The Kiyo Bank (8370) FY2026 Q3 Earnings Report

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Executive Summary

This was a revenue and profit growth quarter, with ordinary revenue, ordinary income, and net income attributable to owners of the parent all increasing, primarily due to expanded interest income. Ordinary revenue was ¥82.857B (+21.4% YoY), ordinary income was ¥23.793B (+44.0%), and net income attributable to owners of the parent was ¥15.304B (+33.9%). Ordinary income growth of 44.0% exceeded the 21.4% growth in ordinary revenue, demonstrating strong profit growth driven by increased interest on loans and cost controls.

Factors Affecting Performance

【Revenue】Ordinary revenue was ¥82.857B, up 21.4% YoY. The Banking segment accounted for ¥74.169B (+23.4%), representing 89.5% of total revenue, driven by growth in funds investment income. Interest on loans was ¥40.366B, up 30.4%, while total funds investment income increased 29.4% to ¥53.858B, indicating progress in monetizing loan assets amid rising interest rates. Other businesses generated ¥8.687B (+6.6%), meaning that the diversification effect of revenue sources remained limited.

【Profit and Loss】Ordinary income was ¥23.793B, up 44.0%. The 14.2% increase in ordinary expenses to ¥59.063B was below the 21.4% growth in ordinary revenue, resulting in operating leverage. Meanwhile, funding costs surged 90.9% to ¥10.826B, reflecting the impact of higher deposit interest rates. Banking segment profit rose substantially by 50.5% to ¥22.987B, while other businesses recorded a 34.7% decline to ¥0.815B, resulting in greater concentration of profit sources. Extraordinary losses of ¥2.035B, including impairment losses of ¥0.368B, reduced income before taxes, and the gap between ordinary income and net income attributable to owners of the parent reached ¥8.489B. In conclusion, this was a high-quality quarter characterized by revenue and profit growth, with profit growth exceeding revenue growth.

Segment Analysis

The Banking segment generated ordinary revenue of ¥74.169B (+23.4%), segment profit of ¥22.987B (+50.5%), and a profit margin of 31.0%, an improvement of approximately 560bp from 25.4% in the same period of the previous year. It thus generated nearly all of consolidated ordinary income (96.6%). In contrast, other businesses, including administrative outsourcing, leasing, and credit cards, generated ordinary revenue of ¥8.687B (+6.6%), while segment profit declined 34.7% to ¥0.815B, and the profit margin fell to 9.4% from 15.3% in the same period of the previous year, a decline of approximately 590bp. The performance of the two segments was contrasting, and consolidated results increasingly depended on improved interest-rate conditions in the Banking segment.

Key Financial Indicators

【Profitability】The ordinary income margin was 28.7%, improving 452bp from 24.2% in the same period of the previous year, while the net profit margin was 18.5%, improving 173bp from 16.7%. Annualized ROE was 6.2%, decomposed into a net profit margin of 18.5% × total asset turnover of 0.014x × financial leverage of 24.70x.【Cash Flow Quality】The gap between ordinary income and net income attributable to owners of the parent was ¥8.489B (35.7%), primarily due to extraordinary losses of ¥2.035B and income taxes and other taxes of ¥6.456B. Recurring earnings power should therefore be distinguished from temporary factors.【Investment Efficiency】Loans were ¥4,323.626B, up 4.3% from the end of the same period of the previous year, while deposits were ¥4,835.822B, up 3.6%. The loan-to-deposit ratio was 89.4%, near the upper end of the guideline range.【Financial Soundness】The equity ratio (reported figure) was 4.0%, with net assets of ¥246.770B against total assets of ¥6,951.80B. The debt-to-equity ratio was high at 23.70x, but this reflects the business structure of banking, which relies primarily on deposits as a funding source, and therefore cannot be simply compared with the D/E ratio of general corporations.

Cash Flow Analysis

As cash flow statement data were not disclosed, funding trends are analyzed based on changes in the balance sheet. Loans increased by ¥177.532B (+4.3%) from the end of the same period of the previous year, indicating continued expansion in funds investment. Deposits, the source of funds, increased by ¥169.314B (+3.6%), confirming a pattern of expanding lending while maintaining the deposit base. Borrowings declined by ¥91.002B (-11.9%), increasing the weighting of deposits in the funding mix. Cash and due from banks increased by ¥54.685B (+6.8%), indicating an increase in liquid assets. Securities declined by ¥58.543B (-7.0%), potentially reflecting a reduction in exposure to assets subject to interest-rate fluctuation risk. Retained earnings increased by ¥7.423B, indicating further accumulation of internal reserves through the build-up of current-period profit.

Earnings Quality

The primary driver of profit growth this period was the recurring expansion of net interest income, which increased 19.7% to ¥43.032B. Net fees and commissions were ¥9.894B, only 2.6% higher than ¥9.639B in the same period of the previous year. Profit growth therefore depended not on non-interest income, but on funds investment income centered on interest on loans, which increased 29.4%. Meanwhile, the step-down from ordinary income to income before taxes and then to net income attributable to owners of the parent included temporary factors. Extraordinary losses of ¥2.035B included impairment losses of ¥0.368B and represented an accounting-related negative factor separate from recurring earnings growth. Comprehensive income increased substantially to ¥17.582B from ¥3.972B in the same period of the previous year, supported by an improvement in the valuation difference on securities, from a negative ¥23.038B to a negative ¥19.959B. However, securities valuation losses remained, and this should be noted as a factor contributing to the divergence from net income.

Earnings Forecast and Guidance

Progress toward the full-year ordinary income forecast of ¥29.200B was 81.5%, while progress toward the forecast net income attributable to owners of the parent of ¥18.500B was 82.7%. Both exceeded the standard Q3 progress rate of 75%. Progress toward the ordinary revenue forecast of ¥106.600B was 77.7%. The Company has not revised either its earnings forecast or dividend forecast. Although progress exceeded the standard level, the variance did not reach a substantial margin of more than 10 percentage points, and performance can be characterized as tracking ahead of the current Company plan.

Shareholder Returns

The Q2 dividend was ¥58.00 per share, and the calculated payout ratio against cumulative Q3 net income attributable to owners of the parent of ¥15.304B was approximately 25.5%. This payout ratio is based solely on dividends and is not the total return ratio, which includes share repurchases. The full-year dividend forecast is ¥116.00 per share, implying a year-end dividend of ¥58.00. Based on 67.30 million shares outstanding, the estimated full-year total dividend is approximately ¥7.807B, and the forecast payout ratio against forecast full-year net income attributable to owners of the parent of ¥18.500B is approximately 42.2%, below 60%. Retained earnings were ¥183.417B, an increase of ¥7.423B from the end of the same period of the previous year, indicating further strengthening of internal reserves.

Risk Factors

1. Concentration of profit sources: The Banking segment accounts for 89.5% of ordinary revenue and 96.6% of segment profit. Segment profit in other businesses declined 34.7% YoY, strengthening the structure in which consolidated performance depends on interest-rate conditions in the Banking business.

2. Sustainability of the loan-to-deposit margin: While interest on loans increased 30.4%, deposit interest rose substantially to ¥6.571B from ¥1.539B in the same period of the previous year. Funding costs surged 90.9%, and if deposit rates continue to rise, the current rate of profit growth may not be sustainable because of pressure on the loan-to-deposit spread.

3. Characteristics of the capital structure: Net assets represented 4.0% of total assets, and the debt-to-equity ratio was 23.70x. Although these figures reflect the deposit-funded structure of the banking business, factors that could affect capital include the valuation difference on securities (negative ¥19.959B) and extraordinary losses (¥2.035B, including impairment losses of ¥0.368B).

Industry Benchmark (For Reference; Compiled by the Company)

Key Takeaways from the Earnings Results

1. Ordinary income was ¥23.793B, up 44.0% YoY, confirming the emergence of operating leverage through increased interest on loans (+30.4%) and restrained growth in general and administrative expenses (+4.4%).

2. Progress toward the full-year forecasts was 81.5% for ordinary income and 82.7% for net income attributable to owners of the parent, both exceeding the standard progress rate of 75%. The Company has not revised its earnings or dividend forecasts.

3. The Banking segment’s profit margin improved to 31.0% (approximately +560bp YoY), while that of other businesses declined to 9.4% (approximately -590bp YoY), indicating a structural shift toward greater concentration of profit sources. This will be an area of focus in assessing future diversification of revenue sources.

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This report is an earnings analysis document automatically generated by AI through analysis of 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 discretion and responsibility, after consulting a professional as necessary.

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