Can first-quarter upside translate into sustainable full-year profit growth?

In the first quarter of the fiscal year ending March 2027, ordinary profit was ¥46,968 million, up 51.0% year on year, while quarterly profit attributable to owners of the parent was ¥32,740 million, up 45.0%. Ordinary revenue was ¥136,802 million, with increases in interest on loans, interest and dividends on securities, and gains on sales of shares and other securities driving revenue growth. Interest on deposits and other liabilities and losses on sales of government bonds and other bonds also increased, however, so the expansion of both revenue and funding costs in a rising-rate environment needs to be examined in the next results.

Following the first-quarter results, the full-year ordinary profit forecast was raised by ¥15,000 million, from the previous ¥152,000 million to ¥167,000 million, while the forecast for profit attributable to owners of the parent was raised by ¥10,000 million, from ¥105,000 million to ¥115,000 million. First-quarter progress was equivalent to 28.1% for ordinary profit and 28.5% for net profit. If half of the full-year forecast is used simply as the first-half benchmark, ordinary profit of ¥83.5 billion and net profit of ¥57.5 billion would be reference points. However, bank profits may include items affected by market conditions, such as bond sales and sales of cross-held shares, so full-year achievement should not be judged solely by simple 50% progress.

When assessing earnings quality, continued growth in net interest income, as seen in the previous year, will be important. Ordinary profit rose from ¥102,073 million in the fiscal year ended March 2025 to ¥130,298 million in the fiscal year ended March 2026, and the current full-year forecast of ¥167,000 million is an even higher level. In the next results, we will examine the breakdown of net interest income and yields to determine whether the increase in interest on loans and interest and dividends on securities was limited to the first quarter or represents a substantive widening of net interest margins that can absorb higher interest on deposits and other liabilities.

The first-quarter disclosure focuses on ordinary revenue and ordinary profit, which are appropriate for a banking group, rather than operating profit and operating margin, and provides only limited breakdowns by factor. In FY2027-H1, it will be important to see whether cumulative gains on sales of shares and other securities, losses on sales of government bonds and other bonds, credit-related costs, and the year-on-year change in net interest income are presented together. Even if first-half profit exceeds the benchmarks above, the quality of the full-year forecast will need to be assessed cautiously if it depends on non-recurring revenue.