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 I would like to express my sincere gratitude to shareholders and other stakeholders of the Bank of the Ryukyus for their continued support. The following is a report on the Bank’s business performance and financial position for the fiscal 2009 business term (April 1, 2009 to March 31, 2010).
Financial & Economic Environment
During fiscal 2009, the Japanese economy maintained moderate overall recovery momentum, thanks to a continued rise in exports, chiefly to China and other destinations in Asia, and to consumer spending lifted by tax breaks and subsidies under the government’s Eco-car and Eco-point domestic-appliance centered programs to encourage environment-friendly purchasing. However, self-sustaining recovery remained a long way off, with private-sector companies continuing to feel that capital investment and hiring are at more-than-adequate levels, and deflation persisting due to a wide gap between demand and supply.
Economic conditions remained tough in Okinawa Prefecture. A decline in visitors from elsewhere in Japan, who make up the largest group of tourists to the islands, outweighed the positive impact on consumer spending of the Eco-car and Eco-point initiatives, as well as a government policy of bringing forward public-works orders to boost the construction sector. During the reporting period, the employment picture brightened somewhat, on signs of recovery in the second half of the fiscal year in the number of job listings. The number of corporate failures declined due partly to the government’s program of emergency credit guarantees. Total corporate debt declined substantially as the wave of bankruptcies at major companies during the previous term abated.
Business activities and performance results
Against this background, our “Challenge 51” medium-term management plan, incorporating a new growth strategy based on a business model geared to “solution-type” services, drew to a close. Our aim in this final year of the plan was to strengthen our ability to generate earnings and revenue, to complete repayment of public funding. Our overhaul of marketing channels involved various measures aimed at reinforcing our client base, including expansion of existing channels and development of new products and services, as well as proactive financing support for SMEs, despite the harshness of the economic environment. Principal achievements during the year are outlined below.
Expanding marketing channels
In addition to its branch network, the Bank offers consultation services for mortgage and personal loans at Mortgage Loan Centers and “Loan Plaza” corners at four locations within Okinawa Prefecture. In August 2009, we rebranded our Mortgage Loan Centers and “Loan Plaza” corners as Loan Centers, and reoriented services to “one-stop” services covering all loan procedures from consultation up to contract-signing. In July 2009, we launched online mortgage loan consultation services, and in March 2010, we introduced a second mortgage advisory service van, “Hello Bank No. 2,” a mobile consultation room that has proved popular since we pioneered this service in Kyushu for people who have difficulty getting to our branches. This expansion of contact points and other measures formed part of our strategy of expanding marketing channels to better match the diversified lifestyles and needs of our customers.
In October 2009, we reconfigured our marketing network to ensure that the branches closest to customers in a particular area are those best positioned to meet their needs. This overhaul involved regrouping branch clusters into wider-area blocks, with some authority delegated to “block managers.”
New financial services
In August 2009, we developed a number of new products and services, and established Team Sunflower, a project team made up of female staff at our branches, in measures to develop a more “customer-centric” approach.
We unveiled a range of new deposit products, including the Ryujin Mabuyer time deposit offering a chance to win a cash prize, and the Ryujin Mabuyer “Power Up” time deposit, which both use the popular local television superhero character of the same name, as well as the “cash back time deposit Yugafu” (in which cash incentives are given to depositors), a first for a regional bank in Kyushu, and the new V-Camp time deposit, which offers chances to win baseball game tickets (Japanese professional teams hold their spring training sessions in Okinawa). Further measures to meet our customers’ wide-ranging needs included launch of the Naha Marathon support deposit in December 2009, developed by the women’s project team.
In the field of assets-in-custody services, we launched a number of new life insurance products. In addition to the single-premium type products we have offered to date, we introduced level-premium plans and plans for corporate customers. In investment trust products, we began handling products tailored to particular customer age-groups, including five funds that principally target newly emerging and resource-rich countries expected to be the growth drivers of the future.
Loans to SMEs
We helped SMEs meet their financing needs by offering loans secured by physical property (such as large trucks and cranes, and measuring equipment), for borrowers with inadequate real estate collateral resources. For a second year, we also actively supported SME fund-raising with loans offered under the government’s emergency credit guarantee system, despite the harshness of the current economic climate.
Facilitation of financing
In the belief that its mission as a regional financial institution is to contribute to the local economy as a financial intermediary facilitating fund provision to customers, the Bank is committed to a relationship banking role with three priorities: (1) strengthening support for corporate borrowers based on their stage of growth as businesses; (2) ensuring rigorous SME borrower screening methods that can identify companies that offer real value; and (3) using information networks to contribute to sustainable economic growth in our region.
In light of the currently rapidly changing economic environment, we have compiled a basic policy for facilitation of financing under which we will further strengthen our role as a regional financial intermediary. Through a network comprising all branches and Loan Centers including the newly established loan support centers, we will offer appropriate and prompt consultation services on new borrowing and on changes to loan terms.
Issues facing the Bank
Economic conditions in Okinawa Prefecture are likely to remain difficult given the slump in tourist arrivals. We expect intensified competition with rival financial institutions within the prefecture and also with Japan Post Bank Co., Ltd. Under these conditions, the Bank recognizes the need to strengthen its business performance while ensuring rigorous compliance with laws and regulations.
In the new Rising Plan 2010 medium-term management plan from fiscal 2010, we aim to diversify our marketing channels for better customer outreach, so that we can broaden our customer base. We aim to bolster earnings performance based on three reforms, which we have dubbed “business innovation” (strengthening our non-price-based competitiveness), “human resource innovation” (training the talent we need to ensure the success of the first reform), and “functional innovation” (supporting front-line business operations through radical efficiency measures).
Looking ahead, we will continue to contribute to the growth of the prefectural economy in a time of continuing dramatic change in the financial and economic environment, by catering to customers’ diversifying needs. We trust we will continue to enjoy our customers’ trust and support as a leading bank in Okinawa Prefecture.
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