Message from the President

The following is a summary of the overall situation and performance of the Bank over the first half of fiscal 2003 (April 1 to September 30, 2003).

Business Environment

In the first six months of fiscal 2003, Japan’s economy failed to achieve a substantial recovery and remained flat. There was a recovery in corporate earnings, accompanied by a modest increase in capital investment. For the household sector, however, the employment and income situation remained harsh, causing consumer spending to stagnate. Public-sector investment was also weak.

The Okinawan economy continued its recovery trend. In the tourism sector, the number of visitors to Okinawa in the first half of fiscal 2003 marked a record high. Consumer spending was firm, supported by strong demand for summer items as a result of the hot summer. The construction sector also showed a recovery trend. Public works exceeded the low level of the previous fiscal first-half period, and new housing starts remained generally high, supported by demand for rental units.

The reporting period saw a rise in the number of job openings in the prefecture. The unemployment rate, however, improved only slightly. Corporate bankruptcies showed a moderate upward trend, centered primarily on companies in the construction industry. Deflation persisted, with prices continuing to fall below previous-year levels. In the financial sector, the balance of both deposits and loans at the prefecture’s five major financial institutions rose year-on-year.  

Interim Performance (non-consolidated)

Amid this operating environment, the Bank launched its medium-term management plan Quality 2003 from April 1. In accordance with the management priorities stated in Quality 2003, the Bank is working to establish a stable earnings structure. More specifically, the Bank has made efforts to expand financing to small and medium-sized enterprises (SMEs), stimulate demand for our investment vehicles for assets in custody, and improve its loan portfolio.

In order to expand financing to SMEs, the Bank has recently established a new Finance Promotion Project Office, responsible for providing support to staff members working at branches and simultaneously strengthening the finance promotion planning function. The Bank launched a new business loan product -- Junpu Manpan (Smooth Sailing) Loan -- which requires neither collateral nor a third-party guarantor, and offers a long loan period and a high lending ceiling. In this way, we are extending our lineup of business loans.

Thanks to our efforts to stimulate demand for investment vehicles for assets in custody, sales of investment trusts rose ￥18.4 billion from the corresponding previous term.

To improve our loan portfolio, we have established a Customer Management Support Office to support the restructuring of corporate borrowers with substantial debt by working together with them to develop management rehabilitation programs and other measures.

Issues and Tasks

The Bank recognizes its top priority tasks to be the attainment of a stable earnings structure and the total disposal of non-performing loans. Meanwhile, amid ongoing structural changes in the economy and society, the very existence and role of regional financial institutions is being called into question. Thus, we must fully consider our role as a regional financial institution.

In August, the Bank published a basic plan for strengthening relationship banking functions, with the aim of establishing a new business model that relies on long-term friendly relationships with customers, enabling it to help revitalize the local economy and simultaneously improve its profitability and financial position. By addressing these issues through the steady implementation of measures described in the plan and the medium-term management plan, the Bank will find solutions to the issues facing it, while helping customers resolve their financial difficulties, and ensuring the smooth provision of funds.