| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥718.5B | ¥552.3B | +30.0% |
| Operating Income | - | - | - |
| Ordinary Income | ¥123.1B | ¥110.0B | +11.8% |
| Net Income | ¥80.1B | ¥69.3B | +15.5% |
| ROE | 6.3% | 6.0% | - |
For the fiscal year ended March 2026, ordinary revenues were ¥718.5B (YoY +¥166.2B, +30.0%), ordinary income ¥123.1B (YoY +¥13.1B, +11.8%), and net income ¥80.1B (YoY +¥10.8B, +15.5%). The Banking segment drove the large revenue increase with ordinary revenues of ¥630.1B (YoY +34.7%), mainly due to improved lending yields in a rising rate environment and accumulation of loan balances (2.36兆円, +4.8%), which were the primary contributors to revenue expansion. Conversely, a reduction in securities operations (balance ▲¥823.6B) and deterioration in other operating gains compressed margins, resulting in a net profit margin of 11.1%, down 1.4pt from 12.5% a year earlier. ROE improved slightly to 6.3% from 6.2% the prior year, but the low equity ratio of 3.9% leaves limited capital buffer and constrains flexibility. Overall, the company posted revenue and profit growth, though issues remain in earnings quality and cost efficiency.
[Revenue] Ordinary revenues of ¥718.5B (YoY +30.0%) were driven by the Banking segment’s ¥630.1B (+34.7%, 87.7% share). Investment income was ¥376.1B, up from ¥320.6B a year ago (+17.3%); breakdown: loan interest income ¥281.4B (prior ¥220.6B, +27.5%), securities interest and dividends ¥85.2B (prior ¥95.4B, ▲10.7%). Loan balances increased to 2.36兆円 (+4.8%), and with improved lending yields in the rising rate environment loan interest income rose substantially. Meanwhile, securities balances contracted to ¥4,965B (▲14.2%), suggesting duration shortening and risk compression. Funding costs were ¥75.5B (prior ¥37.6B, +100.8%), roughly doubling, primarily due to a surge in deposit interest of ¥53.8B (prior ¥15.6B, +245.5%). Net interest income (investment income − funding costs) was ¥300.6B, up +6.3% YoY. Fee income expanded steadily, netting ¥68.4B (prior ¥62.1B, +10.1%). Subsegments also grew: leasing ¥77.9B (+2.4%), credit guarantee ¥4.3B (+6.9%), other ¥6.2B (+31.1%).
[Profitability] Ordinary income of ¥123.1B (+11.8%) benefited from revenue growth, but operating expenses (general and administrative) rose to ¥212.3B from ¥201.2B (+5.5%), partly offsetting revenue gains. Other ordinary expenses included securities-related losses and other operating costs, and a decline in non-operating income to ¥84.5B (prior ¥88.3B) also pressured margins. Profit before tax was ¥120.6B (+15.3%); after deducting income taxes of ¥34.8B (effective tax rate 28.9%), profit attributable to owners of the parent was ¥85.9B (prior ¥75.0B, +14.5%). Comprehensive income was ¥117.7B, ¥37.6B above net income of ¥80.1B, with contributions from other securities valuation gains ¥3.4B, deferred hedge gains/losses ¥12.5B, and actuarial adjustments related to retirement benefits ¥15.8B. Extraordinary items totaled net ▲¥2.5B (extraordinary gains ¥0.3B, extraordinary losses ¥2.8B, including impairment losses ¥0.5B), immaterial. In conclusion, revenue and profits increased, but the sharp rise in funding costs and sustained operating expenses are eroding profitability.
Banking segment profit of ¥114.6B (prior ¥101.4B, +13.0%) reflected revenue gains in ordinary revenues of ¥630.1B. Leasing segment profit ¥3.2B (prior ¥3.1B, +3.2%) remained stable with revenue of ¥77.9B. Credit guarantee segment profit ¥3.5B (prior ¥4.4B, ▲20.5%) saw revenue of ¥4.3B but margin deterioration. Other segments profit ¥1.4B (prior ¥1.0B, +40.0%) with revenue ¥6.2B and strong growth. Revenue concentration to the Banking segment is high at 87.7%; improved lending yields and balance growth drove overall profits, while diversification effects across segments remain limited.
[Profitability] ROE 6.3% improved 0.1pt from 6.2% and is decomposed as net profit margin 11.1% × total asset turnover 0.022 × financial leverage 25.8x. Net profit margin fell 1.4pt from 12.5% due to higher funding costs and rising operating expenses. ROA (ordinary income/total assets) improved to 0.4% from 0.3% a year earlier. [Cash Quality] Operating Cash Flow (OCF) was ▲¥754.5B, a large negative relative to net income ¥80.1B (OCF/Net Income = ▲9.4x), indicating very low cash quality. This largely reflects bank-specific loan and deposit stock movements, with working capital increases as the main cause. EBITDA, including depreciation ¥14.8B, was approximately ¥137.9B, yielding OCF/EBITDA = ▲5.5x. Investment Cash Flow was a positive ¥845.3B (from securities sales, etc.), and Free Cash Flow was ¥90.9B, sufficient to cover dividend payments (FCF coverage 5.3x). [Investment Efficiency] EPS ¥508.05 (prior ¥444.35, +14.3%), BPS ¥7,471.92, implied PBR 0.84x (back-solved from ROE 6.3%). Tangible fixed asset turnover is about 25.7x, high, reflecting the banking business model focused on loans and securities. [Financial Soundness] Equity Ratio 3.9% improved 0.3pt from 3.6% but remains low and close to the domestic regulatory lower bound (4%). Debt-to-equity ratio 25.4x is highly leveraged, but typical for a deposit-funded bank model. Liquidity metrics show a loan-to-deposit ratio of 79.4% (loans ¥2.36兆円 / deposits ¥2.97兆円), appropriate and indicating loans are adequately funded by deposits. Cash and due from banks ¥2,783B represent 8.6% of total assets, securing short-term liquidity. Retained earnings ¥983.7B are the main component of equity.
OCF was ▲¥754.5B; the large divergence from net income ¥80.1B indicates poor cash conversion efficiency, but in banking operations loan and deposit changes are included in OCF subtotals. The primary cause of OCF subtotal ▲¥724.3B was stock changes in investment and funding. Net loan increases of ¥108.6B equivalent and net securities decreases of ¥82.3B equivalent reflect changes in fund allocation. Corporate tax payments of ¥30.3B are reasonable relative to profit before tax ¥120.6B. Investment CF was a positive ¥845.3B from securities sales/redemptions, exceeding capital expenditures ¥35.5B and intangible asset investments ¥8.8B. Financing CF was ▲¥16.9B, mainly dividend payments ¥16.9B; share buybacks were ¥0.0B and negligible. Free Cash Flow ¥90.9B is about 6.0x the total dividends ¥15.2B, indicating sufficient cash generation to sustain dividends. Cash and cash equivalents at period-end ¥2,778B rose ¥73.9B from ¥2,704B at the beginning of the period; the cash change ¥73.9B is roughly reconciled as Free Cash Flow ¥90.9B minus Financing CF ¥16.9B.
Of ordinary revenues ¥718.5B, net interest income from investment and funding was ¥300.6B (41.8% share) and net fee income was ¥68.4B (9.5%), forming the recurring earnings base. Other ordinary revenues ¥84.5B (11.8%) include securities sale gains and are largely market-dependent non-recurring elements. The breakdown of non-operating income is unclear, but comprehensive income ¥117.7B exceeding net income ¥80.1B by ¥37.6B indicates valuation gains on remeasureable assets temporarily boosted comprehensive income, creating a divergence from realized earnings. Extraordinary items were net ▲¥2.5B and limited; impairment losses ¥0.5B are minimal. The large negative OCF of ▲¥754.5B versus net income ¥80.1B reflects accounting characteristics of banking stock movements in funding and investment and does not necessarily indicate fundamental earnings degradation, but accrual-cash timing differences are large and short-term cash conversion efficiency is very low. While investment CF positive inflows ¥845.3B stabilize overall liquidity, rebuilding a recurring cash-generating structure remains a challenge.
Full-year guidance forecasts ordinary revenues ¥660.0B, ordinary income ¥147.0B (YoY +19.4%), and net income ¥87.0B (YoY +8.6%). Actuals (ordinary revenues ¥718.5B, ordinary income ¥123.1B, net income ¥80.1B) exceeded revenue forecasts at 108.9% of guidance, but progress on profits was below: ordinary income reached 83.7% of forecast and net income 92.1% of forecast. The pattern of revenue outperformance but profit shortfall is attributable to funding costs rising more than assumed and persistent operating expenses. Forecast EPS was ¥550.23 versus actual EPS ¥508.05 (difference ▲¥42.18). The company paid an annual dividend of ¥110 versus forecast ¥55 (double), strengthening shareholder returns. Maintaining full-year guidance likely reflects cautious assumptions on expense control and market-related gains/losses.
The dividend was interim ¥50 and year-end ¥60 for an annual ¥110; payout ratio on an actuals basis is 21.7% (dividends equivalent ¥17.3B against net income ¥80.1B), a conservative level. Actual annual dividend doubled the forecast ¥55, raising the payout ratio from forecast 10.0% to actual 21.7%. Share buybacks during the period were ¥0.0B negligible; total return ratio is roughly equal to the payout ratio at about 21.7%. FCF coverage is 5.3x (Free Cash Flow ¥90.9B / dividends ¥17.3B), indicating high sustainability. Given the low equity ratio of 3.9%, prioritizing internal capital accumulation while maintaining dividends in the low-20% payout range is appropriate. Retained earnings ¥983.7B provide sufficient dividend funding, but securing regulatory capital buffer remains a near-term priority.
Capital adequacy strain: Equity Ratio 3.9% is close to the domestic regulatory lower bound of 4%, leaving a very thin regulatory buffer. With continued loan balance expansion (+4.8%) and rising risk assets, scrutiny is needed on whether internal capital accumulation (net income ¥80.1B − dividends ¥17.3B = approx. ¥62.8B) is sufficient to build capital. Sudden external shocks or higher credit costs could push the equity ratio below the limit.
Rapid increase in funding costs and margin compression risk: Funding costs ¥75.5B (YoY +100.8%) were driven mainly by deposit interest surging (+245.5%). In a rising rate environment, deposit cost increases can compress interest margins. Although net interest income rose, further policy rate increases could push funding costs higher and lower NIM. Reducing securities balances (▲14.2%) has also lowered market-driven investment income, limiting revenue diversification.
Vulnerability in operating cash flow generation: OCF ▲¥754.5B is a significant negative with a large divergence from net income (OCF/Net Income = ▲9.4x). While stock effects from investment and funding are large for banks, the low short-term cash conversion efficiency suggests rigidities in working capital management and fund allocation. Investment CF is currently a positive inflow, but if the ability to sell securities diminishes or market conditions worsen and investment CF turns negative, liquidity risk could surface.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Profit Margin | 11.1% | 11.9% (7.2%–35.4%) | -0.7pt |
Net profit margin of 11.1% is slightly below the industry median 11.9%, indicating a roughly standard position within the sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 30.0% | 10.1% (7.3%–12.1%) | +19.9pt |
Revenue growth of 30.0% significantly exceeds the industry median 10.1%, driven by improved lending yields and balance accumulation in the rising rate environment, showing relatively high growth within the sector.
※Source: Company aggregation
Confirmed revenue and profit growth in a rising rate environment. Loan balances 2.36兆円 (+4.8%) and yield improvement expanded net interest income; revenue growth rate 30.0% greatly outpaced the industry median 10.1%. However, funding costs rose sharply +100.8% and deposit interest increased +245.5% YoY, indicating potential future margin pressure. Net profit margin 11.1% is near the industry median 11.9% but down 1.4pt from 12.5% last year, so profitability improvement has not been achieved.
Low Equity Ratio 3.9% is the primary structural risk. Close to the domestic lower bound of 4% with a very thin regulatory buffer, ongoing loan expansion and rising risk assets could constrain management flexibility. Although the payout ratio is 21.7% and conservative, accelerating internal capital accumulation is a priority. Improving ROE 6.3% requires both capital efficiency and profit growth, but capital constraints are currently a growth bottleneck.
Large negative OCF ▲¥754.5B indicates poor cash conversion efficiency, with liquidity structure supplemented by positive investment CF inflows ¥845.3B. Free Cash Flow ¥90.9B supports dividend sustainability, but reliance on securities sales capacity raises questions about long-term sustainability. Strengthening recurring cash generation and securing capital buffers are key to enhancing shareholder value.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm based on public financial statement data. Investment decisions are your own responsibility; consult a professional advisor as needed.