Message from the Management
Message from the Management
The Basic Role of The Norinchukin Bank as the Central Organization for Cooperatives
As the national-level financial institution for agricultural, fishery and forestry cooperatives in Japan, the mission of The Norinchukin Bank (“the Bank”) is to contribute to the development of the agriculture, fishery and forestry industries and to national economic prosperity by facilitating access to financial resources. With the capital provided by Japan Agricultural Cooperatives (JA), Japan Fisheries Cooperatives (JF), Japan Forestry Cooperatives (JForest), etc., as well as the stable funding base through customer deposits at JA Bank and JF Marine Bank, the Bank, to achieve its mission, lends funds to its members, agricultural, fishery and forestry workers, and companies related to the agriculture, fishery and forestry industries. The Bank also conducts various lending and investment activities in Japan and abroad, efficiently manages funds, and stably returns profits to its members.
Moreover, the Bank provides various services for supporting the cooperative banking business of JA and JF, including the planning and implementation of policies, development of human resources, and provision of business infrastructure. The Bank also provides operational guidance for the cooperative banking business based on relevant rules and regulations, and is working to build a safety net for the JA Bank and JF Marine Bank Systems. The Bank continues to work to improve trust in its cooperative banking business, while playing the important role of strengthening and expanding the cooperative banking business.
New Medium-Term Management Plan Formulation
The environment surrounding the Bank and cooperatives is becoming increasingly harsh amid such developments as the revision of the Agricultural Co-operatives Act, the broad agreement on the Trans-Pacific Partnership (TPP) and the tightening of international financial regulations. On the other hand, public interest in and expectations for the agriculture, fishery and forestry industries are higher than ever before, including their transformation into growing industries.
In light of the situation surrounding the Bank and co- operatives and the basic role of The Norinchukin Bank we have formulated a new Medium-Term Management Plan (FY2016-FY2018) comprising management and business management policies for the next three years. JA Bank, JF Marine Bank, JForest Group and the Bank will continue to perform their roles and functions with the goal of becoming financial institutions and organizations that win the confidence of their customers, and contribute to the advancement of the agriculture, fishery and forestry industries and their rural communities.
Finally, we would like to ask you all for your continued support for JA Bank, JF Marine Bank, JForest Group and The Norinchukin Bank.
Message from the CEO
Toward a leading bank that supports the agriculture, fishery and forestry industries, food production and consumption, and the daily lives of local communities
Business Performance in Fiscal 2015
In fiscal 2015, as the final year of the Medium-Term Management Plan (fiscal 2013 through fiscal 2015) , the Bank implemented a series of initiatives in line with the following four policies:
- Proactive efforts on new initiatives contributing to the development of the agriculture, fishery and forestry industries, food production and consumption, and revitalization of local communities
- Planning and implementation of further initiatives for strengthening and expanding the cooperative banking business
- Strengthening of profitability through appropriate risk management
- Building up of organizational strengths through strategic use and enhancement of management resources
For “Proactive efforts on new initiatives contributing to the development of the agriculture, fishery and forestry industries, food production and consumption, and revitalization of local communities,” placing emphasis on encouraging new initiatives supporting reconstruction of disasteraffected areas of the Great East Japan Earthquake in 2011, strengthening of the ability to cater to leaders supporting the sustainable development of the agriculture, fishery and forestry industries, enhancement of the profitability of these industries, and revitalization of local communities through the agriculture, fishery and forestry industries.
For “Planning and implementation of further initiatives for strengthening and expanding the cooperative banking business,” we planned and implemented initiatives that contribute to expand the user base, strive to further initiatives to enhance business management arrangements and management foundation, built and operated business infrastructures which support the implementation of business strategies, and reinforced initiatives for the development of cooperative banking related human resources who can put business strategies into practice.
For “Strengthening of profitability through appropriate risk management,” we engaged in flexible and strategic asset allocation, secured a solid earnings base through stable funding, pursued new investment opportunities to enhance profitability, strengthened corporate finance, and implemented risk management that contributes to enhanced competitiveness.
For “Building up of organizational strengths through strategic use and enhancement of management resources,” we engaged in the development of human resources into key personnel at the Bank and cooperatives, the appropriate allocation of management resources, and the strengthening of compliance and business management systems.
Regarding financial management, we maintained ordinary profit, exceeding targets as a result of efforts to secure profit and strengthen financial conditions targeting the realization of sustainable and stable returns for all members.
In addition, as for self-reform efforts pursued by JA Bank as a whole in the context of an “in-depth initiative that will contribute to increased agricultural income and the revitalization of local communities”, we implemented, in concrete terms, the “Support Program for Increasing Agricultural Income and Revitalizing Local Communities” totaling support in the amount of ¥100 billion and provided assistance including support that contributes to lower management cost for leaders that are expanding in scale, addition of higher value to agricultural products and expansion of sales channels.
Furthermore, working on “arrangement of the business environment so that JA can make best efforts in agricultural businesses,” we engaged in such activities as the optimization of JA and the presentation of a basic scheme for the cooperative banking business agent model scheme, and “provision of financial services that connect agriculture and local communities/users in order to contribute to local communities,” we provided financial services that help increase consumption of Japanese agricultural and livestock products, deployed mobile branches in vehicles in JA, in underpopulated areas and engaged in other initiatives one after the other.
Financial Results and Capital Adequacy in Fiscal 2015
In fiscal 2015, the Bank recorded an ordinary profit of ¥324.9 billion and net income of ¥271.2 billion (both on a consolidated basis), and thus achieved the target profit level (around ¥100.0 billion).
The Bank’s capital adequacy ratios on a consolidated basis were maintained at a high level, with a Common Equity Tier 1 Capital Ratio of 18.94%, a Tier 1 Capital Ratio of 18.99% and a Total Capital Ratio of 25.07%.
(Billions of Yen)
|Common Equity Tier 1 Capital Ratio||17.43%||17.17%||18.94%|
|Tier 1 Capital Ratio||17.56%||17.24%||18.99%|
|Total Capital Ratio||25.24%||24.19%||25.07%|
Reviewing the Previous Medium-Term Management Plan
Towards becoming a “leading bank that supports the agriculture, fishery and forestry industries, food production and consumption, and the daily lives of local communities,” the Bank had been engaging in the Medium- Term Management Plan (FY2013-FY2015).
We assess that the Bank has progressed generally as planned for the past three years. The earnings reached a record high in FY2014 primarily due to a favorable market environment, and generally solid progress has been made with regard to supporting reconstruction of disaster-affected areas of the Great East Japan Earthquake in 2011, and strengthening the cooperative banking business.
The environment surrounding the Bank and cooperatives is becoming increasingly harsh amid such developments as the revision of the Agricultural Co-operatives Act, the broad agreement on the Trans-Pacific Partnership (TPP) and the tightening of international financial regulations.
Over the next three years, the Bank will proactively work on management issues while accurately ascer-taining the change for these substantial turning points.
Based on the view that it will be a crucial period in which the Bank will be put to the test, we have formulated a new Medium-Term Management Plan (fiscal 2016 through 2018).
Basic Policy of a New Medium-Term Management Plan
Under the next three-year Medium-Term Management Plan that begins this fiscal year as the first year, we aim to the achieve three objectives of “contributing fully as the bank rooted with the agriculture, fishery and forestry industries and food businesses, turning the agriculture, fishery and forestry industries into growing industries, “reinforcing the cooperative banking business platform,” and “achieving stable returns to our members through the sophistication of the current globally diversified investment strategy,” namely, by establishing the three business areas of “food and agriculture business,” “retail business,” and “investment business,” which we defined as the basic policy for overall control and enhancement of the supporting corporate functions.
Based on our mission to realize turning the agriculture, fishery and forestry industries into growing industries with certainty, we will continue to challenge self-reform towards becoming a “leading bank that supports the agriculture, fishery and forestry industries, food production and consumption, and the daily lives of local communities.”
Specific Initiatives of Food and Agriculture Business
Among these, for the“food and agriculture business,” we aim to further contribute to turning the agriculture, fishery and forestry industries into growing industries by leveraging our strengths in Japan and overseas networks as a financial institution developing business globally, many years of transactions with food and agriculture- related companies and deep connections with farmers, fishermen and foresters.
The “food and agriculture business” has been positioned as a key business area in this Medium-Term Management Plan so that the initiatives for the sustainable development of the agriculture, fishery and forestry industries in Japan and the transformation of these industries into growing industries will be developed into a business segment comparable to our conventional retail and investment businesses.
Specific actions to be taken in expanding the “food and agriculture business” will involve further developing initiatives that create bonds with a wide range of stakeholders including cooperatives, leaders and the business community by serving as a bridge between agricultural, fishery and forestry workers and the business community, and at the same time, building up initiatives based on a flexible, future-oriented perspective while cherishing existing and conventional norms and frameworks.
Headquarters System Introduction
In addition, the Bank defined the “food and agriculture business,” the “retail business” and the “investment business” as three business areas and introduced a headquarters system from the perspective of achieving quick decision-making, policy development and implementation and the flexible use of management resources within initiatives to enhance corporate functions that control these three businesses.
Specifically, we established a structure to promote these three business areas also at the organizational level by launching four headquarters, three of which are front-office headquarters, namely, “Food & Agri Banking Business” (in charge of the “food and agriculture business”), “Retail Banking Business” (in charge of promoting and strengthening JA Bank and JF Marine Bank’s “retail business”) and “Global Investments” (in charge of the “investment business” aimed at the further evolution of the “globally diversified investments”), and one of which is “Corporate & Shared Services” (in charge of the management infrastructure that supports the aforementioned three headquarters).
The Bank will make every effort to meet member expectations and realize strong results in each of these areas.
Targeted Management Objectives
Within the period of the Medium-Term Management Plan, the Bank aims to achieve ordinary profit of around ¥150.0 billion.
Looking ahead, the economic and financial environment is expected to remain harsh given the prospect of interest rate hikes in the United States, the introduction of the negative interest rate policy in Japan and the continued high cost of foreign currency funding, among others. The Bank will strive to achieve targets based on appropriate financial management.
In 2023, the Bank will commemorate 100 years since its founding. To become a “leading bank that supports the agriculture, fishery and forestry industries, food production and consumption, and the daily lives of local communities” depicted in its Future Vision toward the 100th Anniversary, all directors and employees of the Bank are committed to yielding concrete results in their respective positions and thereby contributing to the transformation of the agriculture, fishery and forestry industries into continuous growing industries. We ask our members and all others concerned for understanding and support.
Messages from the Each Business Head
Toward a “leading bank that supports the agriculture, fishery and forestry industries, food production and consumption, and the daily lives of local communities”
In June 2016, the Bank introduced a new headquarters system.
Food & Agri Banking Business
Major Initiative Issues
- Turning the agriculture, fishery and forestry industries into growing industries (Integration and streamlining of the production base, reducing production cost, value added such as marketing channel development)
- Playing a key role as a bridge between the agriculture, fishery and forestry workers and the business community
The Food & Agri Banking Business is in charge of expanding the “food and agriculture business,” which has been newly positioned as a pillar of the Bank’s business in its Medium-Term Management Plan launched this fiscal year. In the "food and agriculture business”, we take advantage of our deep connections with agricultural, fishery and forestry workers, our dealings with food/agriculture-related companies over many years and our various networks in Japan and overseas to take a centralized approach to diverse issues faced by both parties, with the aim to further contribute to the transformation of the agriculture, fishery and forestry industries into growing industries as well as the growth and development of client companies.
The Bank will realize two major goals in “the food and agriculture business” area. The first is that the Bank and cooperatives will become reliable financial institutions for leaders who play leading roles in the future of the agriculture, fishery and forestry industries in Japan. The Bank will build up initiatives that contribute to strengthening leaders’ management, etc., including not only a financial but also a non-financial support.
The other goal is to fulfill the Bank’s role as a coordinator connecting the business community needs and the agriculture, fishery and forestry workers. More than ever, the Bank will continue to provide various solutions that enable producers and the business community to further respond to consumer needs.
Retail Banking Business
Major Initiative Issues
- Expand retail banking by identifying changes in organizational base and customer needs
- Achieve JA Bank self-reforms and satisfaction of its members, etc.
The Retail Banking Business plays a major role in operations related to strengthening and expanding the JA Bank and JF Marine Bank businesses of agricultural and fishery cooperative organizations and increasing reliability of those businesses etc.
In addition to competition with other sectors, competition for JA Bank and JF Marine Bank in retail financing is becoming increasingly fierce, coupled with structural problems such as changes in the organizational base due in part to the aging of its members and changes in customer needs.
Under these circumstances, JA Bank formulated the JA Bank Medium-Term Strategies to be implemented from fiscal 2016 to fiscal 2018. Having set the future vision of JA Bank at becoming an “entity that is needed more in regions by contributing to food, agriculture and local communities,” we will contribute to “increasing agricultural income” and “revitalizing local communities” by providing high-quality, sophisticated financial services.
In addition to further enhancing and providing financial functions for the fishery industry, JF Marine Bank will promote initiatives aimed at strengthening its business base, soundness and management capabilities in pursuit of a stronger control structure to enable the provision of stable and appropriate financial functions.
Through these initiatives, the Bank aims to “JA and JF to play the leading role in local communities on the themes of food/agriculture/local communities/finance” as indicated in the Medium-Term Management Plan.
Major Initiative Issues
- Further evolve globally diversified investments
- Enhance stable profitability
- Steadily comply with international financial regulations, etc
Global Investments is in charge of investments in securities and other financial instruments based on appropriate risk management in accordance with the basic concept of “globally diversified investments” aimed at realizing a stable return of profits in the medium and long run as the ultimate manager of funds entrusted by members to JA Bank and JF Marine Bank.
Given the mounting uncertainties in the outlook for financial market conditions, it is necessary to keep an eye on the impact of the negative interest rate policy, the continued high cost of foreign currency funding and other such developments, while careful financial management remains necessary at this juncture. In addition, there is a trend towards tougher international financial regulations, so it is fair to say that the task of gaining an accurate grasp of and complying with regulations is a major challenge for the Bank, which secures profits through overseas financial markets and assets.
Under these circumstances, Global Investments has set its future vision at “evolve toward the next model of globally diversified investments strategy” in this Medium-Term Management Plan. We are committed to securing profits that contribute to stable return of profits through the further evolution of “globally diversified investments” by making such efforts as expanding our earnings base and enhancing our foreign currency funding ability, while assuming an appropriate balance with risks and compliance with regulations.
Corporate & Shared Services
Major Initiative Issues
- Develop business/IT infrastructure so that competitive edge can be ensured
- Pursue sophistication of risk management framework
- Fulfill “antenna” and “navigator”functions in management and the organization as a whole
The role of Corporate & Shared Services is to support and control three business areas of the “food and agriculture business,” “retail business,” and “investment business” areas.
Under the new headquarters system, it is extremely important to achieve quick decision-making, policy development and implementation, the flexible use of management resources and the clearer implementation of PDCA in each headquarter to execute missions in the three business areas and realize the future vision. Corporate & Shared Services have supported including the provision of platform, etc., for smoothly conducting business activities in these three business areas, and at the same time, from the perspective of overall optimization, contribute to the facilitation of organizational and operational management of the Bank as a whole, including Group companies, in an attempt to strengthen our strategic structure and overall control function in a so-called cross-functional manner.
By properly fulfilling our role as a “navigator” of the Bank as a whole in the manner described above, we will build up concrete achievements to steadily fulfill our Future Vision toward the 100th anniversary, that is, becoming a “leading bank that supports the agriculture, fishery and forestry industries, food production and consumption, and the daily lives of local communities.”