Hyakujushi Bank : Annual Report 2023（7,935KB）

INTEGRATED
REPORT
2023	Year ended March 31, 2023

The Hyakujushi Bank, Ltd.

Introduction

ForOurStakeholders

By fulfilling our role as a regional financial institution, the Hyakujushi Bank aims for the sustainable growth of local communities together with stakeholders.

The purposes of this Integrated Report is to obtain the understanding of our shareholders and inves- tors, as well as our customers and local residents regarding the Bank's initiatives, in addition to conveying our commitment to you all.

CorporateVision

1. Prosper together with customers and communities
2. Create a vigorous corporate culture
3. Ensure sound business management and enhance corporate value

Code of Conduct

- Promote close dialogue to deepen mutual trust

- Spare no effort to grow as professionals

- Understand diversity and respect human rights

- Strive to reduce environmental burden and contribute to regional vitalization - Take action exceeding the expectations of our shareholders

01 The Hyakujushi Bank, Ltd . Integrated Report 2023

CONTENTS

Introduction

01 For Our Stakeholders

1. The Hyakujushi Bank in Numbers
2. The Bank's Operational Foundation

Hyakujushi Group'sVision

1. Message from the President

1. Long-termVision

Hyakujushi Group'sValue Creation

1. Hyakujushi Group's Value Creation Process

1. Sustainability Management Framework

New Medium-Term Management Plan "Let's Create a Good 114* "

1. Message from the Director in Charge of Corporate Planning

1. New Medium-Term Management Plan

1. Business Deployment Based on Material Issues

*"Hyakujushi" basically means the number "114."

Communication with Stakeholders

35 Corporate Governance

1. Board of Directors and Audit and Supervisory Committee Members

1. Outside Director Interview
2. Enhancement of Shareholder Value

The Hyakujushi Bank, Ltd.

(as of March 31, 2023)

Head Office

5-1,Kamei-cho,Takamatsu, Kagawa

Established

November 1, 1878

Total assets

¥5,784.5 billion

Deposits and negotiable certificates of deposit

¥4,795.8 billion

Loans and bills discounted

¥3,366.8 billion

Paid-in capital

¥37.3 billion

Total shares issued

29,100,000 shares

Employees:

1,995

Offices:

132 (Head Office, 99 branches, 22

sub-branches, 6 Quick Square, 5

Consulting Plaza)

Overseas representative offices: 1

(Shanghai*)

Non-branch ATMs and CDs:

145

*The Shanghai Representative Office closed on April 28, 2023.

Editing Policy

The Hyakujushi Bank has prepared this report with the aim of communicating to our stakeholders in straightforward terms the Bank's initiatives for sustainable value creation from both the perspective of financial and non-financial information.When editing this report, we referred to the Integrated Reporting Framework established by the International Integrated Reporting Council as guidelines, and theTask Force on Climate-Related Financial Disclosures (TCFD) for sustainability-related information. This report (both the informative and reporting editions) also integrate disclosure materials in accordance with Article 21 of the Banking Act (explanatory documents related to the status of performance and financial condition of the bank). Please see the reporting component for figures.

小豆島エンジェルロード

The Hyakujushi Bank, Ltd . Integrated Report 2023 02

Introduction

The Hyakujushi Bank in Numbers

Thanks to the support of the local community, the Hyakujushi Bank has continued operations for almost 150 years, making us one of the few number banks* still in existence today. (A bank that uses the number of the temporary license it was issued upon establishment as its bank name)

The Bank's Operational Foundation

• Solid Customer Foundation and Far-Reaching Network

With Kagawa Prefecture as our operational foundation, the Bank operates 132 branches in 11 prefectures throughout Japan.After our first expansion into Osaka in 1950, we opened branches inTokyo, Okayama, and many other regions to ensure our operations were firmly rooted in each locality. Over the years, we have become one of the few regional banks to build a far-reaching network with a long history.

Established

145years ago

Since 1878

Locations in

11prefectures

We are a wide-area regional bank based in Kagawa prefecture with branches across Japan

No. of customers

(as of March 31, 2023)

Retail customers1.24 million

Corporate customers

55,013

Kagawa (94 branches)				Tokyo
		Hyogo		Aichi
	Okayama
Hiroshima			Osaka	Urban areas (8 branches)
	Kagawa			Tokyo, Aichi, Osaka
Ehime	Tokushima
Fukuoka	Kochi			Our Customers(Mar 31, 2023)

Deposits and negotiable certificates of deposit

(non-consolidated)

4,795.8bill yen

(Billions of yen)	4,795.8
4,539.4	4,648.3

Loans and bills discounted

(non - consolidated)

3,366.8bill yen

(Billions of yen)	3,366.8
3,042.9	3,164.8

Core business net income

(excludes gain/loss of cancellation of investment trusts, non-consolidated)

23.5bill yen

(Billions of yen)

23.5

15.0

9.0

Greater Setouchi area (30 branches)

Okayama, Hiroshima, Fukuoka, Hyogo, Ehime,

Kochi,Tokushima

• The Potential of Kagawa Prefecture - the Bank's home location

Urban areas

Tokyo, Aichi, Osaka

2,676 (14%)

Greater Setouchi area*

6,766 (35%)

*The prefecture of Shikoku, Hyogo, Okayama, Hiroshima, Fukuoka

Kagawa (home base)

9,802 (51%)

Total number of busi-

ness partners

(Total companies provided

with credit or other support)

19,244

(Mar 31, '21)

(Mar 31, '22)

(Mar 31, '23)

(Mar 31, '21)

(Mar 31, '22)

(Mar 31, '23)

(Year ended Mar 31, '21)

(Year ended Mar 31, '22) (Year ended Mar 31, '23)

Industrial structure adapts well to change

Profit(non-consolidated/consolidated*)

(Non-consolidated) (Consolidated)

8.3bill yen 9.1bill yen

(Billions of yen)	Non-	Consolidated
		consolidated	11.7	Non-
		10.8	Consolidated
				consolidated	9.1
				8.3
Non-	Consolidated
consolidated	2.5
1.6

Consolidated capital ratio

9.10%

(%)

9.359.349.10

OHR(non - consolidated)

*Operating costs/ gross operating profit

76.10%

(%)

76.76	76.10
	71.64

Home to factories of Japan's top-ranking corporations engaged in fields that include construction machinery, and electrical machinery, Kagawa Prefecture attracts a large number of such companies' partner enterprises equipped with sophisticated core manufacturing technologies mainly in those fields.The prefecture also hosts large factories that handle basic materials such as chemicals and non-ferrous metals, mainly located in industrial zones situated in the prefecture's coastal region. In addition, many food-related companies handling frozen foods, seasonings, and other such products have operations there.As such, Kagawa Prefecture tends to be resilient to economic shocks due to its well-balanced industrial structure not skewed toward any particular industry.Another distinctive feature of Kagawa is its many niche leaders that are active in numerous specialized market segments.

Industrial Products andAgricultural/Fishery Products of which Kagawa prefecture has Japan's top share

Leather gloves for sport	Uchiwa (round fan)/Sensu (folding fan)	Construction cranes
(includes synthetic leather)	(including the bone part)

(Year ended Mar 31, '21)

(Year ended Mar 31, '22) (Year ended Mar 31, '23)

• Consolidated profit is "Profit attributable to owners of parent"

(Mar 31, '21)

(Mar 31, '22)

(Mar 31, '23)

(Year ended Mar 31, '21) (Year ended Mar 31, '22) (Year ended Mar 31, '23)

Population

940,000

39th in Japan

Kagawa prefecture

Prefecture GDP (nominal)

Natural disaster damage

256mill yen

6th smallest

in Japan

74.7%	49.6%	46.8%
3,343mill yen	2,691mill yen	102,379mill yen
No. 1 in Japan	No. 1 in Japan	No. 1 in Japan
Kintoki Ginseng	Olives

Credit rating	Deposits share(within Kagawa pref.)	Loans share(within Kagawa pref.)
(Mar 31, 2023)	(Mar 31, 2023)	(Mar 31, 2023)
JCR	R&I	No. 1	No. 1
(Japan Credit Rating Agency)	(Rating and Investment Information, Inc.)

Per capita

4,186thou yen

19th in Japan

97%	87%
1,794tons	540tons
No. 1 in Japan	No. 1 in Japan

A	A-	48.3%	38.6%
Long-term Issue	Issue Rating
Rating

Hyakujushi		City banks/Regional banks (other than Hyakujushi), Secondary regional banks, credit unions, etc.

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*Source:"Kagawa's Ranking by 100 Indicators 2023" published by Kagawa Prefectural Government

Transportation and logistics hub

Kagawa Prefecture serves as a gateway to Japan's Shikoku region. It is accordingly equipped with an extensive regional transportation network that includes Seto Ohashi Bridge, Shikoku Odan Expressway,Takamatsu Airport, andTakamatsu Port. The prefecture features convenient transport access to theTokyo metropolitan area and the Kansai region, and occupies a key position in transport networks connecting Shikoku and Honshu.

*Source:The survey of the Census of Manufacturers 2020 published by METI and "Kagawa's Agricultural/Fishery Industries by Statistics 2022" published by the Department ofAgriculture and Fisheries, Kagawa Prefectural Government

Number of ships enteringTakamatsu Port(overseas + coastal) No. 14 in Japan

30,436ships	No. 1 in Shikoku
(2020)
*Source: Ministry of Land, Infrastructure,Transport andTourism website
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Hyakujushi Group's vision

Message from the President

Clarifying our vision with the keyword of "Well-being"

Through evolution of the general consulting group, we will create a society with well-being together with local community members

July 2023

Yujiro Ayada, President

Business Deployment Based on Material Issues

I sincerely thank you for your continued patronage of the Hyakujushi Bank. In FY 2022, the final year of our previous medium-term management

plan "Try Mirai (Future)!," we steadily advanced initiatives aimed at transforming into a general consulting group. As a result, as exemplified by a return to profitability of our customer-oriented services business, etc., I believe we successfully laid the groundwork for a new stage.This is thanks to the strong support of our various stakeholders, including customers, shareholders, and employees, and for that I am deeply grateful.

When formulating the New Medium-term Management Plan launched in April, we identified the major themes (material issues) the Hyakujushi

ideal version of ourselves once we have found solutions to the identified material issues.This is the first time that the Hyakujushi Bank has formulated a long-term vision and, with "Well-being" as the keyword, we aim to shift from the concept of "short-term perspective with the Bank as the focal point" to the concept of "long-term perspective with the customers and the community as the focal points" in order to promote sustainability management.

As such, I'd like to introduce our Long-termVision 2030 and New Medium-term Management Plan in more detail, including the ideal vision of the company we strive to be and the sentiment behind it.

With the aim of achieving our CorporateVision to "prosper together with customers and communities," we considered changes in the external environment and ESG elements, then sorted the major themes our Group should address, and finally identified six "Hyakujushi Group Material Issues."

By deploying business focused on these Hyakujushi Group Material Issues, we hope to create a society of well-being together with local community members.

Hyakujushi Group Material Issues

Efforts to revitalize the local economy

Respond to the era of 100-year lifetimes

Establish an environment where diverse human resources can participate and grow

Digital transformation of our operations and local communities

Initiatives to address environmental issues such as climate change Establish a sustainable management foundation

Group should address and slated our Long-termVision 2030 to depict the

P. 14 "Hyakujushi Group Material Issues"

The sentiment behind our "Long-term Vision 2030"

We chose "Through evolution of the general consulting group, we will		altruism" through our Corporate Vision to "prosper together with
create a society with well-being together with local community mem-		customers and communities."
bers" as the underlying statement of our recently formulated Long-term		"Jiri-tari" is a Buddhism teaching and means that in our attempt to
Vision 2030.The "local community members" component of this		achieve long-term sustainability for the Hyakujushi Group, providing
statement contains the sentiment of "jiri-tari" or "self-interest and		our customers and communities with what they truly seek rather than

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Hyakujushi Group's vision

Message from the President

prioritizing our own interests will ultimately result in our profit.We hope to manifest this "Jiri-tari" concept in our future business activities and the conduct of our employees. Based on this concept, we hope to achieve the sustainability KPIs pertaining to material issues for

Evolution of the general consulting group

"Environment and Social Values," as well as the targets of a consolidated ROE of around 5% and consolidated capital ratio of around 10% for "Economic Values," as the values we will create through the realization of our Long-term Vision.

"strengthening of HR capability to promote strategy" in order to increase employees' passion and capability so that we may obtain the strategic personnel allocation required to realize our vision. For example, through the side-job system introduced this April, we had already authorized the side jobs of Shinto priest and movie producer/scriptwriter. I believe through such activities, employees can acquire a broad range of skills, knowledge, and interpersonal connections that they can leverage to vitalize the local economy. Also, by establishing an environment in which a diversity of people can work, we hope to create a virtuous circle of

Our Long-term Vision statement contains the words "evolution of the general consulting group" as opposed to the "transformation to a general consulting group" of the previous medium-term management plan. Here, if we look back at our accomplishments under the previous plan, firstly in terms of framework, we consolidated the corporate consulting functions that had previously been spread between different divisions to newly establish a Consulting Division. Next, in terms of human resource development, we established 114 Meister system as the Bank's internal qualification system, promoted diversification of career paths, and increased the number of "Professional human resources" in consulting, digital, and other areas by 55 people through placement of trainees with outside entities and mid-career recruitment.While pushing ahead with such framework establishment, we also enhanced our consulting services in the areas where customer needs are especially high; namely consulting in relation to business management, human resources, ICT, business continuity, and overseas support. In that regard, I believe we progressed fairly close to our goal of "transformation to a general consulting group" set out in the previous medium-term management plan.

In our Long-term Vision 2030, we will further "evolve" the general consulting group frameworks we prepared in our previous plan and

strengthen our ability to find solutions to the issues that our customers and communities face.You may ask, what exactly do we aim for when we say "evolve"? First, in the consulting domain, we will enhance the quality of our consulting through further sophistication of our services. In addition, we will boldly take on the challenge of participating in areas we are now able to due to recent industry deregulation, thus broadening the scope in which we can offer solutions. At the same time as expanding our non-financial businesses, we will continue firmly providing consulting services as a regional bank that has walked alongside customers and communities and accumulated a wealth of knowledge in the financial domain over our long history; recognizing that this is an indispensable part of our business.With the ending of Japan's low-interest policy that has continued for many long years, the Hyakujushi Group's sustainability will no doubt require the sophistication of financial areas and synergism with non-financial areas. I believe the "evolution of the general consulting group" will be achieved by strengthening our ability to find solutions to the issues that our customers and communities face through the above-mentioned initiatives which will lead to an increase in the profit of our main business.

P.09-10"Long-termVision 2030"

generating new human capital.

We plan on rolling out various other measures related to employees, and would be very happy if the result was employees coming to think "I'm glad I came to work at the Hyakujushi Group," which would in turn lead to customers coming to think "I'm glad I do business with the Hyaku- jushi Group."

DX (Digital Transformation)

Next is "DX," which we have defined as the "growth engine that will transform business through data and digital technology," and aim to provide customers and communities with new values and experiences as well as dramatically improve productivity.

We also exerted efforts in promoting DX in our previous medium -term management plan "Try Mirai (Future)!" through activities such as releasing the 114 Banking app as a non face-to-face channel for our retail customers and preparing for the introduction of a "branch tablet" aimed at alleviating the burden of customers filling out forms in the branch and reducing wait times. In recognition of our efforts, the Ministry of Economy,Trade and Industry certified us as a DX Certified Operator in October 2022, in accordance with its DX certification system.

This time, under our "Let's Create a Good 114 " plan, we will

SX (Sustainability Transformation)

Finally, we have defined "SX" as the "growth engine to increase corporate value on a mid-to-long term basis through achieving sustainability for both local communities and the Hyakujushi Group." Here, we will promote business deployment based on the Hyakujushi Group Material Issues.

Among these, so that we can address "response to climate change" and "financial education amid the era of 100-year lifetimes" which are issues of particularly high concern in recent years, we will strengthen our efforts to achieve our long-term goals for FY 2030.

Specifically, as response to climate change, we will strengthen our energy-saving and energy-creating activities so that we may ease the burden on the environment, and have set a target of halving Scope 1 and 2 CO2 emissions reduced by half of FY 2013 level by FY 2030. In addition to providing financial support for customers' and communities' decarbonization efforts by promoting sustainable finance, we will also provide non-financial support by offering various solutions to help customers decarbonize their businesses, thereby contributing to solving environmental issues.

New Medium-term Management Plan "Let's Create a Good 114 "

As Phase 1 of the Long-term Vision 2030, we have back-casted to establish
	Key strategies of "Let's Create a Good 114 "
four key strategies for our new medium-term management plan "Let's
	Evolution of the general consulting group
Create a Good 114 ." In order to advance these strategies effectively, we
	Enhancement of employee well-being
will promote three transformations as our "growth engines."
		Dramatic improvement of productivity
		Establishment of a sustainable management foundation

endeavor to not only advance initiatives aimed at enhancing customer convenience, but also dramatically improve productivity through digitization of stores and business operations so that we may achieve ultra-maximization of human capital through synergism between DX and HRX.

Moreover, in order to achieve "digital transformation of our operations and local communities," which has been identified as a Hyakujushi Group Material Issue, our Group will combine its strengths to sophisticate our ICT consulting service and support the digital transformation of local customers and local government.

With the highest savings account balance per household and the highest iDeCo subscription rate in Japan, Kagawa Prefecture has always been a financially literate region, but we intend to expand our financial education initiatives to the future generations (elementary, junior high, high school, and university students) and teachers in the region and contribute to further improvement of financial literacy in the region with a target of 10,000 people receiving such education by FY 2030.

P.19-20 "Let's Create a Good 114 "

The 3 transformations of "Let's Create a Good 114 " (HRX, DX, SX)

		HRX(Human Resources Transformation)			Takeda Shingen, "The people are your castle, your stone walls, your
Firstly, in regards to "HRX," we have defined this as the "growth engine		moat. Protect them, and they shall protect you," ultimately everything
that will maximize human capital by linking management strategy with		comes down to people, so we must shape our employees to be such
human resource strategy," and aim for the ultra-maximization of our		strong assets.
ability to offer value to customers and communities while achieving		In "Let's Create a Good 114 " we will roll out various measures to
synergism with DX promotion efforts. As per my motto, a quote from		achieve "demonstration of capability by fostering engagement" and

"Hyakujushi is Good!"That's what we hope to hear.

In formulating our recent Long-termVision 2030 and "Let's Create a		By steadily promoting the new medium-term management plan "Let's
Good 114 " plan, we thoroughly renewed our awareness that the		Create a Good 114 " as Phase 1 of our Long-termVision 2030, I hope to
significance of our Group's very existence is "promoting dialogue with		hear feedback from customers and communities that "Hyakujushi is Good!"
customers and communities to generate wisdom, work hard, and exert		I sincerely thank you and humbly request your continued support and
every effort at finding solutions in order to realize an abundant local		patronage of the Bank.
community where residents can continue enjoying a better life."

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