| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥25.0B | ¥23.0B | +12.5% |
| Operating Income | ¥16.1B | ¥11.4B | +40.5% |
| Ordinary Income | ¥65.6B | ¥24.3B | +169.6% |
| Net Income | ¥17.5B | ¥13.6B | +28.7% |
| ROE | 1.1% | 0.9% | - |
For the interim results for the fiscal year ending March 2026, Revenue was ¥25.0B (YoY +¥2.0B +8.7%), Operating Income was ¥16.1B (YoY +¥4.7B +40.5%), Ordinary Income was ¥65.6B (YoY +¥41.3B +169.6%), and Net Income attributable to owners of the parent was ¥17.5B (YoY +¥3.9B +28.7%). As a banking group, Ordinary Revenues were ¥952.8B; by segment, Banking Business ¥799.3B (83.9%), Leasing Business ¥135.1B (14.2%), and Other ¥20.6B. The primary driver of the large increase at the ordinary level was expanded investment income in a rising interest rate environment (¥613.9B, YoY +¥139.6B) and suppression of funding costs (¥119.9B, YoY +¥80.9B), expanding Net Interest Income to ¥494.1B (YoY +¥58.8B +13.5%). Net Fee and Commission Income was ¥56.1B (YoY -¥4.0B), a slight decline. Extraordinary items resulted in a net loss of ¥7.5B (including impairment losses of ¥4.8B and loss on disposal of fixed assets ¥3.1B), which pressured Net Income from Ordinary Income, but the improvement at the ordinary level more than offset this. Progress against the Full Year company forecasts (Ordinary Income ¥113.0B, Net Income ¥70.0B) is 58.1% for Ordinary Income and 25.0% for Net Income (parent company attributable), indicating ordinary-stage performance is ahead of standard progression while Net Income lags.
【Revenue】
Revenue was ¥25.0B (YoY +8.7%), reflecting recognition of operating revenues centered on leasing activities. Meanwhile, the banking group's Ordinary Revenues (equivalent to Revenue for the Banking Business) were ¥952.8B, comprised of Investment Income ¥613.9B (+29.4%), Fee Income ¥122.5B (-3.2%), and Other Ordinary Income ¥14.1B. The rise in Investment Income was contributed by increased loan interest income of ¥429.8B (+17.4%) and interest/dividends on securities of ¥97.5B (+43.6%) due to rising interest rates. Fee Income declined YoY and Other Ordinary Income remained minor, indicating continued weakness in non-interest revenues. By segment, the Banking Business accounted for 83.7% of external-customer Ordinary Revenues, Leasing Business 14.2%, and Other 2.2%.
【Profit & Loss】
Operating Income was ¥16.1B (YoY +40.5%). Selling, General & Administrative expenses were ¥8.9B (SG&A ratio 35.6%), down from ¥11.6B a year earlier but still high relative to Revenue. Ordinary Income was ¥65.6B (+169.6%), with non-operating income and expenses roughly balanced at ¥0.1B each. The improvement at the ordinary level was mainly due to expanded Net Interest Income in the Banking Business; funding costs were ¥119.9B (YoY +207.2%), a large increase, but the growth in investment income (+¥139.6B) outpaced this. Net Income attributable to owners of the parent was ¥17.5B (YoY +28.7%); profit before tax was ¥58.1B and income taxes were ¥20.2B (effective tax rate 34.8%). Extraordinary items were net -¥7.5B, with impairment losses of ¥4.8B and loss on disposal of fixed assets pressuring Net Income, but the substantial ordinary-level profit increase absorbed this, resulting in year-on-year growth in both revenue and profit.
The Banking Business recorded Ordinary Revenues of ¥799.3B and segment profit of ¥54.4B; YoY Ordinary Revenues -5.4%, and profit comparison is not available due to data limitations. The Leasing Business had Ordinary Revenues of ¥135.1B and segment profit of ¥6.4B. Other (credit card, credit guarantees, etc.) had Ordinary Revenues of ¥20.6B and segment profit of ¥8.2B. The Banking Business is the core operation, accounting for 83.9% of consolidated Ordinary Revenues and 78.9% of profits; expansion of investment income amid rising interest rates contributed to profit growth. The Leasing Business maintains a stable revenue structure but is limited in scale relative to Banking. The Other segment, though small, has a high profit margin and functions as a complementary revenue source.
【Profitability】Operating margin is high at 64.3%, but this reflects accounting rules for recognition of banking operating revenues and makes comparison with non-financial companies difficult. ROE is 1.1%, improved from 0.7% in the prior comparable period but remains low. On a Net Income attributable to owners of the parent basis, it is roughly 2.3%. Net Interest Income expanded with rising rates, but persistently high SG&A (including Banking G&A ¥416.2B) is capping ROE upside. 【Cash Quality】Operating Cash Flow (OCF) is -¥2,078.6B, representing -118.8x Net Income of ¥17.5B, a large negative. This is due to the characteristic of banking operations where changes in loans and securities holdings are reflected in OCF, making it unsuitable for assessing intrinsic cash-generating ability. OCF subtotal (before working capital changes) was also negative at -¥2,064.0B, driven primarily by rebalancing of loan balances ¥34,951.2B (YoY -¥126.6B) and securities balances ¥10,391.1B (YoY +¥1,095.8B). 【Investment Efficiency】Capital expenditures were limited at ¥18.9B, restrained relative to depreciation expense of ¥47.1B. Intangible asset investment was ¥15.8B, continuing digital investment. Total asset turnover was 0.09x, a low level typical of banking. 【Financial Soundness】Equity Ratio is 2.8%, slightly up from 2.6% a year earlier, but extremely low on a BIS regulation basis and capital buildup is urgent. Interest-bearing debt shows a D/E ratio of 34.91x, indicating high leverage, which is typical of the banking business model. Cash and deposits were ¥29.8B versus long-term borrowings of ¥10.0B, indicating liquidity is secured, while on the banking account deposits are ¥5兆516.6B and loans ¥3兆4,951.2B, yielding a loan-to-deposit ratio of 69.2%, within an appropriate range. Pension-related liabilities are minor at ¥1.3B, and defined benefit plan assets of ¥115.1B (recognized in equity) contribute to balance sheet improvement.
OCF was -¥2,078.6B, deteriorating by ¥6,781.2B from ¥4,702.6B in the prior year. In banking, changes in loans, securities, and interbank transactions are reflected in OCF, so OCF does not directly correspond to operating earning power. Major drivers were securities purchases of -¥1,188.2B (investing CF) and a slight decrease in loan balances, and a large decrease in borrowings of -¥2,208.0B (financing CF), indicating rebalancing of investment and funding positions. Investing CF was -¥1,188.2B driven by increased securities investment. Capital expenditures were restrained at ¥18.9B, and proceeds from disposal of fixed assets amounted to ¥1.9B. Financing CF was -¥16.7B, reflecting debt repayments, dividend payments of ¥14.3B, and share buybacks of ¥2.5B. Free Cash Flow was -¥3,266.8B, markedly negative, which typically occurs because of the cash-circulation nature of banking. Cash and deposits decreased to ¥1兆1,513.6B (YoY -¥3,282.0B), reflecting compression of market funding positions and a shift to investment assets.
Of Ordinary Income ¥65.6B, core ordinary revenues centered on Net Interest Income ¥494.1B and Net Fee and Commission Income ¥56.1B, totaling ¥550.2B. Other ordinary items were a large negative of -¥117.6B, and the burden of Banking G&A ¥416.2B and fee expenses ¥66.4B is heavy. Non-operating items were roughly neutral with minimal impact. One-off items included Special Income ¥0.5B (presumed to include prior-year recognition of ¥11.7B from defined benefit plan revision) and Special Losses ¥8.0B (impairment losses ¥4.8B, loss on disposal of fixed assets ¥3.1B), producing a net -¥7.5B that depressed Net Income. Comprehensive Income was ¥60.0B, adding ¥42.5B to Net Income of ¥17.5B. Components included valuation differences on securities -¥12.6B, deferred hedge gains +¥22.0B, and actuarial gains on retirement benefits +¥12.7B, where deferred hedges and pension asset valuation gains offset other securities valuation losses and contributed to balance sheet improvement. OCF/Net Income is -118.8x, and the cash conversion rate is superficially weak, but this reflects the banking cash-cycle structure and does not indicate accrual manipulation. The divergence between Ordinary Income and Net Income is explainable by tax burden and extraordinary items, and sustainability of earnings depends on interest rate environment and spread management.
The Full Year company forecast is Ordinary Income ¥113.0B (YoY +72.3%), Net Income attributable to owners of the parent ¥70.0B, EPS ¥247.21, and dividend ¥50.0. The interim results of Ordinary Income ¥65.6B represent a progress rate of 58.1%, 8 points above the standard 50%, progressing smoothly. However, Net Income attributable to owners of the parent of ¥17.5B represents a 25.0% progress rate and is lagging; absent improvement in extraordinary items or reduction in corporate tax burden in the second half, there is a risk of missing the target. Upside in ordinary-stage results depends on persistence of the interest rate environment and suppression of credit costs, while upside risks include rising deposit beta and weak fee income. Interim EPS was ¥133.47 (progress 54.0%) against a Full Year EPS forecast of ¥247.21, consistent with Net Income progress. The dividend forecast of ¥50.0 (interim ¥25.0 already paid, year-end ¥25.0 planned) implies a payout ratio of 20.2% on a parent-company attributable basis for the Full Year, a sustainable level, so maintaining the dividend policy is feasible.
Annual dividend forecast is ¥50.0 (interim ¥25.0; year-end ¥25.0), double the prior year. The interim dividend of ¥25.0 has been paid, with total dividend payments of ¥14.3B. The payout ratio relative to Net Income attributable to owners of the parent of ¥17.5B is high at 81.7%, but this is for the interim period only; on a Full Year forecast basis of ¥70.0B, the payout ratio is 20.2%, a sustainable level. Share buybacks were ¥2.5B, modest, and Total Return Ratio (dividends + buybacks) is ¥16.8B/¥37.8B (consolidated Net Income basis) ≈ 44.4%. Although Free Cash Flow is largely negative due to banking characteristics, dividend resources are sufficiently secured by retained earnings of ¥1,264.1B and cash and deposits of ¥29.8B, so dividend sustainability is high. However, given the low Equity Ratio of 2.8%, prioritizing internal reserves to strengthen capital is imperative, limiting scope for further dividend increases.
Capital adequacy risk: Equity Ratio of 2.8% is far below regulatory thresholds, and urgent capital buildup is required relative to BIS regulatory standards (domestic standardized banks 4%, international unified standard 8%). Options include increasing retained earnings (reducing payout ratio), subordinated debt issuance, or compression of risk assets, but with ROE at 1.1% the endogenous growth of equity will take time. Continued capital deficiency could constrain new lending capacity, lead to rating downgrades and higher funding costs, and result in lost revenue opportunities.
NIM compression risk: Estimated Net Interest Margin of 1.41% remains low, and intense loan competition, rising deposit beta (deposit rates rising in tandem with market rates), and re-pricing lags on assets are constraining spread improvement. Funding costs have surged to ¥119.9B (YoY +¥80.9B +207.2%), and if upward pressure on deposit rates continues, growth in Net Interest Income may slow. If loan rate increases do not keep pace, the sustainability of the revenue structure is in question.
Weak cost efficiency: Banking G&A of ¥416.2B accounts for approximately 43.7% of Ordinary Revenues ¥952.8B, and estimated CIR is high at 93%. Structural reforms such as branch consolidation and digitalization are lagging, and revenue growth is not sufficiently reflected in profits. Low operating leverage risks widening the earnings gap with peers, and execution on cost control relative to top-line growth is critical. Recording of fixed asset impairment of ¥4.8B signals branch reorganization but scale and pace are uncertain.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 64.3% | 14.6% (7.2%–39.4%) | +49.7pt |
| Net Margin | 69.9% | 11.9% (7.2%–35.4%) | +58.0pt |
Operating and Net margins substantially exceed industry medians, but this is due to banking revenue recognition rules (only leasing activities recognized under Revenue), and is not suitable for direct profitability comparison.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 12.5% | 10.1% (7.3%–12.1%) | +2.4pt |
Revenue growth rate is 2.4 percentage points above the industry median, indicating relatively favorable growth. However, the banking group’s overall Ordinary Revenues grew by +8.6% YoY, so the growth pace is around the industry average.
※ Source: Company compilation
While ordinary-stage earnings improved substantially aided by rising interest rates, structural issues remain: capital insufficiency (Equity Ratio 2.8%) and weak cost efficiency (CIR approx. 93%). Key items to monitor are concrete capital strengthening measures (capital increase, subordinated debt, dividend restraint), progress on cost reduction such as branch consolidation, and NIM trends under rising deposit beta. Until Equity Ratio reaches regulatory levels, scope for growth investment and shareholder returns will be limited, and transparency in capital policy will be key to investment decisions.
Progress toward Full Year forecasts is healthy at the ordinary level (58.1%) but Net Income is lagging at 25.0%. Without improvement in extraordinary items in H2, there is a risk of not meeting targets, so monitoring credit cost trends and securities valuation gains/losses is important. Comprehensive Income of ¥60.0B significantly exceeds Net Income, and other securities valuation differences and deferred hedge gains are contributing to balance sheet improvement, which could support equity accumulation if market conditions improve. The Full Year payout ratio of 20.2% is sustainable, but prioritizing internal reserves to improve Equity Ratio is rational, so prospects for further dividend increases are limited.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm based on public financial disclosures. Investment decisions are your responsibility; please consult a professional advisor as needed before making investment decisions.