| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥329.5B | ¥268.9B | +22.7% |
| Operating Income / Operating Profit | ¥216.7B | ¥173.7B | +24.7% |
| Ordinary Income | ¥450.3B | ¥524.4B | -14.1% |
| Net Income / Net Profit | ¥243.4B | ¥166.3B | +46.4% |
| ROE | 3.6% | 2.7% | - |
For the interim period of the fiscal year ending March 2026, Revenue was ¥329.5B (YoY +¥60.6B +22.7%), Operating Income was ¥216.7B (YoY +¥43.0B +24.7%), Ordinary Income was ¥450.3B (YoY -¥74.1B -14.1%), and Net Income attributable to owners of the parent was ¥243.4B (YoY +¥77.1B +46.4%). The top line posted a second consecutive period of revenue growth and maintained strong growth through the operating stage, but turned to a YoY decline at the ordinary income stage. Banking-account ordinary revenue expanded to ¥2,619.4B (+22.5%), while a sharp increase in interest costs of ¥443.7B (+¥263.5B) and other ordinary expenses of ¥863.2B (+¥402.7B) pressured ordinary income. Meanwhile, extraordinary gains of ¥28.5B (including ¥26.9B gain on sale of subsidiary shares) contributed to a large increase at the net income stage, and comprehensive income reversed to ¥744.8B (from -¥123.5B year-ago), with an improvement in unrealized gains on securities of +¥357.8B boosting shareholders’ equity. Operating margin improved to 65.7% from 64.6% a year earlier (+1.1pt), and net profit margin rose to 73.9% from 61.8% (+12.1pt), indicating improved profitability metrics, but ROE declined to 3.6% from 4.2% a year earlier, leaving capital efficiency as an outstanding issue.
[Revenue] Revenue of ¥329.5B achieved high growth of +22.7% YoY. Banking-account ordinary revenue expanded to ¥2,619.4B (+22.5%), composed of interest income ¥1,744.0B (+¥252.4B +16.9%), fee income ¥276.1B (-¥11.3B -3.9%), and other ordinary income ¥215.1B (+¥35.9B +20.0%). The main drivers of interest income were an increase in lending balances (¥8.9410T, YoY +3.8%) and improved investment yields; funding also expanded with deposits increasing by ¥1,024B (YoY +¥1.2T) and negotiable certificates of deposit increasing by ¥3,627B (+59.2%). Securities were reduced to ¥2,046.3B (¥2,463B? original was 2兆463億円 — preserve numeric: ¥2,463B) (YoY -¥822B -3.9%) as portfolio reallocation progressed. Fee income slipped slightly, and contributions from non-interest businesses were limited.
[Profitability] Operating Income of ¥216.7B rose +24.7% YoY, reflecting improved operating-stage profitability. At the ordinary income stage, Ordinary Income declined to ¥450.3B (YoY -14.1%), mainly due to sharp increases in interest costs of ¥443.7B (from ¥351.3B last year, +26.3%) and other ordinary expenses of ¥863.2B (from ¥460.5B last year, +87.4%). Net interest margin (NIM) faced downward pressure, as rising deposit and NCD funding costs outpaced improvements in lending yields. General and administrative expenses increased to ¥685.9B (from ¥642.9B last year, +6.7%), raising the expense ratio. On the extraordinary items front, extraordinary gains of ¥28.5B (including ¥26.9B gain on sale of subsidiary shares) exceeded extraordinary losses of ¥12.6B (including impairment losses of ¥10.5B), netting a positive ¥15.9B. Pre-tax income of ¥466.2B less income taxes of ¥134.3B (effective tax rate 28.8%) resulted in Net Income attributable to owners of the parent of ¥243.4B (YoY +46.4%), a substantial increase. In conclusion, the structure was: revenue and operating-income up; revenue up but ordinary-income down; revenue and net-income up.
[Profitability] Operating margin of 65.7% improved 1.1pt from 64.6% a year earlier, and net profit margin of 73.9% rose 12.1pt from 61.8% a year earlier. ROE was 3.6%, down 0.6pt from 4.2% a year earlier, indicating that capital efficiency improvement is still incomplete. [Cash Quality] Operating Cash Flow / Net Income is -10.1x and Operating Cash Flow / EBITDA is -51.7x, indicating extremely weak cash backing of earnings. While bank-specific loan and deposit stock movements significantly affected Operating Cash Flow, cash generation remains weak even after adjusting for that. [Investment Efficiency] Capital expenditures were ¥50.9B and intangible asset acquisitions such as software were ¥61.4B, totaling ¥112.3B of investment. With depreciation of ¥47.4B, investment was 2.4x depreciation, reflecting active strengthening of systems and infrastructure. [Financial Soundness] Equity Ratio is 5.1%, up 0.3pt from 4.8% a year earlier, which meets domestic regulatory benchmark (domestic standard 4%, international standard 8%) but provides limited buffer. Interest-bearing debt totaled ¥738.1B (borrowings ¥690.6B + bonds ¥47.4B), and total funding including deposits and NCDs reached ¥11.8934T. Liquidity position includes cash and deposits of ¥1,664.0B, and loan-to-deposit ratio was 87.3% (loans ¥8.94T / deposits ¥10.24T), within an appropriate range.
Operating Cash Flow was -¥2,451.0B (prior year +¥6,150.9B), turning to a large negative, and subtotal of operating CF (before working capital changes) was also -¥2,292.1B, indicating cash outflow before profit-generation adjustments. In banking, stock movements of loans, securities, and deposits are reflected in Operating CF; composition changes such as loans +¥368.8B, securities -¥82.2B (preserve original: -¥822B? the text says -822億円 -> -¥822B), deposits +¥1.2T, and NCDs +¥3,627B complicated cash flows. Investing CF was +¥928.6B (prior year -¥1,466.2B), positive due to sales/maturities of securities exceeding capital expenditure ¥50.9B and intangible asset acquisitions ¥61.4B. Financing CF was -¥464.3B, with dividend payments of ¥131.7B (parent dividends ¥131.7B + non-controlling interests ¥1.2B) and share buybacks of ¥120.8B making total shareholder returns of ¥249.3B as main cash outflows. Free Cash Flow was -¥1,522.4B, meaning operating activities did not fund capex and dividends; balance sheet restructuring (securities sales and market funding) supported liquidity. Cash and cash equivalents decreased by ¥198.7B from ¥1,846.6B at the beginning of the period to ¥1,647.9B at period-end, partially drawing down liquidity buffer.
Core recurring revenue consists of interest income ¥1,744.0B and fee income ¥276.1B, totaling ¥2,020.1B of core business revenue. Net interest income after deducting interest expenses of ¥443.7B is ¥1,300.3B, and net fee income after deducting fee payments of ¥105.5B is ¥170.6B, so combined substantive earning power is estimated at ¥1,470.9B. Other ordinary income ¥215.1B includes equity-method investment gains/losses ¥0.9B and trading gains/losses ¥8.0B, but a large rise in other ordinary expenses of ¥863.2B offset these and pressured ordinary income. Extraordinary items were net +¥15.9B, with gain on sale of subsidiary shares ¥26.9B providing a one-time uplift. The fact that Operating CF is -¥2,451.0B while Net Income is ¥243.4B indicates concerns over the accrual quality even after accounting for banking working capital movements. Comprehensive income of ¥744.8B substantially exceeded Net Income ¥243.4B, with Other Comprehensive Income of +¥412.9B (unrealized gains on securities +¥357.8B, deferred hedge gains/losses +¥15.5B, actuarial gains/losses on retirement benefits +¥39.3B) contributing to equity build-up; however, reversal risk of valuation differences in the event of market turns warrants attention.
Full-year forecast projects Ordinary Income of ¥675.0B (YoY +49.9%), Net Income attributable to owners of the parent of ¥450.0B, EPS ¥218.41, and annual dividend ¥48 (interim ¥24 + year-end ¥24). Progress against interim results is Ordinary Income 66.7% (¥450.3B / ¥675.0B) and Net Income 54.1% (¥243.4B / ¥450.0B); both exceed standard progress (50%), though the relative achievement rate for ordinary-stage metrics is high, suggesting a cautious plan that factors in possible fall-off of one-off items and higher expenses in H2. Interim dividend of ¥32 is unchanged in the full-year forecast of ¥48, implying an assumed year-end dividend of ¥16. The progress variance factors likely include the assumption that interim extraordinary gains of ¥28.5B will not recur for the full year, expected increases in interest costs and other ordinary expenses in H2, and an assumed slowdown in loan growth pace.
Interim dividend of ¥32 and full-year forecast dividend of ¥48 yield an interim-period dividend payout of ¥131.7B (based on interim results). Payout ratio relative to Net Income attributable to owners of the parent of ¥243.4B is 54.1% (interim basis equals ¥131.7B / ¥243.4B × 2 = ~108.2%), a high level; on a full-year forecast Net Income of ¥450.0B, ¥48 × approx. 206 million shares = ¥98.9B implies a payout ratio of about 22.0%, within a sustainable range. Share buybacks of ¥120.8B were executed, and combined with dividends ¥131.7B the total shareholder returns amounted to ¥252.5B, with a Total Return Ratio of 103.7% (versus interim Net Income ¥243.4B). High levels of returns while Free Cash Flow is -¥1,522.4B were funded by balance-sheet restructuring (securities sales and increased market funding). Given an Equity Ratio of 5.1% and limited capital buffer, sustainability of dividends and buybacks depends on recovery of operating cash flow and stabilization of NIM.
NIM compression risk: Loan balances of ¥8.94T (YoY +3.8%) expanded quantitatively, but a rapid increase in interest costs to ¥443.7B (YoY +26.3%) has pressured net interest income. With repricing of deposit and NCD rates progressing while lending yield improvements lag, NIM is under downward pressure. Future interest rate trends could cause further margin compression and depress ordinary income.
Fragility of operating cash generation: Operating CF is a large negative -¥2,451.0B, and Operating CF / Net Income is -10.1x, indicating very weak cash backing of profits. While loan and deposit stock movements are primary drivers, executing total shareholder returns of ¥252.5B amid Free Cash Flow of -¥1,522.4B relies on balance-sheet restructuring. If Operating CF does not recover promptly, balancing liquidity management and return policy will be a challenge.
Low Equity Ratio and sustainability of capital policy: Equity Ratio 5.1% meets the domestic standard of 4% but is below the international standard of 8%, providing limited buffer. Share buybacks of ¥120.8B increased treasury stock and compressed shareholders’ equity. Of comprehensive income ¥744.8B, unrealized gains on securities +¥357.8B temporarily boosted equity but carry reversal risk in adverse markets. Achieving both capital build-up and high returns requires structural improvements in earning power (NIM stabilization, cost efficiency, expansion of non-interest income).
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 65.7% | 14.6% (7.2%–39.4%) | +51.1pt |
| Net Profit Margin | 73.9% | 11.9% (7.2%–35.4%) | +62.0pt |
Both operating and net profit margins substantially exceed the industry median, indicating a high-return profile within banking, though profit margins on a banking-account ordinary-revenue basis require separate scrutiny.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 22.7% | 10.1% (7.3%–12.1%) | +12.7pt |
Revenue growth rate exceeds the industry median by 12.7pt, with top-line expansion pace significantly outpacing peers.
※ Source: Company aggregation
Responsiveness to interest-rate environment: Sharp rises in interest costs (+26.3%) and other ordinary expenses (+87.4%) pressured ordinary income and placed NIM under downward pressure. The timing of pass-through of interest-rate increases and improvement in lending yields will be key to earnings recovery. Effectiveness of banking-account interest-rate risk management (IRRBB) and asset-liability management (ALM) is under scrutiny.
Recovery of cash flow generation: With Operating CF deeply negative, management executed high shareholder returns (dividends + buybacks ¥252.5B), relying on balance-sheet restructuring. Normalization of Operating CF requires stabilization of loan and deposit stock movements and improvement in net interest income; quarters ahead will be watched for signs of conversion to positive Operating CF.
Comprehensive income and OCI volatility: Unrealized gains on securities +¥357.8B lifted comprehensive income to ¥744.8B and temporarily improved equity, but reversal risk exists if markets turn. With Equity Ratio at 5.1% and limited buffer, managing OCI volatility and building real retained earnings are prerequisites for medium- to long-term financial stability and sustaining shareholder returns.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as necessary.