| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥1670.8B | ¥1353.1B | +23.4% |
| Operating Income | - | - | - |
| Ordinary Income | ¥323.4B | ¥267.2B | +21.0% |
| Net Income | ¥221.1B | ¥182.2B | +21.3% |
| ROE | 6.9% | 5.8% | - |
The fiscal year ending March 2026 closed with Revenue of ¥1670.8B (YoY +¥317.6B +23.4%), Ordinary Income of ¥323.4B (YoY +¥56.2B +21.0%), and Net Income of ¥221.1B (YoY +¥38.9B +21.3%), reflecting higher revenue and profit. The main drivers were improved loan yields in a rising interest rate environment and expanded loan balances (+7.2%), resulting in a large increase in investment-related income to ¥1180.6B (+25.5%). Funding costs also surged to ¥388.1B (+139.8%), compressing NIM to 1.45%, but volume expansion secured net interest income. Fee income remained firm at ¥192.5B (+1.7%), and the expense ratio is estimated in the 58% range, indicating solid cost control. Operating margin was 19.4% (down 0.4pt from 19.8% a year earlier) and net margin was 13.2% (down 0.3pt from 13.5%), both remaining at high levels.
[Revenue] Ordinary revenues rose sharply to ¥1670.8B (YoY +23.4%). The breakdown shows investment-related income of ¥1180.6B (+25.5%) leading the increase, with interest on loans of ¥773.7B (+¥15.6B +25.3%) and interest/dividends on securities of ¥319.5B (+¥66.3B +26.2%) benefiting from higher rates. Fee income was modestly up at ¥192.5B (+1.7%), while net fee and commission income declined by ¥58.1B to ¥134.4B. Other ordinary income increased to ¥196.6B (YoY +14.2%). Funding costs jumped to ¥388.1B (from ¥161.8B prior year, +139.8%), with deposit interest expanding to ¥240.3B (3.6x the prior year ¥66.2B), pressuring net interest margin, though volume gains compensated. By segment, Banking accounted for ¥1457.8B (+24.9%) or 87.3% of the total, Leasing ¥176.3B (+7.4%), and Others ¥36.6B (+64.3%).
[Profit and Loss] Ordinary expenses increased to ¥1347.4B (from ¥1085.9B prior year, +24.1%), but revenue growth outpaced this, delivering operating leverage. SG&A was controlled at ¥422.6B (from ¥409.3B prior year, +3.3%), and the expense ratio (estimated) remained around 58%, below 60%. The sharp rise in funding costs (+¥226.3B) and other ordinary expenses of ¥398.1B (from ¥325.0B, +22.5%) weighed on margins, but top-line growth absorbed the impact. Ordinary Income was ¥323.4B (+21.0%); profit before tax was ¥323.5B (+22.9%); after deducting corporate taxes of ¥96.4B (effective tax rate 29.8%), Net Income attributable to owners of the parent was ¥226.9B (+21.3%). Extraordinary items were minor: Extraordinary gains ¥3.0B (gain on disposal of fixed assets) and Extraordinary losses ¥2.9B (including impairment losses of ¥2.8B). In conclusion, results were driven by interest rate increases and loan growth, delivering higher revenues and profits.
The Banking segment posted Revenue of ¥1457.8B (YoY +24.9%) and segment profit of ¥313.9B (+20.8%), maintaining its position as the core business with a segment profit margin of ~21.5%. Leasing recorded Revenue of ¥176.3B (+7.4%) but segment profit fell sharply to ¥1.0B (from ¥4.7B prior year, -77.6%), lowering its margin to 0.6%. The leasing profit decline appears driven by higher funding costs and reduced deal profitability. Others (e.g., credit card business) grew Revenue to ¥36.6B (+64.3%) and segment profit to ¥8.6B (from ¥3.1B prior year, +179.4%), showing increased but still limited contribution. The structure where Banking generates almost all consolidated profits remains, and improving leasing profitability is a key future task.
[Profitability] Operating margin 19.4% (down 0.4pt from 19.8%), Net margin 13.2% (down 0.3pt from 13.5%), both remaining high. ROE 6.9% (up 1.1pt from 5.8%) exceeded historical results but remains below the preferred 10–15% range, indicating room for improvement. ROA (on Ordinary Income basis) was 0.36%, reasonable for a bank. NIM (net interest margin) is estimated at 1.45% (Net interest income ¥792.5B ÷ Average assets ¥9.04T), below the 1.5% benchmark and low. [Cash Quality] Operating Cash Flow was ¥1362.8B, 6.2x Net Income; OCF/EBITDA ratio was 3.9x, indicating very high quality, and the accrual ratio was -1.3% ((Operating CF subtotal ¥1466.0B - Net Income ¥221.1B)/Total assets), showing strong cash generation. [Investment Efficiency] Capital expenditures ¥83.1B were 2.9x depreciation of ¥28.6B, reflecting proactive system investment. Free Cash Flow was ¥4196.2B, ample to fully cover dividends and buybacks. [Financial Soundness] Equity Ratio 3.6% (flat from prior year 3.6%) reflects the high-leverage structure of banking; debt-to-equity multiple was 27.1x. LDR (loan-to-deposit ratio) was 84.5% (Loans ¥5.46T ÷ Deposits ¥6.46T), within the optimal 70–90% range, indicating good liquidity. Cash and deposits of ¥1.63T (18.0% of total assets) increased +33.6% YoY, strengthening the liquidity buffer.
Operating Cash Flow was ¥1362.8B (down 84.4% from ¥8718.7B prior year), but the prior year included special factors such as a sharp increase in deposits; the current period represents normalization. Operating CF subtotal (before working capital changes) was ¥1466.0B, 6.6x Net Income ¥221.1B, showing high quality; corporate tax payments were ¥103.2B and changes included decreases in allowance for doubtful accounts and depreciation of ¥28.6B. Investing cash flow was positive ¥2833.5B, as securities sales/redemptions exceeded purchases and duration adjustments were made as part of interest rate risk management. Capex was ¥83.1B for continued system and branch investment. Financing cash flow was -¥94.4B, with dividends of ¥79.4B (payout ratio 39.0%) and share buybacks of ¥20.0B executed, reflecting steady shareholder returns. Free Cash Flow ¥4196.2B (Operating CF + Investing CF) covers total shareholder returns of ¥99.4B by more than 42x, demonstrating ample liquidity. Cash and cash equivalents rose to ¥1630.2B (YoY +¥4101.8B), making liquidity extremely robust.
Ordinary Income of ¥323.4B was primarily composed of net interest income ¥792.5B (investment-related income minus funding costs) and net fee income ¥134.4B, indicating healthy core banking profitability. Extraordinary items were minimal: Extraordinary gains ¥3.0B (gain on disposal of fixed assets) and Extraordinary losses ¥2.9B (including impairment losses ¥2.8B). In non-operating items (other ordinary activities), other ordinary income ¥196.6B was outweighed by other ordinary expenses ¥398.1B, creating a net expense position and showing that ALM-related results and bond valuation gains/losses drive volatility in profitability. Accrual quality is very strong: Operating CF subtotal ¥1466.0B is 6.6x Net Income and the accrual ratio is -1.3%, indicating strong cash backing. The divergence between Ordinary Income and Net Income (-29.8%) is mainly due to tax burden from an effective tax rate of 29.8%, within structural expectations. Comprehensive income of ¥193.3B was below Net Income ¥221.1B, as securities valuation differences of -¥272.3B were partially offset by deferred hedge gains of +¥211.1B; interest rate volatility effects remain, but hedging appears to be functioning.
Full Year guidance projects Revenue ¥1976.0B (vs. current period +18.3%), Ordinary Income ¥375.0B (+15.9%), and Net Income attributable to owners of the parent ¥255.0B (+12.4%), expecting revenue and profit growth. Progress rates against first-half results are high: Revenue 84.5%, Ordinary Income 86.2%, Net Income 89.0%, indicating high probability of achieving guidance. Dividend guidance is ¥34 per share for the year, differing from this period’s ¥60 (interim ¥28 + year-end ¥32), suggesting potential revision of full-year dividend policy including the year-end dividend. With forecast EPS ¥169.67, the payout ratio is 20.0%, conservative and preserving capital policy flexibility. Guidance assumes NIM improvement (via deposit beta suppression and loan yield improvement), continued loan growth, stabilization of other ordinary items, and maintaining an expense ratio in the 58% range.
This period’s full-year dividend was ¥60 per share (interim ¥28, year-end ¥32), with a payout ratio of 39.0%, within the sustainable 30–50% range. The prior year dividend was ¥24 per share with a 39.0% payout ratio, so the dividend amount increased by +150.0%. Full-year guidance assumes ¥34 per share (payout ratio 20.0%), set conservatively with potential upside at year-end. Share buybacks of ¥20.0B were executed, and the total return ratio was 42.0% ((Dividends ¥79.4B + Share buybacks ¥20.0B)/Net Income ¥221.1B). Against Free Cash Flow ¥4196.2B, total returns of ¥99.4B represent only 2.4%, with FCF coverage of 42x, indicating dividend safety is solid. With cash and deposits of ¥1.63T and ongoing cash flow generation, stable dividends and opportunistic buybacks can continue.
NIM compression risk: With NIM at 1.45% and low, if deposit rate increases outpace loan rate increases, margins could shrink further and profitability deteriorate. Deposit interest rose sharply from ¥66.2B to ¥240.3B (3.6x), and if deposit beta continues to rise, NIM could decline to the 1.3–1.4% range. If loan yield improvement on Loans ¥5.46T lags, net interest income could turn down.
Market-side volatility: Other ordinary expenses ¥398.1B (net expense ¥201.5B) fluctuate with ALM-related results and bond valuation gains/losses, affecting margins. Securities valuation difference is -¥991.9B and deferred hedge gains +¥288.2B, so AOCI volatility is large; in rapid interest rate moves valuation losses could pressure Ordinary Income. Securities holdings ¥1.71T (YoY -13.6%) and duration adjustments have progressed, but interest rate sensitivity remains high.
Increased short-term funding dependence: Call money ¥8806.1B (from ¥6632.8B prior year, +32.8%) and short-term liabilities have risen, increasing rollover risk. While cash and deposits ¥1.63T provide a thick liquidity buffer, adverse market conditions could spike funding costs and further raise funding expenses. Although LDR 84.5% is appropriate, a higher share of short-term funding raises liquidity management complexity.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Margin | 13.2% | 11.9% (7.2%–35.4%) | +1.3pt |
Net margin exceeds the regional bank median by 1.3pt, placing profitability favorably within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 23.4% | 10.1% (7.3%–12.1%) | +13.3pt |
Revenue growth of 23.4% greatly outpaced the industry median of 10.1%, driven by expanded investment-related income in the rising rate environment.
※ Source: Company compilation
Results of volume expansion in a rising rate environment: Loans +7.2% and investment-related income +25.5% demonstrate the synergistic effect of rising rates and loan growth. NIM at 1.45% is low, but volume expansion secured net interest income; going forward, suppressing deposit beta and improving loan yields are key to margin expansion. Cost control with an expense ratio in the 58% range and strong cash generation (Operating CF/Net Income 6.2x) underpin a solid earnings base.
Sustainability of shareholder returns and room for capital policy: With a payout ratio of 39.0% and ¥20.0B of share buybacks, FCF coverage is 42x, indicating dividend safety is robust. Given the cash buffer of ¥1.63T and ongoing cash flow generation, stable dividends and flexible buybacks remain possible. The full-year dividend guidance of ¥34 (payout ratio 20.0%) is conservative, leaving upside at year-end. ROE 6.9% (up from 5.8%) has room to improve toward the 10% range, making capital efficiency enhancement the next stage.
Declining profitability in the leasing business and structural issues: Leasing segment profit fell from ¥4.7B to ¥1.0B (-77.6%), with margin down to 0.6%. The decline appears driven by higher funding costs and weaker deal profitability, further concentrating earnings in the Banking segment. Reviving leasing profitability is a task for diversifying the company’s revenue structure.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; please consult a professional as needed before making investment decisions.