Quick View
| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥3040.3B | ¥2445.3B | +24.3% |
| Operating Income | - | - | - |
| Ordinary Income | ¥983.5B | ¥743.1B | +32.3% |
| Net Income | ¥697.0B | ¥525.1B | +32.7% |
| ROE | 5.6% | 4.5% | - |
Executive Summary
Revenue and earnings increased, primarily due to an improved interest-rate environment, while profitability also improved. Ordinary revenue was ¥3040.3B (+24.3% YoY), ordinary income was ¥983.5B (+32.3%), and net income attributable to owners of the parent was ¥697.0B (+32.7%). Earnings growth outpaced revenue growth, and the ordinary income margin improved by approximately 2.0pt year on year. The primary driver of earnings growth was the core Banking Business, where the increase in investment income exceeded the increase in funding costs.
Factors Affecting Earnings
【Revenue】Consolidated ordinary revenue was ¥3040.3B, an increase of +24.3% YoY. The Banking Business, which accounted for 88.3% of revenue from external customers, led growth with ¥2683.8B (+28.1%). The Leasing Business reported ¥241.7B (-1.4%), a slight decline, while Other Businesses reported ¥114.7B (+8.8%). In the Banking Business, interest on loans was ¥1290.2B (+15.0%) and interest on deposits was ¥370.6B (+22.6%), highlighting that the growth in funding costs is drawing closer to the growth in investment income.
【Profit and Loss】Ordinary income increased at a pace exceeding revenue growth, reaching ¥983.5B, up +32.3% YoY. Segment profit in the Banking Business was ¥928.9B (+35.3%), with a margin of 34.6%. The main factor was the expansion of net interest income, as the 12.2% increase in investment income exceeded the 4.0% increase in funding costs. Special income was ¥30.7B, including ¥27.4B in gains on negative goodwill, while special losses were ¥38.0B, including ¥23.1B in impairment losses, resulting in a net loss of ¥7.4B; however, the impact on ordinary income was limited. Net income attributable to owners of the parent was ¥697.0B, an increase of +32.7%. The increase in earnings, with profit growth exceeding revenue growth, reflected the expansion of the ordinary income margin in addition to corporate income taxes and other taxes remaining at an assumed level.
Segment Analysis
The Banking Business led consolidated earnings growth, reporting ordinary revenue from external customers of ¥2683.8B (+28.1% YoY), segment profit of ¥928.9B (+35.3%), and a profit margin of 34.6%. The Leasing Business reported a decline in ordinary revenue to ¥241.7B (-1.4%), but segment profit increased to ¥13.8B (+13.2%), indicating improved profitability. Other Businesses, including domestic financial instruments business operations, reported ordinary revenue from external customers of ¥114.7B (+8.8%) and segment profit of ¥612.9B (+50.9%). However, as this includes internal ordinary revenue of ¥589.8B, the profit is reflected in consolidated ordinary income after elimination of intersegment transactions through a negative consolidated adjustment of ¥572.1B. The apparently high profit margin cannot be directly compared with the Banking and Leasing Businesses on an external-customer basis.
Key Financial Indicators
【Profitability】The ordinary income margin was 32.4% and the net income margin was 22.9%, both improving from the same period of the previous year (30.4% and 21.5%, respectively). The Banking Business segment profit margin was 34.6%. 【Cash Flow Quality】Pre-tax income was ¥976.1B compared with ordinary income of ¥983.5B. The impact of the ¥7.4B net loss on special items was limited to 0.7%, indicating that most earnings were generated by the recurring expansion of net interest income. The effective tax rate was 28.6%, a normal level. 【Investment Efficiency】ROE was 5.6% on a cumulative quarterly basis before annualization. With total assets of ¥158,783.6B and net assets of ¥12,477.4B, profitability must be assessed within a highly leveraged structure utilizing shareholders’ equity. 【Financial Soundness】The equity ratio was 7.9%, improving from 7.4% in the same period of the previous year, but remained slightly below the general benchmark of 8%. The loan-to-deposit ratio was 91.4%, calculated as loans of ¥116,478.0B divided by deposits of ¥121,013.0B, indicating that the Group continues to maintain a structure in which loans are largely funded by deposits.
Cash Flow Analysis
Although a cash flow statement has not been disclosed, trends in funding can be assessed from movements in the balance sheet. Deposits were ¥121,013.0B, up +2.7% YoY, while loans were ¥116,478.0B, up +3.7%, meaning that loan growth exceeded deposit growth and the loan-to-deposit ratio was on a slight upward trend at 91.4%. Borrowings increased to ¥14,202.9B, up +6.1%, indicating a slight increase in reliance on funding sources other than deposits. Securities declined from the same period of the previous year to ¥31,852.2B, while cash and due from banks also declined year on year to ¥7,197.8B, indicating a shift in the asset mix toward greater allocation to loans. Treasury stock increased to ¥543.8B from ¥417.6B in the same period of the previous year, making capital returns a factor reducing net assets through cash outflows.
Quality of Earnings
The increase in net income was not dependent on one-time special items but was primarily attributable to the expansion of ordinary income. Pre-tax income was ¥976.1B compared with ordinary income of ¥983.5B, with the difference limited to the ¥7.4B net loss on special items. Special income of ¥30.7B included ¥27.4B in gains on negative goodwill, while special losses of ¥38.0B included ¥23.1B in impairment losses. Both were small relative to the scale of ordinary income and were not large enough to distort the earnings trend. Corporate income taxes and other taxes were ¥279.1B, resulting in an effective tax rate of 28.6%, a normal tax burden. Comprehensive income was ¥1,335.4B, exceeding net income of ¥697.0B by ¥638.4B, primarily due to a ¥447.2B increase in valuation differences on securities. This divergence resulted from changes in market prices and should be distinguished from recurring earnings power.
Earnings Forecast and Guidance
The full-year ordinary income forecast has been revised to ¥1,270.0B (+24.4% YoY), and the Q3 cumulative progress rate was 77.4%, exceeding the 75% benchmark based on simple linear progress. The progress rate against the full-year forecast of ¥880.0B for net income attributable to owners of the parent was 79.2%, also exceeding the standard benchmark. To achieve the forecasts, ordinary income of ¥286.5B and net income of ¥183.1B will be required in Q4. Both the earnings forecast and dividend forecast have been revised upward, reflecting the upward trend in earnings during the fiscal year.
Shareholder Returns
The Q2 dividend was ¥39.00 per share, while the Company’s full-year dividend forecast is ¥80.00, following an upward revision. The implied year-end dividend based on a simple calculation is expected to be ¥41.00. Based on forecast EPS of ¥163.09 for the full year, the forecast payout ratio is approximately 49.1%, below the 60% level generally regarded as a benchmark for sustainability when considering dividends alone. Treasury stock increased by ¥126.2B from the same period of the previous year, but details regarding the timing and scale of the purchases are limited in the disclosed information; therefore, this should be evaluated separately from the payout ratio. The dividend increase reflects the outlook for higher earnings and indicates a policy of returning earnings growth to shareholders.
Risk Factors
-
Low net interest margin: NIM was 1.11%, below the 1.5% level generally regarded as a warning threshold. Interest on deposits increased +22.6% YoY, exceeding the +15.0% growth in interest on loans, and the ability to pass higher funding costs through to investment yields will determine future profitability.
-
Equity ratio: The consolidated equity ratio was 7.9%, improving by +0.5pt YoY but remaining slightly below the general benchmark of 8%. The D/E ratio was high at 11.73x; however, this reflects the structural characteristics of the Banking Business, which primarily uses deposits as liabilities. The impact of fluctuations in valuation differences on securities and increases in credit costs on capital should be closely monitored.
-
Loan-to-deposit ratio and funding structure: The loan-to-deposit ratio was 91.4%, slightly above the generally cited benchmark range of 70–90%. While loans increased +3.7% YoY, borrowings also increased +6.1%, and greater reliance on market funding other than deposits could lead to higher costs in a rising-interest-rate environment.
Industry Benchmark (For Reference; Compiled by the Company)
Industry Benchmark (bank)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Income Margin | 22.9% | – | – |
The Company’s net income margin of 22.9% is currently assessed on an absolute basis, as comparable benchmark data within the industry is not available at this time.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 24.3% | – | – |
The revenue growth rate of 24.3% represents strong growth reflecting an improved interest-rate environment, although comparative data against the industry median is limited.
※Source: Compiled by the Company
Key Takeaways from the Earnings Results
-
As indicated by ordinary revenue growth of +24.3% being exceeded by ordinary income growth of +32.3% and net income growth of +32.7%, the expansion of net interest income is driving the improvement in profitability. The fact that the growth in investment income in the Banking Business (+12.2%) exceeded the growth in funding costs (+4.0%) is a structural driver of earnings improvement.
-
Progress rates against the full-year ordinary income and net income forecasts were 77.4% and 79.2%, respectively, exceeding standard progress benchmarks. Together with the upward revision to the year-end dividend, this confirms that earnings are trending above the initial outlook during the fiscal year.
-
NIM of 1.11%, an equity ratio of 7.9%, and a loan-to-deposit ratio of 91.4% are three indicators that require continued monitoring when assessing the sustainability of earnings growth and the robustness of capital. In particular, the extent to which higher deposit rates are passed through to investment yields will determine the future trend in net interest income.
This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional advisor as necessary.
---End of Report---
AI Financial Analysis
Executive Summary
Shizuoka Financial Group delivered a strong FY2026 Q3 earnings performance, led by banking income growth and a meaningful expansion in ordinary profit. Consolidated ordinary revenue increased 24.3% year on year to ¥304.0bn. Ordinary income rose 32.3% to ¥98.3bn, outpacing revenue growth by 8.0 percentage points. Profit attributable to owners increased 32.7% to ¥69.7bn, while EPS rose to ¥128.66 from ¥95.68 in the prior-year period. The ordinary-income margin expanded to 32.3% from 30.4%, an improvement of approximately 195bp. The net-profit margin increased to 22.9% from 21.5%, up approximately 146bp. Interest income grew 12.2% to ¥186.8bn, while interest expense increased a more moderate 4.0% to ¥64.1bn. Consequently, disclosed net interest income expanded 17.1% to ¥122.6bn. Fee and commission income increased 5.2% to ¥69.3bn, and net fee income rose 6.3% to ¥39.2bn. General and administrative expenses increased 8.7% to ¥79.0bn, materially below the 24.3% growth in ordinary revenue, indicating positive operating leverage. Ordinary income was only ¥0.7bn above profit before tax, indicating that extraordinary items had a limited effect on reported earnings. The extraordinary balance was a net loss of ¥0.7bn, with a ¥2.3bn impairment loss partly offset by a ¥2.7bn gain on negative goodwill. Annualized ROE was 7.5%, supported by profit-margin improvement and high banking-sector financial leverage, but it remains below the 8% general profitability benchmark. Total comprehensive income rose 254.2% to ¥133.5bn, aided by a ¥44.7bn positive valuation difference on securities compared with a ¥28.6bn negative amount a year earlier. Management has revised both full-year earnings guidance and the year-end dividend forecast upward, consistent with Q3 profit progress running ahead of the normal seasonal benchmark.
Profitability Analysis
Annualized DuPont ROE is 7.5%, comprising a 22.9% net-profit margin, 0.026x annualized asset turnover, and 12.73x financial leverage. The principal positive driver was margin expansion: the net-profit margin rose by approximately 146bp year on year, while the ordinary-income margin improved by approximately 195bp to 32.3%. The banking model naturally produces low asset turnover because balance-sheet assets are large relative to reported ordinary revenue; returns are therefore more dependent on spread income, fee income, credit costs and capital efficiency than turnover. Financial leverage is structurally high because customer deposits and other funding liabilities support lending and securities portfolios, rather than representing conventional corporate debt-funded leverage. Interest income growth of 12.2% exceeded the 4.0% rise in interest expense, producing 17.1% growth in disclosed net interest income and supporting profitability. Interest on loans increased 15.0% to ¥129.0bn, while interest and dividends on securities increased 6.6% to ¥50.0bn. Fees and commissions generated additional earnings diversification, with net fee income increasing to ¥39.2bn from ¥36.8bn. Operating leverage was favorable because G&A expense growth of 8.7% was substantially below ordinary-revenue growth of 24.3%. The tax burden was 0.714, equivalent to a 28.6% effective tax rate, which is within a normal range and did not materially dilute pre-tax earnings. The interest burden was 0.993, showing that the gap between ordinary income and profit before tax was limited. The 7.5% annualized ROE remains moderate rather than high in absolute terms, making sustained spread expansion, cost discipline and capital management important for further improvement.
Growth Assessment
Growth was led by the core banking business. Banking external ordinary revenue increased 28.1% year on year to ¥268.4bn, and segment profit increased 35.3% to ¥92.9bn. The banking segment's profit-to-segment-revenue ratio improved to 34.3% from 32.4%, reflecting stronger revenue conversion. Leasing external revenue declined 1.4% to ¥24.2bn, although segment profit rose 13.2% to ¥1.4bn and its profit-to-revenue ratio improved to 5.6% from 4.8%. Other businesses, including securities-related, consulting and IPO-support activities, increased external revenue by 8.8% to ¥11.5bn and segment profit by 50.9% to ¥6.1bn. The earnings mix is therefore increasingly driven by banking, while fee-oriented and advisory activities provide supplementary diversification. Loans and bills discounted grew 3.7% year on year to ¥11.06tr, exceeding deposit growth of 2.7% to ¥12.10tr. This balance-sheet expansion supports future interest income, although the loan-to-deposit ratio increased modestly to 91.4% from approximately 90.6%. FY2026 full-year ordinary-income guidance is ¥127.0bn, and Q3 cumulative progress is 77.4%, 2.4 percentage points above the standard 75% Q3 pace. Net-income progress is 79.2% against the ¥88.0bn full-year forecast, 4.2 percentage points ahead of the standard pace. The upward revision to forecasts indicates management confidence, but the remaining quarter must maintain lending spreads, securities income and cost discipline to preserve the current earnings momentum.
Financial Health
The balance sheet remains deposit-funded, with deposits of ¥12.10tr exceeding loans of ¥11.06tr by approximately ¥1.04tr. The resulting loan-to-deposit ratio is 91.4%, slightly above the 70-90% reference range but below the 100% level generally associated with heightened funding pressure. Borrowings were ¥1.42tr, while payables under repurchase agreements were ¥439.4bn; these funding sources require continued liquidity management alongside the deposit base. Cash and due from banks were ¥719.8bn and securities were ¥3.19tr, providing substantial liquid and marketable asset buffers relative to wholesale funding needs. The reported D/E ratio of 11.73x is above the 2.0x general corporate warning threshold and is explicitly a high-leverage alert. Its root cause is the bank's funding model, in which deposits and financial liabilities fund a large loan and securities portfolio; it should not be interpreted identically to industrial-company borrowing leverage. Nevertheless, the high liability-to-equity structure means that credit losses, securities valuation declines or funding stress can have an amplified effect on common equity. Total equity increased 6.9% year on year to ¥1.25tr, supported by retained earnings growth and higher accumulated other comprehensive income. The capital adequacy ratio improved to 7.9% from 7.4%, but remains marginally below the 8% general Basel III reference minimum and warrants close monitoring. Securities-related valuation gains increased accumulated other comprehensive income, but this also leaves capital sensitive to interest-rate and market-price movements. Treasury stock increased in absolute magnitude by ¥12.6bn to negative ¥54.4bn, a 30.2% year-on-year change that indicates active capital management and reduces reported equity. Intangible assets represent only 0.1% of total assets, limiting balance-sheet dependence on intangible-value retention.
Notable B/S Changes
Treasury stock: -¥54.4bn, an increase in absolute magnitude of ¥12.6bn (-30.2%) year on year — indicates active capital management and reduces reported equity; monitor alongside dividend distributions and regulatory capital. Loans and bills discounted: +¥391.9bn (+3.7%) to ¥11.06tr — supports interest-income growth but increases exposure to credit-cycle deterioration. Deposits: +¥319.8bn (+2.7%) to ¥12.10tr — maintains a deposit-funded balance sheet, although loan growth modestly exceeded deposit growth. Cash and due from banks: -¥274.1bn (-27.6%) to ¥719.8bn — liquidity remains supported by a ¥3.19tr securities portfolio, but liquid-asset composition should be monitored. Accumulated other comprehensive income: +¥63.8bn (+34.8%) to ¥247.5bn — mainly reflects improved securities valuation, supporting equity but increasing sensitivity to market-rate movements.
Cash Flow Quality
Dividend Sustainability
The forecast annual dividend is ¥80 per share, comprising the disclosed ¥39 interim dividend and an implied ¥41 year-end dividend. Based on forecast EPS of ¥163.09, the forecast dividend payout ratio is approximately 49.1%. This is below the 60% sustainability reference level and leaves a meaningful portion of earnings available for capital accumulation and business investment. The Q3 calculated payout ratio based on the ¥39 interim dividend is 32.5% of cumulative earnings. The upward revision to the year-end dividend forecast is aligned with the upward revision in full-year earnings guidance. Treasury shares increased during the period, indicating that shareholder returns and capital allocation should be evaluated using the total return ratio when the scale of repurchases is established. For a bank, dividend capacity remains linked not only to accounting earnings but also to regulatory capital preservation, and the 7.9% reported capital adequacy ratio makes capital-ratio trends an important consideration alongside payout discipline.
Risk Assessment
Business risks include Net interest margin risk: the 1.11% NIM is below the 1.5% warning threshold. The root cause is the relatively thin spread characteristic of Japanese regional banking, where competition for loans and deposits can limit repricing benefits. While interest income growth currently exceeds interest-expense growth, a faster rise in deposit costs or weaker loan pricing could compress future profitability., Credit-cycle risk: loans grew 3.7% to ¥11.06tr, increasing exposure to deterioration in regional corporate, real-estate and SME borrower conditions. The high impact of credit costs is inherent in a bank with a large lending book., Securities valuation risk: valuation differences on securities contributed ¥44.7bn to current-period OCI, reversing a ¥28.6bn loss in the prior year. This supports equity and comprehensive income currently, but exposes capital and earnings resilience to interest-rate and market-price volatility., Regional banking competition and demographic risk: customer acquisition, loan demand and fee-income growth may be constrained by population trends and competition from megabanks, online banks and non-bank financial providers in core markets., Leasing revenue risk: leasing segment external revenue declined 1.4%, indicating that segment profit improvement has not yet been accompanied by top-line expansion..
Financial risks include High leverage alert: the reported D/E ratio is 11.73x, above the 2.0x general benchmark. This is largely structural for a deposit-taking institution, but it magnifies the sensitivity of equity to asset-quality and market-valuation shocks., Capital adequacy risk: the capital adequacy ratio improved to 7.9% but is still below the 8% general reference minimum. Retained earnings, OCI volatility and shareholder returns should therefore be assessed in conjunction with regulatory capital requirements., Funding and liquidity risk: the loan-to-deposit ratio rose to 91.4%, above the 70-90% reference range. Deposits continue to exceed loans, mitigating immediate pressure, but the group also relies on borrowings and repurchase-agreement funding., Interest-rate risk: higher rates can support asset yields, but interest on deposits rose 22.6% year on year to ¥37.1bn, demonstrating that funding-cost repricing is already material..
Key concerns include The NIM warning is the most relevant profitability constraint: 1.11% remains below the 1.5% threshold despite strong current-period earnings growth., The combination of 11.73x D/E and a 7.9% capital adequacy ratio requires continued attention to capital buffers, securities OCI and credit-loss resilience., The ¥2.3bn impairment loss was higher than the prior-year ¥0.8bn, although its effect on group earnings was limited and was partly offset by negative-goodwill income., The increase in treasury stock should be monitored together with dividends because capital returns can moderate the pace of regulatory-capital accumulation..
Investment Implications
Key takeaways include Ordinary income grew 32.3% and net income grew 32.7%, with both exceeding revenue growth and evidencing strong operating leverage., The core banking segment generated ¥92.9bn of profit, or the dominant share of segment earnings, and delivered a 35.3% year-on-year profit increase., Q3 ordinary-income progress reached 77.4% of full-year guidance, above the 75% seasonal reference point, while net-income progress reached 79.2%., The forecast ¥80 annual dividend implies an approximately 49.1% payout ratio based on forecast EPS, which is within a prudent earnings-distribution range., The earnings outlook is balanced by structurally thin NIM, elevated bank-model leverage and capital adequacy that remains close to the general regulatory reference level..
Metrics to watch include Net interest margin and the relative repricing of loan yields, securities yields and deposit rates, Loan growth, deposit growth and the loan-to-deposit ratio, Capital adequacy ratio and the sensitivity of accumulated OCI to securities valuation movements, Credit costs, allowance coverage and non-performing loan trends, Banking segment profit conversion and leasing revenue recovery, Dividend growth, treasury-share changes and the total return ratio.
Regarding relative positioning, The group showed stronger-than-normal Q3 earnings momentum for a regional banking franchise, with banking segment profit growth, margin expansion and disciplined expense growth. Its relative financial profile remains characterized by a deposit-funded balance sheet and a low 1.11% NIM, so the durability of current earnings depends on preserving asset-yield gains ahead of deposit-cost repricing while maintaining regulatory capital.