The Hyakujushi Bank (8386) FY2027 Q1 Earnings Report

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Executive Summary

The Company posted increases in revenue and earnings, primarily due to a significant expansion in ordinary revenue. However, earnings growth was relatively modest compared with revenue growth, resulting in lower profit margins. Ordinary revenue was ¥412.2B (+70.7% YoY), ordinary income was ¥95.4B (+29.3%), and net income was ¥61.8B (+28.4%). The Banking Business segment was the main driver of revenue growth, with ordinary revenue from external customers increasing 76.8% YoY and leading overall performance. However, as ordinary income growth fell below the pace of ordinary revenue growth, the ordinary income margin declined to 23.1% (30.5% in the previous year), while the net income margin declined to 15.0% (19.9% in the previous year).

Factors Affecting Financial Results

【Revenue】Ordinary revenue increased significantly by 70.7% YoY to ¥412.2B. By segment, the Banking Business led revenue growth at ¥386.3B (+76.8%), accounting for 93.7% of the total, followed by the Leasing Business at ¥19.5B (+9.8%) and Other Businesses, including credit cards and credit guarantees, at ¥6.4B (+21.5%). In terms of net interest income, interest on loans increased to ¥129.3B (+19.0%), while interest on deposits rose to ¥41.7B (+61.7%), indicating that funding costs are rising at a faster pace.

【Profit and Loss】Ordinary income increased 29.3% YoY to ¥95.4B, while net income increased 28.4% to ¥61.8B, securing higher earnings despite growth remaining significantly below the rate of revenue growth. Segment profit in the Banking Business increased to ¥89.8B (+27.9%), but fell short of the rate of revenue growth. In the Leasing Business, segment profit declined to ¥0.8B (▲44.4%), indicating deteriorating profitability. Meanwhile, the Other Businesses segment grew to ¥6.7B (+44.2%). The sharp increase in other ordinary expenses from ¥10.7B in the previous year to ¥136.8B was the primary factor compressing profit margins, highlighting that revenue growth has not yet been adequately converted into earnings. Net extraordinary losses were limited to ¥0.5B, and net income consisted primarily of recurring earnings. Overall, the Company achieved higher revenue and earnings, but this should be characterized as revenue and earnings growth accompanied by declining profit margins.

Segment Analysis

The Banking Business generated ordinary revenue of ¥386.3B (+76.8%) and segment profit of ¥89.8B (+27.9%), making it the core business and the source of most of consolidated ordinary income of ¥95.4B. Its profit margin was equivalent to 23.1% against ¥388.4B, including internal revenue within the Banking Business. The Leasing Business generated ordinary revenue of ¥19.5B (+9.8%), while segment profit declined significantly to ¥0.8B (▲44.4%), resulting in a lower profit margin of 4.3% and pronounced deterioration in profitability. Other Businesses, including the credit card and credit guarantee businesses, maintained a high profit margin, with ordinary revenue of ¥6.4B (+21.5%) and segment profit of ¥6.7B (+44.2%), equivalent to 104.9% based on revenue including internal revenue. The difference in profit margins between the Banking Business and the Leasing Business is substantial, making a recovery in the Leasing Business’s profitability a key challenge for improving consolidated profitability.

Key Financial Metrics

【Profitability】The ordinary income margin was 23.1%, down approximately 7.4pt from 30.5% in the same period of the previous year. The net income margin was 15.0%, down approximately 4.9pt from 19.9% in the previous year. Annualized ROE was 6.4%, while annualized ROA was approximately 0.42%, indicating that asset efficiency remains low. 【Cash Flow Quality】Net interest income was ¥142.6B, calculated by deducting funding costs of ¥52.0B from interest and dividend income of ¥194.6B. Interest on deposits increased by 61.7%, outpacing the 19.0% growth in interest on loans, indicating that funding costs are rising rapidly. Fee income was ¥34.4B (+11.1%), while net fee income was ¥24.8B. 【Investment Efficiency】On a DuPont basis, ROE of 6.4% comprises a net income margin of 15.0% × total asset turnover of 0.028x × financial leverage of 15.10x, reflecting a structure in which the high leverage characteristic of banks supports profitability. 【Financial Soundness】The equity ratio was 6.6%. Total assets were ¥58,712.4B, compared with net assets of ¥3,888.8B. The loan-to-deposit ratio was approximately 77.3%, calculated as loans of ¥37,024.3B ÷ deposits of ¥47,906.6B, remaining within an appropriate range.

Cash Flow Analysis

As no cash flow statement has been disclosed, funding trends are assessed based on changes in the balance sheet. Cash and due from banks increased to ¥10,544.9B, up ¥1,354.2B (+14.7%) from the same period of the previous year, indicating an expanded liquidity buffer. Securities declined to ¥9,292.0B, down ¥1,259.8B (▲11.9%) YoY, suggesting that the investment portfolio has been restructured. Borrowed money decreased to ¥4,093.4B, down ¥604.2B (▲12.9%), while negotiable certificates of deposit increased to ¥1,539.8B, up ¥390.3B (+33.9%), indicating that the funding mix has partially shifted toward market-based funding. Deposits increased steadily to ¥47,906.6B, up ¥460.9B (+1.0%), maintaining a stable customer deposit base. The loan-to-deposit ratio of 77.3%, together with ample balances of cash and due from banks and securities, supports the Company’s ability to respond to short-term funding needs.

Earnings Quality

Net income for the quarter of ¥61.8B was calculated by deducting income taxes and other taxes of ¥33.1B from profit before tax of ¥95.0B, resulting in an effective tax rate of approximately 34.9%. Extraordinary income and losses were minimal, consisting of extraordinary income of ¥0.0B and extraordinary losses of ¥0.5B. Accordingly, net income was primarily composed of recurring earnings, indicating high earnings quality. However, other ordinary expenses surged from ¥10.7B in the same period of the previous year to ¥136.8B, making this fluctuation the primary cause of the decline in the ordinary income margin. In net interest income, interest on deposits grew 61.7%, exceeding the 19.0% growth in interest on loans, and the impact of interest rate repricing is beginning to affect the quality of net interest income. Comprehensive income was ¥80.2B, exceeding net income of ¥61.8B, but declined 26.8% from ¥109.6B in the same period of the previous year. The increase of ¥24.9B in valuation difference on securities contributed positively, while adjustments related to retirement benefits had a negative impact of ▲¥7.2B. The divergence in the direction of net income and comprehensive income indicates a high sensitivity of earnings to market-related factors, including securities.

Earnings Forecast and Guidance

The full-year forecast calls for ordinary revenue of ¥1165.0B, ordinary income of ¥330.0B (+13.3% YoY), net income of ¥210.0B, and EPS of ¥185.69. There were no revisions to the earnings or dividend forecasts during Q1. Q1 progress rates were 35.4% for ordinary revenue, 28.9% for ordinary income, and 29.4% for net income, all exceeding the simple progress benchmark of 25%. Since the progress rate for ordinary revenue exceeded those for ordinary income and net income, the composition of Q1 revenue was evidently not higher-margin than the full-year average. In assessing full-year earnings progress, quarterly trends in funding costs and other ordinary expenses will be key areas of focus.

Shareholder Returns

The full-year dividend forecast is ¥70.00 per share, representing a payout ratio of 37.7% against forecast full-year EPS of ¥185.69 (a figure based solely on dividends). The Company conducted a 1-for-4 stock split effective April 1, 2026. Because the previous year’s actual dividend of ¥108.00 was the pre-split amount, it cannot be compared directly with the post-split forecast of ¥70.00. Retained earnings were substantial at ¥2,211.1B, ensuring an accumulated source of funds for dividends. However, with an equity ratio of 6.6%, dividend sustainability in the banking sector must be evaluated not only based on earnings but also in conjunction with the maintenance of shareholders’ equity. No disclosure regarding share repurchases has been made, and no reference is made to the total return ratio.

Risk Factors

1. Interest Rate Repricing Risk: Interest on loans increased 19.0% YoY, while interest on deposits increased 61.7%, indicating that funding costs are rising at a faster pace. If this gap persists, the benefits of higher interest rates may not be sufficiently converted into net interest income of ¥142.6B.

2. Equity Ratio and Leverage Structure: The equity ratio of 6.6% is below the general soundness benchmark of 8%. With net assets of ¥3,888.8B against total assets of ¥58,712.4B, the Company has a highly leveraged structure, making the impact of fluctuations in securities valuations and credit costs on capital more likely to be amplified.

3. Profitability Risks in Securities and the Leasing Business: Securities totaled ¥9,292.0B, accounting for approximately 15.8% of total assets, and interest rate and market fluctuations may affect valuation differences and earnings. In addition, while revenue in the Leasing Business increased 9.8%, segment profit declined 44.4%, requiring monitoring to determine whether the deterioration in profitability will persist.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

Median data indicating the Company’s relative position within the industry for net income margin is currently insufficient.

Growth and Capital Efficiency

Similarly, comparative data against the industry median is insufficient for the revenue growth rate, and the analysis is limited to understanding its absolute level.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Consolidated ordinary income increased 29.3% and net income increased 28.4%, driven by a 76.8% increase in ordinary revenue from the Banking Business. However, the ordinary income margin and net income margin declined by approximately 7.4pt and 4.9pt, respectively, indicating that the efficiency of converting revenue growth into earnings deteriorated from the same period of the previous year.

2. The loan-to-deposit ratio of 77.3% remains within an appropriate range, and the liquidity balance, including cash and due from banks and securities, has been maintained. However, the equity ratio of 6.6% is below the general benchmark, making the status of internal capital accumulation an area requiring monitoring.

3. The decline of 44.4% in segment profit in the Leasing Business and the sharp increase in other ordinary expenses from ¥10.7B in the previous year to ¥136.8B are clearly identifiable in the earnings data as factors affecting fluctuations in consolidated earnings.

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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. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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