Nanto Bank : President’s Message (754kb)

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President's Message

Realizing sustainable management in cooperation with our regional community

President (Representative Director)

Takashi Hashimoto

4 Nanto Report 2022, the integrated report of Nanto Bank

Organizational overview	Governance	Business model
and external environment

Risks and	Strategies and	Performance	Outlook
opportunities	resources allocation

Introduction

The outlook for the Japanese economy remains uncertain today at a time when supply constraints due to disruptions in the global supply chain are exacerbated by the prolonged coronavirus pandemic and rising resources costs.

In Nara prefecture, skies over the tourism industry are brightening, as students on school excursions return to visiting Nara's famous shrines and temples. I nevertheless expect it will be some time before tourism recovers to its pre-pandemic levels, when international visitors were driving the market.

With the recent rise in resources prices exerting negative impact on a wide range of industries in the region, creating new management issues for customers who have been working to improve their management structures in the severe environment of the pandemic, many fear additional downward pressure on the regional economy.

The Nanto Bank Group is not only continuing to pursue its business of supporting customers' cash flow, but it is also providing customers with optimal financial services and solutions, such as introduction of appropriate IT and expansion of their sales channels, that add corporate value and reinforce their core businesses.

At the same time, the increasing and intensifying risks posed by natural disasters associated with the appearance of new coronavirus variants and global warming, both in Japan and overseas, have brought growing recognition of the importance of initiatives for sustainability and the SDGs.

These trends are beginning to impose enormous changes on the economic activities and social lives of our customers, signaling that the roles and responsibilities our Group must fulfill will continue to grow in the future.

Our 10-year Management Plan introduced in April 2020 elucidated the Group's Mission as pursuit of regional development, fostering of vitality-creating human resources, and enhancement of profitability. Guided by this Mission, we are working to achieve the goals of the Plan within 10 years by providing value to our stakeholders.

Supported by intangible assets comprising the trust and confidence invested in us by our stakeholders, the Nanto Bank Group is contributing to regional development by providing financial services and solutions that only the Nanto Bank Group can offer. This approach is in harmony with the Group's goal of realizing sustainable management in cooperation with our regional community.

The objective of this integrated report is to convey not only the Nanto Bank Group's current business circumstances, but also the story of its growth aimed at improving corporate value, to our stakeholders fully and carefully in an easily understandable manner.

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President's Message

Raising targets even higher

(Progress in Management Plan implementation)

"Increasing Nara prefecture's GDP," which is one of the "Objectives for the Next 10 Years" established by our Management Plan introduced in April 2020, expresses our Group's determination to lead the way toward realizing regional development. We recognize this as a key performance indicator showing our Group's continued presence as a regional financial institution, and its progress toward achieving sustainable growth.

As an interim financial goal, meanwhile, we set our sights on moving our non-consolidated profits from customer service operations, which are our core business profits, into the black for the first time since April 2009. We are fully aware that our ability to continue developing flexible initiatives that contribute to sustainable growth of the region depends on stabilizing the Group's management by returning our core businesses to profitability.

Almost immediately after we introduced our new Management Plan in April 2020, the Japanese government declared a state of emergency to combat the spread of the coronavirus. A period of confusion stemming from such factors as new restrictions on face- to-face sales activities ensued, but our efforts to continue providing full customer support including cash flow services paid off. Our activities increased the number

of contact points with new customers and significantly raised our loan balance, which is a key source of income.

When it comes to payment methods, meanwhile, the role of bank tellers and ATMs is changing dramatically due to the expansion of cashless payment systems

and other factors. We have succeeded in reducing expenses steadily according to plan by reorganizing our branch network through such means as joint branch creation and administrative reform of our branch lobbies and back offices, while also conducting a comprehensive review of our headquarters operations.

As a result, Nanto Bank's non-consolidated core business profit returned to profitability in fiscal 2021, three years ahead of schedule.

(Resetting interim targets)

Although returning core business profit into the black had been a longstanding goal, this marks just the starting point in our efforts to transition from negative to positive results.

If we are to keep pace with the waves of change such as the easing of the Banking Law in our

operating environment and to continue investing proactively in new business opportunities to expand our business domain, we must further reinforce our business structure to make it more muscular.

Our new interim targets for the three years through fiscal 2024 have been set on a consolidated basis to maximize the use of our Group's resources. Our executive officers and employees throughout the Group will work as one to achieve these even higher goals.

6 Nanto Report 2022, the integrated report of Nanto Bank

Organizational overview	Governance	Business model
and external environment

Risks and	Strategies and	Performance	Outlook
opportunities	resources allocation

Realizing sustainable management in cooperation with our regional community

While more flexible responses are required to address current issues such as the prolonged coronavirus epidemic, rising resources prices, and inflationary pressures stemming from supply constraints, I believe we, the Nanto Bank Group, should take the initiative ourselves and act to improve the regional environment from a medium- to long-term perspective through efforts to resolve such structural issues facing Japanese society as global warming, a shrinking workforce, and weak economic growth.

In December 2021, our Group formulated its Basic Sustainability Policy with reference to climate

change and other global sustainability issues and to the Japanese government's SDGs Action Plan. It also identified priority materialities and specific themes to be addressed in consideration of their importance to our stakeholders and the Group as a whole.

The action plans and measures currently being implemented by the Group are based on these materialities, which we will continue to revise in a timely, appropriate manner in accordance with changes in our internal and external environments.

Basic Sustainability Policy

Sustainability is at the core of the Nanto Bank Group's Management Philosophy itself.

Guided by its Management Philosophy, the Group will continue to provide the value its stakeholders seek by offering solutions to social and environmental issues.

We will contribute to realizing sustainable regional communities, and work at the same time to achieve sustainable growth of the Group and enhance its corporate value over the medium to long term.

Responding to climate change issues that are not merely someone else's concern

Among efforts to address climate change, realization of a decarbonized society is attracting especially significant attention in Japan and abroad. The Japanese government has committed to achieving carbon neutrality by 2050.

Japan's large corporations are responding by accelerating efforts to reduce carbon emissions in their operations, and the impact of their actions is emerging as an urgent management issue for customers in the regions comprising their supply chains.

Committed to playing a leadership role in customer and regional decarbonization, we are proactively developing solutions to meet customers' needs for finance for their decarbonization activities, consulting services to facilitate their SDG implementation, and services to visualize and reduce their CO2 emissions.

(Enhancing disclosure according to the TCFD recommendations)

In our efforts to comply with the TCFD recommendations we endorsed last year, we are identifying opportunities and risks for our Group related to climate change issues. We have taken the initiative by setting a target of reducing our CO2 emissions by 50% or more from their fiscal 2013 levels by fiscal 2030.

We realize that our Group's role in responding to climate change issues will continue to expand, and that its responsibilities in this area will only become greater. Every single Group officer and employee is determined to face these issues head-on, rather than viewing them as someone else's problem.

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President's Message

Unconventional human resources creating the Nanto Bank Group's future

Our Management Plan elucidates our commitment to fostering unconventional human resources, and we are pursuing various measures to achieve this goal. We are motivated in this by the belief that human resources are among the Group's most vital management assets supporting its efforts to contribute to regional development and to achieve sustainable growth of the Group itself.

We are fortunate to have been supported since our founding by our customers and our regional community, and to be blessed with exceptional human resources. We continue to enjoy an enviably high share of the bank deposits and loans in Nara prefecture.

We realize that the definition of regional customer's trust and confidence contributing to the Nanto Bank Group's exceptional market share will change with shifts in the business environment.

In the past, when banks provided only a limited range of financial products and services, including deposits, loans, and foreign exchange, and when the widest-held expectations of banks were safety and security, we enjoyed the trust and confidence of our community simply for providing these banking services.

With online banks and cashless businesses increasing market share today by adding value through convenience, ease, and low cost, we are experiencing a strong sense of urgency stemming from the fact that our business model, founded on traditional banking products and services, will eventually reach its limits.

In this environment, I believe that one of our strengths is the information-gathering capabilities we have cultivated over many years through multiple wide-ranging contacts with customers and the regional community at large.

This information access we have established through connections with customers and the regional community in the course of our long history cannot be acquired overnight by other financial institutions or digital players.

That said, we will naturally continue to construct information-gathering systems that make full use of digital technologies to provide highly convenient financial products and services. There is some reason for concern, however, that a strategy that relies solely on digital technology will weaken our close connections with customers.

I also expect our Group to be further differentiated by our staff of unconventional human resources who are fully prepared to consult with customers about their most pressing concerns, and to work with them to resolve the issues involved.

To qualify as "unconventional," personnel require a broad perspective with experience in both banking and other fields. Our Group is creating new growth opportunities for our employees by expanding its program of external secondments, trainee dispatching, and employee exchanges among Group companies, while at the same time pursuing concerted efforts to diversify its human resources by introducing a side job system and expanding mid-career hiring.

In addition to these initiatives, Group member Nara Mirai Design, a regional revitalization company established in April 2021, engages in proactive regional development projects. These include operating the "Narawashi" e-commerce site, implementing community development projects such as old private house renovations, and conducting agricultural businesses to revitalize local agriculture. The experience and knowledge acquired by Group officers and employees in businesses outside the framework of the banking industry have been extremely useful in giving them perspectives appropriate to unconventional human resources.

8 Nanto Report 2022, the integrated report of Nanto Bank