Seven Bank (8410) FY2026 FY Earnings Report

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Executive Summary

Although ordinary income remained almost flat, net income declined significantly, primarily due to impairment losses. Revenue (ordinary revenue) was ¥2200.2B (+2.6% YoY), while ordinary income was ¥301.6B (-0.4% YoY), both broadly in line with the previous year. Meanwhile, net income fell sharply to ¥135.4B (-25.9% YoY). Growth in the Domestic ATM Platform Business and accounting-driven profit growth in the Overseas Business were offset by the decline in revenue and shift into losses in the Credit Card and Electronic Money Business, as well as ¥87.0B in extraordinary losses, including ¥84.6B in impairment losses, which reduced net income.

Factors Driving Performance Changes

【Revenue】The Domestic Business (Banking and Other Businesses), which accounted for 66.3% of the revenue mix, grew revenue by +5.1% as the core business driving overall performance. The Overseas Business was ¥436.0B, nearly flat at +0.1% YoY, while the Credit Card and Electronic Money Business generated ¥305.8B, down -5.9%. Consolidated revenue was ¥2200.2B (+2.6%), reflecting a structure in which revenue growth in the Domestic Business offset the decline in the non-bank businesses.

【Profit and Loss】Ordinary income was ¥301.6B (-0.4%), remaining nearly flat, while profit before tax was ¥214.7B, ¥87.0B lower than ordinary income. The primary factor was the recognition of ¥87.0B in extraordinary losses, including ¥84.6B in impairment losses. Net income was ¥135.4B (-25.9%), indicating a significantly greater deterioration in bottom-line profit than the minor fluctuation at the ordinary income level. Profit from the Domestic Business was ¥271.7B (-0.2%), remaining nearly flat, while the Overseas Business surged to ¥35.8B (+915.0%). However, this included a ¥58.3B positive impact from revising the useful life of ATMs from 5 years to 8 years; excluding this impact, the business would effectively be estimated to remain in the loss-making range. The Credit Card and Electronic Money Business fell into an ordinary loss of ¥5.9B. Overall, the results can be characterized as revenue growth accompanied by a decline in profit.

Segment Analysis

The Domestic Business (Banking and Other Businesses) generated revenue of ¥1458.5B (+5.1%) and profit of ¥271.7B (-0.2%). Despite higher revenue, the increase in selling, general and administrative expenses (+2.8%) limited improvement in the profit margin. The Overseas Business remained nearly flat in revenue at ¥436.0B (+0.1%), while profit surged to ¥35.8B (+915.0%). However, excluding the ¥58.3B boost from the change in useful life, no substantive improvement in earnings power can be confirmed, and performance must be assessed excluding the impact of the accounting change. The Credit Card and Electronic Money Business generated revenue of ¥305.8B (-5.9%), while profit was negative ¥5.9B, turning from the previous year’s profit of +¥32.0B into a loss. Intensifying competition in the cashless payments market has become a factor suppressing consolidated profit.

Key Financial Indicators

【Profitability】The ordinary income margin was 13.7%, down from 14.1% in the previous year, while the net profit margin was 6.1%, a significant decline from 8.5% in the previous year. ROE was 4.7%, below the previous year’s 6.6%, primarily due to the decline in the net profit margin.【Cash Flow Quality】Operating cash flow (OCF) was ¥839.3B, equivalent to 6.2 times net income, and cash generation remained strong even excluding impairment losses, which are non-cash expenses. The OCF/EBITDA ratio remained high at 1.37x.【Investment Efficiency】Capital expenditures of ¥99.5B were only 0.32x depreciation and amortization expense of ¥309.8B, indicating that investment in asset replacement continues to fall below depreciation. Free cash flow was ¥124.8B.【Financial Soundness】The equity ratio was 18.5% and the loans-to-deposits ratio was 10.4%, both low levels, indicating a substantial liquidity buffer for a deposit-funded banking business. Meanwhile, the balance of corporate bonds doubled year on year to ¥1000.0B, warranting attention to changes in the funding structure.

Cash Flow Analysis

Operating cash flow was ¥839.3B, a significant improvement from the previous year’s -¥388.7B, representing cash generation equivalent to 6.2 times net income of ¥135.4B. The structure consisted of a subtotal of ¥932.9B before changes in working capital, less ¥80.2B in income taxes paid, indicating good accrual quality. Investing cash flow was -¥714.5B, including increased investments in securities, capital expenditures of ¥99.5B, and acquisitions of intangible assets of ¥163.3B. As a result, free cash flow was ¥124.8B. Financing cash flow was -¥116.5B. Share repurchases of ¥508.2B were nearly offset by cash inflows of ¥514.7B from the disposal of treasury shares, while dividend payments of ¥118.5B were the primary source of cash outflow. Cash and cash equivalents were ¥892.8B, remaining almost flat from the previous year.

Earnings Quality

The quality of earnings for the current period was characterized by solid performance at the ordinary income level, while bottom-line profit was reduced by temporary factors. Ordinary income of ¥301.6B remained broadly in line with the previous year, but extraordinary losses of ¥87.0B, including ¥84.6B in impairment losses, reduced profit before tax to ¥214.7B, resulting in net income of ¥135.4B. Impairment losses were equivalent to 62.7% of net income, indicating that accounting profit for the period was strongly affected by one-time asset valuation losses rather than core earnings power. Meanwhile, operating cash flow was ¥839.3B, substantially exceeding net income, providing strong cash support even excluding impairment losses as a non-cash expense. Comprehensive income was ¥144.2B, close to net income of ¥135.4B, with the divergence attributable to foreign currency translation adjustments (-¥5.5B) and retirement benefit adjustments (+¥9.4B) remaining limited. The increase in profit in the Overseas Business included an accounting-driven boost of ¥58.3B associated with the change in useful life, which must be evaluated separately from genuine growth in earnings power.

Earnings Forecasts and Guidance

The full-year company forecasts are revenue of ¥2355.0B, ordinary income of ¥295.0B, net income of ¥170.0B, and a dividend of ¥11.00 per share. Actual ordinary income of ¥301.6B represented progress above the forecast at 102.3% of the forecast, while net income of ¥135.4B was only 79.3% of the forecast. The divergence was primarily due to ¥87.0B in impairment losses incurred after the forecasts were prepared, confirming that the core earnings plan itself was broadly achieved. The forecast dividend of ¥11.00 per share was equal to the actual dividend and remained at the projected level.

Shareholder Returns

The annual dividend was ¥11.00 per share, with total dividends of ¥118.5B and a high payout ratio of 90.5%. This rose significantly from the previous year’s payout ratio of 70.6%, as the decline in net income pushed up the payout ratio. Although ¥508.2B in share repurchases was conducted, cash inflows of ¥514.7B also arose from the disposal of treasury shares; therefore, the scale of net shareholder returns must be evaluated based on the details of the individual transactions. Comparing total dividends with free cash flow of ¥124.8B, FCF was only slightly above total dividends, suggesting room for improvement in dividend capacity if the current level of net income continues.

Risk Factors

1. Asset Impairment Risk: Impairment losses of ¥84.6B were recorded within extraordinary losses of ¥87.0B, reducing net income by 26.0%. Depending on the future earnings power of the assets subject to impairment, additional impairment losses are possible, requiring monitoring.

2. Deterioration in Profitability of the Non-Bank Business: Revenue in the Credit Card and Electronic Money Business declined by -5.9%, and the business turned into an ordinary loss of ¥5.9B, compared with a profit of ¥32.0B in the previous year. If intensifying competition and fixed-cost burdens continue, there is a risk of further expansion of losses.

3. Underlying Earnings Power of the Overseas Business: Ordinary income of ¥35.8B in the Overseas Business included a ¥58.3B boost from the revision of useful lives. Excluding this impact, no substantive improvement in earnings can be confirmed. The business’s underlying performance must be evaluated excluding the accounting change.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

The net profit margin is below the industry median and is relatively low within the industry.

Growth and Capital Efficiency

The revenue growth rate is also substantially below the industry median, indicating a relatively modest growth pace within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Ordinary income remained nearly flat, but net income and ROE (4.7%, compared with 6.6% in the previous year) declined significantly due to impairment losses of ¥84.6B. The divergence between core earnings power and accounting net income is a defining feature of the current period.

2. Operating cash flow reached ¥839.3B, or 6.2 times net income, indicating strong cash generation in contrast to the deterioration in accounting profit. The capital expenditures/depreciation ratio of 0.32x suggests restrained investment in asset replacement, and its impact on competitiveness over the medium to long term requires monitoring.

3. The payout ratio rose to 90.5%, while the dividend level of ¥11.00 per share was maintained. The inclusion of the impact of the accounting change in the Overseas Business’s profit growth and the Credit Card and Electronic Money Business’s shift into losses are key points to monitor when assessing the future earnings structure.

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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, where necessary, after consulting with a professional advisor.

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