| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥91.6B | ¥122.5B | +23.8% |
| Operating Income / Operating Profit | ¥62.8B | ¥96.9B | -35.1% |
| Ordinary Income | ¥604.8B | ¥416.5B | +45.1% |
| Net Income / Net Profit | ¥59.2B | ¥94.9B | -37.6% |
| ROE | 1.4% | 2.6% | - |
For the six months ended March 2026 (Q2 of FY2026), the group, centered on banking operations, achieved a substantial increase in Ordinary Income. Revenue (operating revenue) was ¥91.6B (YoY +¥30.9B +23.8%), Operating Income was ¥62.8B (YoY -¥34.1B -35.1%), Ordinary Income was ¥604.8B (YoY +¥188.3B +45.1%), and Net Income attributable to owners of the parent was ¥423.6B (YoY +¥110.0B +35.0%). The decline in Operating Income is attributable to changes in accounting classification of profit and loss items in the banking business; however, the substantial increase at the Ordinary Income level indicates that underlying earnings power strengthened. The banking segment recorded external-customer Ordinary Revenue of ¥1,620.7B (+24.2%), loan interest income of ¥860.6B (prior year ¥714.9B), deposit interest expense of ¥216.7B (prior year ¥67.4B), reflecting a revenue/cost structure impacted by rising interest rates, and fee income expanded to ¥288.3B (prior year ¥242.4B). EPS was ¥1,379.11 (prior year ¥1,027.69 +34.2%), and Comprehensive Income was ¥575.5B (prior year ¥115.4B +398.6%), with valuation gains such as deferred hedge gains +¥74.8B and pension remeasurements +¥70.1B materially improving and bolstering Equity.
[Revenue] Operating revenue ¥91.6B (+23.8%) was composed by segment of Banking ¥1,620.7B (+24.2%), Leasing ¥158.4B (+10.3%), and Other ¥214.5B (+28.9%). The main drivers of revenue growth were increased loan interest income in Banking (+¥145.7B) and expansion of fee income (+¥45.9B). Loan balances increased steadily to ¥5,277.5B (prior year ¥4,980.2B +6.0%), and yield improvements in the rising-rate environment contributed. Conversely, deposit interest expense surged from ¥67.4B to ¥216.7B (+¥149.3B +221.5%), which relatively constrained the expansion of net interest income. Fee income was solid due to increases in investment trust sales commissions and trust fees, and other Ordinary Revenue also grew to ¥61.6B (prior year ¥52.6B) due to foreign exchange gains, etc.
[Profitability] Operating Income decreased to ¥62.8B (-35.1%) due to differences in profit/loss classification under banking accounting. At the Ordinary Income level, the group recorded ¥604.8B (+45.1%), indicating substantial underlying profit improvement. Extraordinary items comprised Extraordinary Gains ¥5.1B (prior year ¥42.5B) and Extraordinary Losses ¥1.4B (prior year ¥1.6B), leaving a small net amount; the increase on an ordinary basis pushed Profit Before Tax to ¥608.5B (+33.0%). After deducting Income Taxes ¥184.8B (effective tax rate 30.4%), Net Income attributable to owners of the parent was ¥423.6B (+35.0%), achieving revenue and profit growth. Segment profits were Banking ¥575.4B (+45.1%), Leasing ¥4.7B (+11.6%), and Other ¥125.6B (+4.5%), with Banking accounting for approximately 81% of the company's profit increase. Goodwill amortization ¥5.0B was in line with the prior year, limiting pressure on profits. The divergence between Ordinary Income and Net Income is attributable to tax burden and non-controlling interests, and the quality of earnings is not driven by transitory factors and remains recurring.
The Banking segment reported external-customer Ordinary Revenue ¥1,620.7B (+24.2%) and Segment Profit ¥575.4B (+45.1%), maintaining high profitability with a profit margin of 35.5%. Growth was driven by increased loan interest income and expanded fee income, absorbing cost increases from rising deposit interest. The Leasing segment posted Ordinary Revenue ¥158.4B (+10.3%) and profit ¥4.7B (+11.6%), with a modest profit margin of 3.0% but steady performance. Other reported Ordinary Revenue ¥214.5B (+28.9%) and profit ¥125.6B (+4.5%), with non-interest income businesses such as consulting and IT contributing a high profit margin of 58.6%. The overwhelming contribution of Banking to revenue and profit (sales mix 81.3%, profit contribution approx. 81%) highlights a highly concentrated business portfolio.
[Profitability] Operating margin 68.6% (prior year 79.2% -10.6pt) declined due to the impact of banking accounting classification, but was strengthened at the Ordinary Income level. Net profit margin improved to 64.7% (prior year 48.4% +16.3pt), and ROE was 10.0% (prior year 8.5% +1.5pt), exceeding the company’s historical levels. [Cash Quality] Operating Cash Flow (OCF) was -¥1,378.1B (prior year -¥2,373.8B, improvement +¥995.7B), a large negative driven by funding absorption due to expansion of loans and securities, but narrowed year-on-year. OCF/Net Income was -3.25x and OCF/EBITDA was -10.03x, indicating structurally weak cash conversion of profits. Free Cash Flow was -¥1,488.4B, insufficient to internally cover dividends and capital expenditures. [Investment Efficiency] Total Asset Turnover was 0.001x (in line with prior year), reflecting the low-turnover structure of banking. Loans/Total Assets 72.1%, Securities/Total Assets 12.0% indicate a stable asset management structure. [Financial Soundness] Equity Ratio 5.7% (prior year 5.2% +0.5pt) remains low, but Net Assets were ¥4,234.4B (prior year ¥3,713.2B +14.0%), improving the capital base. Current Ratio 0.09 and D/E Ratio 16.28x reflect the high-leverage structure typical of banking and tight short-term liquidity metrics. Long-term borrowings were ¥1,493.6B (prior year ¥2,070.3B -27.9%), reducing interest-bearing debt and easing interest burden.
OCF was -¥1,378.1B (prior year -¥2,373.8B), a large outflow but improved year-on-year by +¥995.7B. The main drivers were increases in loans (¥2,973.3B) and securities (¥433.2B) causing operational funding absorption, and an increase in defined benefit plan net assets -¥1,471.7B also contributed to cash outflow. After adjustments including corporate taxes paid -¥149.0B and depreciation ¥74.6B, OCF remained substantially negative, indicating structural excess funding demand during the banking expansion phase. Investing Cash Flow was -¥110.3B, with capital expenditures -¥50.9B and intangible asset acquisitions -¥31.2B kept restrained. Financing Cash Flow was -¥53.2B, centered on dividend payments -¥52.3B, and share buybacks -¥0.9B were small. Free Cash Flow was -¥1,488.4B, and cash and cash equivalents decreased to ¥8,235.9B (prior year ¥9,777.6B -¥1,541.6B). Deposits ¥6,185.4B (+¥778.3B) and negotiable certificates of deposit ¥4,032.0B (+¥750.0B) continue to support balance sheet expansion on the premise of stable funding, but rising funding costs in a rising-rate environment warrant attention.
Recurring revenue is composed of net interest income (loan interest income - deposit interest expense), fee income, and other Ordinary Revenue, all showing solid trends. Transitory items were minor: Extraordinary Gains ¥5.1B (gain on disposal of fixed assets) and Extraordinary Losses ¥1.4B (loss on disposal of fixed assets), exerting limited impact on Ordinary Income of ¥604.8B. Non-operating income was small (dividend income received ¥0.3B, interest income received ¥0.1B), and most Ordinary Revenue derives from the core banking business. From an accrual perspective, OCF/Net Income -3.25x is low, and funding absorption from the expansion of loans and securities is inhibiting cash conversion of profits. Comprehensive Income ¥575.5B greatly exceeded Net Income ¥423.6B; the difference is attributable to valuation items such as deferred hedge gains +¥74.8B and pension remeasurements +¥70.1B, and valuation gains improved Equity. The divergence between Ordinary Income and Net Income is consistent with an effective tax rate of 30.4% and shows no signs of temporary profit manipulation. The rise in interest expense (+¥159.9B) reflects a structural environmental change, and future margin maintenance depends on successful repricing of loan rates.
Full Year guidance forecasts Ordinary Income ¥586.0B (YoY -3.1%), Net Income attributable to owners of the parent ¥400.0B, EPS ¥143.11, DPS ¥15. Q2 results recorded Ordinary Income ¥604.8B and Net Income attributable to owners of the parent ¥423.6B, representing progress against full-year guidance of Ordinary 103.2% and Net Income 105.9%—an outperformance. The company’s plan appears to incorporate conservative assumptions including increases in interest expense and normalization of credit costs, and Q2 results already exceed full-year guidance. There is room for revision next fiscal year depending on interest rate environments and credit trends; continued growth in fee income and progress in loan-rate repricing are upside factors.
Annual dividend on common shares is ¥170 (interim ¥85 + year-end ¥85), with a Payout Ratio of 15.5%, which is low. Total dividend payments are approximately ¥¥52.0B, which cannot be covered by Free Cash Flow of -¥1,488.4B and are maintained by a balance of stable funding such as deposits and capital accumulation. Preferred shares include Series 1 Class A Preferred Stock (dividend ¥386, linked to TIBOR+1.1%) and Series 2 Preferred Stock (dividend ¥165.6, linked to TIBOR), and preferred dividend burden is increasing with rising rates. Total shareholder return to common shareholders (dividends + share buybacks -¥0.9B) is approximately ¥53.0B, yielding a Total Return Ratio of 15.7%, which is modest. Given an Equity Ratio of 5.7% and the low level of capital, the policy appears to prioritize building capital via retained earnings while maintaining stable dividends. Over the medium term, if profit growth and improvements in the Equity Ratio proceed, scope for dividend increases would expand.
Risk of net interest margin compression in a rising-rate environment: Deposit interest expense surged from ¥67.4B to ¥216.7B (+¥149.3B), while loan interest income increased by only ¥145.7B, limiting expansion of net interest income. If deposit-rate repricing leads and loan yield improvements lag, margins could narrow and profitability decline.
Risk from low Equity Ratio and insufficient capital cushion: Equity Ratio 5.7% exceeds regulatory domestic standard (4%) but offers limited buffer; unexpected increases in credit costs or market volatility could erode capital, constraining dividend capacity and additional investment. Net Assets ¥4,234.4B (vs. Total Assets ¥7.32T, 5.8%) embody a high-risk structure with leverage of 16.28x.
Risk from large negative Operating Cash Flow and liquidity: OCF -¥1,378.1B and Free Cash Flow -¥1,488.4B indicate weak cash generation; continued expansion of loans and securities depends on stable deposit funding. Deposit outflows or deterioration in market funding conditions could create liquidity stress, making it difficult to maintain cash and cash equivalents at ¥8,235.9B (prior year -15.8%).
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 68.6% | 14.6% (7.2%–39.4%) | +53.9pt |
| Net Profit Margin | 64.7% | 11.9% (7.2%–35.4%) | +52.8pt |
Profitability metrics substantially exceed industry medians, with non-banking segments (Other 58.6% profit margin) boosting overall performance.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 23.8% | 10.1% (7.3%–12.1%) | +13.8pt |
Revenue growth outperforms the industry median by +13.8pt, driven by loan growth and expansion of fee income.
※ Source: Company aggregation
Ordinary Income +45.1% and ROE 10.0% indicate improved profitability, but rapid increases in interest expense (+¥159.9B) limit upside for net interest margin expansion. Key monitoring point is the progress of loan-rate repricing—whether loan yields improve sufficiently to match deposit-rate increases is critical for sustainability of earnings. Fee income (+¥45.9B) is healthy; monitoring whether diversification of non-interest income continues to alleviate margin pressure is necessary.
Comprehensive Income ¥575.5B far exceeded Net Income ¥423.6B, and valuation items such as deferred hedge gains +¥74.8B and pension remeasurements +¥70.1B contributed to strengthening Net Assets to ¥4,234.4B (+14.0%). Although Equity Ratio 5.7% remains low, accumulation of valuation-based capital is improving regulatory capital cushion. Going forward, the balance between retained earnings accumulation and dividend policy is a focus; if profit growth and capital strengthening proceed together, medium-term scope for dividend increases will expand.
This report was automatically generated by AI analyzing XBRL disclosure data to produce financial analysis content. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information aggregated by the company based on public financial statements. Investment decisions are your own responsibility; please consult experts as necessary before making investment decisions.