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Economic and Financial Environment
 During the term under review, against a backdrop of declining production
and lackluster corporate earnings in Japan, difficult economic
conditions remained stubbornly in place, the result of a continued
decline in capital investments as well as a worsening of the nation’s
overall employment situation. By the end of the term, however, emergent
signs of recovery were witnessed in certain sectors of the economy, the
result of significant progress made in adjusting inventories nationwide
and a halt in the notable downslide of Japanese exports.
In Okinawa Prefecture, the effects of low tourist numbers triggered by
the terrorist attacks on the United States during the first half of the
term saw rough economic conditions persist beyond the fall season,
particularly for tourism and related industries, although the beginning
of an overall recovery became increasingly more visible after the start
of the 2002 calendar year. In consumer spending, while a recovery trend
was noted in net sales for super markets, centered primarily on
foodstuffs, net sales at department stores remained weak, the result of
intensified competition from low-priced volume retailers. New car sales
performance was favorable due to strong sales in new model vehicles,
while home appliances turned in performance that was lackluster overall
during the term. In construction and related businesses, despite
positive growth in rental-use apartment housing, severe business
conditions persisted in this sector as demand from potential homeowners
remained stagnant and public construction figures ended the term
essentially unchanged. The tourism industry, initially hard hit by the
after effects of the September 11 terrorist attacks, which included
consecutive cancellations centered on scheduled school trips to the
region, began to make a marked recovery by the start of 2002, thanks
largely to efforts by local and national leaders to attract more
visitors and special tour packages across the country intended to
support tourism in the region.
Taking a look at corporate bankruptcies, while a special financing
system set up to stabilize small and medium-sized businesses had the
effect of substantially lowering bankruptcies among such companies
during the term, an increased number of large-scale bankruptcies
resulted in a total level of indebtedness that was higher than the
previous year. Amid this, the decline in consumer prices, especially for
foodstuffs and clothing, grew even more pronounced, while unemployment
rose further due to bankruptcies and layoffs, resulting in bleak
economic conditions throughout the term.
On the financial front, with the April 2002 enactment of the first phase
of the government’s plan to lift unlimited guarantees on time deposits
and the country’s prolonged economic slump as significant background
factors, both deposit and loan amount growth charted feeble performance
for the term.
Result
of FY2001
Faced with daunting challenges, the Bank of the Ryukyus moved actively
ahead in 2001 with initiating the start of “Speed 2001,” the Bank’s
medium-term management plan designed to provide customers with a higher
degree of satisfaction with the Bank’s services. In May 2001, we began
offering Internet and mobile banking services to our customers, allowing
them to check account balances, transfer funds and make regular time
deposits via mobile phone and personal computer, while launching the B
to Bank service in October the same year to revamp our Firm Banking
Service for corporate clients. August 2001 saw the establishment of the
Bank’s third Mortgage Loan Center in Makiminato, an area in the city of
Urasoe. This and other efforts at the Bank to provide customers with
better access to mortgage loans resulted in the Bank’s mortgage loan
balance climbing 14.8% compared to March 2001 figures, the highest rate
of growth of any bank operating in the Kyushu and Okinawa region.
Moreover, in Loan Revolution 15 (for individual customers) and Hurry!
(for business customers), the Bank’s two “speed loans,” we improved the
versatility of each product by expanding lending limits and eligibility
requirements, rounding out the Bank’s lineup of financial products with
the launch of All in One Loan, a product that allows customers to
consolidate various loans into a single, easy to manage loan. The Bank
also lent its support to Okinawa’s embattled tourism industry, a victim
of the lingering effects of the September 11 terrorist attacks, by
introducing the Win a Vacation Regular Time Deposits service.
In regard to applied interest rates for loans, the Bank reevaluated its
interest rate application system in July 2001, looking at the
creditworthiness of each borrower to determine the most suitable
interest rate, while also striving to derive better interest rates for
new and existing loans.
One branch was converted to a sub-branch in the first half of the term,
and this was followed by the closure of a branch in the second half of
the term. The Bank’s total number of branches at the end of March 2002
was 68 (of which nine are staffed sub-branches), one less than the
previous year.
In computer systems, essential to the Bank’s ability to offer high-level
financial services, the decision was made to outsource computer system
operations and administration to IBM Japan in order to make the most of
cost reduction measures and management resources, while joining forces
in software development with Hachijuni Bank and five other regional
banks (Yamagata Bank, Kanto Bank, Awa Bank, Shinwa Bank and Miyazaki
Bank). Among them, Hachijuni Bank has software development capabilities
on par with Japan’s largest banks.
Issues and Strategies
Ryugin is in the midst of implementing three measures deemed vital to
the completion of “Speed 2002”--the Bank’s medium-term management plan
designed to help it secure a stable, solid earnings base. The first
measure is the promotion of Small Loans, necessary to improving the
Bank’s loan interest margins. By combining unsecured consumer loans and
small-scale business loans into a single category, we seek to take
advantage of the benefits of adopting an automatic consumer & business
credit screening system for both types of loans while simultaneously
promoting the development of a new product.
Appropriate Pricing, aimed at improving the Bank’s overall
profitability, is the second vital measure we seek to enact. This
involves taking a close look at the Bank’s loan and deposit services and
the fees and commissions business, examining the credit, fund
procurement and operational costs associated with each borrower or user
of these services to determine the most appropriate price for each of
these transactions.
The third and final measure is Enhanced Assets Management, in which we
aim to offer borrowers a more extensive and involved level of support,
allowing the Bank to prevent the occurrence of a new batch of bad debt
while working together with customers in the midst of tackling various
management issues in order to improve their overall financial positions.
This measure will go far in heightening the overall quality of Ryugin’s
loan assets, by improving the distribution of the Bank's customers in
various borrowing categories, as well as towards shrinking the Bank’s
non-performing loans.
These combined measures will help us to realize the goal of turning the
Bank of the Ryukyus into the kind of reliable bank that can quickly
provide its customers with the timely financial products and services
they need. And while making optimal use of information technology and
taking other steps to make services more convenient for our customers,
we will move ahead actively with more detailed disclosure of our
management and business operations to work towards building a stronger
relationship of trust between the Bank and its customers.
The business environment we face today remains severe, but the Ryugin
management and staff plan to pull together in a concerted effort to
implement the measures detailed in “Speed 2002,” to ensure that the Bank
of the Ryukyus will emerge a winner in the 21st century—-a strong
financial institution recognized more than ever as indispensable to the
socio-economic livelihood of the Okinawa region.
On behalf of the Bank of the Ryukyus, I would like to sincerely thank
our shareholders and all other stakeholders, and ask for their continued
support and patronage.
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