April 1, 2016
Company Name: Concordia Financial Group, Ltd.
Representative: Representative Director, President Tatsumaro Terazawa
Code No. 7186, First Section, Tokyo Stock Exchange
Re: Foundation of Concordia Financial Group, Ltd. and
Formulation of Medium-term Management Plan
The Bank of Yokohama, Ltd. (Representative Director, President: Tatsumaro Terazawa) and The Higashi-Nippon Bank, Limited (Representative Director, President: Michito Ishii) today incorporated a wholly-owning parent company of the Banks named “Concordia Financial Group, Ltd.”; Concordia Financial Group, Ltd. listed its shares on the First Section of Tokyo Stock Exchange.
In addition, Concordia Financial Group, Ltd. formulated the Medium-term Management Plan “One Heart for You ~1st Stage~” starting from April 2016 through March 2019 and we hereby inform you as follows:
1. Overview of Concordia Financial Group, Ltd.
(1) Company name: | Concordia Financial Group, Ltd. |
(2) Representatives: | Representative Director, President: Tatsumaro Terazawa (Representative Director, President of Bank of Yokohama, Ltd.) |
Representative Director, Vice President: Michito Ishii (Representative Director, President of Higashi-Nippon Bank, Limited) | |
(3) Location of headquarters: | 7-1 Nihonbashi 2-chome, Chuo-ku, Tokyo |
(4) Method of the foundation: | Establishment of a wholly-owning parent company (the holding company) through a joint share transfer |
(5) Nature of Business: | Management and operation of banks and other companies that Concordia Financial Group, Ltd. may have as subsidiaries under the Banking Act and any and all businesses incidental or related thereto |
(6) Purpose of the foundation: | Improve corporate value through the expected improvements in efficiency and synergy effects for growth from the business integration due to not competing in sales areas, customer bases, and area of strengths, but rather having complementary relations |
(7) Amount of capital: | 150 billion yen |
(8) Stock Exchange: | First Section of Tokyo Stock Exchange |
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2. Directors and Executive Officers
Representative Director, President | Tatsumaro Terazawa |
Representative Director, Vice President | Michito Ishii |
Representative Director | Yasuyoshi Oya |
Director | Kenichi Kawamura |
Outside Director | Minoru Morio |
Outside Director | Ken Inoue |
Outside Director | Yuzo Takagi |
Full-time Audit & Supervisory Board Member | Katsunori Amano |
Full-time Audit & Supervisory Board Member | Yoji Maekawa |
Outside Audit & Supervisory Board Member | Kenjiro Noda |
Outside Audit & Supervisory Board Member | Mizuho Ogata |
Outside Audit & Supervisory Board Member | Keiichiro Hashimoto |
Executive Officer | Michio Namiki |
Executive Officer | Naoki Oosawa |
Executive Officer | Mitsukazu Kudo |
Executive Officer | Takashi Sakai |
Executive Officer | Tadashi Komine |
3. Consolidated Earnings Forecast (for the fiscal year ending March 31, 2017)
The forecast for the current fiscal year will be announced once it is determined.
4. The Medium-term Management Plan
With regard to the Medium-term Management Plan, please see attachment “Foundation of Concordia Financial Group, Ltd. and Formulation of Medium-term Management Plan.”
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Foundation of Concordia Financial Group, Ltd. and Formulation of Medium-term Management Plan April 1, 2016 CONCORDIA Financial Group Bank of Yokohama - Higashi-Nippon Bank |
Table of Contents I Foundation of Concordia Financial Group, Ltd. 1. Group's management philosophy o visions, P3 2. Group's operation o management structure, P4 3. Overview of group companies, P5 II Medium-term Management Plan of Concordia Financial Group, Ltd. 1. Rationale and positioning of medium-term management plan P7 2. Overview of medium-term management plan P8 3. Fundamental strategies P9-21 4. Group's capital policy P22 5. Financial targets P23 2 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
I Foundation of Concordia Financial Group, Ltd. CONCORDIA Financial Group Bank of Yokohama - Higashi-Nippon Bank 3 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
1. Group's Management Philosophy and Visions Corporate name Concordia Financial Group, Ltd. Concordia Financial Group, Ltd. First Section of Tokyo Stock Exchange Securities code 7186 Management philosophy Aiming to contribute to creating a vibrant future as a trusted financial group and to enhance its corporate value together with the growth of the region by providing the best financial services to its customers through collaboration that leverages the strengths and uniqueness of each group company Long-term visions I. Aim to become a trusted financial group by maintaining deep relationship with customers as a regional financial institution and providing broad, high-quality financial service and regional information leveraging its wide-area network achieved through the business integration II. Aim to strengthen earning capacity and improve corporate value by strategically placing into growing areas and business fields management resources that are created through proactive sharing of each bank's business infrastructure and know-how to the maximum extent and promoting streamlining and improvements in efficiency, even while maintaining each group company's brand III. Aim to improve each employee's capabilities in consulting services and of assessing the future prospects of customers' businesses in order to appropriately respond to changes in environment and customers' needs and to pursue constant customer satisfaction IV. Contribute to the prosperity of the region by providing solutions that utilize sophisticated consulting services and financial techniques to address various issues in the Metropolitan area and the surrounding region where the group is based Group's slogan - One Heart for You 4 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
2. Group's Operation o Management Structure Build an operation o management structure as a regional financial platform where the two banks can fully utilize their strengths as regional financial institutions in their respective home market Group's operation o management structure Holding Company (HD company) 1 Audit o Supervisory Board Office of Audit o Supervisory Board Group Management Audit Conference General Meeting of Shareholders Board of Directors Management Conference (Compensation Committee) Compliance Conference ALM / Risk Management Conference Group Sales Strategy Conference Administration / IT System Strategy Conference 5 Audit Department 2 Corporate Planning Department 3 Group Strategy Planning Department 4 Risk Management Department Subsidiaries Bank of Yokohama Higashi-Nippon Bank Functions and roles 1 Group's operation and management (group-wide) HD company Develop group-wide operation o management policies Subsidiaries Each bank to execute the initiatives while leveraging its strength based on group-wide policies 2 Corporate planning HD company Develop the group's management plans, budgets and system operation policies, etc. Subsidiaries Each bank to execute its business plans, financial budgeting targets and internal control 3 Sales strategy HD company Develop basic sales and administrative policies and other policies in relation to branch network, etc. Subsidiaries Implement specific sales initiatives, develop branches, etc. 4 Risk management HD company Develop the group's basic policies in relation to risk management and compliance Subsidiaries Monitor potential risks and deal with compliance related issues, etc. 5 Internal audit HD company Perform the audit of the holding company and the subsidiaries Subsidiaries Perform the audit of branches as well as the headquarter audit in cooperation with the holding company 5 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
3. Overview of Group Companies Key metrics for the two banks Yokohama Higashi-Nippon Total of the two banks Loan balance (non-consolidated) 10,036.2 1,626.3 11,662.5 Deposit balance (non-consolidated) 12,125.2 1,891.5 14,016.7 Net assets (consolidated) 1,017.4 117.7 1,135.1 Total assets (consolidated) 15,746.7 2,197.8 17,944.5 Number of domestic branches 205 82 287 Number of overseas offices(Note 2) 5 ?| 5 Number of employees (non-consolidated) 4,776 1,468 6,244 Capital adequacy ratio (consolidated) 13.27% 8.83% ?| (Note 1) As of the end of December 2015; The number of employees: as of the end of September 2015 (Note 2) Overseas offices include representative offices Domestic branch networks for the two banks Yokohama 3 branches Gunma Higashi-Nippon 1 branch Tochigi Higashi-Nippon 13 branches Ibaraki Higashi-Nippon 5 branches Saitama Yokohama 20 branches Tokyo Higashi-Nippon 49 branches Yokohama 180 branches Kanagawa Higashi-Nippon 9 branches Higashi-Nippon 3 branches Chiba Yokohama 2 branches Others Higashi-Nippon 2 branches 6 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
II Medium-term Management Plan of Concordia Financial Group, Ltd. "One Heart for You ^ 1st Stage ^" CONCORDIA Financial Group 7 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
1. Rationale and Positioning of Medium-term Management Plan To consequently achieve the group's management philosophy and long-term visions, the medium-term management plan is positioned as a 3-year phase in which the group enhances and deepens relationships with customers by adapting promptly to changing financial environment and putting efforts in efficiency improvement as well as proactive investments in growth area to realize synergies from the business integration as early as possible External environment Quantitative and Qualitative Monetary Easing with a Negative Interest Rate Decreasing population Increase in dual-income households and decrease in customers who actually visit branches Moderate recovery of the Japanese economy Interest rate hike in US and decelerating emerging economies Progressing FinTech Regulatory trends Expanded scope of operations for the bank holding company Tightened Basel requirements Positioning of medium-term management plan A 3-year phase in which the group enhances and deepens relationships with customers by adapting promptly to changing financial environment and putting efforts in efficiency improvement as well as proactive investments in growth area to realize synergies from the business integration as early as possible Long-term visions 1 Become a financial group trusted by customers 2 Strengthen earning capacity o improve corporate value by promoting collaboration and streamlining 3 Improve each employee's consulting and business feasibility assessment capabilities 4 Contribute to the prosperity of the region New initiatives Effect of the business integration April 2016 March 2019 8 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
2. Overview of Medium-term Management Plan Name One Heart for You ^ 1st Stage ^ Period April 2016 - March 2019 Positioning A 3-year phase in which the group enhances and deepens relationships with customers by adapting promptly to changing financial environment and putting efforts in efficiency improvement as well as proactive investments in growth area to realize synergies from the management integration as early as possible Target metrics for FY2018 ROE (consolidated) Approx. 7% CET1 ratio (consolidated) Mid-11s% OHR (sum of the two banks' non-consolidated figures) Approx. 50% Fundamental strategies (1) Enhance customer interactions and widen services scope (i) Enhance o deepen relationships with customers through both face-to-face and non-face-to-face interactions (ii) Further strengthen support to corporate customers in solving their issues and increasing their enterprise value (iii) Provide financial services while strategically incorporating the progressing ICT(Note) (2) Realize group synergies to accelerate growth (3) Nurture human resources with broad expertise and promote diversity (4) Proactively get involved in regional issues, including regional revitalization (Note) "ICT" = Information and Communication Technology 9 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
3. Fundamental Strategies - Formulate a trusted and preferred group by customers as contributing to growth of communities (1) Enhance customer interactions and widen services scope (i) Enhance o deepen relationships with customers through both face-to-face and non-face-to-face interactions o Tap the potential needs of customers and further enhance transactions with customers by providing a wider variety of products and services tailored to each life stage of customers o Expand branches, extend operating hours including weekends, and increase future-oriented access points (ii) Further strengthen support to corporate customers in solving their issues and increasing their enterprise value o Help customers increase their enterprise value by focusing on business feasibility assessment initiatives and enhancing the functions as an information hub o Assist customers in their business expansion and globalization by utilizing the functions of the group's overseas offices and overseas partner banks (iii) Provide financial services while strategically incorporating the progressing ICT o Improve customer convenience and set up new financial services by combining ICT, FinTech, and big data (2) Realize group synergies to accelerate growth o Reduce costs by sharing and streamlining paperwork, systems, and branches; Invest the management resources created through such sharing and streamlining in growth regions/segments o Group companies to collaborate to realize higher sophistication of investment decisions o Shift to an organizational structure whereby the subsidiary banks can focus on their own business operations, consider establishing new operating companies, reduce the group's financing costs through mutual financing between the two banks while taking advantage of the deregulated environment (3) Nurture human resources with broad expertise and promote diversity o Nurture human resources who can offer sophisticated consulting services and solutions and promote diversity (4) Proactively get involved in regional issues, including regional revitalization o Proactively get involved in taking initiatives to address regional revitalization issues, as well as initiatives such as regional development projects 10 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
3. Fundamental Strategies (1) (i) Enhance o deepen relationships with customers through both face-to-face and non-face-to-face interactions Tap the potential needs of customers and further enhance transactions with customers by both building an organizational structure whereby the group can precisely meet the increasingly sophisticated / diversified customer needs as well as offering a wider variety of products and services tailored to each life stage of customers Segments Customer base for wealth management Seniors, real estates owners, business owners, etc. Face-to-face sales Customer base for asset formation Customers who cannot come to branches during business hours, students, etc. Direct sales Segments subdivided to meet the needs of customers in a customized fashion (Note) Loans to high-net-worth individuals are the loans extended to individuals and asset management companies in relation to effective utilization of real estates, inheritance, and business succession, etc. Major sales initiatives Strengthen capabilities to meet increasingly sophisticated / diversified inheritance related customer needs o Increase the lineup of consulting services and the number of external experts from partner companies o Increase the number of skilled financial consultants o Increase the number of consultants to keep pace with increasing branches / offices To meet the growing needs of asset management o Extend operating hours including weekends o Develop new products in collaboration with an asset management company - Sky Ocean Asset Management o Offer asset management proposals through robo-advisors o Leverage NISA and Junior NISA Launch products / services tailored to each life stage of customers o Offer a wider range of unsecured consumer loan products (including loans without the need for repayment accounts) o Increase the number of call center personnel o Enhance smartphone payment functions Loans to high-net-worth individuals (sum of the two banks) 650.0 550.0 450.0 350.0 250.0 150.0 Up by 90% 20132014 2015 (Forecast) 2018 (FY) Sales of investment products (sum of the two banks) 700.0 600.0 500.0 400.0 300.0 200.0 Up by 33% 20132014 2015 (Forecast) 2018 (FY) Balance of unsecured consumer loans (sum of the two banks) 200.0 160.0 120.0 80.0 40.0 Up by 75% Mar-14 Mar-15 Mar-16 (Forecast) Mar-19 11 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
3. Fundamental Strategies (1) (i) Enhance o deepen relationships with customers through both face-to-face and non-face-to-face interactions Significantly improve customer convenience by combining the two banks' extensive branch network and FinTech Increase sales branches / offices Add new access points of about 30 sales branches / offices in three years X Extend operating hours Open all-time consultation counter Bank of Yokohama Higashi-Nippon Bank ? 30 branches / offices Number of domestic branches 205 branches 82 branches Bank of Yokohama Open sales branches / offices that provide consulting services to high-net-worth individuals primarily in central Tokyo, Jonan and Tama areas Higashi-Nippon Bank Open sales branches / offices primarily in central Tokyo Tokyo Kanagawa Bank of Yokohama Extend operating hours including weekends and holidays Higashi-Nippon Bank Open consultation counter on weekends and holidays (Note) Launch a preferential fee scheme for ATM transfer / deposit between the two banks starting on April 1, 2016 Add future-oriented access points Customers can choose the optimum channel from a wide range of channels made available with ICT Promotion of Omni-channel operation Integrated approach Establishment of system platform Analysis of financial behaviors Real-time linkage Use of artificial intelligence Easy-to-use environment Upgrade smartphone functions o Account opening application o Smartphone passbook Upgrade Internet functions o User-friendly and smarter functionality o Attractive products and services 12 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
3. Fundamental Strategies (1) (ii) Further strengthen support to corporate customers in solving their issues and increasing their enterprise value Provide services tailored to each growth phase of customers and help customers increase their enterprise value by focusing on business feasibility assessment initiatives and enhancing the functions as an information hub through utilization of group-wide functions of Hamagin Research Institute, Hamagin Finance, and Yokohama Capital Support tailored to each growth phase of customers Start-up phase Growth phase Maturation phase Transformation phase Entrepreneurial support Loans for growth area Business matching, M A, business succession Lease, factoring ABL(Note) Consulting overseas business support by Hamagin Research Institute, etc. Management improvement support Growth Support Fund, etc. Future Regional Vitalization Fund Regional Core SME Vitalization Fund SME Vitalization Fund (Note) Asset Based Lending: loans backed by movables or receivables Business feasibility assessment initiatives Analyze target company Identify issues develop solutions Propose / offer solutions Improve customer's enterprise value The two banks share know-how through joint training and tools so that they can provide more sophisticated solutions Enhancement of information hub Customers of Bank of Yokohama (approx. 25,000) (Note) Borrowers of business loans Upgrade corporate coordinating functions, provide consulting on M A and business succession, and hold business meetings, etc. Customers of Higashi-Nippon Bank (approx. 18,000) (Note) Borrowers of business loans Improve enterprise value by expanding potential opportunities through expansion of sales channels, business diversification and overseas expansion 13 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
China India Thailand Philippines Vietnam Malaysia Singapore (Note 2) Loans overseas include loans extended by Shanghai Branch, loans for non-residents, standby LC, and parent-subsidiary loans By FY2015 After April 2016 Customers' expansion into Asia and the Group's Support Structure Initiatives to reinforce overseas business support Overseas loan balance forecast (sum of the two banks) 3. Fundamental Strategies (1) (ii) Further strengthen support to corporate customers in solving their issues and increasing their enterprise value Assist customers in their business expansion and globalization by utilizing the functions of Shanghai Branch, overseas representative offices, overseas partner banks, and Hamagin Research Institute Combine the two banks' know-how on overseas business support Respond more appropriately to customers' needs Expand customer base Expand the scope of operations Continue talent training overseas 50.0 150.0 250.0 350.0 Mar-14 Mar-15 Mar-16 Mar-19 (Ending balance, JPY bn) (Forecast) Up by 65% Customers expanded overseas Approx. 2,300 companies Indonesia Customers expanded overseas Approx. 90 companies Customers expanded overseas Approx. 430 companies Customers expanded overseas Approx. 110 companies Customers expanded overseas Approx. 150 companies Customers expanded overseas Approx. 210 companies Customers expanded overseas Approx. 150 companies Customers expanded overseas Approx. 200 companies Countries with Bank of Yokohama's overseas offices Countries with overseas partner banks Bank of Yokohama's overseas offices Personnel dispatched to partner banks Shanghai Branch Hong Kong Representative Office Bank of Yokohama, Higashi-Nippon Bank, Hamagin Research Institute (Overseas Business Expansion Support Department) Enhance network overseas Dispatch personnel to partner banks Start transaction denominated in CNY at Shanghai Branch (Note 1) The numbers of companies represent the number of both bank's customers that expanded overseas. The number for China is the number of local subsidiaries including representative offices in Hong Kong (as of the end of September 2015) ?s Outside Asia: London Representative Office, New York Representative Office Bangkok Representative Office (FY end) 14 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
3. Fundamental Strategies (1) (iii) Provide financial services while strategically incorporating the progressing ICT Improve customer convenience and set up new financial services that contribute to communities by combining ICT, FinTech and big data Changing external environment Revolutionary changes in ICT Evolution of financial technologies Rapid spread of smartphones and Internet connections Changes in customers' behavior and social life Penetration into financial services from other industries Revision of regulatory framework including laws Initiatives in relation to FinTech business Established "Financial Technology Office" dedicated to strengthening business based on financial technologies Continue to participate in FinTech related funds / consortiums and dispatch personnel Scope of initiatives Fields of research Priority areas Omni-channel Blockchain technology Crypto currency Community money Transaction lending Assist customers in digitalization Upgraded mobile functions Next-generation branch terminals BPR(Note) Artificial Intelligence / robotics Big data Upgraded mobile functions Channels Diversified channels New products and services New payment functions Advanced management tools Selected applications Channel Banking transactions available around the clock New products and services Secured and low-priced transfer service Artificial intelligence backed asset management advisory Cardless cash withdrawal service BPR Simple and easy process using a touch panel Automatic fund management (Note) Business Process Re-engineering: Rebuilding of a business process 15 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
3. Fundamental Strategies (2) Realize group synergies as early as possible to accelerate growth - strengths of both banks and synergies from management integration Provide all kinds of services to a broad range of customers, including individuals and SMEs, by leveraging the strengths of the two banks and realizing synergies from the business integration as early as possible Strengths of the two banks Bank of Yokohama Higashi-Nippon Bank Customer base services Consulting services to retail customers, mainly high-net-worth individuals and SMEs operating primarily in Kanagawa and Tokyo Sales efforts focused on attentive face-to-face transactions and presentation of proposals to SMEs operating primarily in Tokyo Financial intermediation Stable fund raising capability supported by strong brand power Capability to actively cultivate new loans to SMEs Group company services Asset management, securities, venture capital, leasing, and think-tanks Overseas offices Shanghai Branch and overseas representative offices (in New York, London, Hong Kong, and Bangkok) Management efficiency Know-how on low-cost operations Improvement of customer services Synergies from the management integration Wide-area network covering Tokyo and 6 prefectures Dense branch network in Tokyo and Kanagawa Prefecture Providing various services to a broad range of customers, including individuals and SMEs as a result of the integration of the two banks' know-how and management infrastructure Smooth supplying of funds through enhanced financial intermediation capacity of the entire group Providing solutions to various needs of customers Providing services leveraging the think-tank functions, such as industry research and consulting Expansion of overseas business support for customers through the use of overseas network Investment into the enhancement of services to customers using funds generated from cost reduction achieved through promotion of streamlining and improvements in efficiency 16 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
3. Fundamental Strategies (2) Realize group synergies as early as possible to accelerate growth - synergetic effect Implement the initiatives for creating synergies, announced upon conclusion of the definitive agreement. Expand the transaction base by sharing and streamlining operations, systems and branches, and invest the management and human resources created through such sharing and streamlining in growth regions / segments Key initiatives planned during the period of medium-term management plan (3 years) Cost reduction Approx. JPY2.5bn Personnel transfer Approx. 150 persons Invest in growth regions / segments New openings Approx. 30 branches / offices Gross profit Up about approx. JPY10bn Initiatives to create cost synergies Plan to integrate the ERP of Higashi-Nippon Bank into that of Bank of Yokohama (MEJAR) by FY2018 Consolidate the back-office functions of market transaction departments Consolidate operations including the management of cash transfers among branches, etc. Consolidate credit guarantee companies Strengthen the functions of the holding company and simplify the corporate organizational structure in accordance with the deregulation Consolidate / transform part of branches into satellite branches (6 branches of Higashi-Nippon Bank in 3 years) Launch low-cost operations and joint procurement at Higashi-Nippon Bank Initiatives to create earnings synergies Bank of Yokohama Higashi-Nippon Bank Plan to newly open 15 branches / offices by FY2018 (open new branches, converted from existing Tachikawa branch of Higashi-Nippon Bank, in May 2016) Introduce Higashi-Nippon Bank's customers to Hamagin Tokai Tokyo Securities Expand the geographical coverage of card loan services Plan to newly open 15 branches / offices by FY2018 (April 2016: Akasaka branch, May 2016: Takadanobaba branch) (May 2016: Office within Omori and Ebisu Branches of Bank of Yokohama) Enhance corporate loans business by utilizing new branches / offices and expanding the credit limit for loans Make better use of the functions of Bank of Yokohama's Shanghai Branch and partner financial institutions overseas Launch the products of Sky Ocean Asset Management in April 2016 17 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
(Reference) Synergies Expected during Medium-term Management Plan Period 3rd year (FY2018) (Reference) 5th year (FY2020) Channel development New openings Open new branches in high-growth areas of Tokyo A total of about 15 branches (including 4 joint branches) A total of about 20 branches (including 5 joint branches) Convert existing branches into joint branches Convert existing branches primarily in Tokyo A total of about 15 sales offices A total of about 15 sales offices Personnel transfer (reassignment of sales personnel) Thorough streamlining, including the consolidation of paperwork and ERP A total of about 150 persons A total of 200 persons Loans extended (attributable to synergies(Note)) Up about JPY380.0bn Up about JPY1.0trn Earnings synergies Up about JPY7.0bn (Up about JPY10bn on a cumulative basis) Up about JPY15.0bn (Up about JPY35.0bn on a cumulative basis) Cost synergies Saving about JPY1.0bn (Saving about JPY2.5bn on a cumulative basis) Saving JPY3.0bn (Saving about JPY6.7bn on a cumulative basis) (Note) The average loan balance during the subject period attributable to synergies in FY2015 and later 18 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
3. Fundamental Strategies (2) Realize group synergies as early as possible to accelerate growth - higher sophistication of investment decisions Secure stable revenues by strengthening collaborations between the group companies and optimizing the portfolio in a timely manner based on risk/return analysis under changing external environment Stronger collaboration between the group companies Share the same strategies towards joint investments Collaborate in expert training Higher sophistication of investment decisions Enhanced ALM / Risk management Assign experts to improve investment returns Optimize positions as needed to maintain/improve returns Tap growth potential overseas by expanding investments in Asia Higher sophistication of risk management in relation to foreign currency liquidity Strengthen the monitoring of portfolio diversification / concentration, namely the proportion of higher-risk assets in the portfolio, in the current negative interest rate environment Revenues of market department(Note) (JPY bn) Approx. 30.0 28.9 32 27 2013 2014 2015 (Forecast) 2018(FY) (Note) Revenues of the market department do not include gains or losses on stocks and other securities Average balance of marketable securities (JPY bn) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2013 2014 2015 (Forecast) 2018(FY) (Plan) Approx. 620 Approx. 2,160 Diversified investment Domestic bonds 19 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
3. Fundamental Strategies (2) Realize group synergies as early as possible to accelerate growth - taking advantage of industry deregulation Shift to an organizational structure whereby the subsidiary banks can focus on their own business operations, consider establishing a new operating company and reduce the group's financing costs through mutual financing between the two banks, by proactively taking advantage of the revisions to The Banking Act and ongoing industry deregulation Expected impact of financial deregulation Expanded business scope for the holding company Business operations concentration within subsidiaries Increased IT / payment related operations in the financial group Group's vision Concordia Financial Group, Ltd. (holding company) Bank of Yokohama Risk management Audit System Market / ALM Sales Subsidiary banks focus on sales that leverage their unique strengths Affiliates Reduce financing costs for the entire group through mutual financing between the two banks Consider taking over redundant / management operations of the subsidiary banks Higashi-Nippon Bank Risk management Audit System Market / ALM Sales Affiliates Subsidiaries Investment in financial markets Existing operations New business Consider expanding into new business domains including IT Consider consolidating affiliates 20 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
3. Fundamental Strategies (3) Nurture human resources with broad expertise and promote diversity Group companies collaborate in educating personnel who can flexibly meet customers' needs and changing environment, promote diversity and provide sophisticated consulting and solutions Human resource (1) Nurture more sales personnel Nurture more sales personnel to serve high-net-worth individuals Improve consulting and evaluation skills (2) Add more experts Add personnel with expertise in new business segments such as FinTech Make use of the knowledge and know-how of temporary staff and mid-career recruits (3) Promote career development of women Proactively promote the career development of women / support their career path group-wide (Numeric targets (by the end of FY2020)) Increase the proportion of women in executive positions to 15% or more and the proportion of those in managerial and executive positions to 25% or more System (4) Build a personnel / training system that encourages challenge Build a personnel / training system that encourages challenges into new positions and support skills advancement of employees Build an environment that encourages employees' self-learning and self-development Organization culture (5) Promote work style reform Shorten total working hours and realize an optimal work-life balance through the promotion of work style reform (6) Nurture a cohesive corporate culture Build a sense of unity and share the strengths of each company through personnel exchanges, joint training and events 21 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
3. Fundamental Strategies (4) Proactively get involved in regional issues, including regional revitalization Support the implementation of comprehensive strategies by taking initiatives to attract tourists as well as serving as a coordinator between each region and the public/private sector in order to solve regional issues Ken-O expressway Support regional development projects Establish a strategic team Strengthen initiatives for urban redevelopment projects Kitanaka-dori Kita-chiku Redevelopment Project (Naka-ku, Yokohama)) Yokohama Station Kita Nishiguchi Tsuruya-chiku Development Project (Kanagawa-ku, Yokohama) Ebina Station Nishiguchi Land Readjustment Project (Ebina), etc. Initiatives for regional revitalization Promote recruitments by regional companies Develop and implement a customized support package for regional core players Enhance financial services tailored to each life stage of companies and regional characteristics Engage in urban redevelopment projects Support the initiatives for attracting companies to each region in collaboration with local governments Contribute to attracting tourists to each region Hold seminars on developing tourist destinations in each region Provide a tourist support fund in alliance with RECVIC(Note 1) Support the development of tourist destinations (DMO(Note 2) establishment) Serve as a coordinator between each region and the public / private sector (Bank of Yokohama established "Regional Revitalization Office" ) Support the projects originated in each region as a regional coordinator Assist each local government in establishing a PDCA cycle for its comprehensive strategies (Note 1) Abbreviation for Regional Economy Vitalization Corporation of Japan (Note 2) Abbreviation for Destination Management/Marketing Organization Support the revitalization of regional industries Support the development of regional industries Support the initiatives for attracting companies to each region in collaboration with local governments Investment in "Michinoeki," a regional exchange complex facility (Hitachi Ota-shi) Investment in operating companies dedicated to urban revitalization (Hitachinaka-shi), etc. 22 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
4. Group's Capital Policy Maintain a healthy capital adequacy ratio under the environment of current regulatory trend and flexibly utilize capital and implement shareholder returns to realize optimum capital efficiency Basic capital policy Flexible utilization of capital and implementation of shareholder returns to realize optimum capital efficiency Maintaining a healthy capital adequacy ratio under the environment of Basel III implementation Shareholder return policy during the Management Plan Ordinary Dividends Ensure an annual dividend of 13.00 yen per share, regardless of business results Flexible Share Buybacks Flexibly execute the share buyback program based on the market condition and business performance Special Dividends Will pay a special dividend in the case where profit attributable to owners of parent(Note) exceeds 60 billion yen Total Shareholder Return Ratio Set approximately 50% of profit attributable to owners of parent(Note) as a guide for consideration of the total annual shareholder return ratio (Note) Excluding a gain on bargain purchase Changes in equity capital (JPY bn) Common Equity Tier 1 Additional Tier 1 Tier 2 CET1 Ratio (%)(Consolidated) CET1 Ratio is forecasted to stay in the higher 11% range 1,400 1,300 1,200 1,100 1,000 900 800 700 600 13.00 12.00 11.00 10.00 9.00 8.00 7.00 Mar- 2015 (Actual) Mar- 2016 (Forecast) Mar-2019 (Plan) (FY end) 23 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
5. Financial Targets Sum of the two banks (non-consolidated) FY2014 actual Bank of Yokohama Higashi-Nippon Bank Gross operating income 236.3 204.4 31.8 Expenses(-) 123.6 100.4 23.2 Core net business profit 112.7 104.0 8.6 Credit costs (-) 3.4 0.7 2.6 Gains or losses on stocks and other securities 8.7 1.5 7.2 Net income 76.0 67.5 8.5 OHR 52.3% 49.1% 72.8% Credit costs ratio 0.03% 0.007% 0.18% Average deposit balance(Note 1) 13.3trn 11.6trn 1.7trn Average loan balance(Note 1) 11.1trn 9.6trn 1.4trn Sum of the two banks (consolidated) Net income attributable to owners of parent(Note 2) 84.8 (75.7) 76.3 (67.2) 8.5 ROE (Note 2) 8.3% (7.4%) 8.3% (7.3%) 7.8% CET1 (Common Equity Tier1) capital ratio - 12.28?H - (Note 1) Loans extended by domestic branches; deposits excluding NCD (Note 2) The amount in () excludes the gains on negative goodwill incurred; ROE is based on the net income attributable to owners of parent (JPY bn) Sum of the two banks (non-consolidated) FY2018 Plan Bank of Yokohama Higashi-Nippon Bank 253.0 217.0 31.8 133.0 108.0 23.2 120.0 109.0 8.6 10.0 8.0 2.6 6.0 4.5 7.2 80.0 74.0 8.5 APX 50.0% ( 50.0% ( 70.0% APX 0.08% APX 0.07% APX 0.11% 14.7trn 12.8trn 1.9trn 12.6trn 10.7trn 1.9trn Holding Company (consolidated) 81.0 APX 7.0% In the mid- 11.0% *On the assumption that the price stability stated by Bank of Japan is achieved 24 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
(Reference) Initiatives by Bank of Yokohama Basic policies Share know-how with Higashi-Nippon Bank to realize synergies from the management integration as early as possible Aim to become a bank serving both the communities and customers, with a focus on Kanagawa Prefecture, the major sales activity base for Bank of Yokohama Aim to realize an optimum balance between financial soundness, profitability and growth Main individual customers(Note 1) Approx. 2.50million Core corporate customers(Note 1) Approx. 12,000 Fees and commissions income ratio (consolidated) Approx. 25% RORA (consolidated)(Note 2) Approx. 1.0% (Note 1) The numbers of main individual customers and core corporate customers represent the number of customers using Bank of Yokohama as their main bank (definition by Bank of Yokohama) (Note 2) RORA (consolidated) is based on the net income attributable to the owners of the parent (Bank of Yokohama's consolidated net income) Key priority initiatives Individual customers Increase interactions with retail customers that are interested in asset forming, such as young generations, and increase the number of main individual customers Expand the customer reach for investment products and enhance asset management services Enhance consulting services for customers that are interested in asset management, including seniors, real estates owners and business owners Improve customer preference by introducing new preferential programs Corporate customers Increase the number of core corporate customers through focused approach Enhance corporate account functions and solutions services to strengthen its problem-solving capabilities for customers Serve as an information hub bridging between the customers of Bank of Yokohama and the customers of Higashi-Nippon Bank Channels Enhance face-to-face sales channel by expanding sales offices and extending operating hours Strengthen proposal offering capabilities to customers by expanding direct marketing channels 25 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
Operational Targets for Bank of Yokohama Number of main individual customers (million people) 2.60 2.50 2.40 2.30 2.20 2.30 2.35 2.43 2.50 Mar-2014 Mar-2015 Mar-2016 Mar-2019 (Plan) (FY end) Average loan balance to high-net-worth individuals (JPY bn) 2,900.0 2,700.0 2,500.0 2,300.0 2,100.0 1,900.0 1,700.0 1,500.0 1,692.9 1,818.5 1,930.0 2,650.0 2013 2014 2015 (Forecast) 2018 (Plan) (FY) Number of customers invested in investment products (10 thousand people) 40 30 20 10 0 25 25 27 37 Mar-2014 Mar-2015 Mar-2016 (Forecast) Mar-2019 (Plan) (FY end) Number of core corporate customers (companies) 13,000 12,500 12,000 11,500 11,000 10,500 10,000 11,567 11,518 11,500 12,000 Mar-2014 Mar-2015 Mar-2016 (Forecast) Mar-2019 (Plan) (FY end) New loans extended to corporate customers (JPY bn) 200.0 150.0 100.0 161.9 157.1 160.0 180.0 2013 2014 2015 (Forecast) 2018 (Plan) (FY) Number of Business Feasibility Assessments (# of Assessments) 1,000 500 0 develop support analytical tools assisting the feasibility assessment and understanding customer's potential needs 90 600 2015 (Forecast) 2018 (Plan) (FY) 26 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
(Reference) Initiatives by Higashi-Nippon Bank Basic policies Drive loans and increase earnings through the face-to-face sales activities focused on relationships with customers and the risk-taking capabilities expansion on the back of synergies from the management integration Further concentrate management resources on the areas along Japan Railway Yamanote Line to strengthen the sales platform Improve management efficiency by introducing low-cost operations of Bank of Yokohama Operational target for FY2018 Loan to deposit ratio (average) Approx. 90% Total number of corporate borrowers Approx. 21,000 Balance of SME loans Approx. 1,250 bn Balance of investment products Approx. 180 bn (Note) Excluding "apartment loans" for the total number of corporate borrowers and the balance of SME loans Key priority initiatives Corporate customers Acquire new customers and increase the total number of corporate borrowers and SME loans through commitment to sales activities focused on face-to-face interactions and proposal customization Launch business evaluation initiatives in cooperation with Bank of Yokohama to enhance support to customers with unique business models, etc. Individual customers Share Bank of Yokohama's know-how on investment products through personnel exchanges and training, to improve over-the-counter sales skills, consulting skills and asset management services Strengthen proposal-based sales and focus on "apartment loans" and consulting services in relation to asset management Channels Increase access points by opening new branches and converting Bank of Yokohama's existing branches into joint branches based on the channel development strategy Open consultation counter on weekends and holidays 27 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
Operational Targets for Higashi-Nippon Bank Deposit to loan ratio (average) 100.0% 95.0% 90.0% 85.0% 80.0% 75.0% 70.0% 82.1% 82.6% 85% 90% 2013 2014 2015 (Forecast) 2018 (Plan) (FY) Balance of SME loans (JPY bn) *Excluding the balance of "apartment loans" 1,500.0 1,000.0 500.0 0.0 811.0 899.9 980.0 1,250.0 Mar-2014 Mar-2015 Mar-2016 (Forecast) Mar-2019 (Plan) (FY end) Balance of investment products (JPY bn) 200.0 150.0 100.0 50.0 0.0 110.6 123.1 125.0 180.0 Mar-2014 Mar-2015 Mar-2016 (Forecast) Mar-2019 (Plan) (FY end) Total number of corporate borrowers (companies) *Excluding the balance of "apartment loans" 25,000 20,000 15,000 10,000 17,328 17,916 18,500 21,000 Mar-2014 Mar-2015 Mar-2016 (Forecast) Mar-2019 (Plan) (FY end) Number of new borrowers (# of contacts) *Excluding the balance of "apartment loans" 4,000 3,000 2,000 1,000 0 2,072 2,470 2,700 3,000 2013 2014 2015 (Forecast) 2018 (Plan) (FY) Number of Business Feasibility Assessments (# of Assessments) In cooperation with Bank of Yokohama, develop support analytical tools assisting the feasibility assessment and understanding customer's potential needs 0 100 2018 (Plan) (FY) 28 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
(Reference) Collaborative Initiatives Currently In Place Classification Initiatives Progress Individuals Introduction of the customers of Higashi-Nippon Bank to Hamagin Tokai Tokyo Securities with a fee charged Launched operation in October 2015 Holding of joint seminars Held seminars on tax reform primarily for business owners and high-net-worth individuals in Tokyo and Yokohama, in March and June 2015 Improvement of consulting skills to high-net-worth individuals Higashi-Nippon Bank started dispatching its corporate account representatives to Bank of Yokohama so that they can learn the know-how on providing consulting services to high-net-worth individuals Strengthened sales of investment products Higashi-Nippon Bank started dispatching its investment products sales representatives to Bank of Yokohama so that they can learn the know-how on sales of investment products Mutual preferential treatment for ATM Launch a mutual preferential fee scheme for ATM transfer/ deposit between the two banks starting in April 2016 (service already launched for withdrawal since March 2015) Corporates Joint origination of syndicate loans The two banks originated a joint syndicate loan, with Higashi-Nippon Bank joining the syndicate loan arranged by Bank of Yokohama Sharing of business opportunities, including business matching and M and A Started collaborations of operation and held joint business meetings in order to expand business opportunities by leveraging the two banks' network of customers and partners Sharing of affiliates' functions Promoting the utilization of Bank of Yokohama's affiliates (Yokohama Capital, Hamagin Research Institute and Hamagin Finance) Personnel exchanges aimed at promoting corporate sales Bank of Yokohama started dispatching its corporate account representatives to Higashi-Nippon Bank so that they can learn the know-how on corporate sales in Tokyo Holding of seminars for promoting corporate sales Jointly held seminars in relation to asset management, business succession, improvement of transactions with medical institutions, utilization of relationship with affiliates, overseas business expansion support, etc. Overseas Sharing of the functions of Bank of Yokohama's Shanghai Branch Bank of Yokohama, Hamagin Research Institute and Higashi-Nippon Bank have formed alliance with overseas business operations Provided loans to one of Higashi-Nippon Bank's local corporate customers in China through a SBLC (Standby Letter of Credit) scheme Others Personnel exchanges for promoting mutual understanding Held joint seminars for younger managers of the two banks to advance their skills and capabilities 29 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |
Concordia Financial Group This document may not be reproduced or distributed to any third party without prior written consent of The Bank of Yokohama, Ltd. This document has been prepared for information purposes only and does not form part of a solicitation to sell or purchase any securities. Information contained herein may be changed or revised without prior notice. This document may contain forward-looking statements as to future results of operations. No forward-looking statement can be guaranteed and actual results of operations may differ from those projected. 30 Concordia Financial Group, Ltd. Medium-term Management Plan Copyright 2016 Concordia Financial Group, Ltd. All Rights Reserved. |