ORIX CORPORATION FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, Revenue was ¥3兆3,308B (vs prior year +¥4,560B +15.9%), Operating Income was ¥4,562B (vs prior year +¥1,244B +37.5%), Ordinary Income was ¥3,551B (vs prior year +¥1,718B +93.7%), and Net Income attributable to owners of the parent was ¥4,473B (vs prior year +¥956B +27.2%), delivering year-over-year increases across all stages. Operating margin improved to 13.7% (prior year 11.5%, +2.2pp), and net margin improved to 13.4% (prior year 12.2%, +1.2pp), indicating enhanced profitability; ROE improved to 9.8% (prior year 8.6%), indicating better capital efficiency. EPS doubled to ¥386.53 (prior year ¥193.62, +99.6%), and Book Value per Share increased to ¥1,152.71 (prior year ¥1,041.03, +10.7%). Full-year dividend was ¥156.10 (prior year ¥62.17), with a payout ratio of 40.4%, maintaining a sustainable level.

Drivers of Performance

[Revenue] Revenue reached ¥3兆3,308B (YoY +15.9%), a significant increase. As a financial conglomerate with diversified revenue streams including lending, leasing, asset management, and insurance, steady performance across segments drove top-line growth. Improvement in market conditions and an expanded customer base contributed to accelerating top-line growth. Segment-level disclosure was not available, but given total assets grew +6.7% YoY, it is inferred that revenue recognition from increased asset balances progressed.

[Profitability] Operating Income was ¥4,562B (YoY +37.5%), outpacing the revenue growth rate, and Operating Margin improved to 13.7% (prior year 11.5%, +2.2pp). Improvement in cost of sales ratio and operating leverage bolstered core earning power. Ordinary Income was ¥3,551B (YoY +93.7%), lower than Operating Income in disclosure terms, reflecting presentation differences; in substance, non-operating income such as financial income and equity-method gains elevated Profit Before Tax. Profit Before Tax reached ¥6,914B (YoY +43.9%), with notable contributions from interest income, fair value gains, and equity-method investment gains. Final Net Income was ¥4,473B (YoY +27.2%), with an effective tax rate of 35.3% (prior year 31.9%) slightly higher, yet Net Income expanded robustly due to the large pre-tax profit increase. In conclusion, the company achieved revenue and profit growth, with operating improvement and accumulation of non-operating income jointly supporting profit expansion.

Key Financial Metrics

[Profitability] Operating Margin was 13.7% (prior year 11.5%, +2.2pp), and Net Margin was 13.4% (prior year 12.2%, +1.2pp), indicating improved core profitability. ROE was 9.8% (prior year 8.6%), explained by decomposition Net Margin × Total Asset Turnover 0.185 × Financial Leverage 3.94x, with margin improvement the primary driver. Profit Before Tax of ¥6,914B is 1.52x Operating Income of ¥4,562B, indicating substantial accumulation of non-operating income, with large contributions from financial income and equity-method gains. The effective tax rate was 35.3% (prior year 31.9%), somewhat higher, but Net Income still expanded due to the pre-tax profit increase.

[Cash Quality] Cash flow statement data was not disclosed; from balance sheet movements, total assets increased by ¥1兆1,365B YoY (+6.7%), supporting business scale expansion. Net assets increased by ¥4,013B (+9.6%), strengthened by internal retention of Net Income and accumulation of fair value gains. Asset growth has been relatively contained versus profit growth, indicating improved asset efficiency.

[Investment Efficiency] Total Asset Turnover improved to 0.185x (prior year 0.170x), enhancing sales generation per unit of assets. Financial leverage declined slightly to 3.94x (prior year 4.04x), and Equity Ratio improved to 24.9% (prior year 24.2%, +0.7pp). Book Value per Share rose to ¥1,152.71 (prior year ¥1,041.03, +10.7%), reflecting increased shareholder value.

[Financial Soundness] Equity Ratio of 24.9% is consistent with a financial conglomerate that utilizes leverage by business model. BIS Common Equity Tier 1 Ratio was 21.6% (prior year 21.1%, +0.5pp), well above regulatory thresholds, indicating a solid capital buffer. Total Debt to Equity ratio is approximately 2.94x, high relative to non-financial industries but acceptable for a financial firm.

Cash Flow Analysis

With no disclosed cash flow statement, funding trends are analyzed from balance sheet movements. Total assets increased ¥1兆1,365B YoY (+6.7%), driven by expansion of operating assets such as credit assets, investment securities, and lease assets. Net assets increased ¥4,013B (+9.6%), supported by internal retention of Net Income ¥4,473B (after dividend payments) and accumulation of comprehensive income. Total dividends amounted to ¥1,371B, approximately 30.7% of Net Income, and despite dividend payouts, sufficient earnings were retained to strengthen the capital base. Asset growth lagged profit growth, demonstrating improving asset efficiency. As a financial conglomerate, non-operating investment income and equity-method gains are significant contributors to profit, so the stability of Operating Cash Flow depends on diversification of the business portfolio. From next fiscal year onward, equity-method investees related to Toshiba (including sale of KIOXIA shares, etc.) will reflect with a time lag, so volatility in investing cash flows should be monitored.

Quality of Earnings

Operating Income was ¥4,562B while Profit Before Tax was ¥6,914B, a 1.52x expansion, indicating substantial non-operating income accumulation. This suggests contributions from financial income, equity-method investment gains, and fair value gains, meaning investment- and finance-related income, in addition to core operating income, drove profit growth. The gap between Ordinary Income ¥3,551B and Profit Before Tax ¥6,914B is approximately ¥3,363B, where the accumulation may include one-off fair value gains and equity-method gains. Equity-method equity investee results related to Toshiba are reflected with a quarter lag, so current period equity-method gains include prior-period Toshiba performance. According to the forecast notes, the consolidated results for Q1 FY2027 do not reflect Toshiba and KIOXIA-related impacts due to their uncertainty, leaving variability in future equity-method gains. The effective tax rate increased to 35.3% (prior year 31.9%), but net income still expanded on strong pre-tax performance. The rising share of non-operating income introduces potential volatility to earnings quality, so monitoring the sustainability of core operating income and the composition of investment gains will be important. Overall, operating profitability improvement appears sustainable, while non-operating contributions are more sensitive to market, interest rate, and equity market conditions.

Forecast / Guidance

For the fiscal year ending March 2027, Net Income attributable to owners of the parent is forecast at ¥5,300B (vs FY2026 actual ¥4,473B, +18.5%), and full-year dividend is guided at ¥187.36 per share (higher of payout ratio 39% or ¥156.10 per share). The +18.5% increase assumes continued operating profitability improvement and contributions from investment and equity-method income. However, forecast notes state that equity-method investee results related to Toshiba and KIOXIA will be reflected with a time lag from Q1 FY2027 and are not incorporated due to lack of confirmed information; hence equity-method gains may fluctuate YoY and affect forecast achievement. The dividend policy explicitly sets the higher of payout ratio 39% or DPS ¥156.10 as the baseline, and if profit targets are met, DPS ¥187.36 is expected. The current payout ratio is 40.4% (Total dividends ¥1,371B ÷ Net Income ¥4,473B), consistent with guidance.

Shareholder Returns

Full-year dividend for the period was ¥156.10 (interim ¥93.76, year-end ¥62.34), a substantial raise from prior year ¥62.17. Total dividends were ¥1,371B, and the payout ratio to Net Income ¥4,473B was 40.4%, a sustainable level. Dividend notes state that the total dividend includes ¥5B paid to an executive compensation BIP trust. The FY2027 dividend policy is clearly stated as “higher of payout ratio 39% or full-year dividend ¥156.10 per share,” and if the profit plan (Net Income ¥5,300B) is achieved, DPS ¥187.36 (payout ratio approx. 39%) is expected as an increase. Treasury shares are about 2.0% of outstanding shares (22,485 thousand shares); no mid-term share buyback disclosures were made, but the dividend policy consistency and commitment to increasing dividends tied to profit growth are evident. Shareholder returns are dividend-focused, targeting around 40% payout and continuing dividend increases correlated with profit growth.

Risk Factors

1. Volatility of investment and equity-method income: Of Profit Before Tax ¥6,914B, approximately ¥3,363B was accumulated at the non-operating stage, with large contributions from equity-method investment gains and fair value gains. Equity-method investees Toshiba and KIOXIA have results reflected with a time lag, so equity-method income may fluctuate YoY. Forecast notes state that Toshiba-related results for Q1 FY2027 are not fixed and therefore not included, and volatility in investment gains could affect the achievability of profit forecasts.

2. Interest rate and credit cycle risk: In interest-sensitive businesses such as lending, leasing, and asset management, rising interest rates can increase funding costs and depress asset valuations. Of total assets ¥18兆278B, interest-bearing asset/liability mismatches or maturity mismatches can elevate liquidity risk under deteriorating funding conditions. Credit cost increases and widening credit spreads would pressure profitability.

3. Balance between leverage and capital efficiency: Financial leverage is 3.94x and Total Debt to Equity is approx. 2.94x—acceptable for financials but high compared to non-financial firms. Equity Ratio is 24.9% and BIS CET1 Ratio is 21.6%, both above regulatory thresholds, but market downturns could cause capital erosion via asset price declines. ROE is 9.8%, nearing double digits, and while there is room for improving capital efficiency, excessive leverage increases pose financial soundness risks.

Industry Benchmark (Reference, Company Analysis)

Profitability & Returns

Both Operating Margin and Net Margin substantially exceed the industry median, delivering top-tier profitability within the insurance sector.

Growth & Capital Efficiency

Revenue growth materially outpaced the industry median, indicating significant expansion in business scale.

※ Source: Company compilation

Earnings Highlights

1. Profit growth achieved by both operating improvement and investment income accumulation: Operating Margin improved to 13.7% (YoY +2.2pp), strengthening core earnings power. Profit Before Tax expanded to 1.52x Operating Income, indicating large contributions from financial income and equity-method investment gains. Versus industry benchmarks, Operating Margin +4.9pp and Net Margin +9.1pp show superior profitability. From next fiscal year, equity-method investee results (Toshiba / KIOXIA) will be reflected with time lags, so monitoring volatility in investment gains is necessary.

2. Maintains payout ratio around 40% and a dividend policy of dividend increases tied to profit growth: From current Dividend ¥156.10 (payout ratio 40.4%), FY2027 expects DPS ¥187.36 based on profit plan ¥5,300B. The policy “higher of payout ratio 39% or DPS ¥156.10” is clear, and shareholder returns aligned with profit growth are expected. Total dividends are well covered by current Net Income, indicating limited sustainability concerns.

3. ROE 9.8% near double digits, room to improve capital efficiency: ROE rose from 8.6% to 9.8%, but recovering to the 10% range is the next objective. Margin improvement is the main driver; with Total Asset Turnover 0.185x and financial leverage 3.94x, there is scope to further enhance capital efficiency. BIS CET1 Ratio 21.6% provides a thick capital buffer, enabling a balance of growth investment and shareholder returns.

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This report is an earnings analysis document automatically generated by AI analyzing 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 statement data. Investment decisions are the responsibility of the investor; please consult a professional advisor as necessary before making investment decisions.