Primary Objectives

Expanding business base

Aiming at the early realization of synergy from the merger of The Kiyo Bank, Ltd. and The Wakayama Bank, Ltd., we are aiming to expand and strengthen our marketing base, and also to improve our profit margins.

Contribution to regional economy

We aim to strengthen relationships with our customers in the region to facilitate a smoother flow of funds from the financial sector to business enterprises in the region. In this way, we will fulfill our duties as a responsible corporate citizen by assisting in the economic development of the region.

Providing comprehensive financial services – a diverse range of sophisticated products and solutions

The needs of our customers are becoming increasingly diversified, and to satisfy them we listen carefully to their opinions and reflect them in our design of individually-tailored solutions utilizing sophisticated financial techniques. By these means, we play the role of provider of a truly comprehensive array of financial services.

Principal Strategies

1. Strengthening earning power

• By reorganizing our network of branches to eliminate duplication between branches of Kiyo and Wakayama banks we have been building an efficient, cost-effective marketing, enabling us to switch to a management policy of aggressive investment expansion from the current business term, ending March 2008.
  We are using the savings in expenses we have made of approximately ¥5.7 billion to finance investment in a program of expansion of our marketing area by the construction of new branches.
• The closure of certain branches (whose business catchment areas will be taken over by other branches nearby) and the amalgamation of the head office departments of the two banks that have merged to form the present Kiyo Financial Group has created a surplus of employees.
  These employees are being reassigned to marketing jobs in the new branches that we are setting up. We plan to open 18 new business offices during the plan period, including dedicated personal banking offices and mortgage loan centers. These new outlets will employ around 300 new marketing staff.

2. Further reinforcing our financial base

• We have already taken drastic steps to reduce the non-performing loans on our books, and we will maintain our efforts to lower the NPL ratio to an acceptable level.
  Our goal over the near term is to reduce the NPL ratio to less than 5% as quickly as possible.
• To support the planned aggressive management strategy of the new, post-merger Kiyo Bank, we have determined that we must further reinforce our regulatory capital.
  We intend, therefore, to make use of public funds offered under the Law for the Early Strengthening of the Functioning of the Financial System to effect a radical reorganization of the Group.

3. Strengthening the Group’s organization and system to realize continuous growth

• We are working to improve the Bank’s management infrastructure, such as its earnings management system, as a prerequisite for implementing our management strategy. This will enable us to monitor and manage the progress of the medium-term plan.
• While reorganizing our marketing system, we are also reforming our personnel system to develop and make optimum use of employees with drive and energy.

The Stages of the Medium-term Plan, and Measures Already Taken

The Progress of the Plan

Kiyo Bank (non-consolidated)

Targets			Business results for FY2006 (simple addition of the two banks)		Business results for FY2006				Plans for FY2008
						Plan	Comparison with plan
Scale	Term-end balance of deposits (including negotiable certificates of deposit)		2,958.0		3,093.5	3,000.0	+93.5		¥3,300 billion or over
	Term-end balance of loans & bills discounted		2,049.4		2,111.4	2,060.0	+51.4		¥2,200 billion or over
		(of which, loans only)	668.1		681.3	680.0	+1.3		¥780 billion or over
	Term-end balance of assets under custody		270.7		344.8	344.0	+0.8		¥540 billion or over
		(of which, investment trusts)	132.2		177.8	165.4	+12.4		¥260 billion or over
Profitability	Business profit on core banking operations		19.7		18.3	17.2	+1.1		¥23 billion or over
	ROA (business profit on core banking operations as a percentage of total assets)		0.60%		0.56%	0.53%	+0.03%		0.68%
Efficiency	Overhead ratio (costs as a percentage of gross business profit)		64.93%		67.41%	69.31%	-1.90%		Less than 60%
Financial soundness	NPL ratio		7.39%		6.19%	6.51%	-0.32%		4.0-4.9% range

Kiyo Holdings (consolidated)

Targets		Business results for FY2006 (simple addition of the two banks)		Business results for FY2006				Plans for FY2008
					Plan	Comparison with plan
Profitability	Net profit for fiscal 2006	3.2		8.1	5.0	+3.1		¥10 billion or over
Financial soundness	Capital ratio	9.52%		11.58%	11.07%	+0.51%		11% or over
	Tier 1 capital ratio	6.30%		8.51%	8.09%	+0.42%		8% or over
	Deferred tax assets as a percentage of Tier 1 capital	36.08%		22.00%	28.40%	-6.40%		10.0-10.9% range