Q1 turned loss-making on ¥970 million in credit costs; H1 focus is whether credit costs recur

FY2027-Q1 recurring revenue rose 14.8% year on year to ¥2,955 million, but ordinary income shifted from a ¥240 million profit in the same period of the previous year to a ¥851 million loss, while quarterly net income attributable to owners of the parent shifted from a ¥196 million profit to a ¥794 million loss. The fact that higher revenue did not lead to improved earnings is the first point to verify in the next results announcement.

Credit costs were the main cause of the deterioration in earnings. In addition to ¥800 million in specific loan-loss provisions recognized following the commencement of bankruptcy proceedings for 全東信, ¥170 million in general loan-loss provisions was recorded due to a rise in the historical loss rate, resulting in a total ¥970 million exceptional factor. By segment, banking profit declined ¥1,091 million year on year to a loss of ¥852 million, while the leasing business remained profitable at ¥16 million, meaning that almost all of the loss was concentrated in banking.

The basic indicators of credit risk also require review. Risk management claims stood at ¥9,344 million at the end of FY2026, up ¥692 million from ¥8,652 million at the end of the previous fiscal year. Disclosed claims accounted for 2.53% of total credit exposure in FY2027-Q1, but the Q1 figures alone do not show whether the large account in question has normalized or whether the issue is spreading to other counterparties.

In FY2027-H1, it will be important to disclose loan-loss provision expenses, reversals of loan-loss provisions, and the breakdown of risk management claims by category alongside the figures for the same period of the previous year. In particular, the focus will be on whether ordinary income exceeds the ¥342 million recorded in the same period of the previous year and whether the banking segment returns to profitability. It should also be noted that no quarterly consolidated cash flow statement was prepared for Q1, so the cash impact of credit costs cannot be verified directly from operating cash flow.