Quick View
| Metric | Current Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue | ¥1368.0B | ¥918.4B | +49.0% |
| Operating Income | - | - | - |
| Ordinary Income | ¥469.7B | ¥311.0B | +51.0% |
| Net Income | ¥327.6B | ¥225.8B | +45.1% |
| ROE | 2.6% | 1.8% | - |
Executive Summary
Q1 of the fiscal year ending March 2027 marked a strong start, with substantial increases in both ordinary revenue and profit. Revenue (ordinary revenue) was ¥1,368.0B (¥918.4B in the same period of the previous year, +49.0% YoY), ordinary income was ¥469.7B (¥311.0B, +51.0%), and net income (consolidated net income) was ¥327.6B (¥225.8B, +45.1%), of which net income attributable to owners of the parent was ¥327.4B (¥225.8B, +45.0%). Expansion in lending and deposit volumes and growth in fee income in the banking business drove the top line, resulting in a structure where the profit growth rate slightly exceeded the revenue growth rate.
Factors Affecting Performance
【Revenue】Revenue (ordinary revenue) was ¥1,368.0B, representing a substantial 49.0% YoY increase. By segment, the core banking business led overall performance with revenue of ¥1,209.2B (88.4% of total, +50.2% YoY), while the leasing business and other businesses also posted revenue growth, at ¥102.4B (+24.8%) and ¥56.4B (+81.3%), respectively. Net interest income was ¥466.1B (+15.6% YoY), and net fee income also expanded, achieving revenue growth through both interest income and non-interest revenue.
【Profit and Loss】Ordinary income increased to ¥469.7B (+51.0% YoY), while net income rose to ¥327.6B (+45.1%). By segment, the banking business remained the core earnings contributor, with segment profit of ¥436.1B (+46.1% YoY; profit margin of 36.1%), while the leasing business recorded ¥5.1B (+31.4%; profit margin of 4.9%). The difference between ordinary income and net income was primarily attributable to income taxes and other taxes of ¥141.5B (effective tax rate of approximately 30.2%). Extraordinary items were limited to a minor extraordinary loss of ¥0.6B, indicating limited impact from temporary factors. Both revenue and profit increased.
Segment Analysis
The banking business is the core operation, accounting for 88.4% of revenue and the majority of segment profit. It grew while maintaining a high profit margin of 36.1%, with revenue of ¥1,209.2B (+50.2% YoY) and segment profit of ¥436.1B (+46.1%). The leasing business, although small in scale, remained on a growth trajectory, with revenue of ¥102.4B (+24.8%) and segment profit of ¥5.1B (+31.4%; profit margin of 4.9%). The Other segment, including domestic financial instruments business, posted segment profit of ¥309.2B against revenue of ¥56.4B (+81.3%), an exceptionally high level; caution is therefore required when making simple comparisons, given the nature of the figures before elimination of intersegment transactions. Since April 2026, group restructuring, including the conversion of Tokyo Gas Lease Co., Ltd. into a consolidated subsidiary, has been reflected in the leasing business.
Key Financial Indicators
【Profitability】The net profit margin was 23.9%, slightly down from 24.6% in the same period of the previous year, due in part to the increased tax burden (effective tax rate of approximately 30.2%). Meanwhile, the ordinary income margin, relative to ordinary revenue, improved to 34.3% from 33.9% in the previous year.【Cash Quality】Extraordinary items consisted solely of an extraordinary loss of ¥0.6B. The difference between ordinary income and net income was primarily attributable to income taxes and other taxes, with no abnormalities observed from an accrual perspective. Comprehensive income was ¥682.4B, substantially exceeding net income of ¥327.6B, supported by an increase in valuation difference on securities of ¥292.6B and an improvement in deferred hedge gains and losses of ¥43.4B.【Investment Efficiency】ROE was 2.6%, reflecting a level characteristic of the banking business model, which has a low total asset turnover ratio.【Financial Soundness】The equity ratio was 8.0%, an improvement of +30bp from 7.7% in the same period of the previous year. The loan-to-deposit ratio was approximately 92.3%, based on loans of ¥11,204.8B and deposits of ¥12,135.6B, remaining near the upper end of the appropriate range. Total assets were ¥159,229.5B, slightly down from the previous year, while net assets increased 3.9% YoY to ¥12,795.7B.
Cash Flow Analysis
As the cash flow statement is not disclosed in this financial release, funding trends are analyzed based on movements in assets and liabilities on the balance sheet. Cash and due from banks declined substantially to ¥5,396.9B from ¥8,624.6B in the previous year, while securities increased 2.6% YoY to ¥30,744.8B, suggesting a shift in funds from liquid assets to securities. Borrowings decreased 9.9% YoY to ¥13,336.3B, indicating progress in reducing market-based funding. Deposits were ¥121,356.1B, virtually flat at -0.6% YoY, providing a stable funding base supporting loans of ¥11,204.8B (+0.2%). Overall, the Group appears to be directing liquid assets toward securities investment and lending while restraining market-based funding.
Earnings Quality
Current-period profit consisted of recurring net interest income, net fee income, and market-related gains and losses. Since extraordinary items were limited to an extraordinary loss of ¥0.6B, earnings quality can generally be assessed as highly recurring. The difference between ordinary income of ¥469.7B and net income of ¥327.6B was largely attributable to income taxes and other taxes of ¥141.5B (effective tax rate of approximately 30.2%), with no structural abnormalities observed. Comprehensive income of ¥682.4B exceeded net income of ¥327.6B by ¥354.8B, primarily due to OCI factors, namely the increase in valuation difference on securities of ¥292.6B and the improvement in deferred hedge gains and losses of ¥43.4B. While this difference works to enhance the quality of capital, it includes valuation-based elements linked to market fluctuations; therefore, the risk of reversal due to changes in interest rates and equity markets requires monitoring.
Earnings Forecast and Guidance
The full-year ordinary income forecast is ¥1,670.0B (+28.2% YoY), and the progress rate based on Q1 actual ordinary income of ¥469.7B is approximately 28.1%, exceeding the simple benchmark of 25%. The EPS forecast is ¥217.91, and simple progress based on basic EPS of ¥61.69 for the current quarter is similarly approximately 28.3%, indicating an accelerated trend. Both the earnings forecast and dividend forecast were revised upward during the current quarter. If the trend of outperforming the initial plan continues, progress toward achieving the full-year outlook can be considered favorable.
Shareholder Returns
The full-year dividend forecast is ¥108, implying an expected payout ratio of approximately 49.6% based on the full-year EPS forecast of ¥217.91. Compared with the dividend of ¥39 paid in the same period of the previous year, an upward revision to the dividend forecast accompanied by a dividend increase was announced during the current quarter, indicating a trend toward higher dividends. The equity ratio improved to 8.0% from the previous year, with the strengthened capital base supporting the source of funds for dividends. Quantitative figures regarding the implementation status of share repurchases cannot be confirmed from this report.
Risk Factors
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Net interest margin and cost efficiency risk: While net interest income increased 15.6% YoY, the cost-to-income ratio is trending upward due to increases in other operating expenses and related costs. Cost control therefore remains a challenge for sustained improvement in profitability.
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Interest rate and market volatility risk: Securities continued to increase to ¥30,744.8B (+2.6% YoY). Since valuation differences and deferred hedge gains and losses, which drive fluctuations in comprehensive income, are linked to market interest rates and share price trends, valuation gains and losses may reverse.
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Funding structure risk: The loan-to-deposit ratio is approximately 92%, near the upper end of the appropriate range. While deposits remained broadly flat at -0.6% YoY, borrowings decreased 9.9% YoY, requiring close monitoring of the impact of changes in the funding composition on funding costs.
Industry Benchmark (For Reference; Compiled by the Company)
Industry Benchmark (bank)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Profit Margin | 23.9% | – | – |
| The Company's net profit margin of 23.9% has limited relative comparison data within the industry, but represents a solid absolute level for the banking business. |
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 49.0% | – | – |
| The Company's revenue growth rate of +49.0% is a high growth rate for the banking business, although comparative data is limited. |
※Source: Compiled by the Company
Key Takeaways from the Financial Results
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Both revenue and profit growth rates were high, and the progress rate for full-year net income was approximately 28%, exceeding the standard progress benchmark of 25%, confirming that performance is ahead of the initial plan.
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Comprehensive income of ¥682.4B substantially exceeded net income of ¥327.6B. The capital base was strengthened, primarily due to the increase in valuation difference on securities, with the equity ratio improving to 8.0% (+30bp YoY).
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The banking business accounts for the core of segment profit and the majority of the segment composition, creating an earnings structure in which changes in interest rates and market conditions have a relatively significant impact on earnings, as indicated by the loan-to-deposit ratio of approximately 92%.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific securities. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.
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AI Financial Analysis
Executive Summary
FY2027 Q1 was a strong earnings quarter for Shizuoka Financial Group, led by broad-based growth in banking income and a substantial increase in ordinary profit. Consolidated ordinary revenue rose 49.0% year on year to ¥136.8bn. Ordinary income increased 51.0% to ¥47.0bn, slightly outpacing revenue growth. Profit attributable to owners rose 45.0% to ¥32.7bn, and quarterly EPS increased to ¥61.69 from ¥41.66. The ordinary-income margin expanded by 47bp to 34.3% from 33.9%, indicating positive operating leverage at the consolidated level. The net-profit margin, however, declined by 66bp to 23.9% from 24.6%. The lower net margin principally reflects a higher effective tax rate of 30.2%, compared with approximately 28.1% in the prior-year quarter. Banking remained the core business, generating ¥120.9bn of external ordinary revenue and ¥43.6bn of segment profit. Banking segment profit grew 46.1% year on year, while leasing segment profit rose 31.4% to ¥5.1bn. The group’s annualized ROE was 10.2%, meeting the threshold generally regarded as good profitability for a regional financial institution. The annualized ROE is supported by high balance-sheet leverage inherent to deposit-funded banking rather than by high asset turnover. Comprehensive income more than doubled to ¥68.2bn, substantially exceeding net income, supported by improved unrealized gains on securities. The group revised its full-year forecast and raised its year-end dividend forecast, signaling management confidence in the earnings trajectory. Q1 ordinary-income progress reached 28.1% of the full-year forecast, 3.1 percentage points ahead of the standard 25% first-quarter pace. Profit attributable to owners reached 28.5% of the full-year forecast, also ahead of the seasonal benchmark. The principal issue for investors is whether earnings momentum can be sustained as funding costs rise and the reported 0.42% NIM remains structurally low.
Profitability Analysis
Annualized ROE of 10.2% decomposes into a 23.9% net-profit margin, 0.034x asset turnover, and 12.44x financial leverage. The low asset-turnover component is normal for a large deposit-funded bank with a ¥15.9tn asset base, while leverage is the dominant mechanical contributor to ROE. Net margin remains strong in absolute terms, but it fell 66bp year on year as the effective tax rate increased to 30.2% from approximately 28.1%. Ordinary-income margin improved 47bp to 34.3%, as ordinary income grew 51.0%, faster than the 49.0% increase in ordinary revenue. This indicates modest positive operating leverage. General and administrative expenses increased 6.0% to ¥28.4bn, materially below revenue growth, supporting the margin result. Fee and commission income increased 23.6% to ¥26.8bn, providing a supplementary non-interest earnings contribution. Interest income increased 15.7% to ¥70.5bn, while interest expense also rose 15.7% to ¥23.9bn; this parallel increase highlights the importance of maintaining loan-deposit spreads. Banking is the core business, contributing ¥43.6bn of segment profit, or 58.1% of aggregate pre-elimination segment profit. Banking external ordinary revenue rose 50.2% to ¥120.9bn and segment profit increased 46.1%; its segment profit margin on external revenue eased by roughly 100bp to 36.1%. Leasing external ordinary revenue increased 24.8% to ¥10.2bn and segment profit increased 31.4% to ¥5.1bn, with segment margin improving by about 25bp to 4.9%. Other businesses generated ¥5.6bn of external ordinary revenue, up 81.3%, and ¥30.9bn of segment profit, up 10.1%; the scale of internal transactions means its profitability should be assessed cautiously relative to banking. The ¥0.6bn extraordinary loss was immaterial, so reported earnings were overwhelmingly generated through ordinary operations.
Growth Assessment
Revenue growth was broad-based across the reported segments. Banking external ordinary revenue increased by ¥40.4bn year on year, accounting for the majority of the consolidated revenue increase. The leasing business added ¥2.0bn of external ordinary revenue, aided by the inclusion of Tokyo Gas Lease following its acquisition in April 2026. Fee and commission income expanded by ¥5.1bn, supporting diversification beyond pure interest income. Interest on loans increased ¥7.1bn to ¥48.0bn, while interest and dividends on securities rose ¥2.6bn to ¥20.0bn. Full-year ordinary-income guidance is ¥167.0bn, up 28.2% year on year, and Q1 progress of 28.1% is modestly ahead of the 25% seasonal reference point. Full-year profit attributable to owners is forecast at ¥115.0bn, with Q1 progress of 28.5%. The Q1 result therefore leaves some execution buffer relative to management’s full-year plan. However, Q1 ordinary-income growth of 51.0% is well above the 28.2% full-year forecast growth rate, implying that management expects growth to normalize during the remaining quarters. The acquisition-led expansion of the leasing operation raises the importance of integration and portfolio-performance monitoring. No material impairment loss or significant change in goodwill was reported during the quarter.
Financial Health
Total assets were ¥15.9tn, down 0.6% year on year, while total equity increased 3.9% to ¥1.28tn. Owners' equity was ¥1.28tn, and the equity ratio was approximately 8.0%. The reported debt-to-equity ratio of 11.44x exceeds the 2.0x general corporate warning benchmark and is explicitly a quality alert. Its root cause is the bank funding model: deposits of ¥12.14tn and other funding liabilities are recorded as liabilities against a comparatively small equity base. This degree of leverage is common in banking and should not be interpreted using non-financial corporate capital-structure norms alone, but it makes capital preservation and asset quality central to the risk profile. Deposits declined 0.6% year on year to ¥12.14tn, while loans and bills discounted increased 0.2% to ¥11.20tn. The implied loan-to-deposit ratio was 92.3%, slightly above the 70-90% preferred range but below the 100% level that would indicate acute funding strain. Borrowed money fell ¥147.2bn year on year to ¥1.33tn, reducing reliance on this funding source. The capital adequacy ratio was reported at 8.0%, an improvement from 7.7% a year earlier but only at the stated regulatory minimum benchmark and below the >12% level generally considered strong. Cash and due from banks remained substantial at ¥539.7bn, despite falling from ¥862.5bn a year earlier. Securities increased ¥76.9bn to ¥3.07tn, maintaining a significant liquid-asset and market-risk-sensitive portfolio. Off-balance-sheet acceptances and guarantees increased ¥22.1bn to ¥84.4bn and warrant ongoing credit-risk monitoring.
Notable B/S Changes
Cash and due from banks: -¥322.8bn (-37.4%) to ¥539.7bn - lower cash balances were accompanied by a larger securities portfolio, changing the composition of liquid assets. Securities: +¥76.9bn (+2.6%) to ¥3.07tn - reinforces exposure of capital and comprehensive income to interest-rate and market-price movements. Borrowed money: -¥147.2bn (-9.9%) to ¥1.33tn - reduces reliance on borrowing as a funding source. Deferred tax liabilities: +¥158.6bn (+22.7%) to ¥85.9bn - consistent with an increase in taxable temporary differences, including the stronger securities valuation position. Lease receivables and investment assets: +¥24.2bn (+27.3%) to ¥112.7bn - reflects expansion of leasing activities, including newly consolidated operations.
Cash Flow Quality
Dividend Sustainability
The full-year DPS forecast is ¥108, following a revision to the year-end dividend outlook. Based on forecast EPS of ¥217.91, the implied dividend payout ratio is 49.6%. This is below the 60% sustainability benchmark and leaves a meaningful share of forecast earnings available for capital accumulation. Q1 EPS of ¥61.69 represents 28.3% of forecast annual EPS, broadly consistent with the 28.5% profit progress rate. The raised dividend outlook is supported by the Q1 earnings beat versus the standard seasonal pace and by management’s revised full-year forecast. For a bank operating with an 8.0% capital adequacy ratio, the durability of distributions remains linked to ongoing profit generation, securities valuation movements, credit costs, and regulatory capital requirements.
Risk Assessment
Business risks include Net interest margin risk: the reported 0.42% NIM is below the 1.5% warning threshold. The low level reflects structurally narrow banking spreads; even with rising interest income, a similar increase in interest expense demonstrates sensitivity to funding-cost repricing. Sustained margin compression would constrain recurring earnings growth., Regional banking exposure: the core banking operation accounts for the majority of external revenue and segment profit, concentrating group performance in regional loan demand, local corporate conditions, and borrower credit quality., Securities-market risk: securities totaled ¥3.07tn and valuation differences on securities increased to ¥292.6bn. This supported comprehensive income, but changes in interest rates and market prices can reverse unrealized gains and affect capital., Leasing portfolio and integration risk: leasing revenue and profit increased following the consolidation of Tokyo Gas Lease. Portfolio credit performance, funding costs, and integration execution will determine whether the acquired earnings contribution is durable..
Financial risks include High leverage: the 11.44x D/E ratio is above the general 2.0x warning threshold. While deposit-funded leverage is inherent to banking, it magnifies the effect of credit losses and valuation losses on equity and regulatory capital., Capital buffer risk: the reported 8.0% capital adequacy ratio is at the stated minimum benchmark, despite improving from 7.7%. The level provides less headroom than the >12% strong-capital benchmark., Funding mix risk: the implied 92.3% loan-to-deposit ratio is slightly above the preferred range. Deposits declined while loans increased, making deposit retention and alternative funding costs important..
Key concerns include Whether ordinary-income growth can remain above full-year guidance as funding costs and loan-deposit spread pressure develop., The sensitivity of equity and capital adequacy to movements in the ¥3.07tn securities portfolio., The balance between the revised dividend outlook and the need to preserve regulatory capital resilience., The sustainability of the quarter’s strong banking revenue growth and the earnings contribution from newly consolidated leasing operations..
Investment Implications
Key takeaways include Q1 ordinary income rose 51.0% to ¥47.0bn and exceeded the standard seasonal progress rate against full-year guidance., Annualized ROE of 10.2% is solid, with improved ordinary-income margin partly offset by a higher tax burden., Banking drove earnings, with segment profit of ¥43.6bn and 46.1% year-on-year growth., The 0.42% NIM and 8.0% capital adequacy ratio are the central financial constraints to monitor., Forecast DPS of ¥108 implies a 49.6% dividend-only payout ratio based on forecast EPS..
Metrics to watch include NIM and the spread between loan yield and deposit rate, Deposit growth, loan growth, and the loan-to-deposit ratio, Capital adequacy ratio and the effect of securities valuation changes on equity, Credit costs, loan-loss allowance movements, and guarantee exposure, Banking segment margin and the post-acquisition performance of the leasing segment, Progress against ¥167.0bn ordinary-income and ¥115.0bn owner-attributable profit guidance.
Regarding relative positioning, The group combines solid annualized ROE and strong Q1 profit growth with a deposit-funded balance sheet typical of a regional bank. Its earnings profile is more favorable than indicated by its low NIM alone because fee income, securities-related income, and disciplined overhead support profitability; however, the narrow reported NIM, high balance-sheet leverage, and minimum-level reported capital adequacy benchmark warrant closer monitoring than for better-capitalized financial peers.