| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥37.1B | ¥33.8B | +25.2% |
| Operating Income | ¥33.5B | ¥30.5B | +10.1% |
| Ordinary Income | ¥166.5B | ¥117.5B | +41.7% |
| Net Income | ¥33.5B | ¥30.4B | +10.2% |
| ROE | 1.4% | 1.5% | - |
For the fiscal year ended March 2026, the company achieved revenue of ¥37.1B (YoY +¥3.3B, +9.8%), operating income of ¥33.5B (YoY +¥3.0B, +10.1%), ordinary income of ¥166.5B (YoY +¥49.0B, +41.7%), and net income attributable to owners of the parent of ¥123.5B (YoY +¥36.9B, +42.7%), marking increases in both top-line and bottom-line. Ordinary income, the bank business’s core earnings metric, expanded significantly by +41.7% YoY, driven by NIM improvement and resilient fee income. Other comprehensive income improved to ¥286.6B (from ¥-43.5B prior year), with gains in other securities valuation differences contributing to equity accumulation. EPS rose substantially to ¥118.61 (YoY +42.7%). However, Operating Cash Flow (OCF) deteriorated materially to ¥-497.2B (prior year +¥97.4B), indicating a challenge in converting profits into cash.
[Revenue] The banking segment’s ordinary revenue accounted for ¥753.8B (approximately 80% of the total), followed by the leasing business at ¥171.8B and others at ¥16.8B. Revenue (as a general-corporate equivalent metric) was ¥37.1B, up +9.8% YoY, but the effective earning power of the banking business should be assessed on an ordinary revenue basis. Total ordinary revenue was ¥937.9B, up from ¥749.1B (+25.2% YoY), with interest income of ¥519.7B (prior year ¥388.3B, +33.9%) being the primary driver. Within interest income, loan interest was ¥418.2B (prior year ¥318.8B) and securities interest/dividends were ¥83.2B (prior year ¥58.5B), indicating margin improvement in a rising rate environment. Fee income was ¥156.4B (prior year ¥151.8B, +3.0%), remaining firm but with limited growth. By segment, banking ordinary revenue was ¥762.3B (YoY +0.8%), and leasing was ¥176.3B, both showing modest increases.
[Profitability] Operating income was ¥33.5B (YoY +10.1%), and ordinary income was ¥166.5B (YoY +41.7%), indicating acceleration at the ordinary income level. The operating margin of 90.5% appears abnormally high, reflecting technical accounting differences specific to banking (definition gap between ordinary revenue and revenue). Core banking profitability should be evaluated with NIM at 1.35% and a cost-to-income ratio of approximately 78%; gross profit (net interest + net fees + other net) was roughly ¥491.7B against SG&A of ¥385.4B. The large ordinary profit increase was mainly due to expansion in interest income (+¥131.4B) outweighing an increase in interest expense of ¥98.3B (prior year ¥30.2B, +226.5%), expanding the net interest spread. Profit before income taxes was ¥164.7B (prior year ¥117.7B, +39.9%); after ¥41.2B of income taxes, net income attributable to owners of the parent was ¥123.5B (prior year ¥86.5B, +42.7%). Extraordinary items were net ¥-1.8B (extraordinary gains ¥2.4B, extraordinary losses ¥4.2B), limited in scale, indicating low dependence on non-recurring factors. In conclusion, margin improvement in a rising rate environment supported revenue and profit growth, but sustained high CIR and low absolute NIM remain constraints on profitability improvement.
The banking segment accounted for the bulk of consolidated profit with ordinary income of ¥164.9B (no YoY data provided), achieving a profit margin of 21.6% on ordinary revenue of ¥762.3B. The leasing business generated ordinary income of ¥1.5B (ordinary revenue ¥176.3B, margin 0.8%), remaining slightly profitable and providing a stable diversification effect. Other segments (including credit card and credit guarantee businesses) recorded ordinary income of ¥39.9B (ordinary revenue ¥63.6B) with high margins but limited scale. Adjustment items totaled ordinary income of ¥-39.8B (including purchase method adjustment ¥-3.3B), resulting in consolidated ordinary income of ¥166.5B. The banking segment’s profit contribution is overwhelming, and NIM improvement and CIR reduction are key to raising group-wide profitability.
[Profitability] Operating margin 90.5% and net margin 90.4% are technical figures under banking accounting; substantive profitability should be assessed at NIM 1.35% and ordinary income margin 1.8% (ordinary income ¥166.5B ÷ ordinary revenue ¥937.9B). Gross profit of approximately ¥491.7B versus SG&A of ¥385.4B results in a high cost-to-income ratio of about 78%, leaving significant room for operational efficiency improvements. ROE was 5.3% (prior year 4.1%), calculated as net income ¥123.5B over equity ¥2,311.7B, improving from the prior year but still below the sector benchmark of over 8%. [Cash Quality] OCF/net income ratio was -4.03x, signaling challenges in earnings’ cash backing, with volatility driven by bank-specific loan growth and working capital movements. Depreciation was ¥44.1B versus capital expenditures of ¥17.4B, indicating maintenance-level capex. [Investment Efficiency] EPS was ¥118.61 (prior year ¥83.13, +42.7%), BPS ¥2,221.09; valuation depends on PBR levels for shareholder value assessment. Total asset turnover was 0.001x, extremely low due to the bank asset structure (loans and securities comprising the majority). [Financial Soundness] Equity ratio (solvency ratio) was 5.0% (prior year 4.5%), clearing domestic minimums but with limited buffer; D/E ratio was 18.83x, structurally high for a bank. Loan-to-deposit ratio was about 82% (loans ¥3,124,922 million ÷ deposits ¥3,798,777 million), within a healthy range (70–90%). Negotiable certificates of deposit (NCDs) increased substantially to ¥196.86B (prior year ¥73.99B, +166%), raising reliance on short-term funding.
OCF deteriorated to ¥-497.2B (prior year +¥97.4B), turning negative against net income of ¥123.5B. The main drivers were bank-account-specific loan increases (+¥110.55B) and working capital movements; OCF subtotal (before working capital changes) was ¥-454.0B, and payments for income taxes of ¥43.3B further widened the deficit. Investing cash flow was ¥-208.5B, with capital expenditure ¥17.4B, intangible asset investment ¥37.4B, partially offset by ¥18.9B proceeds from subsidiary share disposals. Financing cash flow was ¥-36.8B, with dividend payments ¥33.2B and share buybacks ¥3.6B as outflows. Free cash flow (OCF + investing CF) was ¥-705.7B, a large deficit, indicating insufficient internal funds to cover dividends and investments. Cash and cash equivalents at year-end were ¥348.11B (opening ¥422.36B, decrease ¥74.25B), shrinking the liquidity buffer and warranting monitoring of funding flexibility. OCF/EBITDA ratio was -6.40x (OCF ¥-497.2B ÷ EBITDA ¥77.7B), showing weak cash conversion and structural issues in cash backing of earnings.
Ordinary income of ¥166.5B is the main source of final profit, and extraordinary items were net ¥-1.8B (extraordinary gains ¥2.4B, extraordinary losses ¥4.2B), limited in magnitude and indicating low reliance on non-recurring factors. Breakdown of ordinary income: net interest income ¥421.4B (interest income ¥519.7B – interest expense ¥98.3B), net fee income ¥112.4B (fee income ¥156.4B – fee expense ¥44.0B), and other net income ¥-367.3B (including SG&A ¥385.4B), showing core banking revenue at the center. Non-operating income of ¥18.2B is not measured against revenue but represents 2.0% of ordinary revenue, small in contribution, and core business earnings support earnings persistence. However, OCF is substantially below net income, so attention is required on accruals (unrealized profits) and their cash backing. Other comprehensive income of ¥286.6B far exceeded net income, contributed by other securities valuation differences +¥148.4B and retirement benefit adjustments +¥14.7B, but these items carry realization risk in the future.
The guidance for FY2027 (year ending March 2027) assumes ordinary income of ¥214.0B (YoY +28.6%), net income attributable to owners of the parent ¥150.0B, and EPS ¥144.14. This implies an expected ordinary income increase of ¥47.5B from prior-year ordinary income ¥166.5B, premised on NIM uplift and strengthened cost discipline. Progress rate as of the end of Q2 is undisclosed and cannot be evaluated; achievement is more likely if spread expansion and credit cost containment materialize in H2. Conversely, delayed CIR improvement or deposit beta increases in a rising rate environment that compress spreads pose downside risks. Dividend guidance is ¥22 per share (post-split), implying an adjustment from the pre-split ¥144 for FY2026, and the company targets a payout ratio of 30.0%.
For FY2026 the annual dividend was interim ¥64 and year-end ¥80, totaling ¥144 (pre-split), and with shares outstanding of 104,670 thousand (104,061 thousand excluding treasury stock), total dividends amounted to approximately ¥15,070M. The payout ratio relative to net income attributable to owners of the parent ¥123.5B was about 122%, a high level exceeding earnings. Free cash flow was ¥-705.7B, so FCF coverage was -4.68x, indicating low sufficiency of internal funds for dividends and dependence on equity reserve drawdown or external financing. Share buybacks totaled ¥3.6B (cash flow statement basis), bringing total return ratio to about 125%. Dividend forecast for FY2027 is ¥22 (after a 1-to-4 stock split), which may involve an effective level adjustment. The dividend policy targets a payout ratio of 30%, and from a sustainability perspective the company emphasizes cash generation and compliance with capital regulation in balancing shareholder returns.
Constraint on profitability from low NIM and persistently high cost-to-income ratio: NIM at 1.35% is low relative to industry peers, leaving limited room for spread expansion. A cost-to-income ratio of about 78% is a major lever for profitability improvement; if SG&A reductions do not progress, ordinary income growth may plateau. In a rising rate environment, deposit beta increases could reduce spreads and further pressure profitability.
Persistent OCF deficit and weak cash conversion: OCF at ¥-497.2B is markedly negative, mainly due to loan growth and working capital movements. OCF/net income ratio -4.03x and OCF/EBITDA ratio -6.40x indicate poor cash backing of earnings, and internal funds are insufficient to cover dividends and investments. With FCF at ¥-705.7B and cash outflows of about ¥15.43B for dividends and buybacks, sustainability of capital policy is a concern.
Increased reliance on short-term funding and risk of higher funding costs: NCDs rose +166% from ¥73.99B to ¥196.86B, rapidly increasing dependence on short-term funding. A higher NCD ratio raises maturity mismatch risk and sensitivity of funding costs, potentially compressing spreads in a rising rate environment. While the loan-to-deposit ratio of 82% is within a healthy range, shortening of funding composition heightens the importance of liquidity risk management.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 90.5% | 14.6% (7.2%–39.4%) | +75.8pt |
| Net Margin | 90.4% | 11.9% (7.2%–35.4%) | +78.5pt |
Operating and net margins are technical metrics under banking accounting; divergence from medians is due to structural factors.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 25.2% | 10.1% (7.3%–12.1%) | +15.2pt |
Revenue growth (on ordinary revenue basis) significantly exceeds the median, driven by margin improvement.
※ Source: Company compilation
High ordinary income growth (+41.7%) was driven by margin expansion in a rising rate environment and resilient fee income, with NIM recovering from a low base to 1.35%—a notable development. FY2027 guidance targets ordinary income of ¥214B (+28.6%), but achievement depends on CIR reduction (targeting low-70s%) and containment of credit costs. Other comprehensive income of ¥286.6B exceeded net income substantially, with other securities valuation differences +¥148.4B contributing to equity accumulation and improving financial soundness.
Large deterioration in OCF (¥-497.2B) and FCF deficit (¥-705.7B) expose a gap with earnings growth; high shareholder returns (payout ratio 122% and total return ratio 125%) have not been covered by internal funds. Rapid increase in NCDs (+166%) raises dependence on short-term funding and sensitivity to funding costs in a rising rate environment. Equity ratio 5.0% clears domestic standards but offers limited buffer, making the balance between regulatory capital needs and shareholder returns a monitoring point.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your own responsibility; consult professionals as necessary.