Quick View
| Metric | Current Period | Previous-Year Period | YoY |
|---|---|---|---|
| Revenue | ¥357.2B | ¥271.9B | +31.4% |
| Operating Income | - | - | - |
| Ordinary Income | ¥108.1B | ¥88.3B | +22.4% |
| Net Income | ¥74.5B | ¥63.1B | +18.1% |
| ROE | 3.0% | 2.5% | - |
Executive Summary
Kiyo Bank (Q1 of the fiscal year ending March 2027) secured higher revenue and profits, driven by growth in loans and deposits and an expansion in net interest income; however, profitability declined slightly due to higher expenses. Ordinary revenue (Revenue) was ¥357.2B (¥271.9B in the previous year, +31.4%), Ordinary Income was ¥108.1B (¥88.3B, +22.4%), and Net Income attributable to owners of the parent was ¥74.7B (¥63.0B, +18.5%). Profit growth was slower than revenue growth, and the Ordinary Income margin declined to 30.3% from 32.5% in the previous year, indicating that higher costs offset part of the top-line expansion.
Factors Affecting Performance
【Revenue】Ordinary revenue rose substantially by +31.4% YoY to ¥357.2B. The Banking Business segment led growth at ¥329.3B (92.2% of total, +34.7%), while other segments remained at ¥27.9B (+1.5%). The primary drivers of revenue growth were higher interest income on loans, attributable to a +1.1% increase in loans (interest on loans: ¥158.2B, compared with ¥126.3B in the previous year), and an increase in net fee income (¥36.1B, compared with ¥32.3B in the previous year).
【Profit and Loss】Ordinary Income increased by +22.4% to ¥108.1B, while Net Income increased by +18.5% to ¥74.7B. However, Ordinary Income growth lagged the +31.4% increase in ordinary revenue, and the Ordinary Income margin declined from 32.5% in the previous year to 30.3%. The factors were higher funding costs due to increased interest expenses on deposits (¥35.8B, compared with ¥19.7B in the previous year) and higher general and administrative expenses (¥97.5B, compared with ¥91.2B in the previous year, +7.0%). Extraordinary losses were minimal at ¥0.04B, and the impact of temporary factors was limited. In conclusion, the company was in a phase of higher revenue and profits, but margins contracted due to rising expenses.
Segment Analysis
The Banking Business segment accounts for the core of revenue and profit, with ordinary revenue of ¥329.3B (+34.7%), segment profit of ¥105.8B (+24.9%), and a high segment margin of 32.1%. Meanwhile, the Other Businesses segment (including administrative outsourcing, leasing, and credit card operations) was nearly flat in ordinary revenue at ¥27.9B (+1.5%), while segment profit fell significantly to ¥2.0B (▲45.7% YoY), resulting in a margin of only 7.0%. Revenue is highly concentrated in the Banking Business segment (92.2% of total revenue), and declining profitability in the other businesses is weighing on the overall profit margin.
Key Financial Indicators
【Profitability】The Ordinary Income margin was 30.3%, down from 32.5% in the previous year, while the Net Income margin also contracted to 20.9% from 23.2%. The decline was attributable to a higher expense burden relative to gross operating profit, indicating a slight deterioration in profitability. 【Cash Flow Quality】Recurring net interest income (¥158.2B) and net fee income (¥36.1B) were the principal sources of profit, while extraordinary gains and losses were extremely limited at ¥0.04B, indicating low reliance on temporary factors. However, comprehensive income of ¥55.2B was below Net Income of ¥74.7B, as valuation-related gains and losses, including a ¥16.1B decline in the valuation difference on other securities (▲¥16.1B), weighed on equity. 【Investment Efficiency】ROE was 3.0%. While high financial leverage (total assets of ¥6兆1727.6億B / net assets of ¥2489.9億B) provided support, the decline in the Net Income margin weighed on ROE. 【Financial Soundness】Loans were ¥4兆3930.9億B and deposits were ¥4兆9938.0億B, maintaining the loans-to-deposits ratio at an appropriate level of approximately 88.0%. The Equity Ratio remained flat at 4.0%, unchanged from the previous year, with no significant change in the capital level.
Cash Flow Analysis
As the cash flow statement has not been disclosed, funding trends are analyzed based on changes in the balance sheet. Deposits increased to ¥4兆9938.0億B (¥4兆8250.8億B in the previous year, +3.5%), expanding the funding base. Meanwhile, borrowings declined to ¥6740.8億B (¥7269.97億B in the previous year, ▲7.3%), and securities sold under repurchase agreements declined to ¥480.3億B (¥1164.4億B in the previous year, ▲58.7%), indicating a reduction in market-based funding and stabilization of the funding structure through a shift toward deposits. Loans increased to ¥4兆3930.9億B (+1.1%), while securities declined slightly to ¥7848.7億B (¥7952.3億B in the previous year, ▲1.3%), indicating a preference for allocating funds to loans while slightly reducing securities holdings. Cash and deposits were largely flat at ¥8423.0億B (¥8377.4億B in the previous year), and liquidity remained stable.
Quality of Earnings
Profit was primarily composed of recurring revenue sources, namely net interest income (¥158.2B) and net fee income (¥36.1B). Extraordinary losses were extremely limited at ¥0.04B, and temporary factors did not materially distort profit. On the other hand, other ordinary gains and losses, including market-related gains and losses, deteriorated, which may have increased volatility in core earnings. The gap between Ordinary Income (¥108.1B) and Net Income attributable to owners of the parent (¥74.7B) was due to the recognition of income taxes and other taxes of ¥33.5B. The effective tax burden was broadly within the normal tax range, with no unusual discrepancy. However, comprehensive income of ¥55.2B was below Net Income, reflecting deterioration in other comprehensive income, including a ¥16.1B decline in the valuation difference on other securities (▲¥16.1B) and a ¥3.3B decline in adjustments related to retirement benefits (▲¥3.3B). This indicates a certain divergence between accounting profit and cash-generating capacity and capital accumulation, which should be noted when evaluating earnings quality.
Earnings Forecasts and Guidance
Progress against the full-year plan was favorable. Ordinary Income was ¥108.1B, representing progress of 29.5% against the full-year forecast of ¥366.0B. Basic EPS of ¥115.95 had already reached nearly 90% of the EPS forecast of ¥129.37, exceeding the standard Q1 progress rate of 25%. There was “no” revision to the earnings forecast, and management maintained its current plan. While growth in net interest income and fee income appears to have been the primary reason for performance exceeding the plan, the potential for full-year upside may be limited if higher expenses and deterioration in other ordinary gains and losses continue.
Shareholder Returns
The dividend per share in the same period of the previous year was ¥58; however, a 3-for-1 stock split of common shares is scheduled to take effect on October 1, 2026. Accordingly, the projected fiscal year-end dividend per share and annual dividend for the fiscal year ending March 2027 are presented on a post-split basis. Without taking the split into account, the fiscal year-end dividend would be ¥78.00 and the annual dividend would be ¥156.00. There was “no” revision to the dividend forecast during the quarter, and the dividend policy remained unchanged. Against the full-year Net Income plan of ¥250.0B, Q1 progress was 29.9%, indicating steady progress and a favorable outlook for securing funds for dividends.
Risk Factors
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Net interest margin and funding cost risk: While interest expenses on deposits increased to ¥35.8B (¥19.7B in the previous year), the increase in interest income on loans (¥158.2B) exceeded this amount. However, the Ordinary Income margin declined to 30.3% from 32.5% in the previous year, and continued increases in deposit costs could place further pressure on profitability.
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Risk related to the capital level: The Equity Ratio remained at 4.0%, unchanged from the previous year, with no notable change. However, the absolute level of capital relative to total assets of ¥6兆1727.6億B is limited, and capital accumulation has been gradual.
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Deterioration in the valuation difference on other securities: The valuation difference on other securities deteriorated by ¥16.1B (on an other comprehensive income basis), resulting in comprehensive income of ¥55.2B falling below Net Income of ¥74.7B. Expanding valuation losses arising from changes in interest rates and market conditions could affect capital stability.
Industry Benchmark (For Reference; Compiled by the Company)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Income Margin | 20.9% | – | – |
| The Net Income margin of 20.9% is based on limited comparative data within the industry and is within a standard range for the banking industry in absolute terms. |
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 31.4% | – | – |
| The Revenue growth rate of 31.4% represents a high rate of growth for the banking industry. |
※Source: Compiled by the Company
Key Takeaways from the Earnings Results
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The company achieved higher revenue (+31.4%) and double-digit profit growth (Ordinary Income +22.4%, Net Income +18.5%). However, the Ordinary Income margin declined to 30.3% from 32.5% in the previous year, highlighting a revenue growth structure accompanied by higher costs.
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Due to the deterioration in the valuation difference on other securities (▲¥16.1B), comprehensive income of ¥55.2B fell below Net Income of ¥74.7B. Changes in interest rates and market conditions were factors behind the apparent fluctuation in capital.
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Progress against the full-year plan was 29.5% for Ordinary Income and 29.9% for Net Income, exceeding the standard progress rate of 25%. Performance momentum during the first half was therefore ahead of plan.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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, where necessary, after consulting with a professional advisor.
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AI Financial Analysis
Executive Summary
Kiyo Bank delivered a strong FY2027 Q1 earnings result, driven by higher banking revenue and a material increase in ordinary profit. Consolidated ordinary revenue rose 31.4% year on year to ¥35.72bn. Ordinary income increased 22.4% to ¥10.81bn, while profit attributable to owners rose 18.5% to ¥7.47bn. Basic EPS increased to ¥115.95 from ¥98.42 in the prior-year quarter. The banking segment remained the core business, generating ¥32.93bn of external ordinary revenue and ¥10.58bn of segment profit. Banking segment revenue grew 34.7% year on year and segment profit grew 24.9%. The other-business segment produced ¥2.79bn of revenue, up 1.5%, but its segment profit declined 45.7% to ¥0.20bn. Consolidated ordinary-income margin compressed by 223bp to 30.3%, as ordinary income growth lagged revenue growth. The banking-segment profit margin also narrowed by about 260bp to 32.0%. Interest income increased 21.7% to ¥20.67bn, led by a 25.3% increase in interest on loans to ¥15.82bn. Interest expense increased more rapidly, by 45.9% to ¥4.77bn, including an 81.6% increase in interest on deposits to ¥3.58bn. The reported annualized ROE was 12.0%, within the good 10-15% range, but it was supported by high balance-sheet leverage of 24.79x. The reported NIM of 0.36% remains structurally low and indicates that deposit-cost repricing is a significant sensitivity as interest rates normalize. FY2027 full-year ordinary-income guidance of ¥36.60bn has already been reached by 29.5% in Q1, and profit attributable to owners guidance of ¥25.00bn has been reached by 29.9%. The early progress is moderately ahead of the 25% seasonal benchmark but not by more than 10 percentage points, leaving management guidance broadly plausible. Comprehensive income declined 46.9% to ¥5.52bn because other comprehensive income was negative ¥1.94bn, despite higher net income. The balance sheet is deposit-funded, with deposits of ¥4,993.80bn funding loans of ¥4,393.09bn and supporting an 88.0% loan-to-deposit ratio. The central forward issue is whether loan-yield improvement can continue to offset higher funding costs while preserving the bank's capital position.
Profitability Analysis
The annualized 12.0% ROE decomposes into a 20.9% net-profit margin, 0.023x asset turnover, and 24.79x financial leverage. For a bank, low asset turnover is inherent to a large financial-asset balance sheet, while the principal driver of the reported ROE is the high leverage embedded in deposit-funded banking operations. The annualized ROA implied by Q1 profit attributable to owners is approximately 0.49%, calculated using annualized Q1 profit of ¥29.88bn and average total assets of approximately ¥6,145.83bn. The 20.9% net margin declined from approximately 23.2% in the prior-year quarter, a compression of roughly 230bp. Ordinary-income margin similarly fell to 30.3% from 32.5%, indicating that the revenue increase was accompanied by cost and funding-cost pressure. Interest on loans rose ¥3.19bn year on year, whereas interest on deposits rose ¥1.61bn; deposit pricing therefore absorbed a meaningful portion of the benefit from asset repricing. General and administrative expenses increased 6.9% to ¥9.75bn, substantially below the 31.4% growth in ordinary revenue, demonstrating positive operating leverage in the cost base. However, other ordinary expenses increased from ¥3.15bn to ¥7.38bn, contributing to the margin dilution. The tax burden was 69.1%, corresponding to a 31.0% effective tax rate, and the interest burden was 1.00x under the supplied five-factor framework. The banking segment is the core business, accounting for approximately 98.0% of consolidated segment profit before eliminations. Its margin of about 32.0% exceeded the other segment's approximately 7.0%, although both declined year on year. The earnings profile remains primarily dependent on banking spread management rather than the smaller fee, leasing, guarantee, card, staffing, and IT-related activities included in the other segment.
Growth Assessment
Top-line momentum was strong, with consolidated ordinary revenue increasing ¥8.53bn year on year. Banking revenue accounted for ¥8.49bn of this increase, confirming that growth was overwhelmingly generated by the core bank. Interest income grew ¥3.69bn to ¥20.67bn, fees and commissions income rose ¥0.39bn to ¥5.09bn, and other ordinary income increased ¥1.12bn to ¥3.77bn. Loan balances increased 1.2% year on year to ¥4,393.09bn, while deposits increased 3.5% to ¥4,993.80bn. The moderate growth in loans relative to the larger increase in interest on loans suggests that asset-yield improvement was an important contributor to revenue growth. The other segment's revenue was essentially flat, and its profit fell from ¥0.36bn to ¥0.20bn, limiting diversification benefits. Q1 ordinary income represents 29.5% of the full-year forecast, 4.5 percentage points above the standard 25% Q1 progress rate. Q1 profit attributable to owners represents 29.9% of full-year guidance, 4.9 percentage points above the standard seasonal benchmark. These progress rates support the attainability of unrevised guidance, although margin performance through subsequent deposit-rate resets will be important. The absence of impairment loss in the current quarter also compares favorably with the ¥0.57bn fixed-asset impairment recognized in the prior-year period. The current quarter nevertheless included a small ¥0.04bn extraordinary loss on disposal of fixed assets, which was immaterial to the earnings trajectory.
Financial Health
Total assets increased ¥53.83bn year on year to ¥6,172.76bn. Deposits are the primary funding source at ¥4,993.80bn, equivalent to about 80.9% of total assets. Loans totaled ¥4,393.09bn, producing an 88.0% loan-to-deposit ratio that is within the 70-90% banking benchmark range. Cash and due from banks were ¥842.30bn, providing a substantial liquidity buffer equal to approximately 17% of deposits. Securities stood at ¥784.87bn, or approximately 12.7% of total assets, and provide an additional liquid-asset pool, subject to market-value sensitivity. Borrowed money declined ¥52.91bn year on year to ¥674.08bn, reducing reliance on this funding source. The reported debt-to-equity ratio was 23.79x, above the conventional 2.0x warning threshold; for a deposit-taking bank, this largely reflects the inclusion of deposits and other funding liabilities rather than corporate-style financial leverage alone. Nevertheless, the high leverage means that modest changes in asset values, credit costs, or funding margins can have a disproportionate effect on shareholders' equity. Reported total equity was ¥248.99bn, only 4.0% of total assets, while accumulated other comprehensive income was negative ¥22.54bn. The supplied capital adequacy ratio was 4.0%, below the 8% Basel III reference minimum and therefore requires close scrutiny as a capital-buffer risk. This capital-adequacy reading is material because dividend capacity, loan growth and loss-absorption capacity depend on regulatory capital preservation. Valuation differences on securities were negative ¥29.14bn, underscoring interest-rate and market-value sensitivity within the securities portfolio. Intangible assets were only 0.1% of total assets, limiting balance-sheet dependence on intangible asset values.
Notable B/S Changes
Deposits: +¥168.72bn (+3.5%) to ¥4,993.80bn - deposit growth strengthened the core funding base. Borrowed money: -¥52.91bn (-7.3%) to ¥674.08bn - reduced reliance on borrowed funding. Securities: -¥103.57bn (-1.3%) to ¥784.87bn - a sizeable portfolio reduction in absolute terms; securities valuation movements remain relevant to equity. Payables under securities lending: -¥58.44bn (-50.2%) to ¥58.01bn - significant reduction in securities-financing liabilities. Accumulated other comprehensive income: -¥1.94bn to negative ¥22.54bn - market-value movements, notably in securities, continue to weigh on equity.
Cash Flow Quality
Profit attributable to owners was supported by core ordinary income of ¥10.81bn rather than extraordinary gains. Profit before tax of ¥10.80bn was nearly identical to ordinary income, as the only reported extraordinary loss was ¥0.04bn. This indicates that Q1 accounting earnings were predominantly recurring in composition. The effective tax rate was 31.0%, consistent with the supplied tax-burden factor of 69.1%. The decline in comprehensive income to ¥5.52bn from ¥10.40bn was attributable to negative other comprehensive income of ¥1.94bn, including a deterioration in securities valuation effects. Accordingly, profit attributable to owners increased while total comprehensive income declined, highlighting that reported earnings and changes in economic book value diverged during the quarter. For a bank, the securities valuation movement is relevant to capital resilience and balance-sheet flexibility even when it does not immediately flow through ordinary income.
Dividend Sustainability
The bank's ability to sustain shareholder distributions is supported by Q1 profit attributable to owners of ¥7.47bn and retained earnings of ¥192.31bn. Full-year profit attributable to owners guidance is ¥25.00bn, and Q1 progress of 29.9% indicates an earnings buffer relative to the normal 25% first-quarter run rate. The stated FY2027 forecast includes an expected three-for-one stock split effective 1 October 2026; on a pre-split basis, the indicated annual dividend is ¥156 per share. Distribution capacity should be assessed in conjunction with the reported 4.0% capital adequacy ratio, which is below the stated 8% regulatory reference point. The negative ¥22.54bn accumulated other comprehensive income balance and negative securities valuation differences also make preservation of tangible capital relevant. Consequently, future distribution capacity is more sensitive to regulatory-capital and securities-valuation developments than current-period net profit alone.
Risk Assessment
Business risks include Net interest margin risk: the reported NIM is 0.36%, materially below the 1.5% warning threshold. Interest on deposits rose 81.6% year on year, substantially faster than the 25.3% rise in interest on loans, demonstrating funding-cost pressure. Further deposit-rate repricing could compress spreads and slow ordinary-profit growth., Regional banking and credit-cycle risk: Kiyo Bank's core earnings depend on the performance of its domestic loan portfolio. A downturn among regional corporate and household borrowers could increase provisions and reduce loan demand., Securities-market and interest-rate risk: securities totaled ¥784.87bn and valuation differences on securities were negative ¥29.14bn. Rate increases or adverse market moves could further pressure other comprehensive income and equity., Non-bank diversification risk: the other segment's profit declined 45.7% year on year despite broadly stable revenue, indicating weaker earnings conversion in leasing, guarantee, credit-card, IT, staffing and related operations..
Financial risks include HIGH_LEVERAGE alert: reported D/E was 23.79x, far above the 2.0x corporate-sector alert threshold. Deposit-funded leverage is normal in banking, but the level increases equity sensitivity to credit losses, securities valuation changes and funding-cost shocks. This elevates the importance of capital management in the investment case., Capital adequacy risk: the supplied capital adequacy ratio was 4.0%, below the 8% Basel III reference minimum. A low capital buffer could constrain balance-sheet expansion, shareholder distributions and loss-absorption capacity., Comprehensive-income volatility: comprehensive income fell 46.9% year on year to ¥5.52bn despite the 18.5% rise in profit attributable to owners. The difference reflects negative other comprehensive income and signals market-value pressure outside the income statement., Funding-margin risk: deposits rose 3.5% to ¥4,993.80bn and the loan-to-deposit ratio was a healthy 88.0%, but higher deposit costs may continue to challenge profitability as the interest-rate environment evolves..
Key concerns include Highest priority: preserving or rebuilding capital buffers while maintaining loan growth and shareholder distributions., High priority: ensuring that loan-yield repricing continues to exceed deposit-cost increases, given the 0.36% reported NIM., Medium priority: containing securities valuation losses and their impact on accumulated other comprehensive income., Medium priority: restoring profit growth in the other segment, where segment profit fell to ¥0.20bn..
Investment Implications
Key takeaways include Q1 core earnings were strong, with ordinary income up 22.4% and profit attributable to owners up 18.5% year on year., The banking business generated virtually all incremental revenue and remains the decisive earnings driver., Revenue growth exceeded profit growth, resulting in approximately 223bp ordinary-margin compression., Cost discipline was favorable, as general and administrative expenses rose only 6.9% against 31.4% revenue growth., The annualized 12.0% ROE is solid, but it is achieved with 24.79x financial leverage and therefore must be assessed alongside capital adequacy., Full-year guidance appears achievable based on 29.5% ordinary-income and 29.9% net-income progress in Q1..
Metrics to watch include Net interest margin and the relative repricing of loan yields and deposit rates, Interest on loans versus interest on deposits, Capital adequacy ratio and accumulated other comprehensive income, Securities valuation differences and the size/composition of the securities portfolio, Loan growth, deposit growth and the loan-to-deposit ratio, Credit costs, allowance movements and asset-quality indicators, Other-segment profit recovery, Progress against full-year ordinary-income guidance of ¥36.60bn and profit attributable to owners guidance of ¥25.00bn.
Regarding relative positioning, Kiyo Bank combines a healthy 88.0% loan-to-deposit ratio, strong Q1 profit growth and an annualized 12.0% ROE with a structurally low 0.36% reported NIM and elevated balance-sheet leverage. Its relative earnings positioning will depend primarily on whether asset repricing remains ahead of deposit-cost inflation and whether capital metrics strengthen.