Nanto Bank : Progress under the Management Plan (363kb)

6.9

(Billions of yen)

Trends in credit-relatedexpenses (non-consolidated)

Trends in profit from customer services (consolidated)

Interim targets and achievements

Target Image

Progress under the Management Plan

Progress under the Management Plan

Management Plan overview

In December 2019, the Nanto Bank Group announced its Nanto Mission and Nanto Goals to be achieved in 10 years.

The Nanto Mission involves three objectives: "regional

development," "creation of human resources for vitality creation,"
	2019/3 Actual	2020/3 Actual	2021/3 Actual	2022/3 Actual	2024/3 Target
and "improvement of profitability," while the Nanto Goals are to
Profit from customer	(3.8) billion yen	(4.4) billion yen	(0.9) billion yen	0.6 billion yen	Return to
"increase Nara prefecture's GDP by 350 billion yen," "nurture 350
services
decrease	decrease	decrease	increase	profitability
management personnel," and "increase ROA to 0.35% or above."		(non-consolidated)
The Group has also identified the following indicators as interim		OHR (non-consolidated)	85.7%	85.0%	71.7%	67.8%	Below 70%
targets for realization by 2024: profitability of its non-consolidated	ROA (non-consolidated)	0.11%	0.12%	0.25%	0.25%	Over 0.25%
customer services businesses, an OHR of under 70%, an ROA	Number of qualified	-	422	458	553	1,000
of over 0.25%, and 1,000 personnel with qualifications related to		employees
vitality creation.

Early return to profitability of core business and revised interim targets

As a result of its support for thorough cash management and cost and		Revised interim targets
resources optimization during the coronavirus pandemic years, the Bank
		FY2021 results	Interim target
achieved a long-sought accomplishment, a return to profitability in its non-			(FY2024)
consolidated customer services businesses, where it recorded an increase of	Profit from customer services (consolidated)	1.8 billion yen	3 billion yen
0.6 billion yen in fiscal 2021 compared to a loss of 4.4 billion yen in the year	OHR (consolidated)	68.1%	Below 70%
immediately preceding implementation of the Management Plan.
	ROE (consolidated)	4.09%	Above 4.0%
In light of these developments, we formulated new interim targets for
	ROA (non-consolidated)	0.25%	0.25% or above
fiscal 2024 in December 2021. Aimed at further strengthening the Group's
capabilities, these new targets call for achieving consolidated profit from	Number of employees with	553	1,000
qualifications related to vitality creation
customer services of 3 billion yen, a consolidated OHR of under 70%, and a
consolidated ROE of 4.5 billion yen, with ROE registering above 4.0% on a consolidated basis.

Fiscal 2021 results and outlook for fiscal 2022

Profit from customer services

As income in 2021, although the yield on loans declined, interest on loans and bills discounted increased							(Billions of yen)
				1.8	2.7
by 0.3 billion yen from the previous year to 32.3 billion yen due to an increase in the average loan balance
				Planned
as a result of thorough support for financing during the coronavirus pandemic, while net fees and			0.3
commissions decreased by 0.3 billion yen from the previous year to 6.4 billion yen.
In the payments category, meanwhile, personnel expenses decreased by 0.9 billion yen from the
previous fiscal year due to planned reductions of the number of employees and overtime work hours,
	-3.2
while property expenses decreased by 0.5 billion yen from the year before due to lower branch office
2018	2019	2020	2021	2022(Fiscal year)

maintenance expenses resulting from a reorganization of the branch network and limitations on the Bank's activities stemming from the coronavirus pandemic.

As a result of these reductions, the Bank's non-consolidated net profit from customer services increased by 1.6 billion yen from the previous fiscal year to 0.6 billion yen, raising it into the black for the first time in 13 years.

Profit from consolidated customer services increased as well, climbing by 1.4 billion yen from the previous fiscal year to 1.8 billion yen as a result of the increased profit from non-consolidated customer services.

Looking to fiscal 2022, we plan to raise our interest on loans by 0.2 billion yen from the year before to 32.5 billion yen by increasing the balance of loans outstanding, primarily in the retail sector, despite expected continuing downward pressure on yields from loans to individuals, especially housing loans. We anticipate fees and commissions of 6.7 billion yen, a year-on-year increase of 0.2 billion yen, due to higher income from our corporate solutions business alliances and M&A.

In the payments category, meanwhile, we are planning for a 200 million yen decrease in personnel expenses in response to further reductions in our employee rolls, and almost unchanged property expenses due to planned strategic IT investments to improve customer convenience and Group productivity.

As a result of these and other factors, the Bank anticipates non-consolidated profit from customer services of 1.0 billion yen in fiscal 2022, an increase of 0.3 billion yen from the previous year.

On a consolidated basis, the Group expects to record a year-on-year increase of 0.5 billion yen through enhanced collaboration with Nanto Bank, with a resulting increase in profit from consolidated customer services of 2.7 billion yen, an increase of 0.9 billion

yen from the year before.

Credit-related expenses

Public/private sector support for cash management during the coronavirus pandemic helped to maintain the number of bankruptcies in Nara prefecture last year at its lowest level since the Great Recession. Nanto Bank also saw credit-related expenses decrease by 0.9 billion yen from the previous fiscal year to 2.0 billion yen in fiscal 2021 due to a limited occurrence of non-performing loans resulting from our successful efforts to support our core businesses, including pursuit of in-depth comprehension of customers'

		2.9	2.0	2.0
1.4
				Planned
2018	2019	2020	2021	2022(Fiscal year)

10 Nanto Report 2022, the integrated report of Nanto Bank

Business model	Strategies and	Performance	Outlook
	resources allocation

businesses and business matching.

The Bank's NPL balance was 53.3 billion yen at fiscal 2021 year-end, an upturn of 1.2 billion yen from the end of the previous fiscal year, while the NPL ratio was unchanged from the year before at 1.35%.

Although we plan to continue providing support for cash management of 2.0 billion yen in fiscal 2022, the same level as in the previous year, we will be paying particularly close attention to our customers' business conditions. This added scrutiny stems from our awareness of the unpredictability of our operating environment in the shadow of the prolonged pandemic, the yen's depreciation, rising resources prices, geopolitical risks, and other factors.

Market sector revenue

Market sector revenue fell by 200 million yen from the previous year to 17.3 billion yen in fiscal 2021 due to a weakening of interest on securities in response to the soft market at the end of the fiscal year. These numbers include income of 17.0 billion yen and capital income of 0.3 billion yen.

In fiscal 2022, we expect market segment income to decrease by 1.3 billion yen from the previous year to 16.0 billion yen due to higher foreign currency funding costs and flexible portfolio rebalancing undertaken to prepare for rising interest rates in response to the prospect of a gradual increase in interest rates in the United States.

Trends in non-performing loans outstanding and the NPL ratio

1.57%	1.47%		(Billions of yen)
1.35%	1.35%
54.1	51.8	52.0	53.3
2018	2019	2020	2021(Fiscal year)

Market sector revenue trends

(Billions of yen)

14.7	18.2	17.5	17.3	16.0
				Planned
2018	2019	2020	2021	2022(Fiscal year)

Net Income

Consolidated net income for fiscal 2021 increased by 1.0 billion yen from the previous year to 11.8 billion yen, a result attributable to improvement of the Bank's non-consolidated net income from customer services and decreased credit-related expenses. Although the Bank plans to improve its profit from customer services further in fiscal 2022, consolidated net income is projected to decrease by 0.8 billion yen from the previous year to 11.0 billion yen due to an expected weakening of market segment profit in the face of higher interest rates in the United States and Europe.

Trends in net income

(Billions of yen)

11.1		10.8	11.8	11.0
	3.1			Planned
2018	2019	2020	2021	2022 (Fiscal year)

Capital policy

Basic policy

In addition to ensuring the Group's financial soundness, we aim to raise its medium-tolong-term corporate value by making returns commensurate with the cost of shareholders' equity through strategic investments expected to achieve sustainable growth and stable, flexible returns to shareholders.

Capital adequacy ratio

The Nanto Bank Group's capital adequacy ratio improved by 0.13% point from the year before to 9.60% on a consolidated basis and by 0.14% to 9.29% on a non-consolidated basis owing to an increase in equity capital resulting from higher profits and despite an increase in risk- weighted assets.

We will continue our efforts to maintain an appropriate capital adequacy ratio and to manage capital efficiently.

Policy on returns to shareholders

In the past, our policy on returns to shareholders called for maintaining stable dividends. In conjunction with the reestablishment of our interim targets last December, we have changed our target dividend payout ratio to 30% of net income attributable to shareholders of the parent company, while maintaining the existing stable dividend of 80 yen per share. As a result, the annual dividend per share for fiscal 2021 was 110 yen.

Looking to fiscal 2022, we predict a dividend per share of 102 yen due to expectations of lower profit resulting from weaker market sector earnings.

Cross-shareholding

Cross-shareholding is conducted when it is determined necessary as a business strategy that contributes to attainment of sustainable growth and maintenance/enhancement of the value of the corporation issuing the stocks and the Nanto Bank Group.

The ratio of the balance of cross-shareholdings to consolidated net assets on a market value basis declined from 38.3% as of end March 2015 to 26.0% as of end March 2022. The Bank will seek to reduce this ratio to about 20% by the end of March 2025 through continued promotion of capital efficiency-conscious management.

Trends in the capital adequacy ratio (consolidated and non-consolidated)

9.88			(%)
9.75	9.47	9.60
	9.39
9.64	9.40		9.29
	9.15
	9.06

2017

2018

2019

2020

2021(Fiscal year)

Consolidated Non-consolidated

Trends in dividends and the consolidated dividend payout ratio

				(Yen)
23.3%	81.7%	24.0%	30.1%	30.2%
		110
			102
80	80	80
				Forecast
2018	2019	2020	2021	2022 (Fiscal year)

Dividend per share		Consolidated dividend payout ratio

Trends in the market value of cross-shareholdings and the ratio of cross-shareholdings to net assets

		26.5%		26.0%		(Billions of yen)
				Approx. 20
		77.9		74.7
							Target
		2020		2021		2024 (Fiscal year)
		Balance of policy				Percentage of net assets
		stock holdings (market value)		(consolidated)

Nanto Report 2022, the integrated report of Nanto Bank 11