The Hyakujushi Bank (8386) FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, revenue and earnings increased against the backdrop of expanded interest income, resulting in strong financial results in which profit growth outpaced revenue growth. Ordinary revenue was ¥1,085.6B (+20.6% year on year), Ordinary Income was ¥291.4B (+46.3%), and Net Income attributable to owners of the parent was ¥188.6B (+37.6%). The primary driver of earnings growth was the expansion of net interest income resulting from increased interest on loans, while the growth in general and administrative expenses remained below revenue growth, also contributing to improved earnings efficiency. For the following fiscal year, the Company expects Ordinary Income of ¥330.0B (+13.3%) and Net Income of ¥210.0B, forecasting continued earnings growth.

Factors Affecting Results

【Revenue】Ordinary revenue increased 20.6% year on year to ¥1,085.6B. Funds investment income grew 21.5% year on year to ¥680.9B, with interest on loans increasing by ¥50.6B year on year to ¥460.8B and driving revenue expansion. By segment, the Banking Business accounted for the majority of revenue, with Ordinary revenue of ¥990.0B (91.2% of total), followed by the Leasing Business at ¥74.7B and Other Businesses at ¥20.9B. Loans increased 5.2% year on year to ¥3,6887.2B, while deposits increased 3.8% to ¥4,7445.7B, maintaining the loan-to-deposit ratio at an appropriate level of 77.8%.

【Profit and Loss】Ordinary Income increased 46.3% year on year to ¥291.4B, expanding at a pace above revenue growth, while the Ordinary Income margin improved to 26.8% from 22.1% in the previous year. Although funding costs also increased by 20.0%, the growth in general and administrative expenses (+6.4%) remained below the growth in Ordinary revenue, bringing operating leverage to the fore. Special gains and losses were limited in scale, with a net loss of ¥4.1B, including impairment losses of ¥2.9B, and Net Income was primarily supported by recurring banking income. Segment profit in the Banking Business was ¥276.9B, with a profit margin of 28.0%, making it the core contributor to Group earnings. Revenue and earnings increased.

Segment Analysis

The reporting segments consist of the Banking Business and the Leasing Business. The Banking Business forms the core of the Group, with Ordinary revenue of ¥990.0B and segment profit of ¥276.9B (profit margin of 28.0%), accounting for 91.2% of Ordinary revenue from external customers. The Leasing Business generated Ordinary revenue of ¥74.7B and segment profit of ¥4.2B (profit margin of 5.6%), making limited contributions in both scale and profitability. Other Businesses, including the Credit Card Business and Credit Guarantee Business, generated Ordinary revenue of ¥20.9B and profit of ¥15.2B, representing a high profit margin of 72.9%, although their scale is small. Revenue is highly concentrated in the Banking Business, creating a structure in which fluctuations in the regional economy, loan demand, and the interest-rate environment directly affect consolidated performance.

Key Financial Indicators

【Profitability】The Ordinary Income margin was 26.8%, improving from 22.1% in the previous year, while the Net Income margin also improved to 17.4% from 15.2%. Net Interest Margin (NIM) was 1.38%, with net interest income of ¥510.1B (+22.1% year on year) serving as the primary source of earnings.【Cash Flow Quality】Operating Cash Flow (OCF) was negative ¥1,400.7B; however, this reflects the bank-specific presentation in which fund movements related to deposits, loans, securities, and other items are included in operating activities. Free Cash Flow (FCF), calculated as the sum of OCF and investing cash flow of ¥1,908.5B, was positive at ¥507.8B. The accrual ratio was low at 2.7%, indicating a limited divergence between accrual-based earnings and cash flows.【Investment Efficiency】ROE was 4.9%, improving from 4.1% in the previous year, but remains low compared with the standards of general operating companies. ROIC was 5.0%.【Financial Soundness】The Equity Ratio was 6.6%, improving from 5.7% in the previous year, while the loan-to-deposit ratio of 77.8% remained within an appropriate range. Against total assets of ¥5,8458.0B, net assets were ¥3,844.3B, an increase of 17.1% year on year.

Cash Flow Analysis

Operating Cash Flow (OCF) was negative ¥1,400.7B, representing negative 7.4 times Net Income of ¥188.6B. However, because banks’ OCF includes fund movements related to deposits, loans, securities, call-market transactions, and other items as an accounting presentation, it is not appropriate to apply the standards for general operating companies without adjustment. Investing cash flow was an inflow of ¥1,908.5B, apparently reflecting factors including a decrease of ¥1,347.5B in the balance of securities year on year. As a result, FCF, calculated as the sum of OCF and investing cash flow, was positive at ¥507.8B. Financing cash flow was negative ¥65.7B, primarily due to share repurchases of ¥11.1B and dividend payments of ¥55.1B. Capital expenditures were ¥25.0B, while depreciation and amortization was ¥31.9B. The capital expenditure-to-depreciation ratio improved to 0.78x from 0.73x in the previous year, although investment remained below depreciation and amortization. Cash and cash equivalents at the end of the period were ¥862.1B, an increase of ¥44.2B year on year.

Earnings Quality

Net Income was primarily supported by recurring banking income. Special gains of ¥0.7B and special losses of ¥4.7B, including impairment losses of ¥2.9B, resulted in a net loss of ¥4.1B. Their impact on Ordinary Income was limited to 1.4%, indicating a limited contribution from non-recurring factors. The increase in Ordinary Income was supported by a business-related factor—the expansion of funds investment income, including a ¥50.6B increase in interest on loans—and earnings quality can therefore be assessed as relatively high. Meanwhile, comprehensive income was ¥627.0B, substantially exceeding Net Income of ¥188.6B. The difference was primarily attributable to a ¥302.2B increase in valuation differences on securities and a ¥136.8B adjustment related to retirement benefits. This divergence largely reflects valuation factors arising from fluctuations in market interest rates and equity markets, which differ in nature from recurring business earnings and should be taken into consideration.

Earnings Forecasts and Guidance

For the following fiscal year, ending March 2027, the Company forecasts Revenue (Ordinary revenue) of ¥1,165.0B, Ordinary Income of ¥330.0B (+13.3% year on year), and Net Income of ¥210.0B (+11.4% year on year). Compared with the current-period Ordinary Income growth rate of +46.3%, the forecast growth rate is expected to decelerate significantly, reflecting a plan that may incorporate the reversal of the substantial improvement in the interest spread recorded during the current period and/or higher funding costs, including rising deposit rates. Forecast EPS is ¥185.69 on a post-stock-split basis.

Shareholder Returns

Annual dividends consist of an interim dividend of ¥108 and a year-end dividend of ¥126, for a total of ¥234. The Payout Ratio against current-period basic EPS of ¥166.07 is approximately 141%, exceeding current-period Net Income. Including share repurchases of ¥11.1B, the Total Return Ratio reaches approximately 200%. On April 1, 2026, the Company conducted a 1-for-4 stock split, and the forecast dividend of ¥70 for the following fiscal year is presented on a post-split basis, equivalent to ¥280 before the split. This represents a 19.7% increase from the current-period dividend of ¥234. In terms of cash flow support for the dividend, dividend payments of ¥55.1B were covered 1.90 times by FCF of ¥507.8B. However, the positive FCF partly depends on inflows from investing cash flow, so the trends in Ordinary Income and the Equity Ratio should also be reviewed when assessing the sustainability of the funding source.

Risk Factors

1. Low Net Interest Margin (NIM): NIM was 1.38% and is a key indicator at the center of net interest income growth. If deposit costs rise faster than the repricing of loans during a period of rising interest rates, growth in net interest income could slow. This could also affect achievement of the following fiscal year’s Ordinary Income target of ¥330.0B.

2. Equity Ratio: The Equity Ratio was 6.6%, improving from 5.7% in the previous year. Compared with commonly used benchmarks for capital adequacy, this is relatively low, and the pace of capital accumulation and its balance with shareholder returns will be issues going forward.

3. Concentration of Earnings in the Banking Business: The Banking Business accounts for 91.2% of Ordinary revenue from external customers, while the contributions from the Leasing Business and Other Businesses are limited. Regional economic conditions, the credit quality of borrowers, and fluctuations in the securities market directly affect consolidated performance under this structure.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

The Net Income margin exceeds the industry median and is positioned in the upper range of the industry.

Growth and Capital Efficiency

The Revenue growth rate is approximately twice the industry median and indicates a high growth rate within the industry.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Ordinary Income increased 46.3% year on year and Net Income increased 37.6%, both expanding at a pace above the 20.6% growth in Ordinary revenue. As the growth in general and administrative expenses (+6.4%) remained below revenue growth, improved earnings efficiency was confirmed, reflected in an Ordinary Income margin of 26.8%, up +4.7pt year on year.

2. The loan-to-deposit ratio of 77.8% indicates that loan growth (+5.2%) and deposit growth (+3.8%) progressed broadly in line, suggesting a stable funding structure. Meanwhile, NIM of 1.38% and an Equity Ratio of 6.6% require ongoing monitoring from the perspectives of profitability and capital adequacy, separately from earnings growth.

3. The annual dividend of ¥234 represents a Payout Ratio of approximately 141%, exceeding current-period EPS. The following fiscal year’s forecast dividend of ¥70 after the stock split, equivalent to ¥280 before the split, also represents an effective dividend increase. If shareholder returns continue to outpace earnings growth, balancing such returns with capital accumulation will become a structural issue.

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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 disclosed earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.

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