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IR Presentation Results for Fiscal Year Ended March 31, July 20, PDF

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IR Presentation Results for Fiscal Year Ended March 31, 2011 July 20, 2011 Contents 1. Effects of the Great East Japan Earthquake Effects of the earthquake (Miyagi Prefecture).. 1 Effects of the earthquake
IR Presentation Results for Fiscal Year Ended March 31, 2011 July 20, 2011 Contents 1. Effects of the Great East Japan Earthquake Effects of the earthquake (Miyagi Prefecture).. 1 Effects of the earthquake (77 Bank) Results for Summary of profits and losses.. 3 Major accounts / interest rates / interest margin.. 4 Credit-related expenses.. 5 Credit disclosed under the Financial Reconstruction Law 7 Capital adequacy. 8 Securities Projected performance for FY2012 Profits and losses 20 Major accounts / interest rates / interest margin Progress in implementing Medium-term Management Plan Major management policies FY2012 Management Policy. 11 Utilization of operating capabilities with an eye toward the restoration of the regional economy 12 Improve productivity.. 18 Contribute to stakeholders... 19 1. Effects of the Great East Japan Earthquake Casualties (Persons, as of Jul. 10) Dead 9,212 Missing 2,807 Total 12,019 Building damage (Buildings, as of Jul. 10) Fully destroyed 66,929 Half destroyed 54,006 Partially destroyed 87,607 Effects of the earthquake (Miyagi Prefecture) Electricity Electricity was cut off to approx. 1 million homes (approx. 70% of households supplied with electricity) Restored to all buildings by Jun. 18 except to destroyed by the tsunami Gas Gas Bureau, City of Sendai Gas supply was cut off to approx. 360, homes Restored to all homes by May 4, except those on the east coast, which suffered major damage Water Water supply was cut off to approx. 450, homes As of the end of Jun., some households, mainly in coastal areas incl. Ishinomaki, Onagawa and Minami- sanriku, are still without water Losses due to the earthquake According to the Jun. 24 Cabinet Office announcement (Direct damage to houses, factories, social infrastructure, etc.) Approx trillion yen (1.8 times larger than that caused by the Great Hanshin-Awaji Earthquake) Of this total, Miyagi Prefecture accounts for approx. 9.5 trillion yen (our estimate) Sendai City Airport and airport railway Sendai Airport Apr. 13: Domestic flights partially resumed Jul. 25: Regular international flights scheduled to be resumed Railway access to Sendai Airport Jul. 23: Services on part of the line scheduled to be resumed. Full operation expected by Sep. Port Railway Shinkansen: the entire line reopened on Apr. 29 The restoration of normal schedule for all services is expected by the fall Other JR lines Tohoku line: the entire line reopened on Apr. 21 Part of certain lines in coastal regions remains out of service Sendai City subway: the entire line reopened on Apr. 29 Road Tohoku Expressway: Returned to full service on Jun. 24 Ordinary roads, etc. Traffic restrictions were imposed on 106 routes and at 273 locations Restrictions released at over 60% of these locations as of Jun. 30 Sendai Port Access for general cargo ships resumed on Apr. 7 and for container ships on Jun. 8 Full restoration of major ports by 2012 is planned 1 1. Effects of the Great East Japan Earthquake Effects of the earthquake (77Bank) Casualties As of Jun. 30, one Onagawa branch employee died, and ten branch employees and one temporary employee are still missing. 77Bank Bank s s branches in Miyagi Prefecture (128 branches) *Operating sites of branches as of March 31, 2011 Kesennuma Nainowaki Branch status *Total number of branches Total number of branches (Unit: branch) Iwagasaki Closed operation branches Immediately after the earthquake (Mar.14) 32 1 month later (Apr. 11) 21 2 months later (May 11) 3 Today (Jul. 20) 1 *Sendai Airport sub-branch branch (scheduled to reopen on Jul 25) Furukawa- Tohkamachi Narugo Iwadeyama Ichihazama Wakayanagi Tsukidate Tajiri Sanuma Tome Maiya Shizugawa Open operation branches (Branches operating at sites other than their original locations) 110 (0) 121 (0) 139 (14) 141 (13) Minami- Furukawa Furukawa Onoda Nakaniida Kogota Wakuya ( Matsuyama sub-branch) Kashimadai Ishinomakicity 9 branches Watanoha, Ayukawa, Shinnakasato Number of branches expected to require major repairs or rebuilding 12 branches Tomiya Yoshioka Matsushima Yamoto Onagawa Such as Kesennuma and Shizugawa branches Fixed assets related loss Cost of repairs Loss from disposal of fixed assets (branch buildings, movable properties) (Unit: billion yen) The relevant branches are enclosed with Izumizaki, Takamori, Komatsushima Kawasaki Shiroishi Yuriage Akaishidai 62 branches (including 3 sub-branches) Zao Murata Sendai-city Ohgawara Natori- Nishi Tsukinoki Funaoka Watari Rifu Shichi gahama Geba Tagajyo Takasago Yuriage Masuda Mori Sekinoshita ( Naruse sub-branch) Shiogamacity Shiogama (Sendai Airport) closed at present (Airy sub-branch) Iwanuma Nishi 4 branches Kakuda Yamashita Iwanuma Additional credit-related related expenses . JPY 55.0 billion For details, see P. P 6 Marumori 2 2. Results for Summary of profits and losses Interest income Fees and commissions (0.5) (5.9) Gains (losses) on bonds (4.2) Foreign exchange transaction income (0.1) Expenses (0.3) (0.4) [Core operating income] [ 25.2 ] [ 26.1 ] 0.9 [ 3.5 ] Operating income Special income and losses (2.5) (7.2) (4.7) Gains (losses) on stocks (1.0) Losses on bad debt written-off Ordinary income (2.3) (12.7) Extraordinary income Gains on provision of reserve for possible loan losses Transfer of substitutional portion of the government pension program fund Extraordinary loss Loss on disaster Provision of reserve for possible loan loss Fixed assets related loss FY2010 Gross operating income 77.8 [Core gross operating income] [ 82.0 ] Operating income before provision of reserve for possible loan losses Provision of general reserve for possible loan losses (1.4) Income taxes (incl. deferred taxes) (4.7) Credit-related expenses 0.7 (56.9) [ 82.6 ] Net income (Net loss) 11.6 (30.6) (42.2) Increase/ decrease (JPY bn, %) YoY change Rate of change % 6.6 [ 0.7 ] Interest income Increases due due to to a rise rise in in interest and and dividend income resulting from from (1) (1) a fall fall in in interest on on deposits and and (2) (2) an an increase in in securities, despite a fall fall in in interest on on loans due due to to declining interest rates Core operating income Increase due due to to a rise rise in in interest income and and a fall fall in in expenses Ordinary income Decrease due due to to (1) (1) an an increase in in provision of of general reserve for for possible loan loan losses considering the the indirect effects of of the the Great East East Japan Earthquake and and (2) (2) an an increase in in losses on on bad bad debt debt writtenoff due due to to a fall fall in in the the number of of customers reclassified into into better categories off Recorded 49.4 billion yen of losses due to the Great East Japan Earthquake Net loss Our Our first first net net loss loss since World War War II II 3 * Ref. 2. Results for Major accounts / interest rates / interest margin Major accounts (average balances) FY2010 YoY change % Loans and bills discounted 3, , Corporate loans 1, , [excl. spread loans] [ 1,180.7] [ 1,180.3] [ (0.0)] [Spread loans] [ 788.8] [ 810.2] [ 2.7 ] Consumer loans [Housing loans] [ 673.7] [ 702.8] [ 4.3 ] Loans for local governments (2.8) Securities 1, , National government bonds Local government bonds Corporate bonds Stocks Others Deposits and certificates of deposits 5, , Retail deposits 3, , Corporate deposits 1, , Assets in custody (Term-end balance) (Note) Figures of Assets in custody are total of investment trusts, individual annuity insurance, public bonds and foreign-currency deposits Interest rates / interest margin (JPY bn, %) (%) Loans and bills discounted interest rate FY2010 YoY change % point (0.13) Corporate loans (0.12) [excl. spread loans] [ 2.23] [ 2.16] [ (0.07)] [Spread loans] [ 0.88] [ 0.68] [ (0.20)] Consumer loans (0.16) [Housing loans] [ 2.22] [ 2.09] [ (0.13)] Loans for local governments (0.09) Securities interest rate (0.01) interest rate on deposits (0.06) Interest rate spread (0.01) Net interest margin 2. Results for Credit-related expenses (1) Branches in regions which suffered major tsunami damage Loan in Total All 142 branches 28 branches branches (Lending: JPY 3,500.0 bn as of end-mar Mar. 2011) branches (Lending: JPY bn excluding local governments) (Total number of branches in Miyagi: 128) Kesennuma: 2 Provision of reserve for debtors in regions which suffered major tsunami damage [Extraordinary loss] General reserve for possible loan losses JPY 45.6 bn Corporate loan Housing loan Total Number of borrowers 1,600 4,100 5,700 (Approx. cases, JPY bn ) Credit amount (Excluding borrowers classified as at risk of failure or in riskier categories) Sendai City Minami Sanriku: 1 Ishinomaki / Onagawa: 8 Shiogama area: 8 The southern coastline of Miyagi Pref.. : 5 A) Assuming reclassifications into lower categories in future, the reserve rate (approx. 25%) calculated based on approximately 60% of corporate loans (for borrowers of 300 million yen or more) was applied to the balance of 40% of the loans B) The above reserve rate also applies to housing loans Provision of specific reserve for possible loan losses JPY 1.9 bn Reserve for contingent loss JPY 0.6 bn Fukushima Pref. Hamadori (the coastline of Fukushima pref.) : 4 (Total number of branches in Fukushima Pref.. : 6) Provision of reserve for possible loan loss JPY 48.1 bn *Self-assessments were not performed in light of the effects of the earthquake 5 2. Results for Credit-related expenses Provision of reserve for possible loan losses Loss on bad debt written-off Gains (losses) on provision of reserve for possible loan losses (Extraordinary loss) Credit-related expenses (2) Gains (losses) on provision of reserve for possible loan losses Provision of specific reserve for possible loan losses Reserve for contingent loss Total 2011 Actual Forecast Effect of the earthquake Provision of reserve for possible loan losses JPY JPY 3.1 bn Recorded using a reserve ratio adjusted by taking into account the indirect effects of the disaster (The highest ratio in five years was applied) Provision of reserve calculated using the ordinary method - JPY 3.8 bn JPY 6.9 bn (A) Provision of reserve for debtors in regions which suffered major tsunami damage JPY 48.1 bn (B) Additional credit-related related expense due to earthquake JPY 55.0 bn (A+B) Credit-related expenses and credit-related expense rate trends (JPN bn) Credit-related expenses Credit-related expense rate FY2007 FY2008 FY2009 FY FY2012 Forecast (%) FY2012 Cruising speed for credit-related expenses Provision of reserve to cover damage suffered by regions that were not hit by tsunami JPY 7.0 bn JPY 10.0 bn In light of the damage situation, etc., the reserve ratio was calculated, assuming reclassification into lower categories in future JPY 17.0 bn The effects of the earthquake that can be estimated at present have been taken into account 6 2. Results for Credit disclosed under the Financial Reconstruction Law Credits disclosed under the Financial Reconstruction Law 金融再生法開示債権の推移 Loans to bankrupt and quasi-bankrupt loans Doubtful loans Substandard loans Ratio of credits disclosed under the Financial Reconstruction Law Mar.2007 Mar.2008 Mar.2009 Mar.2010 Mar.2011 (%) Increased at the end of Mar due to a fall in the number of borrowers reclassified into better categories and bankruptcies among large borrowers At the end of Mar. 2011, reclassification of borrower categories in light of the effects of the disaster was not performed. It is likely that the amount of credit to be disclosed under the Financial Reconstruction Law will increase when we perform an assessment in light of the effects of the disaster. [Reference] Number of borrowers who have temporarily suspended their scheduled payments (Approx. cases ) End of Apr End of May 2011 Corporate loan Housing loan 1,400 1,200 Total 2,100 1,800 *The above figures are total borrower numbers at the end of the respective months, and include the number of borrowers who temporarily suspended payments for reasons other than the effects of the earthquake. 7 2. Results for Capital adequacy Capital adequacy ratio -Maintained a capital adequacy ratio of above the 11% level, although the ratio dropped at the end of Mar due to the effects of the earthquake -It is expected that a capital adequacy ratio of the 11.0 to below 11.5% level can also be secured at the end of Mar Consideration of application for public funds -An application for public funds is being considered in order to provide financing together with the government to the Miyagi region (In order to secure adequate capital to address risks such as increases in loan balances) (%) Mar Mar Capital adequacy ratio / Tier I ratio Capital adequacy ratio Tier 1 ratio excluding tax effect Tier I ratio BIS Standard /3 計画 Mar Mar Mar Mar Mar Mar plan Injections of public funds are not taken into account Allocated capital (Second half of ) Management of risk capital Nonallocated capital リスク資本配賦原資 Tier Allocation source Operational risk リスク資本配賦額 Second half of Market risk Credit risk Total risk capital allocated (End-Mar. 2011) Not used 68.6 Used risk capital リスク資本使用量 Allocated capital (First half of FY2012) Reference: Outlier ratio (at the end of Mar. 2011) First half of FY2012 Tier Nonallocated capital Allocation source Amount of interest rate risk Tier I + Tier II Outlier ratio JPY 15.8 bn JPY bn 5.45% (Note) From the end of Mar. 2010, our internal model is applied for the calculation of core deposits 8 2. Results for Securities (1) Balance of securities Gains (losses) from revaluation of securities End of Mar Gains (losses) from revaluation Change from the end of Mar Securities 2, (22.3) Bonds 2, (8.2) National gov. bonds Local gov. bonds (0.6) Corporate bonds (1.0) Others (20.0) (7.6) Yendenominated foreign bonds Foreigncurrency bonds Investment trusts (2.7) (0.5) (17.8) (7.3) Stocks (14.1) (50.0) National gov. bonds Corporate bonds, Short-term corporate bonds (14.0) Local gov. bonds Stocks Others Mar Mar Mar Mar Mar Balance of floating-rate national government bonds at the end of Mar. 2011: JPY bn [The valuation difference between the theoretical price JPY 13.7 bn and market price -JPY 2.9 bn of floating-rate national government bonds was JPY 16.6 bn] Impairment loss of securities: JPY 0.6 bn 9 2. Results for 2, , , , National gov. bonds Corporate bonds Others Securities portfolio * Excluding revaluation gains (losses), after impairment Local gov. bonds Stocks Rate of flotation 0 Mar.2008 Mar.2009 Mar.2010 Mar.2011 Mar.2012 Plan Reference Deposit / Lending Spread (average balances) JPY 1.9 tn JPY 1.8 tn JPY 1.8 tn JPY 1.9 tn JPY 2.6 tn Securities (2) % Improvement in profitability and financial health Improvement in profitability Acquisition of stable, lasting revenue base by building a ladder portfolio (extended duration) mainly in public bonds Flexible duration management Strengthening of management to be able to address increases in the deposit-loan gap Replacement of stock names with emphasis on growth potential and profitability, and diversification of the investment asset classes Strengthening of ability to respond to changes in the investment environment, etc. by ensuring thorough ALM (asset liability management) and revenue management, and improvement in financial health Nurturing of experts in response to diversification and increased sophistication of investment targets and methods % 18.9% 23.0% 15.0% 29.3% 4.8% Interests and modified duration of yen-denominated bonds % (%) 5.0 Modified duration 3.0 Interests (%) (%) Within 1 year 2.94 Composition of written-off securities (at the end of Mar. 2011) Others Corporate bonds Local gov. bonds National gov. bonds 1-3 years years 5-7 years 7-10 years Over 10 years Mar.2008 Mar.2009 Mar.2010 Mar.2011 Mar.2012 Plan * Yen-denominated bonds other than investment trusts 3. Major management policies Management policy 2011: Year One of the Earthquake Reconstruction Project We will commit to restoring and growing the regional economy Top Priorities Early restoration of financial functions Stable and ongoing regional financing Improvement in business performance through the entire company s s total commitment Building solid sales bases Promoting locally-focused financing services - Utilizing Relationship Managers (RMs), whose numbers have increased to approx. 150 in the two years since the start of the mid-term plan - Utilizing our consulting function in which head office staff and operation branch staff work together 11 3. Major management policies Utilization of operating capabilities with an eye toward the restoration of the regional economy Development of Systems toward the Restoration of Financial Functions Promotion of initiatives toward restoration from the earthquake Ascertain in detail customers post-disaster status Utilize earthquake recovery-related products 77 Bank Great East Japan Earthquake Recovery Support Loans Utilize the public financing system for disaster recovery efforts Head office staff interview customers to understand their needs Head office RMs visit customers Increase on-site assessments at each region Meet reconstruction-led demand without fail Improvement of sales system Early restoration of branches, in the form of the branches within a branch As of Jul. 20, 13 branches are operating at sites other than their original locations Continuing set up of temporary counters Temporary counters have been set up in Kesennuma, Nainowaki, Shizugawa, Onagawa, Ayukawa Since Jul. 26, temporary counters are operated regularly twice weekly in Shizukawa and Ayukawa Review branch network Consolidate the Chikukou branch into the Shiogama branch (Feb. 2012) Personnel assignments in accordance with the amount of administrative work Improve administrative processing system Strengthen support regarding inheritance and other procedures Promotion of Financial Facilitation - Immediately after the earthquake, set up temporary counters for consultations regarding loans in connection with temporarily closed operation branches and provided toll-free number for earthquake-related inquiries 金融円滑化の推進 - In order to improve this system, set up a Finance Consultation Service Counter for Disaster Reconstruction and Financial Facilitation in Apr 3. Major management policies Utilization of operating capabilities with an eye toward the restoration of the regional economy Further enhance total deposits, loans and assets in custody (1) Promoting loans to SMEs Operation Branches Build a promotion system enabling the head office and operation branches to work as one team Head Office -Provide refinance funds guaranteed by Miyagi prefecture credit guarantee association -Make good use of the Emergency Guarantee Program for Recovery from the Great East Japan Earthquake -Promote loans by using the 77 Growth Base Support Fund -Promotion of housing loans -Step up efforts to take over other lenders loans Maintain the growth in borrower numbers among small- and medium-sized enterprises (SMEs) and the loan balances of such borrowers - Provide support for solution sales Accompany sales support force on customer visits - Strengthen support by specialist staff in the medical and nursing care fields (3 persons) - Corporate RM Development Program Personnel training through MA* College, etc. *MA: Money Adviser Number of 中小企業向け貸出残高 先数 customers and loan balances to SMEs 億円先 (Customers) Balance Customers 3,600.0 Loans (term-end balance) 15,000 3, , , , , , , , ,748 14,261 1, , ,471 1, ,735 1, ,000 3,000.0 Mar.2008 Mar.2009 Mar.2010 Mar.2011 Mar.2012 Plan 1,000.0 Mar.2008 Mar.2009 Mar.2010 Mar.2011 Mar.2012 Plan 13 3. Major management policies Utilization of operating capabilities with an eye toward the restoration of the regional economy Further enhance total deposits, loans and assets in custody (2) Promoting housing loans (Case) 4,000 3,000 2,000 Number of housing loans granted and housing starts in Miyagi
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