Bank of the Ryukyus Management Briefing for FY2013...Budget amount ・￥82.6 Billion ・¥93.2...

Thoughts of a Mother TurtleBy Chie TenganWinner of the 22nd (fiscal 2013) Bingata Design Contest presented by the Bank of the Ryukyus

Bank of the RyukyusManagement Briefing for FY2013

11

The Financial and Economic Environment of Okinawa Prefecture

22

■Overview of Okinawa Prefecture

(Source: Okinawa Prefecture)

Natural Environment

AreaApproximately 2,276 km2 (around 0.6% of Japan’s total land area, the smallest proportion after Kagawa, Osaka, and Tokyo; 18.4% of Okinawa’s main island is used as a U.S. military base)

Geographical features Comprised of 160 small and large islands (49 of which are inhabited)

ClimateAverage annual temperature 22.7ºC; average annual rainfall surpasses the national average by around 26%

Population

Population Approximately 1,420,000 (estimate as of March 2014)

Households Approximately 550,000 (estimate as of March 2014)

Total fertility rate 1.79 persons (highest in Japan as of 2009)

Ratio of juvenile population

17.89% (highest in Japan as of 2010)

Population growth rate 0.60% (highest in Japan as of 2010)

IndustryNumber of

tourists each year6,410,000 (2013)

Gross production by industry

Primary: 2.0%; secondary: 12.4%; tertiary: 85.5% (fiscal 2010)

Forecast rate of economic growth

1.07% (highest in Japan: 2007-2020 forecast rate of real economic growth (Japan Center for Economic Research))

Okinawa

Within a four-hour traveling distance by air

(Source: ALL NIPPON AIRWAYS CO., LTD)

-60

-50

-40

-30

-20

-10

0

10

20

30

40

Feb-1992 Feb-1993 Feb-1994 Feb-1995 Feb-1996 Mar-1997 Mar-1998 Mar-1999 Mar-2000 Mar-2001 Mar-2002 Mar-2003 Mar-2004 Mar-2005 Mar-2006 Mar-2007 Mar-2008 Mar-2009 Mar-2010 Mar-2011 Mar-2012 Mar-2013Mar-2014

（ Business condition diffusion index: Strong-Week） Bank of Japan Tankan

Japan Okinawa

33

■Economic Trends (Bank of Japan Tankan)Business confidence at a high level for the first time in 22 years

＋28

＋12

＋22

44

■Trends in Land PricesUpward trend in prices within the Prefecture for both commercial- and residential-use land

Commercial-use land (YoY)

-12.00%

-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Jan-1991 Jan-1994 Jan-1997 Jan-2000 Jan-2003 Jan-2006 Jan-2009 Jan-2012

Japan Okinawa

＋0.5％

-0.5％

Residential-use land (YoY)

-12.00%

-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Jan-2009 Jan-2012

Japan Okinawa

＋0.1％

-0.6％

(Source: Land prices published by Japan’s Ministry of Land, Infrastructure, Transport and Tourism)

55

■Employment Conditions

Trends in the overall unemployment rate

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

1991 1992 1993 1994 1995 1996 1997 1998 19999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Japan Okinawa

5.7％

4.0％

Improvement in employment conditions with a year-on-year decline in the unemployment rate of 1.1 percentage points

(Source: Labor force survey by Japan’s Ministry of Internal Affairs and Communications)

(Annual average)

66

■Projected Population

Projected Population

100.0 101.0

100.0

103.5

106.9109.4

110.7 111.3 111.0 110.3 109.2107.5

101.7 101.9 100.898.8

92.8

89.2

85.4

96.0

65

75

85

95

105

115

1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Japan Okinawa

（1995＝100）

(Source: Prepared from census figures provided by Japan’s Ministry of Internal Affairs and Communications through to 2010 as well as estimates for 2015 and beyond provided by the National Institute of Population and Social Security Research)

Okinawa Prefecture’s population is projected to increase for the foreseeable future

Peak

10 Years

77

■Estimates of the Number of Households

Estimates of the Number of Households

100.0

106.5100.0

110.3

120.8

128.9

135.1139.6

143.0145.5

111.7114.5 115.2 114.8

111.1113.5

65

75

85

95

105

115

125

135

145

1995 2000 2005 2010 2015 2020 2025 2030

Japan Okinawa（1995＝100）

(Source: Prepared from estimates as of March 2014 prov ided by the National Institute of Population and Social Security Research)

Continued increase in the number of households

Peak

88

■Tourism

Trends in the Number of Inbound Tourists andRevenues from Tourism

407.0390.4

436.4

373.4390.5

6,046

5,4155,650

5,855 5,835

6,413

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2008 2009 2010 2011 2012 2013

(Thousands)

0

100

200

300

400

500

600

(Billions of Yen)

Revenues from tourism (Right scale)Number of inbound tourists (Left scale)

Record number of inbound tourists resulting from a variety of factors including the impact of LCCs and new Ishigaki Airport

◆LCCs commence services across 15 routes

●Peach Aviation (7)Naha⇔Taipei (2), Naha⇔Kansai (3), Naha⇔Ishigaki (1), Ishigaki⇔Kansai (1)

●Jetstar (5)Naha⇔Narita (4), Naha⇔Kansai (1)

●Vanilla Air (3)Naha⇔Narita (3)

* Number in parentheses represent the number or return flights in one day

◆Naha Airport International terminal operations commenced in February 2014

（Source: Statistical overview of the number of tourists entering Okinawa Prefecture）

◆Painushima Ishigaki Airport opened in March 2013

(Source: ISHIGAKI AIR TERMINAL CO., LTD.

(Source: NAHA AIRPORT BUILDING CO., LTD.）

99

■Monthly Trends in Inbound Tourism

Monthly Trends in Inbound Tourism

-25%

-15%

-5%

5%

15%

25%

EndJan2011

EndJan2012

EndJan2013

EndJan2014

(YoY)

Continuous year-on-year increase for 19 consecutive months

(Source: Statistical overview of the number of tourists entering Okinawa Prefecture）

＋9.5％

◆Naha Cruise Ship Terminal Building operations commenced in March 2014

Breakdown of inbound tourists by region and nationality (fiscal 2013)

Impact of the earthquake

Positive correction

Breakdown of domestic travelers by region

Tokyo

Kansai

Fukuoka

Nagoya

Others

Breakdown of foreign travelers by nationality

TaiwanOthersUSA

Hong Kong

China

Korea(Photo Source: Naha City）

1010

■Measures for Promoting Okinawa

Okinawa Development and Promotion Special Promotion Subsidy (soft)

Okinawa Development and Promotion Public Investment Subsidy (hard)

Budget amount ・￥82.6 Billion ・¥93.2 Billion

Details ・Establish as an independent Okinawa program targeting “soft” businesses

・Simplify and streamline wherever possible all implementation procedures

・Establish while increasing existing Okinawa development and promotion voluntary strategy subsidies and expanding the scope of application specific to Okinawa

Subject businesses

・“Soft” businesses and other ・Social capital improvement, etc.

Okinawa Development and Promotion Lump Sum Subsidy（¥175.9 Billion）

Amount other than the lump sum subsidy（¥174.2 Billion）

Business name Budget amount

Public works-related expenses, etc. ￥138.2 Billion

(portion applicable to public works to expand runway services at Naha Airport) ￥33.88 Billion

Okinawa Institute of Science and Technology Graduate University-related expenses

￥19.8 Billion

Business to develop and promote the northern territories ¥5.1 Billion

Basic expenses in connection with steps to consider the introduction of railway and other services

¥0.2 Billion

Budget trends for the department responsible forOkinawa within Japan’s Cabinet Office

136.2 138.8174.2

157.5 161.3

175.9229.7 230.1

293.7 300.1

350.1

0

50

100

150

200

250

300

350

400

FY2010 FY2011 FY2012 FY2013 FY2014

（Billions of Yen）

Lump sum subsidy

(Source: Japan’s Cabinet Office)

Excerpt from a comment by Prime Minister Shinzo Abe on December 24, 2013

Secured an annual budget of more than ¥300 billion to help develop and promote Okinawa throughout the current Okinawa development and promotion plan period (fiscal 2012 to fiscal 2021)

Construction of a 2,700m second runway; operations to commence in 2020

Excerpt from a comment by Ichita Yamamoto, state minister for Okinawa affairs on December 24, 2013

[Northern territories development and promotion business] Continue business activities of at least ¥5 billion each year throughout the current Okinawa development and promotion plan period

[Public works to expand runway services at Naha Airport] Completion of construction by the end of 2019 in accordance with the agreement between Japan’s Minister of Finance and Minister of Land, Infrastructure, Transport and Tourism

1111

Trends in new housing starts in the Prefecture

2.3 1.0

0.8

1.5

0.9

3.93.42.72.42.32.3

7.5 8.2

7.3

7.5

8.2

10.7

1.8

11.7 11.812.7

16.6

10.7

12.3

0

2

4

6

8

10

12

14

16

18

2008 2009 2010 2011 2012 2013

（Thousands）

Owned houses Leased houses Condominiums, etc.

■ConstructionSubstantial increase in both housing starts and public works

(Source: Japan’s Ministry of Land, Infrastructure, Transport and Tourism）

Trends in orders received for public works projects

77.0 78.3

46.4 55.4 52.565.6

77.1

73.5

84.9

81.2 88.6

102.2

18.9

25.2

16.6 19.3

22.6

96.784.9

76.2

81.386.0

75.6

14.8

285.2

233.7 237.6254.5

224.0

266.7

0

50

100

150

200

250

300

350

2008 2009 2010 2011 2012 2013

Central government Okinawa PrefectureMunicipalities Others

(Billions of Yen)

(Source: West Japan Construction Surety Co., Ltd.)

1212

■Second Runway at Naha AirportAdditional construction of a 2,700m runway to address the increase in air travel demand

Total project expenses Commencement of construction Completion of construction

About ¥198 Billion January-2014 December-2019

(Source: Okinawa Prefecture)

Airport name Operating hours Number of service routes

Flight/Day

Tokyo International

24Hours 49 1,082

Naha 24Hours 27 137

Fukuoka 7：00～22：00 26 175

New Chitose 24Hours 26 164

OsakaInternational

7：00～22：00 24 158

Chubu CentrairInternational

24Hours 16 67

KansaiInternational

24Hours 12 59

Narita International

6：00～23：00 11 287

Second highest number of domestic service routes after Haneda Airport

Additional construction of a 2,700m runway

Proposed site of control tower

Domestic passengerterminal

International passenger terminal

Cargo terminal

Additional construction of a new runway●Address the growing air travel demand●Upgrade and expand infrastructure to help establish Naha Airport as an international logistics base

■Naha Airport runway construction

Current runway 3,000m

1313

■Okinawa Institute of Science and Technology Graduate University (OIST)

Positioned as a future silicon valley and research hub of Asia

ＯＩＳＴ

In addition to 50 senior research officials, approximately 300 research associates conduct research across a variety of specialist fields related to Okinawa Prefecture.

Technology Innovation Economic Zone

OISTUniversity

of the Ryukyus

Promote the formation of a global intellectual and industrial cluster with such institutions as OIST at the center to pursue world-class advanced interdisciplinary research. (Council on Economic and Fiscal Policy “Large-Boned Policy”)

Excerpt from a comment by Ichita Yamamoto, state minister for Okinawa affairs on December 24, 2013Consideration will be given to a variety of issues including the need to secure essential financial resources and to maintain the appropriate level of quality from a broad perspective. These efforts are geared toward expanding the scale of OIST research and operations.

(Source: OIST homepage)

Activities also include the presentation of papers and observation of coral and marine conditions on a real-time basis.

Senior officials from 13 of Japan’s leading pharmaceutical companies toured OIST and exchanged opinions with pharmaceutical-related companies within the Prefecture in December 2013

Okinawa Discovery Tour (organized by the Cabinet Office)

Research institutions

Private-sector companies

Outside the Prefecture

Research institutions

Within the Prefecture

Private-sector companiesCollaborationCollaboration

1414

■Okinawa Bridging Asia (Okinawa International Logistics Hub)Geographic competitive advantage due to its position at the heart of AsiaCenter of a massive market with a population of two billion

Okinawa relay model

Within a four-hour traveling distance by air

Okinawa

Order from New Chitose Airport

HanedaAirport arrival

Haneda Airport departure

Naha Airport arrival

(Late-evening) customs clearing

Naha Airport departure

Hong Kong Airport arrival

Delivery

Next day delivery through the use of 24-hour customs clearing and relay functions

Okinawa inventory model

Order (overseas, domestic)

(Late-evening) customs clearing

Next morning local airport arrivalDelivery on the day

Establish a logistics base in Okinawa and promote a variety of business models(Source: Okinawa Prefecture)

Okinawa→Narita 2 hours and 25 minutes Okinawa→Seoul 2 hours and 10 minutes Okinawa→Hong Kong 2 hours and 35 minutesOkinawa→Haneda 2 hours and 20 minutes Okinawa→Tsingtao 2 hours and 50 minutes Okinawa→Bangkok 4 hours and 25 minutes Okinawa→Nagoya 2 hours and 15 minutes Okinawa→Shanghai 2 hours and 5 minutesOkinawa→Kansai Int. 1 hours and 50 minutes Okinawa→Taipei 2 hours and 25 minutes

Japan 130 million

China 1.3 billion

ASEAN 600 million

Center of a massive market with a population of 2.0 billion

1515

■Substantial Expansion of Okinawa’s Regional and Economic Zone Systems

(Source: Cabinet Office department responsible for Okinawa affairs)

Okinawa boasts a variety of incentive programs including an extremely favorable tax deduction and allowance system that is not available in other prefectures. In fiscal 2014, the Prefecture also took steps to substantially improve the availability and use of various systems following the full-fledged reform of the following economic zone and regional systems.

Economic zone

Economic and financial revitalization zone

Designate one region within the prefecture (Nago City currently designated as a financial zone)

(Businesses covered)Existing finance sector⇒Expand to industries identified by the governor

In addition to the below-mentioned, application of the substantially liberalized angel tax system

International logistics zone

Four existing locations of Naha District, Nakagusuku Harbor (new port zone), Naha Airport District, and Naha Port District⇒Districts designated by the governor

(Businesses covered)Manufacturing, packaging, warehousing, and other sectors⇒Addition of the aircraft maintenance sector

Information and communication industrialdevelopment district

24 municipalities⇒Districts designated by the governor

(Businesses covered)Information recording

devicemanufacturing, telecommunications, software, call center, movie,video, broadcasting, and other sectors

Information and communication zoneNaha and Urasoe District, Nago and Ginoza District, Uruma District⇒Districts designated by the governor

(Businesses covered)Data center, provider, backup center, etc.⇒Addition of the information and communication equipment interconnection verification sector

Tourist site formation and promotion district, industry innovation district

All areas in Okinawa Prefecture(Tourism-related facilities)Sports and recreation, education and culture, relaxation, convention, and sales facilities⇒Removal of floor area and other requirements with respect to facilities covered

(Types of sectors covered by industry innovation)Manufacturing, packaging, warehousing, wholesale, product inspection and other sectors

Regional zone

Overview of measuresTax deductions and allowances(only economic zones)

40%, 10 years(Selection system with investment tax and other credits on the right)

※Several requirements including the location of a head office or principal business base within the economic zone or a company ofless than 10-years standing established within the economic zone

※Substantial liberalization of the required number of full-time employees

Investment tax and other credits (common throughout economic zones and regions)

Machinery, etc. 15%, buildings and other 8%Substantially lower than the minimum acquisition cost of subjectassets (above ¥10 million ⇒ above ¥1 million)

Extraordinary depreciation (machinery, etc. 50%, buildings and other 25%)※Economic and financial revitalization zone, international logistics zone, industry innovation district (machinery, etc. 34%, buildings and other 20%); Selection system with income and investment tax credits

Other support measures

・Provide a variety of incubation facilities in such cities as Nago and Uruma as well as lots for sale and leased factories・Business, real estate acquisition, fixed property, and other tax relief measures・Okinawa – information and communication expense support between the main island・Okinawa youth employment promotion subsidy and other support・Low-interest finance provided by the Okinawa Development Finance Corporation

1616

■Major Projects within the Prefecture

Awase land readjustment project (approx. ¥5.9 billion) *

Residential development comprising over 1,000 dwellings led by AEON Mall Okinawa Rycome, Okinawa’s largest shopping center, and Chubu Tokushukai Hospital

Okinawa Electric LNG Power Station (approx. ¥100 billion)

Units 1 and 2 online; units 3 and 4 scheduled to come online from fiscal 2022 after taking into consideration the status of electricity supply

Fishing harbor development project (approx. ¥4 billion)

Development of a 346-room hotel and commercial facility adjacent to the American Village; Hilton Okinawa ChatanResort scheduled to commence operations in September 2014

Project to extend the Okinawa Municipal monorail (approx. ¥35 billion)

Project to extend the Urasoe Line by 4.1 km; targeting an opening date of spring 2019

Onna Communication Squadron site resort plan (approx. ¥50 billion)

Construction of a 209-room hotel, 20 villas, a spa, and chapel by a Malaysia-based company; targeting a completion date of 2016

Project to develop the Naha City Agricultural Market disaster prevention district (approx. ¥20 billion)

Development of a range of facilities including a market, hotel, and residential area; scheduled for completion in fiscal 2017

Plan to utilize a vacant lot within the Gimbaru Training Area (approx. ¥15 billion)

Construction completed on a regional medical facility, health care center, fitting center, thalassotherapy children’s rehabilitation center in March 2014

Plan to utilize a vacant lot within the Gimbaru Training Area (approx. ¥80 billion)

Hotel development project undertaken by a Malaysia-based company; operating contract with Hilton for a 190-room hotel; targeting a startup date of 2016

◆Hotel Orion Motobu Resort & Spa (approx. ¥9 billion)

Construction of a resort hotel adjacent to the Okinawa Churaumi Aquarium; operations scheduled to commence in July 2014

：Private-sector businesses ：Public works （）：Total project costs

* Investments by such private-sector businesses as AEON Mall and Chubu Tokushukai Hospital not included in total project expenses

Development of a heavy particle beam cancer treatment and additional facilities at a site in west Futenma (approx. ¥16 billion)

Open selection of an operating company from fiscal 2015; targeting the commencement of use in fiscal 2019

1717

Financial Results for FY2013

1818

■Financial Summary (Non-Consolidated)

FY2013 FY2012 Change

Ordinary revenue 37.9 37.5 ＋0.4

Business gross profitExpenses

30.2

21.7

29.3

21.4

＋0.9

＋0.3

Real net business profit 8.5 7.8 ＋0.7

Net credit costsOther extraordinary gain/loss

2.5

0.3

2.8

-0.4

-0.3

＋0.7

Ordinary profit 6.3 4.5 ＋1.8

Total income taxes 2.8 2.0 ＋0.8

Net income 3.4 2.4 ＋1.0


＊Increase and decrease is presented on a financial statement basis.

Increase in revenue and earnings for the first time in nine years

＊ Real net business profit = Business gross profit – Expenses

1919

■Financial Summary (Consolidated)Increase in revenue; substantial increase in earnings due mainly to an increase in the ratio of voting rights in subsidiary company Ryugin Hosho Co., Ltd.

FY2013 FY2012 Change

Consolidated ordinary revenue 39.9 39.3 ＋0.6

Consolidated ordinary profit 7.4 5.6 ＋1.8

Consolidated net income 4.9 2.7 ＋2.2


Company NameNet income

(FY2013)Net assets (as of March 31, 2014) Ratio of voting rights

Impact on consolidated profit as a result of an increase in the ratio

of voting rights

Ryugin Hosho Co., Ltd. 0.3 2.25.00％⇒96.15％

※From March 19, 2014

1.1（Gain on negative goodwill）

Ryukyu Leasing Co., Ltd. 5.0 3.7

4.98％ (Share held by the Bank）0.4

(Equity in net income of affiliates)15.21％(Share held by Ryugin Hosho Co., Ltd.)

【Details of subsidiaries in which the Bank has increased its ratio of voting rights and other matters】

* Bank of the Ryukyus, Ltd. acquired additional shares in Ryugin Hosho Co., Ltd., which holds a portion of the shares of Ryukyu Leasing Co., Ltd., effectively increasing its ratio of voting rights in March 2014* Bank of the Ryukyus, Ltd. acquired additional shares in Ryukyu Leasing Co., Ltd., an affiliated company accounted for by the equity method, in April 2014. Having increased its ratio of voting rights to 49.96%,

the Bank included Ryukyu Leasing Co., Ltd. in its scope of consolidation as a consolidated subsidiary.* Increase and decrease is presented on a financial statement basis

（Billion of Yen）

2020

■Factors Behind the Change in Net Income (Non-Consolidated)

Factors Behind the Change in NetIncome (Non-Consolidated)

3,414

689

349

500893

2,474

294

End Mar14Net income

End Mar13Net income

(Mi l l i ons of Yen)

Increase in total income taxes

Increase in real net business profit

Improvem

ent in gains/losses on shares

Decrease in net credit costs

Other

Increase in net income largely attributable to the increase in real net business profit

Net Income

3.4

2.42.3

4.24.4

3.3

0

1

2

3

4

5

6

End Mar09 End Mar10 End Mar11 End Mar12 End Mar13 End Mar14

（ Billions ofYen）

2121

■Factors Behind the Change in Real Net Business Profit (Non-Consolidated)

Real Net Business Profit

8.5

7.4

9.4

7.0 7.27.8

0

1

2

3

4

5

6

7

8

9

10

End Mar.2010 Mar.2011 Mar.2012 Mar.2013 Mar.2014 Mar.2015

（ Billions ofYen）

Increase in real net business profit largely attributable to the increase in service profit and decrease in interest on deposits

Factors behind the year-on-year changein real net business profit

851

384

51

7,875 8,564

676

885

286

End March14

Real net business profitEnd March13

Real net business profit

（ Millions of Yen）

Increase in service profit

Decrease in interest on deposits

Incre

ase

in

in

terest

an

d

divid

end

in

com

e on s

ecu

rit

ies

Decrease in interest on loans and bills discounted

Increase in expenses

Others

2222

■Loans (Non-Consolidated)

Loans (Non-Consolidated)

121.1

649.1494.9 518.7 540.3 572.3 611.1

559.7573.2

566.0 542.3529.7

520.7

115.1 124.7 127.9 114.5 109.7

1,330.0

1,241.61,183.3 1,209.5 1,210.6 1,216.6

7.11%

0.49%0.09%

2.05%

2.21%1.74%

0

200

400

600

800

1,000

1,200

1,400


（ Billions of Yen）

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

Individuals Corporations Local public authorities and other Rate of increase (Compared with the end of the previous period:Right scale)

Increase in loans to individuals, corporations, and local public authorities; the balance of loans tops ¥1,300 billion

* Rates of increase are presented on a financial statement basis

2323

■Trends in Economic Conditions and the Bank’s Lending Activities

The Bank’s lending activities closely linked to economic conditions within the prefecture

-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

-30

-20

-10

0

10

20

30

40

Feb-

1992

Feb-

1993

Feb-

1994

Feb-

1995

Feb-

1996

Mar-

1997

Mar-

1998

Mar-

1999

Mar-

2000

Mar-

2001

Mar-

2002

Mar-

2003

Mar-

2004

Mar-

2005

Mar-

2006

Mar-

2007

Mar-

2008

Mar-

2009

Mar-

2010

Mar-

2011

Mar-

2012

Mar-

2013

Mar-

2014

Bank of Japan Diffusion Index (Okinawa)

Rates of loan increase and decrease (year on year; right axis)

＋7.1％

2424

■Business Loans (Non-Consolidated)

Business Loans (Non-Consolidated)

246.0 265.9 298.7 320.7

114.1 108.9 104.2102.2

105.976.6 69.3 62.5

60.459.853.4 52.0 53.8

49.661.869.8 67.7 65.0 50.252.5

175.9 163.8 153.6 144.3151.6

254.6

752.5705.6705.3716.5736.0

-1.56%

-2.64%

6.64%

0.04%

2.02%

0

100

200

300

400

500

600

700

800

900

End Mar2010 End Mar2011 End Mar2012 End Mar2013 End Mar2014


-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

Real estate, rental and leasing Wholesale and retail Construction Medical and welfare Manufacturing Others Rate of business loans

* Change in sector classifications from September 2009

* Individual business loans are handled in a different manner and as such data does not reconcile with data for loans to corporations on page 22

Increase mainly in loans to the real estate sector including apartment loans as well as the medical and welfare sector


(Compared with the end of the previous period: Right scale)

2525

■Consumer Loans (Non-Consolidated)

Consumer Loans (Non-Consolidated)

347.1370.4

390.7

58.658.8

58.6

60.3

64.1

356.4369.4

382.2

406.2

430.7

454.9

310.6323.6

297.7

59.0

2.54%

4.33% 4.18%

7.26%6.71%

5.48%

2.26%

0.34%

-0.34%

0.68%2.20%

6.30%

0

50

100

150

200

250

300

350

400

450

500



-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

Mortgage loans Other loans Rate of mortgage loan increase Rate of other loan increase

* Data does not include individual business loans and as such does not reconcile with data for loans to individuals on page 22

Robust trends in mortgage, card, automobile, and educational loans



1,882.8

2626

■Deposits (Non-Consolidated)

Deposits (Non-Consolidated)

97.9126.2

141.0

165.2129.3

161.9

12,262

1,199.6

1,155.91,087.21,021.7965.9

494.6468.8

437.7412.4

376.1356.5

1,758.91,640.7

1,524.11,420.4

1,797.8

0.45%

2.21%

4.72%

7.20%

7.65%7.30%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000



0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%Individuals Corporations Public funds (year-end balance) Rate of deposits

Continued robust trends in deposits from individuals and corporations; increase attributable to the shift in designated financial institution regarding public funds



2727

■Assets in Custody_(Non-Consolidated)

Assets in Custody(Non-Consolidated)

81.9 79.0

45.5 38.0

77.7 79.9

70.2

62.066.8

61.5

32.8 36.9

40.7

47.0 57.0

55.569.7

77.0

176.6169.4164.6

180.7

195.9

192.5

-7.04%

4.25%

2.91%

-8.90%

-7.75%

1.76%

0

50

100

150

200

250



-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

JGBs Investment trusts Single-premium insurance Rate of assets in custody

* Single-premium insurance: Contract value of single-premium individual pension insurance, single-premium whole life insurance, and single-premium medical care insurance

Robust trends in insurance sales; increase in the balance of assets in custody



2828

■Earnings Forecasts for FY2014 (Non-Consolidated)


While yields on loans are projected to decline, net income is expected to remain in line with FY2013 due mainly to an increase in service profit

FY2014 FY2013 Year-on-yearchange

Business gross profitExpenses

29.5

22.2

30.2

21.7

-0.7

＋0.5

Real net business profit 7.3 8.5 -1.2

Net credit costs 2.5 2.5 0

Ordinary profit 5.3 6.3 -1.0

Total income taxes 1.9 2.8 -0.9

Net income 3.3 3.4 -0.1

＊Increase and decrease is presented on a financial statement basis

2929

■Earnings Forecasts for FY2014 (Consolidated)

Substantial increase in revenue due mainly to the inclusion of Ryukyu Leasing Co., Ltd. in the scope of the Bank’s consolidation as a consolidated subsidiary; narrowing of the decline in net income due mainly to a decrease in extraordinary gain/loss

FY2014 FY2013 Year-on-yearchange

Ordinary revenue 52.2 39.9 ＋12.3

Ordinary profit 6.7 7.4 -0.7

Net income 4.6 4.9 -0.3


＊Increase and decrease is presented on a financial statement basis

3030

Bank of the Ryukyus Strategy

3131

■Positioning of the FY2014 Short-Term Management Plan

FY2013

Break Through 2012—Aiming to become the bank of preference for the citizens of Okinawa—

Toward the next medium-term

management plan

FY2011 FY2012

Sowing seeds Sprouting

FY2014

Blossoming

Ⅱ. Hire and train highly specialized staff

Ⅰ. Support development of the regional economy

Ⅱ. Strengthen marketing capabilities in the retail banking and fee businesses

Current trends and issuesHigh potential within Okinawa Prefecture

Gradual decrease in top line revenue

Three arrows of IT innovation

Establish three Loan Promotion groups and an Assets in Custody promotion team ONE to ONE marketing

Provide services that match the needs of

each customer

Become the bank of choice

Solution

New stage of growth

Set up new branches

Streamline branch operations

Enhance Ryugin Financial College

Expand business financing to the medical treatment and nursing care sectors as well as such infrastructure as solar power generation facilitiesMake all necessary preparations following determination of the Financing Facilitation ActIntroduce a T-Point serviceCommence the handling of insurance at loan centers

Core StrategiesGrowth Strategies

Ⅰ. Reform our marketing system

3232

Pursue work-style reformFoster human resources

Develop highly motivated workplaces

FY2014 management target: Become the bank of preferenceIncrease earning capacity

ONE to ONE marketingProvide services that match the needs of each customer/strengthen non-price competitiveness

Adhere strictly to a policy of compliance/strengthen risk management

■Basic Approach Toward the FY2014 Short-Term Management Plan

Expand service revenue

Strengthen assets in custody activities

Buildup the balance of loans

Strengthen activities in growth fields

Undertake more effective securities investment

Diversify securities investment methods

Leverage the collective strengths of the Group

Strengthen consolidated earning capacity

Identify new earning opportunities

Engage in more sophisticated revenue and ALM management

Core StrategiesGrowth Strategies

3333

■Core Strategy I (Reform our marketing system)

Realize increased operating efficiency

and speed

Improve the convenience of online communicationIntegrate retrieval of overall systemsComputerize draft and report workflows

Computerize customer information inquiries and household management cardsCentralize processes for managing the progress of projects and activity resultsIncrease the efficiency of assets in custody sales

Computerize workflows relating to the retail credit operations of the Bank and Ryugin Hosho Co., Ltd.

Increase the efficiency and speed of loan screening and assessmentReview rules and communication

Increase the efficiency of service operationsReview rules and communication

Reform meeting proceduresPromote paperless operationsConsolidate frequently asked questions

Communication tool (Intranet)

Reform over-the-counter procedures

Reform head office operations

“Loan navi” (Automated screening system)

Bank Neo (Marketing support system)

Reform loan operations

Pursue work-style reform

Three arrows of IT innovation; reform branch and head office processes

3434

■Core Strategy II (Hire and train highly specialized staff)Develop specialized staff

A record high 25 individuals accredited as property assessment advisors across all financial institutions

Increased the balance of loans backed by collateral (ABLs) including trade accounts receivable and property (merchandise, raw materials, machinery and equipment)

Accreditation certificate presentation ceremony

A second Bank of the Ryukyus staff member is accredited as a 2nd grade medical management specialist

Medical care and welfare promotion groups with their own designated management consultants worked in unison with branches to bolster the promotion of financeTrends in the balance of loans to the medical care and

welfare sectors

53,40152,042

53,859

49,625

61,861

40,000

45,000

50,000

55,000

60,000

65,000

70,000


（ Millions of Yen）Established a medical care and welfare promotion group in December 2012

Colle-ju, a loan offered exclusively to homes for the care of the elderly

Doctors’ Support Loan

Improving expertise!

Trends in the number of ABLs handled

14

69

6435

0

5

10

15

20

25

30

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

(Number of ABLsHandled)

3535

■Growth Strategy I (Support development of the regional economy)

Became the first financial institution in Okinawa Prefecture to form an alliance with the Okinawa

Agriculture Credit Fund Association

Help expand marketing channelsHeld a business forum to promote the appeal of Okinawa

Launched Ryugin agriculture loans

Bank of the

Ryukyus, Ltd.

The Okinawa

Kaiho Bank, LTD.

Koza

Shinkin Bank

Agricultural and marine products; foods Buyers (top ranked restaurants and

hotels in Japan and overseas)

Support renowned chefs prepare recipes as a

business meeting tool

Support agricultural businesses

Working and capital finance essential to

agricultural operations and management

Up to a maximum amount of ¥10

million

Held agricultural business revitalization seminarsBusiness alliance

（Moku Moku Tezukuri Farm）（Nomura Agri Planning & Advisory Co., Ltd.）

47 business partners

3636

■Growth Strategy II (Strengthen marketing capabilities in the retail banking and fee businesses)

Strategies to forge a principal bank position and build a stronger corporate imageIntroduced a T-Point service

Designate the account into which

salaries are to be credited200 points

Salary transfer + Savings fund 5 points (per savings of ¥5,000)

Salary transfer + DC Card 60 points (end of January each year)

The rate of T-Point membership in Okinawa is the highest in Japan Capture the young generation

Third financial institution to

introduce the T-Point service after Suruga

Bank Ltd. and ShinseiBank, Limited

Launched the Shiawase Free Loan

Unrestricted useUp to a maximum

amount of ¥5 million

Targeting such customers as part-time workers and

full-time homemakers

Balance of loans to individuals excluding mortgage loans

58,802 58,647 59,04760,379

64,175

52,000

54,000

56,000

58,000

60,000

62,000

64,000

66,000

68,000

70,000


（Millions of Yen）

Opened the Chatan Loan Center

Loan centers in seven locations throughout

the prefecture (open seven days a week

including Saturdays and Sundays)

Received the Gold Award from the Okinawa Advertising Association

A finalist at the ACC CM Festival

“Children and Philosophy”educational loan commercial

Ryugin Mortgage Loan Transform commercial

3737

■Hold Sixth Industrialization Seminars (Proposal)Overview (Proposal)

Dates (planned) Locations (planned) ParticipantsJuly 11, 2014 (Friday): 14:00 – 18:00 Hotel to other location within Kumejima ・Farmers

・The general public interested in agriculture

・Public and administrative officers (regional and municipal offices)

July 14, 2014 (Monday): 14:00 – 18:00 Hotel Yugafu Inn OkinawaJuly 15, 2014 (Tuesday): 14:00 – 18:00 Okinawa Kariyushi Urban Resort NahaJuly 17, 2014 (Thursday): 14:00 – 18:00 Hotel KyowaJuly 18, 2014 (Friday): 14:00 – 18:00 Hotel within Ishigakijima

Event Program (Proposal)

Details

Educational seminar

Theme (provisional): Taking up the challenge of the Moku Moku Tezukuri FarmLecturer: Osamu Kitamura, Representative Director

Theme (provisional): The expanding Halal market and the potential of OkinawaLecturer: Akio Tanaka, Director, Brand Research Institute, Inc.

Explanatory meetings

About agricultural funds: Overview of funds and case studies regarding their applicationLecturer: a-five or Nomura Agri Planning & Advisory Co., Ltd.

About the Ryugin Agri Loan Lecturer: Bank of the Ryukyus, Ltd.

About the Sixth Industrialization Support Center Lecturer: Sixth Industrialization Support Center

Consultation meetings

Individual consultation meetings conducted by planners and other appropriate personnel

Part 1

Part 2

Part 3

3838

Bank of the Ryukyus is committed to fostering a close affinity with customers and to become the bank of preference.

Thank you for your kind attention.

Bank of the Ryukyus Management Briefing for FY2013...Budget amount ・￥82.6 Billion ・¥93.2...

Documents

Transcript of Bank of the Ryukyus Management Briefing for FY2013...Budget amount ・￥82.6 Billion ・¥93.2...