

77 Bank PayB (Scheduled for introduction in Mar. 2019)Fee payments

AI/Big data/ Omnichannel

Data provision

RPA

Household finance/ finance management

Data analysis

Financial information

Monitoring Information Service

Provide instant payment service via smartphone

・Select investment trust targets, etc., based on big data analysis

Receiving financial information on TKC Corporation member companies in digital data format

20

・Provide services through information sharing between channels

First Half of Fiscal Year Ending March 31, 2019Key Strategy 1: Growth strategy —Strengthening of profitability—

Strengthen comprehensive services for younger clients

Leverage ITOffer new products and services

Save time and manpower

Enhance business efficiency and automation

(Initiatives for FinTech)

New products

and services

Enhance business efficiency

OtherSophisticate the Bank’s

businesses

Smartphonepayment

Debit card payment

Smartphone apps

Block chaining

Cooperation withexternal organizations

Yahoo! Wallet / LINE Pay / Rakuten Edy / PayPay

77 JCB Debit

77 BANK app for account opening 77 BANK app (household accounting services, etc.)

Dispatch Bank employees to Japan Digital Design to do research on enhancement of the Bank’s businesses and user-friendliness

Enhance business efficiency and automation on repetitive routine work ⇒ Expand target businesses

Join the consortium of SBI Group to do research on new remittance/payment services

Provide instant top-up to electric wallets

Provide instant transfer services, support Google Pay


Contribute to regional revitalization

Key Strategy 2: Regional economy vitalization strategy —Enhancement of value of the region—

Promotion of tourism, job creation

Support for starting a new company or business

Support and develop regional core companies

Resolve issues of the region

Strengthen relations with regional public bodiesPartnership agreements with 19 entities

Strengthen consulting capabilitiesUtilize the information network and the Bank’s group capabilities

・Proactive initiatives for investment and financing in the tourism industry

Promotion of urban development

21

・77 medical and social welfare loans: 102 cases/JPY7.2 bn

・ Strengthen initiatives in healthcare, nursing, environment and energy fields

・Renewables-related funding: 29 cases/JPY14.7 bn* The above results are for 1H FY2019

・ Introduction of loans with principal exemption rider in the event of an earthquake (Launched in Oct. 2018)* A rider exempting the borrower from principal payments in the event of an earthquake with seismic intensity of upper 6 or higher

・Development of loan products for regional core companies

Tokyo Stock Exchange,Tohoku University, etc.

Cooperate with external partners

・ Concluded agreements with Watari Town, Tome City, and Osaki City (number of partners increased to 19 municipal governments)

・ Strengthening cooperation with municipal governments by concluding Comprehensive Cooperation Agreements

・ Greater encouragement for public-private projects (PPP/PFI)

・ Initiatives for development project at Aobayama University House of Tohoku University, etc.

・ Support for formulating business plans

・ Structuring co-financing ・ Providing capital funding

(utilization of funds)

Former school in Ishinomaki City turned into business producing lithium ion batteries

・ Support for new businesses in disaster-affected areas (I･D･F CO., LTD.)

Crowdfunding was utilized to raise funds from supporters nationwide for the opening of “Ire Hasekura Kingdom,” a former school in Kawasaki Town, Miyagi Prefecture, now used as a tourism facility where visitors can enjoy food and other experiences. The attractions of the facility were also introduced outside Japan.

・ Support for manufacturing industry associated with concentration of compact vehicle production bases in Tohoku by Toyota Motor East Japan, Inc.

・ Participation in regional development projects

・ Public-private partnership for integrated operation of tap, industrial and black water system in Miyagi Prefecture

・ Development of Tohoku synchrotron radiation facility

[Aobayama University House, etc.]

Earthquake recovery

Job creation

Industry promotion

・Utilization of crowdfunding


• Utilization of the fund in cooperation with 77 Capital

Fund No. 1: “77 New Business Fund”

Total value of fund: JPY1.0 billion (launched Aug. 2016)

Investments made: 16 deals/JPY451 million (as of end-Sep. 2018)


Make effective investment in light of sales measures and continue initiatives for business reform

Key Strategy 3: Productivity enhancement strategy—Effective and efficient allocation of resources—

Phase 1 Phase 2 Phase 3 Total

PeriodFrom Nov. 2017 to Mar. 2018

From Apr. 2018 to Sep. 2018

From Oct. 2018 to Mar. 2021

ー

Business processes covered

43 processes 35 processes Approx. 140processes

Approx. 220 processes

Annual time saving

2,415 hours 1,435 hours 9,080 hours 12,930 hours

22

○ Initiatives to establish an efficient sales structure ○ BPR initiatives

○ Enhance business efficiency using RPA

[Remote consultation system][77 Smart Counter] [Tablets]A self-service counter with state of the art equipment that can be used with employee assistance

Established a system enabling mutual communication with dedicated HQ staff members in a fully private consultation booth

Reduces the burden of filling out forms by enabling digital signatures on tablets for new account applications, etc.

<BPR initiatives planned in future>・ Expand functions of automatic contract preparation system for contracts

(completed in Oct. 2018)・ Enhance business efficiency through update of the Bank’s internal information

network system (to be implemented in Mar. 2019)・ Automatic preparation of loan execution forms (to be implemented in Jun. 2019)・ Digitalize administration of receipt of investment trust and insurance sales

applications using tablet computers (to be implemented for investment trusts in May 2019 and for insurance in Nov. 2019)

● Expenses

・Introduce next generation branch functionsEstablished the Hebita Branch Nozomino Sub-Branch, which leverages an IT infrastructure (Jun.)

・Development of efficient sales structure (Apr.)Revised business hours at Ayukawa Branch (closed from 11:30 – 12:30)

・Revised branch network (Jul.)Basho no Tsuji Branch converted to branch within Head Office Business Div.

27.5 27.2

13.9

27.8 27.1 26.9

22.5 22.3

10.7

22.8 23.2 21.8

3.2 3.3

1.7

3.3 3.2 3.3

0.0

10.0

20.0

30.0

40.0

50.0

60.0

FY2017 FY2018 1H FY2019 FY2019 FY2020 FY2021

53.2 52.8

26.3

53.9 53.5 52.0

Progress: 48.8%

Target for time saving during the MTMP period: 10,515 hours

Personnel expenses Non-personnel expenses Tax

(JPY bn)

First Half of Fiscal Year Ending March 31, 2019II. Measures under the MTMP

○ HQ centralization 3,387 hours

・Posting of mail 2,330 hours

・Handling of documents for completed loan payments 482 hours

・Administration of real estate collateral assessments 375 hours

・Processing deposit of overseas remittances received 200 hours

○ Update of consumer loan central credit screening system 14,000 hours

○ Expansion of bankbook-free, seal-free operations 420 hours

(Time saved in 1H FY2019 through BPR)

Vigorously address ESG-related issues

EnvironmentE

Key Strategy 4: Governance strategy—Strengthening of governance for sustainable growth—

23

○ Carried out tree-planting activities

<Product features>・ Investment in domestic companies

working to resolve ESG issues・ A portion of the trust fees is donated to

the Miyagi Prefecture Greening Promotion Council

○ Began offering ESG-related investment trusts

New employees of the Bank planted 1,000 Japanese black pine trees in the Arahama District of Sendai City, based on the “Citizens’ Reforestation Activities to Restore the Miyagi Coastal Forests” agreement with Miyagi Prefecture and Sendai City.

SocialＳ

・ Work - Work Sukoyaka ClubOrganized round-table talk for employees taking childcare leave, etc. (Participants: 22 female Bank employees)

○ Initiatives for working style reform

・77 Work - Work Family DayOrganized workplace visits for family members of Bank employees and part-timers at all corporate offices(Participants: 570 people (280 families)

○ External evaluations on the Bank’s initiatives

“Eruboshi (Grade 3)” “Platinum Kurumin”“Gold Certified Company”

Chosen as a constituent of MSCI Japan Empowering Women Index, which recognizes companies with outstanding efforts in promoting the participation and advancement of women in the workplace (as of Jun. 2018)

First Half of Fiscal Year Ending March 31, 2019II. Measures under the MTMP

24

One branch, one social contribution campaign

All branches continue to engage with the local

community

77 Kids ChallengeJoint sports workshops held by three of the Bank’s sports

clubs (baseball, track and field, and badminton teams)Organized “X-Tech Innovation 2018”Business contest across industry and business categories

Renovation of the Currenty and Banking Museum

Set up “Financial Education Website for Children”

Scheduled for Mar. 2019

Official mascot“Shichi-Shika-Kun”

Holding “77 Business Forum —For the Future—”

Business forum on the theme, “the future”(to be held in Jan. 2019)

Organized tree-planting of coastal protection forest

Supported financial education for children

Held Japanese drum and Suzume Odori (sparrow dance) performance for children

Participated in local festival and cleaned up the venue the next day

SocialＳ (140th anniversary project)


Key Strategy 4: Governance strategy—Strengthening of governance for sustainable growth—II. Measures under the MTMP

3.5 3.5 3.5 4.0 4.5 4.5 4.5 22.5

3.5 3.5 4.0 4.5 4.5 4.5 22.5 22.5

2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3

Enhance shareholder value● Dividends

Total sum paid out

(JPY mn)2,616 2,617 2,805 3,180 3,368 3,353 3,364 3,364

Net income (JPY bn)

10.6 12.1 14.7 16.9 15.7 16.6 16.7 18.5

Dividend ratio

24.6％ 21.5％ 19.0％ 18.8％ 21.5％ 20.2％ 19.9％ 18.0％

G Governance

25

(JPY)

(22.5)

Consolidation of shares on Oct. 1, 2017

(Plan)

Interim dividendsTerm-end dividends


Key Strategy 4: Governance strategy—Strengthening of governance for sustainable growth—

○Milestones for enhancement/strengthening of governance

“Corporate Governance Policy” establishedNov. 2015

“Corporate Governance Committee” established

Jun. 2017

Apr. 2014 “Executive officer system” introduced

Transition to a “Company with an Audit & Supervisory Committee”

“Compensation system for Directors” revised (Performance-linked compensation system introduced)

Revision of the executive officer system

Jun. 2018

Appointment of a woman as Director

Increased ratio of Outside Directors

Introduction of a new position, senior executive officer, for streamlining and vitalizing the Board of Directors

The Bank appointed a woman as an Outside Director to enhance management transparency through diversification of directors

37.5%(6 Outside Directors/Total 16 Directors)

Faster decision-making, oversight and business execution, strengthening of functions

<Reference> Acquisitions of treasury stock

Timing No. of shares acquired Total cost of acquisition

Oct. 2002-Jan. 2003 1,770,000 JPY777 mn

Aug. 2003 1,000,000 JPY490 mn

Feb.-Apr. 2011 5,563,000 JPY2,535 mn

Nov. 2016-Jan. 2017 5,346,000 JPY3,000 mn


26

Progress of targets / KPIs

○ Key Performance Indicators (KPIs) for strengthening consulting capabilities

○ Targets


Item FY2018 results 1H FY2019 results FY2021 targets

・No. of corporate loan borrowers (final year) 12,290 borrowers 12,164 borrowers 13,000 borrowers or more・No. of clients who signed contracts for customized solutions based on business evaluation (cumulative total for 3 years) (Note 2)

(1,114 clients) 480 clients 2,000 clients or more

・Fees and commissions from corporate clients(final year) (Note 1) JPY0.6 bn JPY0.6 bn JPY1.8 bn or more

・No. of business succession, inheritance, and asset succession support recipients (cumulative total for 3 years) (Note 2)

(677 recipients) 444 recipients 3,300 recipients or more

・No. of increases in contracts for installment-type assets in custody [compared with FY2018 term-end] (Note 2)

(10,856 contracts) 7,177 contracts 40,000 contracts or more

・No. of seminars for customers(cumulative total for 3 years) (Note 2) (80 times) 268 times 1,100 times or more

Note 1: Fees and commissions for syndicated loans, commitment lines, business matching, M&A, privately placed corporate bonds, manager insurance products, etc.

Note 2: Results indicated for FY2018 are results for the single year.

Strengthening of consulting for retail customers

Strengthening of consulting for corporate clients

・No. of employees with qualifications (1st grade Certified Financial Planner, CFP, and Small and Medium enterprise Management Consultant) (final year) 111 persons 115 persons 700 persons or moreEnhancement of

consulting capabilities


Item FY2018 results 1H FY2019 results FY2021 targets

・Net income (consolidated) JPY18.3 bn JPY13.3 bn JPY19.0 bn or more・Interest on loans and bills discounted JPY41.4 bn JPY21.0 bn JPY45.0 bn or more・Fees and commissions JPY9.3 bn JPY4.8 bn JPY11.5 bn or more

・Core OHR (core gross operating income expense ratio) 69.5% 70.8% 70% or less・ROE (consolidated) 3.8% 5.2% 3.7% or more

Pursuit of soundness ・Capital adequacy ratio (consolidated) 10.4% 10.5% 10% or more

・Balance of corporate loans (term-end) (Note 1) JPY2,796.0 bn JPY2,844.2 bn JPY3,000.0 bn or moreOf which Miyagi Prefecture JPY1,698.9 bn JPY1,716.6 bn JPY1,900.0 bn or more

Of which Sendai City JPY1,223.3 bn JPY1,245.7 bn JPY1,370.0 bn or more

・Balance of assets in custody, Group (term-end) (Note 2) JPY606.2 bn JPY615.6 bn JPY740.0 bn or more・Balance of consumer loans (term-end) JPY1,101.4 bn JPY1,122.7 bn JPY1,200.0 bn or more

Note 1: Yen-denominated only

Note 2: Sum of assets in custody of The 77 Bank and those of 77 Securities (Foreign currency deposits exclude deposits by financial institutions and offshore accounts)

Enhancement of profitability

Pursuit of efficiency

Strengthening of corporate sales capabilities

Strengthening of retail sales capabilities

III. Projected Performance

27

(%)

Interest rates/Interest margin

FY2018 (Results)

FY2019 (Plan) YoY change

Loans and bills discounted interest rate 0.92 0.90 (0.02 )

Securities interest rate 1.00 0.91 (0.09 )Interest rate on deposits 0.01 0.01 0.00

Interest rate spread 0.86 0.81 (0.05 )

Net interest margin 0.19 0.12 (0.07 )(Note) YoY change is a point difference.

(JPY bn)

Projected performance(non-consolidated)

FY2018 (Results)

FY2019 (Plan) YoY change

Gross operating income 67.7 69.0 1.3[Core gross operating income] [ 75.9 ] [ 71.6 ] [ (4.3)]Interest income 69.6 65.5 (4.1)Fees and commissions 9.3 9.7 0.4Other operating income (11.2) (6.2) 5.0

Gains (losses) on bonds (8.2) (2.6) 5.6

Gains (losses) on forex transactions

(3.6) (2.0) 1.6

Gains (losses) on derivatives 0.6 (1.6) (2.2)Expenses 52.8 53.9 1.1Operating income before provision of general reserve for possible loan losses

14.9 15.1 0.2

[Core operating income] [ 23.1 ] [ 17.7 ] [ (5.4)]Provision of general reserve for possible loan losses －－－Operating income 14.9 15.1 0.2Special income (losses) 8.4 7.4 (1.0 )Bad debt disposals (-) 0.5 0.6 0.1Gains on reversal of reserve for possible loan losses 2.8 0.6 (2.2)

Gains (losses) on stocks 2.7 4.3 1.6Gains (losses) on investments in money held in trust 4.0 3.9 (0.1)

Ordinary income 23.3 22.5 (0.8)Extraordinary losses (0.7) 0.8 1.5Income taxes (incl. deferred taxes) 5.9 4.8 (1.1)Net income 16.7 18.5 1.8

Credit-related expenses (2.3) 0.0 2.3

Projected performance for FY2019

28

FY2018 (Results)

FY2019 (Plan)

Ordinary income 25.7 23.5Net income

attributable to owners of the parent

18.3 18.0

(JPY bn)○ Consolidated performance

III. Projected Performance First Half of Fiscal Year Ending March 31, 2019

FY2018 (Results) FY2019 (Forecast)

Unsecured call rate O/N (0.05)% (0.05)%

JPY TIBOR (3 months) 0.06% 0.07%

5-year JGBs (0.10)% (0.05)%

10-year JGBs 0.05% 0.10%

Exchange rate (JPY/USD) ¥110 ¥111

Nikkei Average (At term-end) ¥21,454 ¥23,500

<Interest rates and other assumptions underlying the projection (average)>

Quantitative Plan (1) (Quantitative plan to be formulated and reviewed annually)

29

First Half of Fiscal Year Ending March 31, 2019III. Projected Performance

1. Major accounts (average balance)

FY2018 FY2019 FY2020 FY2021(Results) (Plan) (Forecast) (Forecast) vs FY2018 change %

Loans and bills discounted 4,494.0 4,625.3 4,636.1 4,724.0 4,840.0 346.0 7.7

2,789.7 2,850.1 2,862.0 2,951.0 3,048.0 258.3 9.3

1,056.3 1,110.5 1,122.3 1,158.0 1,189.0 132.7 12.6

1,006.9 1,057.4 1,067.2 1,089.0 1,110.0 103.1 10.2

43.0 47.3 49.4 63.0 73.0 30.0 69.8

Deposits and certificates of deposits (Note 1) 7,761.0 7,818.0 7,760.5 7,653.5 7,568.5 (192.5) (2.5)

2. Term-end balance

FY2018 FY2019 FY2020 FY2021(Results) (Plan) (Forecast) (Forecast) vs FY2018 change %

Loans and bills discounted 4,627.1 4,676.5 4,669.0 4,760.0 4,888.0 260.9 5.6

Corporate loans (Note 2) 2,796.0 2,844.2 2,861.0 2,941.0 3,040.0 244.0 8.7

1,698.9 1,716.6 1,764.0 1,830.0 1,910.0 211.1 12.4

Sendai City 1,223.3 1,245.7 1,282.0 1,310.0 1,370.0 146.7 12.0

Retail loans 1,101.4 1,122.7 1,144.0 1,174.0 1,201.0 99.6 9.0

Housing loans 1,048.9 1,068.9 1,084.0 1,106.0 1,122.0 73.1 7.0

Unsecured loans 46.5 48.3 54.5 66.0 76.0 29.5 63.4

Deposits and certificates of deposits (Note 1) 7,964.3 7,766.6 7,846.0 7,733.0 7,636.0 (328.3) (4.1)

Balance of assets in custody, Group (Note 3) 606.2 615.6 640.0 682.0 740.0 133.8 22.1

Note 1. “Deposits and certificates of deposits” is expected to decrease mainly because of outflow of public deposits in line with the progress of recovery from the earthquake.

Note 2. Term-end balance of “corporate loans” is yen-denominated only.

Note 3. “Balance of assets in custody, Group” is the sum of assets in custody of The 77 Bank and those of 77 Securities (Foreign currency deposits exclude deposits by financial institutions and offshore accounts)

Corporate loans

Retail loans

Unsecured loans

Miyagi Prefecture

Housing loans

(JPY bn, %)

(JPY bn, %)

Increase/decrease

Increase/decrease

1H Results

1H Results

30

First Half of Fiscal Year Ending March 31, 2019III. Projected Performance Quantitative Plan (2) (Quantitative plan to be formulated and reviewed annually)

3. Profits and losses

FY2018 FY2019 FY2020(Results) (Plan) (Forecast)

75.9 37.2 71.6 70.0 (2.5)

69.6 33.9 65.5 63.4 (5.3)

Interest on loans 41.4 21.0 41.9 43.4 3.8

9.3 4.8 9.7 10.2 2.2

Expenses 52.8 26.3 53.9 53.5 (0.8)

Core operating income 23.1 10.9 17.7 16.5 (1.7)

Core OHR 69.5 70.8 75.2 76.4 1.3

10.1 10.2 10.1 10.1 0.0

ROE 3.8 5.2 3.6 3.6 (0.1)

10.4 10.5 10.4 10.3 (0.1)

[Interest rates and other assumptions (average)] (%, JPY)FY2018 1H FY2019 results FY2019 FY2020

(0.05) (0.06) (0.05) (0.05)0.06 0.07 0.07 0.071.50 2.36 2.50 2.350.05 0.07 0.10 0.052.43 2.93 2.90 3.00110 111 111 112

21,454 24,120 23,500 23,500Nikkei Average (At term-end)

USD LIBOR (3 months)10-year JGBs10-year US treasury bondsExchange rate (JPY/USD)

Unsecured call rate O/NJPY TIBOR (3 months)

Non-consolidated

Consolidated

70.8

52.0

21.4

3.7

Increase/decreasevs FY2018

(JPY bn, %)

11323,500

FY20210.000.10

0.202.35

3.10

Core gross operating income

Capital adequacy ratio (domestic standards)

Capital adequacy ratio (domestic standards)

Fees and commissions

FY2021(Forecast)

73.4

64.3

45.2

Interst income

11.5

1H results

10.1

10.3

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 future

performance. Future performance projections may differ from actual results

due to uncertainty caused by factors such as changes in the business

environment.

Documents

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