Hirogin Holdings (7337) FY2026 Q3 Earnings Report

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Executive Summary

Cumulative results for Q3 FY2026 recorded higher revenue and income, primarily due to the expansion of interest income, with solid progress against the full-year plan. Ordinary income increased 16.4% YoY to ¥173.56B, ordinary income rose 12.0% to ¥47.33B, and quarterly net income attributable to owners of the parent increased 13.6% to ¥32.95B. Basic EPS increased 14.5% to ¥109.72 from ¥95.79 in the same period of the previous year. Ordinary income growth fell below ordinary revenue growth because the increase in funding costs partially offset the expansion in interest and investment income.

Factors Affecting Performance

【Revenue】Ordinary revenue was ¥173.56B, representing a +16.4% YoY increase. The Banking segment led overall performance, recording ordinary revenue from external customers of ¥146.75B (+18.6% YoY) and becoming the core business, accounting for more than 80% of consolidated revenue. The Leasing business recorded ¥17.43B (+2.5%), while Other businesses—including financial instruments trading, loan servicing and collection, and IT-related operations—recorded ¥9.39B (+10.7%), indicating slower growth than the Banking business. Growth in loans outstanding to ¥8,266.7B (+4.2%) and securities outstanding to ¥2,146.3B (+12.0%) supported the increase in interest and investment income.

【Earnings】Ordinary income was ¥47.33B (+12.0% YoY), while net income was ¥32.95B (+13.6%). Banking segment income was ¥43.96B (+11.8%), leading overall earnings growth; however, funding costs expanded sharply by +30.9% to ¥37.29B, causing the ordinary income margin to decline by approximately 100bp from 28.3% in the previous year to 27.3%. The Leasing business recorded a slight decline in segment income of -0.8% YoY, widening the profitability gap with the Banking business. Extraordinary losses of ¥0.33B, including impairment losses of ¥0.18B, exceeded extraordinary income of ¥0.03B, resulting in pretax income being slightly below ordinary income. Overall, the Company achieved higher revenue and income, maintaining earnings growth as the expansion in interest and investment income exceeded the increase in funding costs.

Segment Analysis

The Banking segment recorded ordinary revenue from external customers of ¥146.75B (+18.6% YoY) and segment income of ¥43.96B (+11.8%), resulting in a segment income margin of 30.0%. It is the primary contributor to consolidated earnings, supported by increases in interest on loans and interest and dividends on securities. The Leasing business recorded ordinary revenue of ¥17.43B (+2.5%) and segment income of ¥1.198B (-0.8%), representing a decline in earnings; its 6.9% margin was substantially lower than that of the Banking business. Other businesses—including financial instruments trading, loan servicing and collection, and IT-related operations—recorded ordinary revenue of ¥9.39B (+10.7%) and segment income of ¥9.17B (+1.8%), making it a highly profitable segment with a 97.7% margin, although its scale remains limited relative to the consolidated total. Growth in revenue and income in the Banking business offset stagnation in the Leasing business, resulting in higher revenue and income overall.

Key Financial Indicators

【Profitability】The net income margin was high at 19.0%, while the ordinary income margin was 27.3%, down approximately 100bp from 28.3% in the same period of the previous year. Annualized ROE was 7.8%, supported by the high net income margin and the high financial leverage characteristic of the banking model.【Cash Quality】Comprehensive income was ¥75.17B, substantially exceeding net income of ¥32.95B. Other comprehensive income of ¥42.23B, including ¥22.94B in valuation differences on securities and ¥19.37B in deferred hedge gains or losses, increased net assets. Of the ¥0.33B in extraordinary losses, ¥0.18B was attributable to impairment losses, indicating that the impact of temporary factors was limited.【Investment Efficiency】The total asset turnover ratio was low, reflecting the characteristics of the banking model, in which the leverage effect from asset growth complements ROE. Intangible fixed assets were ¥18.48B, equivalent to only 0.1% of total assets, with the majority of assets consisting of loans and securities.【Financial Soundness】The equity ratio was 4.4%, while net assets increased to ¥559.64B, up +10.9% from ¥504.64B in the previous year. Liabilities accounted for 95.6% of total assets, reflecting the high-leverage structure characteristic of the banking business, with deposits of ¥9,399.6B serving as the primary source of funding.

Cash Flow Analysis

As no cash flow statement disclosure could be confirmed for these results, funding trends are analyzed based on changes in the balance sheet. Loans increased by ¥332.2B (+4.2% YoY) to ¥8,266.7B, while securities expanded by ¥229.6B (+12.0%) to ¥2,146.3B. In contrast, deposits increased by only ¥122.6B (+1.3%) to ¥9,399.6B, meaning that deposit growth fell short of loan growth. Borrowings decreased by ¥270.2B (-18.7% YoY) to ¥1,173.4B, reducing reliance on borrowing, while collateral received for securities lending and borrowing transactions increased by ¥241.5B (+77.7%) to ¥552.4B, indicating a slight increase in reliance on market-based funding. Cash and deposits were ¥1,542.8B, down from ¥1,727.0B in the same period of the previous year, suggesting that funds are shifting toward operating assets, namely loans and securities.

Quality of Earnings

The primary source of earnings is interest and investment income in the Banking business. Interest on loans increased +14.4% YoY, while interest and dividends on securities increased +36.2% YoY, with both expanding as recurring sources of revenue. At the same time, funding costs also expanded sharply by +30.9% YoY. As a result, ordinary expenses grew 18.1%, exceeding the 16.4% growth in ordinary revenue, causing the ordinary income margin to decline YoY. Extraordinary items were limited in scale, with extraordinary income of ¥0.03B versus extraordinary losses of ¥0.33B, including impairment losses of ¥0.18B. Their impact on pretax income was limited, and there is no indication that temporary factors materially influenced performance. However, comprehensive income of ¥75.17B substantially exceeded net income of ¥32.95B, with most of the difference attributable to ¥22.94B in valuation differences on securities and ¥19.37B in deferred hedge gains or losses. These are unrealized valuation components associated with changes in market prices and therefore require monitoring from the perspective of reproducibility and sustainability relative to net income.

Earnings Forecast and Guidance

The full-year ordinary income forecast is ¥57.00B (+9.2% YoY), and the progress rate for cumulative Q3 results of ¥47.33B was 83.0%, exceeding the standard benchmark of 75%. Cumulative net income was ¥32.95B against a full-year forecast of ¥40.00B, representing a progress rate of 82.4%; both figures indicate solid progress toward achieving the plan. There were no revisions to the earnings or dividend forecasts during the quarter, and management expects performance to remain within the scope of the initial plan. Against the EPS forecast of ¥133.58, cumulative EPS was ¥109.72, representing a progress rate of approximately 82.1%.

Shareholder Returns

The Q2 interim dividend was ¥27.00 per share, and the full-year dividend forecast is ¥54.00, assuming a year-end dividend equal to the interim dividend. Although there is no comparison with the ¥23.5 dividend in the same period of the previous year, the full-year forecast indicates an increase in dividends. The forecast payout ratio, calculated based on the full-year net income forecast of ¥40.00B, the ¥54.00 dividend forecast, and the average number of shares outstanding during the period, is approximately 40.5%, within the benchmark for sustainable levels of less than 60%. The 82.4% progress rate for cumulative Q3 net income provides stronger earnings support for the full-year dividend forecast. There was no disclosure regarding share repurchases; therefore, shareholder returns consist solely of dividends and are evaluated based on the payout ratio.

Risk Factors

1. Net interest margin (NIM) compression risk: While interest on loans increased +14.4% YoY, interest on deposits rose sharply by +145.0% to ¥16.20B. If the pace of increase in funding costs exceeds the improvement in asset yields, the net interest margin could come under pressure.

2. Financial leverage and equity ratio: The reported equity ratio was 4.4%, while liabilities accounted for 95.6% of total assets, indicating a highly leveraged structure. Although this is characteristic of the banking business, which relies primarily on deposits as a funding source, sensitivity to capital and liquidity conditions increases in the event of deposit outflows or changes in the market-based funding environment.

3. Securities valuation and segment profitability diversification: Securities outstanding increased to ¥2,146.3B, up ¥229.6B YoY, and changes in interest rates and equity prices may affect valuation differences and comprehensive income. In addition, the Leasing business recorded a -0.8% decline in segment income, widening the profitability gap with the Banking business, which had a 30.0% income margin.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

The 19.0% net income margin has limited comparative data available, and there is insufficient information to assess its relative position within the industry.

Growth and Capital Efficiency

Similarly, comparative data for the 16.4% revenue growth rate is limited. In absolute terms, it represents a relatively high rate of revenue growth.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The Company secured double-digit growth in both ordinary income and net income, with progress rates against the full-year plan of 83.0% for ordinary income and 82.4% for net income, exceeding standard progress benchmarks. The expansion in interest and investment income in the Banking business was the primary driver of growth.

2. The ordinary income margin declined from 28.3% in the same period of the previous year to 27.3%, a decrease of approximately 100bp. The fact that the rate of increase in funding costs slightly exceeded the growth in interest and investment income is noteworthy as a structural change indicating sensitivity to changes in the interest rate environment.

3. Comprehensive income of ¥75.17B exceeded more than twice the level of net income, confirming that valuation differences on securities and deferred hedge gains or losses increased net assets. Because this increase includes valuation components associated with changes in market prices, it is useful to understand its qualitative difference from net income.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not constitute a recommendation to invest 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 you should consult a professional adviser as necessary.

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