Tailwinds from higher interest rates will continue, but FY2027-H1 will be the point at which to assess whether earnings are slowing

FY2026 ordinary profit was ¥53,766 million and net income attributable to owners of the parent was ¥37,674 million, up 25.0% and 24.0%, respectively, from the previous fiscal year. The company forecasts FY2027 ordinary profit of ¥65,000 million and net income of ¥45,000 million, assuming continued earnings growth. However, because the earnings release focuses on ordinary revenue and ordinary profit, rather than sales and operating profit, as is standard for a bank holding company, progress against the plan will need to be assessed using the same indicators next time.

FY2027-Q1 ordinary revenue was ¥85,187 million, up 32.8% year on year, but ordinary profit was ¥18,216 million and net income attributable to owners of the parent was ¥12,537 million, down 4.7% and 6.7%, respectively. The company explained that ordinary profit declined because credit-related expenses and operating expenses increased despite growth in core gross operating profit. As the larger revenue base has not translated into profit, H1 should be assessed for the extent to which higher revenue absorbed funding costs, credit-related expenses and operating expenses.

By revenue category, FY2026-H1 net interest income was ¥54,724 million, trust fees were ¥188 million, net fees and commissions were ¥8,984 million, and other operating income was ¥758 million. For the full year, net interest income rose to ¥113,345 million, trust fees to ¥374 million, and net fees and commissions to ¥17,925 million. In the next results announcement, the amounts by category will need to be tracked to determine whether growth in net interest income from changes in the interest-rate environment is continuing or being offset by higher funding costs and volatility in the market-related businesses.

Q1 results represented 28.0% of the full-year ordinary profit forecast and 27.9% of the net income forecast. Although a simple pass-or-fail assessment is not possible given seasonality, whether H1 reaches approximately half of the full-year forecasts, or ¥32,500 million in ordinary profit and ¥22,500 million in net income, will be a practical benchmark for assessing the validity of the ¥65,000 million and ¥45,000 million targets. In particular, if the credit-related expenses and operating expenses that reduced Q1 earnings continue to increase in H1, the scope for earnings recovery against the full-year forecasts will narrow.