| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥7.296B | ¥6.697B | +8.9% |
| Operating Income | - | - | - |
| Ordinary Income | ¥2.518B | ¥2.001B | +25.8% |
| Net Income | ¥1.758B | ¥1.406B | +25.1% |
| ROE | 2.8% | 2.3% | - |
Gunma Bank reported higher revenue and income in Q1, driven by an expansion in net interest income and the maintenance of cost efficiency. Profit growth significantly outpaced revenue growth, resulting in a strong set of results. Revenue (ordinary revenues) was ¥7.296B (+8.9% YoY), Ordinary Income was ¥2.518B (+25.8%), and Net Income was ¥1.758B (+25.1%). The primary drivers of profit growth were an increase in interest income on loans that exceeded the increase in interest expenses, together with an expansion in net fee and commission income and restraint in general and administrative expenses. EPS was ¥46.46 (¥36.77 in the previous year, +26.4%), and progress against the full-year Ordinary Income forecast of ¥9.500B was 26.5%, slightly above the standard quarterly progress rate of 25%.
【Revenue】Revenue (ordinary revenues) of ¥7.296B increased +8.9% YoY. By segment, Banking, the core business, generated ¥6.137B (84.1% of total, +7.3%), Leasing generated ¥956M (13.1% of total, +15.4%), and Other generated ¥203M (2.8% of total, +36.9%), with all segments recording higher revenue. In the Banking business, interest on loans (¥2.872B, ¥2.336B in the previous year) and interest and dividends on securities (¥1.557B, ¥1.432B in the previous year) increased, while fee income (¥921M, ¥854M in the previous year) also expanded.
【Profit and Loss】Segment profit in Banking of ¥2.366B (+25.8%) drove overall performance, while Leasing posted ¥41M (¥44M in the previous year, -6.8%), representing a decline, and Other posted ¥117M (+42.3%), representing substantial growth. Although interest expenses increased to ¥1.636B (¥1.354B in the previous year), the increase in interest income exceeded this rise, expanding net interest income. In addition, general and administrative expenses were held almost flat at ¥1.411B (¥1.402B in the previous year, +0.7%), resulting in profit growth exceeding revenue growth. Extraordinary income and losses were limited, at extraordinary income of ¥6M and extraordinary losses of ¥14M, while the effective tax rate was 29.9% (29.2% in the previous year), remaining broadly stable. Profit growth was therefore supported by recurring factors. In conclusion, Q1 recorded higher revenue and income, confirming positive operating leverage as the expansion in revenue exceeded the increase in expenses.
The core Banking business generated segment profit of ¥2.366B (equivalent to 94.0% of company-wide profit), and the business structure remains concentrated in Banking. Banking recorded higher revenue and income, with revenue of ¥6.137B (+7.3%) and segment profit of ¥2.366B (+25.8%), supported by the expansion of net interest income and fee income. Leasing recorded higher revenue of ¥956M (+15.4%), but segment profit declined to ¥41M (-6.8%), indicating a slight deterioration in profitability relative to revenue growth. Other businesses, including securities, guarantees, and consulting, recorded strong growth, with revenue of ¥203M (+36.9%) and segment profit of ¥117M (+42.3%), making a certain contribution to the diversification of non-interest income.
【Profitability】The Ordinary Income margin (Ordinary Income/Revenue) improved to 34.5% (29.9% in the previous year), while the Net Income margin also improved to 24.1% (21.0% in the previous year). This high level of profitability reflects the nature of ordinary revenues in banking accounting, which consist of interest, fee, and other income, and was driven by both the expansion of net interest income and expense control.【Cash Flow Quality】Extraordinary income and losses were limited, at extraordinary income of ¥6M and extraordinary losses of ¥14M, with the net negative impact limited to ¥8M. The majority of profit growth in the current period was attributable to increases in recurring net interest income and fee income. Comprehensive Income was ¥2.519B, a ¥761M difference from Net Income of ¥1.758B, primarily due to an increase of ¥837M in valuation difference on available-for-sale securities.【Investment Efficiency】ROE remained flat at 2.8% (equivalent to 2.8% in the previous year). The improvement in the Net Income margin was offset by the leverage effect, and the Bank’s return-generating capacity on equity changed little. The total asset turnover ratio was low at 0.67%, reflecting the characteristics of the asset structure of the Banking business.【Financial Soundness】The Equity Ratio was 5.8% (+0.1pt from 5.7% in the previous year), while the loan-to-deposit ratio (loans/deposits) was 82.2%, indicating that lending operations are conducted within the scope of stable deposit-based funding.
As a cash flow statement has not been disclosed, funding trends are assessed based on changes in the balance sheet. Deposits increased to ¥86.682B (¥85.545B in the previous year, +1.3%), expanding the stable funding base, while loans remained almost flat at ¥71.208B (¥71.267B in the previous year, -0.1%). On the investment side, securities increased to ¥20.433B (¥20.018B in the previous year, +2.1%), while call loans in short-term market operations expanded to ¥3.000B (¥1.000B in the previous year, +200.0%). On the funding side, borrowed money declined to ¥8.473B (¥9.482B in the previous year, -10.6%), and call money decreased to ¥10.393B (¥12.311B in the previous year, -15.6%). This indicates a move to reduce dependence on market-based funding against the backdrop of deposit growth. Overall, the Bank is increasing securities investments and short-term market operations using stable funding from deposit growth, while reducing market funding such as borrowings and call money. The quality of the funding base has not changed materially from the previous year.
The profit increase in Q1 was attributable to recurring revenue factors, namely increases in interest income on loans and securities and the expansion of net fee and commission income. Extraordinary income and losses were limited, at extraordinary income of ¥6M and extraordinary losses of ¥14M, meaning that the contribution from one-time factors was extremely limited. Ordinary Income of ¥2.518B and Profit Before Tax of ¥2.509B were broadly consistent, while the difference between Ordinary Income and Net Income of ¥1.758B was primarily attributable to the relatively stable tax burden of income taxes of ¥751M (effective tax rate of 29.9%), with no structural distortion evident. Meanwhile, Comprehensive Income of ¥2.519B exceeded Net Income of ¥1.758B by ¥761M, largely due to an ¥837M increase in valuation difference on available-for-sale securities. As this valuation difference fluctuates in line with market interest rates and share prices, it can vary significantly in period-on-period comparisons. Compared with Comprehensive Income of ¥2.612B in the same period of the previous year, it declined -3.5% YoY. Accordingly, the quality of current-period profit growth can be considered relatively high because it is supported not by fluctuations in valuation gains and losses, but by recurring operating sources of income, namely net interest income and fee income.
Progress against the full-year plan was 26.5% for Ordinary Income, at ¥2.518B/¥9.500B, and 27.1% for Net Income, at ¥1.758B/¥6.500B. Both exceeded the standard quarterly progress rate of 25%. EPS was also progressing at 27.1%, with actual EPS of ¥46.46 against the forecast of ¥171.73. The progress was supported by the expansion of net interest income and restraint in general and administrative expenses. As of the current quarter, there had been no revisions to the earnings forecast or dividend forecast.
Under the company’s plan, the full-year dividend forecast is ¥70.00 per share, implying a Payout Ratio of approximately 40.8% based on forecast full-year EPS of ¥171.73. As of Q1, there had been no revision to the dividend forecast. Retained earnings continued to increase, reaching ¥50.842B (¥50.292B in the previous year), indicating a dividend plan that secures internal reserves. The dividend paid in the same period of the previous year was ¥30.00 per share; however, as the data does not clearly specify whether this represented the interim or year-end dividend, a simple year-on-year comparison is not provided.
Low net interest margin (NIM): The spread between the yield on funds invested and funding costs remains narrow. With interest income of ¥46,951M compared with interest expenses of ¥16,360M, the absolute level of net interest income remains structurally susceptible to the impact of rising expenses. If the interest-rate environment reverses, the boost to net interest income may diminish.
Concentration of the business portfolio: Banking accounts for 94.0% of segment profit of ¥2.366B, while the contributions from Leasing (¥41M) and Other businesses (¥117M) are limited. The sensitivity of company-wide profit to fluctuations in Banking performance is therefore relatively high.
Volatility in securities valuations: The valuation difference on available-for-sale securities increased to ¥1.1835B (¥302.6M in the previous year), making accumulated other comprehensive income in net assets (¥5.882B) susceptible to fluctuations in interest rates and markets. The Equity Ratio was 5.8% (5.7% in the previous year), remaining broadly flat year on year.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Income Margin | 24.1% | – | – |
As industry median data for the Company’s Net Income margin of 24.1% is not available, its relative positioning cannot be assessed.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 8.9% | – | – |
As industry median data for the Company’s Revenue growth rate of 8.9% is not available, its relative positioning cannot be assessed.
※Source: Compiled by the Company
In Q1, progress toward the full-year plan was approximately 27% for both Ordinary Income and Net Income, exceeding the standard quarterly progress rate of 25%. The progress was supported by the expansion of net interest income and restraint in general and administrative expenses, indicating that the revenue expansion trend continued throughout the quarter.
The Net Income margin of 24.1% and Ordinary Income margin of 34.5% improved from the previous year, but ROE remained flat at 2.8%. Given the characteristics of the Banking business, which has a low total asset turnover ratio, the structural challenge for further improvement in earnings power is to build up non-interest income in addition to expanding the net interest margin.
The valuation difference on available-for-sale securities increased from ¥3.026B in the previous year to ¥11.835B, leaving net assets and the Equity Ratio susceptible to fluctuations in market interest rates. The Equity Ratio remained at 5.8% (5.7% in the previous year), and the extent of future fluctuations in net assets resulting from market conditions remains an important point to monitor.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any particular security. Industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.
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