CCI Group,Inc. FY2027 Q1 Earnings Report

Quick View

Executive Summary

In Q1, the Group recorded higher ordinary revenue but lower ordinary income due to increased expenses, while net income rose sharply owing to tax effects, resulting in a pattern of revenue growth, ordinary income decline, and final-profit growth. Ordinary revenue amounted to ¥278.8B (¥258.1B in the previous year, YoY+8.0%), ordinary income was ¥72.1B (¥83.4B in the previous year, YoY-13.5%), and net income (consolidated net income for the current period) was ¥75.3B (¥57.5B in the previous year, YoY+31.0%). The primary reason for the decline in ordinary income was that the increases in interest expenses (+38.8%) and general and administrative expenses (+16.4%) exceeded the growth in ordinary revenue, while the main factor behind the increase in net income was the negative effective tax rate (-3.1%) resulting from the reversal of deferred tax liabilities.

Factors Affecting Performance

【Revenue】Ordinary revenue was ¥278.8B (YoY+8.0%). The Banking segment, which accounted for 86% of the composition, led overall growth with revenue of ¥239.9B (YoY+8.4%), while the Leasing segment posted modest revenue growth of ¥38.5B (YoY+4.5%). Growth in the Banking segment was supported by an increase in interest income associated with loans and securities investments, among other activities (¥19.4B→+36.5% year on year), as well as an increase in fee income (+21.4%).

【Profit and Loss】Ordinary expenses increased to ¥206.7B (¥174.7B in the previous year, YoY+18.3%), substantially outpacing the growth in ordinary revenue (+8.0%), resulting in a decline in ordinary income to ¥72.1B (YoY-13.5%). The primary drivers of the increase were interest expenses (¥56.7B, YoY+38.8%) and general and administrative expenses (¥96.6B, YoY+16.4%). Extraordinary income was ¥2.0B and extraordinary losses were ¥1.1B, including ¥1.1B in impairment losses on fixed assets in the Banking segment, resulting in a small net gain of +¥0.9B; the impact on ordinary income was therefore limited to a temporary factor. Meanwhile, income taxes were a net benefit of -¥2.2B (effective tax rate of -3.1%) due to the reversal of deferred taxes (-¥20.8B). As a result, net income rose to ¥75.3B (YoY+31.0%) despite pretax income of ¥73.0B (YoY-6.6%), moving in the opposite direction from ordinary income. Overall, the conclusion is that the core business experienced revenue growth but lower profit, while final profit including tax effects increased alongside revenue.

Segment Analysis

The Banking segment recorded ordinary revenue of ¥239.9B (YoY+8.4%) and segment profit of ¥72.5B (¥82.8B in the previous year, YoY-12.4%), representing a decline in profit. Its profit margin was 30.2%, down 7.2pt from 37.4% in the previous year, indicating that expenses increased ahead of revenue growth. The Leasing segment posted ordinary revenue of ¥38.5B (YoY+4.5%) and segment profit of ¥0.7B (YoY+14.5%), with its profit margin virtually flat at 1.8% versus 1.7% in the previous year. Beginning in Q1, the sports and entertainment business was separated from the banking business and classified under “Other,” reflecting a revision to the segment classification. Impairment losses on fixed assets in the Banking segment were ¥1.1B, down from ¥4.8B in the same period of the previous year.

Key Financial Indicators

【Profitability】The ordinary income margin (ordinary income/ordinary revenue) was 25.9%, down 6.4pt from 32.3% in the previous year, while the net profit margin improved 4.7pt to 27.0% from 22.3% in the previous year. The divergence in the direction of the two metrics was attributable to tax effects.【Cash Quality】Of net income of ¥75.3B, the negative tax burden resulting from the reversal of deferred taxes (-¥20.8B) made a contribution. It is therefore necessary to note that net income includes an amount exceeding the Group’s earnings power at the ordinary-income level.【Investment Efficiency】ROE was 2.8%, reflecting the low ratio of ordinary revenue to total assets of ¥6,490.3B—a structural characteristic of the banking industry, where total asset turnover is extremely low—and the high financial leverage relative to net assets of ¥273.1B, with total assets/net assets at approximately 23.8x.【Financial Soundness】The equity ratio (net assets/total assets) was 4.2%, a modest improvement from 3.9% in the previous year. The loan-to-deposit ratio (loans of ¥3,078.69B/deposits of ¥4,782.05B) was approximately 64.4%, indicating that lending operations remain relatively restrained relative to the funding capacity provided by deposits.

Cash Flow Analysis

Examining funding trends through changes in the balance sheet, deposits increased slightly to ¥4,782.05B (¥4,731.81B in the previous year, +1.1%), while loans increased to ¥3,786.9B (¥3,173.4B in the previous year, +2.0%) and cash and due from banks increased to ¥1,487.76B (¥1,378.94B in the previous year, +7.9%), using deposits as the funding source. Meanwhile, securities decreased to ¥1,683.93B (¥1,883.13B in the previous year, -10.6%), indicating that the portfolio of operating assets shifted from securities toward loans and liquid assets. Call money, a source of short-term funding, increased to ¥685.42B (¥545.56B in the previous year, +25.6%), indicating that part of the Group’s funding needs was supplemented through short-term market financing.

Quality of Earnings

Profit at the ordinary-income level was pressured by increases in interest expenses (+38.8%) and general and administrative expenses (+16.4%) that exceeded the growth in ordinary revenue (+8.0%), with the expense-led structure being the primary cause of the decline in profit. Extraordinary income and losses were small at a net gain of +¥0.9B (extraordinary income of ¥2.0B and extraordinary losses of ¥1.1B, including ¥1.1B in impairment losses on fixed assets), and their impact on quarterly profit was limited to a temporary factor. On the other hand, the largest factor driving net income was the negative effective tax rate (-3.1%) resulting from the reversal of deferred taxes (a tax benefit of -¥20.8B). The fact that net income of ¥75.3B exceeded ordinary income of ¥72.1B requires monitoring from a quality-of-earnings perspective, as it represents a temporary boost exceeding earnings power at the ordinary-income level. Comprehensive income was ¥243.0B (¥243.5B in the previous year, virtually unchanged). The difference of ¥167.7B from net income of ¥75.3B primarily consisted of valuation-related items associated with other securities and hedges, including valuation differences on securities of +¥130.3B and deferred hedge gains and losses of +¥38.0B, which are susceptible to fluctuations resulting from changes in market conditions.

Earnings Forecast and Guidance

The Q1 progress rate toward the full-year ordinary income forecast of ¥265.0B was 27.2%, slightly above the standard quarterly progress benchmark of 25%. Meanwhile, the progress rate toward the full-year net income forecast of ¥170.0B, based on profit attributable to owners of the parent, was 44.2%, representing a substantial front-loading. This was primarily due to the aforementioned temporary factor of the reversal of deferred taxes, and the pace of progress is expected to slow in subsequent quarters. Neither the earnings forecast nor the dividend forecast was revised during the quarter.

Shareholder Returns

There was no revision to the dividend forecast during the quarter. Against full-year forecast EPS of ¥76.9, the dividend forecast is ¥15.00, resulting in a payout ratio of approximately 19.5%. The Company conducted a 10-for-1 stock split of its common shares effective October 1, 2025, and disclosed that, on a pre-stock-split basis, the year-end dividend for FY2026 would be ¥120 and the annual dividend would be ¥230. Treasury shares increased from ¥4.25B to ¥6.54B (+53.9%), suggesting that share repurchases, in addition to dividends, may be progressing as part of shareholder returns.

Risk Factors

1. Funding Cost and Net Interest Margin Risk: Interest expenses increased at a faster pace than interest income, rising +38.8% year on year to ¥56.7B versus interest income growth of +36.5% to ¥19.4B, creating a structure in which higher funding costs pressure ordinary income. Depending on future interest rate conditions, there is a risk that similar expense-led pressure will continue.

2. Capital Adequacy Risk: The equity ratio (net assets/total assets) was 4.2% (3.9% in the previous year), reflecting a highly leveraged structure with total assets of ¥6,490.3B and net assets of ¥273.1B. The pace of expansion of the capital base will remain a subject for monitoring.

3. Securities and Market Volatility Risk: Securities amounted to ¥1,683.93B, while valuation gains on other securities stood at ¥18.24B, an unrealized gain that increased from ¥5.37B in the previous year. In a rising interest rate environment, these unrealized gains could decline or reverse. In addition, off-balance-sheet items such as acceptances and guarantees-related counterclaims totaling ¥19.36B exist as contingent liabilities.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Points of the Financial Results

1. Ordinary income declined due to expense growth ahead of revenue growth (interest expenses +38.8%, general and administrative expenses +16.4%), while net income increased due to the reversal of deferred taxes. In evaluating the quality of the results, attention should therefore be paid to the pace of expense growth at the ordinary-income level.

2. While the full-year ordinary income progress rate of 27.2% is generally on track, the net income progress rate of 44.2% includes a temporary tax effect. Accordingly, achievement of the full-year net income forecast of ¥170B may be affected by future trends in the tax burden.

3. The equity ratio (net assets/total assets) of 4.2% and the increase in valuation differences on securities (¥18.24B) are items that merit ongoing review from the perspectives of capital base strength and market sensitivity.

---

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

---End of Report---