Consolidated profit is ahead of plan at the 1Q stage, but the sustainability of the upside is the key focus

In the first quarter, consolidated ordinary revenue was ¥2,985,856 million, up 6.2% year on year, ordinary profit was ¥339,863 million, up 50.9%, and quarterly net income attributable to owners of the parent was ¥125,303 million, up 63.8%. The full-year forecasts are ¥11,360,000 million for ordinary revenue, ¥1,170,000 million for ordinary profit and ¥380,000 million for net income, representing progress rates of 26.3%, 29.0% and 33.0%, respectively, based on the disclosed figures.

Under a simple benchmark dividing the full-year forecast by 4, ordinary profit would be ¥292,500 million and net income ¥95,000 million. Actual results exceeded these levels by ¥47,363 million and ¥30,303 million, respectively, meaning that first-quarter progress was superficially ahead of plan. However, revenue recognition in the financial business and market conditions are seasonal and volatile. Before treating this as full-year upside, it will be necessary to confirm whether the magnitude of profit growth and the progress rate are maintained on a cumulative second-quarter basis.

The earnings presentation did not state the company's own assessment of whether results were ahead of plan, in line with plan or below plan, nor did it indicate the profit level required over the remaining 9 months. In addition, consolidated operating profit was not disclosed either in the key performance section of the earnings summary or in the full-year forecast. Materials for assessing profitability at the operating level are therefore limited beyond the progress based on ordinary profit. The next earnings release will focus on whether consolidated operating profit is additionally disclosed and how the profit structure, including the operating margin, is explained.

First-quarter extraordinary gains were ¥22,059 million and extraordinary losses were ¥2,931 million. Extraordinary gains included ¥11,700 million from the reversal of the price fluctuation reserve and ¥9,597 million in gains on the sale of shares in affiliates. Although these amounts are limited relative to ordinary profit of ¥339,863 million, factors outside ordinary income and expenses also contributed to net income growing faster year on year than ordinary profit. In the second quarter, it will be important to distinguish progress in ordinary profit excluding these temporary extraordinary items from any decision to maintain or revise the full-year forecast.