The San-in Godo Bank (8381) FY2026 FY Earnings Report

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Executive Summary

Revenue and earnings increased, primarily driven by higher revenue in the Banking Business, although the sharp increase in funding costs has placed pressure on net interest margins. Ordinary revenue was ¥1,670.8B (+23.4% YoY), Ordinary Income was ¥323.4B (+21.0%), and Net Income attributable to owners of the parent was ¥227.0B (+21.1%). While growth in loans and expansion of funds investment income drove revenue growth, higher deposit and market funding costs partially offset the increase in earnings.

Factors Affecting Earnings

【Revenue】Ordinary revenue was ¥1,670.8B, representing a 23.4% YoY increase. The Banking Business, which accounted for 87.3% of consolidated revenue, grew to ¥1,457.8B (+24.9%), driven by an increase in interest on loans. The Leasing Business recorded revenue of ¥176.3B (+7.4%), while Other Businesses recorded ¥36.6B (+64.3%); both businesses posted revenue growth, although their contribution to consolidated revenue remains small.

【Profit and Loss】Ordinary Income increased to ¥323.4B (+21.0%), while Net Income rose to ¥227.1B (+21.3%). Segment profit in the Banking Business increased to ¥314.0B (+20.8%), but its profit margin declined to 21.5% from the previous year, as a 139.8% increase in funding costs partially offset revenue growth. Segment profit in the Leasing Business fell sharply to ¥1.0B, down 77.6% YoY, with its profit margin declining to 0.6%. In conclusion, both revenue and earnings increased.

Segment Analysis

The Banking Business remains the core source of consolidated revenue and profit, with Ordinary revenue of ¥1,457.8B (+24.9%) and segment profit of ¥314.0B (+20.8%); growth in the principal business drove overall performance. However, the profit margin declined to 21.5% from approximately 22.3% in the previous year, as higher funding costs pressured profitability. The Leasing Business posted revenue growth to ¥176.3B (+7.4%), but segment profit plunged to ¥1.0B (-77.6%), resulting in a substantial decline in its profit margin to 0.6%. Other Businesses, including the credit card business, recorded revenue of ¥36.6B (+64.3%) and profit of ¥8.6B (+179.9%), representing significant profit growth and a high profit margin of 23.5%; however, these businesses accounted for only 2.2% of consolidated revenue, and their contribution to consolidated profit was limited.

Key Financial Indicators

【Profitability】The Net Income margin was 13.6%, slightly below 13.8% in the previous year, while the Ordinary Income margin also declined to 19.4% from 19.7%. Although funds investment income in the Banking Business increased by 27.6%, funding costs expanded sharply by 139.8%, constraining the improvement in profitability. 【Cash Quality】Operating Cash Flow (OCF) was ¥1,362.8B, equivalent to 6.00 times Net Income of ¥227.1B, indicating strong cash backing; however, it includes bank-specific items such as changes in deposits, loans, and securities, and therefore should not be interpreted in the same manner as the free cash flow of a non-financial company. Comprehensive Income was ¥193.3B, below Net Income, primarily due to deterioration in the valuation difference on securities. 【Investment Efficiency】ROE improved to 7.1% from 5.8% in the previous year, but remains below the 8% benchmark generally used for comparison with non-financial companies. Total asset turnover is extremely low, reflecting the characteristics of the banking business. 【Financial Soundness】The Equity Ratio was 3.6%, broadly unchanged from 3.6% in the previous year. The loan-to-deposit ratio was approximately 84.5%, within the 70–90% range generally used as a benchmark for the banking industry, indicating that the deposit base continues to provide a stable funding structure exceeding loans.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥1,362.8B, equivalent to 6.00 times Net Income of ¥227.1B, indicating strong cash generation. However, bank OCF includes changes in funding and investment activities involving deposits, loans, and securities, among other items; therefore, it differs in nature from the cash-generation capacity of a non-financial company. Investing Cash Flow was positive at ¥2,833.5B, apparently reflecting changes in the composition of funds investment, including a reduction in securities (-13.6% YoY). Capital expenditures amounted to ¥83.1B, approximately 2.9 times depreciation expense of ¥28.6B, representing a substantial increase from ¥27.9B in the previous year and suggesting increased investment in systems and the branch network. Financing Cash Flow was negative at ¥94.4B, primarily due to dividend payments and ¥20.0B in share repurchases. As a result, cash and cash equivalents increased by ¥4,101.8B, bringing the period-end balance to ¥1兆6,302.1B and expanding liquidity.

Quality of Earnings

The increases in Ordinary Income and Net Income were primarily driven by recurring factors, namely higher interest on loans and funds investment income in the Banking Business, while the impact of extraordinary gains and losses was limited. Extraordinary income of ¥3.0B and extraordinary losses of ¥2.9B, including impairment losses of ¥2.8B, were both small, and their impact on full-year earnings was immaterial. Meanwhile, funding costs surged by 139.8% YoY, making pressure on net interest margins (NIM) a structural issue that could determine the sustainability of earnings from a quality-of-earnings perspective. Comprehensive Income of ¥193.3B was below Net Income of ¥227.1B, primarily because the valuation difference on securities deteriorated significantly by ¥272.3B. This divergence was caused by market factors, namely fluctuations in the fair value of securities held, and does not indicate a deterioration in recurring earning power itself; however, it requires monitoring as an indicator of sensitivity to interest rate and market fluctuations.

Earnings Outlook and Guidance

Progress against company forecasts was 84.6% for Ordinary revenue, 86.2% for Ordinary Income, and 89.0% for Net Income, all exceeding the 75% benchmark at the three-quarter mark and indicating steady progress. To achieve the full-year forecasts, approximately ¥51.7B in additional Ordinary Income and ¥23.0B in additional Net Income will be required during the remaining period. The annual dividend forecast is ¥68, implying an ¥8 increase from the current-period actual dividend of ¥60.

Shareholder Returns

The annual dividend totaled ¥60, comprising an interim dividend of ¥28 and a year-end dividend of ¥32, representing an increase from the previous year’s level. The Net Income-based Payout Ratio was 39.9%, a reasonable level in terms of dividend sustainability. Share repurchases of ¥20.0B were conducted, and the Total Return Ratio, including dividends and share repurchases, is estimated at approximately 50%. The company forecasts an increase in the annual dividend to ¥68, implying a forecast Payout Ratio of approximately 40.1% against forecast EPS of ¥169.67, suggesting a return policy broadly in line with the current level.

Risk Factors

1. Decline in net interest margin: While funds investment income increased by 27.6%, funding costs expanded sharply by 139.8%. If increases in deposit and market funding costs exceed the pass-through of costs into loan interest rates, net interest margins may come under further pressure.

2. Concentration of revenue sources: The Banking Business accounts for 87.3% of consolidated Ordinary revenue, creating a structure in which fluctuations in the regional economy and loan demand can readily affect consolidated performance.

3. Fluctuations in the valuation difference on securities: Other Comprehensive Income was negative, and the valuation difference on securities deteriorated by ¥272.3B. Net assets are highly sensitive to fluctuations in interest rates, bond prices, and equity markets.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Net Income margin is slightly above the industry median.

Growth and Capital Efficiency

The Revenue growth rate is substantially above the industry median and represents a high growth rate within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Ordinary Income and Net Income both increased by approximately 21% YoY; however, NIM declined due to a 139.8% increase in funding costs, making the balance between volume expansion and net interest margins a key focus going forward.

2. Segment profit in the Leasing Business declined sharply by 77.6% YoY, and it will be necessary to determine whether this reflects a one-off factor or a change in the profitability structure.

3. Progress against company forecasts was solid, at 86.2% for Ordinary Income and 89.0% for Net Income, while the annual dividend is scheduled to increase from ¥60 to ¥68.

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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. The 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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