| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥201.1B | ¥113.2B | +32.0% |
| Operating Income / Operating Profit | ¥192.6B | ¥105.5B | +82.5% |
| Ordinary Income | ¥807.6B | ¥516.2B | +56.4% |
| Net Income / Net Profit | ¥191.9B | ¥104.9B | +82.9% |
| ROE | 2.6% | 1.6% | - |
For the fiscal year ended March 2026, HOKUHOKU Financial Group achieved significant revenue and profit growth: Revenue ¥201.1B (YoY +¥87.9B +77.7%), Operating Income ¥192.6B (YoY +¥87.1B +82.5%), Ordinary Income ¥807.6B (YoY +¥291.4B +56.4%), and Net Income attributable to owners of the parent ¥191.9B (YoY +¥87.0B +82.9%). Using the banking revenue concept of Ordinary Income (経常収益), total was ¥2,774.7B (+32.0%), driven primarily by improved lending yields and securities yields in a rising interest-rate environment which expanded net interest income. Hokuriku Bank segment recorded Ordinary Income from external customers of ¥1,535.3B (+39.9%) and Hokkaido Bank ¥996.4B (+28.9%), both showing high growth. Operating profit margin improved to 95.8% (prior year 93.2%), with increased funding costs absorbed by expansion of net interest spread.
[Revenue] On an Ordinary Income basis, revenue was ¥2,774.7B (YoY +32.0%), a substantial increase. The largest contributor was investment income within funds management of ¥1,873.8B (+35.9%), led by higher interest on loans ¥1,232.9B (+27.9%) and interest/dividends on securities ¥419.3B (+49.3%). Loan balances expanded to ¥10.70T (¥+2.39T +2.3%), and higher interest rates improved lending yields, driving strong growth in net interest income. Net fee income (fee revenue ¥446.3B − fee expenses ¥172.5B) was ¥273.8B and remained stable; improved yields on securities investment also contributed. By segment, Hokuriku Bank posted external-customer Ordinary Income ¥1,535.3B (+39.9%), Hokkaido Bank ¥996.4B (+28.9%), and Others ¥244.8B (+10.7%), with all segments achieving revenue growth. Funding costs rose substantially to ¥458.3B (prior year ¥252.8B +81.3%) reflecting higher deposit rates, but the increase was absorbed by expansion in net interest spread (improvement in loan–deposit spread).
[Profitability] Operating Income was ¥192.6B (+82.5%) and Ordinary Income ¥807.6B (+56.4%), both showing significant profit growth. Operating profit margin improved to 95.8% (prior 93.2%), with revenue growth outpacing expense increases. SG&A expenses were ¥884.5B (prior ¥861.4B +2.7%), slightly higher but absorbed by revenue growth. The structure of Ordinary Income materially exceeding Operating Income is characteristic of banking accounting; share of profits of equity-method investees decreased to ¥3.5B (prior ¥26.3B), but overall Ordinary Income remained robust. Extraordinary items were minor: extraordinary gains ¥0.4B and extraordinary losses ¥8.6B (including impairment losses ¥3.7B), resulting in Profit Before Tax ¥799.4B (+48.8%). After income taxes of ¥207.7B, Net Income attributable to owners of the parent was ¥191.9B (+82.9%). In conclusion, revenue and profit growth were achieved on the back of improved yields on loans and securities in a rising-rate environment, with expansion of net interest income driving profit growth.
Hokuriku Bank segment delivered external-customer Ordinary Income of ¥1,535.3B (YoY +39.9%) and segment profit ¥385.6B (YoY +59.6%), both with substantial revenue and profit increases. Hokkaido Bank segment posted external-customer Ordinary Income ¥996.4B (YoY +28.9%) and segment profit ¥178.9B (YoY +49.8%), also showing revenue and profit growth. Other segments (securities, leasing, etc.) recorded external-customer Ordinary Income ¥244.8B (YoY +10.7%) and segment profit ¥27.4B (YoY +15.4%). Hokuriku Bank accounted for 55.3% of total Ordinary Income, Hokkaido Bank 35.9%, and Others 8.8%. Combined segment profit of the two banks was ¥564.5B; the difference from Net Income attributable to owners of the parent ¥191.9B (after eliminating adjustments) is due to inter-segment eliminations, non-controlling interests, equity-method investment profits, etc. Hokuriku Bank’s relatively higher profitability benefited from its regional-dominant strategy and improved lending yields.
[Profitability] Operating profit margin 95.8% (prior 93.2% +2.6pt), ROE 8.0% (prior 6.1% +1.9pt) both improved. In banking accounting, net income margin relative to Ordinary Income is important; Net Income attributable to owners of the parent / Ordinary Income is approximately 6.9% on our estimate. Our estimate of Cost-to-Income ratio (SG&A / Ordinary Income) is about 31.9%, indicating good expense efficiency. However, continued increase in funding costs means maintaining net interest spread is key to profitability. [Cash Quality] Operating Cash Flow (OCF) ¥854.8B is 4.5x Net Income ¥191.9B; due to banking operations, deposit increases and funds management fluctuations affect OCF. The OCF / Net Income ratio is high, indicating strong cash-generating capacity. Accrual ratios are low, supporting good cash backing of profits. [Investment Efficiency] ROIC (Operating Income / (Interest-bearing debt + Net Assets)) is approximately 1.7%, low. This reflects the high-leverage structure of banking (D/E ratio 22.16x), with ROE dependent on leverage and the low Equity Ratio of 4.3%. Loan-to-deposit ratio is 74.4% (Loans ¥10.70T / Deposits ¥14.37T), maintaining an appropriate liquidity buffer. [Financial Soundness] Equity Ratio 4.3% (prior 4.0%) improved but cushion relative to regulatory minimum (domestic standard banks 4%) is limited. Net assets increased to ¥7,325.2B (prior ¥6,586.8B +11.2%), aided by improvement in Unrealized Gains on Securities ¥670.8B (prior ¥354.5B). Cash and deposits ¥3.56T provide ample liquidity; call loans ¥183.03B, and securities ¥21.13T (prior ¥23.19T −¥2.06T) with securities being reduced to mitigate interest-rate risk. Allowance for loan losses was −¥50.32B (prior −¥61.70B) as reversals progressed, keeping credit costs low.
Operating Cash Flow was ¥854.8B (prior −¥7,676.8B), a significant improvement. The prior year saw a large negative figure due to swings in funds management and funding activities; in the current period deposit increases ¥4.27T, loan increases ¥2.39T, and securities reduction ¥2.06T contributed to cash flows, resulting in Operating Cash Flow subtotal ¥1,073.6B (prior −¥7,645.7B). After income taxes paid ¥218.8B, OCF remained positive. Investing Cash Flow was ¥3,118.7B (prior −¥5,737.3B) due to sales/redemptions of securities far exceeding capital expenditures ¥13.44B. Financing Cash Flow was −¥406.7B (prior −¥179.3B), driven mainly by dividend payments ¥91.6B and share buybacks ¥315.1B. Free Cash Flow (OCF + Investing CF) was ¥3,973.5B and ample; cash and cash equivalents at period end increased to ¥353.77B (period start ¥318.10B +¥35.67B). Given banking characteristics, classification between OCF and Investing CF varies with funds management and funding activities, but overall cash-generation capability is strong and sufficient to cover dividends and share buybacks.
Composition of Ordinary Income ¥807.6B centers on net interest income (Funds management income ¥1,873.8B − Funding costs ¥458.3B) and net fee income ¥273.8B, indicating a solid recurring revenue base. Extraordinary items were minor: extraordinary gains ¥0.4B and extraordinary losses ¥8.6B; most of Profit Before Tax ¥799.4B derives from recurring interest and fee income. Impairment losses ¥3.7B (prior ¥7.9B) are non-recurring but limited in impact. The structure where OCF ¥854.8B substantially exceeds Net Income ¥191.9B is due to banking accounting where deposit and loan fluctuations are included in OCF, indicating high accrual quality. Comprehensive income ¥1,140.2B (attributable to owners of the parent ¥1,137.5B) exceeded Net Income ¥191.9B, supported by improvements in Unrealized Gains on Securities ¥314.4B (after tax), Deferred Hedge Gains/Losses ¥117.1B, and actuarial adjustments for retirement benefits ¥115.2B. Improvement in securities valuation gains suggests that after an initial phase of bond price declines during rising rates, unrealized gains on equities increased, though these are subject to market and interest-rate volatility risk.
For FY2027 ending March 2027, management plans Ordinary Income ¥890.0B (vs prior +10.2%) and Net Income attributable to owners of the parent ¥620.0B (vs prior +5.2%). EPS forecast ¥522.78, dividend forecast ¥75.00 (Payout Ratio approx. 14.3%). The plan for higher Ordinary Income assumes continued expansion of net interest income in a sustained rising-rate environment, with increases in funding costs absorbed by improved lending yields. Net Income growth lagging Ordinary Income is due to modest rise in tax burden and assumptions on extraordinary items. Progress to forecast from current-period results is 90.8% for Ordinary Income and 31.0% for Net Income, implying profit recognition is expected in the second half. If interest-rate assumptions change, maintaining net interest spread may become difficult, posing downside risk; increases in credit costs or weaker fee income growth are also downside factors. Conversely, tighter cost control and strengthening of fee businesses could provide upside.
Dividends were interim ¥45.00 and year-end ¥65.00 for an annual dividend of ¥110.00 (same as prior year). Payout Ratio was 16.0%, a conservative level, with total dividends ¥91.6B versus Net Income ¥191.9B providing ample coverage. Share buybacks of ¥315.1B (prior ¥93.8B) were executed, bringing total shareholder returns to ¥406.7B and Total Return Ratio to approximately 21.2%. Coverage of dividends and buybacks relative to Free Cash Flow ¥3,973.5B is approximately 9.8x, indicating very high coverage and sustainability of current return policy. Next fiscal year dividend forecast is ¥75.00 (Payout Ratio approx. 14.3%), planning an increase aligned with profit growth. With Equity Ratio 4.3% and limited regulatory buffer, management will continue to balance capital policy with shareholder returns.
Interest-rate reversal risk: Net interest spread depends on the differential between improvements in lending yields and rises in deposit rates; if interest rates reverse or competition intensifies leading to lower lending rates, net interest income could decline sharply. Funding costs rose substantially to ¥458.3B (YoY +81.3%) this period, so deviations from interest-rate assumptions could have material earnings impact.
Capital regulation risk: Equity Ratio 4.3% (prior 4.0%) improved but has limited buffer relative to the domestic minimum standard of 4%. If Risk-Weighted Assets (RWA) increase or securities valuation losses are recognized, Equity Ratio could fall, potentially necessitating additional capital raising or restrictions on shareholder returns. The high-leverage structure (D/E ratio 22.16x) is typical for banks but limits loss-absorption capacity in stress scenarios.
Securities valuation volatility risk: Securities balance remains large at ¥21.13T (YoY −¥2.06T), and in rising-rate environments bond price declines can expand unrealized losses and pressure comprehensive income and equity. Although Unrealized Gains on Securities improved by ¥314.4B this period, market and interest-rate volatility could reverse this, and the increase in Deferred Tax Liabilities ¥344.4B (prior ¥117.8B) also amplifies variability of valuation reserves.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Profit Margin | 95.8% | 14.6% (7.2%–39.4%) | +81.1pt |
| Net Profit Margin | 95.4% | 11.9% (7.2%–35.4%) | +83.5pt |
Operating and net profit margins materially exceed industry medians, but this reflects differences in banking accounting (definition of Ordinary Income and Operating Income) versus non-financial corporates; substantive profitability should be evaluated by Ordinary Income and net interest spread.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 32.0% | 10.1% (7.3%–12.1%) | +21.9pt |
Revenue (Ordinary Income) growth rate materially exceeds industry median, driven by expansion of net interest income amid rising rates.
※ Source: Company compilation
Whether expansion of net interest income in the rising-rate environment can be sustained is the primary focus. This period saw improvement in lending yields outpacing funding-cost increases and expansion of net interest spread, but rate shifts or intensified competition could reverse this. The plan for Ordinary Income +10.2% next fiscal year assumes continued rate dynamics; Bank of Japan policy and the evolution of loan–deposit spreads will be critical to performance.
With Equity Ratio 4.3% and limited buffer against regulatory standards, balancing capital efficiency and shareholder returns is important. This period’s share buybacks of ¥315.1B raised Total Return Ratio to about 21.2%, but continued optimization of RWA and accumulation of retained earnings to raise Equity Ratio while sustaining shareholder returns will be a focus. Improvement in Unrealized Gains on Securities (+¥314.4B) contributed to capital, but rate and market volatility could reverse this, so monitoring comprehensive income and accumulated other comprehensive income is necessary.
This report is a financial analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm from public financial disclosures. Investment decisions are your responsibility; please consult a professional advisor as needed.