Hirogin Holdings (7337) FY2026 FY Earnings Report

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Executive Summary

Revenue and profit increased, primarily due to the expansion of interest income; however, profit margins declined slightly relative to revenue growth. Ordinary revenue was ¥2,512.1B (+24.8% YoY), ordinary income was ¥620.2B (+18.9%), and net income attributable to owners of the parent was ¥437.3B (+22.0%). Growth in funds investment income from loans and securities in the banking business drove overall revenue, but higher funding costs resulting from rising deposit interest rates put pressure on margins, causing the ordinary income margin to decline from 25.9% in the previous year to 24.7%.

Factors Affecting Results

【Revenue】Ordinary revenue increased 24.8% YoY to ¥2,512.1B. The banking business led growth at ¥2,144.1B (+28.3% YoY; 85.4% composition ratio), driven by a +15.7% increase in interest on loans and a +35.9% increase in interest and dividends on securities. The leasing business generated ¥234.7B (+3.4%), while other businesses generated ¥133.3B (+14.9%); both recorded more moderate revenue growth than the banking business.

【Profit and Loss】Ordinary income was ¥620.2B (+18.9% YoY), while net income was ¥437.5B (+22.1%). The banking business secured higher profit, with segment profit of ¥569.0B (+19.3%), but its profit margin declined to 26.5% from 28.6% in the previous year, as higher funding costs offset part of the increase in funds investment income. Segment profit in other businesses fell sharply to ¥107.0B (-57.1%), while the leasing business also recorded a slight decline to ¥14.4B (-2.4%). Although the consolidated group achieved higher revenue and profit, profit growth was below revenue growth, indicating an increasing reliance of profit growth on net interest income in the banking business.

Segment Analysis

The reporting segments comprise the banking business and the leasing business. The banking business generated ordinary revenue of ¥2,144.1B (+28.3% YoY) and segment profit of ¥569.0B (+19.3%), accounting for the core of consolidated profit. The leasing business recorded ordinary revenue of ¥234.7B (+3.4%) and segment profit of ¥14.4B (-2.4%), resulting in lower profit. “Other” businesses not included in the reporting segments, including financial instruments trading, claims management and collection, and IT-related businesses, generated ordinary revenue of ¥133.3B (+14.9%), while segment profit declined substantially to ¥107.0B (-57.1%); this warrants monitoring as a factor affecting consolidated profit.

Key Financial Indicators

【Profitability】ROE was 7.7%, improving from 7.1% in the previous year (estimated), while the net income margin was 17.4%, slightly below 17.8% in the previous year. The ordinary income margin also declined to 24.7% from 25.9% in the previous year, indicating that margin growth has not kept pace with revenue expansion. 【Cash Flow Quality】Operating CF was negative ¥3,451.7B; however, in the banking business, changes in balances of deposits, loans, securities, and other items are significantly reflected in operating CF, limiting its interpretation as a cash-conversion indicator under the standards generally applied to non-financial operating companies. 【Investment Efficiency】Capital expenditures were ¥25.3B, compared with depreciation and amortization of ¥70.1B, resulting in a CapEx/depreciation and amortization ratio of 0.36x, which is low on a PPE-only basis. However, including ¥74.8B in acquisitions of intangible assets, total investment was 1.43x depreciation and amortization, suggesting a shift toward IT and systems investment. 【Financial Soundness】The equity ratio was 4.7%, while the deposit-to-loan ratio was 86.4%, indicating an approximately balanced relationship between the deposit base and loan deployment. Borrowings decreased by ¥2,628.2B YoY, indicating lower reliance on wholesale funding.

Cash Flow Analysis

Operating CF was negative ¥3,451.7B, investing CF was negative ¥2,028.0B, and free CF was negative ¥5,479.7B. In the banking business, changes in balances of deposits, loans, securities, deposits with the Bank of Japan, and other items are directly reflected in operating CF, limiting interpretation under the same standards applied to non-financial operating companies. During the period, loans increased by ¥2,590.2B and securities increased by ¥1,303.2B, while cash and deposits decreased by ¥5,735.5B and borrowings also decreased by ¥2,628.2B, indicating progress in reallocating funds to earning assets while reviewing the funding structure. Financing CF was negative ¥209.1B, with dividend payments of ¥156.5B and share repurchases of ¥51.5B being the primary outflows. The negative operating CF should be understood not as a deterioration in working capital, but as a change in the composition of assets and liabilities on the banking balance sheet.

Earnings Quality

Against net income of ¥437.5B, extraordinary items were limited, comprising extraordinary income of ¥0.3B and extraordinary losses of ¥5.6B, including impairment losses of ¥3.4B; the divergence between ordinary income and net income was primarily attributable to income taxes and other taxes of ¥177.4B. Funds investment income in the banking business increased to ¥1,572.9B (+26.1% YoY), but funding costs increased to ¥530.9B (+36.3%), with the rate of increase in funding costs exceeding the rate of increase in investment income, creating a certain pressure factor on earnings quality. Comprehensive income was ¥844.6B, substantially exceeding net income of ¥437.5B. The difference consisted of valuation differences on securities of ¥103.7B, deferred hedge gains and losses of ¥263.3B, and adjustments related to retirement benefits of ¥40.1B, indicating that improvements in other comprehensive income reflecting market fluctuations exceeded net income by a significant amount. General and administrative expenses increased 8.3% YoY to ¥695.2B, below the rate of increase in ordinary revenue, demonstrating continued cost discipline.

Earnings Forecasts and Guidance

Against the company’s forecast of ordinary income of ¥745.0B, the current-period result of ¥620.2B represents a progress rate of 83.2%. Against forecast EPS of ¥172.73, actual EPS was ¥145.84, representing a progress rate of 84.4%. Against the forecast annual dividend of ¥70, the current-period dividend of ¥58 corresponds to 82.9%. All three figures are progressing in the 80% range against the full-year forecasts, exceeding the standard pace of progress.

Shareholder Returns

The annual dividend was ¥58, comprising an interim dividend of ¥27 and a year-end dividend of ¥31, resulting in a payout ratio of 40.5% based solely on dividends as the numerator. Total dividends of ¥175.72B correspond to approximately 40.2% of net income attributable to owners of the parent of ¥437.3B. Including share repurchases of ¥51.5B, the total return ratio was approximately 52.0%. The company forecasts an annual dividend of ¥70, representing a planned increase of ¥12 compared with the current period. The forecast payout ratio against forecast EPS of ¥172.73 is approximately 40.5%, implying a return policy at a level similar to that of the current period.

Risk Factors

1. Business concentration risk: The banking business accounts for 85.4% of ordinary revenue from external customers, creating a structure in which changes in the regional economy and interest-rate environment have a concentrated impact on consolidated results.

2. Net interest margin pressure risk: Funds investment income increased 26.1% YoY, but funding costs increased 36.3%, exceeding that growth rate. If deposit interest rates continue to rise, the scope for improvement in the net interest margin may be constrained.

3. Capital adequacy risk: The equity ratio was 4.7%, while the debt-to-equity ratio was also high at 20.47x. Although this structure is attributable to deposit-based funding, the condition of the capital buffer requires ongoing monitoring.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Return

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The company achieved higher revenue and profit, with ordinary revenue up 24.8%, ordinary income up 18.9%, and net income up 22.1%. However, both the ordinary income margin and net income margin declined from the previous year, indicating that expansion in revenue scale led profit growth.

2. The banking business segment profit margin declined to 26.5% from 28.6% in the previous year, with higher funding costs offsetting part of the increase in funds investment income. Segment profit in other businesses decreased substantially by -57.1% YoY, making profit fluctuations in non-banking areas a factor affecting consolidated performance.

3. Within a financial structure featuring an equity ratio of 4.7%, a payout ratio of 40.5%, and a total return ratio of approximately 52.0%, the degree of achievement against the company forecast—an ordinary income progress rate of 83.2%—is ahead of the standard pace.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, and after consulting a professional advisor where necessary.

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