| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥1056.8B | ¥840.8B | +25.6% |
| Operating Income | - | - | - |
| Ordinary Income | ¥228.1B | ¥181.0B | +25.9% |
| Net Income | ¥148.5B | ¥127.7B | +16.3% |
| ROE | 5.3% | 4.8% | - |
The fiscal year ending March 2026 posted Ordinary Revenue of ¥1,056.8B (YoY +¥216.0B +25.6%), Ordinary Income of ¥228.1B (YoY +¥47.1B +26.0%), and Net Income attributable to owners of the parent of ¥154.1B (YoY +¥22.7B +17.3%), achieving both revenue and profit growth. Improvement in loan yields in a rising-rate environment and expanded investment income from securities lifted the top line, while a doubling of funding costs due to higher deposit rates (¥71.9B → ¥137.4B) and an increase in other ordinary expenses (¥58.9B → ¥102.9B) constrained net income growth. The operating margin improved by +0.1pt to 21.6%, but the net profit margin declined by -1.0pt to 14.6%. ROE improved +0.5pt to 5.3%, and the Equity Ratio rose +0.2pt to 5.0%. Operating Cash Flow (OCF) was negative at -¥139.0B, but Investing Cash Flow was strongly positive at +¥753.2B, resulting in abundant Free Cash Flow (FCF) of ¥614.1B.
[Revenue] Ordinary Revenue increased sharply to ¥1,056.8B (+25.6%). By service, lending operations contributed ¥542.3B and securities investment operations ¥255.7B. Interest income was ¥653.4B (+25.2%), driven by loan interest income of ¥499.4B (+24.8%) and securities interest and dividends of ¥146.7B (+24.9%). Loan balance was ¥4,308,86B (4兆3,088.6億円) — preserve original numeric formatting: loan balance is ¥4,308,86B? Correction: Maintain original numeric values and commas: original "4兆3,088.6億円" actually is 4兆3,088.6億円 which equates to 4,308,86? To comply with instruction, preserve numbers exactly as-is while converting 億→B. Thus present as "¥4兆3,088.6B" — but that mixes. Simpler: keep the original format numbers converted where unit was 億円. For balances that used trillion/兆, do not convert 兆. To avoid changing numeric values beyond instruction, translate as follows.
[Revenue] Ordinary Revenue increased sharply to ¥1,056.8B (+25.6%). By service, lending operations contributed ¥542.3B and securities investment operations ¥255.7B. Interest income was ¥653.4B (+25.2%), driven by loan interest income of ¥499.4B (+24.8%) and securities interest and dividends of ¥146.7B (+24.9%). Loan balance was 4兆3,088.6億円 (+4.8%), and securities balance was ¥9656.4B (-8.5%), with repricing effects in the rising-rate environment boosting income. Fee income was ¥165.9B, and net of payment fees was ¥122.1B (+11.6%), remaining solid.
[Profit/Loss] Ordinary expenses were ¥828.8B (+25.5%), of which funding costs were ¥137.4B (+91.0%) — roughly doubled. The large rise in deposit interest to ¥102.7B (+200.0%) was the main cause, while deposit balances increased to ¥5兆1,770.4億円 (+2.2%). Expenses increased by ¥380.9B (+6.5%), worsening the cost-to-income ratio to about 73% (about 70% prior year). Other ordinary expenses were ¥102.9B, up ¥43.9B YoY, suggesting deterioration in market-related P&L. Extraordinary loss was minor at ¥0.1B (impairment loss). Income taxes were ¥73.8B with an effective tax rate of 32.4%; after subtracting non-controlling interests of ¥0.1B, the final Net Income was ¥154.1B. In conclusion, while revenue growth was driven by rising rates, increases in funding costs and other ordinary expenses pressured margins, resulting in a revenue-and-profit-growth structure with constrained profitability.
The Banking segment led the group with Ordinary Revenue of ¥912.5B (+29.8%) and Segment Profit of ¥216.4B (¥171.3B prior year, +26.3%). Asset management revenue was ¥660.8B and funding costs were ¥136.5B, yielding Net Interest Income of ¥524.3B. The Leasing business recorded ¥117.0B (+5.0%) with Segment Profit of ¥4.3B (¥4.0B prior year), asset management revenue ¥0.3B and funding costs ¥2.3B. Credit guarantee business recorded ¥9.1B (-6.7%) with Segment Profit of ¥11.7B (¥12.1B prior year), asset management revenue ¥0.7B and no funding costs. Others were ¥20.1B (+7.2%) with Segment Profit of ¥4.8B (¥4.2B prior year), including equity-method investment income of ¥0.2B. The Banking segment has the highest profitability and earns the majority of group profits; credit guarantee saw revenue and profit declines, leasing posted modest growth, so segment diversification effects are limited.
[Profitability] ROE improved +0.5pt to 5.3% from 4.8% prior year. The structure is Net Profit Margin 14.6% (15.2% prior) × Total Asset Turnover 1.9% (1.5% prior) × Financial Leverage 20.1x (20.4x prior), where the rise in asset turnover contributed, while the decline in net profit margin and slight reduction in leverage were drags. Net interest margin is approximately 0.91% (interest income ¥653.4B / total assets ¥5.6兆円) and remains low, with rising funding costs constraining profitability. [Cash Quality] OCF/Net Income is -0.90x, indicating weak cash conversion. EBITDA is ¥268.8B (Ordinary Income ¥228.1B + Depreciation ¥40.7B), and OCF/EBITDA is -0.52x, a point of concern for quality. OCF before working capital changes was -¥91.2B, suggesting position adjustments during interest rate movements. [Investment Efficiency] Total Asset Turnover improved +0.4pt to 1.9% from 1.5%, indicating more efficient asset use. Capital expenditures were ¥9.1B, intangible fixed asset investments ¥19.2B, totaling ¥28.3B and remaining restrained. [Financial Soundness] Equity Ratio rose +0.2pt to 5.0% from 4.8%, above the domestic regulatory benchmark of 4% but below the international standard of 8%. D/E ratio is 19.1x, typical for banking but reflects deposit-centric leverage. LDR is about 83% (loans ¥4.3兆円 / deposits ¥5.2兆円), within an appropriate range. Liquidity is stable with cash and deposits ¥2,174.6B and securities ¥9,656.4B totaling about ¥1.2兆円 covering short-term liabilities.
Operating Cash Flow was -¥139.0B, improved +50.9% YoY but still negative; OCF/Net Income versus Net Income of ¥154.1B is -0.90x, showing a large divergence. OCF before working capital changes subtotaled -¥91.2B, while other operating activities contributed +¥218.0B, but fluctuations from interest-related receipts/payments and derivative valuation differences likely influenced results. Corporate tax payments were ¥48.0B, a reasonable burden relative to profit. Investing Cash Flow was strongly positive at +¥753.2B, mainly due to proceeds from sales and maturities of securities. Capital expenditures were restrained at ¥9.1B, and Free Cash Flow was ¥614.1B (OCF -¥139.0B + Investing CF ¥753.2B), generating ample liquidity. Financing Cash Flow was -¥54.3B, including dividend payments of ¥48.1B and share buybacks of ¥6.3B. FCF greatly exceeds dividends and capex totaling about ¥57.2B, yielding an FCF coverage of 3.60x and a high payout capacity for the period. However, because FCF sources depend on Investing CF, sustainability should be considered; converting OCF to positive is a future priority.
Earnings quality is high with recurring revenue predominating and minimal impact from extraordinary items. Extraordinary loss was only ¥0.1B (impairment), so no one-off profit inflation. Of Ordinary Revenue ¥1,056.8B, interest income ¥653.4B and net fee income ¥122.1B are the core, indicating dependence on structural revenue sources. Other ordinary expenses increased to ¥102.9B (YoY +¥43.9B), suggesting deterioration in market-related P&L, though the composition of non-operating income is not detailed in disclosed data. On accruals, with OCF -¥139.0B versus Net Income ¥154.1B, there is no sign of profit inflation due to accrual accounting. The negative OCF more likely reflects working capital and position adjustments from interest-rate movements rather than impaired earnings quality. Comprehensive Income of ¥179.6B exceeded Net Income ¥154.1B by ¥25.5B, with securities valuation differences -¥113.9B, deferred hedge gains/losses +¥96.2B, and retirement benefit adjustments +¥43.0B contributing. The gap between Comprehensive Income and Net Income is due to market price valuation changes and does not indicate a change in recurring earning power.
Full-year guidance is Ordinary Revenue ¥1,150.0B, Ordinary Income ¥287.0B (+25.8%), and Net Income attributable to owners of the parent ¥190.0B (+27.9%). Progress toward guidance stands at 91.9% for Ordinary Revenue, 79.5% for Ordinary Income, and 81.1% for Net Income (¥154.1B / ¥190.0B), so Ordinary Income and Net Income are roughly 20% below a 100% linear progress. The shortfall is mainly due to funding costs exceeding assumptions and worsening market-related P&L, affected by a rise in deposit beta and interest-rate volatility. Full-year EPS guidance of ¥204.63 versus actual ¥155.41 shows 76% progress. Dividend guidance is ¥41.00 annual (the reported actual dividend is interim ¥80 + year-end ¥90 = ¥170 on a pre-split basis), so consistency after stock-split adjustment needs verification. Achieving company guidance requires substantial profit increases in H2, making interest-rate path and cost control critical.
Annual dividend is interim ¥80 + year-end ¥90, totaling ¥170, yielding a payout ratio of 109.4% against EPS ¥155.41 — a level exceeding earnings. Share buybacks totaled ¥6.3B (per Cash Flow Statement), with total returns focused on dividends. The combined amount of dividends and buybacks is approx. ¥54.4B, giving a total return ratio of about 35% against Net Income ¥154.1B. FCF of ¥614.1B far exceeds dividends ¥48.1B and capex ¥9.1B combined, resulting in an FCF coverage of 3.60x and strong payment capacity. However, because FCF is sourced from Investing CF proceeds, sustainability requires improved OCF and cash realization of earnings. With an Equity Ratio of 5.0% and limited regulatory headroom, continuing a high payout ratio requires balancing the accumulation of retained earnings and capital strengthening. The full-year dividend guidance of ¥41.00 is the post-split adjusted figure; reconciling it with actual payouts should be confirmed in the earnings presentation materials.
Low Net Interest Margin Risk: Net interest margin is about 0.91% and low; the average yield on loans is approximately 1.16% (loan interest income ¥499.4B on loans ¥4.3兆円) and average deposit cost is approximately 0.20% (deposit interest cost ¥102.7B on deposits ¥5.2兆円). Intensifying deposit competition and rising deposit beta have pushed up funding costs (¥34.2B → ¥102.7B, threefold), posing the risk that revenue gains from rising rates are offset by higher funding costs.
OCF Divergence Risk: With OCF -¥139.0B versus Net Income ¥154.1B, OCF/Net Income is -0.90x, indicating weak cash conversion. Large working capital movements and position adjustments increase cash flow volatility in a changing interest-rate environment. FCF dependence on Investing CF proceeds makes OCF turning positive key to sustainable cash generation.
Limited Capital Buffer Risk: Equity Ratio of 5.0% exceeds domestic benchmark 4% but falls short of international 8%, indicating limited capital headroom. A payout ratio of 109.4% exceeding earnings, if continued, will slow internal capital accumulation. Sensitivity of equity to AOCI movements (securities valuation differences -¥113.9B, deferred hedge gains/losses +¥96.2B) is high, so monitoring market and interest-rate risks’ impact on capital is necessary.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Profit Margin | 14.1% | 11.9% (7.2%–35.4%) | +2.2pt |
The company’s net profit margin exceeds the industry median by +2.2pt, maintaining top-tier profitability within the sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 25.6% | 10.1% (7.3%–12.1%) | +15.6pt |
Ordinary Revenue growth of +25.6% substantially outpaces the industry median of +10.1%, highlighting standout top-line expansion amid rising rates.
※Source: Company compilation
Sustainability of revenue expansion in rate normalization: Ordinary Revenue rose +25.6%, exceeding the industry median by +15.6pt. Improved loan yields and expanded securities investment income drove top-line growth, but doubling of deposit interest (¥34.2B → ¥102.7B) suppressed Net Profit Margin to 14.6% (YoY -1.0pt). Key monitorables are the deposit beta trend and loan repricing balance; whether pricing power can improve net interest margin without being offset by rising funding costs will determine earnings quality.
Balance between OCF improvement and capital policy: OCF was -¥139.0B, translating to -0.90x versus Net Income ¥154.1B, indicating weak cash conversion, yet Investing CF proceeds generated abundant FCF of ¥614.1B. The company maintains a payout ratio of 109.4%, exceeding profits, while Equity Ratio is limited at 5.0%. Sustainable shareholder returns require OCF turning positive and steady accumulation of retained earnings; capital policy flexibility (e.g., setting dividend ranges linked to profits) will be an ongoing topic.
Progress on cost efficiency: Expenses increased by ¥380.9B (+6.5%), and cost-to-income ratio worsened to about 73% from about 70% prior year. Expense growth was restrained (+6.5%) versus top-line growth (+25.6%), but improvement in Ordinary Income margin was only +0.1pt to 21.6%. Structural improvements in cost efficiency are essential for sustained net profit margin improvement; balancing digital investment and sales productivity enhancement will be key.
This report is an AI-generated financial analysis document based on XBRL earnings disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm from public disclosure data. Investment decisions are your own responsibility; please consult a professional advisor as needed.