Message from the President

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July 2018

Innovative Bank: “Shizugin” will Continue to Create New Value along with the Region

Under the 13th Medium-term Business Plan

Hisashi Shibata President

Hisashi Shibata
President

While the earnings environment becomes increasingly challenging owing to large-scale monetary easing typified by negative interest rates, financial institutions are confronting various new issues associated with the era, such as intensifying competition beyond the borders of business sectors caused by the market entry of companies from other business sectors, and change in customer behavior because of the diffusion of smartphones and other devices.

  The 13th Medium-term Business Plan “TSUNAGU” launched in April 2017 sets a course for the Shizuoka Bank Group, clearly defining the actions to be taken in the current era in which change occurs rapidly and it is difficult to anticipate the future. At the same time, it shows our strong determination to become a powerful comprehensive financial group that continues to grow together with the region no matter what the circumstances may be.

  The plan comprises four basic strategies, namely, reinforce core businesses by focusing on regional economic growth, build a new business model for regional banks by developing and monetizing new business fields, reform sales operations using the retail channel and IT infrastructure, and help realize the dreams and increase the wealth of the region, customers, employees, and shareholders.

  While promoting these strategies, we also started three structural reforms targeting earnings, channels, and people, aiming to establish a new business model to open up new possibilities in the changing era.

  The major initiatives we implemented in fiscal 2017, the first year of the plan, are as described in this report. We vigorously developed business under the sales structure that fully embraces the market-oriented approach in order to offer the optimum products and services attuned to customer needs.

  Let me refer to a couple of examples. Firstly, in the core business field that comprises businesses based in Shizuoka Prefecture, we emphasized business support in various ways by fully utilizing the network of the Shizuoka Bank Group, including provision of loans based on a business assessment by appropriately evaluating the nature of the business and its potential, support for applications for various subsidies, and business matching. Over half of companies in Shizuoka Prefecture are expected to face the issue of business succession in the next ten years. In response, at the headquarters we have assigned personnel who provide advice on inheritance and business succession and established a structure whereby our personnel in charge of corporate customers and retail customers collaborate and offer advice to customers on succession of business and assets. In this way, while also collaborating with Group companies and external expert institutions, we have strengthened initiatives to link the vitality of the regional economy to the future.

  In the nationwide market where we do business mainly via the Internet, the Bank’s Internet Branch, which is the base of our strategy, has gained a large support among customers and grown to 200,000 accounts and a deposit balance of 500 billion yen. In addition, we strove to expand services through nonface- to-face channels. For instance, we started handling housing loans and special loans for corporate customers for which all the procedures from application to loan execution can be completed non-face-to-face. Moreover, we conducted a major overhaul of the Bank’s “Shizugin STATION” smartphone app, whose concept is “turn your smartphone into a bank teller!,” for enhanced functions and convenience. As a result of this vigorous business development, the Bank’s financial performance has remained strong. Above all, the average balance of total loans and the balance of consumer loans exceeded ¥8 trillion and ¥3 trillion, respectively, for the first time, increasing the Bank’s stature as a regional bank.

  This could not be achieved without the support of all of our stakeholders and I would like to greatly thank you for your support of the Bank.

Shizugin as a Pioneer of a New Business Model for Regional Banks

There are concerns about the sustainability of regional banks’ business models. The Shizuoka Bank Group sets itself apart from the trend toward management integration and large-scale streamlining of management. With “Shizugin as a pioneer of a new business model for regional banks” as our maxim, we are emphasizing collaboration with companies in other business sectors by pursuing a unique direction and initiatives to develop new business fields.

  Regarding collaboration with companies in other business sectors, starting with a capital and business alliance with Monex Group, Inc. in April 2014, we have continuously promoted collaboration with a lot of companies, including Money Forward, Inc. and HOKEN NO MADOGUCHI INC., from the viewpoint of creating growth opportunities and establishing a new revenue base. In fiscal 2017, the Bank entered into a business tie-up with Japan Digital Design, Inc., a subsidiary of Mitsubishi UFJ Financial Group, Inc., and is participating in an alliance aimed at commercialization of advanced financial technology. The Bank also invested in a venture fund set up by Silicon Valley-based WiL, LLC, with a view to utilizing a network of venture companies in Japan and overseas that have advanced technology. Regarding HOKEN NO MADOGUCHI@Shizugin whose objective is to offer customers comprehensive life plan support, with the addition of four new branches, including one in Tsunashima in Kanagawa Prefecture as the first branch outside Shizuoka Prefecture, a total of six are in operation, cultivating customers, centering on younger generations.

  With regard to cultivation of a new loan market, we began considering the possibility of a partnership with ARUHI Corporation, a financial institution specializing in housing loans, to develop products and improve operational efficiency. Moreover, we are endeavoring to win housing loan contracts in collaboration with renoveru co., ltd., HOUSALL Corporation, and other companies with nationwide business networks.

  Furthermore, to find new business partners that we can work with to create businesses that will become a pillar of earnings over the medium to long term, the Bank, in partnership with Money Forward, Inc., hosted a networking event in which seven companies from diverse business sectors, all with strengths in advanced technologies including artificial intelligence, participated. We have received proposals from the participating companies on new collaborative businesses based on ideas different from those typical of a conventional bank and intend to flesh out the proposals.

Accelerating Structural Reforms

In the current fiscal year, we will accelerate the three structural reforms we are promoting under the 13th Medium-term Business Plan.

  In this regard, we embarked on a reform of the sales structure on a trial basis in April 2018. Unlike streamlining by major financial institutions, such as consolidation and closure of branches and workforce reduction, this reform aims to offer greater convenience to customers and enhance customer satisfaction by establishing a sales structure capable of offering higher value-added financial services without shrinking the branch network.

  The current branch network consists primarily of branches with full banking functions, including everything from traditional banking business, such as acceptance of deposits and exchange transactions, to provision of loans and asset management. The prerequisite for the reform of the sales structure is to offer full banking functions in each sales area. We will review the functions of each branch according to the region and the market, such as branches specifically focused on corporate customers or retail customers, and integrate personnel according to job functions in each area.

  Specifically, by classifying branches into 1) those with a small number of staff that offer basic services, including acceptance of deposits and exchange transactions, and where consultancy is provided by the headquarters via dedicated terminals, 2) those with the same functions as 1) plus specific functions, such as asset management, provision of loans, and corporate sales, and 3) those offering full banking functions, we will review the configuration of branches and personnel assignment for each sales area.

  By integrating personnel according to job functions centering on area headquarters and accelerating sharing and accumulation of skills and know-how, we will efficiently promote development of abilities of sales personnel and strengthening of solutions functions in each area with the aim of offering higher valueadded services.

  Reform of the sales structure is scheduled for implementation on a trial basis in five areas out of a total of 37 areas in the current fiscal year. Going forward, we intend to implement these reforms in more areas while also reflecting feedback of customers.

“Fueki Ryuko (Continuity and Change)”for the Shizuoka Bank Group

Since assuming office as President of Shizuoka Bank in June 2017, “fueki ryuko” has been my watchword. Fueki means continuity, or to be immutable and eternal, in other words, the fundamentals that never change, whereas ryuko means change, or to be fluid or transient, in other words, the pursuit of something new that matches the change of the era.

  The social mission of a regional financial institution is to contribute to stability and development of the regional economy in any circumstances, and that is also the reason for the Bank’s existence.

  Essentially, for us, the region is “immutable” whereas changing our business model in step with the change of the era or by anticipating change for the sake of the region is to be “fluid.”

  However, we can make something new only if we are creative and energetically tackle new challenges while grasping the issues and being insightful about the changes afoot.

  Each one of our employees constitutes the driving force for change. So, with the objective of fostering human resources capable of embracing customer perspectives and leading the Shizuoka Bank Group and the region, we launched a program of dispatching our employees to partner companies in Shizuoka Prefecture, enabling them to view the Bank from an illuminating external vantage point. We will continue our initiatives of fostering human resources as a key issue for us.

  In the contemporary world where a slight time lag can rapidly become a fatal competitive disadvantage, by gathering and deploying the Group companies’ manifold capabilities and implementing speedy management in anticipation of change, we are determined to fulfill our customers’ expectations.

  I would be grateful for your continued understanding and support in the years ahead.

Hisashi Shibata President
Hisashi Shibata
President

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