Tokyo Kiraboshi Financial Group (7173) FY2026 Q3 Earnings Report

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Executive Summary

Revenue and profit increased, primarily due to the expansion of net interest income and income from fees and commissions amid rising interest rates. Operating leverage was achieved as revenue growth outpaced the increase in expenses. Ordinary revenue was ¥132.48B (+13.2% YoY), ordinary income was ¥39.82B (+30.4%), and net income attributable to shareholders of the parent was ¥27.68B (+33.2%). While the expansion of ordinary revenue and income in the Banking Business drove consolidated results, points requiring attention remain in terms of profitability and capital, with NIM at 1.26% and the equity ratio at 5.5%.

Factors Affecting Performance

【Revenue】Ordinary revenue increased 13.2% YoY to ¥132.48B. The Banking Business accounted for the core portion at ¥109.17B (+15.4%), with interest on loans increasing to ¥63.40B (+20.5%) and interest and dividend income on securities rising to ¥16.67B (+27.3%), reflecting growth in asset management revenue. The Leasing Business increased revenue to ¥11.55B (+9.4%), while Other Businesses declined 2.6% to ¥11.96B.

【Profit and Loss】Ordinary income increased 30.4% to ¥39.82B, and net income increased 33.2% to ¥27.68B, with profit growth outpacing revenue growth. Funding costs surged to ¥19.05B from ¥6.59B in the previous year, while interest on deposits expanded to ¥15.89B, approximately 3.9 times the prior-year level. Nevertheless, net interest income was maintained at ¥65.06B (+7.0%), and income from fees and commissions also increased 16.6% to ¥17.05B. Expenses remained limited to ¥51.07B (+5.2%), below the rate of revenue growth, resulting in improved margins. The net contribution from extraordinary gains and losses was small at ¥0.38B, and the increase in profit was primarily attributable to improved ordinary revenue-generating capacity. Overall, the company achieved higher revenue and profit, and the quality of earnings can be considered favorable, being primarily driven by recurring items.

Segment Analysis

The Banking Business generated ordinary revenue of ¥109.17B (+15.4%) and segment income of ¥38.14B (+29.8%), making it the core business and accounting for 83.1% of total consolidated segment income of ¥45.92B. Its profit margin improved from 31.0% to 34.8%. The Leasing Business generated ordinary revenue of ¥11.55B (+9.4%) and segment income of ¥0.297B (-6.0%), with a profit margin of only 2.4%. Other Businesses, including consulting and card services, recorded ordinary revenue of ¥11.96B (-2.6%) and segment income of ¥7.48B (-32.1%), with the profit margin declining from 40.4% to 32.0%. Consolidated profit growth was driven by the Banking Business, while the recovery of profitability in the non-banking divisions remains an issue to monitor going forward.

Key Financial Indicators

【Profitability】The ordinary income margin expanded by 398bp from 26.1% in the same period of the previous year to 30.1%, while the net income margin increased by 313bp from 17.8% to 20.9%. Annualized ROE was 9.1%. 【Cash Flow Quality】Growth in recurring items such as interest on loans, interest and dividend income on securities, and income from fees and commissions was the primary driver of earnings improvement. The net contribution from extraordinary gains and losses was small at ¥0.38B, indicating limited dependence on non-recurring factors. 【Investment Efficiency】Loans increased to ¥5,159.15B (+3.6%), while securities increased to ¥929.97B (+11.4%), expanding earning assets and contributing to growth in asset management revenue. The loan-to-deposit ratio was 80.3%, calculated by dividing loans of ¥5,159.15B by deposits of ¥6,422.93B. 【Financial Soundness】The equity ratio was 5.5%, and the net asset ratio was 5.6%, reflecting the conventional financial leverage structure of a bank. Net assets increased ¥34.54B (+9.3%) YoY, while retained earnings accumulated to ¥221.25B (+11.1%).

Cash Flow Analysis

As detailed disclosure of the statement of cash flows is not provided in these financial results, fund flows are analyzed based on movements in the balance sheet. Deposits increased by ¥315.31B (+5.2%) YoY to ¥6,422.93B, with fund inflows occurring at a pace exceeding loan growth of ¥177.47B (+3.6%). As a result, cash and due from banks decreased by ¥11.69B (-11.9%) YoY to ¥86.39B, suggesting that part of the increased deposit funding was allocated to loans and securities, which increased by ¥95.20B (+11.4%). Meanwhile, negotiable certificates of deposit decreased by ¥154.17B (-47.0%) YoY to ¥174.03B, indicating a possible shift in the funding mix toward ordinary deposits and other sources. Overall, the allocation of funds toward increasing earning assets using the expanded deposit base was observed.

Earnings Quality

The increase in current-period profit was primarily based on recurring items, and earnings quality appears favorable. Extraordinary income was ¥0.50B and extraordinary losses were ¥0.12B, resulting in a net contribution of only ¥0.38B, with a limited impact on pretax income of ¥40.20B. Funding costs, which are classified as non-operating items, surged to ¥19.05B from ¥6.59B in the previous year, while the sharp expansion in interest on deposits (+285.1% YoY) indicates a structural change on the cost side. Nevertheless, net interest income increased 7.0% YoY, as improved yields on the asset side more than offset the increase in funding costs. Comprehensive income expanded substantially to ¥39.95B from ¥6.86B in the previous year, supported by improvements in valuation differences on securities (+¥7.43B) and deferred hedge gains and losses (+¥5.68B). The divergence from net income of ¥27.68B was primarily attributable to valuation fluctuations in marketable assets, and attention should be paid to asset valuation differences as an accrual-related factor.

Earnings Forecast and Guidance

The progress rate through Q3 against the full-year ordinary income forecast of ¥47.00B was 84.7%, while the progress rate against the net income forecast of ¥33.00B was 83.9%. Both were above the standard progress rate of 75%. There were no revisions to either the earnings forecast or the dividend forecast. If ordinary income of ¥7.18B and net income of ¥5.32B are recorded in Q4, the full-year plan will be achieved, and cumulative results to date are above the level required to meet the plan.

Shareholder Returns

The Q2 dividend on common shares was ¥85 per share, and the full-year dividend forecast is ¥170, unchanged from the previous forecast. The forecast payout ratio against the full-year net income forecast of ¥33.00B is approximately 15.6%, indicating a low dividend burden relative to earnings. Retained earnings have accumulated to ¥221.25B, providing substantial capacity as a source of dividends. Class 1 and Class 2 preferred shares have dividend terms linked to TIBOR, and annual dividend forecasts for the fiscal year ending March 2026 are ¥386.00 per share and ¥165.636 per share, respectively, expected to increase from the previous-year actual dividends of ¥280.00 and ¥59.090 due to rising interest rates.

Risk Factors

1. Interest rate repricing risk: Interest on deposits increased 285.1% YoY, and funding costs expanded to ¥19.05B. NIM was 1.26%, below the 1.5% level considered a warning threshold. If increases in deposit rates outpace improvements in asset yields, growth in net interest income may slow.

2. Capital adequacy: The equity ratio was 5.5%, below the general benchmark of 8%. Although internal reserves have been accumulated through retained earnings growth (+11.1% YoY), capital strength remains an ongoing point for review.

3. Declining profitability of non-banking businesses: Segment income in the Leasing Business declined 6.0% YoY, while Other Businesses declined 32.1%, with profit margins also falling in both businesses. With the Banking Business accounting for 83.1% of consolidated income, the recovery of profitability in the non-banking divisions remains a key issue.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Points from the Financial Results

1. Ordinary income increased 30.4% and net income increased 33.2%, with revenue growth outpacing the increase in expenses (+5.2%), confirming favorable operating leverage. The full-year progress rates of 84.7% for ordinary income and 83.9% for net income were also above the standard level, indicating steady progress toward achieving the plan.

2. NIM of 1.26% and an equity ratio of 5.5% are profitability and capital indicators that should be monitored alongside the earnings growth trend. The sharp increase in interest on deposits (+285.1% YoY) is notable as a structural change that could affect the sustainability of future growth in net interest income.

3. While the Banking Business accounts for 83.1% of total segment income, income from the Leasing Business and Other Businesses declined. Changes in the earnings structure of the non-banking divisions will therefore remain a medium-term focus.

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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 security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed financial results. Investment decisions should be made at your own discretion and responsibility, after consulting professionals as necessary.

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