Message from the President

Annual Report

Financial & Economic Environment

Looking at the Japanese economy during the interim financial reporting period of the fiscal year 2023 (April 1, 2023 to September 30, 2023), despite a negative impact from rising prices, mainly for foodstuffs, consumption as a whole followed a steady trend, thanks to pent-up demand and other factors. In the manufacturing sector, concerns about the supply of semiconductors and other components have eased, and business sentiment is recovering. According to the government’s Monthly Economic Report, the economy picked up moderately during the five consecutive months from May to September.
In Okinawa Prefecture, the economy saw a recovery in consumption following the reclassification of the COVID-19 infection as Category 5 in May. There was increased demand thanks to prefectural residents going out more and traveling for pleasure, and the number of events held to attract customers recovered to pre-COVID levels. In the construction sector, there were signs of recovery due to increased demand for new investments in hotels and condominiums. In the tourism sector, the number of visitors from other parts of Japan returned to pre-COVID levels due to the abovementioned reclassification as Category 5, and the number of foreign tourists also started to show signs of recovery. As a result, the overall economic recovery strengthened.

Business Activities and Results

In an overview of business operations, the balance of loans and bills discounted at the end of the current interim period were 1,828,820 million yen, 18,209 million yen less than at the end of the previous fiscal year, due to a decrease in loans to corporate customers. Deposits (including negotiable certificates of deposit) increased by 47,742 million yen from the end of the previous fiscal year to 2,788,764 million yen, due to increases in both personal deposits and corporate deposits. Securities amounted to 669,483 million yen, an increase of 187,313 million yen from the end of the previous fiscal year due to the acquisition of Japanese government bonds.
Turning to earnings, ordinary revenue was up by 2,156 million yen compared to the same period of the previous year, at 22,480 million yen. This was due to the reversal of the general allowance for doubtful accounts and individual allowance for doubtful accounts, owing to improvements in forward-looking macroeconomic indicators as well as an increase in card business-related service charges.
Ordinary expenses increased by 2,351 million yen from the same period of the previous year to 17,919 million yen, due to an increase in expenses and higher foreign currency procurement costs due to a rise in interest rates, mainly in the United States.
As a result, ordinary income came to 4,560 million yen, down 194 million yen from the same period of the previous year, while interim net income came to 3,332 million yen, down 46 million yen from the same period of the previous year.
 

Issues Facing the Bank

Since the COVID-19 infection was reclassified as Category 5 in May, Okinawa Prefecture’s economy has continued to recover steadily thanks to an increase in the number of in-bound tourists, and personal consumption continues to pick up. On the other hand, the impact of labor shortages, high materials prices, and high prices of general consumer goods continues, especially in the service sector and the construction industry, and business operators will need to take steps to improve productivity if they are to achieve sustainable growth in the future.

In addition, there are concerns about the impact on financial markets as the outlook for the world economy becomes even more uncertain due to rising geopolitical risks such as the tense situation in the Middle East.

In these circumstances, we recognize that the Bank must support the local economy, aim to assist the sustainable development of local communities, and work to solve the issues facing those communities. Under our Value 2023 new medium-term management plan, which we launched in fiscal 2023, we will work to improve “corporate value, environmental value, and social value” in order to resolve issues in Okinawa Prefecture. In this way, we hope to achieve sustainable growth for the Bank and other Group companies, realize further human development for our executives and employees, and improve our financial service capabilities. Through these initiatives, we will help raise the productivity of the region and our customers, and by strengthening our support for decarbonization, we aim to become a financial group that “achieving a beneficial cycle in the local economy as a financial group that grows together with the local community,” as set out in our long-term vision.

1. Basic Strategy 1：Expansion of business foundation (solutions)
   We will improve the efficiency of our core banking operations, consisting of deposits, loans, and securities management, in line with changes in the financial and economic environment. We will also further develop the services business, which achieved good results under the previous medium-term management plan. To respond to diversifying needs, we will leverage high-quality consulting operations to provide our customers with the proposals for financing as well as asset formation and management, which they need to solve their problems. We will work to maximize their profits and achieve optimum customer satisfaction.
2. Basic Strategy 2：Practice of ESG management (sustainability)
   The global trend toward decarbonization is having an impact on various fields, and it is now imperative that all businesses take steps toward decarbonization. To play a leading role in regional decarbonization, the Bank will accelerate efforts to improve the energy efficiency of each of the Group’s facilities and increase the number of ZEB certifications at its branches. In the field of retail banking, we support the adoption of energy-saving equipment in homes, based on the collaboration (ZEP Ryukyu) with businesses involved in ZEH and energy-saving housing construction, which was launched last year. In corporate banking, we aim to support customer efforts to resolve environmental and social issues, and contribute to their sustainable growth.
3. Basic strategy 3：Challenges for Change (Transformation)
   To develop human resources who can make possible the Bank’s sustainable growth, we will provide support for the autonomous career development of our employees, review our training system, and expand investment in human resources. In these ways, we will work to strengthen core banking operations and expand our consulting capabilities, as well as offer our customers financial services that help solve their problems. We will also focus on developing specialized human resources who can provide advanced financial services, and will take on new business fields with the aim of revitalizing local communities and increasing corporate value, such as establishing an asset management company. We will strive to create future value for local communities and the Group and build a new business portfolio.

Through these initiatives, we will continue to provide attractive products and services that meet the diverse needs of local customers, and will further strengthen our efforts to solve fundamental issues affecting local communities. Our aim as a financial group is to grow together with our local community.

December 2023
Yasushi Kawakami,
President