Hokkoku Financial Holdings, Inc. (hereafter the company) is a holding company (wholly-owning parent company) established on October 1, 2021 by core subsidiary Hokkoku Bank, Inc. through a simple share transfer. The company's subsidiaries include Hokkoku General Leasing Co., Ltd., Hokkoku Credit Service Co., Ltd., Hokkoku Management, Ltd., Digital Value, Ltd., CC Innovation, Ltd., QR Investment, Ltd., and FD Advisory. The following information relates to the core subsidiary, Hokkoku Bank (hereafter referred to as the bank). The bank was delisted as of September 29, 2021.
Hokkoku Bank is a mid-tier regional bank with a lending share of 42.5% in Ishikawa Prefecture. The bank is one of the 62 regional banks classified by the Financial Services Agency (FSA), among 189 Japanese banks licensed to operate in Japan under the Banking Act. Its loans outstanding in the prefecture now stand at JPY4.3tn. The bank raises short-term funds through individual deposits and invests in long-term assets such as corporate loans and securities, earning the yield spread between long- and short-term interest rates in the form of interest income, its main source of profit. Against the backdrop of a sustained decline in its deposit-lending margins, Hokkoku Bank considers reducing general and administrative expenses and expanding noninterest income as top priorities for its Banking business. It has scaled down its branch network by just under 40%, and in May 2021 became the first Japanese bank to launch the cloud-based operation of its backbone system (core banking system that manages customer accounts). The bank is digitalizing its banking operations ahead of rivals, and strengthening its cost competitiveness in an effort to support sustainable operations.
Hokkoku Bank has been focusing on expanding noninterest income businesses (Consultation services, Bank cards, and Leasing) to offset a decline in its interest income attributable to a contraction in deposit-lending margins. At present, its net noninterest income accounts for 16.3% of core gross profit (equivalent to gross profit for companies; total of net interest income and net noninterest income), exceeding the average of 14.8% for the 62 regional banks as of FY03/20. Non-consolidated core gross profit has shown a CAGR of -1.7% over the last 10 years. Non-consolidated core operating profit (equivalent to operating profit for companies) CAGR has been -3.6%, which as of FY03/21 was still declining at a rate slower than at rivals (Hokuriku Bank: -4.1%, Fukui Bank: -9.0%).
Hokkoku Bank commenced a drastic overhaul of its business model in 2000. The objective was to create a virtuous cycle by enhancing productivity through the adoption of information and communications technology (ICT). This was expected to fuel changes in work styles, drive reforms of the personnel evaluation system, and ultimately give rise to a mindset change of employees that would further accelerate productivity improvements. The bank adopted groupware to visualize its operations and enhance productivity. It also revamped its personnel evaluation system, discarding the traditional sales quotas imposed by supervisors and introducing a system that assesses employees based on whether they achieved objectives in collaboration with their colleagues and organizations. These reforms have virtually eliminated overtime work and contributed to a change in employee mindset from the previous emphasis on meeting quotas individually to a commitment to resolving customer problems collaboratively as a team.
The reforms that started with a review of the bank’s IT systems (extending to banking office work) have been underway for two decades. They have resulted in reduction of just under 40% in branches, simplified screening processes, a transition from outsourced to in-house systems development, a move of its backbone system to an open system, and the migration of online banking (customer services) to the cloud (a banking industry first in Japan). The bank completed migration of its backbone system to a public cloud service in May 2021 (another industry first). Its labor productivity (core gross profit/number of employees) has been at a CAGR of -0.4% over the last 10 years in part due to contraction in core gross profit, but the decline has still been modest compared with rivals (Hokuriku Bank: -1.0%, Fukui Bank: -3.2%, as of March 2021).
Hokkoku Bank aims to provide additional customer value through Consultation services, leveraging its experience from its own operational reforms and implementation of ICT solutions. It has shifted its focus from ad-hoc lending to a lending stance rooted in an understanding of the potential and future prospects of customer businesses and has started leveraging its screening expertise in Consultation services. Drawing on its experience in digitalizing business processes, it has begun offering ICT and productivity improvement consultation services through a team of 100 members (mainly excess personnel due to branch network reduction). In addition, the bank is a licensed Visa debit card issuer. It not only issues debit cards but also acts as an acquirer, providing a cashless payment method to consumers in the Hokuriku area—where adoption of cashless payments has been slow—and creating earnings opportunities for affiliated merchants. In 2016, Hokkoku Bank became the first Japanese regional bank to launch an overseas branch in Southeast Asia (Singapore) to provide support for business transactions in the region. Through its Singapore branch, the bank provides overseas support to Hokuriku-based companies seeking to expand their sales channels overseas.
Hokkoku Bank’s non-consolidated earnings (core gross profit) comprise net interest income (over 80% of core gross profit) and net noninterest income (fee income). Its income, mainly generated from lending and deposit transactions, is calculated by multiplying loans outstanding by deposit-lending margins, and interest margins are yield on loans minus yield on deposits and general and administrative expenses. While the Bank of Japan (BOJ) has maintained its negative interest rate policy, the bank’s yield on deposits has hovered around zero. As yield on deposits has no room to decline further, the ongoing contraction in deposit-lending margins can be partly attributed to an inexorable decline in the yield on loans. The bank’s fee income (i.e., noninterest income) is a product of the customer count and fees per customer. Income in the Consultation services business is calculated as the hourly rate multiplied by the number of staff deployed, income in the Bank cards business corresponds to affiliated merchant fees (including card issuance fees), and income in the Leasing business is the product of the lease balance and lease rate.
Hokkoku Bank’s strategic decisions are dictated by the Basel III capital adequacy ratio requirements (minimum of 10.5%) specified by the Basel Committee on Banking Supervision (BCBS). To keep its capital adequacy ratio above a certain level, the bank must expand its capital at a faster pace than its assets. At the same time, increases in its capital adequacy ratio lead to a decline in ROE (because ROE = ROA x financial leverage). This means the bank needs to improve ROA to a greater extent than just what is necessary to offset the decline in ROE. To expand ROA (≂ profit/assets ≂ (gross profit/assets) x 1 - overhead ratio [OHR = general and administrative expenses/gross profit]), the bank can pursue two strategies: increase ROA itself or reduce OHR. To strengthen ROA, Hokkoku Bank is focusing on expanding income from its Consultation services, Bank cards, and Leasing businesses. To reduce OHR, it has scaled back its branches and undertaken measures to reduce costs such as migrating its backbone system to the cloud.
On a consolidated basis, Hokkoku Bank reported FY03/21 consolidated ordinary income of JPY79.1bn (+5.8% YoY), ordinary profit of JPY12.9bn (-2.2% YoY), and profit of JPY6.8bn (-7.6% YoY). The consolidated capital adequacy ratio (international standard) was 13.04% (+2.74pp YoY). On a non-consolidated basis, core gross profit came to JPY41.0bn (-1.5% YoY), core operating profit to JPY11.8bn (-3.2% YoY), and ordinary profit to JPY11.3bn (-5.8% YoY). The main factor pushing down profit was a 16.0% YoY increase in cost of credit to JPY11.3bn.
The initial consolidated forecast (released October 29, 2021) for FY03/22, when the company shifted to a holding company structure, called for consolidated ordinary profit of JPY13.0bn (+0.9% YoY) and profit attributable to owners of parent of JPY7.0bn (+3.7% YoY). On a non-consolidated basis, the bank forecasted ordinary profit of JPY12.0bn (+6.4% YoY) and profit attributable to owners of parent of JPY6.5bn (+9.2% YoY). Compared to the initial consolidated forecast for Hokkoku Bank made prior to the shift to a holding company structure, the bank lifted its consolidated ordinary profit forecast by JPY500mn and its profit attributable to owners of parent forecast by JPY1.5bn.
Hokkoku Bank traditionally revised its medium-term business plan every three years, but unveiled a medium- to long-term management strategy that spans a five to ten-year period, which will be updated annually, when announcing FY03/21 results. The new strategy targets consolidated ordinary profit of JPY16.0bn in FY03/26 (CAGR of 4.6% from FY03/21) and JPY21.0bn in FY03/31 (CAGR of 5.1% from FY03/21), and profit attributable to owners parent of JPY10.0bn in FY03/26 (CAGR of 8.3%) and JPY13.0bn in FY03/31 (CAGR of 6.9%). The bank targets OHR in the 55–60% range (70.7% in FY03/21) and ROE of 4.5% (2.5%) in FY03/31.
Hokkoku Bank’s strengths are 1) distinct measures to stay ahead of rivals through the early adoption of digital and cloud solutions to streamline operations, 2) growth in noninterest income businesses driven by Consultation services, and 3) successfully avoiding labor productivity decline by consistently enhancing productivity and strengthening noninterest income. Its weaknesses are 1) its vulnerability to structural declines in demand as the population contracts in its core market, the three Hokuriku prefectures, 2) its slow progress in enhancing credit risk management among internationally active banks, and 3) a lack of diversity in personnel recruiting.
|(JPYmn)||Cons.||Cons.||Cons.||Cons.||Cons.||Cons.||Cons.||Cons.||Cons.||Cons.||HD cons. est.|
|Consolidated ordinary income||70,160||69,314||66,573||74,109||74,686||67,413||68,633||67,114||74,740||79,098|
|Non-consolidated ordinary income||58,524||58,248||55,409||63,162||64,125||56,729||57,693||56,610||64,050||68,414|
|Non-consolidated core gross profit||48,669||46,951||46,384||47,162||46,414||43,949||45,041||41,509||41,584||40,954|
|Non-consolidated core operating profit||18,270||17,098||16,606||16,856||17,974||15,142||16,694||13,253||12,162||11,778|
|Consolidated ordinary profit||14,865||14,123||16,798||18,941||17,601||15,867||16,367||14,165||13,181||12,890||13,000|
|Profit attributable to owners of parent||6,314||6,994||7,855||7,989||9,569||10,851||10,163||8,583||7,310||6,752||7,000|
|Per-share data (split-adjusted|
|Shares issued ('000)||32,740||31,740||31,460||31,460||29,990||29,990||29,990||29,110||29,110||28,115|
|EPS (fully diluted)||189.7||216.5||249.2||254.8||313.6||361.3|
|Dividend per share||60.0||60.0||70.0||70.0||80.0||90.0||90.0||80.0||70.0||80.0||80.0|
|Book value per share||6,223.9||6,657.5||6,835.4||7,829.4||7,524.0||8,138.8||9,029.6||9,106.3||8,361.4||9,954.4|
|Consolidated balance sheet (JPYmn)|
|Cash and due from banks||55,927||77,445||160,303||544,907||467,351||748,544||1,094,772||1,221,400||1,389,813||1,483,423|
|Loans and bills discounted||2,265,382||2,322,999||2,350,504||2,355,374||2,328,285||2,315,444||2,402,114||2,567,333||2,599,328||2,614,865|
|Lease receivables and investment assets||21,588||21,495||22,812||21,672||21,741||25,160||29,602||33,335||36,532||35,846|
|Property, plant and equipment||35,511||33,551||37,368||38,301||36,923||35,223||34,155||32,804||31,414||31,428|
|Call money and bills sold||195||12,659||324,605||67,916||293,334||696,969||847,399||981,819||718,694|
|Adjusted shareholders' equity||171,875||175,276||180,620||182,882||188,353||198,706||201,734||207,876||210,266||215,077|
|Total net assets||209,777||218,492||223,438||247,730||235,020||252,358||268,777||271,215||240,765||286,269|
|Total liabilities and net assets||3,405,627||3,487,404||3,513,777||4,179,790||3,904,020||4,320,364||4,772,893||5,029,226||5,097,268||5,524,513|
|Consolidated equity ratio||6.0%||6.1%||6.1%||5.7%||5.8%||5.6%||5.5%||5.2%||4.6%||5.0%|
|Cash flow statement (JPYmn)|
|Cash flows from operating activities||14,973||-8,211||73,257||637,701||-218,579||324,491||290,627||140,604||110,694||191,877|
|Cash flows from investing activities||-820||34,841||12,420||-247,118||143,804||-41,647||63,755||-12,320||61,370||-127,274|
|Cash flows from financing activities||-19,869||-5,133||-3,249||-5,791||-3,945||-3,243||-8,884||-2,627||-5,852||18,342|
|Financial ratios (non-consolidated)|
|Deposits and negotiable certificates of deposit||3,107,913||3,164,634||3,174,562||3,155,196||3,188,655||3,306,839||3,452,266||3,614,553||3,712,689||4,052,046|
|Loans and bills discounted||2,274,730||2,331,905||2,358,615||2,363,132||2,335,593||2,324,495||2,412,919||2,582,965||2,617,944||2,633,905|
|Dependency on securities investment||22.15%||21.05%||21.01%||25.03%||26.90%||26.94%||33.23%||31.95%||24.83%||22.47%|
|Cash reserve ratio||4.15%||5.63%||5.53%||17.27%||14.65%||23.54%||33.29%||33.79%||37.43%||36.61%|
|Overhead ratio (core gross profit-based)||62.46%||63.58%||64.20%||64.26%||61.27%||65.54%||62.94%||68.07%||70.75%||71.24%|
|ROA (ordinary profit-based)||0.40%||0.35%||0.42%||0.45%||0.41%||0.34%||0.33%||0.26%||0.24%||0.21%|
|Profit ratio of customer services||0.35%||0.29%||0.25%||0.18%||0.19%||0.15%||0.12%||0.13%||0.09%||0.04%|
|Credit cost ratio||0.18%||0.25%||0.07%||0.32%||0.25%||0.05%||0.06%||0.12%||0.37%||0.43%|
|Lending margin (after credit costs)||1.36%||1.17%||1.27%||0.96%||1.03%||1.16%||1.04%||0.89%||0.63%||0.52%|
|Yield on loans (year-end balance-base)||1.55%||1.42%||1.34%||1.28%||1.27%||1.21%||1.10%||1.02%||1.00%||0.95%|
|Total capital adequacy ratio (consolidated)||13.62%||13.69%||13.06%||11.72%||12.98%||12.60%||12.32%||11.78%||10.30%||13.04%|
|Tier 1 ratio (consolidated)||11.62%||11.79%||11.76%||11.24%||9.65%||11.41%|
|CET1 ratio (consolidated)||11.61%||11.78%||11.76%||11.23%||9.65%||11.40%|
Gross profit = Net interest income + Net fees and commissions + Net trading income + Net other operating income
Core gross profit = Net interest income + Net fees and commissions + Net trading income + Net other operating income - Net gains/losses on bonds
Net interest income: The difference between interest income generated by investing funds (interest on loans and discounts and interest and dividends on securities generated by investing deposits and other funds in loans and securities), and interest expenses paid to raise funds (e.g. interest on deposits).
Net fees and commissions: Fees and commissions minus fees and commissions payments. Net fees and commissions, earned when the bank provides services, are the difference between fees and commissions collected for services offered by the bank (such as fund transfer, investment trust sales, insurance sales, and arrangement of syndicated loans), and the expenses needed to provide such services. It includes fees and commissions on domestic and foreign exchanges (the largest component), fees and commissions on fund transfers for individuals or companies (including syndicated loan arrangement fees and ATM usage fees), fees and commissions earned in the investment banking business (including for M&A), and fees and commissions on sale of investment trusts and insurance products at bank branches.
Net trading income: Net income from trading accounts (designated for trading purposes) that aim to generate capital gains from short-term fluctuations in securities or currency exchange market prices (including derivatives transactions and foreign exchange transactions such as forward foreign exchange contracts) or from variation among markets. Net trading income is the difference between income and expenses directly related to transactions in trading accounts. This is a separate account to record results from transactions that are distinct from non-trading operations such as lending and deposits. Trading income mainly comes from gains realized through operations with trading accounts such as market transactions (such as securities) and derivatives transactions. Trading expenses, which are expenses incurred in trading account operations, roughly correspond to losses incurred on market transactions of securities and derivatives transactions. Hokkoku Bank does not operate trading accounts, so it does not record trading income or trading expenses.
Net other operating income: Profits other than net interest income or net fees and commissions. This includes gains/losses on sale of bonds such as government bonds held for investment purposes (net gains/losses on bonds) and gains/losses from foreign exchange and bonds trading (sales/purchase of foreign currencies). Net gains/losses on bonds are generated from sale of government bonds and other bonds held. In other word, net gains/losses on bonds can be considered unusual gains/losses.
Net noninterest income = Net fees and commissions + Net trading income + Net other operating income
Core operating profit = Core gross profit - General and administrative expenses
Cost of credit = Provision of allowance for general loan losses + Non-performing loans (NPL) disposal amount - Reversal of allowance for loan losses - Recoveries of written-off claims
Hokkoku Financial Holdings announced its full-year FY03/22 consolidated earnings and dividend forecasts.
Hokkoku Financial Holdings on October 29, 2021 disclosed its full-year FY03/22 earnings forecast. At the same time, the company upwardly revised its full-year non-consolidated Hokkoku Bank earnings forecast, factoring in gains on securities that exceeded its initial forecast. That said, the company expects full-year earnings to remain flat YoY, largely on the assumption that the COVID-19 pandemic will, at least to some extent, continue to have an impact on the overall economy. The company forecasts consolidated ordinary profit of JPY13.0bn and profit attributable to owners of parent of JPY7.0bn. Compared to the initial consolidated forecast for Hokkoku Bank that were made prior to the shift to a holding company structure, the company lifted its consolidated ordinary profit forecast by JPY500mn and its profit attributable to owners of parent forecast by JPY1.5bn. On a non-consolidated basis, the company forecasts Hokkoku Bank full-year ordinary profit of JPY12.0bn (up JPY500mn from the previous forecast) and profit attributable to owners of parent of JPY6.5bn (up JPY1.5bn from the previous forecast).
On the same day, the company announced a decision had been reached regarding the repurchasing of shares.
The company at a board of directors meeting held on the same day resolved to repurchase its own shares in order to ensure flexibility in its capital policies and return profits to its shareholders.
Hokkoku Bank, Inc. established Hokkoku Financial Holdings, Inc. as a holding company (wholly-owning parent company) through a simple share transfer on October 1, 2021, and listed it on the First Section of the Tokyo Stock Exchange.
On the same day, the company's Board of Directors resolved to acquire all shares of the consolidated subsidiary held by Hokkoku Bank, which became a subsidiary of Hokkoku Financial Holdings, by receiving dividends in kind from Hokkoku Bank, and to make it a direct investment company.
The company plans to continue with the medium-term management strategy and the dividend policy that Hokkoku Bank has announced. It also plans to announce the FY03/22 full-year consolidated earnings forecast and year-end dividend forecast for FY03/22 alongside Hokkoku Bank's 1H results.
The Hokkoku Bank, Ltd. announced that it had been designated as a DX (digital transformation)-Certified Business Operator.
The bank was the first among regional banks to obtain the DX Certificatio
The bank was the first in Japan to move its full banking system to the cloud; it also succeeded in cloud migration and in-house development of its internet banking system. The bank commented that it would endeavor to further transform its business model through utilizing digital technology, with the aim of realizing "digital regionalism."
DX Certification System
Implemented on May 15, 2020, it is a certification system based on the Partial Revision of Act on Facilitation of Information Processing. The METI grants DX certifications to business operators that have taken steps to satisfy the certification criteria—such as formulating management visions and installing DX strategies and systems—and are ready to promote DX.
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||% of Est.||HD est.|
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||% of Est.||HD est.|
|Gross profit (A)||12,645||23,963||37,546||47,538||11,718||21,316||31,711||38,727||12,591||24,097|
|Core gross profit (A)-(B)||11,073||20,704||31,873||41,584||10,915||20,255||30,819||40,954||11,186||21,065|
|Net interest income||9,524||17,550||27,027||34,876||9,337||17,163||26,305||34,259||9,586||17,747|
|Net fees and commissions||1,347||2,771||4,263||5,938||1,432||2,829||4,195||5,737||1,398||2,824|
|Net other operating income||1,773||3,642||6,255||6,723||948||1,322||1,210||-1,269||1,607||3,524|
|Net bond-related gains (losses) (B)||1,572||3,259||5,673||5,952||803||1,061||892||-2,226||1,405||3,032|
|General and administrative expenses (C)||7,183||14,386||21,955||29,422||7,287||14,532||21,850||29,175||7,401||14,720|
|Net OP (before provision for general loan loss) (A)-(C)||5,461||9,577||15,591||18,116||4,431||6,783||9,860||9,551||5,190||9,377|
|Core operating profit (A)-(B)-(C)||3,889||6,317||9,917||12,162||3,627||5,722||8,967||11,778||3,784||6,344|
|Core OP (ex. gains [losses] on trust cancellation)||3,724||6,075||9,568||11,813||3,627||5,699||8,776||11,587||3,566||5,968|
|Provision for ordinary loan loss  (D)||-139||579||1,564||2,674||312||1,653||1,834||3,060||503||1,425|
|Operating profit (A)-(C)-(D)||5,601||8,998||14,026||15,441||4,118||5,130||8,026||6,491||4,687||7,951|
|Net bond-related gains (losses) (B)||1,572||3,259||5,673||5,952||803||1,061||892||-2,226||1,405||3,032|
|Nonrecurrent gains (losses)||92||-658||-1,641||-3,464||2,825||3,149||6,255||4,792||8,428||7,304|
|Net stock-related gains||3,125||3,541||4,192||3,975||3,400||8,317||12,249||13,239||8,871||10,483|
|Nonperforming loan disposal ||3,338||4,298||5,746||7,103||1,409||5,515||6,150||8,335||878||3,588|
|Reversal of provision for loan-loss |
|Gain on recovery of written-off claims ||2||10||12||17||2||4||68||72||1||8|
|Extraordinary income (losses)||-89||-195||-559||-1,154||-58||-637||-664||-897||-54||-241|
|Profit before income taxes||5,603||8,143||11,825||10,823||6,885||7,642||13,617||10,385||13,061||15,014|
|Credit cost (+--)||3,196||4,867||7,298||9,759||1,720||7,164||7,916||11,322||1,379||5,005|
|Securities-related gains (incl. stock and bonds)||4,697||6,800||9,865||9,927||4,203||9,378||13,141||11,013||10,276||13,515|
|Gross profit (A)||12,645||11,318||13,583||9,992||11,718||9,598||10,395||7,016||12,591||11,506|
|Core gross profit (A)-(B)||11,073||9,631||11,169||9,711||10,915||9,340||10,564||10,135||11,186||9,879|
|Net interest income||9,524||8,026||9,477||7,849||9,337||7,826||9,142||7,954||9,586||8,161|
|Net fees and commissions||1,347||1,424||1,492||1,675||1,432||1,397||1,366||1,542||1,398||1,426|
|Net other operating income||1,773||1,869||2,613||468||948||374||-112||-2,479||1,607||1,917|
|Net bond-related gains (losses) (B)||1,572||1,687||2,414||279||803||258||-169||-3,118||1,405||1,627|
|General and administrative expenses (C)||7,183||7,203||7,569||7,467||7,287||7,245||7,318||7,325||7,401||7,319|
|Net OP (before provision for general loan loss) (A)-(C)||5,461||4,116||6,014||2,525||4,431||2,352||3,077||-309||5,190||4,187|
|Core operating profit (A)-(B)-(C)||3,889||2,428||3,600||2,245||3,627||2,095||3,245||2,811||3,784||2,560|
|Core OP (ex. gains [losses] on trust cancellation)||3,724||2,351||3,493||2,245||3,627||2,072||3,077||2,811||3,566||2,402|
|Provision for ordinary loan loss  (D)||-139||718||985||1,110||312||1,341||181||1,226||503||922|
|Operating profit (A)-(C)-(D)||5,601||3,397||5,028||1,415||4,118||1,012||2,896||-1,535||4,687||3,264|
|Net bond-related gains (losses) (B)||1,572||1,687||2,414||279||803||258||-169||-3,118||1,405||1,627|
|Nonrecurrent gains (losses)||92||-750||-983||-1,823||2,825||324||3,106||-1,463||8,428||-1,124|
|Net stock-related gains||3,125||416||651||-217||3,400||4,917||3,932||990||8,871||1,612|
|Nonperforming loan disposal ||3,338||960||1,448||1,357||1,409||4,106||635||2,185||878||2,710|
|Reversal of provision for loan-loss ||-||-||-|
|Gain on recovery of written-off claims ||2||8||2||5||2||2||64||4||1||7|
|Extraordinary income (losses)||-89||-106||-364||-595||-58||-579||-27||-233||-54||-187|
|Profit before income taxes||5,603||2,540||3,682||-1,002||6,885||757||5,975||-3,232||13,061||1,953|
|Credit cost (+--)||3,196||1,671||2,431||2,461||1,720||5,444||752||3,406||1,379||5,005|
|Securities-related gains (incl. stock and bonds)||4,697||2,103||3,065||62||4,203||5,175||3,763||-2,128||10,276||3,239|
Consolidated ordinary income was JPY44.7bn (+5.4% YoY) and ordinary expenses were JPY28.9bn (-13.4% YoY). As a result, ordinary profit was JPY15.8bn (+74.8% YoY), surpassing the initial 1H forecast of JPY9.0bn with a progress rate of 175.7% and the revised 1H forecast (released October 4, 2021) of JPY15.0bn with a progress rate of 105.4%. Profit attributable to owners of parent came to JPY9.9bn (+95.4% YoY), also exceeding the initial forecast of JPY5.0bn and the revised 1H forecast of JPY9.5bn (progress rate of 103.9%). Non-consolidated ordinary profit was JPY15.3bn (+JPY7.0bn YoY). The JPY7.0bn increase broke down into a JPY2.8bn increase in operating profit (after provision of allowance for general loan losses) and JPY4.2bn rise in non-recurrent gains.
Non-consolidated gross profit was JPY24.1bn (+JPY2.8bn YoY), breaking down into a JPY584mn increase in net interest income, JPY5mn fall in net fees and commissions, and JPY2.2bn rise in net other operating income. The JPY2.2bn rise in net other operating income was mainly due to a JPY2.0bn increase in net gains on bonds. The JPY4.2bn increase in non-recurrent gains was broken down into a JPY2.2bn increase in net stock-related gains and a JPY1.9bn decline in the amount of NPL disposal.
Core gross profit adjusted for the effect of net gains/losses on bonds increased JPY809mn YoY to JPY21.1bn and core operating profit was up JPY622mn YoY to JPY6.3bn. Gains/losses on securities (bonds and equity) grew JPY4.1bn YoY to JPY13.5bn. Cost of credit was down JPY2.2bn YoY to JPY5.0bn, while the ratio of cost of credit to the loan balance was 19.1bps (-8.0bps YoY).
As of end-September 2021, the consolidated capital adequacy ratio (international standard) rose 0.27pp from end-FY03/21 to 13.31%, and over the same period, the tier 1 capital ratio rose 0.19pp to 11.60%.
Core gross profit rose JPY809mn YoY to JPY21.1bn (+4.0% YoY). Net interest income was the growth driver, increasing JPY584mn YoY (+3.4% YoY) to JPY17.7bn. The JPY584mn rise in net interest income reflected an increase of JPY965mn in interest and dividends on securities and a decrease of JPY535mn in interest on loans and discounts. Non-consolidated loans outstanding of JPY2.6tn was down JPY17.3bn versus end-FY03/21. The non-consolidated yield on domestic loans was 0.92%, down 3bps from 0.95% in 1H Fy03/21. The decline here was largely within expectations, as the company had expected the yield to fall by about 5bps for the full year.
Net fees and commissions were down JPY5mn (-0.2% YoY) to JPY2.8bn. Income from new businesses (Consultation services, Bank cards, and Leasing) was JPY1.0bn (Bank cards income of JPY502mn, Consulting services income of JPY345mn, and Leasing
Consolidated income from new businesses (1): The company began applying the new Accounting Standard for Revenue Recognition in the Bank cards business from Q1 FY03/22. Consolidated net operating income in the Bank cards business fell JPY148mn YoY to JPY563mn, but excluding the impact of the application of the new accounting standard (i.e., after adding in JPY202mn taken away due to the application of the new accounting standard), net operating income was JPY765mn, representing a YoY increase of JPY54mn. Hence, in 1H consolidated income from new businesses was up JPY94mn YoY to JPY1.8bn (net operating income of JPY563mn in Bank cards + impact of JPY202mn from the application of the new accounting standard + income of JPY384mn [+JPY94mn YoY] in Consulting services + net operating income of JPY614mn [-JPY54mn YoY] in Leasing business). The company expects growth in 2H after the impact from the pandemic has subsided.
Consolidated income from new businesses (2): Consulting services income rose 39.2% YoY in 1H, as income from corporate consulting services made up for the sluggishness in Q1 (50% YoY drop in income). The Leasing business struggled, but Hokkoku Bank thinks the business can recover in 2H.
Net other operating income grew JPY2.2bn (of which, JPY2.0bn was from growth in net bond-related gains) to JPY3.5bn (of which, JPY3.0bn were net bond-related gains).
General and administrative expenses increased JPY188mn YoY to JPY14.7bn. Non-personnel expenses increased JPY232mn YoY and taxes JPY3mn, but personnel expenses were down JPY48mn YoY. The increase in non-personnel expenses was due to additional IT system-related investment. OHR was 69.9%, down 1.8pp from 71.7% in 1H FY03/21.
Core operating profit was JPY6.3bn (+JPY622mn YoY).
Non-recurring gains increased JPY4.2bn YoY to JPY7.3bn (+131.9% YoY), primarily owing to a YoY increase of JPY2.2bn (+26.0% YoY) in net stock-related gains.
Cost of credit fell (provision of allowance for general loan losses + amount of NPL disposal - reversal of allowance for loan losses - recoveries of written-off claims) fell JPY2.2bn YoY to JPY5.0bn. Cost of credit exceeded initial expectations by about JPY1bn due to a drop in the borrower classification of claims for some major customers. However, the provision of allowance for general loan losses fell JPY228mn, and the NPL disposal amount was down JPY1.9bn to JPY3.6bn. The share of NPLs based on the Financial Reconstruction Act was 2.24%, up 0.02pp YoY and unchanged from 2.24% at end-FY03/21. The credit cost rate (cost of credit as a share of outstanding loans of JPY2.6tn) as of end-September 2021 was 19.1bps, down 8.0pp from 27.1bps a year earlier.
The bank had previously planned a cost of credit of around JPY8.0bn for the full-year, but revised the full-year projection to JPY9.0bn. The new cost of credit projection is still below the previous year's JPY11.3bn. For the past three years, the bank has worked to shift its focus from quantity to quality, and disposed of NPLs worth around JPY30bn. It aims to dispose of NPLs at the rate of JPY3.0–4.0bn per year.
Gains/losses on securities totaled JPY13.5bn (net gains on bonds up JPY2.0bn and net stock-related gains up JPY2.2bn for a total increase of JPY4.1bn). The bank appears to have reduced its exposure to bond investment after interest rates rose in Q1 FY03/22. Although gains on securities exceeded JPY13bn in 1H, the bank expects this figure to stabilize in 2H onward. Unrealized gains (losses) on available-for-sale securities came to JPY84.4bn, down JPY3.8bn from JPY88.2bn as of end-FY03/21.
Hokkoku Bank is aware of the issues of declining gains on bonds due to persistently low interest rates and a deterioration in capital efficiency caused by an increase in surplus funds. In light of these issues, the bank has been focusing on strengthening the management of ultra-long-term government bonds and investment trusts as its investment policy for FY03/22. It plans to invest up to JPY50bn in multi-asset strategy funds and aim for stable earnings by managing funds from the standpoint of moderate risk and moderate return without depending too much on equities. The bank will continue minimizing risks by shirking its balance of equities, and allocate unrealized gains to structural reform expenses including systems investment. Further, it intends to form private funds in-house with advice from the group company FD Advisory.
Ordinary profit increased JPY7.0bn to JPY15.3bn due to a JPY2.8bn increase in operating profit and JPY4.2bn increase in non-recurring gains/losses.
The non-consolidated capital adequacy ratio at end-September 2021 was 12.85%, up 0.12pp from 12.73% as of end-FY03/21.
Acceleration in the implementation of the
FD Advisory commenced operations in October 2021. FD Advisory provides advice on comprehensive matters not limited to products and services of the selling company from a neutral standpoint. Its businesses are 1) financial planning for individual clients; 2) consulting services for financial institutions and other professional investors; 3) and advisory services for fund formation. FD Advisory is unique in that it has expanded the target customer base of its investment advisory services (advice on fund management strategies and fund investment decisions) to fund management companies. It enters into investment advisory contracts with the fund management companies where these companies provide investment trust products that reflect the advice of FD Advisory.
For FY03/22, management previously forecasted consolidated ordinary profit of JPY12.5bn (-3.0% YoY) and profit of JPY5.5bn (-18.5% YoY). The forecast assumed that the impact of COVID-19 on the overall economy would continue to some extent. On a non-consolidated basis, it forecasted ordinary profit of JPY11.5bn (+1.9% YoY), profit of JPY5.0bn (-16.0% YoY), and core operating profit of JPY12.0bn. The bank expects a sharp decline in profit in line with a variety of structural reform costs, including costs incurred as a result of the planned October 2021 shift to a holding company structure.
On October 4, 2021, the company revised up its 1H FY03/22 non-consolidated Hokkoku Bank earnings forecast. This reflected higher-than-expected gains on investment securities on a non-consolidated basis.
Hokkoku Financial Holdings on October 29, 2021 disclosed its full-year FY03/22 earnings forecast. At the same time, the company upwardly revised its full-year non-consolidated Hokkoku Bank earnings forecast, factoring in gains on securities that exceeded its initial forecast. That said, the company expects full-year earnings to remain flat YoY, largely on the assumption that the COVID-19 pandemic will, at least to some extent, continue to have an impact on the overall economy. The company forecasts consolidated ordinary profit of JPY13.0bn and profit attributable to owners of parent of JPY7.0bn. Compared to the initial consolidated forecast of Hokkoku Bank that was made prior to the shift to a holding company structure, the company lifted its consolidated ordinary profit forecast by JPY500mn and its profit attributable to owners of parent forecast by JPY1.5bn. On a non-consolidated basis, the company forecasts Hokkoku Bank's full-year ordinary profit of JPY12.0bn (up JPY500mn from the previous forecast) and profit attributable to owners of parent of JPY6.5bn (up JPY1.5bn from the previous forecast).
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Act.||FY Act.||1H Act. (Hokkoku Bank)||FY Est.||FY Est. (Prior to the shift to HD)||FY Est.|
|Consolidated ordinary income||39,483||35,257||74,740||42,451||36,647||79,098||44,736|
|Consolidated ordinary profit||8,746||4,435||13,181||9,049||3,841||12,890||15,817||13,000||12,500||0.9%|
|Core gross profit (non-cons.)||20,704||20,880||41,584||20,255||20,699||40,954||21,064|
|Core operating profit (non-cons.)||6,317||5,845||12,162||5,722||6,056||11,778||6,344||12,000||1.9%|
|Ordinary profit (non-con.)||8,339||3,638||11,977||8,279||3,004||11,283||15,255||12,000||11,500||6.4%|
Hokkoku bank has indicated that it aims to accelerate its medium-term business plan through FY03/24 by one or two years. Therefore, its earnings are unlikely to expand in the near term as the bank expects performance in FY03/21–22 to be weighed down by growth in expenses associated with upfront investment and by an increase in cost of credit due to the impact of the COVID-19 pandemic.
Net interest income: The bank basically looks for a 5bp decline in the yield on loans over the full year, but its yield on non-corporate loans (consumer loans) is showing signs of bottoming out due in part to the effects of a 0.1pp hike in the bank’s prime interest rate in autumn 2019. The bank has been reviewing its lending practices and focusing less on quantity and more on quality. The bank’s operating stance is focused on customer relations, with a view towards pointing those customers toward its Consulting services business.
Net fees and commissions: The bank anticipates an increase of 8% YoY, but it was unable to conduct sufficient sales activities in April–May in Q1 FY03/21, so we will carefully watch whether it can compensate for the lag in Q2 and beyond. The bank indicated that activities in its Consultation services and Bank cards businesses were getting back to normal from August 2020.
General and administrative expenses: The bank expects an increase driven by non-personnel expenses. It forecasts an increase in systems-related costs in line with digital transformation (DX) initiatives and efforts to strengthen the development of in-house systems. The bank also expects an increase in personnel expenses, as salaries will increase for employees of group companies other than Hokkoku Bank following an HR system integration of all group companies.
Cost of credit: In the initial forecast, the company had expected cost of credit of JPY8.0bn for the full year, but in 1H, the classification of claims worth JPY1bn of some major customers deteriorated. The company revised its full-year cost of credit forecast to JPY9.0bn (provision of allowance for general loan losses of JPY1.5bn + NPL disposal amount of JPY7.5bn), below the JPY11.3bn booked in FY03/21.
The medium-term management strategy announced by the bank has been in place even after October 1, 2021, when the holding company (wholly-owning parent company) was established.
On April 28, 2021, the bank announced its medium- to long-term strategy. The bank announced as its current medium-term business plan “Communication x Collaboration x Innovation 2024” in November 2019. However, it has changed to a format of visualizing five- and ten-year targets and updating annually its strategies and implementation policies to attain them.
The bank formulated the medium- to long-term business strategy based on the need to have an awareness of its medium- to long-term direction. In addition, the bank will take into account rapidly changing social and environmental conditions to implement and regularly update the strategy for increased flexibility and to ensure that it is in line with actual conditions.
Profit and other numerical targets for five and ten years ahead are as follows.
|(JPYmn)||FY03/21||FY03/26||FY03/31||CAGR (FY03/21–FY03/26)||CAGR (FY03/21–FY03/31)||CAGR (FY03/26–FY03/31)|
|Act.||Five years ahead||Ten years ahead|
|Recurring profit (cons.)||12,800||16,000||21,000||4.6%||5.1%||5.6%|
|Net interest income||34,600||33,500||33,000||-0.6%||-0.5%||-0.3%|
|Net fees and commissions||8,100||12,000||15,500||8.2%||6.7%||5.3%|
|Other new businesses||0||200||500||-||-||20.1%|
|Core system costs||5,800||6,300||4,800||1.7%||-1.9%||-5.3%|
|Income from new businesses (cons.)||3,900||7,500||11,000||14.0%||10.9%||8.0%|
|Overhead ratio (core gross profit-based||70.7%||65.0%||55–60%|
Expand business bases: augment business bases/areas through new businesses and expand customer base through strengthening of existing businesses
Make credit risk management and support system more sophisticated: management improvement support by understanding business feasibility and strengthening consulting functions
Maximize group synergies: improve the quality of services provided to the local communities by speeding up decision making and ensuring the efficient operation of business
Train people able to contribute toward improving regional quality: increase mobility of group personnel and train next-generation management team
In November 2019, Hokkoku Bank extended its original three-year medium-term business plan covering through FY03/21, until FY03/24 (now effectively a six-year plan), rebranding it as “Communication x Collaboration x Innovation 2024” (the current medium-term business plan).
The medium-term business plan calls for FY03/24 consolidated ordinary profit of JPY16.0bn and profit of JPY10.0bn. It targets JPY4.0bn in non-consolidated income from new businesses, which include Bank cards, Leasing, and Consultation services. As for management indicators, it looks to maintain a capital adequacy ratio in the 11% range, and targets OHR of 60-65% and ROE in the 4.0% range. Over the long term, it aims to bring down non-consolidated OHR to the 50% range and raise non-consolidated ROE to over 5.0%.
The FY03/21 briefing materials show a slight adjustment in the current medium-term business plan, with the non-consolidated profit target lowered from JPY9.5bn to JPY8.0bn. The bank expects net interest income below target of JPY35.0bn on an increase in low-interest loans, including COVID-19 countermeasure loans. Moreover, it expects non-personnel costs of JPY14.5bn, exceeding the target of JPY12.5bn, as it expects DX initiatives and the strengthening of in-house systems development to increase systems-related costs from JPY5.7bn in the plan to JPY7.5bn.
|(JPYmn)||Year 1||Year 2||Year 3||Year 4||Year 5||Year 6|
|Previous medium-term plan|
|Communication x Collaboration x Innovation 2024: Current medium-term plan (three year extension of the previous plan)|
|Ordinary profit (consolidated)||14,165||13,181||12,500||12,890||16,000|
|Net interest income (non-consolidated)||35,556||34,876||35,000||34,259||35,000||34,000|
|Net fees and commissions (non-consolidated)||5,603||5,937||6,500||5,736||9,000|
|Income from new businesses (non-consolidated)||1,224||1,756||2,500||1,912||4,000|
|General and administrative expenses (non-consolidated||28,256||29,422||25,000–25,500||29,175|
|Core system costs||5,700||7,500|
|Core system costs (depreciation, upgrades, operation, and maintenance)||2,600||2,700||3,100||3,100||3,000||2,300||1,600|
|Capital adequacy ratio (consolidated)||11.78%||10.30%||12.5–13.0%||13.04%||Maintain 11.0–12.0%|
|Overhead ratio (non-consolidated; core gross profit-based)||68.1%||70.75%||71.24%||60–65%|
|Number of employees||1,787||1,759||1,764||1,800|
|Number of branches applying the branch-in-branch approach||5||8||11||10–15|
The medium-term business plan does not include a numerical target for core gross profit. Assuming the BOJ will maintain its negative interest rate policy for the foreseeable future, net interest income is likely to remain in a downtrend. The medium-term plan envisages noninterest income businesses will offset the decline in net interest income, while reducing expenses such as depreciation of systems by migrating the core banking system to the cloud.
Accounting for more than half of core gross profit, net interest income CAGR over the past five years has stood at -3.5%. Net interest income tends to follow trends in outstanding of loans and yields on loans. Even if the outstanding of loans CAGR matches that of the past five years (2.4%), a decline in net interest income appears all but inevitable given lower yields on loans.
The medium-term plan calls for non-consolidated income of JPY4.0bn from new businesses, breaking down into JPY2.0bn for the Bank cards business, JPY1.5bn for the Consultation services business, and JPY500mn for the Leasing business. The bank is particularly focusing on income growth in the Bank cards business, which expanded from JPY762mn in FY03/20 to JPY2.0bn. Bank card business income reached to just JPY941mn in FY03/21 due to the impact of the COVID-19 pandemic. The Bank cards business has already been profitable on a single-year basis, and the bank expects the promotion of cashless payment solutions to contribute to increases in affiliated merchants and in the number of debit cards issued.
Hokkoku Bank aims to expand its Leasing business share by achieving an optimal mix of lending and leasing services. However, it has lowered its numerical target from JPY600mn in the previous medium-term plan to JPY500mn in recognition of fierce price competition from major leasing companies. To shore up its group-wide sales capabilities, in April 2020 Hokkoku Bank established a new leasing division to oversee leasing business across the group. The bank has consolidated its credit decisions and response policies, and set up an operating structure that covers all aspects from lease consultations to execution. Shared Research understands that the bank will emphasize cooperation with Hokkoku General Leasing as the bank shifts to a holding company structure.
In the Consultation services business, the bank aims to cultivate professional personnel who can handle a large number of complex challenges and provide new value from a top management perspective. By expanding target customers beyond individual companies and providing comprehensive consultation services for corporate groups and industries as a whole, the bank will develop programs that contribute to the development of regional ecosystems.
Hokkoku Bank’s IT system strategy is a critical part of its overall management strategy. Its Hokkoku Cloud Banking system, released in 2019, has mainly supported individual customer transactions but will have support for corporate customer transactions in 2021. This will provide cloud banking support for nearly all of the transactions handled by Hokkoku Bank’s physical branches today. Because the system runs on a public cloud service, the bank will be able to rapidly respond to customer needs while keeping costs down. The bank in May 2021 launched the operation of its cloud-based core banking system. It expects to leverage the resulting data to qualitatively enhance its sales activities from 2022. The bank is also striving to bring the development of subsystems in-house. The in-house development of subsystems is expected to reduce maintenance costs and system upgrade investment.
Hokkoku Financial Holdings, Inc. is a holding company (wholly-owning parent company) established on October 1, 2021 by core subsidiary Hokkoku Bank, Inc. via a simple share transfer. The company's subsidiaries include Hokkoku Bank, Hokkoku General Leasing, Hokkoku Credit Service, Hokkoku Management, Digital Value, CC Innovation, QR Investment and FD Advisory. The following information relates to the core subsidiary, Hokkoku Bank (hereafter referred to as the bank). The bank was delisted as of September 29, 2021.
Hokkoku Bank is a mid-tier regional bank operating out of Ishikawa Prefecture. It was formed out of a merger of Kano Godo Bank, Kashu Bank, and Nowa Bank in December 1943. It became the only regional bank headquartered in Ishikawa Prefecture when former rival Ishikawa Bank filed for bankruptcy in 2001. The bank has no ties with megabanks or conglomerate-controlled banks, and therefore has a strong independent character.
It had total assets of JPY5.3tn as of end-September 2020 (putting it in 31st position among the 64 regional banks nationwide; non-consolidated basis) and had the highest lending share (at 42.5%) in Ishikawa Prefecture in FY03/20 (according to the “Financial Map for 2021” special issue of the monthly magazine “Financial Journal”). Hokkoku Bank has a traditional banking business model centered on deposit and lending transactions. It raises short-term funds through deposits and invests in long-term assets such as loans and securities, earning the yield spread between short and long-term interest rates.
In addition, the bank collects fees from noninterest income transactions (currency transactions such as the transfer of funds between distant areas, and noninterest income businesses including consulting, cards, and leasing operations). In recent years, the bank has focused on Consultation services, Bank cards, and Leasing as new businesses, and its fee-based businesses are expanding steadily.
Hokkoku Bank is headquartered in Ishikawa Prefecture, but it has expanded its presence into neighboring Toyama and Fukui Prefectures. Collectively referred to as the “three Hokuriku prefectures,” these three prefectures form an industrialized zone along the Sea of Japan nearly equidistant from Japan’s three largest metropolitan areas—the Tokyo, Tokai, and Kinki metropolitan areas. By shipment value, the top industries in the region are chemicals (Toyama ranked top among 47 prefectures, Ishikawa 6th, and Fukui 2nd), industrial machinery and equipment (Toyama 4th, Ishikawa 1st, and Fukui 8th), and electronic components, devices, and electric circuits (Toyama 5th, Ishikawa 2nd, and Fukui 1st) (based on the 2014 Census of Manufacture by Ministry of Economy, Trade and Industry [METI]).
Other characteristics common in the three prefectures are high education standards, a high ratio of women in the workforce, and a low employee turnover rate. Access to female labor has contributed to the development of the textile, electronic component, and other industries that require meticulous workmanship. Between 2015 and 2040, the population in these three prefectures is expected to fall 7.1% in Toyama Prefecture, 5.4% in Ishikawa Prefecture, and 5.6% in Fukui Prefecture, exceeding the average national decline of 4.8%. However, the area is expected to attract a growing number of domestic and international tourists once the Hokuriku Shinkansen route—which opened in 2015 and currently runs from Tokyo to Kanazawa (Ishikawa Prefecture)—is extended to Tsuruga (Fukui Prefecture) at the end of FY2023 (The Ministry of Land, Infrastructure, Transport and Tourism on March 31, 2021 revised the expected completion date for the project from end-FY2022 to end-FY2023).
In FY03/21, non-consolidated core operating profit declined YoY due to a rise in cost of credit. However, the bank continues to make steady progress with the transformation of its business model through operational reforms that started in 2000. Its reforms aimed at achieving a low-cost structure began with a shift to paperless operations, and the resulting productivity gains have allowed employees to reduce overtime work and increase time spent interacting with customers. Putting work rationalization via IT systems at the heart of its reforms, the bank has realized a backbone system (core banking system mainly centered on account management) based on open standards and brought systems development and maintenance in-house under a self-reliance policy. It is also working to move its core banking system to the cloud (an industry first), and started operating the cloud-based system in May 2021. It has also leveraged its expertise (accumulated in its own operational restructuring) in paid consultation services aimed at resolving customer problems, and this has contributed to its earnings.
The bank established a holding company, Hokkoku Financial Holdings Co., Ltd., through a simple transfer of shares, effective October 1, 2021. After the establishment of the holding company, all subsidiaries and subsidiary corporations (excluding three non-consolidated subsidiaries) were reorganized as companies directly held by the holding company, using methods such as paying distribution-in-kind to the holding company for all shares held by Hokkoku Bank.
With the goal of accelerating the realization of the “next generation of integrated regional companies,” the bank will consolidate group management functions in the holding company and improve management efficiency in the group as a whole by allowing the subsidiaries, starting with the bank, to specialize in the promotion of their businesses. The bank also aims to expand the range of businesses in which it operates as well as its business lines. For existing subsidiary Digital Value, the focus is on expanding the customer base to other financial institutions and general businesses. For servicer Hokkoku Servicer, the focus is on strengthening the purchasing of receivables from other financial institutions that do not have a servicer function.
Newly established subsidiaries of the company in 2021 include 1) CC Innovation, derived from the Hokkoku Bank consulting department and launched in June 2021, 2) QR Investment, which was launched in June 2021 and provide capital support to a wide range of business partners, including business revitalization companies, business succession companies, and regional revitalization companies, and 3) FD Advisory, which was launched in May 2021 and develops the investment advisory business for individuals and corporations.
In the wake of the restructuring, the bank will be expected to serve as a front-line sales force for the group. The holding company will handle not only planning, auditing, and management administration, but also systems and sales planning. According to the bank, all bank employees will be expected to resign and then be transferred to the holding company subsidiaries as personnel belonging to the holding company.
In terms of the subsidiary names, the CC in CC Innovation stands for Communication & Collaboration, the QR in QR Investment stands for Quality Region, and The FD in FD Advisory stands for Fiduciary Duty.
Hokkoku Bank’s customers are mainly individuals and companies in Ishikawa, Toyama, and Fukui Prefectures. The three Hokuriku prefectures have a total population of approximately 2.98mn (Ishikawa 1.14mn, Toyama 1.06mn, and Fukui 780,000). Based on monthly average disposable income, Ishikawa Prefecture currently ranks top among the 47 prefectures of Japan, Toyama Prefecture 3rd, and Fukui Prefecture 5th, suggesting these are relatively affluent areas. The three prefectures also have high homeownership rates.
|% of Japan||Toyama||Ishikawa||Fukui|
|Total area||sq. km||377,974||12,624||3.34%||4,248||4,186||4,191|
|Gross product by industry (nominal; FY2016)||JPYbn||549,866||12,400||2.26%||4,566||4,623||3,211|
|Number of listed companies||3,843||71||1.85%||27||28||16|
|Number of offices||5,340,783||153,199||2.87%||51,785||59,770||41,644|
|Number of employees||000||56,873||1,423||2.50%||505||541||377|
|Real income per working household (monthly)||JPY'000||534||610||591 (9)||651 (1)||587 (10)|
|Disposable income (monthly)||JPY'000||434||510||510 (3)||517 (1)||504 (5)|
|Income per head||JPY'000||3,217||3,110||3,295||3,023||3,157|
|Passenger cars per head||units||1.052||1.681 (2)||1.488||1.736 (1)|
|Homeownership ratio||％||79.4 (1)||70.8||76.5 (4)|
|Total floor space per home||sqm||150.08 (1)||127.58 (7)||143.83 (2)|
The three Hokuriku prefectures form an industrial zone along the Sea of Japan nearly equidistant from Japan’s three largest metropolitan areas—the Tokyo, Tokai, and Kinki metropolitan areas. By shipment value, the top industries in the area are chemicals (Toyama ranked top among 47 prefectures, Ishikawa 6th, and Fukui 2nd), industrial machinery and equipment (Toyama 4th, Ishikawa 1st, and Fukui 8th), and electronic components, devices, and electric circuits (Toyama 5th, Ishikawa 2nd, and Fukui 1st) (based on the 2014 Census of Manufacture by METI).
|Industry||Products||% of Japan||Shipments from three Hokuriku prefectures|
|Textile industry||Silk, rayon textile refining, bleaching and dyeing||76.4%||0.0%||0.0%||76.4%|
|Polyester long fiber textiles||72.4%||0.0%||36.8%||35.6%||24,121|
|Warp knit fabrics||75.5%||32.0%||2.8%||40.6%||19,622|
|Knit and lace dyeing and finishing|