Quick View
| Metric | Current Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue | ¥456.9B | ¥349.8B | +30.6% |
| Operating Income | - | - | - |
| Ordinary Income | ¥143.0B | ¥93.3B | +53.3% |
| Net Income | ¥99.4B | ¥67.4B | +47.5% |
| ROE | 1.5% | 1.3% | - |
Executive Summary
The bank posted substantial increases in revenue and earnings, primarily due to the expansion of net interest income, while its equity capital level also improved from the previous year. Ordinary revenue was ¥456.9B (+30.6% YoY), Ordinary Income was ¥143.0B (+53.3%), and Net Income was ¥99.4B (+47.5%). In an environment of rising interest rates, interest income grew at a faster pace than interest expenses, resulting in an expansion of net interest income and serving as the primary driver of earnings growth.
Factors Affecting Performance
【Revenue】Ordinary revenue was ¥456.9B, up +30.6% YoY. As banking is the sole business segment, no breakdown by business is disclosed. The primary driver of revenue growth was the expansion of net interest income. Interest income increased to ¥309.7B (¥258.5B in the previous year, +19.8%), growing at a faster pace than interest expenses (+26.9%); consequently, net interest income expanded +17.5% to ¥231.2B (¥196.7B in the previous year). Net fee and commission income declined slightly by ▲4.8% to ¥3.65B (¥3.83B in the previous year), but other operating income improved to ▲¥1.18B (▲¥2.72B in the previous year), supporting overall ordinary revenue.
【Profit and Loss】Ordinary Income was ¥143.0B (+53.3% YoY), while Net Income was ¥99.4B (+47.5%). Ordinary expenses increased to ¥313.8B (+22.3%), but revenue growth exceeded the increase in expenses, improving the Ordinary Income margin to 31.3% (26.7% in the previous year). Extraordinary items were limited, comprising extraordinary gains of ¥0.09B and extraordinary losses of ¥0.06B, and there was virtually no difference between Ordinary Income and profit before tax of ¥143.4B. After deducting income taxes of ¥44.0B (effective tax rate: 30.7%), Net Income came to ¥99.4B. Revenue and earnings increased.
Key Financial Indicators
【Profitability】The Ordinary Income margin was 31.3%, improving by +4.6pt from 26.7% in the previous year, while the Net Income margin also increased by +2.5pt to 21.8% from 19.3%. The expense ratio (G&A ÷ equivalent gross operating profit), an indicator of banking-sector efficiency, was 49.3%. As revenue growth exceeded the increase in expenses (G&A +8.6%), cost efficiency remained at a favorable level.【Cash Flow Quality】Extraordinary items were limited, comprising extraordinary gains of ¥0.09B and extraordinary losses of ¥0.06B. Most profit was generated from ordinary revenue, indicating limited dependence on one-time factors.【Investment Efficiency】ROE was 1.5% (quarterly actual, not annualized). Although the improvement in the Net Income margin was a positive factor, total asset turnover remained low due to the characteristics of the banking industry.【Financial Soundness】The BIS equity ratio was 8.1%, improving from 6.6% in the previous year and exceeding regulatory requirements. Total assets expanded to ¥7,943.89B (+3.6%), while net assets increased to ¥645.66B (+26.8%). The loan-to-deposit ratio was 75.3% (loans of ¥4,576.97B / deposits of ¥6,080.03B), with loans remaining broadly flat against a stable deposit-based funding base.
Cash Flow Analysis
As no cash flow statement is disclosed, funding trends are assessed based on changes in the balance sheet. Cash and due from banks increased by +6.0% to ¥107.19B (¥101.12B in the previous year), strengthening the liquidity buffer. Securities increased by +14.6% to ¥1,973.42B (¥1,722.41B in the previous year), indicating continued expansion of investment assets. On the funding side, deposits increased by +2.2% to ¥6,080.00B (¥5,950.29B in the previous year), while borrowings decreased by ▲12.2% to ¥688.62B (¥784.28B in the previous year), suggesting declining reliance on market-based funding. Loans were broadly flat at ¥4,576.97B (¥4,588.66B in the previous year), indicating that much of the increase in deposits was directed toward securities investments and additional liquidity.
Quality of Earnings
Current-period profit was primarily supported by recurring revenue. Extraordinary gains of ¥0.09B and extraordinary losses of ¥0.06B were limited, and there was virtually no difference between Ordinary Income of ¥143.0B and profit before tax of ¥143.4B. The expansion of net interest income and improvement in other operating income increased Ordinary Income, representing a substantive improvement in earnings linked to the interest-rate environment. Meanwhile, comprehensive income was ¥140.08B, substantially exceeding Net Income of ¥99.4B, with most of the difference attributable to an increase of +¥130.00B in valuation differences on securities. These valuation differences are unrealized gains that do not pass through the P/L and are susceptible to changes in market interest rates and prices; therefore, comprehensive income should not be regarded as equivalent to the underlying earning power represented by Net Income.
Earnings Forecast and Guidance
The progress rate toward the full-year Ordinary Income forecast was 34.0% (¥143.0B / ¥421.0B), while the progress rate for Net Income was 34.9% (¥99.4B / ¥285.0B). Both are progressing at a pace above the quarterly seasonal benchmark of 25%. No revision was made to the earnings forecast during the quarter. If the expansion of net interest income and improvement in other operating income continue, progress against the full-year plan may continue to trend above expectations. However, the pace of increase in funding costs and market volatility could affect the pace of progress.
Shareholder Returns
The full-year dividend forecast is ¥25.00 per share, and no revision was made to the dividend forecast during the quarter. The Payout Ratio against the company’s planned EPS of ¥123.98 is calculated at approximately 20.2%. A 5-for-1 stock split of common shares is scheduled to take effect on April 1, 2026; therefore, it should be noted that the dividend amount for the fiscal year ending March 2026 is presented at the actual pre-split amount. The equity ratio has improved to 8.1%, and from a capital-base perspective, the bank has sufficient capacity to implement the planned dividend.
Risk Factors
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Risk of securities price fluctuations: The securities balance increased by +14.6% YoY to ¥1,973.42B, while valuation differences on securities expanded significantly to +¥130.00B. As investment assets have increased, the impact of interest-rate and market fluctuations on equity capital (net assets) is greater than in the previous year.
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Risk of margin pressure from rising expenses: General and administrative expenses (G&A) increased by +8.6% to ¥12.63B (¥11.62B in the previous year). Although the expense ratio (49.3%) remains favorable because revenue growth currently exceeds the increase in expenses, higher costs could pressure the profit margin if revenue growth slows.
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Stagnation in net fee and commission income: Net fee and commission income declined by ▲4.8% to ¥3.65B (¥3.83B in the previous year). While fee and commission income increased by +1.2%, fee and commission expenses increased by +23.2%, meaning that the growth pace of non-interest income was weaker than that of net interest income.
Industry Benchmark (For Reference; Compiled by the Company)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Income Margin | 21.8% | – | – |
The Company’s Net Income margin of 21.8% improved from 19.3% in the previous year, although comparative data against the industry median is limited.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 30.6% | – | – |
The Company’s ordinary revenue growth rate of +30.6% represents strong growth reflecting the expansion of net interest income in an environment of rising interest rates.
※Source: Compiled by the Company
Key Takeaways from the Earnings Results
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The expansion of net interest income (+17.5% YoY) drove growth in Ordinary Income and Net Income, improving the Ordinary Income margin to 31.3% (26.7% in the previous year). This is a structurally important point to monitor regarding the impact of a rising interest-rate environment on the earnings structure.
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Although the equity ratio improved to 8.1%, the primary cause was an increase in net assets driven by the increase in valuation differences on securities (+¥130.00B). The fact that unrealized gains linked to market valuations were the central factor behind the increase in capital warrants monitoring.
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Progress rates toward the full-year forecasts for both Ordinary Income and Net Income were in the 34% range, tracking above the quarterly seasonal benchmark of 25%.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific 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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AI Financial Analysis
Executive Summary
Shiga Bank delivered a strong FY2027 Q1 earnings outcome, with ordinary income and attributable profit materially outpacing revenue growth. Revenue rose 30.6% year on year to ¥45.69bn. Ordinary income increased 53.3% to ¥14.30bn. Net income attributable to owners rose 47.4% to ¥9.94bn. The net profit margin expanded by 2.5 percentage points to 21.8%, from 19.3% in the prior-year quarter. Ordinary-income margin increased by 4.5 percentage points to 31.3%, from 26.7%. Interest income rose 19.8% to ¥30.97bn, supported by loan interest of ¥16.90bn and interest and dividends on securities of ¥11.68bn. Interest expense increased faster, by 26.9% to ¥7.85bn, including a 70.6% rise in deposit interest expense to ¥5.01bn. Nevertheless, net interest income increased 17.5% to ¥23.12bn. Fees and commissions income was broadly stable at ¥4.91bn, while net fee income declined 4.8% to ¥3.65bn as commission expense rose. General and administrative expenses increased 8.6% to ¥12.63bn, substantially below revenue growth and indicating positive operating leverage. Other ordinary income more than doubled to ¥8.09bn, and this item was an important contributor to the 53.3% rise in ordinary income. Extraordinary gains and losses were immaterial, with a net extraordinary gain of ¥0.03bn. The effective tax rate rose to 30.7% from 28.3%, moderating the conversion of pre-tax profit into net income. Annualized ROE was 6.2%, below the 8% general corporate benchmark but within a more typical range for a regional bank with a large securities portfolio and substantial regulatory capital requirements. Total comprehensive income was exceptionally strong at ¥140.08bn, predominantly reflecting ¥130.15bn of other comprehensive income and a large improvement in securities valuation gains. The Q1 ordinary-income progress rate is 34.0% against the ¥42.10bn full-year forecast, above the standard 25% seasonal benchmark. Net-income progress is also ahead of schedule at 34.9% against the ¥28.50bn forecast. The absence of forecast revisions indicates management is retaining a conservative full-year stance despite the strong first-quarter start. The key forward issue is whether securities-related income and valuation gains remain supportive as funding costs continue to rise.
Profitability Analysis
The annualized 6.2% ROE is explained by a 21.8% net profit margin, 0.023x asset turnover, and 12.30x financial leverage. The low asset-turnover figure is structurally characteristic of banking, where balance sheets are large relative to reported revenue; profitability therefore depends more on spreads, fee income, credit costs, and capital efficiency than on turnover. Financial leverage is the largest numerical contributor to ROE, although the bank's liability base is primarily deposit-funded and should not be interpreted in the same way as industrial-company borrowing leverage. Margin expansion was the primary improvement in the earnings profile: ordinary-income margin rose 450bp year on year to 31.3%, while net margin improved 250bp to 21.8%. Revenue grew 30.6% while general and administrative expenses grew only 8.6%, creating favorable operating leverage. Net interest income increased ¥3.24bn year on year to ¥23.12bn, providing the principal recurring earnings base. However, interest expense rose ¥1.67bn, faster than interest income, as deposit funding costs increased. The reported 0.51% NIM is below the 1.5% warning threshold and indicates that the bank's core balance-sheet spread remains structurally thin despite the increase in nominal net interest income. Other ordinary income increased ¥4.76bn year on year to ¥8.09bn and therefore accounted for a meaningful part of the quarterly earnings acceleration. This makes the quality and repeatability of that income stream important to sustaining the current ordinary-income margin. Fee income was stable, but net fee income declined to ¥3.65bn because fees and commissions expense rose to ¥1.26bn. The tax burden factor was 0.693, consistent with the 30.7% effective tax rate, while the interest-burden factor of 1.002 reflects the banking income-statement presentation rather than conventional corporate interest-coverage dynamics.
Growth Assessment
Revenue growth of 30.6% to ¥45.69bn was supported by higher interest income, securities income, and other ordinary income. Interest on loans increased 22.6% to ¥16.90bn, while interest and dividends on securities increased 11.0% to ¥11.68bn. Deposits increased 2.2% year on year to ¥6,080.03bn, whereas loans and bills discounted declined 0.3% to ¥4,576.97bn. As a result, the Loan-to-Deposit Ratio was a conservative 75.3%, within the stated 70-90% banking benchmark. This balance-sheet mix supports liquidity but also indicates that loan-volume expansion was not the key driver of Q1 earnings growth. Securities increased 14.6% to ¥1,973.42bn, and the securities portfolio is an increasingly important earnings and valuation driver. The full-year ordinary-income forecast implies 45.0% year-on-year growth, and Q1 progress of 34.0% is 9.0 percentage points ahead of the standard 25% pace. Net-income progress of 34.9% is likewise 9.9 percentage points ahead of the standard pace. The quarterly run rate therefore supports the unchanged full-year guidance, subject to interest-rate, securities-market, and funding-cost developments. Growth durability would be strengthened by sustained loan-yield improvement, stable securities income, and containment of deposit-cost repricing.
Financial Health
Total assets increased 3.6% year on year to ¥7,943.89bn. Deposits of ¥6,080.03bn represented the principal funding source and covered loans of ¥4,576.97bn by a wide margin. Cash and due from banks increased 6.0% to ¥1,071.86bn, supporting near-term liquidity. Borrowed money declined 12.2% to ¥688.62bn, reducing reliance on this funding category. The reported debt-to-equity ratio of 11.30x triggers the high-leverage quality alert and exceeds the 2.0x generic corporate threshold. Its root cause is the bank's inherently liability-funded intermediation model, especially customer deposits, rather than necessarily aggressive corporate-style debt financing. In a banking context, this ratio is less decision-useful than regulatory capital, deposit stability, liquidity coverage, and asset quality; nevertheless, it highlights the importance of maintaining depositor confidence and adequate loss-absorbing capital. Total equity increased 26.8% to ¥645.66bn, helped substantially by accumulated other comprehensive income of ¥302.55bn. The reported capital adequacy ratio improved to 8.1% from 6.6% a year earlier and is slightly above the stated 8% minimum benchmark, but below the 12% level generally characterized as strong. Securities valuation differences were ¥234.00bn, making capital and comprehensive income sensitive to interest-rate and market-price movements. Intangible assets were only 0.1% of total assets, limiting acquisition-related intangible-asset and goodwill risk.
Notable B/S Changes
Total equity: +¥136.64bn (+26.8%) to ¥645.66bn, principally supported by the increase in accumulated other comprehensive income; capital is more exposed to valuation movements. Accumulated other comprehensive income: +¥130.11bn (+75.5%) to ¥302.55bn, reflecting a substantial increase in unrealized valuation reserves. Securities valuation differences: +¥130.00bn (+125.2%) to ¥234.00bn, a major driver of comprehensive income and market-risk sensitivity. Deferred tax liabilities: +¥60.55bn (+92.6%) to ¥125.90bn, consistent with the rise in unrealized valuation gains. Securities: +¥251.01bn (+14.6%) to ¥1,973.42bn, increasing the importance of securities income and interest-rate valuation risk. Cash and due from banks: +¥60.53bn (+6.0%) to ¥1,071.86bn, reinforcing liquidity. Borrowed money: -¥95.66bn (-12.2%) to ¥688.62bn, reducing reliance on borrowed funding. Deposits: +¥129.73bn (+2.2%) to ¥6,080.03bn, maintaining a stable core funding base.
Cash Flow Quality
The quarterly earnings profile is supported by a ¥3.24bn year-on-year increase in net interest income and a ¥4.76bn increase in other ordinary income. Net income of ¥9.94bn was close to profit before tax of ¥14.34bn after a ¥4.40bn tax charge, with no material extraordinary distortion. Net extraordinary income was only ¥0.03bn, indicating that reported net income was not dependent on exceptional gains. Comprehensive income of ¥140.08bn greatly exceeded net income because other comprehensive income contributed ¥130.15bn. This gap was driven principally by securities valuation gains and should be distinguished from recurring profit available for distribution or internal capital generation. The sharp increase in securities valuation gains improves reported equity in the quarter but may reverse if market interest rates or securities prices move adversely.
Dividend Sustainability
The full-year dividend forecast is ¥50.00 per share. Based on forecast EPS of ¥123.98, the implied dividend-only payout ratio is 40.3%. This is below the 60% sustainability benchmark and leaves capacity for internal capital accumulation. Q1 EPS was ¥43.23, equivalent to 34.9% of forecast EPS, which is ahead of the standard first-quarter pace. The unchanged dividend forecast alongside strong Q1 earnings suggests management is not yet assuming that the first-quarter earnings uplift should be fully distributed. The April 2026 five-for-one stock split should be considered when comparing per-share dividend figures across periods. Dividend capacity will remain linked to recurring net interest income, credit performance, regulatory capital retention, and the stability of securities-related valuation reserves.
Risk Assessment
Business risks include Interest-rate and deposit-repricing risk: deposit interest expense rose 70.6% year on year to ¥5.01bn, faster than the 19.8% increase in total interest income., Net interest margin risk: the reported 0.51% NIM is materially below the 1.5% warning level. This reflects a structurally narrow lending-and-investment spread; sustained funding-cost increases could compress core profitability even if nominal interest income remains elevated., Securities-market risk: securities totaled ¥1,973.42bn and securities valuation differences were ¥234.00bn. The large ¥130.15bn other-comprehensive-income contribution makes equity sensitive to market yields and securities prices., Regional lending-growth risk: loans and bills discounted declined 0.3% year on year, leaving earnings growth more reliant on spread, securities, and other-income factors than on loan-volume expansion..
Financial risks include High reported D/E of 11.30x: the ratio is above the generic 2.0x warning threshold. While largely inherent to deposit-funded banking, it underscores the dependence on stable funding and prudent capital management., Capital adequacy risk: the reported capital adequacy ratio of 8.1% improved year on year but remains only marginally above the cited 8% minimum and below the 12% strong-capital benchmark., Valuation-reserve volatility: accumulated other comprehensive income of ¥302.55bn is a significant component of total equity, exposing reported capital to unrealized securities-market fluctuations..
Key concerns include The principal quality alert is the 0.51% NIM. Its root cause is the relatively low spread between earning-asset returns and deposit/funding costs; its impact is that sustainable earnings growth requires continued asset-yield repricing or further cost discipline., The high-leverage alert should be assessed through a banking lens. Deposits of ¥6,080.03bn and an LDR of 75.3% indicate a predominantly deposit-funded and comparatively liquid balance sheet, but the liability-heavy model remains sensitive to funding confidence and capital-market valuations., Ordinary-income growth was aided by a ¥4.76bn rise in other ordinary income. The durability of this contribution is important because it may be less predictable than core lending spreads., The large gap between comprehensive income and net income indicates that reported equity growth was materially influenced by unrealized valuation gains rather than solely by retained earnings..
Investment Implications
Key takeaways include Q1 ordinary income of ¥14.30bn and net income of ¥9.94bn exceeded the standard seasonal pace relative to full-year forecasts., Revenue growth outpaced expense growth, producing 450bp ordinary-income-margin expansion to 31.3%., The 75.3% LDR reflects a balanced deposit-funded liquidity position., Core profitability remains constrained by a reported NIM of 0.51%, despite higher net interest income., Securities valuations materially enhanced comprehensive income and equity, increasing sensitivity to market movements..
Metrics to watch include NIM and the pace of deposit-cost repricing relative to loan and securities yields, Loan balance growth and LDR trends, Other ordinary income composition and recurrence, Capital adequacy ratio relative to regulatory buffers, Securities valuation differences, accumulated OCI, and comprehensive-income volatility, Progress against the ¥42.10bn ordinary-income and ¥28.50bn net-income forecasts.
Regarding relative positioning, Shiga Bank's Q1 earnings momentum, expense discipline, and conservative 75.3% loan-to-deposit ratio are constructive features for a regional bank. Relative profitability is nevertheless constrained by the low 0.51% NIM, while a sizeable securities portfolio and valuation reserve create more market-value sensitivity in capital and comprehensive income than a purely loan-driven earnings model.