| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥778.6B | ¥597.5B | +30.3% |
| Operating Income | - | - | - |
| Ordinary Income | ¥320.0B | ¥201.1B | +59.1% |
| Net Income | ¥236.8B | ¥142.5B | +66.2% |
| ROE | 3.1% | 1.9% | - |
For Q1 of the fiscal year ending March 2027, Hokuhoku Financial Group delivered higher revenue and earnings, with a substantial earnings growth rate, driven by the combination of expanding core revenue attributable to rising interest rates and improved cost efficiency. Revenue (ordinary revenue) was ¥778.6B (+30.3% YoY), Ordinary Income was ¥320.0B (+59.1%), and net income attributable to owners of the parent was ¥235.8B (+65.9%). While net interest income expanded to ¥394.8B (+26.2%), operating expenses remained at ¥221.1B, resulting in operating leverage. In addition, a gain on negative goodwill of ¥27.3B arising from the acquisition of an equity-method affiliate temporarily boosted earnings.
【Revenue】Revenue (ordinary revenue) increased 30.3% YoY to ¥778.6B. The primary driver was an increase in net interest income (+26.2% to ¥394.8B) resulting from improved lending and securities yields. Net fee and commission income was ¥67.4B, remaining broadly flat compared with ¥68.9B in the same period of the previous year. By segment, Hokuriku Bank recorded ¥423.6B (+26.2%; 56.3% of total segment revenue), while Hokkaido Bank recorded ¥264.0B (+25.5%; 35.1%), with both banks contributing comparably to revenue growth. Other businesses, including securities, leasing, and credit cards, recorded ¥64.7B (+16.8%).
【Earnings】Ordinary Income was ¥320.0B (+59.1% YoY), while net income attributable to owners of the parent was ¥235.8B (+65.9%), substantially exceeding the 30.3% growth in revenue. The primary reason for the earnings increase was the emergence of operating leverage, as the increase in operating expenses was limited relative to the growth in net interest income. In addition, a gain on negative goodwill of ¥27.3B arising from Hokuriku Bank’s subsidiary acquiring shares in Hokuriku Computer Service Co., Ltd. and included in equity-method investment income boosted earnings through adjustments. Extraordinary losses were immaterial at ¥0.2B, and there was virtually no divergence between Ordinary Income and profit before tax (¥319.8B). In conclusion, the results represented higher revenue and earnings driven primarily by core revenue growth and improved cost efficiency.
The reporting segments consist of Hokuriku Bank and Hokkaido Bank, together with other businesses, including securities, consulting, leasing, and credit card operations. Hokuriku Bank, the Group’s largest source of revenue, recorded external ordinary revenue of ¥423.6B (¥335.5B in the previous year; +26.2%) and segment profit of ¥135.6B (¥93.0B in the previous year; +45.8%), accounting for 56.3% of total segment revenue. Hokkaido Bank recorded external ordinary revenue of ¥264.0B (¥210.4B in the previous year; +25.5%) and segment profit of ¥67.9B (¥47.5B in the previous year; +43.1%), representing 35.1% of total segment revenue. Other businesses recorded external ordinary revenue of ¥64.7B (+16.8%), representing 8.6%. Both banks benefited from wider interest margins as the interest-rate environment improved. The fact that the profit growth rate exceeded the revenue growth rate suggests that cost efficiency has improved across both banks.
【Profitability】The net profit margin, based on net income attributable to owners of the parent, expanded to 30.3% from 23.8% in the previous year, supported by improvements in the expense structure. The expense ratio, an approximate measure of banking-sector cost efficiency calculated as general and administrative expenses divided by business gross profit equivalent, improved to approximately 47.7% from 56.2% in the previous year. The restraint in operating expense growth was the primary driver of earnings growth.【Earnings Quality】The divergence between Ordinary Income and profit before tax (¥319.8B) was small, and extraordinary items were immaterial, consisting only of extraordinary losses of ¥0.2B. Accordingly, most earnings consisted of recurring revenue from the core business. However, the gain on negative goodwill of ¥27.3B included in equity-method investment income was a one-time factor that should be noted.【Investment Efficiency】ROE, based on total net assets at period-end, was 3.1% (equivalent to approximately 2.8% in the previous year), while basic EPS was ¥196.28 (¥116.30 in the previous year; +68.8%).【Financial Soundness】The equity ratio, calculated as net assets divided by total assets, edged up to 4.4% from 4.3% in the previous year. The deposit-to-loan ratio was 73.3% compared with 74.4% in the previous year, indicating that the Group maintained a stable funding structure with deposits exceeding loans.
As a cash flow statement has not been disclosed, funding trends are analyzed based on changes in key balance-sheet accounts. Deposits increased steadily to ¥14T 5,628B (¥14T 3,711B in the previous year; +1.3%), while loans remained broadly flat at ¥10T 6,700B (¥10T 6,975B in the previous year; -0.3%). On the funding side, negotiable certificates of deposit increased to ¥241.8B (¥107.3B in the previous year; +125.5%), and call money increased to ¥92.3B (¥32.0B in the previous year; +188.5%), indicating greater reliance on short-term market funding. Meanwhile, borrowings declined to ¥958.3B (¥1T 1,206B in the previous year; -14.5%), suggesting that part of the funding mix shifted toward short-term market-based funding. Cash and due from banks increased to ¥3T 8,559B (¥3T 5,588B in the previous year; +8.3%), further strengthening liquidity. This change in the funding structure suggests that sensitivity to funding costs may increase going forward in response to the interest-rate environment.
Most of current-period earnings consisted of recurring factors, namely the increase in net interest income and improved cost efficiency. Extraordinary items were immaterial, consisting only of extraordinary losses of ¥0.2B, and there was virtually no divergence between Ordinary Income (¥320.0B) and profit before tax (¥319.8B). On the other hand, the gain on negative goodwill of ¥27.3B included in equity-method investment income, arising from Hokuriku Bank’s subsidiary acquiring shares in Hokuriku Computer Service Co., Ltd., was a one-time accounting gain with no expected recurrence from the next fiscal year onward. Comprehensive income was ¥371.6B, including ¥369.9B attributable to owners of the parent, exceeding net income of ¥235.8B. Improvements in valuation differences on available-for-sale securities (+¥94.2B) and deferred hedge gains and losses (+¥46.3B) were the primary contributors. Adjustments related to retirement benefits made a slightly negative contribution of -¥6.7B. Overall, an improved market environment had a positive impact on both net income and other comprehensive income, and the earnings can be viewed as being supported by the core business’s cash-generating capacity rather than being accrual-driven.
The Q1 progress rates against the full-year plan—Ordinary Income of ¥890.0B and net income attributable to owners of the parent of ¥620.0B—were 36.0% for Ordinary Income and 38.0% for net income, substantially exceeding the 25% benchmark based on simple quarterly allocation. Neither the earnings forecast nor the dividend forecast had been revised as of the current quarter. The progress above plan was supported by growth in net interest income and improved cost efficiency, in addition to the contribution from the one-time gain on negative goodwill. Excluding this temporary factor, the progress rate should be evaluated with some discount.
The Company plans a 10-for-1 stock split of its common shares, effective October 1, 2026. As a result, the full-year dividend forecast is not presented as a simple aggregate. Excluding the impact of the stock split, the year-end dividend is ¥75.00, and the total annual dividend is ¥150.00 (the dividend paid in the same period of the previous year was ¥45). Based on an annual dividend of ¥150 and average shares outstanding during the period of 120,139 thousand shares, total dividends are calculated at approximately ¥18.02B, resulting in a payout ratio of approximately 29.1% against the full-year net income forecast of ¥620.0B. There has been no revision to the dividend forecast for the current quarter.
Low net interest margin (NIM): Although net interest income increased 26.2% YoY, the absolute level of the net interest margin is considered to remain low. If deposit rates rise or the competitive environment changes, margins could contract again.
Risk of a reversal in credit costs: The allowance for loan losses declined to ¥47.69B from ¥50.32B in the previous year, and credit costs remained low during the current period. However, depending on economic conditions, reversals in provision expense could place pressure on earnings.
Shorter-term funding mix: While short-term market funding, including negotiable certificates of deposit (+125.5%) and call money (+188.5%), increased, borrowings declined 14.5%. Accordingly, sensitivity to funding costs may increase during periods of rising market interest rates.
The earnings growth rate (+65.9%) substantially exceeded the revenue growth rate (+30.3%), and improved cost efficiency, reflected in the expense ratio improving from 56.2% in the previous year to 47.7% due to restrained operating expense growth, was the key driver of higher profitability. This is a structural characteristic of the current-period results.
Progress against the full-year plan was 36.0% for Ordinary Income and 38.0% for net income, exceeding the standard quarterly progress benchmark of 25%. Both Hokuriku Bank and Hokkaido Bank contributed balanced revenue and earnings growth.
Part of earnings, namely the gain on negative goodwill of ¥27.3B, was a one-time factor arising from the acquisition of an equity-method affiliate. In addition, the planned stock split in October 2026 means that a simple comparison of annual dividends is not possible. These points should be considered when evaluating the financial results.
This report is an automatically generated earnings analysis document created by AI based on XBRL earnings report data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.
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