| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥2555.8B | ¥1845.3B | +38.4% |
| Operating Income | - | - | - |
| Ordinary Income | ¥1030.9B | ¥715.2B | +44.1% |
| Net Income | ¥730.2B | ¥505.5B | +44.4% |
| ROE | 18.7% | 15.8% | - |
Rakuten Bank's Q2 results for the fiscal year ending March 2026 delivered a strong increase in both revenue and profit: Ordinary Revenue of ¥2,555.8B (YoY +¥710.5B +38.4%), Ordinary Income of ¥1,030.9B (YoY +¥315.7B +44.1%), and Net Income attributable to owners of the parent of ¥730.2B (YoY +¥224.7B +44.4%). Interest income rose substantially to ¥1,976.4B (YoY +¥69.5B +54.2%), with a rising interest rate environment supporting net interest income and driving revenue growth. ROE improved to 18.7%, exceeding the prior-year-period estimate of 16.0%, supported by an improved equity turnover. However, the Equity Ratio increased only slightly to 2.2% (prior year 2.0%), remaining well below regulatory required levels. Progress against the full-year forecast stands at 89.1% for Ordinary Income and 89.8% for Net Income, indicating some risk of missing full-year targets unless upside occurs in H2.
[Revenue] Ordinary Revenue rose to ¥2,555.8B (YoY +38.4%). The largest contributor was Interest Income of ¥1,976.4B (YoY +54.2%), reflecting improved yields on loans and securities with higher market interest rates. Loan interest income of ¥965.5B and securities interest/dividend income of ¥270.9B increased, and deposit interest rose to ¥391.9B (2.4x YoY), resulting in Net Interest Income of ¥1,424.7B (prior year ¥1,011.7B), up 40.8%. Fee and commission income increased to ¥494.6B (YoY +6.7%), with non-interest revenue expanding, including trust fees of ¥18.4B and other business income of ¥57.3B.
[Profit & Loss] Ordinary Expenses rose to ¥1,524.9B (YoY +34.9%) but grew less than Ordinary Revenue, improving margins. Interest expenses doubled to ¥551.7B (prior year ¥271.3B), but the rise in funding costs was absorbed by increased interest income. Fee and commission expenses were ¥337.7B; operating expenses were ¥569.3B (prior year ¥463.5B +22.8%), yet the operating expense ratio (OHR) improved to 22.3% (prior year 25.1%), indicating efficiency gains. Ordinary Income was ¥1,030.9B (YoY +44.1%); Profit Before Tax was ¥1,030.9B, and income taxes were ¥311.9B (effective tax rate 30.3%), resulting in Net Income attributable to owners of the parent of ¥730.2B (YoY +44.4%). Comprehensive income was ¥700.1B (prior year ¥391.6B +78.7%), including Other Securities Valuation Differences of -¥48.6B and Foreign Currency Translation Adjustments of +¥31.9B; the gap between Net Income and Comprehensive Income was limited to -¥30.1B. In conclusion, revenue and profit both expanded substantially, driven primarily by a favorable interest-rate environment and customer base expansion.
[Profitability] Net Profit Margin was 28.6% (improved +1.2pt from 27.4% prior year), and ROE was 18.7% (improved +2.7pt from prior-year estimate 16.0%), remaining at a high level. Interest Income accounted for 77.3% of Ordinary Revenue, and improved asset-yield efficiency in a rising-rate environment supported profitability. [Cash Quality] Operating Cash Flow (OCF) was ¥3,542.9B (prior year ¥1,837.6B +92.8%), a significant increase, representing 4.9x Net Income of ¥730.2B. The OCF-to-EBITDA ratio is high, indicating strong cash backing for profits. [Investment Efficiency] Total Asset Turnover was 0.015x, low as typical for banking, while financial leverage of 42.6x contributed to lifting ROE. Intangible fixed assets were ¥408.9B (prior year ¥305.8B), representing 0.25% of total assets and indicating continued system investments. [Capital Soundness] Equity Ratio was 2.2% (prior year 2.0%), a slight increase but well below the regulatory requirement of 8%+, representing a capital policy challenge. Deposits of ¥13.05 trillion versus loans of ¥5.94 trillion yield a loan-to-deposit ratio of 45.5%, reflecting conservative asset deployment and ample liquidity buffers. Tangible fixed assets were ¥50.4B and intangible fixed assets ¥408.9B, with fixed asset ratio at 0.28%, indicating a conservatively structured balance sheet.
Operating Cash Flow (OCF) increased significantly to ¥3,542.9B (YoY +92.8%), demonstrating cash generation capacity 4.9x Net Income of ¥730.2B. Adding back depreciation of ¥79.0B and other non-cash expenses to pre-working-capital Pretax Profit of ¥1,030.9B yields a pre-working-capital OCF subtotal of ¥3,834.4B. After subtracting corporate tax payments of -¥291.4B and adjusting for foreign exchange loss adjustments of -¥243.6B, OCF was finalized. Investing Cash Flow was -¥4,575.6B (prior year -¥7,325.6B), primarily due to increases in financial assets such as securities and purchased receivables; capital expenditures were limited at -¥14.9B. Financing Cash Flow was ¥0.0B, with no capital transactions; net decrease in cash and cash equivalents was -¥1,023.0B. Free Cash Flow was -¥1,032.6B, but in banking this negative figure reflects increases in marketable asset holdings included in Investing CF and does not necessarily indicate operational liquidity concerns. Cash and deposits at period end remained high at ¥4.14 trillion (prior year ¥4.24 trillion), indicating sufficient liquidity.
Ordinary Income of ¥1,030.9B plus special gains/losses of ¥0.0B produced Pretax Profit of ¥1,030.9B, meaning profits were entirely derived from ordinary operations. Non-operating income/expense components are included in ordinary revenue/ordinary expenses as interest and fee differentials, and no temporary special factors were observed. The ¥30.1B difference between Comprehensive Income of ¥700.1B and Net Income of ¥730.2B is attributable to valuation items such as Other Securities Valuation Differences of -¥48.6B and Foreign Currency Translation Adjustments of +¥31.9B, and is limited in magnitude. Operating Cash Flow of ¥3,542.9B greatly exceeds Net Income of ¥730.2B, implying minimal accruals and strong cash backing for profits. Allowance for credit losses stood at ¥95.6B (prior year ¥62.1B), or 0.16% of loans of ¥5.94 trillion, a low level; while reserve conservatism warrants attention, credit-cost fluctuations during the period were limited. Overall, earnings quality is high, characterized by recurring and cash-driven profit generation.
Full-year forecasts are Ordinary Revenue ¥3,146.7B, Ordinary Income ¥1,156.2B, and Net Income attributable to owners of the parent ¥813.3B. Progress versus Q2 results is 81.2% for Ordinary Revenue, 89.1% for Ordinary Income, and 89.8% for Net Income. While the full-year Ordinary Income forecast implies YoY +12.1%, Q2 actuals show YoY +44.1%, suggesting that company assumptions embed a slowdown in H2 relative to H1 outperform. Deviations in the interest-rate environment or loan/deposit trends from plan assumptions could produce upside or downside to forecasts. The 89.1% H1 progress for Ordinary Income indicates a scenario of slower revenue and profit accumulation in H2; H2 interest-rate trends, pace of customer-base expansion, and containment of expense growth will be key to achieving full-year targets.
Interim dividend ¥0.00, year-end dividend forecast ¥0.00, maintaining an annual dividend of ¥0.00. Payout Ratio is 0%, and the company intends to retain earnings fully for the time being. Given the Equity Ratio of 2.2% well below regulatory requirements, prioritizing capital accumulation through retained earnings is a rational policy. While Operating Cash Flow of ¥3,542.9B indicates ample cash generation, resumption of dividends is contingent on improvements in the Equity Ratio. Future shareholder-return capacity will depend on the pace of retained-earnings accumulation, restraint in risk-asset growth, and capital-policy measures such as capital increases as needed.
Interest Rate Risk: Interest Income accounts for 77.3% of Ordinary Revenue, giving high sensitivity to market-rate movements. While rising rates improve asset yields, competitive deposit-rate pressure could raise interest expenses. Deposit interest is already ¥391.9B (prior year ¥160.1B), 2.4x prior year, and a rise in deposit beta could compress net interest margin.
Credit Risk: Loans increased to ¥5.94 trillion (prior year ¥5.04 trillion +17.8%), and the allowance for credit losses of ¥95.6B represents only 0.16% of loans. In the event of a recession or a rise in non-performing loans, a sharp increase in provisioning could pressure profits. The conservatism of allowance levels and the quality of the credit portfolio will require ongoing monitoring.
Capital-Regulation Risk: Equity Ratio of 2.2% is well below the regulatory requirement of 8%+, creating potential breach risk under Basel regulations. As risk assets grow with loan and market operations, timing and scale of capital-strengthening measures (retained earnings, equity issuance, subordinated debt issuance, etc.) are the company's top management priorities. Capital constraints could limit growth pace.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Profit Margin | 28.6% | 11.9% (7.2%–35.4%) | +16.7pt |
Net Profit Margin exceeds the industry median by 16.7pt, indicating high profitability within banking.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 38.4% | 10.1% (7.3%–12.1%) | +28.3pt |
Revenue growth exceeds the industry median by 28.3pt, reflecting high growth driven by customer-base expansion as an internet-only bank and benefits from rising interest rates.
※Source: Company aggregation
Revenue expansion in a rising-rate environment was notable, with Net Interest Income +40.8% and Ordinary Income +44.1%, achieving high growth. Efficiency improved with OHR 22.3% (prior year 25.1%), indicating scale economics. Operating Cash Flow of ¥3,542.9B, 4.9x Net Income of ¥730.2B, corroborates high earnings quality. Key watchpoints are the sustainability of net interest margin amid changing rates and management of interest-expense pressure from rising deposit beta.
The biggest constraint is the Equity Ratio of 2.2%, well below regulatory thresholds. Continuing zero dividends to accumulate capital is rational from a capital-build perspective, but with assets expanding rapidly (Loans +17.8%, Securities +29.8%), timing and scale of capital-enhancement measures are the most important management priorities. Progress in capital policy will determine medium- to long-term growth sustainability and shareholder-return capacity.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information aggregated by the firm from public financial statements. Investment decisions are your responsibility; consult a professional advisor as appropriate.