The San-in Godo Bank (8381) FY2027 Q1 Earnings Report

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Executive Summary

In Q1 FY2026, income increased significantly, driven by the expansion of funds investment income. Ordinary revenue was ¥523.6B (+44.3% YoY), ordinary income was ¥91.1B (+117.7%), and net income attributable to owners of the parent was ¥63.4B (+96.6%). The primary drivers of the increase in profit were higher interest on loans and interest and dividends on securities. Selling, general and administrative expenses increased by only +4.8%, well below revenue growth, resulting in the emergence of operating leverage. Meanwhile, funding costs, including interest on deposits, also increased by +65.2%, warranting close monitoring of the sustainability of the interest margin.

Factors Affecting Performance

【Revenue】Ordinary revenue increased to ¥523.6B, up +44.3% YoY. Ordinary revenue from external customers in the Banking segment was ¥470.2B (+49.1%), accounting for the majority of consolidated revenue growth. The leasing business generated ¥46.3B (+10.4%), while other businesses generated ¥7.1B (+31.5%). Interest income expanded to ¥403.98B (+55.2%), including ¥227.4B (+25.7%) in interest on loans and ¥141.9B (+138.8%) in interest and dividends on securities, both of which posted significant growth.

【Profit and Loss】Ordinary income increased to ¥91.1B, up +117.7% YoY, and the ordinary income margin improved by approximately 5.9pt to 17.4%, from 11.5% in the same period last year. Banking segment profit was ¥92.7B (+119.4%), driving almost all of the consolidated increase in profit, while the leasing business remained in the red, recording a segment loss of ¥0.5B, although this narrowed from a ¥0.7B loss in the same period last year. Funding costs increased to ¥135.3B (+65.2%), with interest on deposits rising to ¥81.8B (+55.6%), close to the growth rate of interest income. Accordingly, expansion of the investment and funding spread appears limited. The impact of extraordinary gains and losses was minor, consisting of an extraordinary gain of ¥0.3B and an extraordinary loss of ¥0.1B, indicating that the increase in profit occurred at the ordinary income level. Overall, the Company achieved both revenue growth and profit growth.

Segment Analysis

The Banking business generated ordinary revenue of ¥470.2B (+49.1% YoY) and segment profit of ¥92.7B (+119.4%), with a profit margin of 19.7%, making it the primary contributor to consolidated earnings growth. The leasing business generated ordinary revenue of ¥46.3B (+10.4%) but recorded a segment loss of ¥0.5B, compared with a ¥0.7B loss in the same period last year, meaning that losses continued despite revenue growth. Other businesses, including the credit card business, recorded ordinary revenue of ¥7.1B (+31.5%) and profit of ¥0.3B (-57.8%), resulting in higher revenue but lower profit. The Banking business recorded an impairment loss on fixed assets of ¥0.05B, compared with ¥0.12B in the same period last year.

Key Financial Indicators

【Profitability】The ordinary income margin was 17.4%, improving by approximately 5.9pt from 11.5% in the same period last year, while the net profit margin improved by approximately 3.2pt to 12.1%, from 8.9%. Annualized ROE was 7.8%, reflecting the improvement in profitability but remaining below the commonly cited 10% benchmark. 【Cash Flow Quality】The net contribution from extraordinary gains and losses was small at ¥0.18B, and the increase in profit for the period was primarily attributable to the expansion of funds investment income at the ordinary income level. 【Investment Efficiency】Total assets were ¥8.84733T, down -2.1% YoY, while loans were ¥5.42051T, down -0.8%, indicating a slight contraction in asset size. The increase in profit was driven not by asset growth but by improved yields. 【Financial Soundness】The equity ratio was 3.7%, and net assets were ¥324.79B (+1.9% YoY), reflecting the highly leveraged structure characteristic of the banking business, in which deposits constitute the principal liabilities. Valuation and translation adjustments were negative ¥601.1B, equivalent to approximately 18.5% of net assets, highlighting the high sensitivity of capital to changes in the valuation of securities.

Cash Flow Analysis

As cash flow statement results have not been disclosed, funding trends are analyzed based on changes in the balance sheet. Total assets were ¥8.84733T, down 2.1% YoY; securities were ¥1.58547T, down 6.9%; and loans were ¥5.42051T, down 0.8%. On the liabilities side, call money declined to ¥756.66B (-14.1%) and negotiable certificates of deposit declined to ¥331.00B (-16.6%), indicating a reduction in market-based funding. Meanwhile, deposits remained nearly flat at ¥6.44622T (-0.03%), maintaining a stable funding base. The Company achieved profit growth through improved investment yields amid contractions in both assets and funding, demonstrating revenue growth that does not depend on expansion of asset size.

Quality of Earnings

The increase in profit for the period was primarily attributable to the expansion of funds investment income at the ordinary income level. The net contribution from an extraordinary gain of ¥0.3B and an extraordinary loss of ¥0.1B was only ¥0.18B, indicating limited reliance on temporary factors. Interest income increased by +¥143.8B YoY, but funding costs also increased by +¥53.4B. As the 55.6% increase in interest on deposits was nearly equal to the 55.2% increase in interest income, sustained expansion of the investment and funding spread is difficult to confirm at this stage. SG&A expenses remained limited to ¥109.95B (+4.8% YoY), well below the +44.3% growth in ordinary revenue, supporting the quality of the increase in profit. The tax burden coefficient was 0.694, and the effective tax rate was approximately 30.6%, indicating that the increase in pretax income was reflected substantially in net income.

Earnings Forecast and Guidance

Progress against the full-year forecast was 26.5% for ordinary revenue, 24.3% for ordinary income, and 24.8% for net income attributable to owners of the parent, all within the standard range of approximately 25% progress. Ordinary income in Q1 increased by +117.7%, substantially exceeding the full-year ordinary income forecast of ¥375.0B (+15.9% YoY), indicating a pace well above the full-year assumptions. However, given the Company’s reliance on revenue sources with significant quarterly volatility, such as interest and dividends on securities, a simple upward revision assessment should be deferred. There were no revisions to either the earnings forecast or the dividend forecast.

Shareholder Returns

The Company’s forecast annual dividend is ¥68.00 per share. Based on the full-year EPS forecast of ¥169.67, the forecast payout ratio is approximately 40.1%. This payout ratio is calculated by dividing dividends only by net income attributable to owners of the parent and does not represent the total return ratio, which includes share repurchases. Q1 EPS was ¥42.20, representing progress of 24.9% against the full-year EPS forecast, a standard level. Treasury stock increased to ¥86.9B from ¥74.1B in the same period last year. However, the acquisition amount and timing cannot be identified solely from changes in the balance sheet, and therefore the total return ratio has not been calculated.

Risk Factors

1. Risk of pressure on the interest margin (NIM): Interest on deposits increased by +55.6% YoY, almost matching the +55.2% growth in interest income. Going forward, if the rise in deposit interest rates exceeds the pace of improvement in investment yields, expansion of the ordinary income margin may slow.

2. Volatility risk in securities investment income: Interest and dividends on securities increased significantly by +138.8% YoY, while the balance of securities itself declined by -6.9% YoY. Valuation and translation adjustments were negative ¥601.1B, equivalent to approximately 18.5% of net assets, and the impact of market price fluctuations on the capital buffer must be monitored continuously.

3. Decline in loan balances: Loans declined by -0.8% YoY to ¥5.42051T. While improved investment yields drove the increase in profit, continued stagnation in asset growth could constrain medium- to long-term earnings growth.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (bank)

Profitability and Returns

Growth and Capital Efficiency

※Source: Company compilation

Key Takeaways from the Earnings Results

1. A key feature of the current period’s results was the improvement in the ordinary income margin to 17.4%, or approximately 5.9pt, as operating leverage emerged due to SG&A expense growth (+4.8%) falling substantially below revenue growth (+44.3%).

2. Progress against the full-year forecast was generally around 25%, consistent with the Company’s plan. However, the pace of profit growth (+117.7%) substantially exceeded the full-year assumption (+15.9%), making the Company’s reliance on highly volatile revenue sources, such as interest and dividends on securities, an important area for future monitoring.

3. The growth rate of interest on deposits (+55.6%) was close to the growth rate of interest income (+55.2%), indicating limited room for expansion of the investment and funding spread. This will be an important point to monitor when assessing future trends in profit margins.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest 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 responsibility, and you should consult a professional advisor as necessary.

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