SBI Shinsei Bank (8303) FY2026 Q3 Earnings Report

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Executive Summary

Ordinary income increased 46.5% YoY, with a business structure in which fee income and cost efficiencies offset the decline in net interest income, supporting performance. Ordinary revenue was ¥5,663.19B (+23.4% YoY), ordinary income was ¥934.85B (+46.5%), and net income attributable to owners of the parent was ¥909.17B (+21.7%). The ordinary income margin improved from 13.9% in the same period of the previous year to 16.5%; however, extraordinary income of ¥223.98B recorded in the same period of the previous year fell away in the current period, limiting the increase in profit before tax to 8.1%. The strong growth in net income was primarily attributable to the decline in the effective tax rate to 1.9%, which should be noted when assessing earnings quality. Progress toward the full-year net income forecast of ¥1,000.00B was 90.9%, exceeding the standard Q3 progress rate of 75%.

Factors Affecting Performance

【Revenue】Ordinary revenue was ¥5,663.19B, up +23.4% YoY. Funds investment income increased +21.5% YoY to ¥2,637.26B, fee and commission income increased +15.8% to ¥653.09B, and other ordinary revenue increased +19.7% to ¥1,768.16B, with all categories increasing. However, funds procurement costs rose sharply by +59.4% YoY to ¥1,562.94B, resulting in net interest income (funds investment income − funds procurement costs) of ¥1,074.32B, down 9.8% YoY. The growth in the top line resulted from the expansion of non-interest income compensating for pressure on net interest income.

【Profit and Loss】General and administrative expenses were contained at ¥1,318.90B, up +3.7% YoY, significantly below the growth in ordinary revenue. Operating leverage therefore took effect, and ordinary income increased +46.5% YoY to ¥934.85B. Meanwhile, extraordinary income declined from ¥223.98B in the same period of the previous year to ¥6.35B in the current period. After offsetting extraordinary losses of ¥14.59B, profit before tax was ¥926.62B, representing an increase of only +8.1%. As income taxes and other taxes declined substantially from ¥110.55B to ¥17.49B, net income was ¥909.17B (+21.7% YoY). Although revenue and income both increased, the growth in net income includes the temporary factor of a low effective tax rate.

Key Financial Metrics

【Profitability】The ordinary income margin was 16.5%, improving from 13.9% in the same period of the previous year, while the net income margin was 16.1% (16.3% in the same period of the previous year), remaining broadly at the same level. NIM was 1.04%, below the general cautionary level of 1.5% for the banking industry, consistent with the decline in net interest income (down 9.8% YoY to ¥1,074.32B). Net fee income was ¥385.35B, up +19.6% YoY, serving as a supplementary factor in the earnings structure. The simple CIR (general and administrative expenses / ordinary revenue) was 23.3%, improving from 27.7% in the same period of the previous year, indicating improved cost efficiency.【Cash Flow Quality】Net income of ¥909.17B relative to profit before tax of ¥926.62B indicates a high conversion rate, supported by the low tax burden reflected in the 1.9% effective tax rate. The same period of the previous year included extraordinary income of ¥223.98B; accordingly, while current-period earnings have lower dependence on extraordinary factors, they include another temporary factor in the form of a low tax burden.【Investment Efficiency】ROE (annualized) was 10.2%. Under a DuPont decomposition, the net income margin was 16.1%, total asset turnover was 0.032x, and financial leverage was approximately 19.8x, indicating that the high ROE reflects reliance on high leverage.【Financial Soundness】The equity ratio was 5.0%, and the loan-to-deposit ratio was 76.2% (82.6% in the same period of the previous year). Liquidity improved as the increase in deposits exceeded the increase in loans; however, the accumulation of funds in low-yielding assets could constrain NIM improvement.

Cash Flow Analysis

As cash flow statement data have not been disclosed, fund movements are analyzed based on changes in the balance sheet. Deposits were ¥135,284B, up +17.5% YoY, while loans were ¥103,084B, up +8.5%. As the increase in deposits exceeded the increase in loans, the loan-to-deposit ratio declined from 82.6% to 76.2%, increasing liquidity headroom. Securities expanded significantly by +36.0% YoY to ¥38,281B, indicating continued growth in earning assets. On the funding side, borrowings were ¥18,127B, negotiable certificates of deposit were ¥34,579B, and corporate bonds were ¥2,409B, indicating the use of market-based funding in addition to deposits. Net assets increased +24.2% YoY to ¥11,912B, supported by the accumulation of retained earnings, a reduction in the deduction for treasury stock (from ¥312.67B to ¥63.27B), and an improvement in other comprehensive income.

Earnings Quality

Current-period ordinary income showed low dependence on extraordinary gains and losses, representing a positive development from the perspective of recurring earnings power. The same period of the previous year included extraordinary income of ¥223.98B, whereas the current period recorded extraordinary income of ¥6.35B and extraordinary losses of ¥14.59B, resulting in a net loss of ¥8.24B. Consequently, the 8.1% growth in profit before tax was significantly below the 46.5% growth in ordinary income. Meanwhile, income taxes and other taxes declined from ¥110.55B to ¥17.49B, and the effective tax rate fell to 1.9%, driving the 21.7% growth rate in net income. This structure indicates that different temporary factors were at work: the previous period was boosted by extraordinary income, while the current period was boosted by a low tax burden. Comprehensive income increased substantially to ¥1,523.18B from ¥483.92B in the same period of the previous year; however, as it includes market valuation changes such as valuation differences on securities (+¥326.18B) and deferred hedge gains and losses (¥282.84B), it should be assessed separately from recurring earnings power.

Earnings Forecast and Guidance

The full-year forecasts are net income attributable to owners of the parent of ¥1,000.00B and EPS of ¥121.38. Cumulative Q3 net income was ¥909.17B, representing progress of 90.9% and exceeding the standard progress rate of 75% by 15.9 percentage points. To achieve the full-year forecast, net income of ¥90.83B needs to be secured in Q4, indicating a certain degree of headroom relative to the forecast. However, it should be noted that the high progress rate includes the temporary factor of a lower effective tax rate.

Shareholder Returns

The forecast annual dividend is ¥34.00 per share, while forecast EPS is ¥121.38, resulting in a forecast payout ratio based solely on dividends of 28.0%. The Q2 dividend was ¥0, indicating an expected concentration of the annual dividend in the year-end dividend. Cumulative Q3 net income reached 90.9% of the full-year forecast, and earnings progress is at a level that supports the dividend plan.

Risk Factors

1. Declining NIM and net interest income: NIM was 1.04%, below the general cautionary level of 1.5% for the banking industry. Funds procurement costs increased +59.4% YoY, exceeding the +21.5% increase in funds investment income, and net interest income declined 9.8% YoY to ¥1,074.32B. If increases in deposit interest rates cannot be sufficiently passed through to loan and securities yields, underlying earnings power could come under pressure.

2. Reported equity ratio: The equity ratio based on disclosed data was 5.0%, below the generally cited Basel III minimum benchmark of 8%. This is the highest-priority item to verify when assessing regulatory capital, risk-weighted assets, and capacity for capital returns.

3. Market risk associated with the expansion of earning assets: Securities increased +36.0% YoY to ¥38,281B, while loans increased +8.5% to ¥103,084B. An expansion of valuation losses due to fluctuations in interest rates and spreads, as well as higher credit costs during an economic slowdown, could affect earnings and capital.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (bank)

Profitability and Returns

Growth and Capital Efficiency

※Source: Company compilation

Key Takeaways from the Results

1. The ordinary income margin improved by approximately 260bp YoY, while the expansion in net fee income (+19.6% YoY) and containment of general and administrative expenses (+3.7% YoY) indicate a qualitative improvement in the earnings structure. CIR improved to 23.3%, and from a cost-efficiency perspective, this supports the sustainability of performance.

2. The 21.7% growth in net income includes a temporary boost from the decline in the effective tax rate to 1.9%. Different temporary factors intersected: the elimination of extraordinary income from the same period of the previous year and the low tax burden in the current period. The earnings level that would prevail if the tax burden normalized therefore needs to be assessed.

3. NIM of 1.04% and the decline in net interest income (down 9.8% YoY) are the most important profitability monitoring items. While the loan-to-deposit ratio of 76.2% indicates liquidity headroom supported by the deposit base, the disclosed equity ratio of 5.0% requires verification from a regulatory capital perspective.

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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 disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting experts as necessary.

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