To be your Bank of choice
Fukuoka Financial Group
Investor Meeting
May 28, 2024
Fukuoka Financial Group
Contents
Part I: Management Strategy
Overview of FY2023 Consolidated Financial Results | P5 |
Progress of the 7th Medium-Term Management Plan | P6 |
FY2024 Consolidated Earnings Projections | P7 |
FY2024 Consolidated Earnings Projections (increase/decrease factors in core | P8 |
business profit) | |
Capital Policy and Shareholder Returns | P9 |
5 Key Points for FFG's Sustainable Growth | P10 |
I. Minna Bank #1 | P11 |
I. Minna Bank #2 | P12 |
I. [Reference] Minna Bank | P13 |
II. Transformation of the Existing Business Model (DX Investment) | P14 |
II. Growth of Kyushu Economy | P15 |
III. Growth of Kyushu Economy_Toward Realization of Silicon Island Kyushu | P16 |
IV. From Savings to Investment_Asset Management Business | P17 |
V. Rising Domestic Interest Rates_Impact on Net Interest Income | P18 |
Toward Sustainable Profit Growth/ROE Improvement | P19 |
[Reference] Structured Finance/Diversified Investment | P20 |
Part II: Financial Results & Earnings Projections (Reference)
Summary of Profit & Loss (Breakdown of Banks Total) | P22 |
Top Line (Consolidated Core Business Profit) | P23 |
Bottom Line (Consolidated Net Income) | P24 |
Net Interest Income (banks total) | P25 |
Non-Interest Income (excluding gains (losses) on bonds) | P26 |
Consolidated Expenses | P27 |
Consolidated Credit Cost / NPLs Disclosed under the FRL, Reserve | P28 |
Average Balance of Loans | P29 |
Deposits, etc. (including CDs), Breakdown of Loans and Deposits & CDs by | P30-31 |
Type | |
Securities | P32 |
Minna Bank | P33 |
Part III: Topics (Reference)
SX Support for Clients, Realizing SX at FFG | P35-36 |
Financial and Economic Education | P37 |
Human Resources Strategy | P38-39 |
FY2024 Investor Meeting | Fukuoka Financial Group |
Introduction: Initiatives for Improving Corporate Value (Logic Tree)
- Initiatives for improving corporate value (overview)
Improvement of
ROE
(current profitability)
Improvement of
RORA
(optimization of risk-
return)
Sales divisions: Improve ROE by transforming the existing |
business model and strengthening structured finance |
• Effective use of capital and increase in fee income |
• Strengthen real estate, renewable energy, ships/aircraft, |
LBO, etc. |
• Strengthen solutions business and consulting business |
through goal-based sales |
Market ALM divisions: Optimization of risk-free assets and |
risk-weighted assets |
Today's presentation | |
P14 | Transformation of the |
Existing Business Model | |
P15-16 | Growth of Kyushu Economy |
P17 | Asset Management Business |
P18 | Rising Domestic Interest |
Improvement of corporate value (PBR improvement)
Realization of expectations | New expectations |
Financial leverage
control
• Optimize allocation to domestic and foreign risk assets and |
control interest rate risk by diversifying revenue sources |
Manage capital in a way that balances growth investments |
with shareholder returns |
• Implement share buybacks flexibly, targeting a capital |
adequacy ratio of about 10% |
Improve expected future earnings by taking on the challenge |
Rates | |
P20 | Structured |
Finance/Diversified | |
Investment | |
P9 | Capital Policy and |
Shareholder Returns |
Improvement of
growth rate
(expected future
earnings)
Improvement of
PER
Growth strategy
Human
resources
strategy
of new businesses |
• Achieve returns in new businesses in excess of the cost of |
shareholders' equity |
• Generate new profit and expand customer base through |
Minna Bank, etc. |
Realize sustainability management at FFG |
• Sustainable growth through the provision of social value |
and the improvement of economic value |
• Regional revitalization that only FFG can realize |
• Human resources strategy integrated with the growth |
strategy |
Enhance disclosure of information, including non-financial |
information |
• Improve understanding of the business strategy and growth |
P11-13 | Minna Bank |
P18 | Rising Domestic Interest |
Rates | |
P19 | Toward Sustainable Profit |
Growth/ROE Improvement | |
[Non-financial information] | |
P35 | SX Support for Clients |
Reduced cost of | Reduction of risk | |
shareholders' | factors | |
equity | (from an investor | |
perspective) | ||
strategy |
Proactive communication with investors |
• Improve understanding of the business strategy and growth |
strategy |
P36 | Realizing SX at FFG |
P37 | Financial and Economic |
Education | |
P38-39 | Human Resources Strategy |
3
To be your Bank of choice
Fukuoka Financial Group
Part I: Management Strategy
FY2024 Investor Meeting | Fukuoka Financial Group |
Overview of FY2023 Consolidated Financial Results
[Summary of financial results for FY2023]
FFG Consolidated
FY2023 | (excluding non- | FY2022 | |
(Unit: ¥ bil.) | YoY chg. | consolidated impact of | |
Fukuoka Chuo Bank) |
Core gross business profit | 250.7 | +16.6 | (+12.8) | 234.0 | |||||
4 banks total *1 | 231.6 | +15.1 | (+11.3) | 216.5 | |||||
Interest on deposits and loans (domestic) | 146.2 | +6.4 | (+3.3) | 139.8 | |||||
Loans | 146.6 | (1) | +6.4 | (+3.3) | 140.1 | ||||
Deposits | -0.4 | -0.0 | (+0.0) | -0.3 | |||||
Interest on securities, etc. | 56.5 | (2) | +9.9 | (+9.4) | 46.6 | ||||
Non-interest income *2 | 28.9 | -1.2 | (-1.4) | 30.1 | |||||
Net fees and commissions | 29.0 | (3) | +3.5 | (+3.3) | 25.5 | ||||
Consolidation adjustment, subsidiaries, etc.*2 | 19.1 | +1.5 | (+1.5) | 17.6 | |||||
Overhead expenses | -150.2 | (4) | -9.6 | (-6.6) | -140.6 |
Financial highlights (FFG consolidated)
- Consolidated core business profit increased by ¥7.0 billion due to strong performance of core business
- Achieved net income as planned after implementing measures to secure future earnings and control risks (+¥3.5 billion year-on-year excluding special factors)
[Increase/decrease factors in consolidated core business profit]
- Interest income on loans increased due in part to accumulation of loans to SMEs
- Interest on securities, etc. increased due in part to the effect of measures capitalizing on the rise in medium- and long-term interest rates
- Net fees and commissions increased due to higher asset management revenue, capitalizing on the growing momentum for shift "from savings to investment"
- Overhead expenses increased due to DX-related investment, campaigns promoting banking apps and NISA, etc.
Core business profit | 100.4 | +7.0 | (+6.2) | 93.4 | ||||
(excluding loss (gain) on cancellation of | 103.3 | +7.8 | (+7.1) | 95.4 | ||||
investment trusts) | ||||||||
Ordinary profit | 56.9 | +6.9 | (+9.3) | 50.1 | ||||
Extraordinary profit (loss) | 20.6 | +25.4 | (+25.4) | -4.8 | ||||
Gain on negative goodwill | 21.5 | +21.5 | (+21.5) | - | ||||
Consolidated net income | 61.2 | +30.0 | (+31.5) | 31.2 | ||||
Special factors (after-tax) | 0.5 | +26.6 | -26.1 | |||||
FY2023 special factors | 0.5 | +0.5 | - | |||||
FY2022 special factors | - | +26.1 | -26.1 | |||||
Consolidated net income (excluding special | 60.7 | +3.5 | 57.3 | |||||
factors) | ||||||||
Special factors (FY2023, FY2022)
FY2023 | FY2022 | |||||
(Unit: ¥ bil.) | ||||||
Before | After | Before | After | |||
tax | tax | tax | tax | |||
Special factors, total | -8.4 | 0.5 | -37.5 | -26.1 | ||
Gain on negative goodwill | 21.5 | 21.5 | - | - | ||
Loss-cutting in bonds*1 | -19.1 | -13.4 | -37.5 | -26.1 | ||
Credit cost (existing 3 banks, Fukugin | -9.4 | -6.6 | - | - | ||
Guarantee) | ||||||
Fukuoka Chuo Bank | -2.2 | -1.5 | - | - | ||
Unification of FFG standards on | -1.9 | -1.3 | - | - | ||
credit cost | ||||||
Integration-related expenses | -0.3 | -0.2 | - | - | ||
Fukuoka Chuo Bank 2H profit*2 | 0.9 | 0.5 | - | - |
Loss-cutting in foreign bonds: +¥10 billion/year Loss-cutting in domestic bonds: +¥1 billion/year
Revised reserve standards in preparation for future increase in credit cost
*1. Realized losses on foreign bonds in FY2022 and on domestic bonds in FY2023 (existing 3 banks)
*2. Contribution after consolidation adjustment
*1. Bank of Fukuoka, Kumamoto Bank, Juhachi-Shinwa Bank and Fukuoka Chuo Bank (from 2H of FY2023) | *2. After CVA offset on intragroup transactions | 5 |
FY2024 Investor Meeting | Fukuoka Financial Group |
Progress of the 7th Medium-Term Management Plan
- While steady progress is being made in "transformation of the existing business model" and sales divisions are performing well, the challenge for Minna Bank is profitability
- Nevertheless, we plan to achieve all target management indicators in the 7th Medium-Term Management Plan, including ROE, net income, balance of loans to SMEs
[Progress and evaluation of key measures] | [7th MTMP target management indicators] |
Priority initiative | Progress/outcomes through FY2023 | |
Transformation of the | • Steady progress is being made in measures, and synergies | |
existing business model | are gradually materializing. Sales divisions performed well. | |
Utilization of digital | • Released banking app for retail customers, portal site for | |
corporate customers, and SFA. Number of users | ||
technologies | ||
increased | ||
Business reforms | • Progress made in shifting transactions to digital channels | |
• Developed new branch format | ||
• Goal-based marketing approach spread across all | ||
Sales reforms | companies | |
• Reviewed sales system (area/unit system) | ||
Strengthening | • Expanded solutions function of each company | |
• Strengthened collaboration between headquarters, | ||
strategic subsidiaries | ||
branches, and strategic subsidiaries | ||
• Number of accounts reached 960,000, balance of loans | ||
Minna Bank | reached ¥11.8 billion, and BaaS partners increased to 10. | |
On the other hand, profitability is an issue. | ||
• Commenced new businesses, including FFG Industries | ||
Other new businesses, etc. | (trading company focused on metalworking products) and | |
venture debt | ||
Business integration with | • Unification of management philosophy and governance | |
• Strengthened collaboration framework with Bank of | ||
Fukuoka Chuo Bank | ||
Fukuoka | ||
ROE
Mid 6% | Expected to | |||
5.7% | 6.4% | achieve target | ||
3.4% | ||||
Approx. 6% | ||||
FY21 | FY22 | FY23 | FY24 | |
Capital adequacy ratio | ||||
10.2% | Approx. 10% | Expected to | ||
9.6% | 9.7% | achieve target | ||
Approx. 10% | ||||
22/3 | 23/3 | 24/3 | 25/3 | |
Consolidated OHR (%) | ||||
64.6% | 72.6% | 65.6% | Expected to | |
Approx. 60% achieve target | ||||
Approx. 60% | ||||
FY21 | FY22 | FY23 | FY24 |
Net income (¥ bil.)
61.2 | 68.5 | Expected to | |||||||
54.1 | |||||||||
achieve target | |||||||||
31.1 | |||||||||
¥65 billion | |||||||||
FY21 | FY22 | FY23 | FY24 | ||||||
Loans to SMEs (¥ bil.) | |||||||||
6,612. | 7,089. | 7,286. | Expected to | ||||||
6,391. | 0 | 1 | |||||||
2 | achieve target | ||||||||
3 | |||||||||
¥6,885.1 billion | |||||||||
FY21 | FY22 | FY23 | FY24 | ||||||
Balance of investment trusts (¥ bil.) | |||||||||
1,036. | 1,215. | ||||||||
685.8 | 773.2 | 2 | 8 | Expected to | |||||
achieve target | |||||||||
¥1,200 billion | |||||||||
22/3 | 23/3 | 24/3 | 25/3 |
6
FY2024 Investor Meeting | Fukuoka Financial Group |
FY2024 Consolidated Earnings Projections
[Summary of earnings projections for FY2024] | Increase/decrease factors in earnings projections (FFG consolidated) |
FFG consolidated | FY2024 | ||||||||||||
(excluding non- | |||||||||||||
projected | |||||||||||||
(Unit: ¥ bil.) | YoY chg. | consolidated impact of | |||||||||||
Fukuoka Chuo Bank) | |||||||||||||
Core gross business profit | 261.2 | +10.5 | (+6.7) | ||||||||||
4 banks total *1 | 241.8 | +10.2 | (+6.4) | ||||||||||
Interest on deposits and loans (domestic) | 150.0 | (1) | +3.8 | (+0.6) | |||||||||
Loans | 154.1 | +7.5 | (+4.2) | ||||||||||
Deposits | -4.1 | -3.7 | (-3.6) | ||||||||||
Interest on securities, etc. | 62.9 | (2) | +6.4 | (+5.8) | |||||||||
Non-interest income | *2 | 29.0 | +0.1 | (-0.0) | |||||||||
Net fees and commissions | 29.3 | +0.3 | (+0.2) | ||||||||||
Consolidation adjustment, subsidiaries, etc. *2 | 19.3 | +0.3 | (+0.3) | ||||||||||
Overhead expenses | -159.2 | (3) | -9.0 | (-5.6) | |||||||||
Core business profit | 102.0 | +1.6 | (+1.1) | ||||||||||
(excluding loss (gain) on cancellation of | 104.0 | +0.7 | (+0.3) | ||||||||||
investment trusts) | |||||||||||||
Credit cost | -11.9 | (4) | +12.3 | (+10.5) | |||||||||
Gains (losses) on securities | 8.0 | +25.3 | (+24.3) | ||||||||||
After | |||||||||||||
Ordinary profit | 99.5 | +42.6 | (+39.2) | ||||||||||
tax, | |||||||||||||
Extraordinary profit (loss) | -0.2 | approx. | -20.7 | (-20.7) | |||||||||
+5.0 | |||||||||||||
Gain on negative goodwill | - | (5) | -21.5 | (-21.5) | |||||||||
Consolidated net income | [MTMP: ¥65 billion] | 68.5 | +7.3 | (+5.1) | |||||||||
FY2023 |
250.7
231.6
146.2
146.6 -0.4
56.5
28.9
29.0
19.1
-150.2
100.4
103.3
-24.2
-17.3
56.9
20.6
21.5
61.2
- Consolidated net income is projected to increase by ¥7.3 billion year- on-year and by ¥3.5 billion compared to MTMP
[Increase/decrease factors in consolidated core business profit]
- Funding costs will increase due to rising deposit interest rates, but interest on deposits and loans will increase year-on-year due to buildup of the balance of loans and higher interest rates
- Interest on securities will increase year-on-year in both domestic and international divisions, due to investment in short- and medium-term domestic bonds and lower dollar funding costs resulting from lower U.S. interest rates
- Overhead expenses will increase year-on-year due in part to an increase in base pay and system investment in relation to DX
[Other increase/decrease factors]
- Profit will improve due to a turnaround from the special factors in FY2022, namely, the impacts of the increase in credit cost and loss-cutting in domestic bonds
- Turnaround from the gain on negative goodwill associated with the business integration with Fukuoka Chuo Bank
[Increase/decrease factors from the initial MTMP]
Sales | Net interest income will swing upward due to the buildup of |
loans and higher interest rates | |
divisions | |
Non-interest income is in line with the initial plan | |
Market, ALM | Swing upward in part due to fund transactions capitalizing on |
the rise in medium- and long-term interest rates | |
Consolidated | Swing downward in part due to an increase in base pay an |
expenses | increase in DX investment |
Minna Bank | Swing downward in part due to lagging buildup of loans balance |
*1. Bank of Fukuoka, Kumamoto Bank, Juhachi-Shinwa Bank and Fukuoka Chuo Bank (from 2H of FY2023) *2. After CVA offset on intragroup transactions | 7 |
FY2024 Investor Meeting | Fukuoka Financial Group |
FY2024 Consolidated Earnings Projections (increase/decrease factors in core business profit)
In the 7th MTMP, we will raise profits while maintaining growth investments | ➡ In FY2024, we will capitalize on past investment effects and the |
- We will promote sustainable profit growthby strengthening core businesses | benefits of rising yen interest rates |
consolidated core business profit | during the 7th MTMP |
Change in |
+¥1.6 billion | |||||||||
Existing areas: +¥1.5 billion | New areas: | ||||||||
(Monetary unit: ¥ bil.) | (including deposits) | +¥0.1 billion | |||||||
+¥7.0 billion | Existing areas: +¥5.6 billion | ||||||||
New areas: | +0.7 | ||||||||||||||||||||
Existing areas: +¥6.9 billion | -4.1 | ||||||||||||||||||||
934 | +¥0.1 billion | +4.6 | Other(international | ||||||||||||||||||
Consolidated expenses (excludingMinnaBank, FukuokaChuoBank) | deposit interestrates | Raisingof | |||||||||||||||||||
+9.6 | division,etc.) | ||||||||||||||||||||
+6.2 | -4.9 | existing business model) | Sales buildup (transformation of the | -3.6 | |||||||||||||||||
division, etc . | International | interest rates | Related to yen | interest rates, etc . | Impact of lifting negative | (core) | Minna Bank | Impact of Fukuoka Chuo Bank integration (core) | |||||||||||||
+0.8 | +3.9 | -0.3 | +0.4 | ||||||||||||||||||
Consolidated expenses (excludingMinnaBank, FukuokaChuo Bank) | -0.7 | ||||||||||||||||||||
93.4 | Sales buildup | Minna Bank(core) | Chuo Bank integration(core) | Impact ofFukuoka | 100.4 | • Increase in base pay -1.5 | |||||||||||||||
-4.0 | • | Growth investments, etc. -2.6 | |||||||||||||||||||
⁃ DX/new businesses, etc. -1.0 | |||||||||||||||||||||
⁃ Business reforms, etc. -0.5 | |||||||||||||||||||||
• Loans V: +3.3 | |||||||||||||||||||||
• Investment | |||||||||||||||||||||
trusts/insura | |||||||||||||||||||||
nce: +2.6 | • Growth investments, etc. -4.0 | ||||||||||||||||||||
… | • Loans V: +3.5 | ||||||||||||||||||||
⁃ | DX/new businesses, etc. -2.9 | ||||||||||||||||||||
⁃ | Business reforms, etc. -0.3 | • Investment trusts/insurance +0.6 | |||||||||||||||||||
• Increase in base pay -0.9 | … | ||||||||||||||||||||
FY2022 | FY2023 | ||||||||||||||||||||
results | results |
102.0
FY2024
projected
8
FY2024 Investor Meeting | Fukuoka Financial Group |
Capital Policy and Shareholder Returns
- Our basic policy is to manage capital in a way that balances shareholder returns with growth investments based on the premise of maintaining soundness.
- Shareholder returns are based on maintaining/increasing dividends. In FY2024, we plan to increase dividends by ¥15 year-on-year (+¥5 compared to MTMP) based on profit growth.
Overview of capital policy, Projected capital adequacy ratio
Shareholder returns
Basic | | While maintaining soundness, we aim to manage capital in a way that |
policy | balances shareholder returns and investment in growth for the | |
development of the local economy and the enhancement of FFG's | ||
corporate value. | ||
| Stable (maintain or increase) dividend payment based on profit |
FY2024 dividend
DPS: ¥130 [Dividend payout ratio 35.9%]
(+¥15 year on year) (+¥5 compared to MTMP)
Consolidated net income
- Increase dividend payment based on profit growth
- Revise dividend table
DPS guideline | Dividend payout ratio |
Shareholder returns | growth, and flexible share buybacks |
⁃ Dividend payout ratio: About 35% | |
⁃ Share buybacks: We will consider flexibly executing share buybacks | |
after comprehensively considering business performance trends, | |
capital conditions, growth investment opportunities, market | |
environment, etc. |
Dividend
table
(excerpt)
FY2024 projected
FY2024
MTMP
FY2023 results
¥67.5 billion or more New | ¥130 | Up to 36.4% |
¥65.0-67.4 billion | ¥125 | 35.0-36.4% |
¥62.5-64.9 billion | ¥120 | 34.9-36.3% |
¥60.0-62.4 billion | ¥115 | 34.8-36.2% |
11.5% 11.5%
[Reference] Capital management perspective
Capital | ||||||||
Priority adequacy ratio | Perspective | |||||||
⁃ Additional growth | ||||||||
Shareholder |
[Dividend amount per share] | Projected | [Capital allocation] | |
| Stable dividend payment | 130 | (Image) |
115 | |||
Transitional
measures
9.6% 9.7%
Fully
applied
Basel III finalization basis
Approx. 10%
returns | investments | ||
Growth | ⁃ Additional shareholder | ||
investments | returns | ||
Target level | ⁃ | Growth investments | |
Approx. 10% | ⁃ | Flexible share | |
buybacks | |||
⁃ | Capital accumulation | ||
Soundness | |||
Required level | ⁃ | RA control | |
60 65 65 | 75 | 85 85 85 95105 | RA | Approx | |||||||||||||
buildup | |||||||||||||||||
Shareholder returns | |||||||||||||||||
9.7% | . 10% | ||||||||||||||||
35 40 | Profit | Growth investments | |||||||||||||||
Mar. 2025 | |||||||||||||||||
07 10 13 15 16 17 18 19 20 21 22 23 24 Mar. 2024 |
Mar23/3. 末 Mar24/3. 末 Mar25/3. 末
2023 2024 2025
*Basel III finalization basis |
9
FY2024 Investor Meeting | Fukuoka Financial Group |
5 Key Points for FFG's Sustainable Growth
- Making Minna Bank Profitable
- Transformation of the Existing Business Model
- Growth of Kyushu Economy
- From Savings to Investment
- Rising Domestic Interest Rates
10
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Fukuoka Financial Group Inc. published this content on 19 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 June 2024 07:39:04 UTC.