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| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥789.1B | ¥635.6B | +24.2% |
| Operating Income | - | - | - |
| Ordinary Income | ¥211.4B | ¥156.7B | +34.9% |
| Net Income | ¥133.8B | ¥99.9B | +33.9% |
| ROE (Annualized) | 4.9% | 4.1% | - |
Executive Summary
For the cumulative Q3 of the fiscal year ending March 2026, revenue and earnings increased, driven primarily by growth in net interest income and fees and commissions. The results showed profit growth outpacing the increase in ordinary revenues. Ordinary revenues amounted to ¥789.1B (+24.2% YoY), ordinary income was ¥211.4B (+34.9%), and net income was ¥133.8B (+33.9%). The primary drivers of earnings growth were a 26.8% increase in ordinary revenues in the Banking Business segment and positive operating leverage, as the 7.2% increase in general and administrative expenses was below the growth rate of ordinary revenues.
Factors Affecting Earnings
【Revenue】Ordinary revenues of ¥789.1B (+24.2% YoY) were driven by ordinary revenues from external customers in the Banking Business segment of ¥718.8B (+26.8%, 91.1% of total). Interest on loans increased to ¥339.1B (+11.3%), while funds investment income rose to ¥501.6B (+19.1%), against the backdrop of a 4.1% increase in the loan balance from the same period of the previous year. The Leasing Business generated ¥54.2B (+3.9%), while Other Businesses generated ¥16.1B (-1.2%), indicating a high degree of revenue dependence on the Banking Business.
【Profit and Loss】Funding costs increased 15.0% to ¥123.7B, of which interest on deposits surged 83.9% to ¥83.9B. However, the increase in funds investment income exceeded this rise, resulting in net interest income expanding 20.6% to ¥377.9B. General and administrative expenses remained limited to ¥264.0B (+7.2%), substantially below the growth in ordinary revenues, resulting in an improvement in the ordinary income margin to 26.8% from 24.6% in the previous year. Extraordinary gains and losses represented a net loss of ¥3.7B, including an impairment loss of ¥2.9B, but were not large enough to reverse the upward trend in ordinary income. The company achieved both revenue and earnings growth, with both net interest income and fees and commissions increasing, confirming diversification in its revenue sources.
Segment Analysis
The Banking Business generated ordinary revenues of ¥718.8B (+26.8% YoY) and segment profit of ¥201.1B (+36.7%), making it the core business and accounting for 92.9% of total segment profit. The Leasing Business generated ordinary revenues of ¥54.2B (+3.9%) and segment profit of ¥3.5B (+59.9%), representing a high profit growth rate but a small scale. Other Businesses, including the credit card and credit guarantee businesses, generated ordinary revenues of ¥16.1B (-1.2%), representing a slight decline in revenue, but maintained an exceptionally high profit margin of 73.6% and secured segment profit of ¥11.8B (+0.7%). The Banking Business segment recorded an impairment loss on fixed assets of ¥2.9B, up from ¥0.5B in the same period of the previous year.
Key Financial Indicators
【Profitability】The net income margin was 16.9%, improving by approximately 1.2pt from 15.7% in the same period of the previous year. The ordinary income margin also expanded by approximately 2.1pt to 26.8% from 24.6%. NIM, which indicates the bank’s lending and funding spread, was calculated at 1.04%. With interest on deposits surging 83.9% YoY, the pace of increase in funding costs is a key point to monitor from a profitability perspective. 【Cash Flow Quality】Comprehensive income of ¥399.4B exceeded net income of ¥133.8B by ¥265.7B, primarily due to an improvement in valuation differences on securities (+46.9% YoY). This difference reflects market-driven fluctuations in valuation differences and must be distinguished from the recurring earnings capacity generated by business operations. 【Investment Efficiency】ROE was 4.9%. Based on the structure of a 16.9% net income margin × 0.018 total asset turnover × 16.06x financial leverage, leverage is the primary factor supporting ROE. 【Financial Soundness】The equity ratio was 6.2%, improving 0.5pt from 5.7% in the same period of the previous year, but it had not reached the generally accepted benchmark for financial soundness. The loan-to-deposit ratio was 79.0%, calculated by dividing loans of ¥3 trillion 6,499.5B by deposits of ¥4 trillion 6,189.8B, placing it within an appropriate range.
Cash Flow Analysis
As the cash flow statement was not disclosed in these results, funding trends are reviewed based on balance sheet movements. Loans amounted to ¥3 trillion 6,499.5B, increasing 4.1% YoY, and funds investment expanded at a pace exceeding the 1.0% increase in deposits. Securities amounted to ¥1 trillion 809.3B, decreasing 9.2% YoY, suggesting that portfolio replacement progressed in response to the expansion of loans. Borrowings amounted to ¥5,192.8B, decreasing 15.4% YoY, indicating a further shift toward a funding structure centered on deposits. Cash and due from banks amounted to ¥8,798.7B, increasing 2.1% YoY, and liquidity was maintained.
Earnings Quality
The increase in ordinary income was supported by multiple recurring revenue sources, namely net interest income of ¥377.9B (+20.6% YoY) and fees and commissions of ¥71.3B (+10.8%), limiting dependence on any single factor. Meanwhile, extraordinary gains and losses represented a net loss of ¥3.7B, including an impairment loss of ¥2.9B, up from ¥0.5B in the same period of the previous year. This was a temporary factor reflecting a decline in the profitability of fixed assets associated with falling land prices and other factors. Comprehensive income of ¥399.4B substantially exceeded net income of ¥133.8B, but this difference was primarily attributable to fluctuations in valuation differences on securities. As an accrual-related element affected by market conditions, it must be distinguished from net income when evaluating the quality of business earnings. The effective tax rate was 35.6% (¥73.9B in income taxes and other taxes / equivalent to ¥207.7B in profit before tax), indicating a certain constraint on the conversion of profit before tax into net income.
Earnings Forecast and Guidance
Progress against the full-year plan was 78.9% for ordinary revenues (actual ¥789.1B / plan ¥1,000.0B) and 79.8% for ordinary income (¥211.4B / ¥265.0B). Both exceeded the standard cumulative Q3 progress rate of 75%, indicating solid progress. There were no revisions to either the earnings forecast or dividend forecast, and management expects to achieve its initial plan. To meet the full-year ordinary income plan, ¥53.6B must be added during the remaining quarter, and the company retains sufficient room to achieve this based on the most recent quarterly earnings level.
Shareholder Returns
The Q2 dividend was ¥108.00 per share, and the full-year dividend forecast is ¥216.00. Based on cumulative net income of ¥133.8B, the payout ratio calculated using only the Q2 dividend was 23.1%, indicating a certain degree of flexibility in profit distribution. The projected full-year payout ratio against projected full-year EPS of ¥618.97 is 34.9% (=¥216.00/¥618.97), below the generally accepted sustainability benchmark of 60%. Treasury shares increased from ¥5.65B in the same period of the previous year to ¥15.97B. Accordingly, when evaluating the scale of capital returns including share repurchases separately from the payout ratio, it is necessary to distinguish and assess the total return ratio.
Risk Factors
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Risk of NIM decline: NIM was 1.04%, below the general soundness benchmark of 2–3% and the warning level of 1.5% for the banking industry. Interest on deposits surged 83.9% YoY, and if the pace of increase in funding costs exceeds improvements in lending and securities investment yields, net interest income and the ordinary income margin could come under pressure.
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Equity ratio level: The equity ratio was 6.2%, improving from 5.7% in the same period of the previous year, but remaining below the general soundness benchmark of 8%. An increase in risk-weighted assets from loan growth or an expansion of unrealized losses on securities could reduce capital headroom. Therefore, the accumulation of retained earnings and trends in risk-weighted assets should be monitored continuously.
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Difference in the growth pace of loans and deposits: Loans increased 4.1% YoY, while deposits increased 1.0%, with loan growth exceeding deposit growth. Although the loan-to-deposit ratio of 79.0% remains within an appropriate range, continued divergence would require monitoring of the deposit base and the funding structure, including borrowings.
Industry Benchmarks (For Reference; Compiled by the Company)
Industry Benchmarks (bank)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Income Margin | 16.9% | – | – |
The company’s net income margin of 16.9% is high, but as comparative data are limited, its relative position within the industry should be regarded as reference information only.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 24.2% | – | – |
The revenue growth rate of 24.2% is high for a regional financial institution, but a rigorous comparison within the industry is not possible due to insufficient median data.
Source: Compiled by the company
Key Takeaways from the Financial Results
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Ordinary revenues increased 24.2%, while ordinary income increased 34.9%. The 7.2% increase in general and administrative expenses was substantially below this rate, confirming positive operating leverage. Expansion of the Banking Business segment and growth in fee income supported earnings growth through multiple revenue sources.
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NIM of 1.04% and an equity ratio of 6.2% represent structural issues coexisting with the earnings growth trend. Interest on deposits surged 83.9% YoY, making whether future increases in funding costs can be absorbed by growth in net interest income a key point of focus in the financial results.
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Progress against the full-year plan was 79.8% for ordinary income and 76.4% for net income, exceeding the standard progress rate of 75%. There were no revisions to the earnings forecast or dividend forecast. Meanwhile, impairment losses on fixed assets in the Banking Business segment increased from ¥0.5B in the same period of the previous year to ¥2.9B, making trends in the profitability of idle real estate and other assets a key area for monitoring.
This report is an earnings analysis document automatically generated by AI based on XBRL financial results summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly available financial results data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.
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