SBI Shinsei Bank (8303) FY2027 Q1 Earnings Report

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Executive Summary

Ordinary income increased 43.3% year on year, but net income declined 12.7% due to the normalization of the tax burden, resulting in earnings that combined higher revenue and ordinary income with lower net income. Revenue (ordinary revenues) was ¥2266.5B (¥1806.9B in the same period of the previous year, +25.4%), ordinary income was ¥519.5B (¥362.5B in the same period of the previous year, +43.3%), and net income was ¥385.7B (¥442.0B in the same period of the previous year, -12.7%). The primary drivers of the increase in income were the expansion of net interest income and growth in the Corporate and Retail businesses, while the decline in net income reflected the reversal of the benefit from income taxes recorded in the same period of the previous year.

Factors Affecting Results

【Revenue】Ordinary revenues increased 25.4% year on year to ¥2266.5B. Segment profit in Corporate Sales increased 135.3% year on year, Structured Finance increased 71.9%, and Retail Banking increased 727.0%, indicating revenue expansion in both the corporate and individual businesses. In contrast, Principal Transactions shifted from a ¥13.7B profit in the same period of the previous year to a ¥2.2B loss, highlighting the volatility of businesses dependent on non-interest income. Overseas Business / Securities Investment / Other recorded a profit of ¥153.1B, accounting for 30.1% of total segment profit of ¥508.7B; this figure includes ¥84.9B equivalent to negative goodwill associated with the application of the equity method to Shima Bank and Fukushima Bank.

【Profit and Loss】Ordinary income increased 43.3% year on year to ¥519.5B, while pretax income increased 42.2% to ¥521.0B, demonstrating a clear improvement in earnings power before tax. Gross operating profit increased 19.9%, while expenses rose only 4.0%, indicating positive operating leverage. However, net income was ¥385.7B (-12.7%) as income taxes and other taxes shifted from a benefit of ¥75.7B in the same period of the previous year to an expense of ¥135.2B in the current period; consequently, the growth in pretax income was not reflected in net income. Excluding the ¥84.9B equivalent to negative goodwill, ordinary income was ¥434.6B, up 33.7% year on year, confirming that the underlying earnings growth was also evident on a core business basis.

Segment Analysis

Total segment profit increased 43.4% to ¥508.7B (¥354.7B in the same period of the previous year). Corporate Sales at ¥105.6B (+135.3%) and Structured Finance at ¥62.6B (+71.9%) led the corporate businesses, while Principal Transactions shifted to a ¥2.2B loss from a ¥136.8B profit in the same period of the previous year. In the individual businesses, Retail Banking at ¥55.4B (+727.0%), Shinsei Financial at ¥24.3B (+27.5%), and APLUS at ¥22.7B all expanded. Overseas Business / Securities Investment / Other recorded a profit of ¥153.1B under the “Other” category; however, this includes ¥84.9B equivalent to negative goodwill associated with the application of the equity method and should be distinguished as a temporary factor.

Key Financial Indicators

【Profitability】The ordinary income margin improved to 22.9% from 20.1% in the same period of the previous year, while the net income margin declined to 17.0% from 24.5% in the previous year. This was because the growth in ordinary income was offset at the net income stage by the normalization of income taxes and other taxes.【Cash Flow Quality】Net interest income was ¥471.7B (up 52.5% year on year), while fee income was ¥238.6B (+¥25.2B), indicating an improvement in the quality of gross profit from both interest and non-interest sources.【Investment Efficiency】Annualized ROE was 12.5%, comprising a DuPont decomposition of a 17.0% net income margin, total asset turnover of 0.035x, and financial leverage of 20.86x.【Financial Soundness】The equity ratio was 4.8%, slightly down from 5.0% in the same period of the previous year. The loan-to-deposit ratio was 83.1%, reflecting a stable funding structure in which deposits exceeded loans by ¥2兆2,943B.

Cash Flow Analysis

As cash flow statement data was not presented in this earnings report, funding trends are analyzed based on balance sheet movements. Deposits increased 4.1% year on year to ¥13兆5,537.9B, while loans increased 2.9% to ¥11兆2,594.8B, indicating a structure in which expansion of the deposit base supports loan growth. Securities increased substantially by 17.3% to ¥4兆6,993.3B, potentially contributing to the increase in net interest income through the expansion of earning assets. Meanwhile, payment obligations from transactions involving repurchase agreements increased 22.8% to ¥1兆801.5B, and collateral received for securities lending and borrowing transactions increased 36.8% to ¥5,250.2B, indicating a slight increase in reliance on market-based funding. Cash and deposits remained substantial at ¥4兆6,664.5B, maintaining liquidity headroom.

Quality of Earnings

The current-period ordinary income of ¥519.5B includes ¥84.9B equivalent to negative goodwill associated with the application of the equity method to Shima Bank and Fukushima Bank. Excluding this temporary factor, ordinary income was ¥434.6B, up 33.7% year on year. In the same period of the previous year, ¥37.4B equivalent to negative goodwill associated with the additional acquisition of shares in NEC Capital Solutions was similarly recorded; therefore, both periods include temporary gains of a comparable nature. At the net income level, income taxes and other taxes were a benefit of ¥75.7B in the same period of the previous year, compared with an expense of ¥135.2B in the current period, making the normalization of the tax burden the primary factor depressing net income. Comprehensive income was ¥406.8B, exceeding net income of ¥385.7B, due to the positive ¥44.9B in deferred hedge gains and losses exceeding the negative ¥23.6B in valuation differences on securities. Extraordinary income and losses were small, comprising income of ¥1.6B and a loss of ¥0.2B, and had a limited impact on earnings quality.

Shareholder Returns

No revision was made to the earnings forecast during the quarter, but the dividend forecast was revised, with a revision announced in connection with the introduction of an interim dividend. The dividend per share in the same period of the previous year was ¥0, and the dividend amount for the current period was not included in the disclosed data; accordingly, no assessment is made of specific shareholder return levels, including the payout ratio.

Risk Factors

1. Interest Rate and NIM Risk: Net interest income increased 52.5% year on year to ¥471.7B, with the difference between the growth in interest on loans (+33.1%) and interest on deposits (+21.1%) being the primary driver of the increase in net interest income. If the rise in deposit interest rates accelerates, the growth in net interest income could be compressed.

2. Risk Relating to Capital Levels: The equity ratio was 4.8%, down from 5.0% in the same period of the previous year. The ratio of net assets to total assets was also low at 4.8%, making the impact of fluctuations in securities valuation losses and credit costs on capital headroom relatively significant.

3. Reproducibility Risk of Equity-Method Investments and Temporary Gains: Of current-period ordinary income of ¥519.5B, ¥84.9B represented the equivalent of negative goodwill associated with the application of the equity method to Shima Bank and Fukushima Bank, accounting for approximately 16.3% of ordinary income. A similar temporary gain of ¥37.4B was recorded in the same period of the previous year, making it necessary to assess the sustainability of growth based on earnings trends excluding this factor.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

Comparative data showing the relative positioning of the net income margin within the industry is currently insufficient.

Growth and Capital Efficiency

The revenue growth rate of 25.4% reflects substantial growth in ordinary revenues, but comparative data against the industry median is currently insufficient.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Pretax income increased 42.2% year on year, while ordinary income increased 43.3%, indicating an improvement in underlying earnings power. However, net income declined 12.7% due to the reversal of the benefit from income taxes and other taxes recorded in the previous year, meaning that the growth at the ordinary income level was not directly reflected in profit attributable to shareholders.

2. Of ordinary income of ¥519.5B, ¥84.9B represented the equivalent of negative goodwill associated with the application of the equity method. Excluding this temporary factor, ordinary income was ¥434.6B, up 33.7% year on year. Recurring earnings power is supported by growth in net interest income and fee income.

3. The equity ratio was 4.8%, slightly down from 5.0% in the same period of the previous year. Alongside the stable funding structure indicated by the loan-to-deposit ratio of 83.1%, the trend in capital adequacy will be a key area for monitoring going forward.

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional adviser as necessary.

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