Hirogin : Overview of Interim Financial Results for FY2022

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Overview of Interim Financial Results for FY2022

- IR Presentation -

December 2022

Hirogin Holdings, Inc.

Today's agenda

Financial results

• Net income attributable to owners of the parent fell 1.1 billion yen year on year to 10 billion yen, due mainly to impairment losses on stock holdings. Nevertheless, our main businesses recorded favorable business performance.
• Due to various factors, including positive performance among our main businesses, we project net income in FY2022 in line with our initial projection of 25 billion yen.

IT strategy, DX strategy

• We currently plan to move to MEJAR, a next- generation backbone system, by FY2030 and to adopt a cloud platform. The system will be used jointly by five regional banks across Japan.
• Studies are also underway on cooperation in areas other than the backbone system with MEJAR member banks, to deploy cooperative measures leveraging the strengths of each bank.
• In addition to redefining our digital transformation (DX) strategy, we will enhance the related systems and achieve accreditation as a DX business operator from the Ministry of Economy, Trade and Industry.

Sustainability

• Groupwide efforts are generating results as we make steady progress based on the strategies of the Mid- Term Plan 2020.
• We are enhancing Group carbon neutrality initiatives and strengthening community and customer support by considering the impact of our business activities on our service areas.
• In addition, we are moving ahead with strategies in diversity, inclusivity, and other areas. These are among the measures and design systems intended to enhance our human capital.

Capital policies

• Targeting a consolidated capital adequacy ratio of 11% for the Holding Company, we are enhancing capital allocations for investment securities to restructure the securities portfolio. This is in addition to taking risks on local credit.
• In light of our capital adequacy ratio, we will also reassess returns to shareholders and seek to increase dividend payout ratios based on increased profits.
• We plan to pay dividends of 27 yen per share in FY2022 even if net income attributable to owners of the parent falls below 24 billion yen.

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Contents

Summary of Business

01p.3 performance

02

Toward sustained growth

p.11

03

Appendix

p.38

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Summary of Business

01 performance

02 Toward sustained growth

03 Appendix

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Summary of Business	FY2022 1H	FY2022 Business performance projections
performance

Overview of FY2022 1H financial results

• Interim net income attributable to owners of the parent fell 1.1 billion yen year on year to 10 billion yen, due mainly to impairment losses attributable to the lower price of certain stock holdings. This was despite positive performance among our main businesses.

Summary of consolidated business performance

						(Billion yen)
			FY2022 1H	YoY	(Change rate)	vs.
					change	Announced
	Consolidated gross profit			48.5	0.8	(1.6%)
	(excluding gain/loss related to treasuries	1	50.5	2.1
	and other bonds)
	Net interest income			34.7	0.9
	Net fees and commissions income			9.9	- 0.6
	Income from specific transactions and other		3.8	0.4
	businesses
	(including gain/loss related to treasuries and	2	- 1.9	- 1.3
	other bonds)
	Operating expenses	(-)		29.2	- 0.4
	Credit costs	(-)	3	0.5	- 4.5
	Gains/losses related to equities, etc.		4	- 4.1	- 7.5
	Other			0.1	- 0.1
	Ordinary profit			14.7	- 2.0	(-11.6%)	-3.8
	Extraordinary gains/losses			- 0.1	0.5
	Total income tax, etc.	(-)		4.4	- 0.4
	Interim net income attributable to	(-)		0	0
	non-controlling interests
	Interim net income attributable to		5	10.0	-1.1	(-9.5%)	-2.5
	owners of the Parent
(Ref.) Operating overhead ratio			58.0%	-3.3%

• Operating overhead ratio = operating expenses / (consolidated gross profit-gain/loss from treasuries and other bonds)

Key points of FY2022 1H financial results

1. Consolidated gross profit (excluding gain/loss related to treasuries and other bonds)

• Our main businesses recorded favorable business performance, including significant revenue growth from corporate solutions (up 2.1 billion yen), a particular focus of the Hiroshima Bank's consulting businesses identified as a priority in our management targets.

1. Gain/loss from treasuries and other bonds

• With accelerating US interest rate increases, we recorded loss on sales associated with trades intended to restructure our portfolio of foreign bonds to improve yields. This included the sale of low-yield US treasuries.

1. Credit costs

• At 500 million yen, credit costs remained low. No major bankruptcies have occurred recently; additionally, in the last fiscal year, we revised how we calculate allowances for doubtful accounts, adopting a Group allowance with a longer calculation period for the projected loss rate. We also recorded recording a precautionary allowance of 11.6 billion yen in various ways, including accumulating allowances for certain customers.

1. Gains/losses related to equities, etc.

• We recorded 5 billion yen in impairment losses attributable to the lower price of stock holdings (impact on income after tax: -3.4 billion yen)

Reference: Standard for impairment of listed shares

This is recorded if the stock price falls markedly from the acquisition price as of the end of the period.

• Based on stock prices at the end of March, we will make a final decision on whether to record an impairment loss in year-end financial results.

5 Interim net income attributable to owners of the parent

• We recorded interim net income of 10 billion yen despite a 1.1 billion yen year on year decline due to impairment losses on stock holdings.

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