| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥2649.7B | ¥2204.3B | +20.2% |
| Operating Income | - | - | - |
| Ordinary Income | ¥848.9B | ¥620.3B | +36.8% |
| Net Income | ¥547.3B | ¥404.3B | +35.3% |
| ROE | 8.8% | 7.2% | - |
For the fiscal year ended March 2026, Ordinary Income was ¥2,649.7B (YoY +¥445.4B, +20.2%), Ordinary Income was ¥848.9B (YoY +¥228.6B, +36.8%), and Net Income was ¥547.3B (YoY +¥143.0B, +35.3%). The banking segment accounts for 84.0% of Ordinary Income and the majority of profits; in a rising rate environment increased loan interest income (¥1,017.1B, approx. +26.6% YoY) and expanded fee income (¥343.3B, +16.1%) drove revenue growth. Conversely, rising deposit interest (¥256.6B, approx. +¥131.5B YoY) increased funding costs, and Net Interest Margin (NIM) stood at 1.48%, slightly below the industry benchmark of 1.5%. On the profit side, expense control succeeded: the expense ratio (G&A / Ordinary Income) improved to 21.6% from 23.5% a year earlier (~1.9pt improvement), and the Cost-to-Income Ratio (CIR) improved substantially to 44.3% (prior year 54.1%). Ordinary income margin improved +3.9pt to 32.0% (prior year 28.1%), and Net Income margin improved +2.4pt to 20.7% (prior year 18.3%). ROE rose to 8.8% from 7.7% a year earlier (+1.1pt), driven by the balance of net margin and leverage. On the balance sheet, loans were ¥7.13T (+5.3%), deposits ¥8.55T (+1.2%), and the loan-to-deposit ratio was 83.3% at an appropriate level. Operating Cash Flow (OCF) was -¥1,679.2B, negative relative to Net Income, and even considering financial-institution-specific balance sheet movements, weak cash conversion is a quality concern. Comprehensive income improved significantly to ¥831.9B, with valuation differences on securities (+¥115.3B) and remeasurements of retirement benefit obligations (+¥124.2B) boosting equity. Dividends were ¥62 per share (payout ratio 39.5%), and share buybacks totaled ¥60.0B; shareholder returns are at a sustainable level.
[Revenue] Ordinary Income was ¥2,649.7B, a substantial YoY increase of +20.2%. By segment, Banking was ¥2,226.4B (84.0% of total), Leasing ¥352.8B (13.3%), and Other ¥70.5B (2.7%). The primary driver of bank revenue growth was increased loan interest income (¥1,017.1B, approx. +¥214B YoY, +26.7%), aided by loan balance growth (+5.3%) and repricing effects from higher rates. Interest and dividend income from securities was ¥562.2B (approx. +¥85B YoY, +17.9%), and fee income was ¥343.3B (approx. +¥47B, +15.9%). Deposit interest expense doubled to ¥256.6B (approx. +¥131B YoY, +104.6%), squeezing margins. Leasing grew by approx. +¥77B YoY, supported by a recovery in capital expenditure demand.
[Profitability] Ordinary Income was ¥848.9B (YoY +36.8%), and Net Income was ¥547.3B (YoY +35.3%), achieving revenue and profit growth. Ordinary income margin improved +3.9pt to 32.0% (prior year 28.1%), and net margin improved +2.4pt to 20.7% (prior year 18.3%). Profit drivers were expanded interest income (investment income ¥1,655.8B, YoY +¥331.7B) and improved cost efficiency. On the cost side, G&A rose to ¥571.8B (YoY +¥52.9B, +10.2%) but grew less than revenue (+20.2%), enabling operating leverage. The Cost-to-Income Ratio improved by ~9.8pt to 44.3% (prior year 54.1%), reflecting notable cost efficiency. Extraordinary items were minor: extraordinary gains ¥0.3B (gain on disposal of fixed assets) and extraordinary losses ¥10.6B (impairment losses ¥3.4B, loss on disposal of fixed assets ¥7.2B), with recurring earnings at the core of profits. Income taxes were ¥249.9B (effective tax rate 29.8%), up ¥75.0B YoY, but the increase was exceeded by pretax profit growth (+¥277.2B), yielding strong net income growth. Equity-method investment income was limited at ¥0.7B. In conclusion, loan interest expansion in a rising-rate environment and improved cost efficiency delivered revenue and profit growth.
The Banking segment reported Ordinary Income of ¥2,226.4B (external customers) and segment profit of ¥788.3B, maintaining a high margin of 35.4%. YoY, Ordinary Income +20.3% and segment profit +27.1%, with profit growth outpacing revenue growth. Key drivers were higher loan interest, expanded fee income, and operating leverage from cost control. The Leasing segment reported Ordinary Income ¥352.8B and segment profit ¥16.7B, a margin of 4.7%. Although Ordinary Income grew strongly YoY (+27.9%), the low margin limits its contribution to overall ROE. The Other segment reported Ordinary Income ¥70.5B and segment profit ¥44.4B, a high margin of 63.0% but small scale. Significant margin dispersion across segments means Banking’s high profitability drives overall results.
[Profitability] ROE was 8.8%, up +1.1pt from 7.7% a year earlier. Net Income margin was 20.7% (prior year 18.3%), Asset Turnover was 0.024x (roughly flat), and financial leverage was 17.53x. Ordinary income margin improved +3.9pt to 32.0% (prior year 28.1%). NIM was 1.48%, slightly below the benchmark 1.5%. The Cost-to-Income Ratio improved substantially to 44.3% (prior year 54.1%). [Cash Quality] Operating Cash Flow / Net Income was -3.07x, a significant negative, and even after accounting for financial-institution-specific balance sheet changes (loans +¥357.4B, securities -¥189.6B, retirement benefit assets +¥23.8B, etc.), weak cash conversion is a quality concern. The accrual ratio is low at 2.1%, indicating good accounting profit quality, but OCF weakness requires ongoing monitoring. [Investment Efficiency] Return on Assets (ROA, Ordinary Income basis) was 0.8%, up +0.2pt from 0.6% prior. Loan yield was approx. 1.43% (loan interest ¥1,017B / average loans ¥7.1T), deposit yield approx. 0.30% (deposit interest ¥256B / average deposits ¥8.5T), and rising deposit beta is pressuring net interest spread. [Financial Soundness] Equity Ratio was 5.7%, up +0.4pt from 5.3% prior, but capital buffers are not large compared with international standards. Loan-to-deposit ratio was 83.3% (loans ¥7.13T / deposits ¥8.55T), indicating limited liquidity risk. Loan loss reserves were ¥31.01B, with a reserve ratio to loans of 0.44%, remaining low and indicating stable low credit costs.
Operating Cash Flow was -¥1,679.2B, giving an OCF multiple of -3.07x relative to Net Income ¥547.3B. The main drivers were loan growth (+¥357.4B), reduction in securities (+¥189.6B sales proceeds), and increase in retirement benefit assets (+¥23.8B), reflecting financial-institution-specific liquidity adjustments. Operating cash flow subtotal (before working capital changes) was -¥1,497.7B; including income tax payments of ¥18.14B, operating activities produced a substantial cash outflow. Investing Cash Flow was +¥2,538.4B, a large inflow driven by maturities/sales of securities. Capital expenditures were limited at ¥5.38B, and including intangible investments of ¥3.04B, total investment spending was modest. Free Cash Flow was ¥859.3B (Operating CF + Investing CF), providing adequate capacity against dividends ¥208.6B and share buybacks ¥60.0B (total shareholder returns ¥268.6B). Financing Cash Flow was -¥67.5B, mainly due to buybacks and dividend payments. Cash and cash equivalents at period-end were ¥1,335.2B, up ¥79.18B from the beginning, securing overall liquidity.
Earnings quality is centered on recurring income, with minimal impact from extraordinary items. Extraordinary gains were ¥0.3B (gain on disposal of fixed assets) and extraordinary losses ¥10.6B (impairment losses ¥3.4B, loss on disposal of fixed assets ¥7.2B), representing about a 1% impact relative to Ordinary Income ¥848.9B. The divergence between Ordinary Income and Net Income is mainly explained by tax burden (effective tax rate 29.8%, income taxes ¥249.9B), and one-off factors are limited. Non-operating income included equity-method investment income of ¥0.7B but was immaterial. Comprehensive income ¥831.9B versus Net Income ¥547.3B shows a difference of ¥284.6B due to Other Comprehensive Income: valuation differences on securities +¥115.3B, remeasurement of retirement benefit obligations +¥124.2B, and deferred hedge gains/losses +¥7.1B contributed positively, while the share of other comprehensive income of associates -¥3.4B was negative. The accrual ratio is low at 2.1% ((Net Income - Operating CF) / Total Assets), indicating good accounting profit quality. However, the OCF / Net Income of -3.07x is a material cash-quality concern.
Full Year guidance calls for Ordinary Income ¥950.0B (YoY +11.9%), Net Income ¥600.0B (YoY +9.6%), and Net Income attributable to owners of the parent ¥650.0B. Progress rates against the current period results (Ordinary Income ¥848.9B, Net Income ¥547.3B, Net Income attributable to owners of the parent ¥588.6B) are: Ordinary Income 89.4%, Net Income 91.2%, and Net Income attributable to owners of the parent 90.5%. Net Income is near plan levels, while Ordinary Income is somewhat short. Next year’s plan appears conservative relative to this year’s results, likely incorporating assumptions of margin pressure from rising deposit beta, normalization of credit costs, and volatility in securities valuation gains/losses. EPS forecast is ¥171.73 (current period ¥154.87), and dividend forecast is ¥35.00 per share, a substantial cut from this year’s ¥62, indicating a capital policy prioritizing strengthening the Equity Ratio.
Annual dividend is ¥62 (interim ¥30, year-end ¥32), with a payout ratio of 39.5%. This is a large increase from the prior year dividend of ¥20, reflecting profit growth passed to shareholders. Share buybacks of ¥60.0B were executed, and together with dividends ¥208.6B, total returns were ¥268.6B, implying a Total Return Ratio of approximately 49.1% relative to Net Income ¥547.3B. Free Cash Flow ¥859.3B provides 3.2x coverage for total returns, suggesting high sustainability. However, next year’s dividend forecast of ¥35 (down from ¥62 this year) indicates a plan for a significant cut, reflecting a shift to prioritize strengthening the Equity Ratio (currently 5.7%). Considering cash of ¥1,335.2B and Free Cash Flow ¥859B, dividend funding is available, but the need to build capital buffers is likely the rationale for the dividend reduction.
Margin pressure risk: NIM at 1.48% is below the industry benchmark 1.5%, and rising deposit rates (YoY +104.6%) are increasing funding costs. If rates remain elevated, rising deposit beta could further compress margins and slow Ordinary Income growth. With loan yield at 1.43% and deposit yield at 0.30%, a spread exists, but intensified deposit competition could cause temporary margin compression.
Thin capital buffer: Equity Ratio 5.7% is within domestic standards but modest by international comparisons. Against Total Assets ¥10.9T, Net Assets ¥0.6T and a leverage of 16.53x, loss-absorbing capacity under market stress is limited. Valuation gains on securities and remeasurement of retirement benefit obligations bolster Other Comprehensive Income, but in a rising-rate or spread-widening environment valuation loss volatility could pressure capital.
Weak cash conversion: Operating Cash Flow -¥1,679.2B and OCF multiple -3.07x versus Net Income ¥547.3B indicate weak cash conversion even after accounting for financial-institution-specific balance sheet shifts. Loan growth (+¥357.4B) and securities position adjustments are the main causes, and continued deposit outflows or adverse funding conditions would increase liquidity management strain. Free Cash Flow ¥859B is secured, but maintaining levels above total returns ¥268B depends on working capital trends.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Income Margin | 20.7% | 11.9% (7.2%–35.4%) | +8.8pt |
Net Income margin 20.7% is +8.8pt above the industry median 11.9%, placing profitability in the upper tier within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 20.2% | 10.1% (7.3%–12.1%) | +10.1pt |
Revenue growth 20.2% is +10.1pt above the industry median 10.1%, placing growth in the upper tier within the industry.
※ Source: Our compilation based on public financial statements
The key result point is that expanded loan interest in a rising-rate environment and improved cost efficiency led Ordinary Income margin to improve +3.9pt YoY to 32.0%. The Cost-to-Income Ratio improved to 44.3% (prior year 54.1%), showing the effectiveness of cost control. However, NIM at 1.48% is slightly below the industry benchmark of 1.5%, and rising deposit rates (YoY +104.6%) are compressing margins. The pace of deposit beta increase and the speed of loan repricing will determine the sustainability of profit growth.
On cash flow, Operating CF -¥1,679.2B and an OCF multiple of -3.07x relative to Net Income ¥547.3B is a quality concern. Financial-institution-specific balance sheet movements (loans +¥357.4B, securities -¥189.6B, etc.) are the main causes, but Free Cash Flow ¥859.3B maintains overall liquidity. With dividends ¥208B and buybacks ¥60B (total returns ¥268B), FCF coverage is 3.2x, indicating high sustainability. Nonetheless, the planned dividend cut to ¥35 (from ¥62) next year suggests a policy shift prioritizing strengthening the Equity Ratio (5.7%).
This report is an AI-generated financial analysis document automatically produced by analyzing XBRL earnings release data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by our firm based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.