Juroku Financial Group (7380) FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, the Group achieved higher revenue and earnings, primarily due to the expansion of interest income. Ordinary income growth outpaced recurring revenue growth, resulting in high-quality earnings growth. Recurring revenue was ¥169.09B (+24.0% YoY), ordinary income was ¥42.77B (+36.9% YoY), and net income attributable to owners of the parent was ¥27.38B (+31.3% YoY). While the increase in interest on loans drove revenue expansion, interest on deposits also rose sharply. With net interest margin (NIM) remaining low at 1.22%, the balance between funding costs and asset yields will be key to the sustainability of earnings improvement.

Factors Affecting Performance

【Revenue】Recurring revenue was ¥169.09B (+24.0% YoY). Banking accounted for ¥133.43B of recurring revenue from external customers (78.9% of the total), driven by a 28.6% YoY increase in interest on loans to ¥5.399B. Leasing generated ¥27.22B, while other businesses generated ¥8.45B; both remained smaller than banking. The balance of loans outstanding was ¥5.0762T, representing only a 1.5% YoY increase, indicating that this period’s revenue growth was primarily attributable to improved yields rather than loan-volume expansion.

【Profit and Loss】Ordinary income was ¥42.77B (+36.9% YoY), while net income attributable to owners of the parent was ¥27.38B (+31.3% YoY). Operating expenses were ¥47.08B, increasing only 6.7% YoY and significantly below the growth rate of recurring revenue; operating leverage therefore contributed to earnings growth. Meanwhile, interest on deposits increased sharply to ¥11.57B from ¥3.59B in the previous year, indicating emerging upward pressure on funding costs. Extraordinary losses of ¥2.89B, including impairment losses of ¥2.84B, reduced profit before tax to a certain extent, but did not offset the growth in ordinary income. In conclusion, the Group achieved higher revenue and earnings this period.

Segment Analysis

Banking was the core earnings contributor, generating recurring revenue of ¥133.43B, segment profit of ¥40.19B, and a profit margin of 30.1%. Leasing generated recurring revenue of ¥27.22B, segment profit of ¥0.96B, and a profit margin of 3.5%; the gap in profit margins compared with banking reached 26.6pt. Other businesses, including credit card operations, generated recurring revenue of ¥8.45B and segment profit of ¥13.03B, indicating a high profit margin; however, this segment includes intersegment transactions, so simple comparisons require caution. Segment profit is calculated on an ordinary-income basis, and its definition differs from consolidated operating income.

Key Financial Indicators

【Profitability】The ordinary income margin was 25.3%, improving 2.4pt from 22.9% in the previous year, while the net income margin also rose 0.9pt to 16.2% from 15.3%. NIM was 1.22%. While the increase in interest on loans supported revenue, the sharp rise in interest on deposits remains a challenge in maintaining the spread.【Cash Flow Quality】Operating Cash Flow (OCF) was an outflow of ¥190.32B, resulting in a ratio of negative 6.95x relative to net income attributable to owners of the parent. However, at banks, changes in deposits, loans, and securities balances significantly affect OCF, so caution is required when evaluating it using the same criteria applied to general operating companies.【Investment Efficiency】ROE was 5.9%, and the equity ratio was 6.3% (6.2% based on the figures presented). Net assets were ¥473.28B, up 11.7% from the previous year, with improvements in the valuation difference on securities contributing to the increase in capital.【Financial Soundness】Deposits were ¥6.37847T against loans of ¥5.07621T, resulting in a loan-to-deposit ratio of approximately 79.6%, within a standard range. Securities were ¥1.11255T, down 14.9% YoY, indicating a change in the composition of earning assets.

Cash Flow Analysis

OCF was an outflow of ¥190.32B, a significant reversal from the ¥2.88B inflow in the previous year. At banks, changes in the balances of deposits, loans, securities, and other items are directly reflected in OCF. Accordingly, this outflow should be viewed as reflecting a change in the composition of the funds-management portfolio rather than as a signal of deteriorating profitability at a general operating company. Investing Cash Flow was an inflow of ¥224.98B, consistent with the decline in securities balances (-14.9% YoY). Financing Cash Flow was an outflow of ¥10.19B, of which share repurchases accounted for ¥3.01B. Free cash flow, calculated as the sum of OCF and Investing Cash Flow, was positive at ¥34.66B, while cash and cash equivalents increased by ¥2.447B to ¥1.09454T. Capital expenditures were ¥17.12B, 4.5 times depreciation and amortization expense of ¥3.80B. Together with the sharp increase in construction in progress, from ¥0.81B in the previous year to ¥16.27B, the progress of investments in systems and facilities warrants close monitoring.

Earnings Quality

The increase in current-period profit was supported by a recurring factor—the expansion of interest on loans—while the impact of rising funding costs due to the sharp increase in interest on deposits was also progressing simultaneously, suggesting that the earnings structure is at a turning point. Extraordinary losses of ¥2.89B, including impairment losses of ¥2.84B, were recorded, while virtually no extraordinary gains were recognized; temporary factors therefore had a negative impact on earnings. Comprehensive income was ¥59.85B, a significant improvement from the ¥19.07B loss in the previous year. This improvement was largely attributable to a ¥27.28B increase in the valuation difference on securities, resulting in comprehensive income at approximately the same level as net income attributable to owners of the parent of ¥27.38B. While OCF was a substantial outflow, accrual-basis net income increased. Although the divergence between the two largely reflects changes in the funding position of the banking business, continued monitoring is useful from the perspective of the cash backing of earnings.

Earnings Forecast and Guidance

The Company’s forecast for the fiscal year ending March 2027 calls for ordinary income of ¥41.00B (-4.1% YoY), net income attributable to owners of the parent of ¥28.00B, and EPS of ¥158.09. Compared with current-period ordinary income of ¥42.77B, ordinary income is expected to decline by ¥1.77B, possibly reflecting conservative assumptions regarding higher deposit interest rates, increased credit costs, and volatility in market-related gains and losses. On the other hand, EPS is expected to increase 3.2% from ¥153.22 in the current period. In addition to the projected increase in net income, the reduction in shares outstanding resulting from share repurchases is also likely to contribute.

Shareholder Returns

Dividends were ¥100 per share for the interim period, ¥140 per share for the fiscal year-end, and ¥240 per share for the full year, on a pre-stock-split basis. The disclosed payout ratio was 31.3%. Share repurchases of ¥3.01B were conducted, and total shareholder returns, including dividends, were at an active level. The dividend forecast for the fiscal year ending March 2027 is ¥50 per share, reflecting the five-for-one stock split in April 2026; on a pre-split basis, this corresponds to ¥250 for the full year. As OCF was an outflow in the current period, it is useful to assess the funding sources for shareholder returns in light of current-period profit and the cash-recovery status of securities and other assets.

Risk Factors

1. Low net interest margin (NIM): NIM remained at 1.22%. While the increase in interest on loans supported revenue, interest on deposits rose sharply from ¥3.59B in the previous year to ¥11.57B. If deposit-rate increases outpace improvements in lending and investment yields under the future interest-rate environment, profitability may come under pressure.

2. Concentration of earnings in banking: Banking accounted for 78.9% of recurring revenue from external customers, creating a structure in which changes in regional economic conditions and the credit quality of business counterparties could have a significant impact on consolidated performance. The provision for loan losses was ¥2.08B against loans of ¥5.07621T.

3. Sharp increase in construction in progress: Construction in progress increased from ¥0.81B in the previous year to ¥16.27B, accounting for 23.6% of property, plant and equipment of ¥68.89B. Large-scale investments in systems and facilities are underway, and delays in completion and returns on investment should be monitored together with the future depreciation burden.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company’s net income margin is 4.5pt above the industry median.

Growth and Capital Efficiency

The Company’s revenue growth rate significantly exceeds the industry median, indicating high growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The Group achieved growth in ordinary income of +36.9%, exceeding the +24.0% increase in recurring revenue. The fact that operating expenses grew only +6.7%, below the growth in revenue, was the primary driver of margin improvement. The ordinary income margin increased 2.4pt YoY, indicating a phase of improving profitability.

2. While the expansion of interest on loans drove revenue, the low NIM of 1.22% and the sharp increase in interest on deposits indicate high earnings sensitivity to changes in the interest-rate environment. The loan-to-deposit ratio remained within a standard range at 79.6%.

3. Net assets increased 11.7% YoY, while improvements in the valuation difference on securities and a significant recovery in comprehensive income—from a ¥19.07B loss in the previous year to ¥59.85B in profit—strengthened the capital base. Meanwhile, the sharp increase in construction in progress remains an item requiring continued monitoring of the progress and returns on large-scale investments.

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This report is an automatically generated financial-results analysis document based on AI analysis of XBRL financial-results 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 financial-results data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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