Ken Shimabukuro
President
I would like to open by expressing our gratitude and appreciation to all our stakeholders.
In this message, I would like to review our business situation and give you a summary of our results for the fiscal year to 31 March 2024, our 108th accounting year.
Financial and economic environment
The Japanese economy in FY2023 delivered mounting evidence that consumer sectors were heading towards recovery. Positive news included the 2023 Spring Offensive labor negotiations, which ended with wage increases not seen in some 30 years, and May’s legal downgrading of COVID to common (“Class V”) infectious disease status. Businesses, too, saw revenues rise, and capex is picking up. In May, the government’s monthly report qualified the domestic economy as is in “gradual recovery,” and in March 2024 the Bank of Japan ended its negative interest rate policies on news that, following the wage increases of the 2024 Spring Offensive, which averaged at their highest in 33 years, a virtuous cycle of rising wages and rising prices is underway.
showed signs of gradually expanding. Despite prices remaining high throughout the year, consumer confidence returned and consumption bounced back as the pandemic’s impact receded, opportunities for people to gather increased, and people started going out more. In construction and real estate, private investment in rental housing, on top of that in hotels and condominiums, perked up, further strengthening recovery. And in tourism, travel demand burgeoned, with growth slowly taking off as foreign tourists started coming back and visitors from elsewhere in Japan exceeded 2019’s number.
Business Developments and Results
In the initial year of our Value 2023 medium-term management plan—Realization of Long-term Vision: Achieving a beneficial cycle in the local economy as a financial group that grows together with the local community—we advanced the three basic strategies described below. They cover a range of initiatives to help our local community and customers resolve challenges they face by helping us boost our corporate, environmental, and social value.
⑴Basic Strategy 1. Solutions: Expansion of Business Foundation
Our focus businesses are performing well and delivering solid results. Worthy of particular note is our Corporate Consulting services’ success in arranging major syndicated loans, one for the Four Seasons luxury hotel brand and the other for the Junglila theme park in north Okinawa.
At our cashless payments business, we accelerated our efforts to advance uptake of cashless payments throughout the prefecture, for example by providing services that let bus and ferry riders use contactless payments on Okinawa Island and in the Yaeyama area.
Our Individual Consulting business, too, is now able to provide some of the best inheritance consulting available from any regional bank in Japan.
⑵Basic Strategy 2. Sustainability: Practice of ESG Management
In ESG, we further strengthened our actions to foster sustainable development. We became Japan’s first bank to launch a J-Credit operation and management business, and we applied the environmental value provided by users of our ZEH mortgages to Okinawa Prefecture’s environmental initiatives.
Further, CDP, an international environmental impact measurement non-profit, awarded us an A–, its second highest rating, in recognition of our efforts through the Ryukyu net-ZERO Energy Partnership (ZEP-Ryukyu) community alliance program to popularize energy efficient housing locally, our provision of sustainability-linked financing, and our work to convert our own business locations for ZEB compliance.
And last but not least, in March 2024 we signed on to the United Nations Environmental Plan Financial Initiative (UNEP-FI)’s PRB (principles for responsible banking) as well as announcing our Ryugin Carbon Neutral Declaration.
⑶Basic Strategy 3. Transformation: Challenges for Change
We continue to update and expand the features of our Ryugin app, a digital tool with some 150,000 registered users. Expanding the number of services customers can avail themselves of via the app has reduced workloads at our business locations, in turn giving us more time to attend to customers with better services more closely tailored to their diverse individual needs. We have also funneled energy into training specialized human resources, for instance by dispatching 36 employees annually to receive long-term training or help out at other financial institutions.
Issues Facing the Bank
Okinawa’s economy looks set to continue down the recovery path. We see this age of change as an opportunity and believe we need to take action that will lead to renewed growth for our prefecture’s businesses.
The Bank of the Ryukyus Group finds itself in a shifting business environment. With the Bank of Japan moving to “renormalize” its interest-rate policies, we see ourselves moving into a new world “with positive interest.” Rising rates could work for or against us depending on how we formulate our strategies. To maximize profitability while they’re going up, we see it as essential that we review and rework our system for comprehensively managing assets and liabilities.
Further, now that ESG management—which aims to help local communities address challenges like dealing with climate change—is the global mainstream, ESG consciousness has become an indispensable part of all corporate strategies. This is not only because society demands it, but also because it is now directly linked to businesses’ public reputation.
In this landscape the Bank of the Ryukyus is committed to stepping up its work to the growing the earning potential of the communities we serve, pursuing our long-term vision by expanding our business base and taking up the challenges change throws at us while practicing ESG management.
⑴Dealing with rising interest rates
Moving forward will intend to take our traditional banking services (deposits, loans, securities) to the next stage in their evolution. Building long-horizon relationships rooted in trust is central to that task, and we will do it by providing persuasive ideas-driven consulting built around providing financing, rooted in in-depth conversations with customers to comprehensively ascertain the conditions and issues their businesses face. We also intend to actively involve ourselves in securities management to take advantage of the prospects for expanding profits as interest rate hikes percolate through the market. Here, we will pursue stable returns over the medium- to long-term, chiefly by maintaining a solid risk–return balance in yen-denominated bond investments.
⑵Setting down deeper roots and further evolving our solutions businesses
At our Individual and Corporate Consulting businesses, we work to give the business deeper roots in the community by painstakingly building trust. We take the time needed to discern customers’ goals through face-to-face meetings and hammer out ideas with emphasis on their perspective to develop proposals optimized for their wants and needs.
We are also working to further evolve our Cashless business with measures to ensure its growth. Our various initiatives include partnering with POS cash register suppliers and other outside vendors to enhance convenience for businesses participating in our POS-register services and encourage more Okinawan business to use them.
⑶Human capital-oriented management
To help Okinawa’s communities resolve the increasingly intricate and sophisticated challenges they face, the Bank of the Ryukyus Group commits itself to providing a working environment that motivates the diverse members of its workforce fully exercise their aptitudes. Ultimately, we want to furnish employees with workplaces that are both easy and rewarding to work in. To effectively encourage employees to develop their careers, we are building out programs that steer them towards self-directed career development regardless of age group. And coupled with it, we endeavor to fully apprehend individuals’ skill sets and experience as part of assembling, consistent with our business strategies, a human capital portfolio by hiring, training, and allocating human resources to put the right people in the right jobs.
⑷Practice of ESG-conscious management
As a PRB signatory, the Bank of the Ryukyus Group is committed to helping Okinawan society resolve the challenges it faces by translating the ideals of ESG-conscious management into action with emphasis on ESG impacts. For example, we will be further evolving our Decarbonization Support for Local Communities initiatives to promote uptake of ZEH-compliant housing in the prefecture. This involves providing ZEH mortgages as well as helping Okinawan construction companies improve their technical capabilities through seminars on ZEH organized by ZEP-Ryukyu. Further, we also help Okinawan business owners leverage SDG diagnostic tools to ascertain the challenges they can address and make sustainability-linked investments and loans assist them in resolving those challenges.
Aiming for the growth of our customers, communities, and ourselves, the Bank of the Ryukyus Group serves local communities throughout Okinawa Prefecture and our customers in them, with attractive products and services that answer their diverse needs. Part of that is taking action as described above, to help resolve the issues Okinawa’s communities face and act as a partner for customers in pursuing their objectives.
November 2024
Ken Shimabukuro,
President