San ju San Financial Group (7322) FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, the Company posted higher revenue and profit, mainly due to the expansion of interest income, while profit margins also improved. Ordinary revenue was ¥937.9B (+25.2% year on year), Ordinary Income was ¥166.5B (+41.7%), and Net Income attributable to owners of the parent was ¥123.5B (+42.7%). The growth rate of Ordinary Income exceeded the growth rate of Ordinary Revenue, highlighting that revenue expansion was efficiently converted into profit growth. While net interest income expanded mainly due to growth in interest on loans, interest on deposits also increased, indicating that changes in the interest-rate environment are affecting the earnings structure.

Factors Driving Performance Changes

【Revenue】Ordinary revenue was ¥937.9B, representing a 25.2% year-on-year increase. Banking accounted for ¥753.8B (80.4% of the total) and remained the core business, driven by growth in interest on loans to ¥41.8B from ¥31.9B in the previous year. Leasing generated ¥171.8B (18.3% of the total), while Other Businesses, including credit cards and credit guarantees, generated ¥16.8B.

【Profit and Loss】Ordinary Income increased 41.7% to ¥166.5B, while Net Income increased 42.7% to ¥123.5B, resulting in higher revenue and profit. Banking segment profit of ¥164.9B (profit margin: 21.9%) accounted for the majority of consolidated profit, while Leasing had a profit margin of only 0.9%, indicating a significant profitability gap. General and administrative expenses were ¥385.4B, up 3.9% year on year, growing at a slower pace than revenue and resulting in positive operating leverage. Extraordinary gains and losses were limited in scale, comprising gains of ¥2.4B and losses of ¥4.2B, including impairment losses of ¥1.6B. Accordingly, the difference between Ordinary Income and Net Income was largely attributable to the tax burden, with an effective tax rate of 25.0%. In conclusion, the Company achieved higher revenue and profit.

Segment Analysis

The reported segments comprise Banking and Leasing. Banking generated Ordinary Revenue of ¥753.8B and segment profit of ¥164.9B (profit margin: 21.9%), making it the core contributor to consolidated profit. Leasing generated Ordinary Revenue of ¥171.8B and segment profit of ¥1.5B (profit margin: 0.9%), indicating a limited contribution to profit relative to its scale. Other Businesses, including the credit card and credit guarantee businesses, reported segment profit of ¥39.9B against Ordinary Revenue of ¥16.8B, implying a high profit margin. However, as this figure includes purchase method adjustments and the elimination of intersegment transactions, its contribution to consolidated profit should be assessed based on the adjusted figures.

Key Financial Indicators

【Profitability】The Ordinary Income margin was 17.8%, improving by approximately 2.1pt from 15.7% in the previous year, while the Net Income margin was 13.2%, improving by approximately 1.6pt from 11.6%. ROE was 5.3%, compared with 4.1% in the previous year, mainly reflecting the increase in the Net Income margin resulting from the expansion of interest income.【Cash Flow Quality】Operating Cash Flow (OCF) was a deficit of ¥497.2B, reversing from a surplus of ¥97.4B in the previous year toward cash outflow. In banking, changes during the period in loans, deposits, and securities significantly influence OCF, so direct comparisons with general operating companies are inappropriate. Nevertheless, the change warrants monitoring as an indication of changes in the funding position.【Investment Efficiency】Capital expenditures were ¥17.4B compared with depreciation and amortization of ¥44.1B. Although investment was below depreciation on a PPE basis, total fixed and intangible asset investment, including ¥37.4B for the acquisition of intangible assets, was ¥54.8B and exceeded depreciation and amortization.【Financial Soundness】The Equity Ratio was 5.0%. Loans of ¥3兆1,249.2B and deposits of ¥3兆7,987.8B resulted in a loan-to-deposit ratio of 82.3%, within a standard range. NIM was 1.35%, representing a structural constraint affecting the sustainability of earnings growth.

Cash Flow Analysis

Operating Cash Flow (OCF) was a deficit of ¥497.2B, reversing from a surplus of ¥97.4B in the previous year toward cash outflow. Because changes in positions such as loans, deposits, and securities are directly reflected in OCF in banking, it is not appropriate to immediately conclude that earnings quality has deteriorated based on the standards applicable to general operating companies. However, the direction of the change warrants monitoring. Investing Cash Flow was an outflow of ¥208.5B, comprising capital expenditures of ¥17.4B, intangible asset acquisitions of ¥37.4B, and other items. Financing Cash Flow was an outflow of ¥36.8B, including share repurchases of ¥3.6B and dividend payments. Consequently, free cash flow represented an excess of outflows of ¥705.7B. Cash and cash equivalents decreased by ¥742.5B, resulting in an ending balance of ¥3,481.1B. Although PPE investment was limited to ¥17.4B against depreciation and amortization of ¥44.1B, combining intangible asset investment results in a level exceeding depreciation and amortization; therefore, the overall scale of investment cannot be considered materially insufficient.

Earnings Quality

The core driver of current-period profit was the expansion of net interest income, calculated as interest income of ¥519.7B less interest expense of ¥98.3B, reflecting an enhanced recurring earnings base. Extraordinary gains of ¥2.4B and extraordinary losses of ¥4.2B, including impairment losses of ¥1.6B, were limited in scale and were not significant drivers of the difference between Ordinary Income, Profit Before Tax of ¥164.7B, and Net Income. Comprehensive income was ¥286.6B, exceeding Net Income of ¥123.5B by ¥163.1B. The primary factor was the recognition of ¥148.4B in valuation differences on securities in other comprehensive income. This divergence resulted from changes in market prices and indicates a high sensitivity to capital fluctuations that are not reflected in Net Income. From an accrual perspective, the OCF deficit was largely attributable to changes in funding positions specific to banking. Accordingly, it cannot be concluded that the quality of accrual-based earnings itself has materially deteriorated, although ongoing monitoring of funding trends is necessary.

Earnings Forecast and Guidance

The forecast for the next fiscal year, ending March 2027, is Ordinary Income of ¥214.0B (+28.6% compared with current-period actual results) and EPS of ¥144.14. If the improvement in the Ordinary Income margin to 17.8% and the upward trend in loans continue, continued profit growth can be expected. However, the trend in NIM of 1.35% and increases in deposit funding costs will be key variables affecting the achievement of the forecast.

Shareholder Returns

Dividends were ¥64 in Q2 and ¥80 at year-end, for an annual total of ¥144, compared with ¥37 in the previous year. The payout ratio disclosed in the raw data was 30.3%, and total dividend payments were ¥37.7B. However, a four-for-one stock split of common shares was conducted effective April 1, 2026, and the applicable bases before and after the split may be mixed in the dividend figures. Applying the annual dividend of ¥144 directly to the weighted-average number of shares outstanding results in a calculated payout ratio exceeding 100%. Therefore, confirmation of the split-adjusted basis is required before presenting a single payout ratio. Share repurchases amounted to ¥3.6B, compared with ¥0.04B in the previous year, and the scale of shareholder returns was small relative to net assets of ¥2,311.7B. The dividend forecast for the next fiscal year is ¥44 on a post-split basis.

Risk Factors

1. Revenue concentration risk: Banking accounts for approximately 80.4% of Ordinary Revenue from external customers. Consequently, the Company’s consolidated profit structure is directly affected by regional economic demand for funds, lending competition, and changes in the operating conditions of business partners.

2. Net interest margin compression risk: NIM is 1.35%. If rising deposit rates outpace improvements in lending and securities investment yields, the expansion of net interest income could slow. In fact, interest on deposits increased substantially from ¥25.7B in the previous year to ¥83.4B.

3. Cash flow volatility risk: OCF was a deficit of ¥497.2B, compared with a surplus of ¥97.4B in the previous year, and cash and cash equivalents decreased by ¥742.5B. Even after considering funding position changes specific to banking, the shift toward cash outflow requires ongoing monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Return

The Net Income margin is slightly above the industry median.

Growth and Capital Efficiency

The Revenue growth rate is substantially above the industry median and represents a high level of revenue growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Ordinary Income and Net Income both increased by more than 40%, while the Ordinary Income margin and Net Income margin also improved from the previous year. The simultaneous progress in revenue growth and margin improvement was a defining feature of the current-period results.

2. NIM of 1.35% is below the industry’s general cautionary level of 1.5%, while the loan-to-deposit ratio of 82.3% is within a standard range. The sustainability of earnings growth appears to depend on the trend in NIM and credit cost management.

3. OCF shifted from a surplus in the previous year to a deficit of ¥497.2B, while cash and cash equivalents also decreased by ¥742.5B. Even considering funding position changes specific to banking, the shift in funding trends is a notable point in the financial results data.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings-release data. It does not constitute a recommendation to invest in any specific security. 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 a professional as necessary.

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