| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1142.1B | ¥594.9B | +92.0% |
| Operating Income / Operating Profit | ¥140.2B | ¥113.3B | +23.7% |
| Ordinary Income | ¥150.0B | ¥125.1B | +19.9% |
| Net Income / Net Profit | ¥105.6B | ¥84.9B | +24.4% |
| ROE | 7.7% | 6.3% | - |
For the fiscal year ended March 2026, Revenue was ¥1,142.1B (vs prior year +¥547.2B, +92.0%), Operating Income was ¥140.2B (vs prior year +¥26.9B, +23.7%), Ordinary Income was ¥150.0B (vs prior year +¥24.9B, +19.9%), and Net Income was ¥105.6B (vs prior year +¥20.7B, +24.4%). As a core securities finance operator, the business saw a significant expansion in repo and securities lending volumes in a rising interest rate environment, driving operating revenues to roughly double year-on-year. However, higher funding costs and spread compression reduced the operating margin to 12.3% (prior year 19.0%), a 6.7pt contraction. Non-operating income of ¥10.1B (including equity-method income ¥3.5B and dividend income ¥3.2B) and special gains of ¥18.3B (fixed asset disposal gains ¥11.6B, gains on sales of investment securities ¥6.6B) supported double-digit growth in final profit. Total assets increased to ¥15.5 trillion (+12.8%), reflecting leverage-driven asset growth that influenced both revenue expansion and margin compression. ROE was 7.7%, broadly flat year-on-year.
[Revenue] Operating revenue was ¥1,142.1B, a large increase of ¥547.2B (+92.0%) year-on-year. The main driver was expansion of the Securities Finance business within securities financing, led by increases in repo and securities lending balances (borrowed repo expanded to ¥8.4T, reverse repo to ¥7.2T). By segment, Securities Finance accounted for ¥1,029.5B (+94.2%), representing 90.1% of the total; Trust Bank business was ¥105.2B (+86.1%) also showing large growth. Real estate leasing was ¥7.5B (-8.7%) and slightly down. Interest income received ¥0.0B unchanged; topline growth depended on volume expansion and higher fee income. Revenue concentration toward securities finance is high and business diversification is limited.
[Profitability] Gross profit was ¥218.6B (gross margin 19.1%), up ¥31.1B (+16.6%) from ¥187.5B (gross margin 31.5%) prior year, but gross margin declined by 12.4pt. SG&A was ¥78.4B, up 5.7% from ¥74.2B, so some cost absorption from scale occurred, but gross margin compression depressed operating margin to 12.3% (prior year 19.0%), a 6.7pt hit. Non-operating income was ¥10.1B (prior year ¥12.1B) largely stable; non-operating expenses were ¥0.3B (prior year ¥0.3B) slightly down. Special gains of ¥18.3B (same as prior year ¥18.3B) comprised fixed asset disposal gains ¥11.6B and gains on sales of investment securities ¥6.6B, providing a one-off support to net income. Income tax expense was ¥43.8B (effective tax rate 29.2%), standard. In sum, the company achieved higher revenue and higher net income, but operating-stage profitability contraction is a notable structural feature.
Securities Finance posted external revenue of ¥1,029.5B (prior year ¥530.2B, +94.2%) and segment profit of ¥138.3B (prior year ¥106.1B, +30.4%), making it the core business. Rate increases and expanded repo/securities lending balances boosted revenue, but margin compression reduced the segment profit margin to 13.4% (prior year 20.0%). Trust Bank recorded external revenue ¥105.2B (prior year ¥56.5B, +86.1%) and segment profit ¥27.8B (prior year ¥17.6B, +58.6%), maintaining a high margin of 26.4% supported by loan and fee business expansion. Real Estate Leasing had external revenue ¥7.5B (prior year ¥8.2B, -8.7%) and segment profit ¥7.5B (prior year ¥7.2B, +4.2%), high-margin but small scale. Consolidated Ordinary Income after intersegment eliminations was ¥150.0B; a decline in equity-method income to ¥3.5B (prior year ¥7.7B) impacted consolidated profitability.
[Profitability] Operating margin was 12.3% (prior year 19.0%), down 6.7pt; net profit margin was 9.3% (prior year 14.3%), down 5.0pt. ROE was 7.7% (prior year 7.4%), broadly flat. ROE decomposition: net profit margin 9.3% × total asset turnover 0.007 × financial leverage 112.9x, indicating margin compression as the main driver of variation. [Cash Quality] Operating Cash Flow / Operating Income was 9.6x, and Operating Cash Flow / EBITDA was 9.3x, both very high; accrual ratio was -0.88, indicating cash generation that reflects economic reality. Cash conversion is favorable. [Investment Efficiency] Total asset turnover was 0.007 (prior year 0.004), low as typical for financials but improved with asset growth. Equity-method investment income of ¥3.5B declined from ¥7.7B, limiting contribution from investees. [Financial Soundness] Equity Ratio was 0.9% (prior year 1.0%), reflecting a highly leveraged financial business model. D/E was 111.9x, Debt/Capital 73.9%, Debt/EBITDA 27.0x – superficially extreme but marketable liabilities (repo, CP, etc.) comprise the majority. Current ratio was 102.6%, and cash on hand was ¥1.56T, securing short-term liquidity. Investment securities were reduced to ¥301.6B (-94.5%), lowering interest rate and market price risk.
Operating Cash Flow was ¥1,350.3B (substantial improvement from prior year -¥5,350.8B), 12.8x Net Income ¥105.6B. Prior year was negative due to large working capital outflows; this period’s cyclical expansion of repo/securities lending balances contributed to strong CF. Operating CF subtotal (before working capital changes) was ¥1,205.7B; corporate tax payments -¥109.7B; interest and dividends received ¥885.8B; interest paid -¥701.4B, so net interest received/payments supported CF by ¥184.4B. Investing CF was -¥4.0B, with capex -¥1.1B and intangible asset acquisitions -¥1.7B nearly offset by fixed asset disposal gains ¥11.9B. Free Cash Flow was ¥1,346.3B, 19.8x dividends ¥68.0B, indicating ample cushion. Financing CF was -¥102.1B, reflecting dividends -¥68.0B and share buybacks -¥34.0B. Cash and cash equivalents increased by ¥124.43B to ¥1.56T, leaving a healthy liquidity buffer.
Against Ordinary Income ¥150.0B, Net Income was ¥105.6B, with tax burden ¥43.8B (effective tax rate 29.2%) the main reconciling item. Non-operating income ¥10.1B consisted of dividend income ¥3.2B, equity-method income ¥3.5B, and investment partnership operating income ¥1.6B, accounting for 0.9% of revenue and indicating low dependency. Special gains ¥18.3B (1.6% of revenue) comprised fixed asset disposal gains ¥11.6B and gains on sales of investment securities ¥6.6B, one-off items that boosted net income. The structure where operating cash flow exceeds net income by 12.8x stems from expanding turnover assets in repo/securities lending, and cash collection capability reflects this reality. Comprehensive income was ¥132.0B; the ¥26.4B difference from net income ¥105.6B is attributable to other securities valuation gains ¥17.7B, actuarial gains on retirement benefits ¥9.7B, equity-method affiliates’ OCI ¥1.7B (positive), and deferred hedge losses -¥3.2B (negative). The recorded valuation gains are temporary but contribute to financial flexibility.
Full Year guidance: Operating Income ¥144.0B (vs prior year +2.7%), Ordinary Income ¥158.0B (vs prior year +5.4%), Net Income ¥110.0B, EPS ¥135.86, Dividend ¥47.00. Actuals achieved Operating Income ¥140.2B (progress 97.4%), Ordinary Income ¥150.0B (94.9%), Net Income ¥105.6B (96.0%) — slightly below targets but within acceptable range. Shortfall likely due to greater-than-expected operating margin compression (margin decline and rising hedge costs). Next fiscal year guidance assumes continued volume growth but focuses on spread trends and hedge cost management.
Annual dividend is ¥86.00 (interim ¥40.00, year-end ¥46.00), up 2.05x from prior year ¥42.00. Composition: ordinary dividend ¥68.00 and special dividend ¥18.00 (interim ¥8, year-end ¥10). Payout Ratio is 67.4%, unchanged from prior year. Total dividend outlay ¥68.0B is 5.1% of FCF ¥1,346.3B, indicating high sustainability. Share buybacks of ¥34.0B (prior year ¥30.0B) were executed, giving total shareholder return ¥102.0B. Total Return Ratio is 96.1% (dividends + buybacks ÷ Net Income), a high level that signals a clear priority on shareholder returns over growth investment. Next year’s forecast dividend ¥47.00 implies a cut driven by the absence of special dividend; ordinary dividend is expected to remain stable.
Spread compression and rising hedge costs risk: Operating margin has declined to 12.3% (from 19.0%), a 6.7pt drop, and gross margin to 19.1% (from 31.5%), a 12.4pt contraction. Continued adverse interest rate environment or deteriorating spread management could limit profit growth despite revenue increases. While repo/securities lending volumes expanded, simultaneous increases in funding costs and compression of lending spreads are squeezing margins.
Increased reliance on marketable liabilities risk: CP balances rose from ¥859.7B to ¥8,597.3B (+96.1%), and repo liabilities increased from ¥8.0T to ¥8.4T, raising dependence on short-term funding. In periods of rapid market liquidity shifts, rollover costs or haircut expansions could pressure funding and spreads. D/E 111.9x and Debt/EBITDA 27.0x are extreme on the surface; attention to market stress resilience is required.
Business concentration risk and potential slowdown in Trust Bank growth: Securities Finance accounts for 90.1% of revenue, making the company sensitive to market changes and regulatory tightening. Trust Bank has a high margin (26.4%) but slower growth would materially affect consolidated profitability. Equity-method income halved to ¥3.5B (prior year ¥7.7B), indicating potential volatility in investee contributions.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.3% | 8.8% (4.0%–20.0%) | +3.4pt |
| Net Profit Margin | 9.2% | 4.3% (0.6%–11.3%) | +4.9pt |
Profitability exceeds the industry median, maintaining the high-margin profile typical of securities finance. However, year-on-year margin compression is notable.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 92.0% | 2.1% (-4.5%–6.9%) | +90.0pt |
Revenue growth is exceptionally high within the sector, demonstrating success in volume expansion though partly driven by temporary market conditions.
※ Source: Company aggregation
Expansion phase of leverage-driven business model: The large revenue increase of +92.0% is underpinned by rate increases and expanding repo/securities lending balances. Although operating margin contracted by 6.7pt, ROE of 7.7% was maintained and absolute profit growth from scale was realized. Key future watch points include whether margin recovery is achievable through refined spread management and hedge cost control. Rising reliance on marketable liabilities (CP +96.1%, repo +4.1%) increases funding risk, but short-term liquidity is secured with ¥1.56T cash and a current ratio of 102.6%.
Aggressive shareholder returns and sustainability: Payout Ratio 67.4% and Total Return Ratio 96.1% are high. FCF is 19.8x the dividend, indicating short- to medium-term sustainability, though internal reserves accumulation is limited. The policy clearly prioritizes returns over growth investment, reflecting a capital-efficiency focus. The next-year forecast dividend ¥47.00 (down ¥39.0) is mainly due to the fall-off of special dividend; ordinary dividend is expected to stabilize. The substantial reduction in investment securities (-94.5%) lowers market risk and improves financial flexibility.
This report is an earnings analysis document automatically generated by AI analyzing XBRL earnings disclosure data. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by our firm from public financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.