Loan growth and yield sustainability will be the focus in FY2027-H1 as interest-rate normalization boosts earnings

In FY2027-Q1, ordinary revenue was ¥359.982 billion, ordinary income was ¥116.203 billion, and quarterly net income attributable to owners of the parent was ¥80.526 billion. Ordinary income increased 19.3% year on year and net income increased 14.2%. The full-year net income target was raised by ¥20 billion from ¥310 billion to ¥330 billion, with first-quarter progress at 25.9%. The company cited upside in net interest income following the Bank of Japan's June policy-rate increase as one reason for the upward revision.

The main driver of earnings growth was domestic deposit-and-loan earnings, which increased by ¥20.9 billion year on year. The breakdown was ¥9.1 billion from the average loan balance and ¥11.8 billion from loan yields. The average loan balance was ¥47.69 trillion, up 6.76% year on year, and the loan yield rose 0.25 percentage points to 1.33%, while the average balance of deposits and NCDs was ¥63.21 trillion, down just 0.11%. The contribution from both volume and yield was positive, but it will be important to see whether loan balances continue to grow at the same pace beyond the first half and whether higher deposit funding costs offset the benefit from yields.

The company's estimates for the 1.0% and 1.5% policy-rate scenarios assume an unchanged balance sheet and reflect loans, time deposits and other items reaching interest-rate repricing dates within one year. Accordingly, in FY2027-H1, it will be important not simply to track the first-quarter levels of a ¥47.69 trillion average loan balance and a 1.33% yield, but also to see whether the contributions from yield and average balance can again be disclosed separately. In particular, while additional rate hikes may benefit net interest income, the extent to which deposit rates and market funding costs have risen will be essential to assessing the sustainability of the upward revision.