 |
| Shinichi Koide, President |
Business and Financial Conditions
During the period under review, led by the private sector the Japanese economy initially followed a moderate recovery track, as solid corporate earnings fueled increases in capital investment and the employment situation showed improvement. However, the economy later gave signs of deceleration, reflecting the impact of a slowdown in the U.S. economy, surges in the prices of crude oil and other raw materials, and the yen’s appreciation against the dollar. These factors hurt corporate profits and had a negative effect on capital investment and the employment situation.
In our business base, centered on Aichi Prefecture, improvements in the employment and income situation, bolstered by brisk corporate earnings, led the local economy to expand at a moderate pace. In early 2008, however, the pace of expansion slackened, with capital investments growing at a slower pace and production also showing a slight decline, reflecting the impact of recent developments.
Meanwhile, the financial sector saw dramatic changes in the business environment, as the U.S. subprime mortgage loan crisis destabilized financial markets worldwide. In addition, the Financial Instruments and Exchange Act came into full effect in Japan in April 2008.
On the stock market, the Nikkei Average generally held steady, reflecting an overall favorable corporate earnings performance. The key index rose above ¥18,000 at one point, but later lost steam, ending the term at ¥12,525.
Earnings
Our business results on a consolidated basis are as follows.
Total income decreased ¥1,099 million year-on-year to ¥59,669 million (US$595 million), due in part to a decline in other operating income. Total expenses rose ¥4,776 million to ¥51,234 million (US$511 million), attributable to an increase in interest payments on deposits and a provision for possible loan losses. As a result, net income fell ¥3,585 million to ¥4,526 million (US$45 million).
By segment, ordinary income of the banking segment rose ¥1,324 million to ¥51,856 million (US$517 million), ordinary income of the lease segment decreased ¥151 million to ¥8,104 million (US$80 million), and ordinary income of the other businesses segment declined ¥5 million to ¥105 million (US$1 million).
Cash Flows
Net cash provided by operating activities increased by ¥2,562 million over the previous fiscal year to ¥15,436 million (US$154 million), which is mainly attributable to an increase in deposits. Net cash used in investing activities decreased by ¥2,520 million from the previous term to ¥17,029 million (US$169 million). Net cash used in financing activities increased by ¥408 million over the previous year to ¥824 million (US$8 million).
As a result, cash and cash equivalents at the term-end stood at ¥40,130 million (US$400 million), a decline of ¥2,417 million from the previous year-end.
Medium-term Strategy
In April 2007, we launched our seventh three-year medium-term management plan under the theme of offering truly comprehensive financial services. By working to improve the quality of our services, we will further strengthen our earnings base and transform ourselves into a provider of truly comprehensive financial services that is indispensable to the economic development of Aichi Prefecture and the surrounding region.
More specifically, we will listen intently to the views of our customers regarding both our corporate banking services and our retail banking services to enable us to provide precisely the sort of financial services our customers want.
We will also establish a more robust internal control system, to secure an appropriate level of profit based on effective risk management, and enable us to deal with various management risks.
By achieving these goals, we aim to earn the trust of local corporations and individual customers. This, we believe, is the true role of a regional financial institution.
The key business indicators on a consolidated basis targeted under our seventh medium-term management plan ending March 31, 2010 are as follows.
| Net income |
¥6.0 billion |
| Core banking profit |
¥14.0 billion |
| Balance of loans at term-end |
¥1,600 billion |
| ROE |
4.5% |
| OHR |
65.0% |
 |
Shinichi Koide
President |
|
