Earnings growth remains strong, but FY2027-H1 will be key to assessing earnings quality

FY2027-Q1 ordinary income was ¥109,640 million, ordinary profit was ¥20,269 million, and net income attributable to owners of the parent was ¥13,880 million. The full-year forecasts remain unchanged at ¥263,000 million for ordinary income, ¥65,000 million for ordinary profit, and ¥45,000 million for net income, representing progress rates of 41.7%, 31.2%, and 30.8%, respectively, as of Q1. However, because quarterly market transactions and securities sales have a significant impact on banks, it is necessary to assess earnings composition at the interim stage rather than simply concluding that results have exceeded one-quarter of the annual plan.

For comparison, FY2026 ordinary income was ¥249,074 million, ordinary profit was ¥56,038 million, and net income was ¥39,705 million. Ordinary profit increased 46.2% and net income increased 44.7%. The FY2027 net income forecast of ¥45,000 million is ¥5,295 million, or 13.3%, above the previous year's actual result, making cumulative net income of approximately ¥22,500 million at the next interim period one progress benchmark. However, the company had not revised its full-year earnings forecast as of Q1, and the Q1 financial summary did not provide sufficient explanation of the likelihood of achieving the plan or the earnings assumptions for the remainder of the period.

FY2027-Q1 segment profit was ¥18,687 million in banking, ¥298 million in leasing, ¥524 million in securities, and ¥11,422 million in Other. Year on year, profit increased 30.4% in banking, 198.0% in leasing, 376.3% in securities, and 9.2% in Other, with all segments reporting higher profit. However, the simple sum of segment profits does not equal consolidated ordinary profit. Without disclosure of adjustments, including consolidation eliminations and holding company expenses, it is not possible to accurately assess how much each business contributed to consolidated profit.

Factors behind the Q1 earnings increase included higher gains on securities sales, investment income, and gains (losses) on stocks, while gains (losses) on bonds, including Japanese government bonds, declined as a result of bond sales, and deposit interest and expenses increased. In the next earnings release, it will be necessary to assess not only the year-on-year earnings growth rate but also whether net interest income continues to support growth, whether market-related gains and losses are reversing, and whether the increase in expenses can be absorbed, by segment and by major profit and loss item.