Hirogin : Overview of Interim Financial Results for FY2023

Hirogin Holdings, Inc.

Overview of Interim Financial Results

for FY2023

- IR Presentation -

December 2023

Today's key points

Financial results

• Interim profits came to 16.6 billion yen, an increase of 6.5 billion yen year on year, due mainly to higher gains/losses related to equities and favorable performance in main business areas.
• Net income attributable to owners of the parent is planned to grow by 15 billion yen year on year to 27.5 billion yen in FY2023.
• We expect to achieve the final target of Mid-Term Plan 2020 for net income attributable to owners of the parent of over 27 billion yen.

Toward the second stage of Hirogin Holdings

• Three years have passed since the transition to the holding company structure, and joint efforts among group companies are progressing. We are achieving steady results under the first Mid-TermPlan since the transition, as stage one.
• In the next Mid-Term Plan, as stage two, we will carry out initiatives based on formulation of value creation strategies, management foundation reinforcement strategies, and strategy drivers, to address materiality topics (priorities) in our community and the Group.

Improving corporate value

• With a view to improving corporate value, we will push forward to improve ROE through RORA improvement and financial leverage controls, while also pursuing nonfinancial initiatives.
• We will strive to improve RORA through efforts such as reinforcing loan pricing with an eye on the potential for rising domestic interest rates, strengthening ALM strategies, and rebuilding the securities portfolio.

Returns to shareholders

• Targeting a payout ratio of roughly 40%, we plan annual dividends per share of 36.0 yen in FY2023, up nine yen from last year.
• We will implement proactive acquisition of treasury stock (3 billion yen in FY2023) aiming for a consolidated capital adequacy ratio of approximately 11% for the holding company.

1

Contents

Summary of business

01p.3 performance

02

Strategy

p.13

03

Appendix

p.37

2

01

Summary of business performance

02 Strategy

03 Appendix

3

Summary of business	FY2023 1H	FY2023 Business performance projections
performance

Overview of FY2023 1H financial results

• Interim profits attributable to owners of the parent came to 16.6 billion yen, an increase of 6.6 billion yen year on year (+3.6 billion yen over target disclosed at year-start).
• Progress in the interim period relative to the full-year earnings forecast was 60%, indicating steady progress towards profit targets for the final FY under Mid-Term Plan 2020.

Summary of consolidated business performance

Key points of FY2023 1H financial results

(Billion yen)

			FY2023 1H	YoY	(Change rate)	vs.
					change	Announced
	Consolidated gross profit			49.0	0.5	(1.0%)
	(excluding gain/loss related to		1	50.3	-0.2
	treasuries and other bonds)
	Net interest income			35.2	0.5
	Income on service transactions and			11.7	1.8
	other fees
	Income from specific transactions and		2.0	-1.8
	other businesses
	(including gain/loss related to treasuries		-1.2	0.7
	and other bonds)
	Operating expenses	(-)		28.5	-0.7
	Credit costs	(-)	2	4.3	3.8
	Gains/losses related to equities, etc.		3	7.4	11.5
	Equity in earnings of affiliates			-0	-0
	Other			0.3	0.2
	Ordinary profit			23.9	9.2	(62.1%)	4.9
	Extraordinary gains/losses			-0	0.1
	Total income tax, etc.	(-)		7.2	2.8
	Interim net income attributable	(-)		0	0
	to non-controlling interests
	Interim net income attributable to		4	16.6	6.6	(65.0%)	3.6
	owners of the parent
(Ref.) Operating overhead ratio (*2)			56.7%	-1.3%

*1: Net non-interest income = Income on service transactions and other fees + Income on specified transactions and other business income - gain/loss related to treasuries and other bonds

1	Consolidated gross profit (excluding gain/loss related to
treasuries and other bonds)
	 Net interest income grew due to steady revenue growth in main business areas,
			such as revenue from interest on loans.
	 Revenue from derivatives, which increased last FY by a wide margin following
			growth in customer forex hedging needs due to forex liquidity, experienced a
			reactionary decline this interim period.
	 Revenue from corporate solutions related to non-derivative consulting
			operations was favorable, with net non-interest income progressing briskly.
			(Billion yen)	FY2020	FY2021	FY2022	FY2023
				YoY change
			1H	1H	1H	1H
	[Bank] Net non-interest income	7.4	8.2	10.2	9.3		-0.9
		Corporate solutions income	1.4	1.6	3.7	2.8		-0.9
			Customer derivatives	0.5	0.5	2.2	0.8		-1.4

2 Credit costs

 Posted allowance for doubtful accounts based on factors such as reduced business performance of customers due to the impact of steep price hikes in raw materials.

3 Gains/losses related to equities, etc.

 In addition to the gain on sales of cross-shareholdings, etc., the loss posted last FY (5.0 billion yen in amortization of shares, etc.), which stemmed from revaluation losses of stock holdings, was extinguished.

4 Interim net income attributable to owners of the parent

 Grew by 6.6 billion yen YoY due mainly to growth in profits related to shares, etc.

 Progress in full-year earnings net income forecast (27.5 billion yen) during the interim period was 60%.

*2: Operating overhead ratio = operating expenses / (consolidated gross profit-gain/loss from	4
treasuries and other bonds)

Summary of business	FY2023 1H	FY2023 Business performance projections
performance

Results for major Group companies - Bank -

• While the lending revenue-expenditure balance increased alongside fees and commissions income from syndicate loans, etc., the declining securities revenue-expenditure balance attributable to costs of raising funds in foreign currencies and a reactionary decline in revenues from derivatives for customers resulted in a slight drop in net income from our core businesses.
• Interim net income increased by 6.5 billion yen YoY to 16.6 billion yen owing mostly to the growth in profits related to shares, etc.

Hiroshima Bank

							(Billion yen)
					FY2023 1H	YoY	(Change rate)
						change
		Core business gross profit	45.7	-0.5	(-1.0%)
			Net interest income	36.4	0.5
			Net non-interest income	9.3	-0.9
				Corporate solutions	2.8	-0.9
				Customer derivatives	0.8	-1.4
				Syndicate loans/ship-related	1.3	0.8
				Asset management	2.4	0
				Other (domestic exchange, foreign	4.1	0
				exchange, etc.)

Factors underlying changes in core business gross profit and ordinary profit

(Core business gross profit)							(Billion yen)
Balance of		Balance of
	lending*		securities*		Other net		Net
+2.3	-1.6		interest
	non-interest
					income
						income		(-0.3)
19.8				-0.2		Expenses
					-0.9		-0.1	19.5

Net interest income

(+0.5)

Expenses (excluding	(-)	26.2	-0.1
extraordinary disposal)
Net income from core businesses		19.5	-0.3	(-1.8%)
Net income from core businesses		19.5	-0.3	(-1.8%)
(excluding gains/losses from cancellation
of investment trusts)
Gains/losses related to treasuries and

FY2022	* After taking into consideration deposit interest,
1H	external fundraising costs, etc.

results

(Ordinary profit)

FY2023

1H

results

Gains/losses

related to (+0.92) equities, etc.

+11.5 23.2

other bonds		-1.2	0.7
Effective net income from businesses	18.2	0.3	(2.0%)
Credit costs	(-)	4.0	3.6
Gains/losses related to equities, etc.		7.4	11.5
Other temporary gains/losses		1.6	0.9
Ordinary profit		23.2	9.2	(65.0%)
Extraordinary gains/losses		-0	0.1
Total income tax, etc.	(-)	6.4	2.7
Interim net income		16.6	6.5	(65.0%)

	Net income			Gains/losses
		Other	related to
	from core	Credit	treasuries
	temporary
14.0	businesses	costs	and other
gains/
-0.3
	+3.6	losses	bonds
			+0.7
			+0.9
FY2022				FY2023
1H				1H
results				results	5

Summary of business	FY2023 1H	FY2023 Business performance projections
performance

Results for major Group companies - Excluding Hiroshima Bank -

• With earnings in the immediate term steadily progressing by and large at each Group company, we will secure an increase in interim net income for Group companies.

Hirogin Securities

Hirogin Lease

Shimanami Servicer

Interim net income for Group companies

Interim net income for Group companies

(Million yen)		FY2023 1H	YoY change		(Million yen)		FY2023 1H	YoY change
Gross income	2,482	85		Gross income	1,214	64
Ordinary profit	485	99		Ordinary profit	572	-29
Interim net	324	91		Interim net	391	0
income		income

(Million yen)

Gross income

Ordinary profit

Interim net income

FY2023 1H	YoY change

257 -114

-91-248

-71-179

• Total amount obtained after multiplying interim net income of consolidated subsidiaries, etc. excluding

25.0

Bank by ownership ratio

(Billion yen)

20.0	1.93
		(+0.06)
15.0	1.25	1.31
	1.0

Hirogin Human Resources

Hirogin Capital Partners

Hirogin IT Solutions

10.0

(Million yen)			FY2023 1H	YoY change		(Million yen)			FY2023 1H	YoY change
Gross income	132	61		Gross income	71	3
Ordinary profit	16	50		Ordinary profit	21	5
Interim net	9	34		Interim net	14	4
income		income

(Million yen)

Gross income

Ordinary profit

Interim net income

FY2023 1H	YoY change
549	90
126	68
83	45

5.0

0.0

FY2020	FY2021	FY2022	FY2023
1H	1H	1H	1H
(Reference)
Hirogin Holdings nonconsolidated	6.4

Hirogin Area Design		Hirogin Credit Service*
(Million yen)			FY2023 1H			(Million yen)		FY2023 1H
		YoY change			YoY change
Gross income	89	29		Gross income	1,824	138
Ordinary profit	-16	33		Ordinary profit	858	74
Interim net	-11	23		Interim net	561	44
income		income

• On April 1, 2023, Hirogin Guarantee absorbed and merged with Hirogin Card Service and changed its trade name to Hirogin Credit Service on the same day.
  YoY figures are comparisons with sum calculations for Hirogin Guarantee and Hirogin Card Service.

interim net income
(+)	Bank	16.6
(+)	Group companies excluding	1.3
Bank
(-)	Offsetting of dividends from	7.8
subsidiaries, etc.

Hirogin Holdings consolidated	16.6
interim net income

6

Summary of business	FY2023 1H	FY2023 Business performance projections
performance

Results of main Group companies - Excluding Hiroshima Bank -

Hirogin Securities assets under management

Hirogin Lease total asset balance

(market capitalization)

(Subtotals indicate brokerage balances)

(Billion yen)

	(Billion yen)
860	85.5

10,000	783.3	809.7	842.5	923.5
9,000
8,000
7,000			394.4	414.9
5,000		340.4
6,000	310.7

4,000

3,000

2,000

1,000

0

End of March	End of	End of March	End of
2022	September	2023	September
	2022		2023

Hirogin Capital Partners balance of investment in funds

(book value, cumulative)

			Total investment line (Billion yen)
			in four funds
			8 billion yen
3,000		209.4	233.1	270.4
2,500
2,000	137.3
1,500			Investment
1,000				in principal
500				1.5

0

billion yen

850
840
830			80.4
820	80.4
810	79.5
800
790
780
770
760
	End of March	End of	End of March	End of
	2022	September	2023	September
		2022		2023

End of	End of	End of	End of
March	September	March	September
2022	2022	2023	2023	7

Summary of business	FY2023 1H	FY2023 Business performance projections
performance

Progress of first stage of Hirogin Holdings

• As three years have passed since the transition to the holding company structure, mutual cooperation among group companies is progressing, and we are steadily expanding both customer and operational axes through the provision of solutions that leverage all group functions and alliances.

Main initiatives of Group companies

Financial/

nonfinancial needs

Main solutions

provider

Cumulative total since transition to

Resultsa holding company structure (October 2020)

	Asset management
	Capital investment,
Financial	leasing
consolidated
subsidiaries	Capital enhancement
	(Business succession,
	business revitalization)
	Diversification of payment
	methods
	Recruiting/HR systems
	development
Non- financial	ICT/ business
consolidated
efficiency
subsidiaries

Hirogin Securities

Hirogin Lease

Hirogin Capital

Partners

Hirogin Credit

Service

Hirogin Human

Resources

(Established in

April 2021)

Hirogin IT Solutions

(Made subsidiary in

January 2021)

Number of financial

instruments brokerage

accounts

Number of customers

Amount invested

(* total of fund and

principal investment)

Credit card balance

Number of companies with whom consulting contracts concluded

Number of contracts

concluded

End of September 2023

28,109

(+304 accounts vs. end of

September 2022)

End of September 2023

6,450

(+88 vs. end of September 2022)

End of September 2023

3.5 billion yen

(-0.1 vs. end of September 2022)

FY2023 1H

7.6 billion yen

(+900 million yen vs. end of

September 2022)

End of September 2023

93

(+44 vs. end of September 2022)

FY2023 1H

98

(+19 vs. end of September 2022)

+7,066 accounts

vs. end of

September 2020

+292

vs. end of

September 2020

+3.4 billion yen

vs. end of

September 2020

+2.7 billion yen

vs. end of

September 2020

+93

since April 2021

+414

since January 2021

Solutions to

community issues

Hirogin Area Design

(Established in

April 2021)

Number of orders

received during

period

FY2023 1H

26

(+/-0 vs. end of September 2022)

+67

since April 2021

8

Summary of business	FY2023 1H	FY2023 Business performance projections
performance

Total profits from the consulting business for corporate and individual customers and net income for Group companies

• Corporate solutions revenue at the Bank declined, resulting in revenue pertaining to consulting services for corporate and individual customers and net income for Group companies of 6.5 billion yen, or -900 million yen YoY
• Corporate solutions revenue at the Bank is steadily progressing except for derivatives for customers.

Trends in profits generated by the consulting business

Breakdown of profits generated by the consulting business

(Billion yen)

		7.4
	6.9		6.5
			Corporate
	1.6
			solutions
	(0.5)	3.7		-0.9
4.8	2.8	( ) stands for
	(2.2)	Derivatives
		(0.8)
1.4	2.8			Asset
(0.5)
			management
				±0
2.4	0.6	2.4	2.4	Equity business
				±０
0	1.9	0	0	Interim net
1.3	1.3	income for
1		Group
				companies
FY2020	FY2021	FY2022	FY2023	±0
1H	1H	1H	1H

				FY2023
					YoY
				1H
						change
				results
	[Bank (nonconsolidated)]	5.2			-0.9
	Profits from the consulting business for
	corporate and individual customers (i)
		Corporate solutions	2.8			-0.9
			Syndicate loans, etc.	0.9			0.5
			Derivatives	0.8			-1.4
		Asset management	2.4			0.0
			Financial instruments brokerage	0.3			-0.1
			Investment trust	0.3			0.0
		Equity business	0.0			0.0
	Interim net income for Group companies	1.3			0.0
	(ii)
		Hirogin Securities	0.3			0.1
		Shimanami Servicer	-0.1			-0.2
		Hirogin Lease	0.4			0.0
Total ((i) + (ii))	6.5			-0.9

(Billion yen)

FY2023

1H YoY planned change

12.0	-0.5
5.6	-1.7
1.7	0.2
1.5	-2.0
5.0	0.0
0.6	-0.1
0.8	0.0
1.4	1.2
3.0	0.7
0.5	0.4
0.3	0.1
0.8	0.2
15.0	0.2

9